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Proud to be involved

Interview - February 10, 2012
With a 135 year history, interests in agriculture, fisheries, construction, plantations, leisure or power generation, and associations with many global brands, Browns Group is very much part of Sri Lanka’s economic revival. Here, Mr Murali Prakash, CEO of Browns Group, discusses his company’s role

H.E. President Mr. Rajapaksa recently visited the UN and he described his experience as very positive for him personally, and also for all Sri Lanka as a whole. How do you think that reality differs from the International perspective that the International community has about Sri Lanka?

I think that for someone to speak about Sri Lanka, he has to make a visit to the country. Once they come and see the reality - the political stability, the freedom people have, the economic development, the opportunities from a regional and  local perspective - they will see that those preconceived ideas they might have had about Sri Lanka, have all arisen from the war. Today we are one country that has completely eradicated terrorism. With that, come all those freedoms I just mentioned. So in a nut shell, and with regards to your question, what people perceive and what the reality is about our country, are two very different things. Today, Sri Lanka is a vibrant society that has embraced peace and that is positively developing for its future.

When you look at the recent history of this country we notice that two of its provinces were basically excluded from the country’s GDP development. Now there is a rush to include these provinces into the country’s GDP and develop them. This is something where the government is very heavily involved and the private sector is also very actively participating. In what ways can the private sector contribute to building Bridges with the Tamil population and to further integrate the North and Eastern Provinces?

As a private entity, we are involved heavily in Agriculture and Fisheries and also several other Industries. When it comes to the livelihood of the people of the North and the East, agriculture takes a prominent place and this also accounts for about 12.5 to 13% of GDP. In these areas agriculture and fisheries are two key sectors. We provide our tractors and our marine engines for these two segments of the economy apart from host of other services that we provide from travel/tours to lifestyle products and services. Another way, in which we are involved in these two areas, is that we have put up a massive Regional Centre in the north and east in an attempt to take our services right to the doorstep of the people. This has already made them feel that the rest of the country wants them and needs them. This economic empowerment is what the private sector can do; and we are very much doing it; and not just us, but many private sector enterprises are also participating. In addition to this, Government is investing great resources in terms of infrastructure development. So I think once again, we simply need to reach out to this people, empower them economically and help them to standup on their own.

National Projects can also contribute greatly to reconciliation. In this sense, Hon. Professor Peiris, Minister of External Affairs, explained to us the huge campaign the government is doing internationally to promote Sri Lanka. This event could really contribute to uniting the people in Sri Lanka in a common project. What do you think it would need for Sri Lanka, what message it would send to the world if a Country Like Sri Lanka host the Commonwealth Games?

To me, sports mean always integration. Then you also have to look at the sport and where it is going to be played and how it can contribute to build societies. In this sense, the Commonwealth Games is certainly a sporting event that goes beyond the technicality of being called a sport. It integrates nations and races right across the world, the region and the country. I am confident that a mega event of this nature will definitely help to integrate all the parties in Sri Lanka economically, politically and socially. Furthermore, it will also contribute to integrate the region. Therefore, for me, it is an event that will propel a country like Sri Lanka to the next level, especially if you consider that we are located in a region that is expected to grow over the next two decades. I am fully supporting our campaign to host these games and I definitely think that it will do a world of good not only to us but also to the entire region.

Speak to us now about the country´s resilience, because even during the war, the economy kept growing at a 5% rate and even year, it recorded an 8% rate. What lies at the heart of this resilience?

In my opinion, and even though many people have a negative idea about it, I think that having an islander’s mentality is where our resilience lies. When you look at our history, you see that over the years, we suffered many invasions: the Portuguese, the Dutch, the English, etc. So no matter who invaded us, we have always had this resilience. It did not matter to us, who the invader was; we always concentrated on what was happening around us in trying to find a way around it. This is part of this what I call an islander´s mentality and what helped us also get through the war.

