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January 2018 Corporate Focus

Published on: 2018-01-23 11:37:23     1103 times read    0  Comments
MV Dugar Group : A Legacy of Business Excellence

From hydropower to automobile and BFI sector, this business house with a long history has made a significant mark in business arena in Nepal.

--BY KRISHANA PRASAIN

Vivek Dugarn Vice Chairman, MV Dugar GroupVivek Dugar
Vice Chairman, MV Dugar Group

Continuing the legacy of 137 years of a family run business, MV Dugar Group in recent years has stepped into new areas of business. Among the priority sectors for the group is hydropower where the conglomerate is investing significant amounts of money. The group is spearheading the construction of hydropower projects that will be the biggest in Nepal in terms of private sector investments. “We will complete the construction of HEPs with installed capacity totaling 500MW within the next six to seven years.  Out of 500MW projects, Likhu A (29 MW), Likhu I (77 MW) and Likhu II (51 MW) having a total installed capacity of 156MW are under construction with investment amounting to Rs 21 billion,” says Vivek Dugar, vice chairman of MV Dugar Group. With ten years of experience in the hydropower sector the group has already expressed its commitment for the “Ujyalo Nepal” initiative of the government under which 500 megawatts will be produced over the next 10 years.  

The projects that are under construction are being financed by three different consortiums of 18 banks.  A consortium of seven banks led by Prime Commercial Bank and Hydroelectricity Investment and Development Company Limited is investing Rs 6.96 billion in the Likhu I project. Similarly, Likhu A is being financed Rs 3.33 billion by a consortium of five banks led by Laxmi Bank. Likewise, the Machhapuchhre Bank led consortium of six banks has already agreed to invest Rs 4.68 billion in the Likhu II project.  The electricity generated from the projects will be connected to the national grid within the next two and a half years. According to Dugar, the group has received licenses for other projects. “We are conducting project feasibility studies as well,” he says.   

For the Likhu HEPs, MV Dugar Group has constructed roads stretching 85 kms to the project sites.  “This is very big progress in itself,” Dugar remarks proudly. Similarly, the Group is about to complete the construction of the 45km transmission line. 

Vice Chairman Dugar is among those who believe in moving on their own rather than depending on the government for everything. “People usually say that it is the duty of the government to build basic infrastructures for development projects. But we believe that the requirements needed for the projects should be constructed by the investors themselves,” he says. “We should not be too dependent on the government and need to build the basic infrastructure by ourselves to a possible extent.”  He sees the government as supporting the efforts of the private sector in hydropower development.   

Business History
The foundation of MV Dugar Group was laid by Vivek’s great grandfather late Chandan Lunkaran Dugar in 1894 starting with textile trading  which was continued by his son, the late Lunkaran Dugar. “The growth of our group started taking heights after my father Moti Lal Dugar and his brothers took over the business,” recalls Dugar. “He ventured into various areas of the manufacturing business taking the group into a new era of growth and profitability. He got into jute processing and export which was a huge business back then. This was our second milestone in business after textiles,” he adds.  The business of food grains became the third milestone for the Dugars. “The food grain business was our traditional business. We launched many new concepts at that time in this area of business,” he says.  

According to Dugar, his father is the first businessman in Nepal who started the practice of paying farmers in cash while buying the raw food grains. “When we began this practice, people were doubtful about its success,” he mentions. However, the initiative became a turning point for the Dugars while benefitting for the farmers. “It’s now been over 60 years since Nepali farmers have started getting cash in for supplying their products to the companies which has ultimately brought a big change in the agriculture sector,” he shares. 

The Dugar family is credited for starting industrialisation in the far-western region (now province number 7). The opening of the first rice mill followed by an oil mill by the Dugars in places such as Dhangadhi sowed the seeds of industrialisation in the region. “Opening industries in this part of the country became the next big business decision for us. At the time, my father and his three brothers were jointly looking after the family business,” he says, adding, “After dividing the business among the brothers, different business groups of Dugars emerged.” Currently, business groups formed by Dugar family members are engaged in different business activities.  

