INDUSTRIAL INVESTMENT

INTERVIEW: Yaroslavsky eyes banking sector following recent flurry of investments

DCH Group owner has been in the news recently following a number of high-profile acquisitions

INTERVIEW: Yaroslavsky eyes banking sector following recent flurry of investments
Oleksandr Yaroslavsky has made a number of headline-grabbing investments in recent months and is now looking to enter the banking sector
Business Ukraine magazine
Monday, 19 June 2017 17:27

The owner and president of the DCH group of companies Oleksandr Yaroslavsky has recently engaged in a flurry of investment activity. The Kharkiv businessman has acquired controlling stakes in a number of industrial projects, while DCH is now looking to purchase one of Ukraine's largest banks, Prominvestbank. Mr. Yaroslavsky explained what is driving the current expansion of his business interests.

 

The range of your recent investment activity is geographically diverse but the majority of your investments have traditionally been in the Kharkiv region. What is the total investment to date into the Kharkiv regional economy?

It might be possible to provide an exact figure but it would not be particularly helpful. In broad terms, DCH investment in the Kharkiv region fluctuates at around the USD one billion mark. I began investing in my native Kharkiv region in 1995 with the establishment of UkrSibbank. This is my hometown and I am glad to have been able to invest in its development.

 

You have been involved in a diverse range of business sectors. Which of your investments mean the most to you personally?

It is difficult to say. All my investments are equally important to me. I cannot place them in order of importance because they all involve not only money but also investments in terms of time, energy, and nerves. For example, I find it impossible to compare an airport with a hotel or say that one is better than the other. Is Karavan shopping center better than Kharkiv Tractor Plant? They all demand my attention and financial support. For me, the most important thing is that all my investments operate effectively. 

 

In late 2016, you acquired the Kharkiv Tractor Plant - an iconic but troubled asset. Production has since restarted at the plant and on 7 June, Kharkiv Regional Administration Head Yulia Svitlychna voiced her public support for your efforts. What were the biggest challenges you faced in taking on Kharkiv Tractor Plant?

The immediate priority was to restart operations and get the plant back into the business of producing tractors for Ukraine. It was important to get the workforce back to the plant and on the payroll. The plant had been standing idle for an extended period, resulting in huge losses for the state and for me as the owner. Within a few months of the launch, we produced 400 tractors and brought more than 3,000 employees back to work - not including subcontractors. Production is now in full swing with taxes paid to the state budget, so I am satisfying my obligations as an investor.

 

What are the prospects for the plant and what potential do you see for the expansion of export markets?

In terms of tractor sales, it is clear that attractive niches do not stay vacant for long. As soon as there is any space in the market, it will be filled by competitors. The recent absence of Kharkiv Tractor Plant from domestic and international markets illustrates this point all too well. We are now working hard to restore the plant's former positions. The artificial pause in production last year was a great favor to our competitors, but now we are back in the game. 

In terms of export markets, it is still premature to discuss ambitious expansion plans at this point. The main victory of the past six months has been our return to the domestic market. Prior to this, Ukrainian tractors were absent at a time when there was significant demand for our products. We saw agribusinesses purchasing expensive tractors from the EU, often at four times the price of our products despite the fact that Kharkiv tractors are up to the same technical standards and in many ways actually superior in quality. Why should Ukrainian companies look to spend money abroad when there are quality local alternatives? In this context, our return to the domestic market is a big victory and a prerequisite for further growth.

Despite significant challenges, I am not disappointed by my investment in the plant. I remain fully engaged and see huge scope for further development. At the same time, I will continue to focus on other investments such as the development of Kharkiv International Airport. We are now working to attract as many new international carriers as possible to the airport. This is the key to the airport's continued success. I will also remain focused on the Kharkiv Palace Hotel, which is now the most popular official venue for events in the region. This is recognition of the hotel's status and reflects the world-class service and facilities it offers.

 

In May, the supervisory board of the Russia's VEB Bank confirmed that they had received a proposal from DCH for the purchase of their Ukrainian subsidiary Prominvestbank. Are you optimistic about completing this transaction?

I will not comment on this issue at present, as it is confidential information covered by non-disclosure agreements.

 

DCH recently acquired a 25% stake in the insurance company INGO Ukraine. Are you interested in expanding the Group's presence in the financial segment?

I have actually acquired 100% of this asset. Media reports have cited a 25% stake due to technicalities of the acquisition process as the registration of shares is currently still underway. This is an interesting and profitable asset. It will be a good fit for DCH Group.

I will certainly expand my presence in the financial segment. If the Prominvestbank acquisition is not successful, I will consider other banks. I have recently acquired several major industrial assets and I will need a bank as a financial tool to manage them. This is not a new sector for me. I understand what it takes to make a bank successful and efficient. For example, I established UkrSibbank, which continues to function successfully.

 

In May, DCH took over management of the Sukha Balka industrial asset formerly owned by EVRAZ Group in a deal reportedly worth USD 110 million. What attracted you to this acquisition?

We did not only take over management of the enterprise - I acquired a 100% stake. Back in 2010, I was forced to sell a number of industrial enterprises such as "Azot" in Cherkassy and UkrSibbank. But I have always gravitated towards the industrial sector and have a long record of investments in this segment. Industry is nothing new to me. I have acquired a lot of knowledge about the management of such assets, so the purchase of Suhka Balka made perfect sense. We now plan to increase production while reducing production costs. These are the two initial priorities.

 

What additional assets are currently on the radar for DCH Group?

Over the past year, we have acquired a significant amount of assets. At this stage, I would not want to say anything specific about further acquisitions in order to maintain a sense of intrigue.

 

As the former owner of Metalist Kharkiv, do you have any plans to return to football?

I really miss football, but there are currently no concrete plans in place for a return. Coming back to Metalist is not yet possible. The club is in an incomprehensible state at present. Other Ukrainian clubs simply do not interest me. If we were to talk about the acquisition of a foreign club, my response might be different - only time will tell.

 

Kharkiv International Airport posted a record number of passengers in May, with 84,300 people using the airport. How do you see the airport developing in the coming period?

I regard this new record as the result of the DCH Group's professional approach and hard work, but I do not expect the passenger record to remain in place for long. We plan to triple passenger traffic. We are regularly adding services for passengers and seeking to attract new international carriers. Given the circumstances in the eastern Ukraine region, the recent performance of Kharkiv International Airport is unprecedented for the European market.

Current airport development plans also depend on the continued improvement of the economic situation in the country. We are confident that the current positive trends will strengthen further and people will have more disposable income available for travel. Our development strategy reflects these expectations.  

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