JAT had been in business for 25 years when Nishal Ferdinando was appointed Chief Executive in 2017. Even by then, the company was market leader in wood coatings and paint brushes. Growing a business that already dominates a narrow vertical can be challenging when growth in the construction business isn’t greater than economic growth.

However, Ferdinando has led the team at JAT with a new vision to expand its product range, grow overseas and reposition the business. JAT Holdings went public in 2021 and since then, has doubled down on a strategy that responds to challenges in the Sri Lankan market, and exploits global opportunities.

JAT went public in 2021. How has the company performed since going public?

We decided to go public in late 2020. There were many apprehensions about the pandemic related lockdowns then; and if it was the right time to go for an IPO.

After a risk assessment, we decided to stay the course. However, two weeks before the IPO’s planned opening there was another pandemic related lockdown. We took a calculated risk and banked on some of the major investors here along with some foreign investors. That period was certainly challenging. It was a successful IPO and we were oversubscribed.

There were several undertakings we gave and forecasts we made as part of the IPO. One is about company performance. We had forecast revenue and a bottom line of a certain level. Those were two major financial performance undertakings.

We were also going to use the funds to start manufacturing in Bangladesh and build a state-of-the-art R&D facility in Sri Lanka. Other undertakings were to start manufacturing in Africa in two years and invest in the WHITE by JAT decorative paints range. Those were the four major projects which we were going to undertake following the IPO. Our valuation was based on all of this. We had forecast a Rs1.2 billion bottom line, and a top line of around Rs8 billion in the financial year 2021/22.

However, so many things had changed, due mostly to the pandemic, since the IPO prospectus was issued. Despite all of that we are on course to achieve a bottom line of Rs1.2 billion or greater. We also expect to meet the top-line forecast.

Mind you, we had to deal with situations like import restrictions, lockdowns, and limited foreign exchange for inputs. Yet we have managed these challenges on our own. Manufacturing in Bangladesh was expected to commence in the first quarter of the financial year 2022/23, but we have started manufacturing there months earlier. Work on the R&D centre is progressing on schedule. Sales for the decorative paint brand ‘WHITE by JAT’ have also exceeded forecasts by around 30%.

As a company, we have striven to deliver on our promises without offering excuses to our shareholders. Naturally, we are grateful to the investors who believed in us.

How did you manage to meet or exceed targets, first amidst Covid and then the forex and economic crisis?

There are several reasons. One is our strong presence in Bangladesh, about 20% of our revenue now comes from Bangladesh. And unlike Sri Lanka, Bangladesh’s economy is doing exceptionally well. Through greater backward and vertical integration we are focusing resources for growth.

Around 25% of revenue is in foreign currency, and we are expecting to grow this in the next three years to a share of at least 50% of total revenue.

The conditions may be challenging in Sri Lanka. But we believe that if we do the basics, the fundamentals right, and dare to see opportunities in this environment, we can make the best out of a bad situation.

The current financial year has been the best ever yet in the history of the company. Our turnover in Sri Lanka will exceed Rs6 billion, which is almost a 40% increase from the previous year. We are able to grow and grab market share due to this financial stability. We had little debt even before the IPO and now we are taking advantage of our strong balance sheet.

To have half your revenue generated overseas in three years, your global business will have to grow at a much faster rate than the one in Sri Lanka. How do you plan to achieve this?

We have strategies for several different markets. We now manufacture our range of wood coating products in Bangladesh. In Bangladesh, we are number one in the industrial market, but we haven’t been able to penetrate the retail market due to the lower prices of our Chinese and Malaysian competitors. By manufacturing in Bangladesh and establishing our R&D centre, we anticipate cost reductions that will enable us to better compete in the Bangladeshi retail market.

The second opportunity is in Africa. We have the right to distribute the wood coating products, Sayerlack of SherwinWilliams Performance Coatings Group in 75% of African countries. We had a five-year plan for the African continent. Now, we are planning to enter all 75% of countries in Africa in three years or less. Some of our sales and technical guys here will be relocated there to expedite this expansion. We are also open to acquiring manufacturing companies in the region.

In India our presence is small. We are working on introducing our own brands to India, which is a very price-sensitive market. In our product development lifecycle, some of these projects were expected to take two to three years, but we have fast-tracked these to be completed within the year. We are hiring foreign scientists for our R&D centre, for faster product development for the overseas market.

Another idea is to list our manufacturing business in Bangladesh, a subsidiary of JAT, in three years.

Are you challenged by this forex crisis? I presume you import a lot of raw material?

We are certainly challenged, more so lately. We’ve always maintained stocks adequate for six to seven months at least at any given time. That has been a cushion to a certain extent. Now when we have input difficulties, due to the Forex crisis, we still have excess stocks. Second, our dollarized income cushions us for 25% of our imports.

Through these two strategies, plus due to our over 25-year long relationship with Sherwin Williams (owners of the Sayerlack brand) who have offered extended credit to us. All these reasons have helped mitigate the forex crisis but it’s still extremely challenging.

What is your strategy with the decorative paints brand, WHITE by JAT?

Sayerlack is a wood coating brand and it’s a growing market segment where our share is over 55% in Sri Lanka. WHITE by JAT is a strategy to move into emulsion paints. See, when my sales team go to the dealers, and the hardware shops, it’s the same shop that sells emulsion paint as well. So, I don’t need to recruit new salespeople to sell decorative paint.

