If he buys Dewan Cement, he will be salvaging the largest financial default in the 70-year history of this country. Dewan Cement notified its shareholders on January 31 that Mega Conglomerate showed interest in acquiring 87.5 percent shares in the company. The share price was Rs 26.38 on that day. It closed at Rs 27.29 on March 9. Dewan Cement posted a net profit of Rs1.3 billion in 2016-17, down 13 percent from a year ago. Its total assets amounted to Rs30.2 billion at the end of the last fiscal year. Khan’s approach to reviving a debt-ridden, sick enterprise involves cutting down expenses ruthlessly even if it means laying off people. “If I buy a company that has a lot of debt, the first objective for my CEO is very simple: my debt has to be zero. I can’t sleep at night (until that happens),” he says. If the deal goes through, Khan’s group will be the first player to have a cement-making plant in each province. This will help the group survive downturns in domestic demand by allowing it to export surplus production, he says. Besides showing interest in acquiring Dewan Cement, Khan has recently acquired a significant stake in Hubco from Dawood Hercules and become its chairman. The Dewan Cement acquisition was already anticipated because of market talks about another cement company, also owned by Khan, eyeing a stake in the former. However, his purchase of a stake in Hubco, which currently generates 1,200 megawatts, came as a surprise to many, who were left scratching their heads as to what he was up to. “He’s on an acquisition binge,” said one analyst, responding to a question about why Khan would invest in a power company. “He has a lot of liquidity,” said another, referring to Khan’s back-to-back transactions worth almost Rs 31 billion, which not only moved the market but also brought him in the limelight for the first time.

Electricity at slightly above one-third the present price Market analysts may still be guessing the rationale behind his interest in Hubco, but Khan is sure about it. He has bought a stake in the country’s largest independent power producer (IPP) with a plan that Hubco becomes a leader in electricity generation. “We want to work with the management and the board to make Hubco local and Hubco International,” says Khan. “We’ll try to go into Africa. We will try to go into other places in the world.” But how will he, given that he doesn’t own an outright majority in the company? As of June 30, 2017, Hubco had five directors from Dawood Hercules and one each from NIT and Fauji Group. “It’s simple,” Khan says, his voice filled with confidence. The board is very competent with institutional investors such as Fauji Foundation and NIT representatives on it and he plans to bring his plans to the board and with their approval have the board guide the management to embark on a growth strategy. “We’ll buy more assets and we’ll collectively put more equity into it [Hubco] if need be, to me it is clear we are all on the same page,” he says of the IPPs governing body. “We want to generate 20 to 25 percent of the country’s power. That’s the plan,” he says. As we press him to share with Profit his post-acquisition plans for Hubco, Khan says he’d like to bring the electricity cost down and create the right energy mix by adding components of renewable energy to its portfolio. “Today, our average cost is 12.96 cents per kilowatt. Bangladesh is at nine cents, India at 10. We have to come down to eight cents,” Khan says. The country cannot become competitive in local manufacturing or the export market unless it brings the cost down and for that, we need to add renewables to our energy mix, he adds. After Hubco’s acquisition, Khan plans to install solar panels and smart meters at the household level. He wants to create a deregulated economy whereby customers will pay him for power consumption and solar panels and eventually become owners of the equipment. Installing solar panels, which don’t come cheap, in one of the world’s largest cities will need a big investment. Khan seems to be aware of that as he plans to issue a bond especially designed for the general public from Hubco’s platform. He also plans to set up a desalination plant and use the company to power that plant and provide water to Karachi; collect waste from the port city; and make regional hubs. “I’ll set up various 30-megawatt plants and give power to households in those areas and that, too, at five cents (a unit). This is what my plan is,” he says, adding that it should all materialise within two years. The Haleeb turnaround Khan’s move to buy Dewan Cement and Hubco is in line with his core strategy: buying a distressed asset at a time when the market is down and turning it into a profitable entity. To understand his strategy, one has to look back at the turnaround of Haleeb Foods Limited (HFL), which he owns. A one-time dairy giant, which had more than half of the packaged milk share till 2006-07, was bleeding money hand over fist when Mega Conglomerate bought it from Chaudhry Dairies Ltd (CDL). HFL lost focus on white milk conceding market to Engro Foods’ Olper’s, hitting its worst crisis in fiscal year 2008, small wonder then that its share was down to 2 percent last year as already reported by Profit in a recent article.