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What is common among diverse Indian companies such as Cleartrip, Future Group, Indiabulls, Strava Technologies, FreshToHome, Anarock and cure.fit? They all chose the Middle East market as their first port of call for their international foray

Why Indian firms favour the UAE for initial international expansion

Shan Kadavil (right) & Mathew Joseph, co-founders of FreshtoHome 

Indian companies – both start-ups and established ones – increasingly prefer the UAE and other countries in the Gulf region for their initial phase of international expansion.

While the world’s first fresh marine and meat online platform, Bengaluru-based FreshToHome, and fitness and wellness firm cure.fit  have launched their first international operations in Dubai in October and June this year respectively, India’s first space and cyber technology start-up Strava Technologies is currently in the final stages of setting up its first international operation in Bahrain.

Besides, a host of Indian tech start-ups, including EXPRESbase Systems and Articbot, are among the companies in the pipeline, preparing to foray into the UAE and other Gulf markets.

Several leading Indian companies such as FMCG major Dabur, online travel and stay operator Cleartrip and real estate sector players such as Indiabulls Real Estate and Anarock have already spread their wings in the GCC and the wider Middle East, after establishing their first overseas operations there.

“The presence of a huge Indian diaspora is the biggest attraction and the largest deciding factor for Indian companies  for zeroing in on the UAE – Dubai in particular – for their entry point for an ambitious expansion into the international market,” Shan Kadavil, CEO and co-founder of FreshToHome, tells Arabian Business.

“As for e-commerce companies such as ours, the UAE – and other Gulf countries – is like a virgin market and therefore is the perfect marketplace to replicate our successful Indian business model.”

Mumbai-based global online travel company Cleartrip has offices in the UAE, Saudia Arabia and Egypt

The expat factor

With about 3.3 million Indian migrants in the UAE alone (according to the UN’s migration report in 2017), constituting a sizeable chunk – estimated to be 27-plus percent of its population, the Gulf region is often described as an extended market for Indian companies to test their brands to the desi – the people, cultures and products of the Indian subcontinent and their diaspora –  consumer base.

It is this business logic which has driven the Future Group, which owns pan-India hypermarket and supermarket stores such as Super Bazar, Food Bazar and Brand Factory, to join hands with the Middle East’s leading chain of retail supermarkets, T Choithrams & Sons, to sell its products across the GCC and the Middle East market.

Under the tie-up, FCL’s popular brands such as Tasty Treat, Golden Harvest, Karmiq, Kara, Sunkist, ThinkSkin, Mother Earth, Kosh and Nilgiris will be marketed, distributed and retailed across Choithrams’ 60-supermarket network, as well as to other retail stores.

Can the Middle East market be a good testing ground for Indian companies planning international expansion? Management consultants point out several advantages for Indian start-ups and companies to enter the Gulf market for their initial foray into the international market.

Harminder Sahni, founder and managing director of leading management consultancy firm Wazir Advisors, says: “Middle East region is an affluent market and retail is quite well developed, so the potential market is as big as many other emerging markets but highly concentrated. Also, the region is used to paying European and American costs, so Indian start-ups make even better margin at lower prices”.

According to a recent KPMG India-Google study, international business opportunities for Indian brands in select verticals, which stood at $16bn in 2017, are expected to grow to $39bn by 2022. Travel, media and entertainment, SaaS (Software as a Service), jewellery and real estate are the key verticals with high potential for international opportunities.

Much before the likes of KMPG and Google projected the international opportunities for Indian brands, leading Indian gold and diamond jewellery retail chains such as Malabar Gold and Diamond, Kalyan Jewellers, Bhima Gold, Tribhovandas Bhimji Zaveri and JoyAlukkas have spread their wings to the UAE and beyond in the Middle East, offering their exquisite and exclusive collections of South and North Indian gold and diamond jewellery collections to both the Indian diaspora and international tourists. Malabar Gold alone has about 112 retail stores in the Gulf region.

