Kerala's non-resident tycoons investing in massive projects back home
the stage was set for the inauguration of the Global Investors Meet (GIM) organised by the Kerala government in Kochi. The then prime minister, AB Vajpayee, was at his oratorical best when he recounted a story of a non-resident Keralite (NRK) coming back from West Asia to start his own business. Based on the hugely popular Malayalam film Varavelpu, the story goes that his business, a bus service, was a failure as he did not know how to manage the trade unions, the officials and the street-smart customers. Vajpayee was indirectly driving home the point that Kerala needed a mindset change towards industry and business.
Vajpayee's speech was an instant hit among Malayalees. For, almost every Malayalee would have seen the protagonist of Vajpayee's story in real life in his or her village. In the 1980s and 1990s, thousands of small ventures promoted by NRKs sprouted in different parts of the state only to close down after a few months or years due to lack local support. Their promoters would then pack their bags and return to the stability and growth offered by the economies of the Gulf countries in those days.
Today, such stories of business failures are passe, thanks largely to a clutch of NRKs who are returning to plough the billions earned in the Gulf on local soil.
Consider, for instance, Ravi Pillai and Yusuffali MA — they hail from two different parts of Kerala (Pillai from Kollam and Yusuffali from Thrissur), migrated to two different countries in West Asia (Saudi Arabia and the UAE) and built their business empires there in two different lines of business (construction and organised retailing).
Both these West Asia-based NRKs are now equally passionate about investing in the Kerala growth story. They're not the only ones. Other NRK business houses include the Mfar and Sobha groups, which are also in the race to be change agents in Kerala. N Ajithkumar, economist at the Centre for Socio Economic and Environment Studies (CSES), explains this phenomenon by pointing out that the NRKs are investing in areas in which they have gained expertise in the Gulf countries. "Their experience is mainly in services like trading and financial services, which they are trying to replicate in the state."
Billionaires like Pillai and Yusuffali are important not because of the quantum of investment they have made but by the endorsement that they have given to the state in the international business circle.
The Turning Point
Yusuffali was only 16 years old in 1973 when he embarked on a 14-day voyage to join his family members who were running a small trading establishment in the Abu Dhabi souk. Yusuffali went on to become a regular supplier of frozen foods and other items to expatriates from Western countries. Soon he forayed into the wholesale distribution of frozen foods in poultry and meat.
The turning point came when he opened the first retail outlet in Abu Dhabi. The Kuwait-Iraq war was under way when Yusuffali decided to take the risk of investing more money in the business. His venture not only turned out to be successful but also won him the support of the rulers as he was one of the very few who stayed back and made investments, while others were leaving.
The big expansion came in 2000, when he opened the first hypermarket in Dubai. Soon, the LuLu brand spread all over the UAE, Oman, Kuwait, Bahrain and Saudi Arabia. Today, Yusuffali is the managing director of the $4.75-billion Abu Dhabi-based LuLu Group.
Politicians from his home state describe him as the "unofficial ambassador" of Kerala in the Gulf region. His role in settling disputes between Kerala and Dubai over the SmartCity project — an IT special economic zone being set up in Kochi in a joint venture between the Kerala government and a subsidiary of Dubai Holdings — or his role as facilitator of investment or as the provider of jobs to nearly 24,000 Malayalees have all contributed to this title.
In Kerala, the LuLu group's first investment was a convention centre in Thrissur at a cost of Rs 145 crore. The LuLu Shopping Mall and Marriott Hotel in Kochi have been built at a cost of Rs 1,600 crore. The two other projects of the LuLu group in the state are a flight catering service at a cost of Rs 65 crore and the Airport Marriott Hotel in Kochi at a cost of Rs 150 crore. In other words the group has so far invested Rs 1,960 crore in projects in Kerala. Apart from this, the LuLu group is one of the leading investors in the equity of a local bank and Cochin International Airport Ltd.
The Ravi Pillai (RP) group has also made similar investments in the state's tourism, health and trading sectors. "We have so far invested Rs 1,500 crore in Kerala," says Pillai. His group started investing aggressively in Kerala in the past few years, buying hotels and resorts in Kovalam and Kozhikode and promoting another one in Kollam. The group entered organised retailing in Kerala with the RP Mall in Kozhikode. Its forayed into health and education by setting up the Upasana hospital and Nursing College in Kollam.
Pillai, head of a $3-billion business empire, comes from a farming family, but he of course had other plans. Right from his younger days he was on the lookout for opportunity and he found it in the construction sector. After completing a few projects in Kochi, Kerala's only industrial area, he decided to chase his dreams in West Asia. In 1978 he reached Saudi Arabia and soon started his own company with a local partner. The construction company he floated, Nasser S al-Hajri Corporation, initially had 150 people working for it. Today, the company employs 70,000 people and has a presence in West Asia, Australia, Africa and the United States.
Pillai says the RP group's plans for Kerala include "some very good business ideas". But he refuses to divulge details as they are "in a pre-start stage". Pillai explains that there are opportunities in Kerala in areas like technical institutes, energy, infrastructure development, amongst others. Kerala, according to him, has a friendly investment climate and his vision for the state is that it should become an economically developed state. But other states are also on his radar. "We are looking at investment opportunities in Pune and Delhi," he adds.
Not to be outdone, the LuLu Group has also unveiled ambitious plans for Kerala. These include the LuLu Logistics Centre at an investment of Rs 110 crore, the Bolghatty Convention Centre and a hotel at an investment of Rs 800 crore and shopping malls at Kozhikode and Thiruvananthapuram at a cost of Rs 700 crore.
