Exclusive Interview: Kumud Dugar, MD of K.L. Dugar Group,: IPO of  Hydropower projects & Cement company in near future

Sun, Nov 8, 2015 4:33 PM on Exclusive, IPO/FPO News, Interview,
Mr Kumud Dugar is the Managing Director of K.L. Dugar Group. He is also responsible for the Group’s entire business in the Western and Mid-Western regions of Nepal, along with additional responsibility of the Group’s upcoming ventures in Hydroelectric Power Plants. Mr. Dugar is recipient of Nepal’s most prestigious award ‘Prabal Gorkha Dakshin Bahu’ for his outstanding service in the field of trade and business.    
  1. Please tell us about K.L. Dugar Group.
K.L. Dugar group is a diversified industrial and trading group. This is the third generation family owned business which has been operational in Nepal for more than a century. We have largest market share in edible oil and food grain industries of Nepal. We also have business in cement, hydropower, electronics, housing, banking, and import and export.  
  1. What do you think the effects of the Earthquake and Terai unrest have in economy of Nepal?
In terms of economy, the effect of the earthquake is not even 10 % as compared to the effects of Terai unrest. Rs 1.5 Kharba has already been lost. The current loss is at the rate of Rs. 2 arba per day. So, the earthquake appears to have minor affect to the economy of Nepal as compared to the ongoing Terai bandh.  
  1. What is your take on the Terai unrest?
If the situation prolongs than it will be very dangerous to everybody in Nepal. I do not think the government is serious about this issue because it’s been almost 90 days the Terai is closed and the solution is nowhere in sight. What baffles me the most is there is shortage of almost everything and yet there is no strong voice from the general public. If the situation prolongs for a while, many business will go bankrupt which can even affect the banking sector.  
  1. If things were to go back to normal in a week’s time or so and the remainder of this fiscal year was to run smoothly, do you think we could recover the loss incurred?
No. Not possible at all. It will take time to bring things back to normal. For example, we have cancelled most of our orders as it is impossible to get goods into Nepal. 40% of the businesses are done during Dashain and Tihar. This 40% business for this year is a lost opportunity for us which cannot be recovered. After things become normal it will take 2/3 months for profitability to appear on books.  
  1. Recently prices of various brands of edible oils have increased tremendously. What are the reasons for it?
There are many reasons to it. First of all, our shipments have not been able to be dispatched from Calcutta due to Terai unrest. We have to pay detention charge of USD 18,000 to 20,000 per day for everyday we are unable to unload goods from the ship. Second reason is that the cost of transportation from Calcutta to Nepal has almost doubled as very few drivers are willing to transport goods to Nepal. The third reason is that our production has dropped to just 25% of our capacity. This tremendously increases cost of operation due to low output. The transportation cost of goods from our factories to various destinations in Nepal has also doubled. Thus, we were compelled to increase the cost of goods.  
  1. When things get back to normal, will the price come down?
Absolutely. When our cost of operation comes to previous level, the price of goods will definitely fall down to the pre Terai unrest rates.  
  1. K.L. Dugar is a leader in exporting goods from Nepal. Could you please elaborate condition of export market in Nepal?
We have been exporting essential oils, food grains, pulses, flour, herbs etc. in small quantities. We are determined to provide highest quality in our products. That is the main reason we have been able to export to various countries in Europe.  
  1. What are the problems faced by Export industry in Nepal?
The main hurdle for exporting goods from Nepal is the lack of farsightedness in government policies. For example, the government introduced the policy of 4% rebate on the amount of goods exported. Now the rebate has been brought down to 1%. Another hurdle is the transition cost. The transportation cost of exporting goods from Nepal is almost 7‑8% while it is 1.5% in India.  
  1. What kind of investment does K.L. Dugar group have in hydropower sector of Nepal?
We have investments in four hydropower projects in Nepal. Charanawati Hydroelectricity Project (3.5MW), Lower Modi Khola Hydroelectricity Project (20 MW), Lower Charanawati (6.4MW) and Ankhu Hydropower Project (42.9 MW). We have other partners in all of these projects. We have been generating electricity of 3.5 MW from Charanawati since 2013. 70% work has been completed in Lower Modi Khola which is scheduled to produce electricity from December 2016. Construction of Lower Charanawati will begin within two months and is scheduled to generate electricity from October 2017. We are in final stages of purchasing license of Ankhu Hydropower Project (42.9 MW) from Hydro Solutions Group. The Ankhu project is expected to generate electricity within four years. Furthermore, our ultimate aim is to build hydroelectric projects with capacity of 100 MW, 250 MW and so on. In order to launch projects at this scale we need experience, stable production of electricity in our existing projects, goodwill and good partnership among promoters.  
  1. Can we expect IPOs from the hydropower projects?
Yes. We are planning to issue Initial Public Offering of Nepal Hydropower Development Pvt. Ltd. in near future.  All of our hydropower projects will come up with public issue eventually. In big projects like Ankhu Hydropower Projects (42.9 MW) we will be offering IPO sooner than our other projects. When it comes to bigger projects we will need more capital to complete them, so we will be coming with IPO sooner with Ankhu project.  
  1. K.L. Dugar Group is leader in manufacturing sector. Will there be any IPO from the manufacturing sector of your group?
The goodwill and reputation is top priority of our group. After going public, the manufacturing companies should be able to give good returns to the investors. Publicly listed manufacturing companies are not doing very well in the context of Nepal. In manufacturing sector, we will be coming with IPO of United Cement within 1.5 years.