That we issued new bond, $150 million new bond on the local stock exchange. I will talk about this in more greater detail later on. We nearly retired all of the EUR 300 million GCAP euro bonds, which we issued 5 years ago. I think only $16 million are left, which will be retiring fully in September. Gross leverage has been substantially changed; it halved from $300 million to $150 million. We also bought our minority shareholder in retail pharmacy. According to the agreement, we were going to buy 10% but ended up to buy 20% at the same valuation. We went to from 77% in the retail pharmacy to 97.6%.
We had a nice development in terms of the NAV per share. We grew more than 8% in the quarter. Record high NAV per share at more than GEL 73. Another good development that our NCC ratio, our key target, has decreased by 2.3 percentage points at 17.4% end of the second quarter. We are way ahead on de-leveraging promise and nice developments there.
We have received substantial amount of dividends in second quarter, more than GEL 120 million, of which there's a big portion is one-off. Nice cash inflow we had in second quarter as a GCAP. To move forward, Shako, help me to move forward. Well, okay.
Let me talk about a little bit more about our 100 new bond. Because of the size of the leverage we wanted to decrease substantially, we decided to do a local bond. Out of $150 million, $110 million were anchored by the IFIs. We had a big anchor demand already. What I am pleased also that it is sustainability linked bonds. I'm pleased with this one, obviously, we have our targets, we are hoping to meet these targets to support the climate change mitigation space. The annual coupon rate was 8.5%. Maturity is five years. Important point, we have that it's callable after two years.
As you know that our target is to go to zero gross debt in short to medium term. The call option was very important for us. Bond is rated at BB-, one notch upgrade to the previous bond. We had a progress on the credit rating as well. Just a little bit for information for you, a look back on this. In total, we had $365 million of gross debt, which we issued in dollars.
Looking back, what it cost us in terms of the lari, we ended up paying 8% in lari, when during this period of time, the interest rate was between 11.5% and 14.5% in lari terms. Basically issuing the USD bond paid off for sure, as we have made a substantial spread over the lari interest rates. To go back on the next slide. Shako, I can't control it now, so. To go back to next slide, we have a breakdown of the final bondholders.
The, the reason I want to show this one is a very important new client, new investor base we have discovered in Georgia, which I am pleased to have such a big support from the local retail investors. Which show to us that there is a lot of trust for Georgia Capital locally, and it was largest placement to local investors ever in this country, with $83 million subscribed by the local investors, which was 55%.
We had to scale back the IFI substantially from $110 million to $67 million, and we, as we welcome more and more retail investors into our bond. Our long-term partners, the European Bank for Reconstruction and Development, IFC, and the Asian Development Bank, participated.
We had a new IFI joining the ranks, Asian Infrastructure Investment Bank, which I'm pleased to welcome as our new partner. We are looking forward to working with these IFIs, with GCAP, and with our portfolio companies, obviously. The good thing is we have a total retail investor base of around 275 people, basically, retail investors, participating in this bond. Another point there was that we have increased our shareholding in the retail pharmacy from 77% to 97%. We expect substantial dividend flow to increase over the next couple of years, we are pleased with this increase of shareholding in the retail pharmacy.
In terms of the NAV per share growth, our key metrics from 2018, CAGR, was nearly 12% in GEL terms. In terms of the USD and GBP, is a little bit higher, around 12% to 12.4%. CAGR growth over the past 6 years, not the best results, I must say, but not the worst either. We hope to accelerate the NAV per share growth going forward. In past 6 months, year to date, basically, our NAV per share grew nearly 12%. We, we expect substantial NAV per share growth this year.
of the share buybacks, our track record being that, in total, we bought back more than $70 million of shares. We bought 6.8 million shares. As you know, we have been buying almost all the time of GCAP existence, other than during COVID times, when we had a cash preservation strategy. And now we continue to buy back shares. So that's kind of our. So recently, we bought exactly 1 million shares. I don't know how we ended up buying exactly 1 million shares, but we ended up buying those shares. So it's around, it's around 2.2% of our share capital.
We have a decreased number of shares further, and we are obviously looking forward to decrease the number of shares towards the 39 million, where it was share count when the GCAP was incepted. Free cash flow, very strong free cash flow generation we had over the past five years. In 2023, we expect $20 million. That's a recurring one. That will include the one-off of $34 million, which we received from the Bank of Georgia buybacks and one-off dividend we received from our pharmacy retail. In 2022, we had that number.
Hopefully, our number was $11 million. We had substantial increase over 2022, and substantial increase during the COVID time. What we had in 2020, we had negative. In 2021, we had whole $1 million of the free cashflow. Substantial progress there. We are pleased with this, another milestone, which we are looking to increase our free cashflow over time.
