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Softlogic
Holdings in acquisition mode
By Duruthu Edirimuni
Softlogic, providers of business solutions through application of
advanced technology, has come a long way since its inception in
1991. Adding 11 companies within 14 years and consolidating them
under Softlogic Holdings (Pvt) Ltd., it employs over 500 people
in offices located in Sri Lanka, Singapore, Pakistan and Australia.
The group’s annual turnover is approximately US $ 50 million.
Its Chairman and Managing Director, Ashok Pathirage spoke to The
Sunday Times FT about the company’s beginnings, its businesses
and future outlook.
How
did you start up and what ssentially prompted you to do so?
In 1991 with a capital of Rs.1 million and eight employees
we started a software development firm and called it Softlogic Information
Systems (Pvt) Ltd. It was formed with the objective of catering
to local software requirements.
How
did the business pick up?
There was a need for a company such as ours in the country,
especially when software applications were catching up. We approached
the markets in a focused manner. In the first year we had about
Rs.6 million in turnover.
Why
did you decide to diversify?
We wanted to diversify because we did not want to depend
on one industry or a brand. We always consider the return on investment
in the long term. If it is a feasible venture and has long term
sustainability the company always takes on the challenge.
A year
after Softlogic Information Systems, we started Softlogic Trading.
Now the company has the sole authorised distributorship for DELL
computers in Sri Lanka. In 1995 Softlogic Computers (Pvt) Ltd.,
specialising in marketing and supporting a variety of networking
and power protection products, through a locally established dealer
channel was set-up.
Softlogic
International was started as an authorised partner of Dialog GSM
to provide mobile connections. Then we went on to set up ABACUS
International Lanka in 1998 as a joint venture with Abacus International
Limited, which is Asia Pacific’s largest computer reservations
system. At Lifestyles Store we have contemporary furniture on offer
and Softlogic Communications (Pvt) Ltd. is the only authorised distributor
for Nokia mobile phones and accessories in Sri Lanka. Softlogic
Solar (Pvt) Ltd, was started in 2002 and the latest company is Softlogic
Properties. All these companies are consolidated under the Softlogic
Holdings umbrella.
Why
did you venture into furniture, which is quite different to the
IT related activities the company has been dealing in? How did you
identify the market?
When I was holidaying in Bangkok, I came across ‘knockdown
furniture’ at a supermarket. By this time a lot of apartment
complexes were mushrooming and I saw a big need for ‘functional
furniture’ in Sri Lanka. We brought this new concept in furniture
to the country, where chairs, tables, drawers and any other furniture
item could be fixed within a short time.
The
company managed to create a brand for lifestyle furniture. Now we
have progressed from a furniture shop to a home store. We want to
add more new products and expand the store. We want to ultimately
have a similar store as that of Ikea.
Have you expanded to other countries as well?
Yes. Gerrys Softlogic (Pvt) Ltd., is a joint venture with Gerrys
Holdings (Pvt) Ltd., in Pakistan. Its operations are centred in
Pakistan and the company is involved in marketing and selling of
DELL and Cisco products, while having the largest DELL distributorship.
Softlogic
Australia is located in Melbourne, Australia and was established
in 2000. It is responsible for promoting a range of e-business application
developments and professional services such as business analysis,
Internet, Intranet and Extranet. Meanwhile, E-solve Trading (Pvt)
Ltd., was incorporated in 2002 in Singapore for developing and marketing
software products and other trading activities.
What
is your cash cow?
It is Nokia mobile phones. We import about 10,000 handsets a month
and in a year’s time I expect it to double. The mobile industry
is the fastest growing today and the Nokia brand has 80 percent
market share.
What
are your growth figures?
We are growing presently at an annual rate of 30 percent. Softlogic
is an asset rich and a cash rich company. We have about a five billion
rupee turnover annually.
Are
they healthy compared to the industry growth figures?
They are very healthy. In terms of import statistics we are the
largest computer and mobile phone importers. Every seven out of
ten phones are imported by Softlogic.
What
are your forecasts for the future?
What we have experienced so far is an organic growth. We want to
grow faster and bigger in a short period of time. We are looking
for acquisitions and are aggressively focused in this area. We want
to acquire businesses in similar industries or acquire related businesses.
We are looking at acquiring businesses which can complement our
synergies.
Can you explain about the competition the group faces in the different
industries?
All the industries we are in are competitive. We need to have competition
in the furniture market, because it will create awareness. In the
mobile phones market we do not have much competition. In computers
we are an established player, because we have been in the industry
for 14 years.
Are
you planning to go public?
Yes, but it really depends on the market conditions. In about two
to three years we definitely want to go public. Either we will go
public with one sector of the company, part of the group or the
whole group.
How
much of a stake will you be offering if you plan to go public with
Softlogic Holdings?
We will probably sell out about 15 to 20 percent of the group.
Why did the company decide to play the stock market?
We do not want to put all eggs in one basket. We bid for Hotels
Corporation because we wanted a hotel chain. It is easier to compete
with the existing hotels and in the tourism market with a hotel
chain. Time is money and it will take time for us to build a hotel
chain. Had we secured Hotels Corporation, we could have strategised
on what our business plans would be. So depending on the circumstances
and our business plans as well as the opportunities that come our
way, we will invest in the Colombo Stock market.
How do you rate the current stock market? It is
a bit risky because of the political developments happening in the
country. We need to wait till presidential elections are over, to
make a move. In terms of the advice the investors get, all I can
say is that most of the stock brokers are sales representatives.
They cannot advise properly. Also I feel that the regulations have
to be tougher to make the CSE a vibrant and a strong market.
Are there any plans for expansion?
Yes. We still feel there are a lot of opportunities in
Sri Lanka and also we are looking at markets such as India. India
will be a very good market in five years. We want to grow faster
than what we have been growing at present. We also want to grow
global.
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