• CG Corp has been a staunch ambassador of SL since 1998
• Group believes in the fundamentals of Sri Lankan market
• Strongly believes that country is now on the right track
• Looking to invest in cement, FMCG, hospitals, real estate
• SL has long way to go in branding, positioning, infrastructure
• CG Corp’s continued interest in SL market has not changed

“The country is moving in the right direction, it is going to get there, and that’s why we believe in Sri Lanka. I don’t see any signs where things could get any worse. The worst, I believe, is behind us,” asserted CG Corp Global and CG Hospitality Group Managing Director and CEO Rahul Chaudhary, in an interview with The Sunday Morning on Thursday (27) during a brief visit to Sri Lanka.

The group, which has been present in Sri Lanka for some 25 years, is now looking to expand its footprint here, no longer limiting itself to hospitality alone. Marking its entry into the financial services space, the group’s acquisition of a majority stake in Union Bank is currently underway, while CG Corp is also looking at investing in cement, FMCG, hospitals, and real estate here.

“As a large investor, we are gung-ho about this market and our continued interest in this market has not changed,” added Chaudhary, pointing out, however, that Sri Lanka needed to work on branding, positioning, and infrastructure.

“In terms of the country’s potential, you have everything from your oceans and tea estates to experiences and culture – everything is there for you in terms of the product, the market offering, and the location, but there is a long way to go in branding, positioning, and infrastructure.”

You’ve just opened your 100th hotel in India and announced interest in expanding in the region, with Sri Lanka on top of the agenda. What does the group have in mind in terms of expansion in Sri Lanka?

We have been staunch ambassadors of Sri Lanka since 1998 or so. We entered Sri Lanka in 1997/’98, when we first invested in the Taj Samudra and also the two assets in the Maldives. This was at a time when the country was going through its worst-ever time in history. But still, we looked at Sri Lanka as an emerging market.

There was a saying by Lee Kuan Yew, when he was interviewed once. He was asked which other country in this part of the world he saw as having the potential to be a Singapore and he said Sri Lanka. He must have seen that the fundamentals of the country are wonderful, right? That is a reality now because we invested in Sri Lanka at that time and look where we are today in terms of the Taj Samudra itself. 

Post that, we also partnered with two Jetwing properties – Vil Uyana and Jetwing Sea. Then we also took up three bungalows of Watawala Plantations, the Mandira bungalows, to operate them under a lease structure. We also partnered with Sanjeev Gardiner and his Ceylon Hotels Corporation (CHC) hotel portfolio – not Galle Face, he has a separate portfolio with 10 hotels. These are small, niche properties where we are now partners. 

We have approximately 13 hotels in Sri Lanka. We’ve always been staunch believers of the market, the fundamentals of the market, and it’s public knowledge now that we are looking at acquiring a bank – Union Bank – for which the deal will most likely go through by next month. We’ve also already started doing studies in various locations that are available for cement and are exploring sectors such as FMCG, hospitals, and real estate. We are here to stay.

How has the CG portfolio of tourism properties in Sri Lanka been performing thus far and what is your outlook for them in the months ahead?

The last 20 years have been up and down. Until 2009 there was a huge upheaval and it’s after 2009 that the market started looking up naturally, so we spent big money to upgrade the Taj Samudra. We started getting a better market coming in, not the backpackers. 

But keep in mind also that the country went through the whole works – the global recession and so on and so forth. Tourism is a sector that’s the first to be affected whenever there is a crisis and the first to show signs of recovery.

Unfortunately, Sri Lanka all the way from 2019 or so has been going through a very difficult time, with the Easter Sunday bombings that took place, then the Covid pandemic, then just when there were signs of recovery the political situation unfolded, and I strongly believe that the country is ‘not out’ yet. With President Ranil Wickremesinghe coming on board, I strongly believe that it’s on the right track.

You are still in a situation similar to 2010 to 2015, but the market now is not only backpackers. You don’t have the high-paying market coming in, you have the medium market, but that is a demand and supply phenomenon. The market is going through a shift right now. Your exchange rate is almost at 330. While inflation has now come down slightly from what it was, travel is also restricted because of the prices. 

There are signs of recovery and I believe that you will see the better equation of the recovery early next year. The test of that is going to be at the end of this year, when the season starts.

What would you describe as Sri Lanka’s strengths in terms of tourism and hospitality and what areas should it improve on in order to lure the top tourism segment?

In terms of the country’s potential, you have everything, from your oceans and tea estates to experiences and culture – everything is there for you in terms of the product, the market offering, and the location, but where I believe there is a long way to go is in branding, positioning, and infrastructure.