I will ask Nino to continue with macro. After that, I'll talk about the performance of our portfolio companies in second quarter and first half of 2022. Giorgi will present portfolio valuations and liquidity and dividend income outlook, and I will do the wrap-up in the end. Nino, please continue.
Hello, everyone. Thank you, Irakli. As usual, I will provide quick macroeconomic update on Georgia. We have prepared, prepared several slides. The, the, here we have the messages we think is most important and interesting for you. You can see additional information in our extended presentation, and of course, your questions will be highly appreciated.
Let me start with the GDP growth and let me tell you several words about the general global economic outlook. Now, despite the fact that there are some upward revisions in terms of global economy, still, global economy is expected to, the growth is expected to be slower compared to last year.
Last year, global growth was 3.5%, and this year, according to the latest projections, it is expected to grow by 3%. It is interesting to see that mostly, this slower growth is attributable to the advanced economies rather than emerging markets. In looking at the aggregate numbers, mostly in emerging markets, the countries which are commodity exporters do have some challenges related to the lower commodity prices.
On average, emerging markets are going good compared to the advanced advanced ones. For the, the scenario for the soft landing is still on the table, but of course, there are some risks. There's there's huge uncertainty in the global economy.
Despite the fact that this March US and Swiss banking turmoil was quite nicely averted and contained, still, there are some risks related to the additional shock or some geopolitical geopolitics, that's why this soft landing scenario is not guaranteed yet. Now let me move to Georgia. We had two year of double-digit growth. Despite this high base effect, Georgia economy continue... Previous slide, please... Georgia economy continued to expand nicely. During the first half, we had 7.6% growth, and the drivers for the growth was quite similar what we were talking like last year.
It was mostly the external demand and the fixing flows from the external side, and on the domestic side, we have a loan growth, which increased more than 13%, excluding the exchange rate. This drivers, which was true for last year growth, also continued to lead strong growth this year also. On the other hand, we had below target inflation. Since April 2023, inflation fell below the target, so the latest number printed at 0.3%. It is significantly lower compared to 3% target, and we do expect the very close to zero numbers to be maintained in the coming months, and then inflation start to increase to reach the target.
The National Bank of Georgia started to ease the monetary policy. I will talk a bit on later on. On the next slide, we have several interesting charts. Last year, there was many interesting developments last year related to the sanctions on Russia. We were telling that we have this high-skilled labor immigration, and so we were expecting that this immigration would have some positive impact on our GDP growth. We have charts to show that this was kind of true. We see Information and Communication sector to jump in terms of value creation, and so there was significant jump in share of GDP also.
Like, on average, it was like, ICT sector had some 3% share in our nominal GDP, after the second quarter of last year, so share jumped and reached 5.5% in the first quarter of 2023. Looking at the fourth quarter, like, after second quarter of last year, or after sanctions on Russia, so we see this ICT sector to be the highest contributor in terms of GDP growth. Rather than gross domestic product, so we like this sector due to its significant contribution in current account also.
When we are talking about current accounts, so and when we are talking about the service export, the tourism is the key source of, for the service export, and the share of tourism in service export, exceeds 70% before the COVID, then sharp fall and recover to 62%. Now, ICT sector have any diversification in any of the, any macro variables is always welcomed.
And so we also welcome this, a new sector, which, shows that, which share increased sharply. It was quite insignificant, before 2016, then the sector started to increase the share in, in our, service export, and it reached 16%, of total service sector export in, in first quarter.
To tell you some numbers, like, in 2021, we had exporting like close to $150 million ICT services. Last year, it jumped to more than $500 million, and only in the first quarter, the service export, ICT service export, exceeds $200 million. We, we like this sector due to its high value-added potential and potential to accelerate productivity and it has some positive developments in GDP, in current account, and in general in economic activity. There were some other developments last year, like in this next slide, please. We have, in the next slide, we have current account deficit. Last year was quite exceptional for us.
We had some record numbers, like record low current account or record high reserves, or record high FX flows, stuff like that. This year, we see that trend continues. There are some switches in terms of among the FX sources of FX flows, on an aggregate level, FX flows continue to maintain at an elevated level. Current account reduced last year to 4%.
Mainly, it was attributable to the recovery of tourism revenues, most prominently, it was the current transfers, which contributed positively. This year, in the first quarter, current account deficit printed at 3.2%. To compare the first quarter of last year, it was 13.3%. It is significant development, significant improvement in our external balance sheet.
In terms of FX flows, tourism revenues continue to recover. It's recovered to 2019 levels, even last year, in terms of revenues. In terms of number of visitors, we are still recovering. In first half, tourism revenues increased by 58% compared to last year, and it recovered to 124% of 2019 levels. Remittances, which was like the highlight of last year, FX flows continue to increase, especially in the first quarter of 2023, and it remained at an elevated level, more or less. In total, in seven months, it increased more than 30%.
