"From day 1 of establishment we've been transparent, so technically we are already a public company. Issuing IPO is just another brick on this foundation"; Interview with Sudeep Acharya, CEO of Dish Home

Sudeep Acharya, CEO of Dish Home and chairman of Kamana Sewa Bikas Bank, had completed his schooling from Budhanilkanth School and thereafter spent most of his adult life in US studying. He did his undergrad and masters from the University of Arkansas on Industrial Engineering. After the completion of his studies, despite his educational qualification he was always drawn towards business given his fathers’ occupation.

Prior to Dish Home he was involved in Pashmina export and distribution in US, and then he was involved in the Nepali carpet industry. After that from 2008 till 2010, he was actively involved in Hydro Power sector. However after 2010 he has been at Dish Home in variety of positions contributing to its growth and development.

Dish Home is one of the few non-BFIs companies that are preparing to go public very soon. This has drawn attention of a lot of investors trying to diversify their portfolio, which currently has been dominated by Banks and financial institutions. Similarly, Kamana Sewa Bikas Bank is one of the emerging national level development banks. Other than the information published on the financial reports; there is a lot that goes on in the background. On these backdrops, Rachit Agrawal and Aakriti Thakali of Sharesansar caught up with Sudeep Acharya. The excerpts of the interview are given below:

Dish Home

Could you provide us a brief background of Dish Home?

Initially there were two DTH satellite TV providers – Dish Nepal and Home TV. Both the companies started roughly around the same time and within a few months’ time both of us realized that this sector required huge capital which could neither be met by Nepali Banks nor the private sectors alone. So around August 2010 we merged and started joint operation. We raised further capital, but soon came to face the need of further capital. So after that we brought in investment from Sandmartin International (SMT) holding, which currently has 47% stake in the company.

The other mistake that we did was making an assumption that we only had to distribute our product and the customers would figure out the rest. Contrary to our assumption, what we needed to provide was an entire system solution. We figured it out soon and started working towards delivering an entire system solution with efficient and dependable after-sale service.

All-in-all, our product was good, the customer-acceptance rate was good, improvements were going on but still we were facing financial troubles. We weren’t making enough money to cover all our costs. Our customer volume was still below the hump. Despite these troubles we never gave up, we brought in capital from our pockets too and kept company going.

2015 was the year of our turnaround as we started making operating profits from that year. We still have accumulated losses of past years to cover but since 2015 we are making good profit.

As for me, I’ve been involved from the very beginning. Initially I was one of the people to bring Home TV into existence. I was here until 2014, there was a slight gap in between then I came back on 2015 in leadership and have been here ever since.

How did the idea of issuing IPO came into being?

In Nepal, generally companies prefer to stay private, as it feels safer. However with us, the nature of product itself is public, so we felt that going through IPO would give us more leverage in the market. Given the nature of our product, we have a very large room for growth and expansion and by going public we’ll be able to fund and support such growth.

Was the decision to go public unanimous from your Board? Who else are in the board?

Yes, all the decisions we make are unanimous. Even at occasions where even one member isn’t satisfied, we go through several discussions until we have an unanimous outcome. Currently in our board we have Mr. Devi Prasad Bhattachan from Prabhu Group, Mr. Hem Raj Dhakal and Mr. Suman Pokharel from IME group and Carmen Chen and Frank Fischer from SMT Holdings.

What are the hiccups that you’ve had to face so far while going public?

There weren’t many hiccups as such, so we’re almost ready. We’ll be completing three consecutive years of operation with profit by the end of this fiscal year. We’ll also be completing one full year of operation as a public limited company. So after the completion of this fiscal year, we’re good to go.

By when can the interested investors expect the IPO to come out, for how many units and at what price?

IPO Pricing

We are currently considering two alternatives for pricing – at par or premium. We’re weighing both our options. Valuation wise we have to go at a premium as our net-worth is high. This will also improve our balance sheet and bring more money into the company. However, we have also considered about the amount of hassle we’ll have to go through. First of all we’ll need to do a DDA (Due Diligence Audit) and after that the determined price would have to be approved too. So all these will make the entire process time consuming and tedious too.

