Cinnovation: Chaudhary Group’s innovation to go global

Some years ago, when Binod Chaudhary, the President and Managing Director of Chaudhary Group (CG) would talk of his vision to make CG a Nepali multinational, people would laugh at it. Those days, Nepali laws were unfavourable for any growth potential for companies to expand beyond the country’s boundaries. However, where there is a will backed by determination and a dream, there is always a way to realise it. Chaudhary realised his vision by creating Cinnovation Group, a Singapore-based multinational company.

The opportunity came in the form of a new law which allowed non-resident Nepalis to pursue businesses anywhere in the world. Chaudhary’s two sons, Rahul and Varun, who were stationed abroad, got the recognition of non-resident Nepalis. They both were educated in some of the leading institutions such as the famous Doon School of India. This gave birth to Cinnovation Group in 1991 which can now (after the non-resident Nepalis law) be officially declared as a Chaudhary Group enterprise.

Rahul Chaudhary Executive Director Cinnovation Group

After several decades of business growth, the Chaudhary clan became the first Nepali business family to be featured in The Forbes Asia’s list of the richest non-royals in Nepal in its June issue. With their significant holdings in sectors like Hospitality, Real-Estate, Financial Services, Fast Moving Consumer Goods and like, the business valuation of Chaudhary Group exceeds over half a billion US dollars and their Empire is on a fast-track towards global stardom, holding enviable assets in locations spreading from New York, Dubai, Maldives, Singapore, Sri Lanka to India to name a few. Their driving principle: ‘Think globally and act locally’.

Cinnovation has grown exponentially over the last few years through their business undertakings in sectors like real estate, hotels & resorts, wildlife and in-bound tourism in more than a dozen countries. And the growth is achieved through partnership with like-minded visionaries and investors for such expansion and growth, at home and abroad, says Rahul Chaudhary, who is heading the Cinnovation Group as its Executive Director. “CG is a home-bred Nepali company and we have been reasonably successful on our home turf. This success story drew our partners to join hands with us to expand Cinnovation Group,” he adds.

“Investment opportunities exist locally and globally, the only question is which one should you grab and when. This is exactly what differentiates a global company from the rest. We started Cinnovation with the vision of going global in a big way where every Nepali would be proud and I believe that each day we are getting closer to realizing our vision,” he says further.

Among Cinnovation’s core competency sectors - Hospitality, Real-Estate, Financial Services and Fast Moving Consumer Goods (FMCG), Rahul Chaudhary mentions hospitality as the leading one. Under this, the group’s portfolio includes some of the posh and luxury hotels all over the world in exotic destinations from Maldives, Colombo, Malaysia, Philippines and India to New York. Over the years, they have developed partnerships with some of the leading hotel chains in the world. For example, Cinnovation has a 50-50 partnership in Taj Asia Ltd with The Indian Hotels Company Ltd. (A member of TATA Group of India). This portfolio includes the Taj Exotica Resort & Spa and Taj Coral Reef Resort in Maldives, Taj Rebak Marina in Malaysia, Taj Samudra and Taj Airport Garden in Colombo. The Taj Exotica Resort & Spa was named the best resort in the world in 2005 by Queens & Harpers magazine published from the UK. Now plans are underway to reclaim that award as they have begun developing the Taj Exotica Resort & Spa in Phuket ( Thailand). “Our vision is to create the best resort in the world once again by giving the world a taste of a newfound paradise,” says Rahul. They are also looking forward to building 14 four-star business hotels in India with Taj and developing destinations featuring wellness, ayurveda and spa experiences.

Cinnovation is also one of the major promoters of Alila Hotels & Resorts Ltd., a management company which manages unique hotels and resorts in the Asia Pacific Region. Alila is already managing cinnovation's hotels & resorts in Bali, Jakarta and Thailand. They are also managing The Farm, a wellness resort in San Benito ( Philippines) for Cinnovation. They have an impressive growth plan and will be managing various leading hotels in destinations such as Bangkok, Koh-Samui, Oman, Dubai, Cambodia, Goa, Kerala, China and Bangalore, informs Rahul.