As for the export, this year we think that this, this story is more like on export rather than remittances. This is another kind of shift in our economy. We were always telling that Georgia do have this strategic location, which means that we are kind of bridge between Eastern European countries and landlocked Central Asian ones.
After Russia's invasion of Ukraine and the sanctions, this so-called Middle Route Corridor, the, the importance of this corridor even accelerated. We see some, more like ongoing negotiations to improve logistics, to improve legislation, stuff like that, to increase the turnover and to increase the cargo through this route. It is reflected in numbers also.
This year, total export increased 15.7%, and fully it is attributable to re-export rather than domestic export. We had, so looking at like the last year's number, and development is also interesting. Like, we see that our export to the Central Asian countries expanded, increased, and we see that re-export is gaining its strength, and it was the first time when re-export exceeded domestic export. This route, like gaining its strength and importance. This FX inflows, which remained at elevated level and even increased further, supported our currency.
GEL it continued appreciation, appreciated by 3.2% year-to-date against the US dollar, less than 1% against the euro, due to the euro strengthening against the US dollar. On the next slide, we have some like this, in summary of the policy making, macro policy making in general. As I have mentioned, inflation is way below to the target level of 3%, and National Bank of Georgia started to exit from tightened monetary policy.
They are quite slow, and we think that it's appropriately tightened, and the stance is appropriate, because despite the sharp fall in inflation, there are some sticky parts in our consumer baskets, like mostly services and the domestic inflation, which remains elevated levels.
Also, there are some pressures, price pressures coming from more than expected economic activity. Also, we see some pressure from the wages. Despite the fact that wage growth kind of slowed down, it still exceeds the productivity. That's why, due to this kind of risks from the demand side, and from the wages, National Bank of Georgia is quite careful, and we, we, we think this chance is quite appropriate. They, they did two cuts, 75 bips cuts.
According to their current projections, they expect to do from 50 to 75 bips more cuts this year, and to gradually decrease the interest rate in the coming years. National Bank of Georgia appropriately used this favorable timing to rebuild the buffers.
In the net terms, they got, like, GEL 1.6 billion, and increased the reserves to GEL 5.1 billion, which is 29% higher compared to last year. On the fiscal side, the fiscal stance moderating on the back of their commitment to reduce the fiscal deficit below 3% cap. According to the Liberty Act, we have this fiscal deficit cap capped at 3%. There is some interesting development in the deficit itself.
Looking at the operating balance, the operating balance was always positive, and operating balance is the difference between current revenues and current expenditures. The deficit for the fiscal policy was mostly attributable to the capital expenditure rather than the current expenditure.
It was like the last previous years, due to the COVID and increased the social expenditure and reduced the revenues. Operating balance was negative, but after 2021, the operating balance again started to be in a surplus territory, which is very important, we think. On the debt slide, debt side, debt is below to the pre-pandemic level, mostly due to the two years of double-digit growth, as well as significant exchange rate appreciation.
Ministry of Finance do not expect and plan any sharp movement in terms of debt level. They are more thinking about switching to the domestic debt rather than external debt. That's why in their projections, the share of external debt is flowing. I want to note one thing, the, the structure of external debt, despite the fact that we have most of the debt denominated in foreign currency, the structure is quite favorable.
Despite the fact that we are living in one of the fastest rate hike cycle in the history, then most of our external debt is denominated in fixed interest rate, and that's why the average interest rate on the portfolio is close to 2.7%, which is quite favorable during this time. In the next slide, we have some wrap up, like the key messages we wanted to deliver. The GDP continue to be strong, inflation is below target, and we expect inflation to be below the target this year.
We might see some overshooting in the first half of next year, gradually return to the target. In the medium term, balance sheet improved significantly last year, we see this robustness to persist. GEL continue to appreciate.
We don't expect any significant changes from these levels in the short term. The macroeconomic framework for Georgia is sound, and this is the key strength for our country, mentioned in the reports prepared by IFIs or rating agencies. This was all from my side. Now, I will hand over to Irakli to continue the presentation, of course, we are appreciate any questions during our Q&A session. Thank you.
Thanks, Nino. Let me start with the performance of our portfolio companies. The... The aggregate revenue growth of our portfolio companies in second quarter was up more than 12%, and in first half, 11%. We reached GEL 1 billion of revenue for our portfolio companies in the first half, and nearly GEL 513 million in the second quarter. So nice growth we are... we continue to experience.
