We start by introducing today's format, actually. We have a lot of news, but we have news in the format as well. I will be presenting our quarterly statements. As usual, I will present on the key developments and the high-level performance of our portfolio companies. However, our large portfolio company CEOs will be presenting their respective businesses. This is to increase the prominence of our three large portfolio companies. That's a pharmacy, so Tomika Nikolashvili, the CEO, will present the pharmacy results and the key operating data. Irakli Gogia, our CEO for our healthcare services, will report also on the performance of his division. CEO of insurance, Giorgi Berishvili, will report about the results of insurance companies. We will have a very short overview of macro.
We have reduced the portion of the macro in our presentation and we talk more about the details of the performance of larger portfolio companies. Then, Giorgi Alpaidze, our CFO, will talk about the valuation and the liquidity. In the end, I will do a wrap-up. This will be followed by the Q&A session. You can obviously ask the Q&A not only to me and Giorgi, but also CEOs of our portfolio companies regarding the performance of their respective businesses. Let's start with the highlights. A lot of good news. We have the NAV per share increase by 17.7% in Q2. It's one of the largest quarterly increases in NAV per share recorded in the Georgia Capital history. The EBITDA and revenue of our private portfolio companies also grew very strongly, 14% revenue and nearly 29% EBITDA in Q2. The strong performance of our portfolio companies continues.
Their strong operating performance is basically one of the key targets for us and key milestones to achieve. Another good news we have is that we have completed our put option and we have collected the GEL 17.4 million cash in July 2025 from the sale of the water utility, 20% of the water utility company. That's kind of a move in the right direction. I want to thank our partners, Aqualia, for a great partnership. We enjoyed being partners with Aqualia a lot. We expect to continue as an advisor for Aqualia going forward in Georgia, the Georgia Capital, obviously. The NCC ratio target we are decreasing from 15% to 10%. This is in line with our deal-averaging strategy. As you know, at Georgia Capital level, we want to, in the medium to long run, have zero debt. We don't like to have debt on Georgia Capital level.
Therefore, we are reducing the NCC ratio target. Most likely, the next move will be moving towards 5% or we may have a hard cut on the 10% NCC so that we will be between 0%- 10% level. Right now, throughout the cycle, it's 10%. We can overshoot a little bit 10% and undershoot depending where we are in the cycle, basically. Another good news is that we are completing this GEL 300 million buyback program, which we announced a year and three months ago. According to this program, we should have been done. We had another year and a half to go to fulfill this target, but we are actually completing the buyback of the GEL 300 million , actually, probably this month or maybe next this month. Yeah, next this month is probably the latest. That's another good news from us.
Obviously, as we are completing this 300 million GEL buyback, we are introducing a new GEL 700 million capital return program, which will end in 2027. That's our target. Hopefully, we will do earlier than the end of 2027, like we did with GEL 300 million . Let's see. I will talk about this later on in greater detail. In total, we are nearly 30% of the Georgia Capital's own bought back shares, which is around more than 14 million shares we bought back in our history of seven years. I think that's a big track record from the young investment company, how committed we are in investing in ourselves. We've been lucky and unlucky at the same time. We are lucky that we are buying it cheaply at a big discount. Unlucky that we have is because we have a big discount.
Anyway, we've been taking the opportunity of the big discount and we've been buying back shares and we continue to buy back shares. As you know, we will be announcing this capital return policy and other buyback program, which I'll talk to you about later. To highlight some key highlights on the water utility, when we disposed end of 2021, stake in a water utility company, the value of 20% was GEL 40 million according to the valuation back then. Basically, the value increased by 56% over this period of time. We collected GEL 70.4 million. In total, our investment looks like we made 3.8x money in lari terms and IRR of 25% on this investment. Not a bad track record on this investment so far. Actually, we completed one of the big exits in Georgia Capital history, with, I think that's a pretty good track record.
Regarding the, just briefly on the GEL 300 million capital return program, only GEL 20 million is left, which we have committed already. It's in the market and we are doing the daily buybacks basically here. We are expecting to complete soon. Regarding the GEL 700 million capital return program, which we are launching until end of 2027, GEL 300 million consists of the three pillars. One is that share buybacks would count in this GEL 700 million buyback program, also dividends, and also repaying the leverage. Regarding the dividends, we will not be introducing dividends as long as we have a high discount on the NAV. Therefore, it will be only focused right now for the share buybacks. We expect that till 2027, the discount will be fixed, so we may move into the dividend. That's why we have a dividend also included in this program.
We are starting with the GEL 50 million buyback program, which we are announcing, which is under this GEL 700 million capital return program. Another GEL 50 million, at least GEL 50 million, will be repaying in September, actually prepaying our bond, because we have a call option on our bond and we can exercise partially this call option. We will be exercising at least GEL 50 million of bond buyback basically. So GEL 100 million out of GEL 700 million capital return program is already clear for our investors. We will be announcing the further capital returns, which we will announce going forward. Now regarding the passive foreign investment company situation, before I talk about this in detail, I want to give you just high-level background of what it means. Basically, under the U.S.