Cinnovation has also partnered with The Conservation Corporation of Africa (CCA), the largest safari company in the world with over 50 tiger gaming resorts in South Africa alone. Cinnovation has joint venture with CCA and Taj to develop wildlife resorts in India. Four high-end boutique resorts will be completed by the end of this year to create a circuit for wildlife junkies, says he adding that also planned is an expansion in Chitwan National Park in Nepal.

Cinnovation together with CCA has created an inbound tour company called Indian Safaris & Tours (P) Ltd. to cater to the high-end niche clientele who want to come to Asia attracted by the world famous Asian hospitality. “We are now working on creating tailor-made journeys using our portfolio of assets together with merging with our future growth plans of adding more assets,” he further adds.

Rahul believes that Nepal has immense growth prospects in the hospitality sector. “Tourism is the backbone of our economy and despite the difficult times we have faced in the past, our country continues to attract tourists from all over the world. So much so that new airlines are being introduced every day and the connectivity to and from Nepal has improved a lot now bringing a further pool of tourists. Therefore, my concentration now lies also on creating Himalayan journeys by opening hotels and resorts in places like Kathmandu, Pokhara, Mustang and Jomsom to name a few,” he says.

In Real-Estate, Cinnovation has heavily invested in Dubai. Binod Chaudhary’s youngest son, Varun heads the Real-Estate initiatives for the group under the guidance of Rahul. They are building various residential and commercial towers in some of the key business areas of Dubai. Some of their current investments include the Burj Dubai, the tallest tower in the world and Discovery Gardens, a Mediterranean style community housing complex. The only two man-made creations that are visible from the moon are the Great Wall of China and ‘The World’ development in Dubai where islands have been made in the shape of countries, says Rahul. Cinnovation has acquired the Nova Zamalya Island to develop a high-end resort and villa for the most discerning travellers. Moreover, they have also just inked a deal with Mirvac from Australia to develop a business hotel on the famous Sheikh Zayed Road which links Dubai and Abu Dhabi. The plans are to develop projects with Mirvac in Qatar, Bahrain and RAK as well.

“The business model of such developments will be very unique and new to this market. Innovation is always the key to success and having an edge over others in the long-term is the way to survive in such booming markets,” Rahul adds.

Apart from such high-end projects, they are also into low-cost housing and labour accommodations in Dubai. “Everyone wants to be a developer and the labour market keeps growing with the rising development activities. This is clearly a robust growth opportunity which we want to tap and further expand,” says Rahul. Being the pioneer in the real estate business in Nepal, the Group also plans to develop a township near the Kathmandu valley giving birth to a new Kathmandu. Rahul says, “We have tested the water for being a developer and now we want to take on the role of becoming master-developers where our first real-estate initiative began, in Nepal”.

It is no secret that Cinnovation has significant stake in Nabil Bank, which is held by an offshore institution. Under this holding, Nabil Bank has grown into the leading financial institution in the home turf competing with international institutions like Standard Chartered Bank and State Bank of India. “We are embarking on a very important journey to plant the seed of a double-digit growth in Nepal through a high-level conference being organized by CNI this month where all the leaders of our nation will unite with one vision. Expansion in the banking sector is the key for the fruition of such an initiative and we have already started plotting a long term plan for the bank and our economy’s overall growth. Our economy has sufficient capital and liquidity as has been proven by the over-subscription in many primary issue of shares for banks in recent times. But it fails to deliver due to lack of opportunities,” Rahul shares.

In terms of FMCG, their noodles brand Wai Wai has already gone international with production plant in Sikkim and Rudrapur in India. To cater to the growing demands of the Indian Sub-continent alone, they are looking forward to building a third plant at Guwahati in Assam to compete with Maggi, a leading Indian brand from the global giant Nestle. Banking on the brand’s distinction of being the ‘Top Brand of Nepal’ for three consecutive years (2005, 2006 & 2007) in surveys conducted by the research firm AC Nielsen Nepal, Wai Wai is exported to more than 20 countries across the world including Canada, UK, Hong Kong and Dubai, Rahul informs.