We had a growth in NAV as well. Sorry. So, we had a growth in EBITDA as well in our portfolio companies. They grew in second quarter, the EBITDA grew by 7.3%, and in first half, more than 4%. So not a high growth in EBITDA side but continues to grow nicely.
Uh, in terms of the cash flow developments-... uh, we are funding the growth, but importantly, the, we are, uh, down in operating cash flow due to the timing, uh, on the, uh, hospital side and the other, uh, portfolio companies, but mostly on hospitals, as the government is moving a new, uh, system that, uh, uh, delayed the, uh, the cash inflows. But overall, uh, we expect the cash inflows to grow, uh, along with the EBITDA and the, uh, and the, uh, and the growth of the company in general.
So, NAV per share, uh, uh, growth was, as I mentioned, more than eight percent, but it consisted with the uh, uh, portfolio company grew, uh, by the two percentage point. The, our listed and observable portfolio grew more than five percent.
Due to the buybacks, which we have, we've done recently, it grew by, it contributed the 2%, 2 percentage point growth. Operating expense was negative contributor, obviously 0.3%, and the liquidity management, FX, is actually contributed negatively 0.7. That's how we ended up growing the NAV in second quarter by more than 8%, and the NAV per share stood, stands now at a record high at 73.2 lari. Now on the update on deleveraging, our most important metric is one of the most, most important metrics we watch is net capital commitment ratio.
Actually, we had the question, I just saw in the messages, that why you don't... why we are not doing the $50 million large buybacks as the NAV discount is more than, or is, is 60%? I think that the answer is on this slide, so I will answer this slide, that basically, we are targeting to delever the holdco, the investment company, which right now, stands at 17.4%, and we want to be below 15%, and that's where we would be doing more, larger buybacks, basically, to increase our NAV per share even more rapidly, basically. Watch the ratio, the answer is that we need to watch this ratio basically to...
It gives you a good guidance when we are doing a tactical small buybacks and when we are doing the larger, when, when we can do the larger buyback. As here is a development of the... our NCC ratio in 2019, which was record high of 42.5%. After that, we have now at 17.4%. As I said, our target is 15% over the cycle. That's what we are aiming for in order to do a larger buybacks. Now, our portfolio results and valuation. Giorgi, I will ask Giorgi to take over the presentation.
Thank you, Irakli. Hello, everyone. I will start the presentation by providing the overview of the portfolio valuations as of the end of the first half. To highlight here, every 6 months, as you know, we have the independent valuation company.
This time, the valuations were done by external third-party valuation firm. To summarize, our portfolio increased again, as you will see on the next slide, about 31% of the overall portfolio was listed and observable portfolio, that's Bank of Georgia and our 20% stake in the water utility business. We had nearly half of the portfolio in the large portfolio companies, about 16% in the investment stage, and the other portfolio remained largely unchanged at less than 10% or 9% of the overall portfolio.
The valuations were performed consistently with how they were done in the previous periods. We applied the similar future cashflow DCF models, combined with the multiples-based approach and any precedent transactions that we saw during the last six months as well.
Overall, our largest portfolio company continues to be retail pharmacy, where the valuation increased, you know, largely because we now bought out the minority shareholders, and that meant that the minority stake is now decreased significantly, and instead, our, you know, valuation in this business changed. The hospitals business and the insurance business continued to be, you know, second and third largest businesses.
We'll talk later in the slides, but in, in the insurance business, we had a change in the law, which is pretty much allowing insurance companies and putting them in line with the other companies in Georgia subject to the Estonian model. Meaning that when the insurance companies will pay dividends to us going forward, they're no longer subject to any, you know, either corporate taxation or any dividend taxation. Therefore, you know, going forward, they will not be paying income taxes.
As a result, when we reassess these future cash flows, given that this law was adopted in the first half of 2023, you know, the, this resulted in the, in a one-off increase of about GEL 40 million in the insurance business valuations in the first quarter.
That, combined with the strong performance of the insurance businesses, led to, you know, the higher valuation, which is close to GEL 350 million at the end of the first half. I will next talk about itself the, you know, portfolio developments during the quarter. As you know, in the first quarter, we continued to participate in the Bank of Georgia buybacks, and, you know, we trimmed our stake close to 19.9%. However, despite of this, as Bank of Georgia shares continued to rally, we had a positive performance, and the Bank of Georgia overall added GEL 53 million to the value of our overall portfolio.
From the large portfolio companies, GEL 29 million largely came from the insurance company that we discussed, and investment stage GEL 9 million, that was also largely due to the education businesses. Our portfolio at the end of the quarter was GEL 3.3 billion. If we summarize where the gains came from in the valuations in the first quarter, they were largely from both insurance companies, P&C and medical, GEL 65 million in aggregate .