Focus Sectors
The group’s consistent presence throughout the years is due to the fact that it keeps on changing with the times. “It is embedded in our business philosophy that we need to change according to the time. We keep on making changes in our portfolio,” he says. Earlier, food grain was the group’s main business.  “Now, we’ve exited from the business. Many groups are not ready for switchovers. They keep on retaining their old businesses,” says Dugar. Similarly, the group refrains from getting into many sectors at once. At present, automobile and hydropower are two major focuses for the group. 

 MV Dugar Group has also been maintaining a strong presence in the BFI sector. It is the major promoter of Sunrise Bank Limited and Gurans Life Insurance Company and Sanima General Insurance company ltd.

 Established in 2007, Sunrise Bank is among the country’s top commercial banks providing all types of modern banking services to its customers. The bank having an authorised capital of Rs 10,000 million has fulfilled the new capital requirement set by the Nepal Rastra Bank in 2015 by increasing its paid-up capital to Rs 8.15 billion.  

Taking on business challenges has become a tradition of the group. “Our history clearly shows that we never hesitate from taking challenges in business,” Dugar says. He sees long-term planning as essential for the sustenance of the various businesses. MV Dugar Group deploys a decade long plan for effectively executing business plans and market strategies. “We move ahead according to the 10-year plan,” he informs.  

MV Dugar Group in Automobile Sector
For 47 years the group has been in the automobile sector making the conglomerate one of the pioneers in Nepal when it comes to dealing with renowned global vehicle brands. “It was in 1972 when we stepped into the automobile business. The sector over the years has grown multifold as a result of the changing economic scenario in the country,” he notes. 

MV Dugar Group is the authorised distributor of Mahindra and Mahindra, Royal Enfield, Mine Master, Leica Geosystems, Kirloskar oil engines and John Deere tractors in Nepal. It introduced the Mahindra and Mahindra Loadking tipper for the first time in the Nepali market three decades ago. Over the years, the group has rolled out different variants of Loadking tippers becoming the market leader in the Light commercial vehicle (LCV) segment. “We hold more than a 75 percent market share in the Light commercial vehicle (LCV) segment,” says Dugar. The Group has more than 31 networks across Nepal that include 14 3S, five 2S service points, 12 touch points. Furthermore, five new highly sophisticated workshops are under construction.

Similarly, the group for the last seven years has been distributing small commercial vehicles (SCVs) of Mahindra & Mahindra in Nepal. “We hold the second position in SCV market segment,” says Dugar. He expects that the group will climb to the number one position within the next three years. “We have been selling quality vehicles ensuring a high level of customer satisfaction,” he adds. 

Likewise, MV Dugar Group started selling heavy commercial vehicles (HCVs) two and half years ago. “Mahindra & Mahindra is the third largest HCV brand in Nepal at present. We will reach the number two spot in this segment within a year,” states Dugar. Also, the group launched Mahindra & Mahindra backhoe loader two and a half years ago in the domestic market. 

He cites the use of advanced technology, higher fuel efficiency and comfort as the key USPs of Mahindra & Mahindra vehicles. “This is why we have been receiving the encouraging market response,” he says.  

Similarly, for over the last 15 years, the group has been the authorised distributor of John Deere tractors in Nepal. John Deere is a brand of the US-based giant Deere & Company which is among the world’s top companies in agriculture solutions.  “We are the market leader in the tractor category of 55 horsepower (hp) and higher,” he says. According to him, the group introduced 36hp tractors in the medium segment around two years ago. He hopes the group will be in the number one position in this market segment within the next two years. 

Likewise, the group launched Kirloskar Power Tiller n Pump Set six months ago and hopes to attract the attention of Nepali customers in this segment also. “Kirloskar Power Tiller n Pump Set will grab a good share of the market within the next 2-3 years,” says Dugar. 

Furthermore, the group is planning to launch the Hyva brand, a global leader in hydraulic solutions, in the Nepali market soon. Dugar sees the passenger vehicle market as overcrowded and says that the group currently has no plans to enter the segment. “We believe in healthy market competition. However, there is a culture of snatching dealerships by wrong and corrupt means which is very sad situation for global brands at present,” he shares. MV Dugar Group is in talks with some foreign automobile brands for the dealership of vehicles. “We will bring in some other brands,” says Dugar.  