Revenue Service, if the investor is invested in passive investment fund, then need to pay a tax on unrealized capital gains. We do not want to become a passive foreign investment company by no means. There's no chance we want to be that passive investment company. Therefore, we will be undertaking some corrections in our balance sheet not to become one. How it calculates, basically, we take the balance sheet value of our assets of our private companies. We add the passive investments like the Bank of Georgia stake we have and the cash we have. This cash and the Bank of Georgia, I'm talking about the high level going into details here. Basically, if this passive cash and it counted also water utility company and the Bank of Georgia together, if they are more than 50% of these total assets, then we are qualified as PFIC.
Back in 2021, it was only 26% of passive investments in our assets, and now that increased to 45%. This is mainly due to the rally in Bank of Georgia share price, but also the reason is that we undertook the capital-light investment approach. We sold capital-heavy assets like companies like water utility, for instance, or brewery, also capital-heavy. That reduced the asset base of our private companies. At the same time, Bank of Georgia share price rallied heavily, and that's contributed to the increase. We are managing this process of keeping it under 50%. We made a correction in our shareholding in Bank of Georgia recently, and we decreased it to 18.1%. That's where we are right now. We will target probably just below 18%. That's where we feel comfortable. The calculation is done every year on year-end, 31st of December each year.
Basically, we are positioning for that date. Right now, we feel pretty comfortable to be under 18% that we will not become a PFIC. Therefore, that's where we are. That's a correction that we made in our Bank of Georgia shareholding to keep us away from becoming the passive foreign investment company. On the next slide, on slide eight, we have a highlight on the economic developments in Georgia. First half 2025, 8.3% GDP growth. The economy is doing extremely well. We are also in a very good position in foreign currency inflows. It's at GEL 6.9 billion in the first half versus GEL 6.4 billion last year. This resulted in a big buying of the dollars by the National Bank of Georgia. In the first half, in total, more than GEL 900 million of foreign currencies have been bought by the National Bank of Georgia.
It's GEL 100 million in Q1 and GEL 780 million in Q2. Nearly GEL 900 million of foreign currencies have been bought by the National Bank of Georgia. The total reserves are at GEL 4.7 billion. Very good recent developments. This is happening on the back of strong tourists, remittances, etc. Good position to be a country regarding the foreign currency inflows. On the inflation, we had a little bit of uptick, 4.3%. We don't expect interest rates to increase on the back of that because it's a small uptick. I think that this foreign currency buying is also one of the reasons of this inflation uptick. I think it's a small one. We are not worried too much about this. NAV per share overview, let me talk about the contributors of the NAV per share growth.
The largest one is obviously the listed and observable, and water utility, passive investment side of growth of the NAV, 15.3%. Private was nearly 3%. Multiple changes, we are decreasing multiples overall on all our private investments, and it was -0.5% . The emerging and other portfolio companies, it was -0.3% . Buybacks contributed +1 .1%. Operating expenses was - 0.2%. Liquidity and other assets are - 0.6%. So 17.7% growth in the quarter in NAV per share. If we do a mark-to-market now for 5th of August, then actually the growth is 22.4%. Very high growth in NAV per share. Now in terms of track record, we have a very good track record in three and five years. So 30%+ NAV per share growth, last three years and last five years. Since inception in December 2018, we are up seven.
The package of NAV per share growth is 17.4%. The slide which I love the most is the share buybacks. At the merger, our number of shares was 39.4 million shares. Now, for the first time, we are below this level at 36.5 million shares. We peaked nearly 48 million shares in 2020. Now we have fully bought back that and even more. Basically, I'm very happy that our number of shares is below the merger level, the merger times, which is in 2018, in May 2018, when there was 39.4 million shares. Now, let's talk about the aggregate portfolio results. If we talk about the aggregate portfolio results, we have a situation like that. Revenue up 14.4% in Q2. First half, 17.6%. Great performance by the team. They'll talk about this in their respective presentations. Great performance across all large businesses. Aggregate EBITDA went up 29% in Q2.
Overall, in the first half, 36.5%. Another stellar performance, as I understand, and CEOs will talk about that. As I understand, this strong growth continues in July and August. We should expect strong Q3 as well. Regarding cash flow, that's one of the metrics we watch closely. Cash is up 45% year over year in Q2, 35.5% year over year first half. We, as an investment company, for us, it's very important what kind of cash, what is the cash generation for our portfolio companies. EBITDA is good, good target, etc., but it's not a good enough target. For us, cash is the key target, and cash is the king, as we say. Cash balance is also at good levels in our portfolio companies. Now, let me give you some updates on deleveraging.
The NCC ratio, which is one of the key metrics we watch closely, has been decreased significantly over the years. You may know that the peak was 42% of our NCC ratio at the time of the merger, basically. Now it's at 7%. We are very mindful of keeping this ratio down. As we said, we have a new target of 10% throughout the cycle. On page 19, you see the development, and you see the 7% level against the 10% new target we have. 10%, as I mentioned, is throughout the cycle. In bad times, we may be over the 10%. In good times, below 10%. That's where we are right now. That's actually this level why it allows us to step up the buybacks, the way we are stepping up.
Now, let me hand over the presentation to Tomika Nikolashvili, who is the CEO of our retail pharmacy business. He will talk about the great performance of his business line.