A simple example: if I have to go to Jaffna, what is the option? People usually drive. But I would not like to take four to six hours, I would like to go on a plane. Infrastructure is a huge issue from the perspective of travel here.

I would say the second biggest issue here is in terms of the brand. I think that Sri Lanka could do a much better job when you talk about the branding of the country and the branding of the offering and in general on the perception that it is safe. If you get these fundamentals correct, everything will be okay.

You recently said that the Indian market, which has a lot of potential for Sri Lanka, remains underserved here and that your group plans to showcase Sri Lanka through its massive hospitality network there. How do you intend to promote Sri Lanka tourism in India?

All throughout Covid, every major market followed an inclusive strategy. India focused on the Indian market to survive through Covid and it did very well. China, although very radical in its Covid approach, survived because of the Chinese market itself. 

I believe that what is happening now is that people are looking at China and India in terms of the global market as a threat or as a feeder market that provides the backpacker market, but I look at them as an opportunity. You are literally close to a population of three billion. If you’re not able to capitalise on that, I don’t know what you can capitalise on. 

I foresee that the Indian market is only going to increase coming to Southeast Asia, because Indians look at Colombo, Nepal, Bhutan, and Thailand as domestic markets. These are markets that are just two hours away. It takes more time to just go from one end of India to the other. So what are we talking about? 

The highest middle class in the world is in India and China and they are the ones who are willing to go out and spend. That’s what Indians are doing. Markets are open; you should see the numbers in the Maldives – it’s crazy. That’s why Indians are coming to Sri Lanka as well. 

Yes, the issue is that it’s not the desired niche market, the high-paying market, that is coming, so the strategy right now has to be to make the most of the market that is coming, which is a price-sensitive market, no doubt. It’s about demand and supply.

Regarding CG Group’s entry into the financial services space in Sri Lanka via the acquisition of a majority stake in Union Bank Colombo, what plans does the group have for the bank?

We will be closing the deal by August and first and foremost, I think the approach here is going to be to derive a strategy to grow.

As a simple example, when we bought the bank in Nepal, Nabil Bank, it was nothing. It was more or less a non-existent bank in Nepal. Today, we are the largest bank in Nepal.

The strategy always is to make it the largest in the country, whether it be by acquiring similar financial services, niche businesses, maybe financing companies, insurance companies, and other banks, but then also look at the possibility of taking this bank to other parts of the world as well.

CG has always played in its core competency or its core area of expertise – frontier and emerging markets. We want to focus on taking, let’s say, as an example, Union Bank to emerging markets like Africa, to markets like Nepal and Bhutan. These are markets we believe we understand better.

Could you expand on your plans in terms of the other sectors the group is looking to enter in Sri Lanka and sees as having high growth potential?

We continue to look at hospitality as a growth sector for sure. That is still our big focus. Second is our bank, third is cement, and fourth is real estate.

While real estate is going through a difficult time right now, I also believe this is a buyer’s market, not a seller’s market, but it cuts both ways. It may be a buyer’s market, but liquidity is a huge issue. If you’re able to find a way to enter the market in these sectors, I think it’s only going to get better. 

I would also say FMCG. I can’t disclose names, but we are already in discussions with big FMCG players here to take them to Nepal and to bring our products here. Similarly, we are also in discussions with some hospitals for some acquisitions.

Given your continued presence in Sri Lanka for over two decades, what would you list as the key reasons for CG Group’s continued faith in Sri Lanka?

The fundamentals of the country. I don’t think the fundamentals of this country have changed. Unfortunately, it has been through a lot of turmoil. President Wickremesinghe came in at the most difficult time and I think he was the right person to come in at this difficult time. 

The country is moving in the right direction, it is going to get there, and that’s why we believe in Sri Lanka. I don’t see any signs where things could get any worse. The worst, I believe, is behind us. I believe we are moving towards that phase where things will look up again, unlike in the past two decades when the country has only been going down. 

Let’s not forget the time from 2013 till 2020, at what rate the stock market was going, what rate the real estate market was going, hospitality, FMCG, banking, everything. So, the fundamentals were right. It’s more global market-driven matters that are creating these issues, but you will get out of it. I have no doubt.

That’s why the fundamental message that I want to drive home after saying all this is that, from our hospitality perspective, the Indian market is going to grow. 

With 100 hotels in India now already operational in the mid-market space and 25 more coming online soon to add to our portfolio of 160 hotels and CG hospitality in 12 countries, which makes us one of the most diversified and larger privately-held hospitality groups in the region, we are ready to come here and start taking over properties with our brand.

As a large investor, we are gung-ho about this market and our continued interest in this market has not changed.