Billionaire Yusuff Ali’s blockbuster IPO spotlights UAE's India-born tycoons

The ascent of the Indian-origin industrialists mirror the rise of the UAE, which is now home to over 10 million people — a third of them from India, with the biggest portion hailing from Ali’s home state of Kerala. An extended post-Covid boom has prompted thousands from around the world to move to Dubai and Abu Dhabi in search of jobs and a better lifestyle, unencumbered by high rates of tax.

Yusuff Ali arrived in the United Arab Emirates as a teenager in 1973, when the country was populated by just half a million people. He opened his first grocery store in the capital Abu Dhabi the next year, before embarking on an expansion spree on the back of a years-long oil boom.

His journey culminated this month in a $1.72 billion initial public offering by Lulu Retail Holdings Plc. That share sale — the UAE’s largest of the year — boosted Ali’s net worth to $7.1 billion, cementing his position as the country’s second-richest private individual, according to the Bloomberg Billionaires Index.

Ali, who turns 69 on Nov. 15, a day after Lulu makes its trading debut, is part of a cohort of tycoons from India who spotted pockets of opportunity in the UAE in sectors from real estate to health care and education. That includes the likes of Aster DM Healthcare’s Azad Moopen, infrastructure conglomerate RP Group’s Ravi Pillai and Danube Properties’ Rizwan Sajan.

“They were all first-generation entrepreneurs who moved here to make their fortunes,” said Viswanathan Shankar, a former top executive at Standard Chartered Plc and founder of Gateway Partners. “Adept at networking, and exceptional at identifying and resolving basic consumer demand.”

Their ascent mirrors the rise of the UAE, which is now home to over 10 million people — a third of them from India, with the biggest portion hailing from Ali’s home state of Kerala. An extended post-Covid boom has prompted thousands from around the world to move to Dubai and Abu Dhabi in search of jobs and a better lifestyle, unencumbered by high rates of tax.

Lulu Retail, for instance, now caters to well over half a million shoppers a day from 240 stores in six countries, and reported a profit of $192 million last year. It operates one of the Middle East’s largest hypermarket chains and employs more than 50,000 people.

When the firm kicked off its IPO last month, investors snapped up all shares on offer within minutes. Listings from non-energy firms are relatively rare in the Middle East, where stocks tied to oil tend to dominate.

The deal came months after Brookfield Asset Management Ltd. led an investment into GEMS Education, another business founded by Indian immigrants who turned a single school into one of the world’s largest private education providers.

The GEMS back-story has some parallels to Ali’s own journey, with roots dating back to 1959 when founder Sunny Varkey’s parents moved to Dubai from Kerala.

“The legacy entrepreneurs have done an excellent job of building enterprises that meet the basic requirements of the rising population,” Gateway’s Shankar said. “They have also benefited from historical links between the Gulf and India.”

Still, for all the success Indian tycoons have enjoyed, there have been hiccups along the way. For instance, NMC Health Plc, founded by Bavaguthu Raghuram Shetty, was engulfed in a scandal over more than $4 billion of undisclosed borrowings.

Operating in the region also comes with a unique set of challenges. For one, expatriate entrepreneurs have to navigate a landscape dominated by assertive state-backed entities that control vast swathes of the economy, often operate competing businesses and sometimes even own chunks of the tycoons’ firms.

For instance, a wealth fund overseen by Sheikh Tahnoon bin Zayed Al Nahyan owns a fifth of Lulu International Holdings. Another entity linked to the Abu Dhabi royal has a stake in Burjeel Holdings Plc, a $3.2 billion firm chaired by Ali’s son-in-law and health-care tycoon Shamsheer Vayalil.

Sheikh Tahnoon’s sprawling $1.5 trillion empire spans everything from fast-food chains, pharmacies, and dental clinics to apartments, hotels, schools and malls. Expatriate-run businesses also sometimes face competition from Emirati family-run conglomerates like Majid Al Futtaim, which operates the Carrefour brand in the Middle East.

