NEL: A Leading Distributor of Hospital Equipment for Home Care Use in Kenya

Interview with Raju Dhanani, Managing Director of NEL (Nairobi Enterprises Limited)

What is your assessment of the sector in Kenya? Is the sector competitive? Are there global issues that are addressed by the companies in this sector?

It is a very competitive sector. Margins are growing thinner but at the same time there are some regulations coming into play which might help the established players. The Pharmacy and Poisons Board is becoming more and more regulated each day. It is taking some time, but it will come to a place eventually where everything will be fair. There is still scope in the sector. The margins will become better with time.

Is the sector driven by demand or by distribution? Is the power on the side of the client?

The power is on the side of the client. It is driven by demand.

Where do your suppliers come from?

We have a global range of suppliers from China, Europe, India, the United States, Brazil. About 50% of our main suppliers come from China.

How does your company distinguish itself from the competition?

The hospital has taken us to a different level. In three to four years’ time, if the first hospital does well, we will plan for new units. We have scope of expansion there.

Our specialty is hospital equipment. We are one of the companies which caters to home care use. Once the patients are released from the hospital, they come to buy units required for long term use. We have one or two key elements in specialization in the hospitals field with our oxygen units and dental units. In the private sector though, we are one of the only companies looking at home care products.

What are some of the products you offer?

We offer hospital beds, walking frames, oxygen concentrators. We go directly to the clients.

How does the client find out about you?

We have a team of 15 reps. We inform doctors and nurses on what products we have. When a patient requires a product, the doctors refer them to our stores. We also do some online marketing and social media through Facebook, etc.

How long have you been in business?

NEL (Nairobi Enterprises Limited) is about 33 years old. Predominantly, we went into pharmaceuticals in 2010. We rebooted the sales in NEL in 2011. We were previously in the suburbs of Nairobi and we are now in the city center and our sales and volume have grown. We have a completely new and young team dedicated to sales and marketing.

What are the projects that you are currently working on?

We have one or two indirect subsidiaries. We are involved in medical disposable production in Kenya now. I own shares in the company and the entire sales of that particular company is done by NEL. We have indirect interests in the pharmaceutical industry which also helps us grow. Also, we are now offering turnkey solutions for hospitals. NEL is currently building a hospital in the city center and we have been contracted to build another hospital on a turnkey basis.

You take care of the whole project?

Yes, the whole project from construction to equipping it. This is a major change but we have a young and dynamic team in charge of this. Nairobi Enterprises Limited has put up money for one hospital already on our own and the second one does not belong to NEL but we have been contracted to do it.

This is a shift in the way you do business. How did you come to this opportunity?

We saw that there was a need. There was no hospital in the city of Nairobi so we decided to go into that first. This will be the only hospital in the city center of Nairobi. All the other hospitals are in the suburbs, such as Aga Khan in Parklands and Nairobi Hospital in Hurlingham. It will cater to the lowest end of the market. The hospital will be ready about four months from now.

How big is the hospital?

We were initially planning on a 200-bed hospital, but because of some funding issues, we have decided to start with 50 beds.

At the moment, you have three shops and are opening a fourth. What are your expansion plans?

We have a target that we have made internally. For every branch we open, we need to make a certain number and once we do that, we look for a new position. If we are right with our numbers, we might be able to do about three or four branches per year. We do small, consolidated units. Initially, our idea was to buy the location out, but that does not seem to be a very viable proposition, so we have now started renting so we can move a little faster.

Is there a need for this development of shops in the rest of the country?

When you want to buy a hospital bed for your home, you want to get the feel of it. That is why there is a need to be physically present.

You have an amazing growth of about 20% to 30% per year. How do you explain this?

We have a young, focused team coming up with ideas every day. We implement ideas. Our profitability has been growing considerably and our growth has been consistent. We have been getting new lines and discarding old lines. The hospital project we are putting up right now is at cost, but the second hospital project will make us a considerable amount of money. We look at every opportunity that comes our way.

What are some of your success stories?

The hospital we are doing now will be a big success. We are specializing in oxygen and dental and people are very happy with the services we provide on those lines.

What is your evaluation of the Kenyan market? How do you see the evolution of the market?

There are two ends of the market. One is the upper end and the other is the lower end. What we have been concentrating on mainly is the lower end of the pyramid. We are now moving into the upper end. The upper end hospitals are getting very technological. The lower end hospitals have a lot of financial difficulties in acquiring funding. They want to go technological but they cannot afford it. We still have a big market that is not technologically advanced yet.

What is your strategy in Uganda?

We are doing things similar to what we are doing in Kenya. We are only doing medical equipment in Uganda. We are just trying the market out now. We are not doing pharmaceuticals as we do not have enough funding just yet. We are waiting to see how the market paradigm shifts there. The partner we have in Uganda is quite active and we are seeing some positive results there. It will take us one or two years to actually grow Uganda in the manner that we want.

You are talking with different partners and funds. Are you looking for investors to join the company?

We are very open. We are very willing to take on partners who can inject funds into the company on a long-term basis. Nairobi Enterprises Limited is now a dividend paying company. The partners will make some money out of NEL if they come onboard.

What kind of partners are you looking for?

We can look at partners that bring just funds, or those that are strategic partners. Strategic might not work for NEL because we are in various fields in this sector. Strategic partners might want only a certain part of the business and that might not help.

What is it like running a family business? What are the advantages and disadvantages?

The advantage is that you are your own boss. We are quite structured and we have an understanding of how the business should be run and how the dividends and proceeds should be shared. There is not really a big disadvantage in being a family owned company if you have the right structure. We are two brothers now and my three children are also in the business. In the future, we would obviously need a stronger structure than what there is right now. If we have external forces or external investors, we would be able to create a good structure, but we will no longer be a family owned company. It would have to be run professionally and everybody would have to abide by the rules and regulations of the Boards. There might be a better future. I have seen family owned companies growing rapidly where the second generation and third generation come in and the fortunes dwindle in time. If it is not structured well, you could lose 30 years of business in no time.

What is your vision for the company in three to five years’ time? What do you want to achieve?

The hospital has taken us to a different level. In three to four years’ time, if the first hospital does well, we will plan for new units. We have scope of expansion there. Today, we already have a society that has pledged to take up some shares in the hospital. In the future, if we do two, three, or four hospitals of that size, we will not have to look for a market, NEL will have a market by itself.

 

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