Today's Paper

How steel magnate built empire from scratch

By Moses Michira | Published Tue, February 13th 2018 at 07:31, Updated February 13th 2018 at 08:31 GMT +3
‘Guru’ Narendra Naval; he came to Kenya as a teenager in 1978

NAIROBI, KENYA: Africa’s richest man Aliko Dangote came knocking through an agent. Despite his stature and global recognition for his business acumen, his East African equivalent in steel and cement Guru Raval politely turned him away.

It was a brief conversation between two billionaires that ended with a blunt “no”.

Dangote was seeking entry into the region and had figured out that launching a greenfield operation in an already crowded market was untenable.

His bet was buying a stake in Devki Group, to produce for the region and continue multiplying his billions.

Guru, Indian for teacher, is Kenya’s ‘man of steel’ who controls a vast business empire spanning five sectors, including aviation.

Northwood Aviation acquired a third chopper last year when demand was literally sky-high as the political aspirants took their campaigns to the air.

He started out as a teenage religious teacher in a temple in Gujarati, India, before coming to Kenya to continue learning four decades ago.

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“I just wanted this business to remain a Kenyan company for my family. Besides we did not need his money,” he told the Financial Standard of Dangote’s interest.

He granted us an interview at his Ruiru offices but not before lashing out at us for turning up a little late - owing to an error on judgment on the travel time considering the unpredictable traffic in Nairobi.

Clad in a navy blue suit and white shirt, he ushered us into a huge boardroom where the conversation quickly turns from admonishment for the lateness to an easy walk through his life.

Opposition leader

In between the chat, he talks about his close relationships with key national leaders, including retired Presidents Daniel Moi and Mwai Kibaki and President Uhuru Kenyatta.

When we arrived in his office, he had been on the phone with Opposition leader Raila Odinga whom he also refers to as a “buddy”.

But he claims he does not do any business with the government despite his close associations because such deals are often dirty which his religious beliefs do not accommodate.

“I belong to the Brahmin Caste and it is against our practices to engage in unclean business,” he said, adding that it has become normal in Kenya for government officials to demand kickbacks after awarding tenders.

But as a pointer to his vision for the group, last week President Uhuru Kenyatta commissioned Guru’s Sh28 billion clinker plant in Kajiado County.

Electricity for running the power-hungry machine would also be produced on the site by a 15-megawatt diesel plant, already slashing the energy costs by half.

World Bank’s lending arm, the International Finance Corporation (IFC), contributed the biggest portion of the capital for the clinker plant that will produce the raw material for cement manufacturing for the region.

IFC was also granted a minority stake in the cement business in exchange for Sh1.5 billion.

Clinker makes up more than half of the finished cement, making it the single largest cost ahead of energy.

It is made by roasting the readily available limestone at high temperatures and has until now been mostly imported by his National Cement firm and its rivals.

“We should not be importing any clinker into Kenya by end of 2019,” Guru said, adding that the plant would produce three million tonnes by then.

According to his math, the three million tonnes of clinker will produce five million tonnes of cement – which is just about the annual national demand.

But how did he amass so much wealth, estimated at 40 billion, in just three years? 

His answer is simple: “When everyone is slowing down, you must walk faster.”

President Kenyatta is said to have accepted to write a foreword to an upcoming book documenting Guru’s meteoric rise and achievements which often take several generations to achieve.

His close friend and namesake Indian Prime Minister Narendra Modi has also written a foreword for the book that is set to be published later this year.

His firm’s annual group turnover now exceeds Sh70 billion while the staff count is about 5,000 employees, including the 700 newly employed at the clinker plant.

Devki’s turnover compares closely with Bidco, the regional edible oil manufacturer whose Kenyan plant is based in Thika.

It is a story that began on his arrival in Nairobi in 1978, before heading to Kisumu by bus to put up with an aunt.

Armed with nothing except a return ticket bought at $130 (Sh13,000) by his home temple, which he would eventually not use, his life took an unbelievable turn.

He had no formal education but could read in his native Gujarati language. After a few weeks, he was transferred to a temple in Nakuru where he worked for two years.

And in 1981, Guru moved to Nairobi where he sought employment, first in hardware shops and as a labourer at a steel factory. He would be in between jobs for months on end.

From his meagre savings, he identified a vacant shop on the road leading to Gikomba market that was owned by a company headed by former Assistant Minister Leonard Nduati Kariuki – the current Speaker of the Murang’a County Assembly.

 It was also around this time that he got married to his wife who is a medical doctor, a decision that saw him fall out with his temple as a priest because she belonged to a different order.

He vividly remembers the monthly rent for the shop-cum-warehouse measuring 2,500 square feet was Sh5,000.

Prior to the 1983 General Election, the owner of the building sought to dispose of the property to fund his political campaigns.

Residential estates

Guru acquired it for Sh3 million loaned to him by Habib Zurich Bank AG.

“I repaid it in one year through it was a three-year facility. I had just acquired my first property,” he said.

Business was good as most of the present residential estates and major commercial buildings were just coming up.

Among his suppliers for steel products was a company he would later acquire at Sh400 million in 1996, with some helping from a bank loan.

It is here that he transformed from being a trader to manufacturer, subsequently setting up the Devki Steel Mill in Athi River and much later a similar giant plant in Ruiru.

By 2000, Guru was thinking of establishing a cement plant in Kenya to take advantage of the super profits in the sector then dominated by Lafarge-Holcim Bamburi Cement.

Market shares for the older firms, including Bamburi, State-owned East African Portland and ARM have dipped steeply on the entry of the cheaper options manufactured by Guru and Savannah.

A 50-kilo bag of cement was retailing at between Sh750 and Sh820 depending on the distance from the factory.

He made good his intentions in 2011 and built what was then a tiny 400,000 metric tonne-a-year capacity plant.

It would mark the start of a major disruption in the market where National Cement, marketed as Simba brand, undercut rivals on pricing to sell at nearly 20 per cent less.

Ex-factory prices for Simba have further fallen since the commissioning of the plant six years ago, to Sh525.

He feels sorry for ARM Cement, which has suffered the most under the pricing war, saying he hopes it will get back to its feet soon.

“I could only sympathise with my friend Paunrana but could not help much because he does not fully own the firm. I could have helped if he came earlier,” Guru said of the erstwhile family-owned ARM.

Financial difficulties

Since it became a public company, the founding family of Pradeep Paunrana lost full control while more recent financial difficulties have further edged them out.   

One of the reasons he has been successful on his pricing strategy is the efficiencies gained from newer plants and producing nearly all inputs in-house, including packaging materials.

Savings accrued along the production line are passed on to consumers through lower prices hence the success in beating rivals.

Winning has become his second nature, resulting in so much wealth, more than he could ever have dreamed about.

But he does not give a straight answer to how much he is worth, even though he has pledged to give half of his wealth to charity.

Unlike other billionaires who have clear plans on how their donations are distributed to the less fortunate through foundations and trusts, Guru said he would directly build schools, sponsor children to get education, build and equip healthcare facilities and provide water to communities.

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