That includes the one-off related to the tax legislation change and plus, you know, the normal, organic gains from their growth of the net income. Education business was, you know, another second largest loan, generating GEL 8 million in this quarter.
Now, diving in into the individual portfolio companies and starting with the retail pharmacy, that actually had a very strong quarter in the second quarter, despite of the headwinds that this business has been facing in 2023, given the certain government regulations that were adopted that kept prices for certain drugs. This business performed really well. The revenue growth was more than 5% in the second quarter.
They translated into double digit, close to 12% growth in the EBITDA line as well. This was also supported by the strong same-store revenue growth, which, you know, last year, as you see, it was negative, but this year it turned positive, which is about, you know, close to 3%.
However, this is positive on the back of the another appreciation of the local currency, which is usually, you know, negative for the same-store revenue growth. This, this business has, has done really well during the second quarter. We discussed earlier that there has been a buyout of the minority shareholders in this business, which impacted the net debt, which you can see on this slide.
However, the minority interest reduced almost with, with a similar amount. As a result of this buyout, we have also used the cash that we had in this business to buy out the minority shareholders together with the third-party debt.
On top, there was a one-off dividend that we received from this business, about GEL 20 million, and there will be an additional about GEL 6 million that we'll receive in the third quarter. That has also impacted the net debt. Overall valuation of this business, when we look at the enterprise value, was, was slightly up, but because of the movements in the net debt, the equity value was slightly down by GEL 27 million. As you can see, the multiple in this business also decreased, the implied multiple, from 9.3 to 9.2.
Adjusted net debt was slightly higher than our targeted 1.5, but we expect this will come down to less than 1.5x EV/EBITDA by the end of this year, as the business continues to generate cash during the second half of the year. In the hospitals business, as we expected, we hit the, you know, inflection point when the revenues and the EBITDA started growing. You can see on this slide that they were in the high single digits. This is because last year, the second quarter was a very low base, given the exit from the COVID contracts back then.
So this business continues to recover, you know, from the, the loss of the occupancy rates that we experienced last year, and they are on the, you know, recovery trajectory. As we look at in the, in the second quarter, that recovery has started. In the valuation-wise, we didn't have much impact on the, the equity value here, while the enterprise value increased.
As it was mentioned earlier, some delays in the collection of cash from the government impacted the net debt, so the net debt was also up by GEL 18 million, similar to the enterprise value increase. Therefore, they offset each other, and the impact on the equity value was minimal. Insurance businesses, so we talked about the one-off impact from the taxation change, but organically, both P&C insurance and the medical insurance had a very strong quarter.
You know, 20% plus growth in revenues and the net income, and this growth was also as a result of the very diversified growth of their revenue streams across multiple, you know, products, which includes product, motor, credit life, agri products, Border TPL, and obviously the medical insurance, where we saw the number of insured clients and the premiums also grew. We also saw that the combined ratio in the P&C was up, but still within the range that we look at, you know, between 80% to 85%.
The growth was, you know, largely due to the claims in the agri insurance that we provide due to the bad weather conditions during the second quarter. Overall, very strong performance for this business, which is something that was also strongly reflected reflected in the value creation in this business.
You see here that for the P&C business, the value went up by GEL 45 million, and it's, you know, valued now more than $100 million, if we look at it in, in dollar terms, and we continue to have no leverage in this business. In the renewable energy business, it was relatively quiet quarter. The business continued to, you know, produce revenues and generate cash flows.
However, one of the small hydros continued to be offline during this quarter, due to the refurbishment works. That has completed, you know, from the beginning of July, that hydro is back up and running. The reason for the decrease, both in the revenues and the EBITDA, is related to, you know, lower electricity generation because of that one hydro being offline. There is no material change in the valuations here.
The business continue to generate, you know, cash in this business, the valuation remained the same as at the end of the first quarter. That's $95 million for our equity value in operational and pipeline projects. The next one is the education business, which continued to have a very strong quarter.
The revenues grew by 27.5%, you know, I will highlight here that we have continued to grow the capacity, and you will see that capacity has now grown close to 7,000 learners at the end of the second quarter. We expect that, you know, by the end of September, this will grow close to 7,300. There will be another 400 learner capacity that will be added.
We're also seeing a very strong amplification of the new learners for the upcoming school year. The current number of learners is, you know, 4,500. With this strong pipeline, we think, and we currently project that there will be more than 1,000 new learners that will be added to our school.
That will take the number of learners in excess of 5,500 learners. This strong performance in revenue, the performance in the EBITDA was not as strong, but that's because we have been investing in growing the school, so there is some OPEX associated with it. If we normalize that, the EBITDA has been growing double digits as well. The strong performance was reflected in the valuations. Enterprise value was up by about GEL 4 million, also the net debt was down as the business continued to generate cash ahead of the school year.
