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Having pioneered the auto gas industry, set up a chain of Laugfs fuel stations and supermarkets along with a string of new businesses, the founder of LAUGFS Holdings, says his dream is to alter local people’s lifestyles.

W.H.K. Wegapitiya says this is why he got into the leisure business in the first instance, responding to critics who challenge his diversification strategy into hotels. LAUGFS Eco Sri, LAUGFS Leisure and a few other firms were preparing to go public but the plans were shattered when a crisis hit the share market two years ago. He still wants to do it but will do so when the All Share Price Index to cross 7000. He says supercharging growth is what he’s good at.

LAUGFS’ founder W.H.K. Wegapitiya during the interview. Pix by Athula Devapriya.

In an interview with the Business Times, he spoke on a range of issues dealing with current and future plans of the mega business empire. Here are excerpts of the conversation:

Your plans for the next three years:

We want to be in the first top 10 companies’ bracket in the next 10 years – or maybe even earlier . More than that we want to be in the first 10 Sri Lankan brands that have a high brand loyalty rate with the consumers.

Where do you see the company positioned in the next 10 years?

We have done our business planning. In the next 10 years our business planning includes diversification, improving infrastructure and resources. It’s a journey. Our human resources, technical resources, etc – we got all this figured out in the next 10 years.

What’s your business model?

It will always be related expansion, forward or backward diversification. We feel that strong brands such as LAUGFS can be extended into very diverse business areas. We also want our business diversification strategy to look forward along the supply chain for opportunities to tighten our grip on the market.

Critics say that your companies are getting into many unrelated businesses:

Our expansion will always be close to our core objective which is being close to the day to day lifestyles of Sri Lankan people. The businesses that we get into will always be in line with the daily lives of our people. That is how we see our business model.

This diversification strategy can put you on the fast track to growth but if the strategy fails it can also burn up your money:

The decision to enter one or more new areas is primarily done to take advantage of the company’s existing distinctive competencies. In this respect, how far you are in the value chain determines how strong you are as a company, which in turn will give you an idea of what areas to get into. With the right people, business plan and structure in place, diversification can help to supercharge growth.

In terms of strategy was getting into hotels a good thing?

Diversifying into hotels is also trying to alter local people’s lifestyles, which is in line with our core objective. Suddenly we see an opportunity and we grab it and it might be a success.

It might also be otherwise. Then it’s an experience.

What new ventures will you get into?

We want to shift from orthodox energy sources and get into renewable energy sources. We want to get into transport fuels. Now we use hydrocarbon such as petrol and diesel and we are dependant on them. One third of our foreign exchange goes to importing oil.LAUGFS might find a solution through renewable energy for this. It’ll be something which no one has introduced before.

We’re also looking at value addition to local mineral resources. We’re producing high quality materials, adding value to them and substitute imports in these materials.

In this regard we have already started a joint venture with the Sri Lanka Institute of Nanotechnology to add value to Ilmenite and produce nano titanium dioxide, which is a raw material for products such as paints. Most ilmenite is mined for titanium dioxide production.

Finely ground titanium dioxide is a bright white powder widely used as a base pigment in paint, paper and plastics. We’re setting up this factory at the Nano Park in Homagama.

Weren’t you planning to go public with some six of your companies?

LAUGFS Holdings, LAUGFS Eco Sri, LAUGFS Leisure and a few other firms were readying to go public, before the crisis hit the share market. Arrangements to improve are internal processes, etc, were made as these essential for listing, but plans were dragged due to this unhealthy situation market. We’re waiting for the All Share Price Index to cross 7000 to list these companies. Our leisure company is something that we’re seriously looking at going public with.

Your hotels are taking a long time?

It was mostly due to bad weather. In two months’ time, we’ll open our ‘Ananthaya’ resort in Chilaw. The Chilaw resort hotel, which is a 4-star resort with 88 rooms costs Rs 1.5 billion, while the 110 room resort at Pasikudah will cost Rs. 2.5 billion. This is also a 4-star resort and we plan to complete this project within 18 to 24 months.

Will you be buying or building hotels and where are you interested in?

We’re a cash rich company and we have the capacity to acquire or build hotels. Currently we’re looking at hotels in the deep South, Central and North Central Province. Many hotels which are for sale are also approaching us. We’re evaluating them.

What’re the new product line up that you’ll launch?

We plan to bring alternate energy products which are solar and wind based. We plan to set up power generation through solar and wind power.

Are there any expansion plans in other countries?

We looked at many regional countries and there are many opportunities in Bangladesh, Vietnam, Cambodia and Australia to expand in energy – LPG Petroleum, but we realised that we have more opportunities here.

How is your retailing business doing?

Electricity increases and taxes are affecting retailing business and it’s really bleeding.

Have you got any favours from the government?

No favours. The only favour is that they saved this country from terrorism. As a Sri Lankan I’m forever being grateful for that. Also they are national minded when it comes to businesses.

Sri Lanka needs to do a lot more in terms of marketing and promoting its capital markets in the Middle East and be on its radar, according to a capital markets expert.

“We need to do a lot more in terms of promoting this country in the Middle East. The road show to Dubai is a good start,” Ravi Abeysuriya, CEO Candor Equities, owned by Dubai based Eagle Proprietary Investments Ltd (EPIL), told the Business Times in a telephone interview from Dubai where he was attending the “Invest Sri Lanka’ Forum organized by the Colombo Stock Exchange. He said that the forum was an encouraging one and that they made many contacts. “There is great interest from investors and fund managers in the UAE on Sri Lanka.”

