''It is all about passion''
Ashok Pathirage, Chairman and Managing Director of Softlogic is driven by passion and to be the best in everything that they do. His Group has a diverse portfolio and he has ensured that Softlogic is a main player in all the segments that they operate in. Continuously introducing international brands as well as partners to the country, Ashok Pathirage stresses that the private sector is indeed the engine of growth, where a more aggressive approach and stable Government policies will enable Sri Lanka to go to the next level.
By Udeshi Amarasinghe | Photography Menaka Aravinda and Mahesh Bandara
An international hotel name has been established in the country after more than 25 years with the opening of Mövenpick, can you elaborate on the strategy behind this endeavour?
The only industry that is currently growing is tourism. We have always believed that tourism will have a good growth and also provide opportunities in this country. Therefore, we wanted to establish a good 5-star business hotel that would set the standard for the industry. When you look from that perspective, we felt that it was a good investment and went forward.
We did not actually go after a brand, however when Mövenpick approached us we felt that they would be a good fit. They are not too big with only 70 hotels internationally. They have a good presence in the Middle East, and we were confident that the focus would be there. Sri Lanka is not a large market and we felt that if we went for a bigger brand then the focus that we required would not be there. Mövenpick is also very much like us and have the same values. Therefore, we felt that Mövenpick would be a good choice. From a commercial perspective too, we have entered a mutually beneficial agreement, which is a win-win for both parties.
Leisure and tourism are important sectors for the Group, can you tell us about any future plans made in this area?
Softlogic Holdings does not have any immediate plans in terms of the hotels. We have invested in Centara Ceysands Resort & Spa that has been in operation for the last two and a half years and it is doing quite well. The resort is one of the best in Bentota. Mövenpick Hotel Colombo was opened to see how the Colombo environment behaves as tourism in the city, consisting quite significantly of business travellers is not driven by seasons, but on the economic growth of the country.
We want to first see the progress of Mövenpick and then we will move on to our next project. We always ensure that we are dominant in the sectors that we enter.
We are cognizant of the plans being made by the Government and are waiting for many of them to become a reality. Therefore, if everything goes well, and even if the Government does not put too much emphasis on these plans, we believe that with the country achieving peace alone there would be many opportunities that will be utilised by the private sector, which is the engine of growth. Irrespective of whether the Government brings in investment or provides support to them, the private sector will always do their part. In that sense the leisure and hospitality sector should do well. But from our perspective Softlogic Holdings will watch first, we want to wait because we are making massive investments. It is not easy to build 5-star hotels one after the other. We want to first see the progress of Mövenpick and then we will move on to our next project. We always ensure that we are dominant in the sectors that we enter.
We have entered the leisure sector, I would say may be we are too late as there are many established players, but if the opportunities are there and everything goes well we want this sector to be a large focus for us. As the Softlogic Group, we do not want to be a small player; we want to be a substantial player.
Softlogic is also involved in the restaurant sector, what can you tell us about this area?
The restaurant segment is actually tagged with our retail sector and not the leisure sector. We have been very aggressive even on that front. We hold the Burger King franchise in Sri Lanka and we have already opened 13 outlets and another four will be opened in the next three months. By the end of the financial year we would have a total of 20 outlets. Some of the other restaurant franchise operators who have been in the industry for over 20 years are still operating 10. Therefore, you can see the approach that we take. We need size and scale and that is the way fast food chains grow. We will expand continuously while being cautious.
The acquisition of Odel can be seen as a major milestone for the Group, what was the thinking behind this endeavor, and what more has been planned?
We were already a fairly large fashion retailer with many international brands under our wing when the opportunity to acquire Odel came up. We felt that this would be a good fit for us because we saw a lot of synergy between the two. A key aim was to bring in our international brands, which were already in the country into Odel whilst also introducing new ones. We felt that there was a need for a good department store in Sri Lanka offering genuine authentic products where there would be a good market for it. Our strategy for Odel was not to run it as it is was but to develop it further and take it to the next level of growth. We saw great potential in where we could take the business to and that is why we have invested significantly in Odel.
Today, Odel emulates the look and feel of an international department store. We will continue to make improvements every day.
We have made many changes. If you look at the main store you will see that our product offering is quite different. We have introduced new brands. Today, Odel emulates the look and feel of an international department store. We will continue to make improvements every day. We are adding a further 10,000 sqft and many more international brands are coming in.
We have also planned to develop a mall. Today one of the constraints for the retail industry is that we cannot find a proper mall with adequate space. Sri Lanka has not seen a new mall in the last 25 years.
However, there is massive development taking place and Shangri-La is building one too. We will definitely be present in these malls, because today almost 95 per cent of the brands are either owned by us or represented by us. We need international grade malls in which we would operate as the anchor tenant.
In terms of Odel, we have planned on a 100 million US dollar investment, which will be the 670,000 sqft ultra chic and modern Mall. We hope to commence construction within the next one month. This would also have 40 high-end apartments and a fully-fledged cinema complex, which will operate seven screens. We have partnered with India's largest cinema operator in this regard. I feel this would be a great addition to the country and for our growth.
