Economic Impact

Season 2, Ep. 2: Vivasvaan: Making it in the UAE

Episode Summary

Welcome to Economic Impact, conversations from Emirates Development Bank (EDB), the key financial engine for economic development and industrial advancement of the UAE. In each instalment CEO Ahmed Al Naqbi leads insightful discussions with change-makers and thought-leaders in the UAE to learn how they’re contributing to the nation’s economy and realising the UAE’s economic ambitions.

Episode Notes

It's time for the second episode in season two of Economic Impact...

...and we're pleased to welcome Ravi Hinduja, Founder and CEO of Aquaflex Holding Ltd. and Vivasvaan Industrial, to discuss academic motivation, the lessons he learnt from his first business venture, improving our community’s quality of life and more.

You can listen to 'Economic Impact' wherever you get your podcasts. Plus, you can watch ‘Economic Impact’ on the EDB website, edb.gov.ae, and on Youtube. Subscribe and like us on Facebook, Instagram and LinkedIn - and let us know what you think…

To find out more, just look for ‘Economic Impact, Conversations from Emirates Development Bank'.

Episode Transcription

EI S02E02 Vivasvaan - Transcript

Speaker 1: HOST
Speaker 2: GUEST


00:00:00 INTRO V/O

“This is Economic Impact...Conversations from Emirates Development Bank”.

 

00:00:05 Speaker 1 

A’Salaam A’laikoom. Welcome to Economic Impact. We have a very special guest with us today. The founder and CEO of Aquaflex Holding Ltd. and Vivasvaan Industrial, Mr. Ravi Hinduja. A very warm welcome, thank you so much for joining us here today. Can we start by asking yourself a bit about your background? You have a very interesting story. I was privileged to know a bit of it…

00:00:27 Speaker 1 

…of how you've reached the point of where we reached today, could you please for the audience give us a bit about your background and the journey that you took with the company to reach where you are today?

00:00:37 Speaker 2 

Thank you, Ahmed. Thank you for having me here. It's, it's an honor. And I take this as a big encouraging step for our small business, for being able to tell and share our story with the CEO of a big development bank. Thank you again.

00:00:55 Speaker 1

Thank you.

00:00:57 Speaker 2 

My story.

00:01:00 Speaker 2 

I'm originally from Bombay. In the early 90s, I joined the family business. For whatever reason - it may be, I was not very academically motivated. I wanted to get out of school and college and start working – yesterday! I started in the family business in the early 90s, working half days when I would go to college.

00:01:30 Speaker 2 

The business had been around for a while, my father and my uncles had started the business. 

00:01:39 Speaker 2 

The business was involved in the business in the manufacturing of plastic pipes and fittings. 

00:01:45 Speaker 1 

OK. 

00:01:46 Speaker 2 

I learned some very interesting and important business lessons, and back then I just wanted to make money, to be very honest with you. 

00:01:54 Speaker 1 

OK. 

00:01:55 Speaker 2 

That was the driving force, but I realized that we were a lifestyle business in the sense, we had everything. We had a great lifestyle, but we were always playing defense. We were playing not to lose. Whereas I wanted to, I was aspiring to, run a bigger business, a more growth oriented business that would have bigger market share and obviously would have more risks tied to it.

00:02:25 Speaker 1

OK. 

00:02:26 Speaker 2

So, I was in disagreements with the family, but I was young and obviously I was vetoed on most occasions and I possibly didn't have the benefit of experience. But along the way, I was presented with an opportunity in the late ‘90s to move here. And I followed my heart rather than my mind. 

00:02:51 Speaker 1 

And that opportunity was to establish a similar kind of manufacturing facility here or was it to come in for something else? 

00:02:59 Speaker 2 

Erm, the current manufacturing facility that we have right is actually my second go at it in the UAE. The first one failed miserably in the early 2000s and I'll tell you a little bit about that. 

00:03:11 Speaker 1

Please do…

00:03:11 Speaker 2 

But in the late 90s, when I came here, I had a friend who was in the general trading business and Dubai was not what it is today…

00:03:21 Speaker 1

Right.

00:03:22 Speaker 2

…we did not have most of the buildings on Sheikh Zayed Rd. It was more of a merchant economy…

00:03:27 Speaker 1

Right.

00:03:28 Speaker

…and my friend was moving on to America. He was migrating and he had a business that was involved in general trading. 

00:03:36 Speaker 2 

I initially partnered with him to keep expenses low and cover some cost and got involved in the business of again, plastic pipes and fittings our core competence. 