Overall, the gain that we had in this business was 7 million, but the growth was about 9 million, as we invested about GEL 2 million in this business to, you know, build the new schools. Last but not least, this is the clinics and diagnostics business, who also had an inflection point, given the, you know, the last year's low base, when we had to exit from the COVID contract with the government.
The growth here was very strong, you know, 18% growth in the revenues in an aggregate level, and about 38% growth in the EBITDA, which was driven by the recovery in the number of admissions and the registrations in this business, both in the clinics and the diagnostics.
You know, these businesses continue to, to generate cash, and then they also continue to invest in the growth. We have been adding the, the new clinics, and as a result, we have invested in the net debt. The net debt grew in this business by about GEL 7 million.
Overall, even though its enterprise value grew because of the strong performance in the bottom line, the growth in the net debt, where we still do not take into account, you know, the future revenues that come in with these new clinics, when they will open, the equity value was slightly down by GEL 5 million. This is about the operating performance of the companies. Now, liquidity and the dividend income outlook, with a little bit of an overview.
We had a very strong liquidity at the end of the second quarter, $173 million, which was up by, you know, $20 million plus, compared to the end of the year. We used all this cash then to pay down the debt, as you saw earlier in the slides. You know, following this pay down, we will have, at the end of this quarter, about $150 million remaining local bonds, the sustainable local bonds. On top, we expect to have about $40 million liquid funds on our balance sheet, you know, available. In terms of the dividend income, we continue to have a very strong dividend inflows in the first half.
You know, one of the strongest starts of the year that we have seen. It's actually the strongest since the, since the demerger. We have collected now GEL 148 million dividends in the first half, and, you know, this includes the Bank of Georgia dividends where the ex-dividend date was at the end of June as well. From this GEL 148, GEL 98.6 is what we call the regular dividend. So these are the dividends that we expect are sustainable and continue in the future, et cetera.
The one-off dividends, which one of them is the retail pharmacy dividend, GEL 20 million, I mentioned earlier, plus the participation in the Bank of Georgia buybacks, for the portion of their buybacks that was done last year, we treat that as a one-off as well.
That's another GEL 50 million, and in total, we have GEL 148 million. When we look at the projection for the full year, we still expect that on a regular dividend-wise, we will at least get GEL 50 million, could be as high as GEL 60 million. Then the one-offs, there will be another GEL 5 million that we expect to collect from the retail pharmacy business as a one-off dividend. This, what you see here is that the strong recovery is providing a very good stream of dividends, regular dividends, like we have not seen in the previous periods. On this bright note, I'll go back to Irakli for the wrap-up.
Thanks, Giorgi. I think that we talked all the point, just let me repeat that NAV per share, we are at record high. NCC ratio, our key metrics for the buybacks program is approaching our target, which is 15%, and now we are at 17.4%. The strong dividend, as Giorgi said, in second quarter, and we expect these dividends to grow further, the regular dividends to grow further in the second half.
Completing the buyout of the retail pharmacy, minority shareholder, we have decreased the gross debt from $300 million to $250 million, and we think that's an important point for us to decrease the leverage first, and secondly, to continue decreasing it. Now let's move to the Q&A session. Please raise your hand to ask the question. Alternatively, you can also send us the message. We prefer you to raise the hand. It's as it's more interactive.
Thank you, Irakli. Just a quick reminder again, we have a Q&A panel below. You can type your questions, but, as you previously said, we prefer the live questions, which you can absolutely do so by clicking the Raise Hand button. We have one question, which I think we already addressed. This refers to the 60% NAV discount.
Yes, we have. Basically, I just want to reiterate that we are big supporters of buyback, as especially on such a high NAV discount. We think that the value creation for shareholders is good by doing the more buybacks. Big, substantial buybacks will come as we will be around 15% of our NCC ratio. Obviously, we want to fix our balance sheet substantially before we go into the bigger buyback. When we do a bigger buyback, we don't want this NCC ratio to go above 15. That's kind of our target throughout this cycle. Any further questions, please don't hesitate.
There is a question from Giorgi Todua. You mentioned government moving to a new system which cost the 69% net operating cash flow decrease. Would you be able to elaborate a bit further?
I mean, we received this money in July, so it's like a time thing. It's not a substantial thing. It's just the, the DRG system, which is upgrade from previous one, which is a little bit better system for us in terms of further cash flow generation, that as we were moving to, from one system to second system, the cash inflow has been delayed by a couple of days, that's kind of what we had. Overall, it's, it's basically the, the calendars issue, not the cash flow issue.
Thank you. Next question from Giorgi again. Who holds the other 2% of retail pharmacy business?