Thank you, Irakli. Good day, everyone. I'm pleased to share a brief business overview and update on the performance of our retail pharmacy business for the second quarter and the first half of 2025. Our business consists of three main directions: retail, wholesale business, and international operations. Retail business is our core, generating around 75% of our revenue. Wholesale business is our biggest focus for growth. In international, honestly saying, we are at the startup mode, believing to expand further in the region. We have a unique and positive category structure in retail pharmacy, having around 50% share of non-medication versus med category. Why it's positive is because parapharmacy category is characterized by higher margins and no price regulation risks.
We continue to be the largest player in the retail pharmacy market in Georgia, with around 36% market share in organized trade, operating under two well-positioned brands: GPC, which targets the high-end segment, and Pharma Depot, serving the mass market. We also operate two franchise brands, The Body Shop and Alana Fluid Optics, and are active in Armenia and Azerbaijan. As of June 2025, we operate 430 pharmacies, including 15 in Armenia. We expanded our network by 14 pharmacies added in quarter two, most of them in cost-efficient formats that require limited capital injection. On the next slide, let me discuss more business operating performance of the business. In terms of performance, our retail revenue grew by 5.4% and 6.4% in the first half and second quarter, respectively, supported by same-store growth of 4.7% and 6.6% in quarter two.
This was despite the exit from our textile retail business, which slightly affected headline growth. We are encouraged by this trend as it reflects healthy consumer demand and solid in-store execution. On the wholesale side, revenue grew by almost 26% as we extended distribution of our strategic brands beyond our own retail chain. This has helped diversify and strengthen our overall performance. We also saw an increase in average bill size. It's up by 10% year -over- year. It's mainly due to mix. Finally, gross profit margins improved to 32.7% in quarter two, driven by, again, sales mix and improved supplier terms. On the next slide, I'll more concentrate on financial performance. EBITDA grew by 38.3% in the first half, and we reached a record high, GEL 48.5 million, while EBITDA margin improved to 10.8%. In quarter two alone, EBITDA grew by 24.6%.
Cash conversion from EBITDA was slightly lower at 63.8% in quarter two, mainly due to growth acceleration and changing mix toward the wholesale business. We have a time shift, time difference in the collection of receivables. We believe at the end of the year, we'll reach 90%+ , which is our target. From a financial balance sheet position, standpoint, we remain cautious and disciplined. Our adjusted net debt to LTM EBITDA stands at 1.4 x, which is below our target of 1.5x. We expect to improve it further. We also distributed GEL 10 million in dividends during the quarter, reflecting confidence in our cash flow and overall financial health. Let me summarize on the next slide. We have maintained a solid revenue momentum, especially with same-store sales growth and strong wholesale results. Profitability has improved, supported by gross profit margin improvement and good cost discipline.
Leverage remains at a healthy level, giving us flexibility for future investments and shareholder returns. Let me mention that we also have a strong performance in July and August so far. Thank you again for your time. I am happy to take your questions during the Q&A session, and let me hand over to Giorgi Berishvili. Thank you.
Thank you, Tomika. Ladies and gentlemen, today I'm going to present the insurance business, and I will let you deep dive into the details of our business. A short overview, we run an insurance business, and we divide it into two main directions, as we call two main business lines. The first is the P&C, property and casualty, that is run under the name of Aldagi, and medical insurance that is run under the brands of Imedi L and [Aldagi]. I would say that we had an outperformance, record high performance in Q2 through both lines. In the coming slides, I will deep dive into both lines separately. Talking in total, our insurance revenues grew by 27%, and the pre-tax profits grew by 24%. In terms of the first half, we had an amazing 42% increase in insurance revenues and 24% increase in pre-tax profit.
We had also an outstanding performance in terms of the operating data. In terms of the net premiums written, the total premiums grew by 19%. 17% was due from P&C line, and 22% came from the medical insurance. On the next slide, I will overview the P&C business separately. We had a really major development in a P&C line. A leading rating agency, AM Best, upgraded our P&C business by one notch. By this upgrade, Aldagi became the first company in Georgia with an investment-grade rating that I'm really proud of. I want to really congratulate our team. Just to make a few comments, from B (Fair), our financial strength was upgraded to B+ (Good), and the long-term credit issuer rating has been upgraded from BB (Fair) to BBB- (Good). By this upgrade, as I have mentioned, we became the company with an investment-grade rating in Georgia.
The rating agency has underlined that we keep the strongest balance sheet on their scale that is supported by the prudent capital and a very disciplined underwriting, leading to the healthy portfolios that are translated then into the high ROIs, respectively. The insurance revenues, as I mentioned, are really remarkable. They grew by 22% in Q1. In Q2, the main increase came from the expansion of our retail motor portfolio, that is in line with our strategy to increase our retail presence in the market. The life insurance also increased in Q2 2025. Our pre-tax profit increased even more, leading to a 27% increase that was translated into a record high ROE of 36%. In total, we paid GEL 5.3 million dividends to GCap in Q2. That makes, in total of Q1, in the first half, that comprised GEL 11.1 million.