Mr. Abeysuriya said that stock brokerage Heraymila Securities Ltd and asset management firm Heraymila Capital (Pvt) Ltd, which headed, have been acquired by National Industries Group Holding SAK (NIG) through its investment arm EPIL. With this acquisition the Heraymila companies will be rebranded as ‘Candor’.

He said with EPIL’s backing, Candor will have a strong presence in the Middle East.

Heraymila had been scouting for a strategic partner and was offering 15 per cent but EPIL was interested in 100 per cent.

“This is how EPIL acquired Heraymila,” Mr. Abeysuriya said. He said that under the terms of the deal, EPIL has acquired four licenses to operate in Sri Lanka, covering equity capital market brokerage, asset management, financial advisory, and outsourcing. Working alongside the current management team, as well as partners such as New York-based consulting firm Accordion Partners, EPIL plans to aggressively grow all four business areas.

Raj Dvivedi, CEO of EPIL, in a company press release, said that Sri Lanka’s capital markets have immense potential for growth being situated at the centre of global shipping routes that link international trade between East and West. He further expressed that “Sri Lanka’s proximity to rising economic powers of Asia and Middle East will also play a central role in its success story. Since mid-2009, Sri Lanka has been a politically stable nation and perhaps one of the safest places in Asia for doing business”.

More than a year after the share deal fiasco at the National Savings Bank (NSB), another ‘crisis’ surfaced at the bank.

This time it is over a US$1 billion bond issue the bank wants to float; not for its own use, but for the state.

The simple fact is that state coffers are empty and sources of funding for the Government are fast drying up. NSB Chairman Sunil Sirisena was sacked at the behest of always-in-the-news Treasury Secretary Dr. P.B. Jayasundera because the former stood his ground to carefully assess the risk element in this huge borrowing commitment. There were other issues too between Jayasundera and Sirisena, a recently retired and respected civil servant, over changes at the bank but the delay in securing the loan was the trigger to Sirisena’s departure from the bank.

While Pradeepa Kariyawasam’s exit from the NSB as chairman, after the 390 million-rupee stock market scam involving a deal between some directors and investors of The Finance Co and the NSB, was for an irregular transaction that would have severely affected the bank, Sirisena’s folly is in doing what is right and protecting the rights of shareholders (Government) and depositors in ascertaining the risks involved in securing a foreign loan.

Our report on the events at the NSB also speaks of Sirisena being reprimanded by Jayasundera for the delay in processing this loan. This is however not the first time Government officials have been lambasted for doing their job.

For the record, Kariyawasam, once a ruling party favourite, is yet to face charges of corruption with the state’s anti-bribery office pushing in all kinds of directions – earlier in favour of the former NSB chairman and now going after him following his wife’s (former Chief Justice Shirani Bandaranayake) un-ceremonial fall from grace.

Various attempts by the Treasury to raise money hasn’t worked and when the expected cash (NSB bond issue) was being delayed, ‘fury’ has taken over and succeeded over rational thought and obligation to thousands of depositors at the bank. A good man (Sirisena) who refused to quit when asked to as he had done no wrong, was then ordered to leave. His replacement, W.A. Nalani, a veteran banker, will fast-track the bond issue and a Thursday meeting with President Mahinda Rajapaksa and officials headed by Jayasundera was meant to push home the point that the loan must be expedited.

The NSB is the country’s premier savings institution and considered the safest investment for thousands of middle and lower middle income Sri Lankan depositors. It’s not an investment bank, not has it done any (sizable) foreign trades or investments. Its mandate provides for 60 per cent of the investments to be made in treasury bills and government bonds, which are low return instruments but also at minimal risk. The bank has traditionally been averse to risk and in recent times the debate has been growing as to whether the investments should be spread far and wide into higher return instruments at a higher risk, the route used by all commercial banks. In some cases, the NSB has been dumping 90 per cent of its money into bills and bonds, playing safe in the process. That’s why depositors were horrified, when the share market scandal exploded last year, leading to a run on the bank.

With the $1billion bond issue accounting for 1/5th of the bank’s assets, have the authorities considered the foreign exchange risk involved if and when the rupee depreciates in the future? With the money bringing in no return, the risk is greater and someone has to bear the loss – the Government or the bank. If the bank bears the loss, it would be playing around with depositor funds in an unproductive, no return investment.

A few weeks back, the viability of the loan was raised at a parliamentary meeting by opposition parliamentarians. In response, harried NSB officials said the loan was approved by the Cabinet and the NSB was borrowing on behalf of the Government. Such concern in opposition quarters may have prompted Sirisena to re-examine the loan issues.

The supply and demand scenario in financial resources is a nightmare for Jayasundera and his staff. The cash flow is just one-way: money going out, nothing coming in. Treasury efforts to secure a $1billion loan for budget support from the International Monetary Fund (IMF) failed while a request to the World Bank for a $750 million facility is in the pipeline.

The longer the delay, the higher the cost becomes of funding infrastructure development and other projects. Immediate and urgent requirements are ‘borrowed’ from other ministry budgets (health and education for instance) and paid back.Ironically Jayasundera, at a public meeting on Friday to release the Finance Ministry’s 2012 annual report, urged state officers to be more efficient, a contradiction when considering the decision to sack Sirisena.

The proverbial story of the three monkeys “hear no evil, see no evil, speak no evil” aptly fits the state of play in Sri Lanka today where transparency has hit the lowest depths and the few, remaining, honest officials are being eased out.