You are known to rent some of the largest retail spaces, what is the thinking behind this?
This is because we cannot find space so we make sure that we get whatever space is available. We also want to go to a place where we can see like-minded brands and ambience. Therefore, we acquire the space and bring in our own brands so that we can create the right shopping experience for our consumers. We have to create the ambience and provide confidence to the customers that the products offered are the same as what you would find in international markets like Singapore, Dubai or Malaysia.
With Softlogic partnering with many international brands, can you tell us how the Group is performing?
We have been in this business for about 7 years. I am very happy to tell you that this year our Brands portfolio of the business has demonstrated a growth of 30 per cent. Having said that we do not see the same thing happening in some of the other areas of retail. I do not feel that in terms of the current economy, as a country, we are doing that well as inflation is on the rise, interest rates are high and consumer confidence has not peaked. This reflects upon our sales too. We find this is not the best situation, however we are, and as always have been very optimistic about the country. There will always be fluctuations, however the Government too needs time to get things in order. Everyone is very ambitious and hopeful that the Government's plans will be realised soon. When that happens I am sure there will be good times to come.
Softlogic is also in Healthcare. Could you elaborate on the strategy behind this?
Before we entered the healthcare sector, we were very much into ICT and Consumer Electronics retail. We felt that it was better for us to move into a different segment that generates cash rather than credit. That was one of the reasons we entered the healthcare sector. It was not really a planned entry but an opportunity that we received by chance. We realised that there was great potential because if you look at our healthcare industry today, most of our operators are family driven. But we are not; we are a public quoted company and a professional organisation. We are looking for returns for our shareholders. Therefore, we look at business in a different way. We saw the opportunity and went for it. We invested and we bought Asiri Hospitals and Asha Central, and we totally revamped the two hospitals. We entered the sector 12 years ago and today we are the largest player.
Everyone is very ambitious and hopeful that the Government’s plans will be realised soon. When that happens...there will be good times to come.
We will not stop because we see that there are so many opportunities in this sector. We are building a hospital in Kandy because there is a need for a private hospital in the district. We are investing 5 billion rupees in the Kandy hospital project. That should be opened in about 20-months time. And we believe that its going to be a great business proposition for us.
As you know many people are acquiring medical insurance. These people will want to seek private healthcare. In this manner there are many opportunities in the healthcare sector. There are obstacles such as regulatory challenges as well as policy changes. However, we need to work through these challenges and work with everyone. It is necessary to change with the situation as no business can run with one strategy. Your strategies have to change based on what is happening around you.
How is the performance in the Automobile sector?
I must admit that we have not made much progress in this sector. Today our Ford dealership is the main aspect of this segment. However, it is very challenging due to fluctuations in terms of Government policies and duties. Everything depends on this as with changing policies, vehicle leasing facilities change as well. Whenever the authorities want to curtail imports, the first area they look to is to increase vehicle duties. This does not affect only us, but all motor vehicle agents. The Government has to look at the investments made by these companies. We are not just small traders who import reconditioned vehicles and display. We are an organisation that has made significant investments in our facilities. Therefore, we expect the Government to be more clear in terms of their policies. If there is a proper procedure and system this industry can grow further. We will wait and see. This has not been a very profitable venture for us and it has not been a large sector for us. But we want to see how we can do better.
We may need to reconsider certain decisions if things do not improve. We operate in many other large sectors, which hold a commanding or leadership position and therefore we may decide to channel our focus to those areas.
Softlogic has also entered the Finance sector, which also includes insurance. What can you tell us about the progress thus far?
Our financial services sector is a cluster of finance companies which are listed as Softlogic Finance. We rebranded Asian Alliance to Softlogic Life. We also recently sold the general insurance part of the business to Fairfax, a Canadian company, for 1 ½ billion rupees. That was one of our small businesses within the insurance segment in which we were losing money. Therefore, we wanted to completely focus on our life insurance business, an area in which we are very strong. This area has been a great investment and we also believe that there is much opportunity here. The insurance industry has had a substantial growth in the recent years. Softlogic Life is growing at 40-45 per cent YOY. It is phenomenal. Since we took over the insurance company we have been growing at a higher rate than the industry. We continue to get great results. This year we believe that we will deliver in insurance more than a billion rupees in profits.
It is necessary to change with the situation as no business can run with one strategy. Your strategies have to change based on what is happening around you.
Softlogic Finance is also doing well. Our profits have been growing. I believe that there needs to be consolidation because as some finance companies are in trouble. I hope the regulators will look at that, because we need some stability to make sure that customers have confidence in finance companies. Due to the progress we have achieved, the finance industry will be one of our key growth sectors.
Softlogic recently entered the property segment, can you elaborate on this?
Softlogic has just entered the property development sector and we are actually testing this area out. We recently commenced a 25-unit apartment complex. We have not even started marketing the property because it is not difficult to sell 25 apartments. We want to deliver the best when it comes to anything. That is our game. We will develop quality apartments and we would look at how the market reacts. After that we will look into how we can develop further in this industry.