Besides, we have the exclusive agency for Harris brushes, and have our own brand, Brush Master as well. In this segment too, we are the market leader.

We didn’t want to have a traditional decorative paint strategy because paint is a very competitive market, where big promotions and extended credit are common. There are eight players in Sri Lanka.

We have a unique strategy. In Sri Lanka, out of the total decorative market 80% is white. Out of that white paint sold, 80% is brilliant white, so if you take the total decorative market approximately 65% is brilliant white paint. We are only focusing on this. We had our R&D team develop the best quality, brilliant white paint and produce it at the best price. We focused on quality, paint coverage, and viscosity.

Besides, paint companies haven’t succeeded with an online strategy because most devices people use to get paint online don’t display colours accurately. This is the biggest barrier. However, if you’re only selling brilliant white paint you don’t face this challenge.

Online sales bypass the distributors’ related costs allowing us to give the price benefit to consumers. That was the thinking behind our, WHITE by JAT strategy.

When you do sell coloured paints, significant amounts of unsold paints are returned, because it’s difficult to predict how much of what colour will sell. So there’s a large stock that has to be maintained, plus the raw material for manufacturing coloured paints. We don’t have any of these costs.

The traction we have had with WHITE by JAT has been amazing. We want to establish dominance in the Sri Lankan market before taking the product overseas. So far our overseas strategy is predominantly the wood coating business.

Of your top line in Sri Lanka, what percentage is from WHITE by JAT brand?

Our topline in Sri Lanka is about Rs6.5 billion. Of that around Rs800 million is from an area we call projects, that’s the SEA German Kitchens, Herman Miller and other furnishing ranges.

Our coatings and brushes revenue here is Rs5.7 billion, and of that about Rs3.6 billion is Sayerlack, and Rs700 million is WHITE by JAT. WHITE by JAT is only a year-old brand. We also have another Rs700 million in from our local wood coatings brand. The rest are brushes and rollers.

How did this come about? When did you realize you can launch a decorative paint company with just one colour?

I did my Executive MBA at Harvard. We were discussing a case where a company entering an overseas market selected one segment, and in that segment, how they built an online strategy, eventually becoming one of the most dominant companies in the world.

Each time I did one of these case studies, I asked myself how this relates to what I’m doing in Sri Lanka. It’s then that I realized that brilliant white paint was 65% of the market. I started strategizing about the costs and how we can penetrate the market?

I figured out we could have an online strategy. No paint company has an online strategy. Now, if I could just sell white paint, my market is 65%. We figured we would sell this entirely online.

I finished the course in June 2020, and immediately went to the drawing board with this concept, and introduced the product in December of the same year.

How much of WHITE by JAT is sold online?

We launched with a purely online strategy. We advertised a 40% discount online. What happened was consumers saw this 40% discount, they asked our dealers for WHITE by JAT. In turn, shop owners were asking us for WHITE by JAT.

As a result, the product is now also sold at the retail level too. Online sales constitute about 30% and 70% is from retail. It was not supposed to happen this way.

What we feel is that three to five years from now, the world is going to switch to online sales even for paint. So this share will increase. Our online sales are growing at an annual 50% now.

Your decorative paint revenue is 700 million rupees. What is the total size of the market?        

We estimate the white paint market is Rs24 billion. Of that 65% is for brilliant white paint, which is about Rs15.6 billion or so. Look at it from a monthly perspective, and it’s a Rs1.3 billion market for brilliant white paint. We do roughly about Rs200 million in revenue, which means our market share is 15% of the brilliant white market.

We are forecasting to grow our market share to 22% this year, and eventually to 30%.

What can a company do differently, you think, in an economic and social climate like we are in?

Sri Lanka is going through some of the worst times we have seen in our lifetime. I think the private sector has a responsibility to stand up and help. As a leader and a Chief Executive, I believe we have a responsibility.

CEOs should look at how they can make an impact and assist staff plus other stakeholders. An important stakeholder in our business is the painter. We have introduced a scheme for them that sponsors them for a NAITA (National Apprentice and Industrial Training Authority) certificate course, a professional qualification in wood painting. With that certification, they will be better skilled and valued more. They can maybe even charge a higher rate for their work.

Most of our painters in Sri Lanka earn a daily wage. They are unable to even obtain a loan from a bank. We have now created a loyalty scheme for them, and we can tell a bank that they perform a certain amount of work with our products for a month, and that the person is also a qualified painter. We can make it easier for them to obtain bank credit through this scheme. They can obtain a personal loan or a business loan through this scheme.

Further, at JAT we have a scheme that pays out a loyalty to high users of our products. These are essentially the painters. With Sayerlack coating we issue a scratch card. Painters send us the scratch card number every month to collect a royalty. We have 400 staff on our payroll, but every month, we pay an extended painter network. Of the total estimated painters of around 110,000 in the country we pay about 5000 of them a loyalty.

What I’m suggesting is that corporations have to make a choice at this time, to balance profitability, with the well-being of their employees, and that of society. I think this is very important. CEOs can make a difference and I think we need to be of that mindset. We are leaders and we should set an example.

One of the biggest challenges for the country is that young people, with the present situation, want to migrate. We have to step up, develop something exciting, expand our businesses, go to overseas markets and only then can we retain the talent in this country. The benefits of actions like these will probably be seen in the next 10 to 15 years. I think our responsibility as CEOs and leaders is even greater at this juncture in the country than ever.