The most influential Indian in west Asia

Around 10 in the evening on March 10, there’s a traffic holdup in front of LuLu Mall in Kochi, Kerala. Large crowds are gaily streaming out and spilling onto the streets even as harried policemen try to make way for cars to pass. The mall is brightly lit with multicoloured strobes washing over its walls. Spread over 2.5 million sq. ft. on a 17 acre plot just off the intersection of NH 47 and NH 17, LuLu Mall opened earlier in the day. It’s the first of its kind in the state and one of the largest in the country. Kochi is all LuLu. Step outside its distinctively designed international airport with sloping red-tiled roofs, and you’ll see LuLu Flight Kitchen—a low, white-washed building with a huge LuLu signage set against a black background. Drive along NH 47 that connects the airport to Ernakulam, Kochi’s downtown, and LuLu dominates the billboards. From global brands such as Benetton, McDonald’s, and Vodafone, to local Gem Lights (home décor) and Josco (jewellers), all advertise their presence at LuLu Mall. It’s not just brands; believe it or not, close to the mall there’s a banner put up by the local Al Ameen Public School congratulating the mall on its opening.

In Arabic, LuLu means ‘pearl’. In Kerala though, it’s shorthand for power, influence—and the remarkable story of a local Malayali, Yusuffali M.A., 57. Based in Abu Dhabi, he’s been running the LuLu Group in West Asia for over two decades now, and malls are a recent addition. A report by accounting and audit firm Deloitte, Global Powers of Retailing 2013, names him as one of the 10 fastest growing retailers in the world by sales with an annualised growth of 30.5% between 2006 and 2011. His personal wealth is estimated at $1.5 billion (Rs 8,115 crore), which makes him the richest Malayali in the world and the biggest success in one of the most defining migratory stories of the last 60-odd years—Malayalis to the Gulf. More important, he’s perhaps the most powerful Indian in West Asia. He’s the lone Indian in The Wall Street Journal’s list of the most influential non-royals in the Emirates, the first foreigner to be elected to the board of the influential industry association, Abu Dhabi Chamber of Commerce & Industry, and he sits on the board of Abu Dhabi’s Zakat fund, which distributed 30.5 million dirhams (Rs 44.9 crore) in the first quarter of this year. The Zakat is the obligation of Muslims to donate money for charitable causes.

There are other immigrants who’ve made it big riding the Gulf’s economic boom, such as Micky Jagtiani of the Dubai-based Landmark Group or B.R. Shetty of the Abu Dhabi-based New Medical Centre Group of Companies and U.A.E. Exchange. But Yusuffali’s proximity to the royal family, the Al Nahyans who rule oil-rich Abu Dhabi and one of the most powerful potentates in the region, is unmatched.

The day before the Kochi mall opened, a prayer in its cavernous lobby was led by Sheikh Al Sayed Ali Al Hashemi, advisor to the president of the U.A.E. on judicial and religious affairs, a key position in an Islamic state. Sheikh Abdulla Al Saleh, deputy minister of foreign trade in the U.A.E., says, “Yusuffali is Indian, but we in the U.A.E. and the region consider him one of us.”

Yusuffali’s bonhomie with the sheikhs began during the First Gulf War (1990-91). “When people were hesitant to expand, I opened the biggest supermarket in Abu Dhabi. I got acceptability among the people there and it was a turning point in my life,” he remembers. His willingness to invest when capital was fleeing the region was particularly appreciated by the Al Nahyans.

By 2003, he was part of the inner circle. Yusuffali accompanied Sheikh Mohammed bin Zayed Al Nahyan, then Abu Dhabi’s deputy crown prince (now crown prince) on a delegation to India. The entourage included B.R. Shetty and Mohan Jashanmal, regional manager of the Jashanmal National Company (Abu Dhabi) and chairman of the Indian Business and Professional Group. As K.C. Singh, former ambassador of India to the Emirates points out, Yusuffali knew the importance of being in the delegation. “Of all the businessmen who came, Yusuffali was able to capitalise on the opportunity the most.”