As I said, we had also, on the other hand, we had an amazing, out of an amazing operating performance. I would like to touch a few of them. Key, as I said, the key metrics in the insurance are the net premiums written where we are up by 17%. We had a really good improvement in our combined ratio. That went down by four points, reflecting a revised tailored segmentation mainly in the corporate segment and eliminating a few big loss-making clients. That led to an 84.5% combined ratio for P&C. This is really unique. That's in line with our strategy to keep it in line of 85%. Our individual insurers grew by 13% and the number of policies even more by 15%. We recorded a record high renewal rate for our retail business, 76.3%. Now, moving to the health insurance.
The health insurance business has recorded also a record high Q2 that we have never seen before. We had a 32% increase in revenues in our health insurance. We are envisaging a really good performance in both business units, R&D as well as Imedi L. The main increase came from the organic growth. The second big factor was the increase of the ticket size of the policies. The third was the acquisition of Aldagi that we acquired in last year, second half of Q2 last year, that also contributed to the revenue increase. Our pre-tax profits are growing also. That is eventually translated to the record high ROEs. To touch the numbers, we had an 18% increase in revenues, in profits. That is translated to also a record high ROEs of 32.6%.
We paid GEL 1.5 million dividends to GCap from our medical insurance direction that made almost GEL 3 million in the first half of 2025. A few words about the key operating metrics. Net premiums written grew by 22%. We had a slight increase in a combined ratio that was due to, as I mentioned, we acquired Aldagi in the second half of Q2. The full period was not reflected. That is due to the low base, but adjusted for this, the normalized combined ratio is mainly, broadly, the same year-over- year. It's in line with our expectations. Going to the number of individuals, we are also in line with our strategy. We want to decrease the presence in the state tenders, and to increase the direct insurance quantity. That reflects, the figures reflect the above-mentioned.
We decreased our presence in the state tenders by 30% in terms of the number of insurers that was, grew, and that was partially offset by the direct insurers of the corporate and the retail by 12.8%. Key operating highlights for Aldagi and Imedi L. As I have mentioned, we are running two brands there. Imedi L has recorded a 17% increase. We are really paying attention to our operational excellence and the service. What we did in Q2 was that we launched the new regulation that all claims that are submitted via online are settled within 24 hours. I would say 95% of our claims, so 95% of our claims that are submitted online via portal or the app, are settled within 24 hours. We are in line with our strategy of digitalization.
In Q2, Imedi L has launched a new application that gave the opportunity to decrease the occupancy of our call center from 70% to 30%. We will have some more initiatives coming in terms of the digitalization in Q3. The main focus also in the coming quarters will be service, excellence in service, and diversified provider, medical provider database. On the other hand, Aldagi continues to be the shining star in its class. They have also recorded a 10% increase and managed to increase their premiums by 10%, offering the highest ticket size on their health insurance services and making them the market leader, the best in class in their peer providers of the medical insurance service. Constant quality and diversification and different offerings, premium offerings of health insurance gives the status of Aldagi to be the best in class.
As I said, we have a really good June and July, I mean July and August, and we are expecting even better figures in Q3. A few considerations to remember and a few important developments in the insurance business. The first and the one that I'm really proud of, Aldagi became our P&C company. Aldagi became the first company in Georgia with the investment grading, and the reputable investment, reputable rating agency has underlined the strengths of the balance sheet and the healthy portfolios that are managed through the prudent underwriting practices and the disciplined underwriting that is translated to highest ROEs that we produce constantly and have a track record of it. Both of our health insurance providers managed to increase their rates and tariffs, and that's on the back of the improved services and the back office efficiency.
We have the highest rates in both insurance lines in P&C and business, respectively 76% and 85%. That's a record high renewal rate for the insurance business, and that underlines the resilience and the customer loyalty of our customers. That's it, and I will take questions at the end. Thank you very much, and I will pass the floor to Irakli Gogia, the CEO of our healthcare business. Thank you.
Hello, everyone. I'm Irakli Gogia, CEO of the healthcare services business, and today I will walk you through our latest results. We delivered double-digit revenue growth in the second quarter. Our EBITDA grew by 36%, with EBITDA margin reaching 20%. Notably, combined EBITDA growth over the past four consecutive quarters comprised 51%. Besides, over the past 12 months, net debt to EBITDA decreased from 5.1x- 3.9 x. Next slide, please. In the beginning of 2024, we identified five strategic pillars to concentrate our efforts on, which are outpatient development, clinical quality improvement, nursing competence improvement, utilization and efficiency improvement, and asset location. Outpatient direction is a major focus area for us due to its strategic advantages such as negative working capital need, ability to apply inflation, less dependency on state funding, higher profit margins, and higher ROICs. Our efforts have delivered notable results.
The share of outpatient services in total revenues of large and specialty hospitals increased from 33% to 37% in the second quarter only. We plan to apply AI capabilities in radiology diagnostics and consultations to further enhance our position as a leader in outpatient services. Our flagship hospital and diagnostics business are both JCI accredited, while all other hospitals within our network hold internationally recognized accreditations. We reorganized clinical quality boards, which resulted in substantial improvement in clinical quality. As a result, demand for our hospital services has increased significantly. Some of our hospitals have had a negative reputation among patients. We flipped the trend through notable improvements in clinical quality and safety. Now, one of these hospitals has the least infections in the country, and others are very preferred destinations for our clients.