I remember that during the War, we lived in constant fear but we carried on with our jobs and our lives. Again with the 2004 Tsunami you saw people trying to help each other; hundreds of people out there helping one another to get back on their feet forgetting all differences. This resilience, in my opinion, means that you never succumb of the surrounding environment, but take things positively as they happen and try to overcome them. In a sense the negative in this is the fact that you try to accept anything but I guess that’s much better than being pessimistic.

It’s a fantastic mindset that has come from the islander´s mentality.

Sri Lanka is strategically located. All our interviewers have spoken to us about this. As the world´s economy shifts more and more towards Asia, Sri Lanka stands to benefit from possible international investments. How is Sri Lanka building competitiveness in global markets when it comes to attracting foreign investments?

I think Sri Lanka should play the Hong Kong – China combination. Also, our biggest neighbor, India, is an economic giant into which we have to tap. But also, look at us: we are a politically neutral country in the region. Furthermore, we have some fantastic Free Trade Agreements with India, Bangladesh and Pakistan, which offer great opportunities not only for Sri Lankan enterprises but for anybody wishing to do business in the region. You will not find a better place in the region that offers you: political stability and neutrality, economic and social development, plus its resilience and highly qualified workforce due our high literary rates. The skill levels are there for you to establish possible joint venture and reach out to the entire Southeast Asia, where you have a market of over 1.6 billion people. So our market should not be the 20 million in Sri Lanka but the 1.6 billion in the entire region. Let us think of the entire region as our own. 

So you definitely see Sri Lanka becoming a gateway to the entire SAARC Region.

Absolutely. We have a Government that has brought stability and I do not foresee anything going wrong or negative. Terrorism it’s a distant past for us. While some of our neighbors are having issues, our economic growth is 8% and will probably grow more. Our monetary and fiscal policies have brought us soundness; our unemployment rate has come down to below 4% and poverty levels from 12.5% in 2007 to 9% today.
Sri Lanka is fantastically poised in all areas to cater to the entire region.

Mr. Murali tell us more about Browns, of which, I am sure, is what you are most eager to talk about. This company has one hundred and thirty five (135yrs) years of history and it is one of the few brands that can boast three generations serving Sri Lanka. Today it is a well- diversified conglomerate serving to different sectors of the economy and with a turnover of  Rs 12 billion a year. How do you assess the role that your company is playing in today’s national economic renaissance?

Browns is actively participating in several areas of the economy. As I mentioned before, we are engaged in agriculture and, fisheries. In agriculture, we are the largest marketer of agricultural equipment. If we talk about Fisheries, it’s the same thing. In other sectors such as construction and plantations we are very much in. we have a general trading area where we provide from pneumatic tools to other home and office products, generators and hydro power. Besides this, we are present in the tourism and leisure segment with our hotels and airlines. Browns is definitely present in all the sectors that are contributing to building a modern Sri Lanka be it agriculture, fisheries, construction, plantations, leisure or power generation.

Browns has today a wide portfolio and is associated with over 70 reputed global brands such as Sharps, Olympus, Lexus, Exide, and many others. In what ways has this association with global brands been instrumental for your success?

These types of associations form the nucleus of the company. However, we also are diversifying. As you probably know already, today brands and trading account for about 40% of our net income but the fact remains that this is the core business of the company; and as a house  of brands, we have acquired this skill of being able to manage international brands, be it Olympus, FG Wilson, Sharp or whatever. So, definitely yes, these brands have been the core and  will continue to be the core, as we continue to expanding in that area.

Have you any Global Brand’s that you wish to attract?

We would like to get ourselves involved with large international brands. In this sense, we have already started talking to many people to see how we can expand and we strongly believe that new areas will open. Trading has been an area where we have been extremely active. In addition to this, our infrastructure, combined with our knowledge and competency, gives us the ability to leverage into many more brands. So yes, we are looking at attracting more of such reputed brands in diverse fields.

We are now talking about diversification as you just mentioned. I read in an interview which you had in LMD Magazine, that the economic climate of Sri Lanka, is perfect for Diversification. You mentioned healthcare, before. What are the sectors you are most interested in?