T.K.A. Nair, advisor to the Indian Prime Minister, says Yusuffali has established a rapport with a large number of people who matter in the Arab world. “It is a great asset for us. Whenever there is a meeting with leaders of these countries, you can make out that he is respected. It is an unseen role that he plays because his presence is a source of comfort for the other side, and for us.”

Building trust is crucial to Yusuffali’s modus operandi, and his non-threatening and rather grounded demeanour clearly helps. It is difficult to imagine the slightly built, middle-aged Yusuffali as a billionaire, or for that matter, an influential power player. Fellow Malayali, the Congress party’s Vayalar Ravi, minister for overseas Indian affairs, says part of Yusuffali’s charm has to do with the fact that he doesn’t act rich. “Everybody thinks he is like any ordinary citizen.”

Yet he influences business: He has played a behind-the scenes role in Etihad’s talks to buy a stake in Jet Airways. “See, the investment is not going to Naresh Goyal [Jet’s owner]. The investment is going to India. I am not a broker. If they need some help, I will do it because I will be helping the country. It is my responsibility for my country,” says Yusuffali, shoes off, sitting cross-legged and sipping home-brewed Arabica coffee sent to him in a flask, at Cream Centre, a vegetarian restaurant in LuLu mall run by his son-in-law. (His rationale behind the mall is somewhat similar: It’s not just about the money he can make, but about bringing investment into Kerala. Some years ago at Davos, Anand Mahindra asked why he wasn’t investing in Kerala, he says. Though by then he’d already taken a stake in the Kochi airport, it clearly hit a nerve.)

And politics: He has used his influence to build the first crematorium for Hindus in Abu Dhabi and often intervenes with the rulers of U.A.E. for granting pardon to Indians staying without valid work visas.

Back home, he’s something of a folk hero—in Kerala they all know who he is and see him as a “great Malayali”. Around 70 km from Kochi, in his hometown, Nattika, a quiet little place by the sea with a 3 km long palm-fringed beach, his name is a byword. There’s Azia, who works in a local snack shop (peedika in Malayalam) and tells of how he helped her with gold for her marriage and money to construct her home. It’s all fairly institutionalised. He employs a team that scans applications for help and then gives it to him for his consideration, mostly when he is flying to, or is in, India.

Almost every family in the town of about 20,000 has someone employed by Yusuffali, through LuLu and other smaller group companies. Saeed Mohammad, who runs a small store next to Yusuffali’s palatial bungalow, says every time Yusuffali is in town, thousands queue up overnight to apply for a job at LuLu—mass interviews used to be held just outside the 7 foot-high compound walls that surround his house, but are now held in a larger compound a few kilometres away to accommodate the numbers that turn up. About 22,000 of his 30,000-strong workforce is from Kerala, something that Yusuffali says is his biggest achievement and his way of giving back to his home state.

There are others. Two years ago he stepped in to help then Chief Minister V.S. Achuthanandan (Left Democratic Front) salvage a prestige project. In 2007, Achuthanandan had kicked off a Rs 2,000 crore special economic zone (SmartCity) near Kochi. The idea was to attract IT investments, since Kerala hasn’t been as successful as neighbouring Tamil Nadu or Karnataka in attracting these. SmartCity was pitched as a big idea that would create 5,000 jobs. However, talks between the state government and TECOM Investments, a Dubai-based firm it had partnered, broke down over differences in landholding. TECOM runs business parks, including the Dubai Internet City and the Dubai Media City. Yusuffali stepped in as mediator and repaired matters. K.C. Joseph, the state minister for rural development, planning, and culture, says putting SmartCity on track was a turning point in Yusuffali’s relationship with Achuthanandan. The first phase of SmartCity’s construction is expected to start this July.

