By Ramia Farrage
The chairman of Pantheon Group, Kalpesh Kinariwala, discusses his unique evolution to chemical distribution, algorithmic investing and real estate development
With meagre cash and a shoebox office, embracing the uncertainty that comes with new ventures, Kalpesh Kinariwala, chairman of Pantheon Group, grew his multi-million dollar business from humble beginnings.
“I was a rebel in my house and I started on my own, and that’s how Pantheon was formed – with borrowed capital of $2,000 and a borrowed office of 100 square feet,” he tells Arabian Business.
Seventeen years later, Pantheon Group, headquartered in Dubai, has diversified internationally, primarily in the chemicals, capital markets, and real estate development sectors. With offices in India, the Far East and Latin America, its annual turnover is now more than $327m.
Within 13 months of doing business, we roughly had 40 percent of India's market share and we became a very dominant player
During his professional journey, Kinariwala has established the world’s biggest distributor of iodine, has created the largest algorithmic hedge fund in India, and is well on his way to launching one million square feet of property in Dubai by 2020.
But life hasn’t always dealt him a fortuitous hand. It was when he lost his father at age 13 that the young Kinariwala quickly adopted the self-reliance that helped him grow into the business mogul he is today. Starting out working for his extended family’s business in India, Kinariwala disagreed with the way in which it was operated. So he chose to forfeit the security of working within his family’s business and opted to launch an independent enterprise.
“I think it was a different mindset, culturally, in the way the business was being conducted and certain principles which I follow in the way it should be done,” he explains of his decision. “And because of those differences I decided to start on my own. It was very challenging because I had no capital but I decided to take that shot.”
That “shot”, as he calls it, certainly paid dividends. When Kinariwala founded Pantheon in 2001, the aim was to distribute chemicals to industries in and around Mumbai. He reached out to the world’s largest producer of iodine in terms of reserves and the second largest in terms of production, located in Chile. The South American company had yet to export to India and Pantheon began selling in the market.
It proved to be a very smart move. In its first year of business alone Pantheon captured about 67 percent of India’s market share and subsequently expanded into the rest of Asia. “Within 13 months of doing business with them we roughly had 40 percent of India’s market share and we became a very dominant player,” says Kinariwala.
Subsequently, in 2008, Pantheon was granted distribution for North America, transforming the company into the world’s largest distributor of iodine. Shortly after, the business stagnated with growth limited to three to four percent. So Kinariwala began to search for new opportunities in the financial sector and he found them in an unlikely place: the 2008 financial crisis.
“I was really struck by the strength of hedge fund control over the financial markets and I said this is the business to get into,” says Kinariwala. “The timing couldn’t be better because you like to enter the business in the recession phase of the cycle, not at the peak of the cycle.”
There is some oversupply but I truly believe in this city... demand for real estate will increase before Expo 2020
He hired a group of statisticians and developed a code for approaching the financial markets through an algorithmic fund. Then, Kinariwala launched what he says was the largest such hedge fund on the subcontinent, the CapVeda Capital fund.
“The fund did extremely well and created a lot of buzz in the institutional community,” says Kinariwala.
Touting the scientific approach to capital markets, Kinariwala theorises that the absence of human emotion produces a winning formula. While buying with a set target and stop-loss may lack passion and excitement, Kinariwala says that, in practical terms, it’s what works.
“We always believe that what we buy will do well and even if there’s a deep correction in those markets we still hold on to it because we don’t have a human tendency to book losses,” says Kinariwala. “That’s the human element, the emotional element to the market. There is no human emotion saying, ‘let’s wait, let’s see how the market turns’.”
Today, Dubai’s real estate sector is a main focus for Pantheon as it aspires to launch one million square foot of construction by 2020. Kinariwala says he doesn’t anticipate any obstacles to meeting this goal, as the first two projects already comprise 600,000sqft. These include Pantheon Boulevard at District 13 of Jumeirah Village Circle, where through a unique selling-scheme the developer used its own capital to complete the AED150m project and subsequently launched unit sales, rather than selling off-plan.