However if we issue at par i.e. Rs 100 the entire process will become a lot easier and will be completed in a lot less time. In addition, we’re going to issue only 10% this time, which isn’t a very huge amount. So even if we issue at par this time, it won’t be bad for us. Rather it will create some market price for now based on which we can further issue FPO at a premium in later date.

Currently, the ball is in par’s court but we’re still indecisive. We’ll see other companies who are issuing IPO at premium like Shivam Cement and then come to a conclusion.

IPO date and units

Like I mentioned earlier, procedure wise we are ready and just waiting for the completion of this fiscal year. After the completion of audit and clearing of Balance Sheet we’ll be issuing IPO. We’re already looking for an issue manager, it’s not fixed yet but we’ll know soon. We are also mid-ways in regards to Underwriting and Credit rating. So by Shrawan/Bhadra 2075 you can expect the issue to come out.

Similarly, we’re issuing 10% of paid-up in IPO. Our current paid-up capital stands at Rs 201 crore, so we’ll be issuing 20.1 lakh units. So post IPO our paid-up capital will be Rs 221.1 crore. And if we issue in premium, the balance will go into our reserve.

Given such bearish nature of bourse and lack of liquidity in the market, do you think it will affect your issuance?

If we decide to issue in premium I think there might be some difficulty, but if we issue in par I think the issue is going to be highly over-subscribed. We are a profitable company and product wise we’ve been able to win hearts of our customers. In addition to this we’re issuing only 10%, which isn’t a very huge quantity. So I don’t think the liquidity shortage is going to be a problem.

How do you think will going public help the overall image of Dish Home?

From the day 1 of establishment, we’ve focused on transparency and fair practice. Even when we were in loss we managed to pay all the taxes and Royalties by bringing in money from our home. In fact in 2013/14 we did few advertisements on Kantipur. At that time digitization wasn’t made compulsory and most people used analog/cable TV. The government did not have any control to properly collect taxes or royalty or VAT of any sorts from them. Whereas we on the other hand were paying for everything, so for that we made an ad about how much we were paying on taxes and Royalties. So to sum up we’ve been maintaining transparency from day 1 itself, so now by going public we’re aiming towards more openness.

I think we won’t have much problem in the transition, rather I believe it will help build our goodwill, uplift our brand image and help us proliferate.

These days most on the ISP (Internet Service Providers) are also providing TV services, how are you taking the competition from them?

As you can see, in the overall market the size of internet is pretty small. To be more precise, it’s mostly concentrated in the city areas, so on these grounds we aren’t facing much competition from them. We have also explored our option. We can provide internet service via satellite, technically it is feasible but in context of Nepal it’s not our current priority.

Another thing is when TV and internet is packaged together, the two services become co-dependent, but in Nepal internet is highly unreliable and goes off most of the times. In these cases when internet goes, so does the TV and that will create customer dis-satisfaction.

However with Dish Home that is not the case. Our service isn’t disrupted by such minor problems.

What is the penetration level of Dish Home?

Our strategy from the beginning was to first focus on villages and then the cities. This strategy has worked from the time of King Prithvi Narayan Shah to the political parties, and it has worked for us too.

Given the nature of our product, there’s no distinction regarding who is better suited for it. However the requirement or need was more intense in the rural areas as there was no other option. So that is where we focused on first and after that we entered city. Surprisingly, the acceptance in city is also pretty great. Right now we’ve reached all 77 districts of our country and the customer base is about 30% of overall market.

What is the marketing strategy of Dish Home?

The entire marketing strategy of Dish Home is focused on excellent after-sale service and top-of-the-class customer experience. Rather than just a product, we are selling a service which means it’s not a one-time deal. So in service sector if we can’t keep our customers happy then they’ll just switch. So we’ve heavily invested on resources and tools to enhance and improve the quality of service being delivered. To be precise, our focus in on making new customers and retaining the existing ones.