That explains why no red flags went up (literally) when LuLu Mall opened. Achuthanandan’s party (now in opposition), as well as Chief Minister Oommen Chandy, of the ruling United Democratic Front (UDF) alliance, have both opposed organised retail. While their resistance is shrillest when it comes to the Walmarts and the Carrefours of the world, it has also stung Reliance Fresh and the Future Group when they were opening in Kerala. Yet both Achuthanandan and Chandy were present when the Kochi mall opened—itself a rare occurrence in a politically polarised state—and publicly applauded Yusuffali.

R.V.G. Menon, former president of Kerala Sasta Sahitya Parishath and a noted social commentator, explains the paradox. “The ideological opposition is mostly against Western money from companies like Walmart flowing into organised retail in Kerala. There is increasingly a realisation that big retail, especially promoted by local companies like Big Bazaar or Reliance Fresh can co-exist with the neighbourhood store. But when it comes to Yusuffali, the most important reason is that he is the beloved of political parties across the divide.”

His political connections and influence, however, make other businessmen wary of him. They rarely openly woo politicians the way Yusuffali does. For the past several years, Kerala has had alternate five-year terms by UDF and LDF, the two main political forces. For businessmen, being seen with one party is generally believed to affect their chances when the other comes to power.

So, except C.J. George, managing director of Kochi-based brokerage firm Geojit BNP Paribas, who admires the way Yusuffali built his company from scratch (“For an ordinary Malayali to have gone to the Gulf and created what he has and have leadership across pan-Gulf Cooperation Council states in retail is quite amazing”), all other local businessmen refuse to comment. When Fortune India reached out to The Cochin Chamber of Commerce and Industry, it said that its members were uncomfortable talking about Yusuffali.

The joke in Kerala is that there are two kinds of businessmen: those who have expanded into the Gulf from Kerala, and those who have expanded into Kerala from the Gulf. The Yusuffali story involves a bit of both. The lack of opportunities at home had pushed millions of Malayalis to the Gulf. The migration started as a trickle in the ’50s, and then grew steadily over the next couple of decades till the early ’70s when opportunities took off in the Gulf with the oil boom. Today, an estimated 2.5 million in this state of 33 million is employed in the Gulf. They send back some Rs 50,000 crore in remittances every year.

Unlike an overwhelming percentage of his fellow Malayalis, Yusuffali didn’t leave for the Gulf directly. He was born and raised in Kerala, in an agribusiness family. His grandfather was a coconut farmer who sold his produce to mills to make coconut oil and coir. In the early ’70s, he first went to Ahmedabad, where his father ran grocery stores, EMKE Brothers and EMKE General Stores, to study and help in the family trade. He learnt about business in Gujarat and also got a business administration diploma from an Ahmedabad institute that doesn’t exist anymore, he says. These days, when he is sometimes called Kerala’s Dhirubhai Ambani, Yusuffali says it’s but natural because he shares the legend’s Gujarati instinct for opportunity.

In 1973, he boarded a ship called Dumra, alighted in Dubai, and joined his father’s brother in Abu Dhabi where he ran a grocery store. “We were buying a lot of things that other people imported. I thought why not import them myself,” he says. Dubai and Abu Dhabi were far from the gleaming, glamorous oases in the desert they are now. Capital had only then started flowing in and the consumption of tinned food or frozen food had just begun. So Yusuffali spent his early years importing and selling tinned food.

In 1983, he travelled to Singapore, Hong Kong, and Australia. It was there that he stumbled upon the marvel called a supermarket. “That is when I saw the world. When I travelled, I came to know that we were doing something small and that we’d have to expand.”

Back then, local stores catered to the premium end of the market, but there weren’t any supermarkets which catered to the growing population of South Asian labourers (mainly Indians, Pakistanis, Sri Lankans, and Bangladeshis) who were helping build the Gulf. Armed with 25,000 dirhams from the British Bank of the Middle East (which later merged into HSBC) he started his own supermarket. He called it LuLu—an ode to the days when West Asians earned their living pearl hunting.