Over the past quarter, we have attracted 11 doctors contributing to circa GEL 10 million annual revenues. On the nursing competence side, we opened six training centers financed through external donations across Georgia that enabled us to increase our group's nursing capabilities and quality as well. We will continue to invest in this direction going forward. In terms of utilization and efficiency improvements, we increased the bed occupancy rate by more than 6 percentage points compared to the second quarter of 2024, while simultaneously increasing the number of beds by 94%. Our revenues increased by 18% during the second quarter, while our expenses increased by 14%, translating to +3.8% operating leverage, resulting in EBITDA margin increased by 250 basis points to circa 20%. On the asset reallocation, we are constantly identifying alternative opportunities for efficient usage of our properties, beds, and hospitals.
Based on this, we have downsized several departments in order to enlarge the operation direction. In addition, we dispose of some unused and low ROIC generating assets. Next slide, please. In our hospital business in the second quarter of 2024, we delivered the revenue growth of 17% and the EBITDA growth of 34%. Generally, operating cash flows are much stronger in the second half of the year. This is caused by considerably lower working capital need during that period. In second Q2 2025, we had an EBITDA to cash conversion of 88%, which is historically the highest for this period. It was a result of the improvement in the working capital to revenue ratio from 25% - 21.5% in second Q2 2025. Next slide, please.
In our polyclinics business, the number of admissions increased by 11%, and in the diagnostics business, the number of tests performed increased by 15%, which resulted in revenue growth of 27% and EBITDA growth of 47%. In the diagnostics business, we still operate at below 50% capacity and intend to increase our utilization significantly going forward. That concludes my presentation, and let me hand over to Giorgi Alpaidze.
Thank you, Irakli. Hello, everyone. Let me quickly walk you through the evaluations of the excellent portfolio performances that were just presented by the CEOs. Starting with the overall view, at the semi-annually, we do the independent evaluation reviews of our portfolio valuation. Again, in June, this was done by Crowe, the independent third party who does this every six months. Based on these valuations, to summarize, about 50% of our portfolio was at the Alliance Finance Group, and the rest was within our private portfolio company, where the largest business continued to be retail pharmacy, followed by healthcare services and insurance. Emerging and other businesses continue to be in the low 15% range, and in this case, it was 12%, slightly down from 14% in the previous quarter.
Moving on to the next slide, you will see we wanted to show you how the multiples have evolved over the past 12 months. Here you can see that in terms of the retail pharmacy, the multiple has now stabilized at around 8.2x EBITDA. In the insurance, we're looking at slightly less than 10 x, and that's where the multiples have stabilized. In the healthcare services, we saw the multiples come down slightly again, this time to 9.9 x, but we think this is more or less the area where it will continue to stabilize. A key thing has been in this quarter that, and for the first time over the last 18 months, we actually saw that discount rates have come down as part of the independent valuation report, and that was largely driven by the tighter credit spreads that were observed in the second quarter.
From business to business, they differ, but we saw about 50- 100 bps improvements within our WACs. As we go through individually, actually on the next slide, we will see the portfolio value development. The one change here has been that as we exercised our put option in the water utility for a 20% stake, we moved that away from the portfolio. It was classified as a receivable at the end of the second quarter, and we received all the cash on July 29 last month. In terms of the portfolio movements, the largest gain was from Alliance Finance Group that contributed more than GEL 500 million to our portfolio. The private portfolio companies increased by GEL 76 million, where the largest valuation gains came from retail pharmacy of GEL 42 million, insurance close to GEL 30 million, and healthcare services about GEL 20 million.
Our portfolio finished the quarter at a record high, GEL 4.5 billion. In terms of each individual business and where the values came from, the biggest drivers of the value creations continue to be EBITDA growth that we observed across all our large portfolio companies. In retail pharmacy, we had GEL 42 million value creation, the increase in the enterprise value. There was about GEL 9 million decrease in net debt, largely because of the dividends that were paid by this business. As Tomika presented earlier, the adjusted net debt to EBITDA continued to improve here, and now it's less than the 1.5x targeted level at 1.4x. In insurance, the growth in the operating performance delivered about GEL 28 million operating performance growth, which when combined with the dividends received was the total valuation gains for Georgia Capital of around GEL 35 million.
Leverage share also continued to come down, which is now at 0.4x , and this is the leverage that we took for the acquisition of Aldagi. The last business is healthcare services, which also delivered GEL 40 million growth in the enterprise value that was slightly offset by the growth in the net debt. Overall, GEL 20 million + value creation from this business on the back of the continued improvements in net debt to EBITDA, which is now at 3.9x , way down from 5.4 x that we had there last year. This is all about valuations. Briefly about the liquidity, we continue to have strong liquidity. When we count in the GEL $70 million that were received in July as part of the 20% water utility sale, we now have more than GEL 125 million worth of liquidity. That's a significant improvement from previous periods. Our gross debt is GEL 150 million.
Net debt as of today is less than GEL 25 million. Briefly about the outlook for the dividend flows, in terms of the dividends, we continue to expect again GEL 180 million, but you can see that all but GEL 75 million dividends have been received up until now. This also includes the dividends from Bank of Georgia Alliance Finance Group that were received in July as well. The GEL 75 million we now expect to be comprised of Bank of Georgia interim dividends plus the dividends from private portfolio businesses spread across pharmacy, insurance, auto services, and renewable energy. One key thing to highlight before I finish is even though the outlook for the dividend income is similar to last year, on a per-share basis, given our continued buybacks of our shares, it has grown approximately 14%.