"From day 1 of establishment we've been transparent, so technically we are already a public company. Issuing IPO is just another brick on this foundation"

Kamana Sewa Bikas Bank (KSBBL)

There are altogether 11 national level development banks now, how are you looking at the competition?

KSBBL is one of the last to join the national level group, so the competition is pretty tough. Actually KSBBL was a 10-district regional development bank and after the merger with Kaski Finance which is a national level finance, as per prevailing provisions we became national level development bank.

Soon after the merger, the minimum paid-up capital requirement was raised to Rs 250 crores. At that time our paid-up capital was around Rs 68 crores and after the merger along with bonuses it came to be around Rs 81/82 crores. Since we were still far behind the bar, we merged with Sewa Bikas Bank. So currently we’re hovering around Rs 235 crores and after the issuance of bonus from last year’s profit we’ll easily cross the minimum requirement bar.

Thus being the last entrant, we have to be more aggressive to meet the rest. We came in the valley only 6 to 7 months ago i.e on Poush/Magh of 2074, whereas most other national banks are older and have wider market covergae. This has forced us to be more aggressive in expanding our branch network and our operations.

How are you looking at the competition from the commercial banks?

The major set-back is that the Central Bank has setup constraints on businesses and services to be provided by development banks in comparison to commercial banks. But at the same time we have a lot of opportunities too. Commercial Banks attracts a different set of customers whereas we attract a separate crowd. So as long as that difference is maintained, I don’t see any serious threat from the side of the commercial banks.

How has the liquidity shortage in the market affected KSBBL?

Liquidity shortage is a market-wide phenomenon, so when it occurs all the sectors are touched by it only the magnitude varies. So KSBBL was also affected but not in a significant manner. I think it was because we had planned ahead of it and devised strategies based on the trend. Our growth was tight but we were comfortable with it as we had enough room to wiggle. Similarly our deposit base comprises retail savers (the individual saver) mostly, so that was also one of the reason that we weren’t affected that much.

After NRB increased the minimum paid-up capital requirement to Rs. 2.5 arba, drastic measures were taken. Kamana Bikas Bank also merged with Sewa Bikas bank. According to the recent Q3 report, there was 8.43% rise in NPL and 38.53% decline in annualized EPS. Do you think this consolidation is a good thing?

As I’ve seen it, the regulation gets stricter as we go up. The regulation is a lot loose when the company is small, but as it becomes larger with the same customers and even the same employees the scrutiny becomes tighter.

When we merged with Kaski Finance, many things came up in the surface and the same thing happened while merging with Sewa Bikas Bank. These cases increased our NPL (Non-performing Loan). However, the problem is manageable and solvable so no issue for now. For the management, yes it is going to be hard to manage all this, but as a Chairman it’s a good thing. When NRB or any other regulatory body points out our flaws and directs us to work on it, it gives us room for improvement and aids us in growing stronger. If these problems hadn’t been pointed out, we’d be rotting from the inside slowing and would kill us one day.

This was the data of the 3^rd quarter, by now it’s down to 2% and by Ashad end we aim to decrease it to below 1.5%. Once these problems are solved, we’ll be back on track and the EPS will also pick up the pace.

Final Note:

To all the aspiring entrepreneurs out there, I want to say that Nepal is full of opportunities. It’s not necessary that you do something big. If you look at smaller things you can find a lot of possibilities and opportunities.

Whatever you want to work on, first make sure that your product is a winner – something that people need, something that people will love – and then have faith in it. Don’t pull out immediately.

“Tenacity despite failure is the most important quality to be successful. Rome wasn’t built in a day. Big discoveries weren’t conceived in a day. Everything takes time. All you need is dedication, hard-work and faith in yourself.”

Also don’t focus too much on the payback, anything you do won’t bring return immediately. Put a vision and work towards it. Have patience.