Ambeon CEO Murali Prakash upbeat on SL prospects and tech, calls for greater policy consistency

Ambeon Holdings CEO Murali Prakash

Conglomerate Ambeon Holdings Plc CEO Murali Prakash is upbeat on Sri Lanka’s growth prospects provided the country gets a few fundamentals right. Here are excerpts of a candid interview with Murali:

By Darshana Abayasingha

Q: What is your take on the current business climate, are things progressing better than before?

Initially during November and December I felt there was quite a resurgence and it was quite good; people were up there. Right now, there is a little bit of wait and see and you can’t blame people because uncertainties creep in. But if you look at things overall and take the last three months and compare it to the three months before… there is a huge upswing. That’s a positive. There is greater focus and decision making now.

Q: How about the new tax regime, how will this augur for the investment climate and consumers?

It’s positive and let me qualify why. If you look at Sri Lanka, negative sentiments have dampened spending and investment patterns. As a result, the cost of doing business in Sri Lanka has been pretty high over the last couple of years. What happens when you don’t have enough bottom and your shareholders don’t get enough; they don’t reinvest. If I don’t have enough at the bottom I don’t reinvest – so the cycle doesn’t work. Similarly, for the public as well when you don’t have enough in your kitty you cut down on your consumption and spending. One thing that was needed is to streamline taxation, we had many layers of taxation. I see that happening now which is very positive. On the other hand, I think there will be more money with people and businesses, and they are definitely going to reinvest. So, I see it as a very positive move, the stimulus they have done in the short run. In the long run there can always be arguments within the economic sector, but you have got to start somewhere.

Q: Ambeon has a very good run last year with profitability growing over 110%, is this trend continuing into this year?

From a topline point of view, we are doing even better this year, and we are waiting to see how it will translate to the bottom. Naturally, the aspirations are to do better than last year. Particularly the technology cluster it is doing extremely well and so have the manufacturing areas like fabric. So hopefully we will do better.

Q: Ambeon acquired Millennium IT in 2017, will it continue as a service provider or do you envisage different things, and what is your take on overheads in the sector?

About six months ago we repositioned Millennium IT with a new purpose ‘Reimagine Today, Reinvent Tomorrow’. That syncs with our thinking for that particular business, where we want to go beyond being the premium systems integrator to a more digital solutions provider. That’s the transformation we are trying to lead through, so we are building internal capabilities to gear us towards that.

We are doing very well with Millennium IT. In comparison to the industry we are very much within, and we post very good results at the bottom. We are very conscious about overheads and we are also doing what we call robotic process automation within MIT. So, lot of functions are being translated or being automated; the processes, and that is also helping us to keep costs on check. Generally, in terms of industry norms the costs are higher than what you would see elsewhere, but it is not a concern per se. These all these are well qualified and highly-trained engineers, so the returns are also on the same line. Therefore, we are very upbeat.

Q: What’s 2020 looking like for Ambeon, any potential investments into new sectors maybe?

As a company organic and inorganic growth are both important for us, that’s how we went into technology. We are looking at possible expansions through joint ventures or acquisitions wherever possible. We are primarily focusing on fintech and retail. In other areas we are investing to modernise processes to bring in efficiencies. Any new acquisitions at the moment… nothing right now, and we are not looking at tourism at this point. But we are continuously on the look out to add value to the fintech or technology cluster. Plus, anything that will augment our existing businesses.

Right now, we are equally putting money into technology, real estate and the manufacturing cluster. But going forward we will skew a bit more towards technology, as we feel this is where the growth is and easier to expand into the region.

In terms of DI, the manufacturing part is being divested. Simply because we want to focus on technology and other areas. We didn’t see the scale up to be worthwhile, so we have moved it out. Right now, we only handle the retail part of it.

Q: For the real estate sector, there is the train of thought we don’t have takers for all the apartments and other buildings that are coming up around the city. What is Ambeon’s take?

Our real estate is relatively small now, in Colombo City Holdings we own a fair chunk and we have a couple of properties. We are looking at expanding into the office market segment in terms of rental properties and so on. We feel there is opportunities in that sector partly because a lot of medium sale companies are looking for spaces and I think that’s on the rise. I feel that sector will grow.