00:03:48 Speaker 2 

We uh, we did things differently back then. I brought my ideas from India. 

00:03:57 Speaker 2 

Traders here would, would carry large inventory and they were not very familiar with the concept of just in time…

00:04:04 Speaker 1

Right.

00:04:05

And I used to go to the shops and say that why are you carrying so much inventory? We send our pickups twice a week…

00:04:12 Speaker 1

Right.

00:04:12 Speaker 2

Maybe you need to reduce your invoice, invoice values and make smaller purchases and that's how the business started. 

00:04:19 Speaker 2 

And having had the experience and knowledge of the plastic piping business back from India, I realized very quickly that I had more to offer than most decision makers here. The engineers were always conflicted with the contractors, the specifications were written for Imperial standards and what would show up on sites would be metric sizes, and there was always a disconnect. 

00:04:46 Speaker 2 

I could, I could decipher that fairly well and provide solutions and that's where the business started from. So, we were not manufacturers. When we, when I came here…

00:04:59 Speaker 1

OK

00:05:00

…I was a distributor, a trader in this space and we did fairly well.

00:05:06 Speaker 1

OK.

00:05:07

Somewhere later in the early 2000s I had put aside some capital and I got into the manufacturing of plastic pipes and fittings…

00:05:17 Speaker 1

OK

00:05:18 Speaker 2

and this time I kind of duplicated what we would do in India.

00:05:23 Speaker 1

Right.

00:05:24 Speaker 2

I did it very small. I bootstrapped. It's almost like a cottage industry. I made only a few SKU's that were the fast runners. 

00:05:31 Speaker 2 

And that failed miserably…

00:05:33 Speaker 1

OK.

00:05:34 Speaker 2

And I realized that it’s failing…

00:05:36 Speaker 1 

Nobody. Nobody bought the product or failed as in you were not able to manufacture it to the standards you were looking for?

00:05:42 Speaker 2 

It's just that operational costs were so high and because I was not scaling as much as we are doing today…

00:05:50 Speaker 1

Right…

00:05:51 Speaker 2 

The production cost was possibly higher to produce than to import…

00:05:55 Speaker 1

Right…

00:05:56 Speaker 2

And we were importing from Singapore on private label basis…

00:05:59 Speaker 1

Right…

00:06:00 Speaker 2

So, I realized very quickly that the Indian style of manufacturing cottage industry back in India where labour cost is much lower than what it is here…

00:06:08 Speaker 1

Right…

00:06:08 Speaker 2

…is not suited for this environment…

00:06:10 Speaker 1

Right…

00:06:11 Speaker 2

So, if you're manufacturing here, you need to go big, you need to go grand. You need to scale. You need to be magnanimous, you need to be bigger than the next guy, and that's possibly why we are here today and what we're doing with Vivasvaan. 

00:06:26 Speaker 1 

Right, right. Very interesting. So that first venture didn't work out the way that you had wanted it to. You had a lot of great lessons and learnings out of that obviously and then you went on to the second venture. And can you tell us more about the 2nd venture, and the 2nd ventures what really took off and what brought you to where you are today?

00:06:44 Speaker 2 

Sure. So, uh, we've always been distributors and I always say that our business has been structured in a certain way like a coin, you have two sides. We have the unorganized side which is customer facing and what the customer loves in this part of the world. And we have the organized side which is dealing with this suppliers and vendors.

00:07:07 Speaker 1

Right.

00:07:07 Speaker 2 

So, we have best of both worlds and we adapt very quickly to the market needs. We carry very good inventory and we've scaled. We are today in four countries in the GCC, we have 8 warehouses and we're just under 150 people and we've learned a lot about what the customer needs, what the contractor needs.

00:07:32 Speaker 2 

And that's helping us today in our decisions on manufacturing the business that failed was actually a gift. It taught us that manufacturing is the future, but it needs to be done differently. It's not as though we cannot manufacture and recent COVID lessons have taught us that…

00:07:50 Speaker 1

Absolutely…

00:07:51 Speaker 2

…globalization is no longer a word that people like to hear. It's more about localization and in the plastic business, we are producing a lot of raw material here. There's so many initiatives by the government. ICV, retaining GDP value here, it's possibly better to get into manufacturing. 

00:08:11 Speaker 1 

Absolutely. And that was the interesting thing when I had the opportunity to visit your factory, I was very, very encouraged and happy to see…

00:08:21 Speaker 2 

Thank you.

