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Saturday, October 1, 2016

6 benefits of an afternoon nap

Taking a nap in the afternoon helps you stay alert and productive
Are you feeling tired and sleepy in the afternoon?  Better it would be for you to take a nap for 15 to 30 minutes.  Research supports the age old tradition of having Siesta in the afternoon.
The afternoon nap has many benefits.  Some of them are mentioned below.

1.     Increased productivity 
Afternoon nap helps you to be more productive. The energy boost enables you to do more.

2.     Better health
Afternoon naps boost your health as well. A person having enough of shuteyes, the risk of physical ailments reduces. The enhanced testosterone level helps your body remain healthy.

3.     Successful family life
A person who doesn't sleeps enough, have more quarrel with his partner.  Pretty things become issues threatening your matrimonial life.

4.     Mental alertness
Afternoon naps are a good way of maintaining your mental health as well.  The nap makes your mind more alert.

5.     Energy boost
Afternoon naps boost your energy level. In the afternoon when your energy level falls to its low, it helps you recoup the reduced energy.

6.     Better social relationships
Naps help you understand emotional signals from other people, which means you can enjoy better social relationships.

Sunday, July 24, 2016

Using customers' money for your startup

Beijing has the world’s costliest rental housing, according to a survey of 15 global cities, with average prices more than 1.2 times average salaries, says a report by the Global Cities Business Alliance, a UK-based not-for-profit organization. The rise in rent, in developing countries like China, India, and Pakistan, has provided developers an opportunity to make money out of thin air.

What they do is to purchase a piece of land and then announce construction of residential plaza or shopping mall over it. Advance booking is announced for residential and commercial units. The advance money collected is then used for completing the project. Unheard in many developed countries, realty development is one of the most lucrative areas for investors.

The use of customers’ money for growth isn’t limited to realty sector only; entrepreneurs can use this method to grow their startups in other areas as well. Take the example of TutorVista, which successfully leveraged this customers’ money model of financing. It started when Krishnan Ganesh hired three teachers and provided them with VoIP internet connection, PC displaying a digital whiteboard along with webcam. It quickly became a 100$ per month tuition service.

Dell is another example of customer funded business. Michael Dell, founder of Dell, started by selling customized PCs to small businesses. The core percept in his business was to collect cash before having to lay out money on chips and computers to be sold. 

Customer funding provides many benefits to the startups. Usually, startups receive higher valuations if they performed successfully for an extended period of time, without external funding. Additionally, strong cash inflows, from customers, allow entrepreneurs to focus on proving business model rather than wooing investors.

In this model of business funding, balance sheet shows more current liabilities than current assets. In accounting term it is called negative working capital. Ironically positive working capital is assumed to be good as it poses less insolvency risk to the business.

Not every startup can be run using customers’ funding. Capital intensive projects need to rely on traditional way of financing. 

Sunday, July 17, 2016

Foreign investment in Pakistan: boon or bane?

In the last couple of days, Pakistan has witnessed an increase in foreign investment. Many local companies were acquired by foreign multinationals. Dawlance, Pakistan’s white goods manufacturer was acquired by Turkish group Arçelik . Furthermore, in the same week a Dutch based dairy cooperative FrieslandCampina acquired stakes in Engro for around $460 million.

This shows that international investors are viewing Pakistan as a growing market. Its huge population provides huge consumer base. The rise in middle class along with young population makes it attractive location for investment.  Many European countries are having population as much as Pakistan has graduates.

But is there any benefit to the nation of these huge investments from multinationals. In a nutshell we would say yes. But on a deep analysis we would say it is hard to say anything precise unless we take into account other factors.

Let us assume that Turkish group would enhance the quality of the products, manufactured by Dawlance, and would make them attractive to export markets. Definitely, in this case it would be good for Pakistan. Multinational companies have huge research and development departments with billions of dollars in budget which helps them in developing new and better products. Small companies like local ones cannot expend that much on research and development. Furthermore, small companies have issues with protecting patent rights. Hence, from this particular angle it is good that foreign companies are making inroads into Pakistani market.

With better quality and increased foreign clients’ satisfaction, country would be able to earn foreign exchange. This would also help Pakistan to move from exporter of low-tech to exporter of high-tech products.

The ability of multinationals to get a better deal from Govt. in matters of tax rebates is another thing to ponder. In countries like Pakistan, Govt. rules are more favorable to foreign big investors rather than local small investors. The exemption of duties and taxes extended to Chinese companies working on CPEC is one such example.

Exemptions in taxes make it more likely for these companies to earn heavy profits and pay high salaries to its employee. This would mean more and high paying jobs for locals as well as better employee retention for the multinational companies.

