HOW I TURNED A $5,000 INVESTMENT INTO A HALF A BILLION DOLLAR FORTUNE Dubai is on course to attract 20 million visitors a year by 2020. But how many of these visitors will decide they like it here so much they will invest $5,000 of their savings setting up a small business, and then turn that into a fortune of over half a billion dollars? The answer is not many, but someone who did just that is Faizal E Kottikollon. Not only has he built a world-class business in Dubai from scratch but he is now on course to channel his successful business ambition into the charitable sphere, and change the lives of tens of millions of people in his native India, the Gulf and beyond. “I came to Dubai from the US where I was studying in 1995. My wife Shabana and I took a holiday here and we loved the place and we decided to stay on,” he recalls, adding that the emirate was not the shining skyscraper city it is today. “We were staying in Karama at that time, it wasn’t a fancy hotel. We were here for two weeks and I was obsessed to know about the companies here. I realised it was a challenge as well as a potential. I called people up and met with some people about the potential of manufacturing in this part of the world.” Kottikollon had earned his Bachelor’s Degree in Civil Engineering from the Manipal Institute of Technology in India and followed it up with an MBA from TA Pai Management Institute in Manipal and a Master’s in Industrial Engineering from Bradley University in the US. As he looked around the emirate for opportunities, it was obvious engineering was his speciality and he immediately noticed a gap in the market he could develop. “Everybody said it is a trading place, it is not a manufacturing place. When I look back I thought this place cannot survive only on trading. I took a bold step of doing research on the region and the product we chose was for oil and gas as it is the main GDP for Middle East and my experience coming out of industrial engineering in the US helped me to take a position on manufacturing valves, which is a huge commodity for the petrochemical sector.” Kottikollon noticed that although the oil and gas industry was a major driver of economic growth in the region, much of the manufacturing for parts was done abroad and shipped into the region, something he found to be quite strange. “I was just scouting around to see what was there and what was the real need. The only industry I could choose was oil and gas. Then I looked what products were needed. Valves are a huge requirement that they are totally dependent on but were importing them from the US and Europe at the time, mainly out of approval services as it is a critical product.” Starting with a capital investment of $5,000, Kottikollon set himself an ambitious ten-year plan to break into the notoriously tight-knit oil and gas community and bring local manufacturing and innovation to the industry. The first step was in 1995 when he established Al Ahamadi General Trading in Ajman. The company traded in scrap metal and today boasts an average annual turnover of $70m. Once he started to get approvals as a supplier to the European valve makers, the local companies soon began to realise they could do business with Kottikollon by eliminating the middle men, enabling them to purchase their products cheaper and faster. As this first venture began to take off, he approached the banks to help him in his bid to tap into the potentially lucrative valve sector. “The biggest support came from the National Bank of Dubai [now Emirates NBD]. I had a meeting with the chairman and CEO at the time and they took the proposal. They were my first bank and gave me a loan of $3m for the factory in 1997.” Just two years down the road at this stage, Kottikollon’s first foundry — Emirates Techno Casting FZE in the Hamriyah Free Zone in Sharjah — was up and running. The facility specialises in the manufacture of industrial valves and within ten years it had grown to become the key supplier to major oil and gas companies in the region, and recognised as the third most technologically advanced foundry in the world. But Kottikollon admits that in the early years it was not easy and the company fought hard to prove itself. Article continued on next page... “The foundry industry was considered to be very backward… Nobody wanted to recognise that the new guy could do this. The whole European market was shocked to see someone from the Middle East doing this. I brought the best technology available.” Kottikollon’s unique selling point was that all the major oil and gas companies were based in Jebel Ali in Dubai, so he had easy access, unlike his competitors in the US and Europe. “They were pretty surprised to see a technology industry coming to this part of the world. These guys started communicating to the headquarters in Europe and the US. That is where I started breaking in slowly… But it was a struggle in the first five years. “This product was half a million dollars per valve, [but] we were selling it for $300,000. The gap was so huge. At the time the world went into outsourcing, so they made the castings in India or China, the machining in Eastern Europe and the assembly in Western Europe. What we did was to put it all under one roof, from design to assembly, and the client was nearby so there was no shipping cost. We really took the industry by storm.” Kottikollon certainly did take the world by storm and he was soon attracting attention from some powerful investors. In 2008, Dubai International Capital (DIC), the investment arm of government-owned Dubai Holding, acquired a 45 percent stake in KEF Holdings, Kottikollon’s newly formed parent company. By 2012, and amid the downturn in the Dubai economy, DIC was eager to exit many of its investments and Tyco International, a $20bn conglomerate, acquired a 100 percent stake in the company, which was worth $400m at the time. When the company was sold in 2012 it had five factories: one in Malaysia, a small plant in India and three factories in the UAE. While staying on as chairman, Kottikollon says the plan is to grow the business into a $1bn company within five years and open more facilities in Qatar and Saudi Arabia. Kottikollon’s net worth is estimated at $510m, which is an impressive return from an initial investment of $5,000 in 1995 and zero debt. But does he have any