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Environment Conducive for Business -Nimal Perera
A rapidly growing environment group in Sri Lanka believes that despite many saying that the environment is not conducive to business, companies are doing well.
Nimal Perera, Deputy chairman pan Asia Banking Corporation (PABC) Plc, in an interview with the Sunday Times FT insisted that all banks in the country are making over a billion rupees and that Royal Ceramics Ltd (ROCELL), under the Vallibel Holdings umbrella where he functions as the Managing Director, has doubled revenue and profitability. Excerpts of the interview.
How many companies are under the Vallibel Holding’s umbrella?
We have 40 companies.
How many are listed in the Colombo Stock Exchange (CSE)?
We have six companies - Connaissance Holdings Ltd, Fortress Resorts Ltd, Hotel Reefcomber Ltd, Royal Ceramics Lanka Ltd and Vallibel Powel Earthena Ltd and LB Finance Ltd, all of which we have controlling interest. We have Asian Alliance Plc and Lanka Ceramics Ltd which are our associated companies. PABC and Sampath Bank where Mr Dhammika Perera has 15 percent, are connected to us.
What are your hopes for PABC?
We want to make it another leading financial institution in Sri Lanka such as Commercial Bank and HNB.
What about the capital adequacy position at PABC?
Right now we do not have any issues with the capital adequacy. We have been given time to address these issues.
Are you planning to stand on your own with PABC or are you planning to merge with other banks?
Right now, we do not have any such ideas, but we see globally that ‘’most financial institutions such as Standard Chartered Bank, HSBC and Citi Bank have struck merger and acquisition deals. That is how they have become so big. This might also happen in Sri Lanka in the future. Various banks may merge with each other in order to become stronger.
Are you looking at a merger option with PABC and Sampath Bank?
Right now we do not have any thoughts or plans, but we never know in the future. With globalization and new market trends we cannot forecast the future, but presently we do not have any such plans.
On issues relating to the bank directors and their ages?
I totally agree with the Central Bank Governor’s thinking especially when it comes to financial institutions. The age, credibility and transparency are important. But the shareholders should have the proper ownership to speak up. From time to time we need to have new leadership. Jack Welch leaving General Motors is a good example. You should always allow new people to come in. Shareholders should have the freedom to be directors since they have their own interests. To go forward you need new leadership.
Would you be at any point in time be looking at merging your two finance companies with PABC?
We do not have any idea right now, but in time to come we may. Presently both firms operate independently and we do not have any idea to merge now.
Lanka Ceramics which is Royal Ceramics Ltd’s (ROCELL’s) competitor invited Mr Dhammika Perera to join the board. How can competitors co-exist on the same board?
We are not enemies. We are not like Pepsi Cola and Coca Cola. We are living in a small country and we know each other and they are all well respected businessmen. Both companies realized that and in order to achieve wider synergies we decided to get together.
How well are your hotels doing?
Generally Amaya Hotels are doing alright. I cannot say that they are doing well because of the current situation in the country. With the various travel embargoes and warnings specially it is difficult. European countries are major contributors to tourism. Without them you cannot have very successful operations, but Amaya Hotels as well as Reefcomber made profits last year. But Fortress did not, mainly because our investment on the hotel was high. It functions on a different concept. With the current situation these kinds of tourists do not visit Sri Lanka. Their thinking and lifestyles are totally different and they do not want to risk their lives with the current country situation and the travel embargos and warnings that we have. Fortress has a decent occupancy at 45 percent. Due to the high initial investment, our return is less at Fortress.
What happened to your hotel projects in Wadduwa and Weligama?
After the bad experience at Fortress such as the high investment coupled with the country situation and the peace agreement being terminated, we thought we should postpone these projects.
Are you looking to sell these lands?
No. Land is expensive in Sri Lanka. We have six acres in Wadduwa and 15 acres in Weligama.
LB Finance was planning to assemble cars some years ago. What is the status now?
We did have such an idea, but it did not work. It is very difficult to compete with Indian and Chinese manufactures. Our market is small is very small, unlike China and India.
What percentage of exports does Rocell export?
We do not concentrate enough on exports. As it is we find it difficult to cater to local demand due to capacity issues. We export about five percent just to keep momentum going. It is very difficult to compete with India and China, especially Chinese products, because they have low energy costs, where as ours are very high.
What is Rocell’s arrangement with Lanka Ceramics?
Lanka Ceramics has ball clay and Cavolin mines. We buy from them. They are of our major suppliers.
What is your competition in the tile market?
We are the market leader. We do not have any competition with Lanka Tiles. We only have competition in the Indian Market.
What business brings in the most money to Vallibel Holdings?
Our chairman’s (Dhammika Perera’s ) thinking is that whatever he earns, he will reinvest in other businesses. He is not taking a cent of profits.
What about the casino Business. No one has really spoken about them.
This is also a legal business. I personally do not get involved in casino businesses, but I proudly associate with them.
These are part of us, they are associated with us and it is a known factor and I am proud to talk about it. It is a good business, owned by Sri Lankans. Slowly many countries are starting this business, because of tourism.
What are the new ventures?
We are going ahead with five or six hydro power projects all situated in the up country. Within the next two or three years about three to four will come into operation. Each project will cost over a billion rupees.
You have not touched Telecom. Why?
We missed this opportunity. We had the opportunity to take over Hutchinson Telecom. The proposal came to us, but we ignored it. Even Lanka Bell proposal came to us and the same thing happened. Today there is one Telecom company available, but their asking price is too much.
What are you doing about the missed opportunity?
Now it is too late. The industry is too competitive. However, the prices such as the call charges will come down and all the super profits made by the telcos will reduce when other operators come into operation.
What about getting into media?
This is a very sensitive subject. We do not want to take up troubles. These are very sensitive and critical industries.
What is your opinion on the macro environment for business in the country today?
Right now the country is doing well. Many say the environment is not conducive to business, but I do not agree with that. The country is maintaining a good economic growth rate. It is true that the cost of living is increasing due to various factors such as the oil price hike.
When you have a war, it is difficult to maintain a decent inflation rate. In spite of all these things, all companies are doing pretty well. Look at the bank’s net profits.
All are making over a billion rupees. ROCELL has doubled revenue and profitability.
So how can anyone say that the country is not doing well? How can they buy tiles if the economy is not doing good?
How do you maintain the close relationship that you have with Mr Dhammika Perera?
This is purely based on trust, loyalty and honesty. With these qualities intact, it is very difficult to break a relationship.
(SOURCE : Sunday Times) |