As South Asians kept pouring in, LuLu prospered. It wasn’t difficult to figure out what they wanted—they were all culturally similar. And as the profile of the immigrant changed, Yusuffali kept adding newer kinds of stores: LuLu Centres, the department store in 1991, LuLu Hypermarket (1998), and finally the first mall at the turn of the century.

Arvind Singhal, chairman, Technopak Advisors, a retail consultancy, says Yusuffali’s key skill lay in targeting his audience and growing with it. “There is a lot for Indian retailers to learn from LuLu,” says Singhal. “He grew with the profile of the market: It was first aimed at basic construction workers, and then the portfolio widened as the profile of workers in the Gulf evolved to middle-level managers, all the while keeping the value proposition intact.” LuLu’s strategy to keep prices low included cutting costs, negotiating aggressively with suppliers (‘back margins’ in industry parlance, using extremely high volumes as a negotiating tool), and introducing own-brands in almost all categories. That combination of value and convenience appealed not just to the Indians in West Asia, but to others, from Filipinos to Europeans. Yusuffali also consistently used Indian labour to keep costs low. In fact, if there is any grouse against Yusuffali even in his village, it is that he pays salaries that are 15% to 20% lower than Western competitors. Ask him and he laughs it off.

Yusuffali has always been willing to take risks, from introducing supermarkets and hypermarkets in the Gulf through the 1980s and 1990s, to investing money in Kerala, which isn’t ideologically free market-friendly, or, for that matter, his plans to open soon in Tunisia and Algeria, Indonesia (with two stores in Jakarta), and Malaysia (one store in Kuala Lumpur).

For Gulf returnee Idiculla V. Daniel, who went to Kuwait in 1956, and worked with Alghanim, a rival of LuLu’s (based in Kuwait but with operations across the Gulf), this is unique among Malayalis. He argues that as a community they are not known for their entrepreneurial spirit, and when in the Gulf, they are more concerned about sending money back home than getting into the uncertainties of business. “But Yusuffali is different.”

Yusuffali prays five times times a day, often quotes from the Koran, always walks with a large entourage, converses in English, Malayalam, Tamil, Hindi, and Arabic, and speaks of his exercise routine (60 minutes doing a mix of treadmill, cross-training, and yoga) with gusto. That, he says, prepares him for the day ahead and all major decisions that he needs to take. He knows how to put on a show (Chief Minister Chandy was showered with petals from a helicopter when he arrived at LuLu Mall); exhibits a sense of humour (like asking his wife Shabira not to buy anything expensive at a sari shop); and often cries when he talks of his late mother, who taught him charity. A YouTube video that shows him weeping while talking of his mother has a quarter million hits.

LuLu Group International, the group holding company (EMKE Group earlier) is a fully family-owned business. Its 2011 turnover from retail was estimated by Deloitte at $4.5 billion. That makes it bigger than the Future Group, India’s largest retailer. Yusuffali says the current figure is around $6 billion but he doesn’t discuss profits. He sits right at the top, while his brother Ashraf Ali is the second in command. Then there’s Saifee T. Rupawala, the group CEO, to whom the various business heads report.

Yusuffali’s senior team comprises some 30-odd executives—all men, and mostly from India. “Young boys, I bring and groom them. If I take old people, they will be gone in five or 10 years. I want to groom the boys from salesmen to general managers. I have a regional director who was a salesman and rose to his current position,” he says, laughing loudly, before suddenly concluding the conversation and moving on to his next meeting, entourage in tow, in his black Land Rover with a blue light flashing on top, a concession he enjoys as the vice-chairman of Norka-Roots (an organisation that acts as an interface between non-resident Keralites and the government of Kerala.)

