National 5 (Spotlight Weekly)

Steady Progress

Even in a difficult year, the leading joint venture company registers growth

By BHAGIRATH YOGI

t a time when even products like food and medicine are finding it difficult to reach remote destinations within the country, Nepal Lever Limited (NLL) - a leading joint venture company’continued to maintain steady growth.

NLL management team : Successful strategy

While the domestic business recorded an impressive growth of 25 percent in turn over to reach Rs 881.5 million, the export turnover declined to Rs 354.5 million (down from Rs 836.7 million the previous year), company officials said.

Addressing a press meet here Sunday, Gurdeep Singh, co-chairman of Nepal Lever Limited (NLL), said that the companyís exports to India had declined last year due to changes in revenue policies by the government of India as well as due to introduction of duty on exports by the Nepalese government.

Added Sandip Ghose, outgoing managing director of the company, ‘despite the last fiscal year being perhaps the most difficult year for many industries in the country, the NLLís domestic business achieved a spectacular growth (of 25 percent), which was likely to be the highest sales growth of any industry in the country.’

Nepal Lever Limited reported a turn over of Rs 1236 million and profits after tax of Rs 42.6 million for the year ended in mid-July 2002. The board of directors of the NLL recommended a dividend of Rs 40 per share in their meeting in Kathmandu early this week.

Incorporated in 1992, NLL set up its factory at Basamadi, Hetauda in Makwanpur district in 1993 with a total investment of Rs 320 million. The company started its production in the areas of personal wash, oral care, skin care and hair care from 1994.

With well-known, popular brands like Fair & Lovely fairness cream, Close Up and Pepsodent toothpastes, Lux, Liril and Super OK soaps, and Wheel detergent power, Nepal Lever has become a household name across the country. It serves even the rural population in Nepal through its extensive network of 100 wholesalers and around 24,000 retail outlets.

Of its total share capital of Rs 92 million, Hindustan Lever Limited ñ a part of Unilever— owns 80 percent and some 2,000 Nepalese general public own 20 percent. Nepal Lever is one of the listed public limited companies at the Nepal Stock Exchange (NEPSE) Ltd., the only stock market in the country.

Rakesh Mohan : In the driver's seat

A leading fast moving consumer goods (FMCG) company, NLL has been exporting products to India besides occupying major share in the respective category in the domestic market.

‘We did not come primarily for exports. We needed exports to justify the economy of scale,’ said Ghose. ‘ Due to a series of initiatives and strong brand focus the domestic business continues to grow. To that extent we have been reasonably successful.’

According to NLL, its exports to India were adversely affected due to provisions in the Indian budget that withdrew the advantage of lower countervailing duty for the companyís customers in India. The disadvantage of non-refund of excise duty for raw and packaging materials sourced from India and introduction of export tax by the Nepalese government did not help the matter.

‘Moreover, extra ordinary delays in settlement of Duty Draw Back claims and several unanticipated ad hoc and arbitrary tax decisions by the revenue administration of HMG/Nepal have imposed additional financial burden on the company,’ said Ghose.

The company officials complained that a major chunk of their fund continued to be held up under the duty drawback. The sum of money held up under the duty draw back system amounted to Rs 120 million this year (down from whopping Rs 200 million last year).

‘There hasnít been any improvement in the situation even after the introduction of the ‘ pass book system’ by the government,’ said M. K. Sharma, director of NLL. ‘There was certain degree of arbitrariness in the behaviour of the revenue administration in the country.’

As part of social responsibility, the NLL has launched an ambitious ‘Miles of Healthy Smiles’ program for contacting school children throughout Nepal, to impart oral health education, in collaboration with leading NGOs. The company also organized several dental camps. A mobile medical unit is being operated in Hetauda by the Companyís Employees Trust to provide emergency medical service to the residents of Makwanpur district. The company is also participating in a major initiative for restoration of heritage sites in collaboration with the Kathmandu Valley Preservation Trust.

‘Since its inception, the company continues to invest aggressively in developing the domestic market through consumer relevant innovations, building brands and creating a robust distribution infrastructure,’ said M. S. Banga, chairman of the NLL. ‘The Company will also explore options of adding other sustainable, value added exports to India and other countries in South Asia.’

In a tough and competitive market, NLL has left its mark through a number of marketing innovations, say market watchers. In order to penetrate the rural market, the company introduced a number of low-unit packs at affordable prices targeting rural consumers. Following test marketing of a number of products produced by HLL, the company has started manufacturing products like Vim dish-wash bar and Clinic All Clear shampoo locally.

Company officials said that NLL products now occupy 60 percent of the total domestic market in toothpaste category, 50 percent of the total market in toilet soaps, 80 percent of the total market in detergent powders and 45 percent of the total market in fairness creams. Shampoos, which were introduced only two years back, are fast approaching the 30 percent mark.

Despite spectacular growth in the domestic market, NLL faces a major problem in the form of fake goods branded as its own products, popularly described as ‘grey imports.’ ‘Grey imports have become a major menace which unless tackled will erode the equity of our brands,’ said Ghose. The company has taken an active role in both educating the public and the government on the ramifications of this problem and also to protect its investments in brands, he said. Besides resorting to legal actions, the company ha also taken up an initiative to set up a 'Brand Protection Committee' with the support of FNCCI.

‘The company is determined to put the business back on the path of profitable growth driven by the domestic business despite the difficult business environment in the country,’ said Gurdeep Singh. Under the leadership of Rakesh Mohan, new managing director at the NLL who succeeds Mr. Ghose, the Nepal Lever has daunting challenges to face. That is ñ to recover its lost ground in terms of exports and maintain its strongholds within the domestic market.

NEPAL-BANGLADESH TRADE TALKS

By A CORRESPONDENT

Though small economies, Nepal and Bangladesh have set an example by cooperating in trade related issues.

At the end of the two-day trade talks (Aug. 26-27) in the Nepalese capital last week, Bangladesh offered a number of concessions to Nepalese side to promote bilateral trade and investment.

As per a Memorandum of Understanding (MoU) signed between the two countries, Bangladesh offered 50 percent reduction in port handling duty for Nepalese products at the Mongla port.

Bangladeshi side also agreed to construct a bridge over Rupsa river for facilitating the transportation between Banglabandh and Monglaport. They also agreed to continue discussions on the issue of reaching into a bilateral transportation agreement.

Bangladesh agreed to develop necessary infrastructure for efficient use of Phulbari-Banglabandh road and Radhikapur-Birolpur railway route to facilitate Nepalese exports. They also agreed to look into possibility of operating short distance flights between Bhadraput/Biratnagar in eastern Nepal with Saiyadpur of Bangladesh.

Officials said that there were no trade disputes between the two countries. Both the countries also discussed the possibility of starting direct over-land route between Nepal and Bangladesh through India. The distance between Kakarbhitta, a bordering point in Nepal and Banglabandh in Bangladesh is only 33 km.

Joint Secretary at the Ministry of Industry, Commerce and Supplies Purushottam Ojha said that discussions had focused on developing the Kakarbhitta-Fulbari-Banglabandh route’which became operational in 1997— as an efficient transport corridor by removing existing bottlenecks. Nepalese entrepreneurs have complained of customs hassles and dilapidated condition of the road that provides Nepal an alternative access to sea at Mongla port in Bangladesh.

Ojha added that facilitation of trade and promotion of investment between the two countries would also help materialize the concept of proposed ‘South Asian Growth Quadrangle’ that incorporates Nepal, Bangladesh, Bhutan and some northern states of India. The Quadrangle proposes to develop a seamless network of transport in the sub-region, among others.