Healthcare is definitely one of them. We have a large ageing population and this requires greater and better medical care. As you know, economic development makes people more affluent, which in turn, lead them to seek private Healthcare. We have quantified and studied these factors as we see a huge opportunity in the looming in healthcare and also Medical Tourism. Thailand is very active in this sector, and yet, we have so much more to offer, not only in these sectors, but in Age Care as well.

Also, the second area is the real estate sector. If you look at any country, as the economy grows and develops, people acquire higher disposable income and therefore, will search for better houses. In this sense, we strongly believe that in one and a half years, there is going to be a boom in real estate for sure, so we are gearing ourselves towards that.

Then, of course, an area where many companies are involved in is leisure, so we are also getting involved in what we call the Leisure World. In this sense, we have secured a large property of about 6 acres, which we intend to use for banqueting and conference facilities, along with entertainment and shopping.

In addition to our ventures into these three areas, we are also looking at forward and backward integration with regard to agriculture and power. As a matter of fact, we are already into power and we are looking at co-generation of power through our sugar plantations.

So these are the five large areas we are looking at in the broad sense.

I see you are very present in the Marine engine sector, where you hold 56% of the market. With Sri Lanka poised to become a Maritime Hub, are you positioning yourself in any particular way to take advantage of this?

Indeed we are. Our intention is to go more and more into boat building and pleasure crafts. In order to make this happen, we are in contact with some overseas companies. In addition to this, we are looking at other possibilities as well, as we are always open to interesting opportunities. However I must confess that we have not looked at being an organization looking at logistics and the related areas from a maritime perspective but more focused on the marine engines and related extensions.

Looking at your annual report, we see that Browns experienced a 35% increase in revenue (Rs 3.1 bn), a 186% increase in net profit (Rs 2.1 bn) and a 230% increase in share price (Rs202.05). Where do you see the reasons for this tremendous success?

I think it was our core strategy, which focused on one thing: brand building. In 2007 and 2008, when times were hard, the first thing most companies decided to do was to cut down on advertising, reduce marketing spending and reduce training. These are areas that I never touched. I strongly believe that you spend to ensure that you build your brands because that is the only way people will know you. I persisted on building brands and in training people, so today, so many of our brands are market leaders. Brand building adds value and it’s an investment and not an expense.

In addition to this, we went and invested in diversification. For example, in 2008, we went into plantations. While there was risk due to the economic problems, no one wanted to invest. Nonetheless, we saw the opportunity, invested and heaps of profit came about because the price of rubber and tea went up. In addition to this, we also decided to invest in sugar, in which we are heavily involved in right now.

In my view, Brown´s success comes from a combination of factors: brand building, strategic investments and finally, our vision of building for the future value creations. In this sense, when the economy came out of the turmoil, our company was one of the first to benefit.

As we mentioned before, one of the big successes of 2010, was a 230% increase in share price (Rs202.05). How are you building shareholders value and why should institutional investors pick Browns?

Five years ago, this company had a market capitalization of just Rs 2 billion. Today –just five years after- we boast Rs 20 Billion. This is a 1000% increase in just five years and it speaks for itself. Investors should not need to go beyond that. Our asset base and our earnings per share are fantastic. When you look at our brands and our positioning in the market, I don’t see anyone with the capacity to dislodge us for the next couple of years. I might sound overoptimistic but this is a fact.

Finally, it is our sustainable business development model. From a strategic perspective, we have taken our Service Development and our Brand Development and we are taking our expertise into different areas. We are planning medium and long term, so that this sustainable business development model that we have brought, will ensure that companies that are good for today, will continue to be so, for another hundred years.

You have said that “CSR means building a sustainable business that reflects the principles we hold important and meeting our obligations to the communities in which we live and work in.”  What can you tell us about the Galoya Plantations project? What was the vision behind it?