Our. We have. We have our guy who, executive who worked with us in business, and he was shareholder of the company with whom our pharmacy merged. We had two partners, and now one partner is out, and then the second partner is there, and we'll be buying him out over the period of time, over 10 years. Longer this executive is with us, better, as we've been a very good partner with him.
The next question is: Thanks for the presentation and good results. As inflation is very low, where do you see central bank policy rate at year-end, and year-end 2023 and year-end 2024? What would be the impact of the lower interest rates on your portfolio companies, if any, except BoG?
I mean, the, the, the interest rates, I mean, you know, jumping.
Yeah, sp... [crosstalk]
Yeah, sorry, I'll let you if add... Right, we expect the interest rates to go down as the inflation is down. The cost of borrowing for our portfolio companies will decrease, so it will be a, a positive side. Rest, you, Nino, please.
Yeah, sure. In terms of the interest rates, as we mentioned, they start to exit from tight monetary policy, but they are quite careful due to the fact that price pressure still exists from the demand side. According to their projections, they, they plan to reduce the rate by additional 50 to 75 bips this year, so it will standing close to 9.75%, maybe this year, at the end of 2023.
And they will gradually decrease the rate, according to the current projection, to 8% in 2025. Current path is quite slow. They are telling that of course, this, this is not they promise. This is just the projection of interest rate. They will use this data-driven approach for further policy making.
Nino, there's another question from James, that, do we, are we fearful of lari weakening due to the weak ruble?
Yeah, sure. What we see is that correlation to ruble is quite small for Georgia because due to the fact that looking at the FX inflows, despite the current last year still, we have other sources for our FX inflows. We see some impact in terms of remittances, like the remittances is still alleviated, but a bit slower compared to last year peaks.
But this FX inflows is quite, kind of, this is the, there is a significant switch in terms of export and in terms of other destination. Like, we see that remittances are surging from other countries like the US and other countries, but we see, like, the lower FX inflows from Russia. There is different factors.
One of the factor we think is attributable to weakening Ruble, but as you know, today, they had this emergency meeting and surged the rate to respond to this Ruble depreciation and inflation expectations. We think that in the medium term, we, we might see some, like, the short-term movement of Ruble, but we, we don't expect any, any significant impact on, on, on the GEL. You can see that Ruble started depreciation quite early, and so GEL, GEL was quite strong against the US dollar and depreciated.
Thanks, Nino. In general, basically, if you talk just a little to add on the ruble and the lari, the linkage, it's a very limited linkage there, because there is very little trade going on, and remittances mainly are coming outside Russia. Mainly EU countries are, have taken over the inflow of the remittances to Georgia.
What we have, we have the a lot of Russian... Not a lot, but some substantial number of Russian IT specialists are living in Georgia, and they are exporting the IT services. It's not related to, to, to Russian economy at all. That's where, that's why we don't think there will be a impact on the lari due to the weakness of the ruble. There's...
Just... [crosstalk] Sorry.
Sorry.
No, just, I will add one point. We, we had, like the, last year, we did some analysis, to see the sensitivity to Russia in general, of Georgia, and Georgia, so looking at the region, so we had like, like very insignificant exposure to Russia, despite the fact that so we have some export, we have remittances and stuff like that. Exposure is, excluding the last year migration impact, exposure in general is quite limited, so we don't expect any significant movement. Thank you.
Thanks, Nino. We have a question about the NCC ratio. Are we giving a guidance when we are going to reach the NCC of 15%? We are not giving the guidance, but we aren't far away from NCC of 15%. In general, the point which I was making, that we want NCC of 15% over the cycle. We had a 10% growth in 2021, we had another 10% growth in 2022. We are having a 7.5% growth this year. It is, we are pretty, you know, it's a high cycle.
We want to be below the 15% to when when we announce the big buyback, and that is below 15%, so that after the buyback, we are still below the 15%. It's not, we reach the 15% and the big buyback comes. I want to plug that. We, 15% is over the cycle, so we would want to be below 15% now. Okay, thank you. Any question come up?
Yes, I think Miloš has a lot of questions. Let's Miloš, you can unmute yourself and ask the questions, and then we'll continue with the questions that came through the Q&A.
Yes. Hi, thank you for the presentation. I just wondered if you could comment maybe on the dividend outlook across your private portfolio companies beyond 2023, I mean, keeping in mind any investment or deleverage needs. Thank you.
Thanks. Giorgi, maybe you talk about that, the, the dividend outlook.
Yeah, sure. Miloš, I mean, you saw that, at least in the second half as well, in the P&C insurance, we have reported about GEL 8.4 million dividends. We expect similar amount in the second half. In 2024, we expect the organic growth, growth in that business, and organically, they've been growing, if you look at last two years, at double digits, close to 10%. You would think that that growth will continue to be there as well.
