Markets

How man made Sh2 billion fortune from water tanks

Flame Tree Group managing director Heril Bangera with a worker at his factory in Nairobi last week. Photo/SALATON NJAU
Flame Tree Group managing director Heril Bangera with a worker at his factory in Nairobi last week. Photo/SALATON NJAU  

When the Flame Tree Group brings to an end the two-year listing drought with its entry to the Nairobi bourse later this year, it will be a culmination of a 43-year-old man’s journey into the world of enterprise that began 25 years ago with the founding of a plastic tanks making enterprise.

The man behind the company is Heril Bangera who took a leap of faith as an 18-year-old in 1989 to exercise his entrepreneurial skills using the Sh500,000 startup capital he got from his father.

The business he founded is Roto Moulders Limited, a company that has since grown to become one of Kenya’s biggest plastic tank manufacturers.

Roto has since evolved into the Flame Tree Group (FTG), a diversified consumer goods maker that produces popular household brands such as Roto Tanks, Zoe beauty products and Happy Golden snacks.

Mr Bangera wants to take the company public by the end of the year, bringing to maturity a business that has its roots in the backyard of a family friend’s factory on Nairobi’s Enterprise Road.

The mechanical engineering graduate from Bangalore University founded the business while studying in India, depending on his father Fredrick Bangera to keep it going until he graduated in 1991.

Mr Bangera, 43, says he got inspired to go into the plastic tanks business using the experience he gained while helping out at his father’s steel fabrication firm -- David Engineering.

“I saw opportunity in the plastics industry given that at that time there was only one manufacturer of plastic tanks,” said Mr Bangera in an interview at the group’s now expansive premises in Nairobi’s industrial area.

Unlike the case with many family businesses, Mr Bangera chose to break away from his father’s business to start his own and remains the sole proprietor of the company to date.

From an initial production of just four tanks a day in 1989, the group now produces about 500 tanks per day across the different brands and sizes.

Mr Bangera says he has gradually expanded the business using retained earnings – staying away from bank loans which he considers a high-cost financing option.

“We hardly made any money for the first eight years of the business until we put in place a regional expansion plan that helped us break even,” says Mr Bangera.

The Flame Tree Group is now operating on an annual turnover of more than Sh2 billion from its operations in Eastern Africa and a workforce of 1000 employees.

Roto Moulders Limited rebranded to the Flame Tree Group in 2003 as it diversified into the fast moving consumer goods (FMCG) market with the launch of the Zoe brand.

The company has since diversified its activities to include active trading in polymers, chemicals and hardware products, through Buildmart Limited in Rwanda and Cirrus FZC in UAE.

After observing the market’s reception of the Zoe brand, the group went into the manufacturing synthetic wigs and hair extensions in 2011 under the Siora brand name, making an early entry into a market that has attracted suppliers from as far as India.

In 2012 the Flame Tree Group stepped into the food industry through its subsidiary Happy Eaters Kenya Limited.

“Our expansion has always been helped by the fact that we take advantage of the existing distribution networks we have built over time to drive the new products,” Mr Bangira says.

Plastic products, however, remain the group’s main business for which it has established manufacturing plants in Kenya, Ethiopia, Sudan, Rwanda and Mozambique, and offices in DR Congo and Burundi.

The FMCG arm that manufactures Zoe and Cerro range of beauty products is active in Kenya and Rwanda.

Mr Bangira says this arm of the business will be the main focus of the expansion drive it plans to go into using money it hopes to raise from entry into the stock exchange.

Mr Bangera says the plan is to grow existing lines of products rather than launch new ones and to position the business as an African multinational.

The Flame Tree Group also plans to sharpen its instrument of war to stay ahead of rivals such as Kentank and Top Tank in the plastic tanks market, and Unilever, L’Oreal and Interconsumer in the personal care market, even as it seeks to find new markets in the counties.

“There is potential to introduce and grow the FMCG unit in five countries. We are looking to develop FMCG as our major business with a presence in five countries,” Mr Bangira says, adding that this is part of the reason the company is going public to access capital.

Kenya has a long list of businesses that started as family-owned and listed on the Nairobi bourse where they continue to generate wealth for investors The list includes ARM Cement, which went public in 1997, NIC Bank, which listed in 1971, and AccessKenya, which went public in 2007 before delisting last year, and media firm Scangroup.

If listed, Flame Tree Group will be the second firm to enter the Growth and Enterprise Markets Segment (GEMS) of the NSE after Home Afrika.

Companies listing under this segment, meant to spur small and medium-sized enterprises to use the stock exchange to raise capital, face less stringent capitalisation rules.

Other than FTG, Mayfox Mining, which is majority-owned by the Manga Mugwe family through Mayfox Mining Mauritius, is also planning to list in the GEMs segment by the end of the year.

The Flame Tree Group has appointed Burbidge Capital the nominated advisers, Viva Africa as the structuring consultant and PKF as reporting accountants while Coulson Harney will handle the legal work for the planned listing.

Mr Bangera, however, admits that growing the business thus far as a sole proprietor has not been without its challenges.

Accessing capital tops the list, especially in the early stages of growth when very few financiers are ready to listen.

He also cites the competitive advantage that multinationals in the FMCG sector get through access to cheaper credit from home countries for local operations as another hurdle.

Kenyan businesses have to contend with steep interest rates that go up to 17 per cent from local lenders.

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