Their re-emergence came about when the family branch, led by Hussain Dawood, acquired a controlling stake in Engro Corporation. PHOTO: FILE
It may very well sound like a cliché, but Samad Dawood - the 32-year-old CEO of Dawood Hercules - made a valid point.
“Why is there so much negativity in what we read about Pakistan,” he asked. “Why is it that the good things about business and the economy don’t get the same amount of coverage?”
Samad sounded upbeat for a man whose family business, by its own standards, went down post 1960s.
The Dawoods were either the first or the third richest business family in Pakistan in terms of assets owned, as per two separate researches cited by Stanley A. Kochanek in his extensive book “Business and Politics in Pakistan”.
They were everywhere - from the production and distribution of textiles, paper, rayon, chemicals and fertiliser to banking and shipping. But the nationalisation of the 1970s and division among family interests relegated them to the sidelines.
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Their re-emergence came about when the family branch, led by Hussain Dawood, acquired a controlling stake in Engro Corporation, one of Pakistan’s largest private sector conglomerates.
But that came at a price that saw them re-invent themselves and forgo legacy.
Even after the nationalisation, Dawood Group kept a few businesses with itself - the Dawood Hercules Fertiliser and textile units, which included Burewala Textile Mills, Dawood Lawrencepur and Dillon, which were their mainstay for years.
It is said that Burewala owes its development to Ahmed Dawood, the group’s founder, who established massive textile mills in the city.
But now they are not in the textile business and Dawood Hercules’s fertiliser has been sold off. “We had a choice to make as far as textile operations were concerned. They required significant amount of capital to be globally competitive,” said Samad, Hussain’s youngest son.
Another option was to pump additional liquidity into Engro. They opted for the latter.
Since the mid-2000s, Engro has expanded massively - first came a $1.1-billion investment in a new urea plant, then the launch of a food division with Olper’s packaged milk, a unique 217MW power plant that uses permeate gas, building the country’s first LNG terminal and finally, the $2-billion investment plan to develop a coal mine and power plant in Tharparkar.
Dawood Hercules, the holding company, which has a majority stake in Engro, also has substantial shareholding and management control of Hub Power Company, another cash-cow.
Most of its focus is on energy projects.
“Why should a small SME entrepreneur invest in a generator?”
“Good businesses have to solve large problems … and better the solution the more value gets created for stakeholders.”
Dawood’s three power projects in the pipeline include two 660MW plants that will be built by Hubco and will use imported coal, the Thar power plant and a 50MW wind farm.
Not a smooth ride
But despite massive investments and perceived clout that Dawoods enjoy, their projects have not had easy sailing.
Engro’s new urea plant could not run at full capacity for two years after its inauguration in January 2011 due to gas shortage. And now its latest venture, the liquefied natural gas (LNG) terminal, has been dragged into controversy.
“I am disappointed because I think people haven’t really understood what the issue is and they are basing their reactions on other people’s reaction,” Samad said about the terminal.
The issue, he said, is the criticism that there is still no long-term LNG supply agreement. But that doesn’t undermine the project in any way, he said.
With extensive gas pipeline infrastructure, Pakistan is an advantageous position to use LNG especially when prices are low, he says.
“For the first time, people in Pakistan have the ability to get their own molecule,” he said, adding large consumers like auto-fuel station owners and fertiliser makers have the option to import.
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The terminal tariff, which is the cost of storing and processing super-chilled LNG into gas, has also been criticised but people don’t realize that it’s the lowest in the world.
The benefits of the terminal have already started to show. Fatima Fertilizer imported LNG for its urea plant. The case is even more interesting since Fatima has acquired Dawood Hercules Fertilizer, which suffered from gas shortages in Punjab.
So why did the Dawoods not use their own terminal to import gas and run the plant?
“People measure risk in different ways. They [Fatima] will have different capital views and we would have a different one,” he said.
Published in The Express Tribune, September 29th, 2015.
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