Yusuffali says the investments in banking, healthcare and education that he made in the state were at a personal level. But for the group as a whole the core business will continue to be "retail, hospitality and related areas." According to him, Kerala is not suited for heavy industry.
"Big factories not only require large chunks of land, something which is already scarce in Kerala but also may negatively impact our valuable ecosystem and greenery," he told ET Magazine.
Both Pillai and Yusuffali know that land, being scarce, is a touchy issue in the state. Recent attempts by both to own new plots of land landed them in controversy.
That's not the only storm these NRK investors find themselves in. Both Pillai and Yusuffali have been dragged into political controversies in the recent past after getting caught in the midst of faction fights within the CPI (M).
For instance, when Pillai bought the Kovalam property from Leela group he also staked a claim for 16.4 hectares of the adjoining Kovalam Palace, also known as the Halcyon Castle.
Though most of the political parties, including the main group of the CPI (M), were in favour of giving the land to the NRI investor, opposition leader VS Achuthanandan objected. Despite this, the government allowed the transfer to Pillai after convening an all-party meeting to get the consent of different parties.
Barely had this controversy died down when Yusuffali faced allegations that his LuLu Mall encroached on government land and that the 25 acres on Bolghatty island that he purchased from Cochin Port Trust (CPT) through auction was grossly undervalued; the factions within the CPI (M) took different stands. The Ernakulam district committee of the CPI (M), known for its loyalty to the official faction in the party, alleged that LuLu Mall encroached on the Edappally canal. The office bearers also asked for a closer look at the CPT land deal. But Achuthanandan backed Yusuffali in the entire controversy prompting political observers to comment that it was faction fighting within the CPI (M) that was dragging the NRI bigwigs into controversies in the state.
They point out that the official faction is against the LuLu Mall as it came up with the support of VS Achuthanandan when he was the chief minister. But soon CPI (M) state secretary Pinarayi Vijayan ended the controversy by announcing that the party did not have any issues with Yusuffali and that his investments were welcome. At the height of the controversy, though, Yusuffali had announced that he would not invest in the state in future. However, he soon changed his stand and declared that the Bolghatty project would go ahead as per schedule. There was another allegation against Pillai that The Raviz in Kollam, a 5-star hotel project inaugurated by Shah Rukh Khan, violated the coastal regulation zone norms.
But the allegation and the controversy that it generated soon died down because there was no one to take it up. Clearly, the two NRI businessmen enjoy enormous political patronage in a state where consensus is a word that is fast becoming redundant. But both Pillai and Yusuffali have stood by the governments in the state in times of need. When the Saudi government recently announced the Nitaqat labour reforms, which seek to replace expats in the workforce with locals, the RP group came forward to recruit Indians who were affected.
Yusuffali had also come to the state government's assistance when the SmartCity deal was in a limbo. He held talks with the Dubai company to revive the project.
The Other NRKs
Other NRK business houses like the Mfar group and Sobha group are also in the race to be the change agents in Kerala. P Mohamed Ali, founder of the Mfar group, is a diploma holder in civil engineering, who started his career in the Northeastern states. But he soon migrated to Dubai and, after a short while, to Oman.
He found a local partner and launched the Gulfar group, which forayed into the construction of key infrastructure projects like highways, hotels, bridges and the oil sector. Later the group expanded to Qatar and became a major player in the construction sector there, too.
In 1997, Ali founded Mfar Holdings to begin a real estate business. His other local businesses include construction, hospitality and manufacturing.
Mfar is one of the very few groups to set up a manufacturing unit in the state. The company has spent Rs 50 crore to set up an activated carbon unit. "The unit exports nearly Rs 150 crore worth of activated carbon every year," says MM Abdul Basheer, director of Mfar Hotels and Resorts Ltd. It has also set up MIV Logistics, a container freight station in Kochi.
After building the Le Meridien hotel and convention centre the group has now identified a high-end villa and apartment project in Kochi and a Rs 90-crore resort in Thekkady as its next big projects. "We are completing a hotel project in Chennai," Basheer adds. Mfar group is also active in infrastructure projects in north India.
Unlike Pillai and Yusuffali, Ali is low-key, distancing himself from local controversies and keeping himself busy in other parts of the country like Delhi and Bangalore. Then there is PNC Menon, who hails from Palakkad district, the rice granary of Kerala. He lost his father when he was just 10. As he grew up, he decided to migrate to the Gulf though his dream was to write the civil service examination. The incident that changed his life was a chance meeting with a captain in the army. Together they floated an interior decoration company in Oman which became a well-established firm capable of taking up projects in the entire West Asia.
After nearly three decades of creating palace interiors in Oman, the UAE and Qatar, Menon came back to India in 1995 and founded Sobha Developers, a real estate company with residential and commercial projects in cities ranging from Gurgaon to Pune to Chennai to Thrissur. In Kerala, however, the Sobha group is best known for its massive CSR project, the Sobha Hermitage near Palakkad, where the group has adopted two villages. It provides education for the students from these villages and also has health facilities for the villagers.
A school, a hospital and an old age home are part of this project. Kerala is thus becoming the beneficiary of investments made by its own people who have amassed wealth in West Asia by their hard work. So far these investments have mostly been in the services sector. But there are those who feel that NRIs should be given incentives to invest in other sectors. SR Nair, president of the Kerala Management Association (KMA), points out that "services alone will not bring prosperity". According to him, a policy to develop micro, small and medium enterprises should be pursued by the state government. "Services alone, without manufacturing, will see the economy falling like a pack of cards," adds Nair.