At Odel too we will have very high-end apartments. We believe that there is an opportunity for a company like Softlogic where customers believe that we always deliver great products and reliability. I feel that it is important when selling apartments or anything for that matter. We have earned that reputation as a company. I feel this is a good industry to have a presence in. We have not considered any further plans at the moment because we have made significant investments in other areas.
It is not a big deal for Softlogic to bring in brands because we are the giant in this sector and we have the necessary infrastructure in place.
Our current focus is on Movenpick and the hospital in Kandy. Our biggest project is going to be the Odel Mall, which is a 100-million-dollar investment. These are our priorities. As a Group we do not do small things. We do small things only to test the waters when we enter an industry. We then know where we want to put our capital and investments.
Softlogic has such a diverse portfolio, how do you manage it all?
As long as you have good CEOs and a good organizational structure then you can manage a diverse portfolio. We have six sectors and each is run by a sector head. Within the sectors there are many companies. So it is well- structured. We have about 8 listed companies within the Group. We have independent directors and have regular meetings and various committees. We take corporate governance very seriously.
The retail sector comes under my purview as it is a fast paced sector. Decisions must be made quickly. For me the excitement today is more in retail because I believe there is so much opportunity.
Softlogic has partnered with many international brands. What was the thinking behind this?
When your company is transparent and straightforward its very easy to attract foreign partners. In certain instances foreign partners have come to us. In terms of brands, we select what we want to introduce to the country. There are many brands that we have in the pipeline, but we will not be bringing them in immediately. We will introduce these brands when the time is right. I will tell you what we are introducing in the next three months. You will see Aldo coming to Sri Lanka very soon.
It is not a big deal for Softlogic to bring in brands because we are the giant in this sector and we have the necessary infrastructure in place. We have the privilege to pick and choose what we want. We have the back-end to support new brands.
In terms of partnerships when we acquired Asiri Hospitals we partnered with Actis. When they left three years later they had recovered 100 per cent of their initial investment. Today TPG Growth is our partner. Then with Softlogic Life, DEG and FMO are our partners and they collectively own 38 per cent.
How can the private sector make use of the opportunities available?
We have always sought after opportunities and we take calculated risks. Everything depends on how you analyse the situation. I feel that the private sector can be more aggressive. The point is most Sri Lankans are very comfortable with what they have. I do not know if they are driven by passion or driven by a certain amount of returns. There is no harm in that, but it all depends on how you look at things. For me it is not about having 100 million dollars in my personal account, it is all about passion. I work not for the need to make money, it is because of my passion, I simply love it. If you love what you do, you can also be successful. The end result will be that you will increase your wealth and develop a larger organisation, you will create value. That is how I look at things.
I feel it is important from the Government's perspective to create stability and to create a fear free environment. The private sector and the public sector have to work together. The Government has to clearly role out their strategies and inform the private sector about their expectations from the private sector. The policies they introduce should be for the long term and not short term. Even if a Government changes they must support the policies implemented by the previous Government because people have invested based on those policies. Therefore, stability has to be created, irrespective of what political changes are happening in the country. This will attract more investment to the country. Today foreign investment is at a low level, why? When policies are inconsistent it is very difficult to attract foreign investments. Furthermore, even if you have brilliant policies you need to communicate these properly. There is no point in concealing it. If those areas are rectified, then there will be more investment by the private sector and foreign investors as well.
All my investments are in Sri Lanka, because we believe in our country and we love our country.
Who is Ashok Pathirage?
Ashok Pathirage is a businessman. His vision is to build a great company,which can contribute towards society and the country at large. He is down-to-earth and has not changed his values for over 25 years. I might be busier today with my current responsibilities but I am driven by passion and I like what I do. There is no formula to success. Also there are no short cuts. Work hard and believe in yourself. You also need to be passionate about what you do. If you do not love what you do, I do not think you will have long term success. If your motive is only money, I do not think you will achieve long term sustainability and profitability. It will be short term. As long as you work and are focused, you build that credibility as an honest man. Then you will succeed. I do not think I could have come to this position alone. The reason is I have always been straightforward in my dealings. You need to build your credibility. Of course, you need to be focused and work very hard to be successful. Maybe you need a bit of luck as well.
I have never gone behind politicians and asked favours. I have never seen the reason to do it. I think if you are an upstanding individual the political establishment or the respective institute would always help you. That is what I practice. You do not need a middleman to get your work done. That is my experience.
I can very simply go to another country and receive benefits through investments. But I will not do that. All my investments are in Sri Lanka, because we believe in our country and we love our country. We also want to develop this country because if we do not we will not be able to achieve what we want. It is very simple.
Softlogic is here to stay. We have great plans as an organisation. We are very confident about this country. We are confident about ourselves. Hopefully the Government can get their act together. We have already missed many opportunities and time is running out. We are growing around 5 per cent as a country, we should actually be aiming for 8-10 per cent in order to take Sri Lanka anywhere near countries such as Singapore, Malaysia or Dubai. India has a large economy and is growing 6-7 per cent. We are a small country and economy and have all the ingredients to be successful. I hope that we look at the country positively, without looking from a political perspectives or our own individual gain. Think about the country and put our best foot forward.