Financial Times

Hemas in hotels, pharmaceutical expansion
By Duruthu Edirimuni
The Hemas group, which last week reported a 54 percent rise in after tax profit, is planning to expand its hotel sector and pharmaceutical line. The group's CEO, Husein Esufally told The Sunday Times FT that they plan to set up two up-market boutique style hotels, one at the southern coast and one in Kandy. "By the end of the year we will have clear investment plans ready for these two ventures."

When asked about why they are venturing into the pricey upper end market, he said, "we feel that the present demand-supply situation in the country is well positioned to attract quality tourists." He said that currently the market needs a range of offerings and this in turn will secure a segment of tourists that the country has long been over due in attracting.

Abbas Esufally, Head of Leisure Sector at Hemas, who had just returned from an educational trip from Bali with 16 top managers of Hemas leisure sector, said that they will be drawing extensively from the Bali experience.

"We have studied the service standards, service quality and customer focus in their tourism industry and will implement them in our ventures in addition to carrying out continuous improvement in those standards."

He also said that for the hotel in Kandy they are hiring a foreign architect as a consultant. He added that they are diligently examining two more opportunities to invest in the hotel sector, but declined to comment further.

Hemas recorded a turnover of Rs. 483 million up by 42 percent in 2003 and a profit after tax of Rs. 106 million, up by 253 percent from 2003 in their leisure sector for FY 2004.

Hemas is also looking at broadening their involvement in the pharmaceutical sector. Husein Esufally said that they plan to incorporate a separate company considering the healthcare and pharmaceutical sectors as a whole.

Meanwhile, The Sunday Times FT learns that Hemas is trying to outsource alcohol-based personal care products from India. Debu Bhatnagar, Managing Director, Hemas Consumers Sector said that Hemas constantly calls on Indian manufacturers to check on their facilities as a way of 'internal benchmarking' in terms of cost and quality.

He said unlike most competitors in the industry, who import products from India, Hemas tries to benchmark their manufacturing facilities with those of their Indian counterparts.

Imports from India are cheaper than from other countries because of the Free Trade Agreement between India and Sri Lanka. Indian manufacturers who export to Sri Lanka have an advantage because of lower import duty.

Bhatnagar said India is the cheapest source and the most difficult to compete with because of this cost factor. "Therefore our reference benchmarking is more critical to India," he said. Hemas recorded Rs. 2,948 million in sales up by 23.8 percent over the previous year in the personal care sector. Profit after tax rose 85 percent to Rs 298 million. Hemas is concentrating on a nutraceutical product and a cosmeceutical product range, Bhatnagar added. He explained that nutraceutical products are those between nutrition and pharmaceutical products and cosmeceuticals are those which are between cosmetics and pharmaceutical products.

Meanwhile, a top official at Hemas said that the firm has plans to import alcohol-based personal care products, such as perfumes and colognes from India. He said that the imposition of Rs 250 per litre excise duty on alcohol and alcohol-based products in the last budget had affected the company's bottom line.

Hemas Group recorded a profit after tax of Rs. 654 million for FY 2004, up 54.7 percent from the year before.

Back to Business