regrets about giving up control of his prized company that he grew from the ground up? “I asked my wife at the time. The recession was playing in the back of our minds. You don’t see how the world could go. We took a decision for the family and sold with no regrets. What we are doing now is much more exciting.” Many people may not consider the oil and gas sector as the most glamorous, but listening to Kottikollon it is obvious that he has a passion for it and is rightly proud of the success he has achieved in bringing much needed innovation to the sector. However, his passion for valves pales in comparison to the obvious motivation he feels for the latest philanthropic ventures that have become the focus for him and his wife. In 2007, they set up the Faizal and Shabana Foundation, a charitable trust in India which aims to leverage the business models they developed in the oil and gas sector. “The world is full of opportunities if you are prepared to work hard. Making money should not be the only objective. That is what we are doing now. You have to give something back to your home country.” In the same vein as when he visited Dubai, Kottikollon set about finding out what was most lacking in India and he noticed that the infrastructure was at least 50 years behind that in the Gulf. To address this need, he set about establishing an industrial park to manufacture precast buildings. Similar to the model he established with the valves foundry, Kottikollon’s factory in India is able to deliver precast schools or hospitals at prices that significantly undercut the current contractors in India. “In India, 65 percent of students go to government schools which are in a bad state. The government schools are run down and teachers are unmotivated. At the famous institution called the Indian Institute of Management, which is like the Stanford or Harvard of India, we asked them to do a study of what is going wrong in the public education.” The first pilot school project was the Girls Vocational Higher Secondary school (GVHSS) in Nadakkavu in Kerala. “In this school with 2,400 girls studying it had only eight running toilets. Because of that kids don’t want to come to the school and teachers don’t want to come to the school. What we did was using this precast concrete technology we went to the government and we showed them a model that can be replicated. Article continued on next page... “The school was built in 95 days, which was a shock to the whole country as it normally takes two to three years. We do it step-by-step. We have a fully automated concrete plant… it is like Lego blocks or like an industrial-style Ikea. Everything was done in the factory and designed in Dubai with a Danish company. At this 120-year-old school we introduced food facilities, astro-turf, a football stadium and a canteen and kitchens.” The school is now one of the top five in the country, something which has never been achieved before by a government-run establishment. “It has taken off and the government now wants 100 more schools, which will have 250,000 students.” New advances in technology may be making all this possible, but Kottikollon doesn’t want to stop at schools and is now working on making advances in healthcare and affordable housing to drag down costs in these vital sectors too. “Technology should bring down the cost, not the other way round. Healthcare is there but the cost is going up and up. This is the model we are working on… we are replicating the school model.” Working with the precast plant in India, which is set to be officially opened this month, Kottikollon has also struck a deal with the prestigious Cleveland Clinic in the US to develop cost-effective clinical processes. Under the new model Kottikollon and the Cleveland Clinic are developing, they aim to be able to build a standard hospital that normally costs $1bn for just a tenth of the price. “What we did was standardise the design. We have a partnership in Dubai Healthcare City where we have about 100 designers working on the model. This will bring the infrastructure cost down by 50 percent and with Cleveland [Clinic] we are working on the clinical care model to bring the cost down.” Kottikollon has also partnered with Stanford University in the US to develop healthcare technology that is effective but cheaper to produce and replicate. Under their plans, the first hospital is scheduled to be ready by the end of 2015. The entrepreneur aims to use the first hospital as a springboard for developing cheaper and quality healthcare in India, the Gulf and beyond. “No one believes we can bring down the healthcare costs,” he says. “But then we can bring them to this hospital. Then to go all over the world, starting with the UAE.” In addition to education and healthcare, Kottikollon is also developing sustainable farming models and training farmers in India to make the most from their small holdings. He is also looking to adapt the successful precast construction model to the affordable housing sector in the Gulf. “We are looking at what human beings really need. They need decent housing, good education, good healthcare and good food,” Kottikollon says. “Money is a by-product of your know-how and hard work. It is good to make money but not at the expense of people. Business has changed, the social side has been forgotten and it’s all about profit. We wanted to create a positive impact on society.” Kottikollon certainly is having an impact. The 100 schools he is planning in India over the next few years for the government will help 250,000 students. With an average of four people per family, that’s a million people assisted. With an average of ten people indirectly helped per person, that is a reach of 10 million people. In a capitalist market, I ask Kottikollon if he has made any enemies in his campaign to drag down the cost of healthcare and education — two sectors which are, after all, two massive cash cows for many organisations in India, the Gulf and beyond. “If you want to build a hospital you need 15 consultants. So this bunch of people will be unhappy. They will say this guy is killing our bread,” he laughs. If there were a few less consultants and a few more Faisal Kottikollons, the world might just be a better place.
Posted on: Sun, 09 Nov 2014 15:00:13 +0000
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