Each time there’s a new project, this team flies down to manage the show. They exhibit schoolboy camaraderie: One day at lunch, I notice them sitting in three rows, chatting about food, work, and the latest Malayalam movie. All look young, but there’s one notable exception: Abdullah Kutty, widely called moothapa, or grandfather in colloquial Malayalam. He is introduced as a bit of a legend, having been with Yusuffali right from the time he arrived in the Gulf. He’s a sort of agony uncle who helps LuLu Group’s employees with their problems.

LuLu has 105 stores across the Gulf, India, Yemen and Egypt, with 12 more slated to open over the next year. And though it runs other businesses like foreign exchange, and is showing interest in aviation, retail is by far the biggest chunk. Yusuffali is targeting $10 billion in revenue by 2022 and says that to get there he needs to make the India retail venture work. It’s a $450 billion opportunity growing at a fast clip. So will it?

To answet this, it’s important to understand how Malayalis react to LuLu. In the first couple of days after it opened, locals came in droves to check out the place. Vivek George, a youngster who came to the mall, was busy updating his Facebook status: “Just out from Lulu mall. Awesome. Hypermarket ... first of its kind ... asset to Cochin.” Like many others around him, George too may have been driven by curiosity to visit the mall, but many of those who had come only to window-shop, left the mall carrying loaded bags and spoke of returning to buy more. It’s clear that Yusuffali wants to cater to a wide audience: There’s a Benetton as well as illustrated signs on how to use a Western toilet.

I asked a few who have never been to the Gulf about the store. Their reaction was revealing. All of them recognised the white bag with LuLu written in red and green in which goodies were brought by their relatives flying back from the Gulf. The LuLu brand in Kerala is powerful, almost as much as or perhaps even more than some local Indian retailers.

Sandip Tarkas, president (customer strategy) at Future Group, says smaller, nimbler groups like LuLu, which operate in similar environments will understand Indian consumers better than Walmart, which has to learn about the market on the go. “What that means is that LuLu will do better than the Walmarts and Tescos, at least initially. Local knowledge and consumer understanding is everything in retail: Walmart for example, has not been able to replicate its big success in the U.S. and Mexico in Europe and Japan.” If the hypermarket is any indication, Yusuffali can deliver. Well lit with wide aisles, boasting a variety of goods not easily available in many metros, 28 checkout counters and a pleasing display, he has got the mix right. Shabu P.A., who heads buying for the LuLu Groups, says the company is learning fast, though there are plenty of issues to contend with, including India’s complicated tax structure that varies from state to state unlike the relatively simplified regime in markets like the U.A.E. Or the fact that, though in the Gulf LuLu works primarily on back margins rather than front margins (the difference between the final selling price and the cost price), its India operations are currently too minuscule for significant back margins to kick in.

Businessmen who have succeeded in building large companies in Kerala and making big money have often done it by milking the state’s appetite for consumption, particularly its fascination for gold, either through jewellery retail (Joy Alukkas, Kalyan, Malabar Gold) or through gold loans (Muthoot, Manappuram Finance). A brokerage like Geojit or an electronics company like V-Guard are the exceptions.

Certainly, outside the state LuLu may not have the same resonance, particularly in markets that are not as obsessed with the idea of the Gulf. But as and when his expansion happens, Yusuffali says, it will be slow and considered. His store currently doesn’t hold many in-store brands (it has own-brands in almost all categories in the Gulf) as it doesn’t make economic sense to create the supply chain for just one store.

It is a move that retail experts approve of. Techno Pak’s Singhal says, “Too many Indian retailers have expanded nationally in a hurry without slowly expanding locally first. Having a huge store at Andheri in Mumbai and the second one in Chennai doesn’t make sense as there is very little in common between these markets. LuLu has the opportunity to intelligently roll out, first in Kerala, a market where it has brand loyalty, recognition, and knowledge, and expand organically to, say, Tamil Nadu, markets where it may not be as recognised.”

That’s exactly how he has grown, for beneath all his easy banter, Yusuffali is a master entrepreneur. And he will be marshalling his forces, waiting for the right moment.