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We aim 70pc market share
Ujjwal Shrestha is executive director of Panchakanya Group, one of Nepal’s leading business houses.How is the construction sector performing, and what is its current status?
The business environment in Nepal for the construction sector is stable. It has been slightly positive for the last few months because of the new government formation that has accorded high priority to attract foreign direct investment and boost the hydropower and other sectors. As living standards and income of the people are presumably improving, they are also turning out to be more materialistic. And it has led to increased consumption of goods and commodities, particularly foreign-made goods. From trading to manufacturing, everything is picking up. But if you see the construction sector, in the past three years, the momentum has been slow. The real estate, especially the housing sector, has totally backfired because people look for individual houses with their own compound. Hence, the concept individual bungalow has been doing well against slowed apartment projects. Being the manufacturer of steel and concrete, we are satisfied with the growing demand over the last six months.
What is the size of iron and steel business in Nepal?
In 2008, the annual demand for steel was 550,000 tonnes. The growing demand led to mushrooming of a lot of companies, but when the market started to slowdown around three years ago, there was a panic. Optimistically, steel and construction materials market has been corrected from this year. Consumption has stated to pick up and sales have gone up by 25-30 percent compared to last year. This year, we are targeting 450,000 tonnes sales. And, we are expecting more business next year due to the boom sectors like hydropower. Moreover, increased inflow of remittance has been a boon as everyone is building a house. House construction is most visible in the eastern part of Nepal as our group witnessed 40 percent sales there. However, the growth is not the same in the western part, while it is constant in the central part.
What is the state of iron and steel manufacturers?
There are around 30 companies registered in Nepal. Out of them, 16 steel manufacturing companies are in operation. In the last four years, half a dozen new companies have come into operation. This shows there is demand, which is likely to go up further. In terms of turnover, although it varies company-wise, I think most of the companies should be doing a business of around Rs 3-4 billion annually.
What are the major constraints for this sector?
Being a construction materials manufacturing brand, we see a big opportunity. There is a huge opportunity ahead as we are yet to see implementation of large development projects that are in the pipeline. And this outlook suggests a huge demand for iron and steel products. But the government needs to implement its development plan.
How is Panchakanya Group performing and what are its future plans?
We are trying to focus on brand value. We are restructuring in such a way that we can maximise the capacity of whatever we are producing. We are manufacturing around 30 products now. As of now, we are only using 60-65 percent of our capacity in the steel industry because of the extended load-shedding hours. Every steel industry needs at least 10MW electricity, and insufficient power supply has forced us to operate only 7-8 hours a day. It has really made the steel industry difficult to sustain. Besides, we are also facing labour shortage. We are also exploring ways to export our products. We have recently launched a German brand named Veka. It’s a premium windows and door brand. This is our new product and it will arrive in the market within a month. People are very much aware about this product. In next five years, we want to maximise our production capacity. I think we have a space of 4-5 years to grow.
How were you able to create brand like Panchakanya?
What we have been persuading the people is we are the most premium and preferred brand in Nepal. We are always focused on quality and customer service. We are the first one to introduce TMT steel in Nepal. Today, everyone has followed it. We did a lot of work for almost 3-4 years to convince the people about TMT and now everyone has their trust in it. We are doing the same with stainless steel water tank. It is because of quality and service offered to the customers we have succeeded in maintaining the brand value.
What is your company’s market share?
Our market penetration stands at around 30 percent, which is so far good. From Guwahati to West Bengal everyone is aware of Panchakanya. But we are supplying in low amounts as our focus is on the domestic market. In the next five years, we have targeted to capture 70 percent of domestic market. We have also targeted exporting 30 percent of our products to India, mainly plastic products.