The right chemistry

Yogesh Mehta created Petrochem from scratch. Today, it is the twelfth biggest chemical distributor in the word. He tells Anil Bhoyrul why
By Anil Bhoyrul
Wed 15 May 2013 04:50 PM

Yogesh Mehta does a very good job of hiding just how successful he is. Calm, laid back, attentive, the boss Petrochem has a fair amount on his plate.

“You know we are now the fastest-growing chemical company in the Middle East? You know we are the top chemical distributor in the Middle East and the twelfth biggest in the world?” he asks.

Most people in the industry already know that, and they know Mehta pretty well: the company he started from scratch raked in $1.1bn in revenues last year, with his profit margin in excess of 3 percent - not bad for an industry that is still feeling the winds of recession, and where doing anything over 2.5 percent is a sizeable achievement.

But then this is Mehta, this is Petrochem. It has offices in Dubai, Jebel Ali, Mumbai, Antwerp and London, plus an office and distribution facility in Singapore and China. Today the company exports of over 250,000 million tonnes (MT) of products to the Middle East, Africa, Europe, the Indian subcontinent, the Far East and the Asia Pacific. It has an inventory of over 180 types of chemicals from solvents to specialties, and an ultra-modern fleet of road tankers and large trailer trucks. Best of all is a state-of-the-art distribution terminal in Jebel Ali which cost $33m to build and that no rival has been able to match.

“Our USP is our terminal in Jebel Ali. This actually creates a barrier to entry for others. It means we have the tanks, we have the storage. That’s why we are distributors for companies like Shell, for all kinds of products used on a daily basis. It means we can be a one-stop producer, we can stock large volumes in our terminal,” he says.

The Jebel Ali terminal, now the lynchpin of the company, was built in four stages between 1996 and 2004, but has been such a great success, Mehta is now expanding it: ten new storage tanks are being added by 2014.

With its current profits, and based on an industry-wide price/earnings ratio, you quickly get to market value for the company of $640m. Time to head to the stock market surely and take some cash? Mehta had previously had his eye on a 2015 listing, but says that despite the strong performance of his company, the economic environment still isn’t right.

He explains: “I wanted to do it in 2015 but we moved it, I think the environment is still hostile in terms of doing an IPO. The chemical industry is still in a slump because of the eurozone crisis and because of oversupply in the whole region. Right now we just wouldn’t get the value we want, so I think the earliest we would go to the stock market is 2018.”

But Mehta adds: “That doesn’t mean the company isn’t growing. By next year we will have set up an office in Houston. With the advent of shale gas, I want us to be in the area to receive downstream chemicals.” Either way, you can be sure that Mehta will be right in the centre of the action. He was ranked seventeenth in this year’s Arabian Business Indian Rich List with a fortune of $720m, and also took a top twenty slot in the coveted Indian Power List. Not bad for a guy who came to Dubai at the age of 29 with virtually nothing. Having first run a smaller chemical trading business in Bombay that ended in failure, he picked Dubai as his next move, 21 years ago. “I just said to my wife ‘Let’s go some place where there is more opportunity’.”

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Mehta spent his first two months in the emirate visiting the library each day to learn more about the region’s chemical industry, before starting a chemical division within a food company. But four years later, in 1994, he decided it was time to run his own show. “My wife said ‘We have a car and four walls, let’s not change’. But I said ‘Let me start this, let me try it.  I have a dream to build a terminal’,” he says.

With his business partner and friend David Lubbock, he founded the company and soon embarked on the project, building the Jebel Ali terminal.

The results were staggering, with Petrochem growing by 30 percent to 40 percent for the first few years after launch. Even by 2007, annual growth was still running at eighteen percent. Lubbock, who lives in London and manages the company’s European operations, has also played a huge part in Petrochem’s growth, and is someone Mehta describes as “more than a brother to me”. But it hasn’t always been a walk in the park. September 2008 saw the collapse of Lehman Brothers and the global recession that followed. Mehta admits he was hit hard, very hard.

“We had a huge debacle. The whole world collapsed, we had our share of agony and losses. We got hit badly. Everything going north went south. We had a lot of products out there and lost value in them — we lost $17m in one year. I thought, will we come out of this? Will we lose everything?” he says, adding: “We had these bold ideas to sack 20 percent of the staff and reduce salaries for fifteen percent of staff. But these were silly ideas. I said ‘No, these are people who have been with us for 20 years, what’s one year?’ And we had deep pockets. I said ‘Let’s ride this storm’. I never for a second thought the ship was sinking but it was a huge hiccup. We made no money in 2008.”

But by 2009, facing the biggest crisis of his career, Mehta pulled off another masterstroke. “I thought, I know what to do — we started studying current values against future values. I felt the market would rise and made a calculated decision to make six-monthly contracts on the day’s numbers — and the market jumped 300 percent. In nine months, we made back all the money we lost,” he says.

It’s impressive stuff, and despite the slump in the industry and the recent recession, Mehta is widely seen as one of the smartest business leaders in town. His company has recently bought its own offices in Dubai’s Jumeirah Lakes Towers, where 126 of the 234 global staff are based. Mehta has always been well known in the Indian community, though last year he achieved much wider fame after appearing as a judge in the reality television show The Entrepreneur.

“I really enjoyed doing it. It brought me out of the corporate environment I am in, and allowed me to step back into the world of entrepreneurs. I had a lot of fun doing it. But the real thrill was realizing just how much young talent there is out there. I am still in touch with many of the contestants on the show, and try to advise and help them wherever I can,” he says.

It’s been an impressive decade for Mehta and Petrochem, and the future looks pretty decent. While the industry he is in may still be on the rocks, Dubai  itself is clearly on the comeback trail. Asked for his take on the emirate’s prospects, Mehta says he has a simple way to measure how things are going.

“I just look out of my window at the traffic on Dubai’s Sheikh Zayed Road. I can see right now it is bumper to bumper. It may sound simplistic, but this all translates to an improved GDP. I think a lot of this is because the retail sector is booming. Dubai has always been melting pot of cultures, and a great place to do business. It is a retail hub, it a financial hub, and it a hub for Petrochem.”

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