Global polyester king
Shoeb K Zainuddin
Sri Prakash Lohia has built a $7 billion global business empire using his considerable business skills and ability to operate in difficult markets. The 60-year-old, who operates from London and Jakarta, is not done yet and has aggressive expansion plans for the next five years. He sat down with GlobeAsia in a rare interview in his London home recently to outline his vision.
Sri Prakash Lohia, the chairman of Indorama Ventures, has come a long way from the humble surroundings of Purwakarta, West Java. It was only in 1973 that he and his father established the company’s first spinning plant in Indonesia after arriving from their native India.
Today, 38 years later, Lohia oversees a global business empire that spans 18 countries and last year booked a turnover of $7 billion with EBITDA (earnings before interest, tax, depreciation and amortization) of $1 billion. Indorama is today the world’s largest producer of polyester and PET, the raw material for the production of plastic bottles, controlling one third of global supply.
One of every three plastic bottles produced in the world comes from an Indorama plant somewhere around the globe. And the 60-year-old tycoon is not done yet. Last month, he paid $795 million to acquire Texas-based Old World Industries to expand his reach in the United States, where he already has a significant presence.
A lover of rare books – he has the second largest collection of sets of lithographs in the world – he is a meticulous planner, leaving nothing to chance. He shuttles between his homes in Jakarta and London, scouring the world for investment opportunities and new ideas.
In the next five years, he intends to pump $5 billion into his Indonesian operations, building a new petrochemical plant and a state-of the-art polyester plant. He also intends to keep on acquiring new companies if they meet his strict criteria.
“Indorama Ventures grew from $2 billion to $7 billion in three years and we will be a $10 billion company by 2013,” he told GlobeAsia in a recent interview in his London home in Mayfair. “Everything is meticulously planned, it’s not just a figure I picked from the sky.”
“To become the largest in an industry is something I am very proud of,” he adds. “Going forward, we will expand in the upstream sector, which is more capital intensive but has less competition.”
Does he have a magic formula for his company’s amazing growth? No, he says. “We do everything using common sense but nobody can replicate us.”
Lohia attained Indonesian citizenship in 1983 and now considers Indonesia his home, despite his sprawling global presence. He is still very much hands-on but leaves day-to-day operations to his son Amit – who is based in Singapore and runs the Indonesian and African operations – and his younger brother Aloke, who is group chief executive officer and is based in Thailand.
Lohia’s incredible rise to becoming the world’s largest polyester and PET maker is a tale of business acumen, vision and calculated risk-taking. His decision to buy a mothballed petrochemical plant in Nigeria, for example, raised eyebrows but he has turned that around into one of the most profitable plants in his network.
But what led him into the polyester business in the first place, since it has long been regarded as a sunset industry?
“It is the basic raw material for our yarns,” he noted. “For years we had to import polyester from Taiwan but I decided I could do it myself so we bought existing plants from all the big players including from Dow Chemicals in Italy, Dupont in the US and SK Chemicals in Poland and Indonesia.”
Rather than build plants from scratch, which takes far too long, he decided to go on an acquisition binge, which propelled him to the forefront of the global petrochemical industry.
“Over the past three to four years, we have grown by acquiring new plants and managing these assets well,” says Lohia. “In the process we created a world-class company but Indonesia is still very much in my blood.”
His expansion into Europe was one of necessity and desire to be closer to his customers. Indorama now has 10 plants across Europe, from Germany to Lithuania, making the company one of the largest players on the continent.
“Before we thought we would be exporting our goods under GATT and that people would wait for our goods. But things have changed. People do not want to wait for one and a half months for the imported cargo to arrive,” he noted.
From 1983 to 2003, the company exported its goods because it enjoyed a lower cost advantage by operating in Indonesia. But after trade tariffs fell, it became a free market and Lohia realized he needed to be close to his customers.
“We can now deliver on time at a price that is low,” he added. “So we now have four plants in the US, one plant in Mexico for South America, and plants in 10 countries in Europe.”
Indorama also has plants in Nigeria, China, Thailand and, of course, Indonesia, giving it a geographical spread that is unmatched by any other player in the industry. Managing the complexity of such an operation requires management know-how and planning but Lohia has mastered it.
“We work like an MNC and that’s the reason we are able to become an efficient organization,” he said. Plants are run at maximum capacity but are so well-managed that there are virtually no breakdowns or disruptions to production.
“We have been able to sell everything we produce and we have never lowered our production capacity,” he noted. “Our profits have gone up from 2008 even during the global crisis, so I feel the turmoil is more financial in nature and affected those companies who had over leveraged.”