This, combined buybacks with the strong operating performance, which is our value growth story, as you know, has been contributing to these very strong dividend flows. With that, I'll hand it over to Irakli for the wrap-up and conclusion of today's presentation.
Thank you, Giorgi. Let me wrap up. Strong energy growth, NCC ratio improvements, very strong operating performance, big cash pile after the sale of the 20% of water utility. Buyback program is GEL 300 million buyback program is ending a year and a half or a year and four months before the deadline, which I'm extremely, extremely happy about this development. We have an overall more than 14 million shares bought back in GCap's lifetime, nearly 30% of our share issuance. In terms of the outlook, GEL 700 million capital return program, including deleveraging, share buybacks, and dividends, delivering our value growth continues through the NAV per share growth and EBITDA growth, obviously. Our new NCC ratio is 10% throughout the cycle. We have a very strong economic outlook. We are pretty bullish on the future of the GCap and Georgian economy. Let's move to the Q&A session.
I'm going to share a question.
Thank you. Yes, thank you, Irakli. Let's start with taking live questions. We have [Dimitri ] who wants to ask a question. [Dimitri], please go ahead. You can unmute yourself.
Hi. Thank you for the opportunity to ask the question. Congrats on strong second quarter results. I have three questions, please. The first one is on the performance of your major private assets. It was very strong in the first half of 2025, and I was wondering if you see any upcoming risks for your major private assets in the second half of 2025, which we should be aware of. The second question is whether you expect any M&A in the second half of 2025 for your major private assets, maybe something similar to what you did with insurance last year. The last question is a general one. Once your discount to NAV comes down and you will look into the new investment opportunities, do you have an industry in mind which you would like to invest in? Thank you very much.
Thanks for the questions. Let me start from the end. In terms of the industries, we don't like to talk about it openly, what we are targeting, but we have some industry select. Overall, we like asset-light because Georgia Capital, in our experience, asset-heavy industries consume cash, and we may need cash for the buybacks if the share price is weak. Therefore, we think that the asset-heavy industries are not appropriate for Georgia Capital, being basically the listed investment, closed-end investment fund. For that structure, the way Georgia Capital is organized, I think that asset-heavy industries are not good for us. As discount shrinks, obviously, investment opportunities will come, and we will realize them. One thing which we are very open about investment into the industry is education. We are increasing in education, our presence.
We are investing organically, as well as through M&A, and you should expect that's happening over time. To move to the other question about the outlook for our operating companies, overall operating performance in the first half was great. Second half, we expect also good operating performance. Macro is strong. Foreign currency flow is strong. I don't see a reason why the second half should not be strong operating performance for our portfolio companies. There was a third question. Sorry, can you remind me?
Yeah, it's about M&A, I guess.
Potential M&A. We don't, right now, we usually don't talk about it. You know, we cannot talk about it, but your guidance is basically our share price. Less discount we have on the NAV per share, percentage-wise, or NAV discount, more appetite we have for the investment in terms of the M&A. Also, we are always looking at opportunities to divest some of our asset-heavy businesses.
Thanks, Irakli. Thank you so much.
Thank you.
I'll take a question from [Harvey], and then I'll read out the questions that came through the Q&A. [Harvey], please go ahead.
Yes, sir. Congratulations on a really good quarter. I want to thank you for getting ahead of the PFIC issue. It shows real investor caring, which a lot of I've seen holding companies ignore completely and create real problems. Thank you. I have a question about the wholesale and the pharmacies. Can you describe a little bit more? What is that business? What is the expected scope of it? It mentions in the presentation that it may affect your actual retail. I wasn't quite clear on how it can affect your own retail sales. If you could explain that a little more.
Sure. Just Harvey, just to comment on PFIC, as I said, we are very much committed to not become PFIC. We are actually, it's part of our kind of main target. We will keep an eye on it and we'll update you as we go. Regarding the wholesale, I think Tomika is in a better position to talk about it. It's Tomika's strategy to expand in wholesale in the region, especially. Tomika, maybe you talk about this.
Thank you.
We can hear you, Tomika. Please go ahead.
Okay. Thank you for the question. Let me say a few words about the structure of our wholesale business. That was the first part of the question, I believe. We are selling to the pharmacy accounts, so-called, which are the big players, our competitors, in fact. The second part is that we are selling to the independent small pharmacies, traditional trade pharmacies, let's say. The third part is the special projects, which are the government tenders and hospital channel, and so on and so forth. This is a three-part. What I have mentioned is that we had the brands which we were selling exclusively into our own pharmacies. For our strategic brands, we opened the gate, in fact, and we started selling them into other key accounts and other outlets in order to develop that brand, develop that brand availability, and also grow sales.
You can see in the wholesale growth is really huge. It was something like 27%. That strategy gave us results. There is no sense to close the brands into your own retail because anyhow, the world is global, and our competitors were also getting products and different products via parallel import. That's another part. Do I answer your question?
What are the, how broad do you expect this business? You said it's regional. Can you become a distributor? In how many other countries? What is the potential size of the distribution business?