As for apartments as such, I don’t think I am qualified to comment, but all what I see is things being stagnant. There aren’t enough takers mostly in the middle and upper end, probably because they are overpriced, or the recent activities have kept people away.

Most of the people have built and they are selling as investments. So, for the investment cycle to work there has to be a lot of confidence. I think the erosion of confidence affected that and they also brought in VAT and other things, which may not have been a major impact financially for some, but still it brings in that negative sentiment.

What must be understood is that business and countries move based on perception. That’s the reality. I think there is a huge problem there and if we can solve that and create a country which is even more peaceful and stable, I’m sure there will be enough people coming and investing. Right now, it is kind of at a standstill, but I think there is room for growth for Sri Lanka. Being at a centre and if we project it properly to the over two billion people in neighbouring markets and some of the excesses from Singapore… all that can flow in with the Port City, etc. I think the future holds good. Right now, there is problem due to confidence and lack of money circulation.

Q: The manufacturing sector provided Ambeon the best returns and porcelain probably the jewel in the crown, but is that under threat?

Yes, roughly about one-third was from manufacturing. But porcelain has a very difficult marketing process when it comes to exports, simply because of economies of scale compared to other countries. Fox example, China, Vietnam and Thailand; they have massive factories which churn out larger quantities. So obviously we are not the best in terms of cost. We compete in more niche upper end segments, and primarily market on contract manufacture basis to other large brands. To that extent we have been very successful.

This is an industry with the potential to become the next iconic Sri Lankan brand in that sense, so we are gearing towards that. We are trying to build a lot of technology into it like 3D printing and various other process automations and IOT. We believe we will be there soon.

Q: Energy costs have constantly been a problem there, have we made any progress in this aspect?

It’s a tough one to solve. We actually transformed from being kerosene-based to various other fuel based to LPG and currently that’s one of the cheapest. If LNG comes in, we believe it could be even cheaper. Plus, we also have to look at new emerging technologies. For example, 3D printing might solve this problem once and for all. We are closely monitoring this and in fact we are experimenting with some aspects. So probably one way is to look at how we can bring in better and cleaner energies and technology to reduce costs.

We haven’t really spoken to the authorities on this, because there isn’t much anyone could do in that sense and we are all highly energy dependent. The only way is to bring in new technology.

Q: How about the capital market segment, it is not performing to full potential, for how long more must it endure in this state?

It is a difficult but pertinent situation. Capital markets, if handled properly, will really propel the country forward. One of the problems I feel is the inherent doubt on policy consistency. First and foremost, we need to have a national policy on what capital markets are, what they can do and what they are going to do for the country and what it means to us. We have to accept that for capital markets to grow beyond a certain point there has to be foreign intervention as well. It is good for the country to bring in that kind of money. When they don’t see policy consistency, they don’t come in.

Policy consistency first and then policy congruency. You can’t have A doing one thing and B doing another. These are the primary reasons I have seen which have kept people away from the market, so much so they don’t want to get in now. Also, one or two negative things that have come out have dampened the whole condition. I feel if we have the right policy framework and the right political and judicial environment the rest will happen.

Q: Do you think the trade chambers are doing enough, or are you with the notion they are just glorious bodies?

These should be a thought leadership body and working closely with certain authorities to drive certain thinking and overarching policies. I don’t know how successful they have been in the past, but I do know now the Ceylon Chamber of Commerce has created a five-year strategic plan and they have initiated discussions with government and authorities on many areas. That I saw as a very positive move and that is what we should be doing. Change and influence policy making to suit the country and be the premier chamber. So, it is happening now.

Q: Is this because we have a somewhat laid-back culture, even in terms of our employees where we practice a lot of live and let live?