Notwithstanding his global operational span, Indonesia remains very much the heart of his business empire. He has aggressive plans to expand his business in his home market over the next few years, taking advantage of the country’s strong economic growth and rising middle class.
And contrary to public perceptions, he does not think it is a difficult market in which to do business. It is cost efficient, especially compared to China, and has a stable political environment. The one drawback in the country, he noted, is that the quality culture is absent.
He recently bought two new petrochemical plants and is building an ultra-modern state-of-the-art polyester plant back where he started in Purwakarta. “That will take our turnover from $800 million to $2 billion over the next two years.”
“We have to boost the Indonesia platform because the market will grow,” he added. “We can export to many destinations in Asia from Indonesia because it has a very good cost base. If you can manage well, Indonesia is a great country.”
Unlike many other business owners, Lohia has no gripes with the infrastructure. “If our trucks take an extra two hours, what difference does it make?” He transports his goods from Purwakarta to Jakarta without much difficulty.
Eye on big projects
Lohia spends most of his time these days on business development and analyzing new opportunities. All the individual operations are decentralized and managed independently by well-trained and competent managers.
His focus is therefore on capturing the opportunities that he sees opening up in the next five years. “We are working on some very big projects in Nigeria, Uzbekistan and the Middle East which will be valued at more than $5 billion.” Given that some of these projects are greenfield, they might take longer to come on stream.
What factors does he look at when considering where to invest? “I look for feedstock, the availability of raw material and what price I can get for it,” he answered. “I always look for a discount to the market so I can stay competitive.”
The last factor he considers is financing. Lohia has good relations with global institutions such as the International Finance Corporation and private banks because of his commitment to always pay on time.
Even during the 1997 Asian financial crisis, Lohia honored his word and paid off a $175 million syndicated loan without asking for a haircut when the rupiah was trading at 12,000 to the US dollar. “We have credibility with the banks,” he said. “This allows us to perform in difficult markets.”
But his biggest consideration is his people and whether he can find the right managers to run his operations. “We train them to perform in the most diligent and honest way. They work like owners which gives us a huge advantage.” With 18,500 employees world-wide, that gives him the ability to continue his aggressive expansion drive.
Focused on Growth
At the age of 60, most business tycoons would be happy with their life’s work, especially if they have built a global business empire that spans 18 countries and five continents.
Sri Prakash Lohia, the chairman of Indorama Ventures, however, is not done yet despite building one of Indonesia’s few multinational corporations. Last year, the group booked a turnover of $7 billion and profits of $1 billion, making it one of the country’s largest business groups.
Indorama is the largest polyester producer in the world with an annual production of 5 million tons; it is the second largest polyolefin producer in Africa; the seventh largest PTA producer in the world; and a global spun yarns producer.
As an Indonesian company, it is only one of a handful that is truly global. Indorama Ventures Public Co. Ltd. is listed on the Thai Stock Exchange and the group has headquarters in London and Jakarta.
Always on the move, Lohia is the driving force behind Indorama’s eye-popping expansion over the past decade. The company has grown by an average of 30% per annum over the past six years, far more than doubling in size.
When asked what he focuses on, Lohia had a simple answer. “I focus on growth. We buy mature profitable companies and we improve them.”
“All our factories are making money,” he added. “My job is to get growth, look for new opportunities and realize them.”
The management’s job, he adds, is to run the companies professionally. Whenever he acquires a company, he keeps the same managing team, trimming it to make it more efficient.
His commitment to his senior executives is legendary. When some senior executives were kidnapped and held hostage by rebels in Nigeria some years ago, Lohia personally traveled to the country to negotiate directly with the captors despite considerable danger to his own life.
“You cannot take care of everybody but at least if you can bring a smile to the faces of my 18,500 employees, that is a good feeling,” he said. “Satisfaction is the most important thing when you run a business.”
Such commitment to his employees wins him loyalty and dedication. It has enabled him to create one of the most efficient cost structures in the industry and this makes Indorama highly competitive.
“We are constantly innovating at our plants. Our machines are completely spotless. We don’t expect anything to be B-. We have a gene for perfection. It must be triple BBB and we like to be the showcase for the industry.”
“In our company, we have never had any claims. We do not produce substandard products and we do not ship out any substandard products. That’s why we are known for our quality all over the world. That has been our driving culture – always aim for innovation and perfection.”
Having come so far from his early roots in Purwakarta, Lohia is now giving back to the community, building a vocational institute on a five-hectare plot in the area, close to his new state-of-the-art polyester plant.
“This is what is lacking in Indonesia so we are helping to fill a void,” he noted.