25113 - Detroit Investments

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Summary of Proposed Investment

Project Number

25113

Company Name

Detroit Investments

Date SPI Disclosed

Jul 21, 2006

Country

Eastern Europe Subregion

Industry

Agribusiness and Forestry

Projected Board Date

Aug 24, 2006

Status

Completed

Sector

Soft Drink

Date Revised SPI Disclosed

Nov 15, 2007

Department

Gbl Ind, Manufact, Agribus & Services

Environmental Category

B - Limited

Previous Events

Approved : Oct 30, 2006
Signed : Nov 8, 2006
Invested : Mar 7, 2007

Project Description

Detroit Investments Ltd. (DI or the company), a Cyprus-based entity, is the main investment vehicle of the Detroit Group which is involved in the production and distribution of beverages (beer, mineral water, fruit juices) in Belarus and Russia. DI is also the sponsor of two IFC projects: DBBC and PIP-Vladpivo.

Detroit Investments requested for further IFC support as the company expands into the juice sector in Belarus and the IT services sector in Russia. IFC’s investment and participation in this transaction will facilitate the establishment of the first commercial juice company in Belarus via the privatization of underperforming assets and support DI, an existing client, as it diversifies into a regional player and enters the IT services sector. DI will be acquiring a minority stake in BAC, a Russian IT services provider, that provides systems integration and business application services to the agribusiness, finance, telecommunications and transport sectors.

Note: This SPI was updated to incorporate information about DI’s investments in the IT sector in Russia in lieu of its original plans to invest in the retail sector in Belarus.

Sponsor / Cost / Location

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	35.50
Equity	4.50

Development Impact

- Private sector development:

DI plans to expand in the juice sector via the privatization of underperforming assets in a frontier country. To date, there has been negligible progress on the privatization front and little Foreign Direct Investment (FDI) in Belarus. DI’s Investment Program is likely to be a catalyst for further FDI. DI will rehabilitate and transform idle assets into a juice plant that will be comparable to international production standards. This will result in the production of safe and affordable juice products that will be available to a wider segment of consumers and serve as a vital source of vitamins during the colder season. The successful privatization of a high-visibility company will have tremendous demonstration effects beyond the immediate sector.

- Employment and living standards:

The juice plant will be significant employer in their respective local municipalities. These operations will create new and direct employment and provide indirect job opportunities along its supply chain. Additional jobs will also be created indirectly as the company develops its transport and distribution networks.

In the IT sector, BAC has more than 500 employees and is expected to employ more than 1,000 people in the next 2-3 years. BAC has in-house training programs on leading software applications that provide specialized knowledge and capacity building for its employees.

- Backward and forward linkages:

The establishment of the beverage operations will help create a class of micro-entrepreneurs who run small retail outlets, kiosks, restaurants and transport companies. This investment will also facilitate the transfer of modern distribution, warehousing and retail techniques and enhance supply chain efficiency in Belarus.

- Offering consumers a more affordable and reliable IT services

The development of local IT service companies will provide end-users will more affordable, reliable and efficient IT services.

IFC is supporting private sector development in Belarus by facilitating the development the first commercial juice producer that country. The development of this enterprise will result in substantial employment opportunities both at the enterprise level and along the supply chain. IFC’s investment in this frontier country will have a catalytic effect on other foreign investors.

This is an extension of IFC’s first investment (DBBC) in the agribusiness sector in Belarus and is the second investment in the country since its membership in 1993. This transaction is an important opportunity for IFC to participate in the development of the private sector in this state-dominated economy. In the proposed transaction, IFC will play an important role in:

- providing long-term financing to upgrade idle assets to international productive standards;
- promoting further foreign direct investment in Belarus where such investment has lagged; and
- creating incremental jobs within its operations and along its supply chain.

IFC is supporting DI in its investment in the IT sector and thus facilitating access to funding for a developing IT company who would otherwise not have access to adequate financing to support its growth.

Contacts

For Inquiries About the Project, Contact

Mr. Nicholas Henderson-Stewart
Detroit Investments Ltd.
3/1 Barykovsky Alleyway
Moscow, 119043
Russia

For Inquiries and Comments About IFC, Contact

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IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors' consideration of the proposed transaction. It is not an offer of shares to the public and is intended solely to enhance the transparency of IFC’s activities. This document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. The following SPI is disclosed in accordance with IFC’s Policy on Disclosure of Information that went into effect April 30, 2006.

The map is for illustrative purposes and does not imply the expression of any opinion on the part of the World Bank, concerning the legal status of any country or territory or concerning the delimitation of frontiers or boundaries. Country borders or names do not necessarily reflect the World Bank Group's official position. In some cases, available project location information is limited to the country of the project's activities. Locations are approximate.

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