I think the mindset change is not easy for any country. But what I have been trying to do is involve the people in the final result of the company. Not only in terms of sharing the reward but also in terms of being visible so they understand why we are doing what we are doing. Over the years that has helped garner greater support from employees. Having said that, there are times where we have had to be tough and say ‘nothing doing and you have to’. I always say that with change management it is great if we can be nice to everyone and get it along, but that just doesn’t happen because democracy has its limitations. You have to sometimes put it down and say look guys this is what it is so let’s move through, but we will prove to you at the end of the day we will all benefit.

If you live to the philosophy that when things are good you share it with the people, then they cotton on to it much faster. That’s what we have been doing and that’s what successful businesses are doing. As a country again that is probably where we should be doing.

Q: What is your vision for Ambeon over the next five years and for the country?

For Ambeon we have a clear three-pronged strategy. One is in every business that we do, to be relevant to the consumer no matter where you are. Towards that end whatever we do, to demystify the future.

Most of the time people react and create programmes of strategies to keep up to change. We are trying to reverse it where we try understand it before – which is why we went into technology as well – and try and recreate that in a manner where we don’t get caught to disruption. For example, our venture into 3D printing and 3D-led website for porcelain. We are very focused on whatever we are doing.

Secondly wealth creation across the board. We won’t be in any business if it is not scalable. Thirdly, given the current business sentiment and level of investment, we are very committed to governance, risk and compliance. That’s a core element.

Given these three our plans for the next five years revolve around fintech primarily, and anything to do with technology. We are looking at property tech, regulatory environment related tech.., being one of the first to create a security operations command under Millennium IT, anything to do with regulatory environment, property and finance environment. Ultimately, I would love to own that entire space of money transfer in digital form, that’s something we are very keen to look at and are focused on.

Secondly, we are focused on the region and you will see us moving in again with technology and that’s an ambition we have. Thirdly we are also looking at environment-related projects. Things like recycling-based industries and whether there are any opportunities for us to get in including with some of those attached to the current industries like fabric manufacturing. But it could be completely new as well like renewable energy. That’s where we are modelling ourselves to be into the future.

Q: You said you wish to own the fintech space, but isn’t there a lot of people already doing that and competing in that space?

The thing is how you differentiate yourself and this is something we speak of day-in day-out. There might be many people doing the same thing, but how do you differentiate. One of the things we are doing is focus on delivery… with delivery to the customer to be the best. Not only in terms of time and cost, but the actual product that we give them. So, you would see we are heavily investing and focusing on new technologies the chatbots, Artificial Intelligence, Robotic Process Automation… these are things we are immersing ourselves fully in. So, we kind of breakaway from the traditional Systems Integrator mindset to deliver.

We are also kind of trying to be a thought leader in that sense. What we go and tell the business leader is tell me your pain point, you know your customer you know what you want to do, we will handhold you and build that digitisation process to take you there. Again, we are combing the management acumen we have with technology. So, we are not just a technology company. We are bringing in that management acumen to handhold and try and help them. So we are trying to be unique in terms of what we have to offer.

There are a myriad of products and services not just one or two. We are trying to create our own IPs and special platforms that you could sit on an ERP or anything, so we are trying to differentiate. We are very positive about what the future is going to be. By nature, our DNA is to look at opportunities and jump in and move through, and that’s something we will continue to do as Ambeon. Hopefully, the country will be on the right tract and together we can reap the benefits.

Pix by Ruwan Walpola

Profile: Ambeon Holdings PLC

Ambeon Holdings PLC (formerly Lanka Century Investments PLC) is a medium-sized, diversified conglomerate with over 3,500 employees. The subsidiaries of Ambeon include Taprobane Capital Plus Ltd. (a leading financial services provider with experience in capital markets in Sri Lanka), South Asia Textiles Industries Lanka Ltd., (a leading manufacturer of quality weft knitted fabric for leading global brands), Dankotuwa Porcelain PLC and Royal Fernwood Porcelain Ltd. (world renowned manufacturers of porcelain tableware), Ceylon Leather Products Ltd. (manufacturer of leather footwear and accessories, popularly known as DI), Millennium Information Technologies Ltd. (Sri Lanka’s leading information systems solutions providers delivering IT solutions for many industries) and Colombo City Holdings PLC (a property management company actively engaged in the real estate market).