--By Gaurav Aryal
Bishnu Prasad Neupane
Chairman, Saurabh Group
Saurabh Group, one of the leading industrial houses of Nepal is planning to establish a large scale cement factory in Sunawal, Nawalparasi. Bishnu Prasad Neupane, Chairman of the group says this new factory will be producing 400,000 metric tonnes of clinker in the first stage and expand it to 1 million metric tonnes of clinker at the end of 2015. The factory has set a target to begin production by February 2014.
This factory has been established with an authorised capital of Rs 4000 million. It is one of the largest cement factories of Nepal that produce their own clinker. The factory has 45 per cent shareholding of a Hong Kong based company, Krishna Holdings Limited. The factory is spread over 30 bighas of land and the mine is spread over an area of 20 square kilometres for extracting limestone.
Neupane says that this factory uses the latest technology that is not only efficient but also energy saving. He adds the technology installed in the factory is different than those used in Nepal and consumes 50 per cent less energy. All machineries for this project are imported from Denmark and manufactured by FLSmidth Private Limited.
The group has always been prioritising the expansion of its factories. Last year, the group had a major expansion on its laminated sacks factory, Jagdamba Synthetics Pvt Ltd. New technology was installed and all upgraded machineries were imported from Austria. The factory has an installed production capacity of 1.5 million metres of fabrics per day. Neupane claims that it is the largest woven sacks factory in South East Asia. He adds, “We are proud to say that we are the largest producer and exporter of woven sacks in Nepal.”
Jagdamba Synthetics was established around 13 years ago and the latest addition is the new process of producing laminated bags. Neupane claims that this company has the capacity to produce the thinnest fibres in the entire South Asian region with quality consistency. He says that quality consistency has helped the company export 90 per cent of its production to India.
Similarly, the group has plans to convert its 15 storey building in Bhaktapur into a hotel as a part of its plan to move into the tourism industry. This three-star hotel will come into operation in a few years tying up with an international chain. Neupane says that it will be a unique hotel that utilises green technology.
The group in its initial days was involved in trading business. When Neupane separated from his family business and started his own, he had little experience in the manufacturing sector. He partnered with Shanker Lal Agrawal who was also in the trading business then. It was around 1996 when he and his partner Agrawal thought about entering into the manufacturing industry. Agrawal had the experience of running Jagdamba Steel and Neupane, who is also an engineer, had thoughts of establishing a cement factory.
In 2001, the group started the construction of a woven sacks factory that produces bags for cement packaging. Construction was completed in 2003 and production began in the same year. Similarly, the group moved into spinning and tea gardening and processing. It was followed by the establishment of Jagdamba Roto Packaging factory. Likewise, the group also moved into pashmina, steels and other construction material production. Sarbottam Cement would be the latest addition to the construction material production business of the group.
“I always had a desire to go for production based industries especially on construction material rather than the service industry,” Neupane says. He was often suggested to venture into more profitable sectors such as real estate and gold trading but they never lured him. Though the group is still involved in trading, it is the manufacturing sector that gives Neupane an immense pleasure. He says that the manufacturing sector creates employment for a good number of people and benefits society with both backward and forward linkages. The Saurabh group has been employing 2600 people at the moment in all of its companies.
When democracy was restored in the country in 1990, it was a new beginning for the Saurabh Group as well. The group’s major industries were established in the 1990s. The liberal policies of the government encouraged industrialists like Neupane to establish new companies. The easier licensing policies and laws were a sort of relief for them. In the mid-1990s to early 2000s, the group came up with its major companies. This was the same period when the armed insurgency was escalating and businessmen were realizing that the situation is unfavourable for making investments.
Neupane says his companies were least affected by the armed conflict being located in urban areas of the Tarai region. However, when the conflict ended and the country was moving towards conflict resolution, the political events of 2005-2006 took its toll on companies in the Tarai by disrupting the operation of factories. Neupane says that bandhs and strikes are a part of life and industrialists must be immune to such incidents.