00:08:22 Speaker 1

…that such fantastic products were being locally made as an import substitute, but also on standards that could be considered, you know, higher grade than what would be imported into the country. And you had actually shown me a couple of examples of some of the joints and elbows, some of the pipes and I've seen some of the, for example, double fittings of the rubber and a few things that that that that were built in that you know as an average layman you wouldn't notice these things obviously, but being there in the factory and you pointing them out to me as like, Wow!, that's very high quality things that are being….

00:08:55 Speaker 2

Thank you.

00:08:56 Speaker 1

…manufactured here locally. So how do you see that going forward? I mean how do you see the production of your of your products? Going forward, do you see that you're going to still be maintaining the same lines and expanding or potentially moving into new products and bringing the manufacturing expertise to other products in the same field?

00:09:17 Speaker 2 

OK. So, we produce to very high quality standards. We are governed by not only the quality specification standards of BS Kitemark, which is the epitome of quality standards. We're also governed by standards of our principals. So, for our principals to agree to allow us to use their brand name…

00:09:39 Speaker 2 

We're representing Marshall Tufflex. That's an 80-year old family business. And Marley, which is part of the Aliaxis group and their revenue is in the excess of €4 billion.

00:09:50 Speaker 2 

For them to allow us to put their brand name on our product stands testament to our quality and our product. Erm, in terms of little things that you made an observation from which I shared with you, that comes from local expertise and learning, being a distributor.

00:10:10 Speaker 2 

We've spoken to so many contractors, so many plumbers, so many engineers, and little things that they've told us along the way have been incorporated into the product today. So, our product is best in class, can stand the test of time and is as per any quality specification written by any developer, any contractor or consultant today… going forward. 

00:10:38 Speaker 2 

Going forward, we…I can't, I can't take names of another big manufacturer that we've been associated with for over a decade due to confidentiality. But we're talking to them about our manufacturing licence here. So, this is a European company that has a very Middle East centric business…

00:10:58 Speaker 1

Right.

00:10:59

…and they only export to the Middle East. So, they see no sense in having high cost of production. They want to partner with us and we are very keen on that and we're going to bring a lot more product on the manufacturing side. Er, distribution is good, but the value addition is better in manufacturing and we feel we've developed scale. We have developed industry knowledge we want to grow on that side. So, a lot of lot of exciting times ahead. You will be seeing a lot more of us, or at least seeing our company name in applications going forward.

00:11:37 Speaker 1 

I'm sure, I'm sure - and it's very exciting. And like you said, very exciting times ahead. An epiphany I had actually when I was visiting your factory - and I visit tons of factories - but your factory in particular, when we were looking at these little details was that the boom that I'm seeing today in the UAE in the manufacturing space is going to lead to a significant improvement in quality of life on a very small scale. But these little small things are what add up to quality of life. So, when you talk about, you know what the plumbers and what your local industries need, especially when we talk about the specifications of the UAE…

00:12:11 Speaker 1 

…which is, generally speaking, a harsh environment when we talk about the weather and, you know, the salt content and the soil and all these kinds of things…

00:12:20 Speaker 1 

And so these little things, little improvements and high quality, high grade quality manufacturing that's happening locally today. I personally believe in the next 5 to 10 years, there's going to be a significant improvement to quality of life. When I say quality of life, I'm talking about the little things that annoy us all on a daily basis, which could be a leak that you see coming from the roof. 

00:12:40 Speaker 1 

Because that pipe was a pipe that was imported that was made for specifications that were maybe not for the UAE, right as simple as simple as that, right? 

00:12:47 Speaker 2 

I agree, I agree. 

00:12:49 Speaker 1 

But you could imagine, you know, with local manufacturing at such high quality, how much that could, Insha’Allah, improve the quality of life.

00:12:56 Speaker 2 

I completely agree with you. It's not only quality of life for the standalone individual, but the community, the larger community, the economic impact. Erm, we are seeing small steps of progress, but these will eventually grow into exponential leaps as more and more manufacturers come about. 

00:13:17 Speaker 2 

COVID in particular has taught us life lessons and even as we speak today, post COVID, we had seen a huge uptake on freight rates and if we are going to be dependent on imports, freight is a big cost component…

00:13:33 Speaker 1

Absolutely.

00:13:34 Speaker 2

and as we speak today with everything that's going on in the Red Sea…

00:13:37 Speaker 1

Right…

00:13:38 Speaker 2

…there's already indications of freight rates going up…

00:13:40 Speaker 1

Absolutely.

00:13:41 Speaker 2

So, when freight rates go up it makes the product unviable and why would you import plastic pipes and fittings? It's almost like importing air…

00:13:50 Speaker 1

Right, and the raw materials are all here.

