BR Research recently sat down with Syed Nabeel Hashmi, a veteran of Pakistan’s automotive and plastic industry. Born and educated in Bahrain, Nabeel returned to Pakistan at an early age of 26 and has since founded Thermosole Industries Pvt. Ltd, which is a plastic automotive parts and industrial packaging plastic manufacturer. Due to his vast exposure in the fields of policy formulations, engineering, plastics and auto parts manufacturing, Mr Hashmi has over the years been elected as Chairman of the All Pakistan Business Forum, the Pakistan Plastic Manufacturers Association (PPMA), The Pakistan Auto Parts Manufacturers Association (PAAPAM), AOTS – (Japan) and the Pakistan Japan Business Forum (N) amongst others. Mr Hashmi was nominated as a founding Director of the PIEDMC - (Punjab Industrial Estates Development & Management Company) in 2004 and has since headed the Marketing, Telecommunica-tions & IT strategies of the Punjab Industrial Estates. We discuss the dynamics of the automotive plastic industry and future trends in the car market of Pakistan.
Below are edited excerpts of the interview.
BR Research: Please tell us a bit about the history of Thermosole Industries Pvt. Ltd and your entrepreneurial journey since coming back to Pakistan.
Syed Nabeel Hashmi: Thermosole Industries was established in 1984 when I moved to Pakistan from Bahrain. The company has been able to effectively establish itself as a high quality original equipment manufacturer (OEM). We offer plastic blow and injection molding processing facilities, which are supported by an integrated in-house mould manufacturing back-bone.
I initially set up the plastic industry at the Kot Lakhpat Industrial area. As of today, Thermosole is the largest automotive Blow Molding facility in Pakistan. We manufacture components that include air-conditioning ducting systems, interior trims and under hood components such as wind-screen washer jars, radiator bottles, engine air in-takes and thermostat housings amongst others.
The majority of our components are supplied to companies like Honda, Suzuki and Toyota and we are single source suppliers. It is not only the production process that matters but also the management, which controls that process. There are two reasons for choosing us: quality and delivery. Price is a third factor.
Twelve years ago, Thermosole Industries diversified into industrial packaging, which includes drum, jerry cans, bottles etc. It is an off-shoot of the plastic industry. So there is basically two divisions now- automotive and industrial packaging. We have been successfully exporting for the last ten years to USA, EU and the United Kingdom.
In packaging, we service clients that include blue chip companies such as Coke, BASF and ICI. We are the only company right now that is certified as FSSC (Food Safety System Certification) in Punjab, and cater to the food related sector also.
Apart from the plastic business, I also own another company by the name of BBN Energy Pvt, which is involved in storage and distribution of liquefied petroleum gas (LPG). We have the largest storage for LPG in Lahore located on Raiwind Road. BBN also has storage and distribution facilities in Multan and a terminal in Baluchistan near the Taftan border.
BRR: You are also known to host a variety of trade fairs, which includes the famous Pakistan Auto Show. Please tell us a bit about that
SNH: The Pakistan Auto Show 2017 is the pioneering trade exhibition for the rapidly developing automotive aftermarket in Pakistan. The show is undisputedly the country’s largest gathering of leading auto parts suppliers and auto service providers from all over the country, covering the full range of motor vehicles parts as well as components for the drive, chassis, body, electrics and electronic groups, as well as equipment for vehicle service and repair, bodywork repair and painting, tyres & batteries.
I have been organising it since its inception and we are currently in preparations for the upcoming show, which will be held in March. However, this time I am having a serious problem. The capacity of the Expo Centre in Lahore is constrained. We are trying to put on a big show and have huge interest from international exhibitors. Last year, every square inch of the place was booked.
The Chinese have expressed great interest and have asked for an entire hall to showcase their products and manufacturers. It is pure foreign exchange yet one is surprised that apparently there is a capacity constraint.
It is exhibitions like these that help build Pakistan’s image in the global markets. I have been trying to book the entire Expo Centre but since the last 7-8 years we have only been provided Hall 1 and 2, whereas the other two halls have always been unavailable.
BRR: What’s the size of your plastic business?
SNH: I employ around 500 people with group revenues of Rs1.25 billion on an annual basis. Almost 51 percent caters to the automotive division, while the remaining is industrial packaging. The overall export share is around 12 percent, which consists entirely of automotive parts.
BRR: Given the retailing boom and the expansion of many of your clients that are involved in consumer retail, would you be going for expansion to meet the increased demand?
SNH: Currently I have two units out of which one is located in the Kot Lakhpat Industrial area and the other in Sunder Industrial Estate. Even now, we are constructing phase three of the second unit at Sunder. There is also an upcoming third unit, which will be based in Karachi. We are planning to shift our automotive production there as most of our customers are based in that region. Our growth is not only in the automotive sector but also in industrial packaging.
My pulse on the economy tells me that my packaging clients, who are involved in chemicals, paint, food, honey concentrates are experiencing high growth. There has been an increase in demand in all of these sectors. So for us our capacity always remains a little on the plus side to cater to our client’s rising demands.
BRR: What is the main raw material used in your production and how is it procured?
SNH: Our raw material mainly includes polyethylene and polypropylene which is sourced from outside Pakistan. Most of our materials are classified as engineering plastics and are used for special high tolerance ambient.
BRR: Are you interested in an initial public offering (IPO)?
SNH: Yes, we are going towards that. I would like to do it sooner rather than later, but once our expansion plans have been completed that will be our next objective.
BRR: What’s your forecast for the car market (local assembly) in Pakistan by 2020?
SNH: I see it crossing 500,000 vehicles by that time. If current financial policies remain then 660cc number will remain small whereas larger capacity vehicles will take a major share similar to current market dynamics.
BRR: What are the problems when it comes to vehicle financing in Pakistan?
SNH: Till date the government has not come up with a sound financial policy for encouraging vehicle financing. Resultantly, the unorganised private sector has filled the gap and provided financing for this segment.
BRR: What is the proportion of firms in your industry that avail bank financing?
SNH: The figure is small since the majorities are family-run businesses and fall under the SME category. However, in the future there will be a greater need to go for bank financing because without the requisite funding, the expansion that will be required to cater to the increased demand will not be possible.
BRR: What is your advice for the new entrants coming into the Pakistan automotive sector such as Hyundai and KIA?
SNH: They would need to come up with a decent annual production target figure to make a dent in the market share of their existing competitors. You have to realise that this sector has a long gestation period, but if you see it through then the returns are extremely lucrative. My advice would be to set up plant with a capacity of at least 50,000 vehicles to make them economically viable and achieve the economies of scale their competitors already have.
BRR: Given your considerable experience involving industrial estates, what would be your advice to policy-making quarters when it comes to development of industrial zones especially in light of CPEC?
SNH: For starters, I would not create any further industrial estates having a land area of less than 3000-4000 acres. Secondly, within those industrial estates there needs to be a separate SME zone as well for supplying the bigger units. These need to be created at the earliest otherwise we will lose the CPEC advantage as far as Chinese investment is concerned. There is also a need for a comprehensive industrial estate policy, which focuses on attracting foreign investors.