The cement factory was one of the major establishments of the group in the early 1990s. The group’s course changed when Neupane thought of establishing his own cement bags factory while the general trend was to import bags from abroad as local production was insufficient. This very move led the group to be the largest producer of woven sacks in the South East Asian region at present.
Neupane considers the group’s move to establish a cement factory that totally depends on local raw materials as another turning point. The group came up with the idea of producing cement by manufacturing clinker using local limestone when a majority of industries were importing clinker. This gave the company the benefit to get a strong foothold in the market as one of the producers of cement in Nepal.
According to Neupane, 90 per cent of the total production of Jagdamba Spinning Mills is exported to India while the remaining 10 per cent is supplied to local textile manufacturers. Similarly, products of Jagdamba Roto Packaging are supplied to confectioneries, biscuits and noodles producer for packaging and wrappers.
Neupane says that the largest market of cement is Kathmandu Valley and its periphery where 40 per cent of the group’s production is consumed. Out of around 1 billion sacks of cement produced by the group, 40 million sacks are consumed in Kathmandu Valley alone, says Neupane. He expects the groups’ market share on cement to increase to 20 per cent once Sarbottam Cement’s production enters the market.
When offering products to the market, the group abides by three fundamentals: quantity, quality and consistency. Neupane says that producing larger quantities helps to achieve economies of scale and also gives an edge to competition. Similarly, quality is the prime focus of the group and he says that any complaints on quality are taken seriously.
History of Saurabh Group
The Saurabh Group’s journey began from Myanmar. Till the 1960’s, Bishnu Prasad Neupane’s father, Lila Ram Neupane, was doing retail business alongside running a butter processing factory in Lashio town in the Shan state of Myanmar. After Buddhism was made the state religion in the 1960s, people of Nepali and Indian origin were forced to leave the country. Lila Ram Neupane made a decision to leave Myanmar and resettle in Nepal and started his own business with a wholesale store of textiles in Bhairahawa. During that time, textiles were brought from Kathmandu and distributed there. Later, he also took dealership of the National Trading and Salt Trading Limited.
It was in 1964 when the business took shape of a group and was further diversified. Bishnu Prasad Neupane took up responsibility in 1986 and started the Jagadamba Cement Industries, his first manufacturing venture, in the early 1990s.
Saurabh Photo International, the authorized distributor of Konka products, was in the agency trading business since 1990 and has a strong presence in the market. Currently, the group is mainly involved in the production of cement, steel, tea, spun yarn, PP Woven fabrics, calcium carbonates and other such products. The group’s trading activities continue with imports of Konka products, Citizen watch components and other Chinese products. There are 14 companies under the group and some companies are operating under a joint venture with Shanker Group, another business house of Nepal. Today, the Saurabh Group registers an annual turnover of Rs 5 billion, Rs 4 billion, and Rs 2 billion from its cement, spinning and synthetic production, respectively.
The Saurabh group and the Neupane family have a good reputation in Rupandehi district not only for business but also for their contribution to society. The business house has contributed over Rs 100 million for social work in the area. Along with institutional corporate social responsibility (CSR) activities, the Neupane family has been carrying out philanthropic activities on a personal scale. A separate trust has been established and run by the family. This trust was established by Neupane’s father and every year, at least Rs 2.5 million is donated by the family for social work. According to Neupane, donations amounted to Rs 2.7 million last year. He modestly says, “This is not our CSR activity and is not for any commercial benefit. Within our family, there are three business groups and all of them contribute to the trust to make it an independent social entity.” Neupane says that the group does not take any credit for the trust’s activities.
The trust supports government hospitals, schools and government organisations. Neupane says that most schools in Rupandehi and Nawalparasi districts have received support from the trust. Similarly, Jagdamba Cement has recently initiated ambulance services. It also carries out social training programmes for various activities such as cancer relief activity. Likewise, the group also awards people and their social and non-profit organisations that have made good contributions to society. The company has been providing cement to construct buildings of such organisations at cost price.