00:13:53 Speaker 2

They're all coming from here.

00:13:54 Speaker 1

Yes.

00:13:55 Speaker 2

The only thing has been is that previously the quality was not too standard, not too par. And the misconception people have had that local production may not be good enough. 

00:14:07 Speaker 1

Right.

00:14:07 Speaker 2 

And that's why they've they latched on to brands and we understand that and hence we've tied up with international brands and the international brands have also understood it that with their cost base back in Europe, they can't really compete here and there's plenty of expertise here, local knowledge and they should partner up and that's what we're doing. 

00:14:29 Speaker 1 

Right. And you touched a bit on that. So, it's interesting because you know these international brands as you put them, have their own challenges and sets of challenges that they face. And it's a reason why they come to partner with local manufacturers here in the UAE…

00:14:44 Speaker 1 

What have you seen from your viewpoint of the benefits of setting up and establishing the UAE and manufacturing in the UAE? We, of course, have a set of challenges which are continuously being improved upon, but what would you see as the opportunities and, let's say, the benefits of really having your manufacturing business in the UAE?

00:15:03 Speaker 2 

So, it's a no brainer that you would save on freight. You would save on custom duty, you'd save on inventory management cost because you don't have to carry inventory for long periods of time. But in addition to that, this is where my boys were born. This is what they call home. They're originally Indian, but they grew up here…

00:15:23 Speaker 1

Right.

00:15:24 Speaker 2

And this is where we need to, we need to plant roots. And this is where we need to contribute and pay back to the community. 

00:15:30 Speaker 1 

Right.

00:15:30 Speaker 2

And what better place than here? I mean you have a great life in the UAE…

00:15:35 Speaker 1

Absolutely.

00:15:35 Speaker 2

…why would you not invest here? I just feel manufacturing here is…it's best of both worlds. You're geographically-suited to meet requirements, demands of the West AND the East. You're right in the middle…Etihad Rail. I've seen the trains moving. I've seen containers that say ‘Rail Connect’.

00:15:58 Speaker 2 

If we can put material on product and on the trains and have them move to Saudi Arabia and all the way to Oman, Salalah…

00:16:07 Speaker 2 

It's…it's just a very bright future that I see.

00:16:10 Speaker 1 

Absolutely. Absolutely. What do you see for the future of your business? How do you see it expanding in the next five years? What are your aspirations in, in essence, for what you'd like to see and do with it?

00:16:24 Speaker 2 

So, we…we want to produce to export - we have some plans of producing products which we will export back to Europe. Maybe under certain buyback arrangements with principals we're already discussing that and we also see certain export opportunities to India…

00:16:46 Speaker 1

Right

00:16:46 Speaker 2

…we are a small geography here with 10 million people. Yes, you've got the larger GCC, but more and more GCC countries are supporting and making it mandatory for local manufacturing within their countries, that's a little difficult because you may be able to put up manufacturing in Saudi, in Qatar, but will you be able to scale it? Maybe not? Maybe we'll have to for reasons that may be required to meet certain obligations, but in reality we feel that the UAE is going to be the hub for our manufacturing base going forward to supply regionally and to Europe and maybe we have some aspirations of putting up some manufacturing in India, but that's in the, I would say distant future…

00:17:39 Speaker 1

Distant future…

00:17:39 Speaker 2

not in the immediate future. We have our hands full with our home country for now.

00:17:44 Speaker 1 

Absolutely. You had mentioned India a couple of times exporting and even potentially setting up a branch of the business back in India, which is very interesting for me to hear. Have you seen the CEPA agreements? Have these been things, have the CEPA agreements you know the CEPA agreement that the US has signed with India, has this been of benefit to you and have you…

00:18:02 Speaker 2 

It has not, but that's what I was thinking when I was thinking of India to test market India, initially…

00:18:08 Speaker 1

OK.

00:18:09 Speaker 2

India is a huge country. There is no way you can feed that market sitting here. But you can test that market sitting here…

00:18:16 Speaker 1

OK.

00:18:17 Speaker 2

…or maybe…

00:18:18 Speaker 1 

What? What do you mean by test that market, as in used products and see how they are taken on in India?

00:18:25 Speaker 2 

No, it's it's. I won't say it's…I'm quite certain about the products. I'm quite certain about our ability to manage in India. It's just that the competitive environment, India is such a big country. We'll have to find our gap. We can't be going out to say you know we're going to cover all of India that would be suicidal.

00:18:45 Speaker 1

Right, right…

00:18:45 Speaker 2 

You would have to find your niche, be it the North India, the South India, the West or the East, you have to see where is, erm, an open gap. It's almost like football and then shoot there, so that's what I meant by test marketing.