Okay, I got the point. That's an international part. We put it in a pie chart in the international part. For the international, let me first of all underline the region, what we believe it's a region for us. This is South Caucasus and the Central Asian, post-Soviet Central Asian countries, so-called STAN markets. The total population for them is 96 million. Now we have already contracts for new territories, commercial contracts for the new territories, for the med, and also in the parapharmacy. Some negotiations are ongoing. I can't, for the moment, underline the exact number and the exact figures where we're going to reach, but this we believe is a big potential, and we are working on that direction.
Okay, thank you.
Thank you.
Thank you, Harvey. I think here, the important part for us is that basically we take some of the brands which we cover them for the region. Basically, in a way, we act as interpreters between the foreign multinational companies and the locals. The foreign international companies would rather give us the ownership of the brand, of their brand for the region, and they enter the region through us than enter directly. I think that we want to realize that. Also, the trading comes through us, logistics comes through us. There is no extra cost by selling their products through us in wholesale to these STANs and the Caucasus countries.
We are focusing on that to expand the international wholesale business in both the parapharmacy and the pharmacy, and basically learn better the international markets for us to have a foothold for future expansion when our discount narrows and we will be able to invest.
Thanks, Irakli. I'll take a question from John and then move to the Q&A questions. [John], please go ahead.
Hi. Thank you very much for the presentation and congrats on the results. I'm quite impressed. I have two questions. One for the pharmacy business. 115 pharmacies in Georgia, I mean, it looks quite crowded. Do you have any idea of what's the white space, how much you can grow here if that store expansion potential is limited? What's the next leg of growth for this business? Is it Armenia? Is it the wholesale or international, as you mentioned just recently? The second one is on the healthcare business. Quite an impressive occupancy rate improvement. The business has been on an upward trend in the past three quarters, if I recall correctly, or four quarters. Maybe you can help us understand how you did improve this occupancy rate that much in the first half and talk a bit about going forward.
How do you see the business in terms of deleveraging and the margin recovery? Where do you see its margin leveling off in the next quarters or years? Thank you very much.
Yeah. John, let me address the pharmacy one again. I think that basically we grow, you're right, as a pretty overcrowded Georgian market. That's why we will not be expanding much of the pharmacies. We may be closing down some bad pharmacies, opening new ones. There will be no major growth. Our growth, as I mentioned, is through health, through the wholesale business, Caucasus and Central Asian countries, which is a significant growth opportunity for us. We act as a counterparty for international multinationals with our excellent management team to be their counterparties for the distribution in that region. We have been picking up some contracts where we are becoming a distributor for the wider region. This is a big growth opportunity. Also, in terms of M&A, we can grow into the neighboring countries. Armenia, especially, is an interesting country to grow pharmacy chains.
We are actually organically, we are growing the pharmacy chains in Armenia. Very, very interesting country for us for the growth. We see if there will be M&A opportunity. In terms of the growth for the pharmacy business, locally we continue to improve. Internationally, I think the sky is the limit there. In terms of the healthcare question, I will ask Irakli Gogia to jump in and talk about his and his team's achievements for the excellent growth over the past three quarters.
Thank you, Irakli. In terms of occupancy rates, how we managed to increase that, it's primarily driven by quality improvements in the hospitals that are closely connected to the creation of a very effective board at the head office level. They are managed by the doctors who work in the hospitals. We also attracted some good, very star doctors that also increased our occupancy levels in the hospitals. We believe that we are having a significant market gain because of those factors, and that results in the occupancy rate increases. On the margin side, we think that the margin is mainly EBITDA margin is getting better because of the increased share of outpatient services in our revenues, plus the additional services that we are launching and providing for the customers are marginally accretive. That means we are adding more, let's say, good services for the business that have high margins.
We expect that the margins should be at least 25% in the medium term. On the leveraging side, we target to decrease the EBITDA to net debt for under three. That answers your questions, I believe.
Yeah. Thank you very much, Irakli. Maybe I'll follow up. I remember there have been some couple of regulations in the past regarding the emergency room or something, yeah, around that. Is there any other regulation that is upcoming in the healthcare business, or it's more stable now, operating environment from a legal point of view?
It's now a more safe environment. The regulations are always ongoing. We expect one to come next year, but it's not a negative. It doesn't have a negative impact. We don't anticipate a negative impact, at least for the medium term, for those changes. Generally, we try to soften these regulations to not hit us much. We are not afraid as of now on the regulation side, etc.
Yeah, good to hear. Thank you very much, and congrats on the results.
Thank you, John. Maybe I'll read out the questions that came through the Q&A. The question is from [Neil O'Connor]. Congratulations on another great quarter at Georgia Capital. Your
Market cap, to over GEL 1 billion. Now you are effectively delivered. Will you be looking to make acquisitions? If so, which business area, countries, look interesting?
I mean, our investment theme is, it's not only the deleveraging, it's also the NAV discount. The NAV discount is pretty high. Right now we cannot really make big investments. We are committed to the buybacks and we will hunt down discounts as much as we can. Once the discount improves, I think our hands will be untied more to invest. With this presentation and with large companies' presentation, I want to show you also opportunity for them to grow and invest, locally, also internationally, that we have investment opportunities within our portfolio companies. We like bolt-ons. We are looking internationally. We want to get more comfortable and we are moving in with caution. At the same time, we want to learn more of the operating environments there. For instance, in Armenia, we've been operating our pharmacies for a while now.