Well, it sounds enough already but their expansion plans just don’t end here. You can just begin to imagine how far a Nepali company can grow if they have a vision. Rahul asserts, “Success is a relative term. A company can certainly go global being in Nepal. Companies in Nepal may not have gone to the international arena to compete but we can certainly expand, grow and create our own arena. Being a multinational company from a developed country such as the USA, Japan or India is one thing where you are just one out of many but being a global company from an under-developed and now slowly developing country like Nepal, speaks for itself.”

Going through all this, it’s no wonder that the question pops up: How they have been managing such a vast conglomerate? “The main challenge for any multinational company is to create the right team at the right places,” Rahul explains the group’s managerial approach. It is extremely hard to track Rahul as he shuttles between his strategic offices in New York, Singapore, Dubai, Nepal and India every month managing his team and putting the right people at the right place. “Through these principal offices world-wide and our association with renowned consultants and financial institutions, I am able to smoothly manage the operations,” he says. “The next few years should be very interesting for the group and there is yet much more to come.”

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Mission C.R.I.S.P.

Nabil Bank has registered a net profit of Rs 750 million in the fiscal year 2007/08 which marked the growth rate of 11.3 percent over the previous fiscal year 2006/07. In previous FY, the bank had registered a net profit of Rs 674 million.

Anil Shah CEO, Nabil Bank

In cursory glance, the rate of profit growth in Nabil seems less than a number of other banks. Still that shows the efficiency of the bank. While the source of the profit growth in many other banks has been the write back from NPL of the previous years, Nabil had very low NPL in the last years. As a result, it could not show any write back from NPL this year.

Though the bank’s net interest income increased by 18 percent over the previous year, there was over 6 percent decrease in foreign exchange transaction and 17 percent increase in staff expenses. These two seem to be the main factors that have dragged the profit growth.

However, the bank has increased the deposits as well as loans and advances by over 36 percent that will yield higher interest income in the current year.

It’s no cakewalk for any banking institution to report a steady growth in a situation like what Nepal has been going through for the last several years. However, as a bank of a lengthy 24 years of experience in Nepal, Nabil knows how to keep the ship stable on its course. Started as the first joint-venture bank on July 12, 1984, Nabil has “evolved into an institution with an unparalleled insight into the market, operational risks, opportunities and customer needs,” notes Anil Shah, the CEO of the bank.

To remain at the forefront of the competition, Nabil has, for the last four years, been following a management style that is summarized as C.R.I.S.P. with the letters representing Customer-focused, Result-oriented, Innovative, Synergistic and Professional. Accordingly, the bank has restated its mission as the 1 st ChoiceComprehensive Financial Solutions Provider toall their stakeholders—customers, shareholders, regulators, communities and in-house workforce.

“This ‘mission’ is not merely a destination but a journey; a journey in which we would like to see our existing and potential customers thinking of Nabil as the ultimate service provider catering to their diverse financial needs,” says Shah. The bank further wants to stretch this mission to encourage the investors to choose Nabil shares as a blue-chip investment opportunity. “Moreover, we want to set an example for regulators in terms of professionalism and transparency,” he adds.

The executives at Nabil admit to have realised that success is attainable only by ensuring personal and professional help to their customers. And to this end, they have developed mutually beneficial relationships with an array of customers ranging from multinational organizations, national corporations, small and medium size local businesses, individuals and diplomatic missions, donor agencies, INGOs and NGOs. Despite unfavorable economic situation in the country, Nabil has been able to register a robust financial performance in the fiscal year 2007/08 (see figures). And to achieve this, they have formed a synergistic team right from the unit-level upward to the senior management-level with their consistent focus on productivity and team efficiency. For the long-term success, they review internal and external developments to ensure that they identify, understand and make calculated decisions on any risk unfolding on credit, operation or market.