Renewable energy, we also expect, you know, this year they paid about $3 million, and then the growth there can be also $3 to 4 million next year. The bigger growth we expect to come from is the retail pharmacy.
One, for the reasons that our stake has increased there, now that we own, close to 98%, and, but also because the business, as you saw on the slides, is having a very strong growth momentum in the second quarter. You know, you can expect that, what they paid this year is a one-off, and they will pay a regular dividend this year, which is about GEL 15 million from this business. The next year, we should be looking at, you know, GEL 20 million-GEL 30 million.
Those will be the key private portfolio, you know, dividend outlooks. We provide more, you know, tailed outlook, at the end of the fourth quarter when we publish the fourth quarter results. It's a little bit too early for 2020.
Oh, perfect. That's very helpful. Thank you.
Sure.
Thank you. The next question is from Floris Steenkamp: "Can you, can you explain a bit on the performance of the hospitals? Margins are still well below 2019 levels. Are there any structural differences compared to 2019, or what needs to happen to get back to those levels? Also, what are the constraints to increasing utilization of hospitals further, given that there has been such an influx of people into Georgia? I would have expected we would see more people coming, coming, to the hospitals.
Basically, the, just to start from the end, we have young people coming to Georgia, so they don't require that much hospitals. Just to give you the bigger, bigger picture, what we have, that over the past three years, number of hospital beds have increased substantially. It went up to around 18,000 hospital beds from 12,000 or 13,000 hospital beds. That was driven mainly pre-COVID and mainly during the COVID times, to handle with COVID. Now we have a ... which drove our utilization down, and now it's, our utilization is, is lower than pre- during the pre-COVID times. Therefore, the margin is lower.
However, just a new decree came out from the Ministry of Health recently, which have increased the standard of the emergency rooms, which we are estimating will drive the number of hospital beds from 18,000 to, for back to where it was, 13,000 to 14,000, which would increase the utilization of our hospitals. That's kind of structurally, that's what we are expecting.
There is a structural issue, which is, which we believe will be fixed over the next six months as the regulation or the emergency rooms have substantially strictened. We are in compliance with that, mostly in compliance. We are doing some renovations, but mostly compliance of this new emergency rooms. Expectation is the around, 14,000 hospital beds to decrease and our utilization to increase.
Thank you, Irakli. The next question is from David. "Not an investor yet but would like to become. What would be your advice to me and others like me about ways to become an investor in Georgia?
I mean, I think it's, you know, you buy shares, so if you want to become investor. We cannot advise more than that.
Thank you. There are no open questions as of now. Just a reminder, you can press the Raise Hand button or type them in the Q&A panel below.
If there are no further questions. There is one?
There is one. Any comments on the political situation?
I mean, the, the, the, we, we are where we are. Basically, we have a, we have a dialogue with the EU. We have a, now the, the government has been talking with the, the, the Chinese as well on the, on the cooperation. We expect, in December, we expect the candidacy status. Elections are next year in October. I think that we'll have more clarity back then.
I think that there have been a lot of different meetings, high-level meetings with EU leaders recently by Georgian Prime Minister and the high-rank ministers. We are waiting for end of the year, where the decision will be made on the EU candidacy status. Let's, let's, let's see. I think, Harvey, you know as much as I do about Georgian politics.
Yes, Harvey, Harvey responded that he does not know. Was his answer.
Anyway, Okay, we have another question?
Yes. The question is, any plans to sell assets from other small companies?
We basically want to get the price right. As I said that the other portfolio companies are subscale and non-strategic for us. If we get a good price, we will. You saw we've been selling pretty actively the hotels. We almost completed. We have only one hotel left for sale. We sold commercial real estate before, so we are, we are, we are out there, and we'll see what we can achieve. Yeah, this is at right price, obviously, we are sellers of the subscale businesses.
Yes, I think there are no open questions. One just came through. If I remember, you target a ROIC of around 12% for your hospitals business over, over the medium term. Does the long-term returns value you would expect from, from the business?
I mean, we, we, we should get to that point. I think that, yeah, we are in a low single digit ROIC area now, but we are being restructuring the group, and also, we expect the occupancy rate to go up. I think the low teens is realistic in the medium term to achieve. That's, that's our target anyway.
Yes, I think there are no open questions for now.
Thanks, everybody, for participating in our earnings call and listening to us, we are looking forward to present even stronger third quarter and even stronger fourth quarter, as we expect this year, macro to to to drive macro growth to drive high and also our portfolio companies to continue to deliver. Thanks again, looking forward to seeing you. Bye-bye.