It's a small portion, but actually we know nitty-gritty of operating in Armenia through our pharmacies. That's a kind of a, you know, maybe there's an opportunity in the future, basically for us. I guess that's pretty much on the investment side. There's a second part of the question, I think.
Yes. Is the MBGF expiring intended to weaken Lari?
Basically, the Lari is not intended to weaken. It would appreciate even further if the National Bank of Georgia would not have bought it. It was GEL 2.75 Lari exchange rate before the quarter, before the major buying of GEL 700 million+ in the quarter. Basically, the appreciation took it to GEL 2.7. Even the National Bank was buying. I think that the FX intervention is more focused towards growing the reserves, while the Lari appreciates slowly. If not this big acquisition of the Lari, the FX exchange rate would have gone to GEL 2.5, basically. On the other hand, you have more Lari coming into the market and that may cause the pickup in inflation. That's what we saw. We saw the small pickup in inflation, but we are not afraid of that.
We don't think that it's going to be a major problem going forward, the inflation in this country, as countries are also growing pretty fast.
Thank you. The next question is from [Hongb o Yan]. Can you comment on the insurance company business's development plan coming with the improvement in the credit rating?
Can you have Giorgi, please, to talk about it? It's our CEO. Giorgi.
Sure. Basically, there are three main aspects that are how Aldagi will benefit. Firstly, it's the corporate clients. By upgrade, we are more, the clients more trust Aldagi, I mean the big corporate clients on the local market, and our corporate sales are more brave in terms of the cooperation and acquiring the clients. This gives us a real advantage in terms of the competition. The next one, and the bigger one, I would say, is the reinsurance business that we entered a few years ago and we announced that we allow our internal direction. It will be Aldagi capturing the opportunity in two directions. The first direction is the local reinsurance that Aldagi insures the risks from the local small companies because there are 19 insurance companies. As you know, recently the markets have been quite harsh for the reinsurance. We found an opportunity there.
We provide them the Aldagi, I mean, the internal direction. It's not another company, it's an internal division, but we have a Chinese wall between insurance and the reinsurance internally that provides the local reinsurance for the local insurance companies. That gives the local companies even more transparency by this upgrade because besides the credit rating, we've been upgraded by a financial rating. We became B+. B+ is a quite high rating for the insurance companies all over the world. Mainly, mostly all in the region, mostly all regulators accept reinsurance. The third part again is the reinsurance, but the regional part. We said that we'll be entering the regional reinsurance market. By the regional, I mean Armenia, Azerbaijan firstly, Turkey partly, and Kazakhstan, where we see the opportunity. Before the upgrade, we were not quite eligible in their local regulations.
By this regulation, we are accepted by the regulators of those respective countries, mainly the supervision agencies or the national banks of those companies. Aldagi will be on their list as the reinsurer. Mainly, this is a big opportunity for Aldagi on the local market and on the regional market. To underline, we take it quite cautiously. Of course, we love to taste, but we need to filter the risks. We are not jumping into it. This opens hands to us to be more active in this additional revenue stream that we see an opportunity, big opportunity there.
Thank you, Giorgi. I think that Giorgi and his team delivered excellent results. Being the first Georgian company to be investment grade, that's a big achievement. This is ahead even before the country became investment grade. I think that our management team has done an excellent job. We are really looking forward to actually understand the regional market better by doing the reinsurance. As Giorgi said, we are not going to do a big business in the beginning. We will slowly step up and learn the international business. We will be better repositioned to understand whether in the future there are many opportunities by doing the reinsurance from this country. We want to step up the reinsurance business, and the investment grade is a key milestone for that.
Thank you. Thank you both. The next question is from [Brad Skibitzki]. What margin do you target in a pharma wholesale business?
Tomika, can you please address this one?
Thank you for the question. Margin now, we have a 20%+ in the wholesale business, but the direction we are developing is around 25%, which is the big players like Pharmacy Accounts and other pharma retail. What I want to underline, in order to compare with the retail margins, we need to take retail direct EBITDA margin, which is 15%. We will compare direct margin of retail business to the wholesale business. Wholesale business margin, which translates later into EBITDA, is higher. The second, what is attractive in the wholesale business is that it is less capital it needs. It's less capital expenses it needs. That's why we have for the growth, we have more potential in wholesale and for the business and financials, it's much better what we believe. I believe I answered.
Thank you. The next question is from [Hongb o Yan]. It's about the education business. The new school year is about to start. Can you comment on the outlook of the enrollment prospect, campus occupancy expectations?
I mean, the overall expectations are similar, more or less, maybe a little bit weaker in BGA-based occupancies due to the disputes. We have these minority shareholders. The rest of the businesses are performing very well. Tech business also performs, but not as much as well as we want to. We hope that we will turn this around.
Thank you. I guess we don't have open questions for now. We're slightly over.
Thanks a lot for your questions and for your time. Please continue, be tuned. We are on a very good path to grow Georgia Capital on the next level as an investor in the region. Thank you very much.