Succession planning is another challenge, especially in cases where ownership is shared by immigrant entrepreneurs with a local partner, said Kavil Ramachandran, a professor at the Indian School of Business. “Most of these entrepreneurs have inducted their next generation into the business who may not share the same kind of relationship with their Arab partners,” he said.

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Modi-MBZ

A defining feature of Ali’s success has been his ability to deftly navigate the inter-connected worlds of politics and business in the Middle East.

“Before the IPO, I sought the blessings of GCC leaders,” he said at a press conference this month, referring to the six-nation Gulf Cooperation Council bloc. Sporting a button featuring a photo of UAE President Sheikh Mohammed bin Zayed al Nahyan, Ali highlighted the participation of government-linked entities from the region in the share sale.

The tycoon was the first expatriate to be granted permanent residency by the UAE government and is a rare non-Arab board member of Abu Dhabi’s chamber of commerce. He resides on a prestigious street in the emirate, alongside members of the royal family.

At the same time, the billionaire has also positioned himself as a key part of the UAE’s push to boost ties with the country of his birth. Ali is chairman of the Indian Business and Professional Group, which aims to promote commerce and investment between the countries.

Over the years, he’s plowed money into India, particularly into Kerala to build malls and hotels. Ali has cultivated a cult following in his home state, where his private jets, luxury car collection as well as philanthropic efforts garner regular media attention.

India is the UAE’s second-largest trading partner and the Gulf nation is considering investments of up to $50 billion there, Bloomberg News has reported. Meanwhile, rich Indians are increasingly buying high-end real estate and using the emirates as a base to use their wealth globally.

Ali’s influence extends to the top echelons of government — he was present when Narendra Modi visited the UAE in his first term as prime minister. Since that trip, the first by an Indian premier in three decades, Modi has returned to the UAE multiple times and Ali has often been photographed with key members of the visiting delegation.

A video from one recent event to shows Ali smiling with Abu Dhabi’s Sheikh Mohammed and India’s Modi. Those ties to the UAE have, however, at times required him to find a delicate balance with the region’s biggest economy, Saudi Arabia.

Months after ADQ plowed money into Lulu, the kingdom’s sovereign wealth fund explored a potential investment, Bloomberg News has reported. The firm also briefly considered a rare dual listing in Riyadh, before picking Abu Dhabi.

In the press conference, Ali didn’t rule out a potential IPO in Saudi Arabia, which is home to nearly five dozen Lulu stores, but stressed this wasn’t a priority.

IPO Boom

Ali’s decision to list his firm could potentially serve as a template for other expatriate-run businesses based in the UAE, where officials have been encouraging share sales on local bourses as part of a long-standing ambition to boost their size to over $1 trillion.

“The Lulu IPO demonstrates that there is plenty of investor appetite for companies at the right price that have grown out of the private sector but have a well-connected local strategic shareholder,” said Hasnain Malik, emerging and frontier market strategist at Tellimer.

Still, with a string of deals in the offing, the IPO will be a test of investors’ appetite. Delivery Hero SE’s Middle Eastern food delivery unit Talabat is gearing up to list, while Kabir Mulchandani’s FIVE Holdings, which operates luxury hotels in Dubai and Switzerland, is also weighing a share sale.

For Lulu Retail, the focus now shifts to its trading debut next week. Ali’s decision to float the firm comes as the conflict in the Middle East enters its second year and follows a grim start for the region’s largest deal of 2024 — a $2 billion energy-sector IPO in Oman.

While the Middle East remains a robust pocket of the global IPO market, there may be reasons for investors to temper expectations. Like Lulu, supermarket chain Spinneys 1961 Holding Plc received more orders than shares on offer in its May IPO, but the stock had a tepid debut and has since hovered around its offer price.

“Lulu offers a rare private-sector play on the consumer in the UAE and the over-subscription suggests there is pent-up investor demand,” Tellimer’s Malik said. “However, an IPO at the top end of the range may take some of the immediate valuation upside off the table in the secondary market.”