“It’s a very different and unique strategy, a very unconventional strategy, that is unheard of among most developers in this part of the world,” says Kinariwala of the bold move. “I waited for the building to energise so in a true sense we gave the option to our buyers to select the apartment they want to live in, see it for themselves, and at the same time move in on the same day they sign.”
Next came the launch of the AED180m Pantheon Elysee, to be delivered in October 2020 in time for Expo 2020 and in close proximity to the site. This was no accident as Kinariwala predicts that, “demand for real estate will increase significantly before the event.”
The affordable luxury market gives a much higher rental yield of eight percent and that’s the strong driver of the segment in Dubai
Despite anticipated demand growth ahead of Expo, oversupply remains a real concern for many developers in the UAE, especially in the luxury segment.
Kinariwala concedes that luxury real estate developers are facing some pressure and this is prompting them to diversify into the affordable luxury space.
“There is an oversupply but I truly believe in the vision of this city,” says Kinariwala. “It has some of the best infrastructure in the world. I’ve been to Europe, I’ve been to North America, I haven’t seen anything better. So I strongly believe demand for the affordable segment is not going to diminish in the near future.”
Kinariwala believes there is room for all developers who deliver their product on time and offer fair quality and pricing. He identifies a niche gap in Dubai’s affordable luxury segment, based solely on rental yields. “Luxury housing gives a rental yield of four to five percent,” says Kinariwala.
“The affordable luxury market gives a higher rental yield of eight percent and that’s the strong driver of the affordable luxury segment in Dubai.”
I strongly believe demand for the affordable segment is not going to diminish in the near future
Having transformed three start-ups into the multi-million dollar Pantheon Group, Kinariwala advises entrepreneurs to recognise that their first venture is a learning curve, which tests their ability to adapt to the various components of the business, manage internal and external business threats, and build the right team with limited resources.
“Once I scaled up the iodine business it was much easier for me to diversify into other businesses because I already had tasted success, so was more confident, able and had the resources to start a new venture,” says Kinariwala. Once he sails past this stage then his role typically evolves from business management to people management.
During the 17 years he spent growing his business, managing people became one of Kinariwala’s foremost responsibilities. While he gives credit to his core team for believing in him and his vision, and appreciates their contributions to Pantheon’s success, he simultaneously scrutinises operations from every angle as part of his personal internal philosophy.
“Inspect what you expect,” says Kinariwala. “It’s a basic human tendency that if they know they’re not being inspected they deviate. That helps me keep my company aligned to my goals and vision. So that’s the secret.”
Over the past two years, Dubai’s real estate sector has witnessed a steep rise in off-plan residential sales. Dubai Land Department data reveals the value of off-plan sales rose by 17 percent between 1H 2016 and 1H 2018, from AED12bn to AED14bn.
Interestingly, existing property sales are witnessing the opposite trend, with the value of sales dropping from AED98bn in H1 2016 to AED85bn in 1H 2018.
Jones Lang La Salle says demand for off-plan properties explains future oversupply in Dubai’s residential market. Around 7,000 residential units were put on the market in Q2 2018, with the majority of projects in the apartment category. An additional 34,000 units are in the construction phase and are scheduled for completion by end-2018.
Meanwhile, sale prices and rents softened by about one percent in Q2 in both the apartment and villa sectors. JLL says sale prices haven’t declined by as much as rentals during Q2 and throughout 2017. In fact, attractive deals from developers are prompting more long-term renters to commit to buying. JLL says it expects further declines in both rentals and sale prices throughout the year ahead.
With more than 15 years of experience in various business verticals, Kinariwala launched sourcing operations in Chile, South America and soon expanded globally to various territories across the world.
Within seven years, Pantheon Group became the world’s largest iodine distribution company. As an ardent enthusiast of finance and algorithms, Kinariwala in 2010 launched his own hedge fund company, CapVeda Capital (India) Advisory, ensuring constant value-creation and continued growth for both high-net-worth individuals and institutional investors.
He entered the Dubai’s real estate market in 2016 with Pantheon Development, a subsidiary of Pantheon Group.
Pantheon Development set out with a mission to complete one million square feet of construction by 2020. The company’s strategy is to fill a niche gap in the affordable luxury segment in Dubai.