He sees a bright prospect for the automobile business and says that the growth of the Nepali auto market in last five years has been very good. “We are satisfied by our overall business portfolio in automobiles. We are leading in most of the segments already introduced by us in the market. We are trying to climb to the top position in the product categories that have been launched in recent times,” he mentions.   

The Royal Enfield Business 
Over the years, Royal Enfield two-wheelers have become a top choice for Nepali motorbike enthusiasts. Originating in Worcestershire, England in the early 20th century, the Royal Enfield brand has garnered a big cult-following in Nepal due to the sturdy build design and classic looks of the two-wheelers. MV Dugar Group is at the forefront in this particular motorbike culture as it has been the authorised distributor of Royal Enfield two-wheelers for the last 17 years. “It is the aspirations not the bike we sell,” states Dugar.  It is the top-notch sturdiness of the motorbikes for which Royal Enfield has amassed popularity the world over. “We have a slogan ‘From Grandfather to Grandchild’ which means the Royal Enfield motorbike can run for three generations,” he says.

The group also first brought the concept of motorbike clubs in Nepal. The massive cult-following of the brand is shown by the fact that the number of Royal Enfield motorcycle clubs have increased to over 100 over the years.  “There is a culture of brotherhood among the Enfielders and we have been actively promoting this since the beginning,” he expresses. “Developing this culture is important as it helps to grow cooperation among people coming from different cultures,” he adds.  

In the earlier years, the group used to sell 50 bikes yearly. According to Dugar, over 5,000 Royal Enfield two-wheelers are sold in Nepal per year at present. “We cover 90 percent market share in the motorbike market segment of 300 CC and above,” he states. 

The group for the last three years has been designing the motorbike outlets with same parameters across the country to provide customers with the same experience whichever showroom of Royal Enfield they visit. Currently, seven brand stores have been established across the country while five are in the pipeline and in the next two years, 19 more brand stores will be opened across the country. 

Effective after-sales support is another major reason for the strong growth and popularity of Royal Enfield two-wheelers in Nepal. This is an area where MV Dugar Group has been investing and concentrating its efforts with an aim to provide world-class after-sales services to the buyers of Royal Enfield bikes. “We established 100 service bays last year at different locations of the country. 200 more will be added within the next two years,” shares Dugar. 

Human Resource
Like other Nepali business houses, MV Dugar Group is also coping with the present workforce shortage.  “There is a huge challenge in terms of availability of human resource,” says Dugar. Nevertheless, the group has been trying to effectively manage the available workforce. “We believe in building relationships. The employee turnover rate is very low at senior levels in our group,” he shares. The business house has set some good examples in retaining staff. “Over 30 percent of our employees have worked here for more than 15 years,” he informs. Currently, more than 1,200 people are working in various positions for the MV Dugar Group. Meanwhile, focusing on capacity enhancement of its staff, the business house has been organising various types of training sessions conducted by experts from India and abroad. Moreover, the group will soon be partnering with an Australian consulting firm to train staff. “In this way, our workforce will be trained by international professionals for better productivity,” says Dugar. 

CSR Activities
Apart from regular business practices, the group is also engaged in various CSR activities. It is building schools, medical centres and also working on rural electrification in the hydropower project areas that are currently under construction and 7,000 households will avail electricity connection soon. “We are planning to construct 30 to 40 health posts in the project area also,” shares Dugar. He further says that the group has been continuously interacting with the locals to find ways to support them. Likewise, its automobile division is providing support to schools, orphanages and organising health camps in rural areas. Beside this, the group has contributed in building various schools and hospitals in major cities of Nepal. “Our group has always been appreciated by the Nepali society for its continuous contribution for good causes,” says Dugar. 

SWOT Analysis

Strength

  • Staff retention
  • Dedicated workforce
  • Strong organisational discipline 
  • Long business history and business experience in multiple sectors

Weakness/Areas Need to Improve

  • Interaction among staff
  • Upgrading of infrastructure 
  • Network expansion

Opportunity

  • Stable government can result in tremendous business opportunities in Nepal 

Threat

  • Political instability

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