I think we just felt that there was an opportunity there. We discussed it with the government and at that point, they were very much willing to go ahead with it. This is a Public-Private Partnership in Sri Lanka. We saw the opportunity, and when we visited the plantations, we saw that the factory had been closed for up to 14 years. So for us, it was a business proposition on one hand, and on the other making bringing livelihoods and prosperity to five thousand families. We saw that we could help the entire Eastern Region, which was really very much in the war zone. At the end of the day and after 3years of work, we are very proud of our accomplishments and having contributed to make this people´s lives better. Also, because people know us and trust us, it was easy. Browns is working with Lanka Orix  Leasing in this project. Today, if you look at the factory, almost 90% of it is done; plantations are being grown again and sometime next year, we will start producing sugar. With this, Browns and its partner Lanka Orix Leasing, are contributing to improving the lives of five thousand families.  So for me, it is huge and I feel a great personal satisfaction.

And that sugar will be used to produce natural energy (ethanol).

That’s another opportunity. Today they say Sugar is a by-product and there are lots of opportunities in it. In Sri Lanka, almost 92% of the sugar is imported, so even if you have another five sugar factories, we will still need to import. Therefore, there are tremendous opportunities in this area. We are looking at power generation using the byproducts and other possible add-ons.  

It is important to bear in mind that the implications of a country´s foreign policy are not confined to the diplomatic sphere alone, but that it also permeates strongly into the economic sphere as well. What role can the private sector play in branding Sri Lanka abroad?

I would go one step further: every citizen has a responsibility in this. Take, for example, a business delegation that is going to another country and has the possibility of speaking to hundred different business people about what Sri Lanka is. That is already a huge lobby that has the capacity to create a perspective there. If you tie up a business with another country, you are also selling a brand. It is as simple as that. We cannot and should not leave this communication about Sri Lanka, exclusively to the government. Even the Governments have limitations. After all, as private sector people, we have greater access to other business communities and people around the world.

I would like to end the interview by asking you the opposite question to my opening one. What are some things that the rest of the world, especially the West, still needs to learn about Sri Lanka?

We have spoken about commercial and economic aspects of which they obviously need to be aware of. Besides this, you have the diversity that the country offers. But most importantly, there is something about the people and the hospitality that we offer; it is second nature in us. People should know this and the world should know this. That here there is a country and people extremely hospitable and who have various skills.
After the war, the biggest problem that we have is that the outside world does not know the kind of reception they will receive in this country. Also there is this perception when it comes to Tamils and Sinhalese. People believe that they are like Cats and Dogs but it has never been the case.

Sir, you are the CEO/GMD of a company that has the Superbrand Status and that was chosen among the top 30 most valuable brands in LMD´s 2010 Brands annual. Your company is a flagship company of Sri Lanka. What would you like your legacy to be?

I would like Browns to be remembered as an entity that has helped to empower the nation economically and socially. If you look at our history, we were the first to introduce agriculture mechanization back in the 50´s. Browns has contributed tremendously to empowering the farmer so that he can increase his productivity. Also, we spoke about marine engines; already in the early 19th century, Browns has powered all the tea factories for over a century where tea is one of our largest exports. So I believe that I can boldly say we will be remembered as an entity that is corner stone in our country´s economy.

Your vision is to be a leading Sri Lankan conglomerate with a global presence by the year 2013. How would you like people to perceive the brand Browns?

I think now we will have to go into larger joint ventures and associations –regionally and globally- with some of the real big brands. There are two things in the vision in which we have to concentrate now: cutting edge technology and going global. We have to understand that the country is small, so when you look at the region, we are a small entity and therefore, the only way to propel ourselves to the next level, is by partnering with a giant offering the core values that we can bring in from a regional perspective. That is the route that I am taking to ensure that we truly remain global. Browns brand is a living matter that boasts of a heritage of trust and is everywhere in people’s lives.

What final message you would like to convey to our readers  about  Sri Lanka as an attractive investment destination and about Browns?

About Sri Lanka, I can say that many organizations and individuals have probably missed out on the opportunity our country offers. People speak about the Asian Tigers, but they should be aware that there is another opportunity right here. I am convinced that Sri Lanka is going to be and economic supersonic. Opportunities never go waste. If you miss out, someone else will grab them.

As for Browns, this is entity that has survived over 135 years. So if you want a partner of substance and reliability, then we are the ones for you. We offer the best of both Sri Lanka and of being your partner, as both are poised to grow.