Dr Roop Jyoti is one of the most recognised industrialists in Nepal. The Vice-chairman of Jyoti Group has been a member of Parliament and minister of state, but says he is not satisfied with the way the government looks at the private sector. Dr Jyoti, who has in recent days aggressively investing in the health sector, has already invested more than
Rs 1.5 billion in the sector.
Onlinekhabar recently talked to Dr Jyoti about the prospects and problems in the healthcare sector, and Jyoti Group’s plans to diversify its portfolio. Translated excerpts:
Most of Nepal’s business houses are focusing more on trade enterprises rather than on manufacturing. Jyoti Group, which has a history in manufacturing, has, in the last few years, entered the service sector.
When our father Maniharsha Jyoti started his business 52 years ago, his interest was in the manufacturing as well as the service sector. During the Rana regime, our father spent a lot of time in Kolkata taking his business forward. There were many Nepalis, who used to live with my father in Kolkata. It was during this period that he met BP Koirala. When democracy came to Nepal, BP urged our father to come to Nepal and invest here. That is when he returned to Nepal.
While in India, he had established trade links with Tibet. In 1965, he imported a second-hand rolling mill. One of the engineers, who came to Nepal to install the unit, said he has connections with Honda. “Why not start selling Honda?” he’d asked. That’s when we started the Honda business.
The point I want to make is that we have been in trading and manufacturing business since the beginning.
“In the beginning, we’d consider getting a license to run a factory as a big achievement.”
Could you share with us your experience investing in manufacturing?
We put in a lot of effort to invest in manufacturing. But it’s difficult to establish and run a factory here in Nepal. In the beginning, we’d consider getting a license to run a factory as a big achievement. Our father wanted Jyoti Group to select a core area, and focus on it. After setting up an iron rod manufacturing plant, he established Himal Cement. But the government nationalised it saying that the same family should not manufacture both iron rods and cement. From what I’ve seen, in Nepal, it is difficult to sustain a factory.
You said it is difficult to sustain a factory in Nepal. What are the reasons for this?
We could establish a spinning mill only after putting in a lot of effort. When we asked the government to give us the license, they said that we were going to make big profit. They imposed a precondition for the license. They said Jyoti Group can only own 49 per cent of the shares. Just two years after we started our spinning mill, the government allowed businesses to import thread, which was very cheap, from India in US dollars. The government’s policies made it difficult for us to sustain our manufacturing units.
Jyoti Group has had experience in manufacturing, trading as well as running service sector business. Of the three, in which sector has the group made more profit?
It is beyond doubt that trading is where there’s most profit. If we had not taken up trading, we would not be able to sustain our manufacturing business. We could sustain manufacturing because we are investing the profit that our trading business makes in manufacturing.
Nepal’s private sector’s capacity to take risks is very low. We need to go to the bank to ask for money to finance our projects. The bank tells us that it will finance 60 per cent of total cost. We pay the interest regularly. But if the project fails, we need to take responsibility for the money the bank has invested.
“My father only taught me to run a business. He believed that politics and business can never go together.”
You said that BP Koirala invited your father to invest in Nepal. During the Royal rule, you were appointed minister of state. Do you not think about becoming a politician?
My father has had a lot of influence on me. He only taught me to run a business. He believed that politics and business can never go together. My father did not want to invest in cinema halls and hotels, he wanted to invest only in factories.
First, I just wanted to become an MP, but later I was appointed minister of state. When I was an MP, I did participate in discussions on different bills. I understood politics when I became minister. It is a different world.
Now let’s talk about Grande Hospital. You invested a lot of money in it saying that you wanted to set a benchmark for the industry. But even four years after its establishment, the hospital is still making losses. What’s in store for Grande?
When my wife was ill, I visited Dr Chakra Raj Pandey. He told me that he was going to start a hospital. He urged me to invest. I invested Rs 50 million because I was thinking of putting some money in the service sector.
I was asked to join the board, but I decided not to do so because I neither had time nor interest. But when I was told that the board would convene only once every 5-6 months, I agreed to become a board member.
I said that we needed to bring in an international management team to run the hospital. We approached Samtivej Hospital in Thailand, and they agreed to work with us. Samitivej also wanted to investment in the hospital.
How did the hospital get the required investment?
I myself went to the banks to ask for loan. The banks said they do not invest in hospitals, but they agreed to grant loan because I was involved in the project. But the banks later said the loan would be counted as a loan issued to Jyoti Group, and because there was a limit on how much a group can get as loan, the bank could not issue more loan.
“My only objective was to establish a hospital of international standards.”
The banks told me they can issue more loan only if my stake in the hospital was below 25 per cent, and I was not the chairman of the board.
My only objective was to establish a hospital of international standards. So, I resigned from the post of chairman. I brought down my stake to 25 per cent. But then, the bank said if the hospital fails, I would have to pay back its money. When I thoroughly went through the project’s report, I found lot of deficiencies.
When the hospital opened, CEO Bijay Rajbhandari said he was busy and could not take charge. He told Dr Pandey to become the Medical Director. But the hospital did not have a CEO. Then I approached Samitivej, and asked them to send a CEO. They did send a CEO, but he left after the management did not cooperate.
“After I left, Upendra Mahato came in. When Dr Mahato was coming, he asked me what the situation was.”
Then I sensed the emergency. I started going to the hospital. There was a time when I started going there every day. I was only a board member, and did not have the rights to take decisions. Then the board formed a management committee, and made me its head.
Then Dr Pandey and I had lot of trouble working together. He even told me to ‘leave’.
I ‘left’, but I did not get my money back.
How is the hospital running after you left?
After I left, Upendra Mahato came in. When Dr Mahato was coming, he asked me what the situation was. I advised him to take it up. But the hospital could not do well even after he came. I was again invited two years later.
The hospital was in bad shape, financially. For the patients, the hospital was the best. It was also good for doctors who started earning more than they had been doing in the past. But for the investors, it was a letdown. It does not have the money to service its loan. In the beginning, I used to pay the bank’s interest, later Dr Mahato did it.
Grande’s loss has exceeded its paid-up capital.
Does this show that large-scale investment in the healthcare sector in Nepal is doomed to fail?
The main reason Grande failed was because it did not have a strong management team. I think that if Samitvej was allowed to manage the hospital, things would have been different. The hospital will not function with the current set of investors and managers.
What about Grande City?
Grande Hospital is in Dhapasi. It is far from the city. So I thought that we need to have a clinic in the city. That is why I established a clinic at Kantipath taking Grande’s name. I had told the board that I will construct the building, let’s start a clinic there, we can bring in doctors and equipment from the hospital. But Dr Pandey told me that since it was on my property, I’d better manage it on my own.
Although it looks small from outside, it is spacious. We built it following Samitivej’s guidelines.
Jyoti Group is one of the biggest industrial houses in Nepal. Your cash flow is also good. But the group has not expanded its footprint. Why so?
Our focus has been on sustaining what we have, rather than going after new areas of investment. We see good potential in healthcare. That is where we want to invest. Our group has also invested in Butwal Power. As of now, we do not have plans to venture into other sectors.
We are investing on land. We think that when new avenues for investment open, we can enter into partnerships by using the land we own.
Jyoti Group is raking in profit through its trading business. Where are you investing the profit you are making there?
We are investing on land. We think that when new avenues for investment open, we can enter into partnerships by using the land we own.
It is up to our children to decide where they want to take the business in the future.
Many industrial houses are now venturing into tourism. But you have stayed away. Why?
It is our policy to not invest in hotels because you need to sell cigarettes and alcohol in a hotel. We have received lots of proposals to invest in hotels, but we are not considering it.