00:18:59 Speaker 1

Right.

00:19:00 Speaker 2

Product standards are similar. 

00:19:01 Speaker 2 

Right.

00:19:01 Speaker 2 

Quality is similar and with the CEPA agreements it does make sense to test market…

00:19:06 Speaker 1

Right. 

00:19:07 Speaker 2

…but not in the long run. In the long run we would be manufacturing in India. 

00:19:10 Speaker 1 

And as a manufacturer in the UAE, when you hear about, you know, a CEPA agreement being signed with a certain country, does it, you know, ring bells, did you, I mean, does it make you kind of wake up and say, well, maybe I should look at exporting to this market now that the UAE as a UAE manufacturer, local manufacturer in the UAE. Now the UAE has this agreement with country X&Y, does it make you think maybe that's a country to…

00:19:35 Speaker 2

Incomplete honesty and full disclosure, every time I've read about a CEPA agreement, I get excited because we possibly import from there and I say OK, savings opportunities. I haven't looked at it…

00:19:47 Speaker 1

…from the export…

00:19:48 Speaker 2

…from the export perspective because we're a small company…

00:19:50 Speaker 1

Right.

00:19:51

We've got enough on our plate and possibly to get distracted with different geographies, you've got to understand - every country follows a different standard. So, it may look like it's just a pipe or a pipe fitting; or a faucet; or a switch; or a power tool…

00:20:12 Speaker 2 

…but the regulations behind it are different. The power source is different, the sizes are different. A switch which would possibly have a 66mm center distance where the two screws are, your back-boxes would be different in America as opposed to in Europe. 

00:20:30 

Right. 

00:20:32 Speaker 2 

So, unless you have fitted out your factory to quickly retrofit, it's quite expensive, so these are good initiatives. If someone's already doing business there or for citizens of that country based here because they know what are the products. I recently read about a CEPA agreement with a with a country that I was surprised that we had it with. But then on thinking about it, I said why not? You know, the world is becoming more closer and that country probably has something to offer and why not have a CEPA agreement with the UAE.

00:21:08 Speaker 2 

It just makes so much sense.

00:21:10 Speaker 1 

We had a chance also to speak off camera. Some interesting conversation that we had with regards to some of the work that yourself and your company does in order to support local initiatives, entrepreneurship, some of the groups that you're a part of, could you elaborate on that a bit.

00:21:31 Speaker 2 

Sure…er, we believe as a business our priority and objective is definitely to work for profit. But we also believe in creation of value and value creation is not always in dollars and cents or in dirhams. It's, it cannot always be about money. I read something somewhere. It went to the, went to something as...

00:21:54 Speaker 2 

“Everything that can be counted does not count”, so we want to make impact to, to the community, to the larger community. 

00:22:03 Speaker 2 

And we have this utopian desire in our business to make our employees and even local, regional businesses that I'm supporting via my initiatives, be it with incubators like EO Accelerator, YPO, whatever they may be, to support the community as a whole to achieve larger good. And we want to impact ten thousand people either through direct employment or indirect employment and support them so that they can be independent. They can gather vocational skills, may not necessarily need to be employed, they can be a one man, plumber, a one man, shopkeeper in any part of the world. And that's how the overall humanity would improve.

00:22:58 Speaker 2 

We’re eight billion people on this planet, seven billion possibly need upliftment and if…70,000 businesses signed up to uplift 10,000 people…

00:23:15 Speaker 2 

Problem solved. Why wait for the government?

00:23:17 Speaker 1

Absolutely.

00:23:17 Speaker 2

It can be. The private initiative led with support of the government.

00:23:21

Absolutely. 

00:23:23 Speaker 2 

It’s a utopian desire, but let's see if it takes shape. I hope it does one day.

00:23:27 Speaker 1 

I'm sure it's will and Emirates Development Bank will actually be definitely looking to work closer with you on several of these initiatives, Insha’Allah, going into the near future. 

00:23:35 Speaker 1 

Thank you, Ravi. I wanted to thank you so much for your time today, we really appreciate you coming in and telling us about your story and about the company and your future plans. We wish you all the future success and luck and thank you again for your time.

00:23:45 Speaker 1

Most welcome and thank you for your time and I understand you must be quite busy, but to take time out and moderate this session…it's really wonderful.

00:23:55 Speaker 1 

Of course. Thank you so much. Thank you, Ravi. 


00:23:58 OUTRO V/O

“Economic Impact. Conversations from Emirates Development Bank”.