“Indian companies, especially in FMCG, jewellery, appliances and ecommerce sectors, which enter the Gulf market, typically start their marketing [by] targeting the ethnic communities there. This provides them a base on which they can build on to expand to a wider, international consumer base,” Mathew Joseph, co-founder and COO of FreshToHome, tells Arabian Business.

Financial services group Indiabulls is aiming to capitalise on the huge Indian expat community in the GCC

However, more than the presence of the diaspora, which is driving more and more Indian tech start-ups to set up operations in UAE, is the lure of funding. Start-ups, whose lifeline depends on continuous funding from investors – mainly international private equity (PE) and venture capital (VC) firms for their upscaling, increasingly see the UAE and Saudi Arabia as high potential centres to raise funds from local as well as international investors.

“Though India could be a large market, having an international presence, especially in cities like Dubai, is considered a big positive when international PE and VC funds assess Indian start-ups for funding,” Joseph says. His online fresh fish and meat e-commerce company is currently in the process of raising the next round of funding, after foraying into the UAE market last month.

M R Rajaram, a leading financial sector consultant, concurs: “The UAE, especially cities like Dubai, offers the dual advantage of operating in an international market and the potential to tap the large Indian consumers there to get a head start to their operations. The combination is not only a big plus for the success of Indian companies but also a big factor for international investors to bet on these companies.”

No wonder, cure.fit, the Indian fitness and wellness company, which made its first international foray into Dubai in June this year, is already in the process of opening another 10 centres across the UAE.

“Dubai is our first international launch. We have plans for opening 10 more Cult centres in 2019 and many more planned across the emirates by 2020,” according to Ankit Nagori, co-founder of cure.fit.

Another important factor for Indian companies, especially e-commerce and tech start-ups, is the increasing digitalisation of operations across companies and governments in the Gulf region, leading to a rising digital influence on consumers. Incidents such as the recent drone attack on two vital production facilities of Saudi Aramco and the increasing trend of cyber attacks also opened up big opportunities for Indian tech companies to seriously look at the Gulf region for their initial international foray.

“There is tremendous potential for geospatial, technology-based applications in the UAE, KSA and other Middle East countries for building location intelligence, 3D mapping, analysis and visualisation in sectors and industries such as smart cities, power grid, sea ports,  oil and gas industries,  law enforcement and transportation,” says Jancy Jose, founder and managing director of Strava Technologies, the Trivandrum-based cyber security start-up, which will soon be opening a centre in Bahrain.

Limitless potential

For real estate companies such as Indiabulls and Anarock, it is the presence of huge NRI (non-resident Indian) population in the Gulf countries which made the region a natural choice for their first international expansion. As per Anarock’s Consumer Sentiment Outlook survey, Indian real estate continues to be the favourite investment option for most NRIs.

“There is limitless, untapped potential for organised and professional, technology-driven residential real estate firms in the Middle East, as there is massive cross-border NRI interest from the Gulf countries for Indian real estate,” says Anuj Puri, chairman, Anarock Property Consultants.

After opening offices in Dubai and Abu Dhabi, Anarock is currently gearing up for further expansion into Oman, Bahrain, Saudi Arabia and Kuwait.

The very fact that NRIs – especially the Gulf-based expat Indians – make up for 25-30 percent of their overall businesses make a compelling reason for leading Indian real estate companies with ambitions to go global to set up offices in Dubai, the GCC and beyond.

It may be the nostalgic, home-loving NRIs as the reason for companies in the real estate and retail chains to set up shops in the UAE, but for a large number of new generation, tech-based Indian companies, it’s the opportunity to learn the initial lessons in international operations in a ‘closer-to-home’, ‘comfort zone’ that prompts them to choose the UAE as their gateway for their international expansion.

“Dubai, with its state-of-the-art infrastructure facilities and international-level business practices, offers a great learning experience to Indian companies for their onward international expansion plans,” sums up Rajaram for the increasing rush of Indian companies entering the Gulf market as their first step overseas.

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