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A story of turnaround

NCC Bank made a whopping profit of Rs. 495 million in the FY 07/08. The troubled bank had incurred an operating loss of Rs. 79 million in the last FY. The recent data indicate an impressive turn around.

 

Ratna Raj Bajracharya CEO, NCC Bank

The bank claims that recovery of non-performing loan (NPL) from NB Group and increase in bank’s business volume are the main determinants for such a significant rise in profit. NCC’s profit before bonus and tax in FY 07/08 is Rs. 625 million out of which operating profit is Rs. 596 million. The bank plans to earn an operating profit of Rs. 800 million in the current fiscal year through further increase in business volume along with recovery of remaining NPL so as to reach a position where it can pay dividends to its shareholders.

NCC also raised its capital adequacy ratio to positive 11.40 percent on mid-July 2008 from a negative 9.14 percent of the last year. The bank’s capital fund increased due to the positive effect in reserve and surplus from the increased profit. During the year, the bank raised Rs. 700 million by issuing right shares in the ratio 1:1 which increased the paid up capital to Rs. 1.4 billion. As a result, NCC Bank became the largest bank of the country in terms of paid up capital.

Loans and advances of the bank increased by Rs. 159 million to reach Rs. 5.28 billion. There isn’t much increase in loan and advances because the bank was following a conservative lending policy in the FY 07/08 focusing more on recovery of NPL.

The bank recovered entire NPL, including principal and interest that amounted to Rs. 538 million, from the privately held companies of NB Group. It also recovered Rs. 34 million, including principal and interest, from public limited companies associated with NB Group, informs the bank. The only remaining company of NB Group from which the bank is yet to recover its NPL is Harisiddhi Brick and Tile Factory and its subsidiaries. It plans to recover its NPL from these companies within the first quarter of the current fiscal year.

As of the end of the fiscal year 07/08, the bank’s NPL reduced from 31.37 percent to 16.36 percent. The bank plans to give more priority to recovery of NPL in the current fiscal year as well and reduce the NPL level to below 5 percent.

Deposits with the bank increased by 12.6 percent to Rs. 7.32 billion at the end of FY 07/08 from Rs. 819 million one year earlier. The bank’s deposits would have further increased by 30 percent if the institutions such as Provident Fund, Rastriya Beema Sansthan and Nepal Army had not withdrawn their deposits from the bank. They withdrew the deposits following the direction of Finance Ministry. The Ministry had asked these institutional depositors to withdraw the money from banks that did not have adequate capital fund.

To compensate such big withdrawal of deposits, NCC Bank introduced various deposit schemes such as Mahila Suraksha Bachat Khata, Bal Suraksha Bachat Khata, Jestha Nagarik Suraksha Bachat Khata, NCC Saving Plus and Shareholder’s Saving Account. Now the bank also plans to introduce NCC Karmachari Bachat Khata in the near future to mobilize more deposits in view of its expanding lending business. The target for the current fiscal year 2008/09 is to increase the deposits to Rs. 10 billion, says the bank. Recently the bank has introduced a three year fixed deposit account on which it offers an interest rate of 7 percent per annum. In addition to attractive interest rates, the bank has been providing medical and life insurance facilities as well to its depositors.

To attract deposits, the bank also introduced additional services in the FY 07/08. It started Any Branch Banking Service (ABBS) in its 14 branches. This service will extend to remaining three branches located in the remote areas within the current fiscal year, says the bank.

The bank also launched SMS and Internet Banking recently. It installed its own ATM machine at Bagbazar and Chabahil branches and further plans to install its own ATM machine at nine other branches within FY 07/08.

Lagankhel branch of NCC also started issuing loans against gold and gold ornaments, which was previously available only at the Chabahil branch. The bank plans to issue such kind of loan from its Biratnagar and Thankot branches as well within the current fiscal year.

The bank also plans to make ATM/Debit Card service more effective. “We have a line up of various programmes to expand its branches and add more customer-oriented services in the coming days,” says Ratna Raj Bajracharya, CEO of NCC Bank.

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