But there are more cases in which these companies hire foreign people than local ones. This would mean snatching jobs which could be provided by local companies to local people. Moreover, huge portion of profit earned, through getting tax rebates, by these companies is repatriated back to their country of origin.

Thus foreign investment is good for host country if it leads to transfer of technology; increase in exports, provides employment to local ones, pays taxes and duties to host country Govt. and improves quality of manufactured goods.

Sunday, July 3, 2016

Turkish company Arçelik acquires Dawlance for $258 million

Turkish company Arçelik has said it is going to acquire Dawlance, Pakistani manufacturer of consumer durables, for $258 million.

The deal is expected to be closed by the end of 2016, as it requires approvals from Competition Commission of Pakistan (CCP), purchase of minority stakes and transferring of land and buildings to the ownership of the company, it said.

Dawlance had revenues of $220.6 million in 2015. Similarly, its earnings before interest, tax, depreciation and amortization (EBITDA) is $45 million last year. Its net debt amounted to $30 million at the end of 2015, according to Deutsche Bank.

Sources close to the sponsors of Dawlance say the company had been on the auction block for the last five years.

Bashir Dawood is the major shareholder of Dawlance. He is Hussain Dawood’s brother-in-law, a corporate tycoon who controls majority shareholdings in Engro, HUBCO, and Dawood Hercules groups.

Sources say the owner of Dawlance wanted to permanently move abroad. His children have established careers in fine arts and interior designing in Europe and the Middle East and apparently have no interest in managing the family business.

Tuesday, June 7, 2016

Islamic mode of financing

Islamic finance is sharia compliant way of financing.  Sharia, on one hand, prohibits any transaction involving undue uncertainty and on the other hand, it requires avoidance of receiving interest. Sharia defines interest as any income derived in excess of loan. Loans involve personal guarantee of debtor and therefore any such benefit would amount to injustice to debtor. In other words, you can only make profit when you don’t enjoy guaranteed return of the principal amount.

Another important aspect of sharia financing is use of money for ethically healthy projects e.g. you cannot invest in projects involving alcohol manufacturing.  

Sharia compliant financial institutions have developed many sharia compliant products including modaraba, musharika, sukkuk, murabaha etc. Let’s discuss them one by one

Modaraba is financing mode in which one person provides financial resources and other labour and skills to carry out business. Both share profit, in pre-determined ratio, while losses would accrue to one who invested financial resources.

Musharka is mode of financing in which both partners contribute capital and divide profits/losses according to pre-agreed ratio.

Sukkuk is a bond which gives right of ownership, of some tangible asset, to its holders. The holder of instrument then collects profit as rent of the asset.  Three elements of sukkuk as outlined by Taqi Usmani are
·         Sukuk must represent ownership shares in assets or commercial or industrial enterprises that bring profits or revenues
·         Payments to Sukuk-holders should be the share of profits (after costs) of the assets or enterprise
·         The value payable to the Sukuk-holder on maturity should be the current market value of the assets or enterprise and not the principal originally invested,


Murabaha is sharia compliant form of leasing. In this form no amount is charged for late payment as it would constitute interest (Riba). Murabaha has become the most prevalent form of Islamic financing.

Thursday, May 26, 2016

How leveraging works

Leveraging (Other People’s Money) is one of the techniques, most used by billionaires to amass fortune. Sam Walton, Donald Trump, Aristotle Onassis, W. Clement Stone, Daniel Ludwig and number of other tycoons applied this principal to set up their empires.

Financial leverage is using borrowed funds to invest in an industry. Say, for example, an investor borrows 1000$ and invest it along with his own 1000$. Now, if the industry generates 20% returns he would be able to produce 33% return on equity as compared to 20% returns he would have generated without leveraging.

The most famous example of application is Aristotle Onassis who borrowed funds from banks, using future cash flow from his already owned ships as collateral, to build more ships. Although Daniel Ludwig was the founder of this technique but Aristotle Onassis is more famous for its application.

W. Clement Stone also used other people’s money to buy other insurance companies. E.g. he bought the Pennsylvania Casualty Company using funds borrowed from the Commercial Credit Company of Baltimore, which owned the company he was buying.

Financial leverage is a double edged sword. Using it can generate super normal profits in good days but it can play against you, as well, by generating extra losses during recession.

Leveraging may help you to be extra vigilant regarding your business expenses. The liability you have under taken in form of funds and interest would pressurize you to be extra careful in your expenditure and you would move towards cost cutting. It may provide impetus for you to work hard. Fed chairman Ben Bernanke, has compared, adding debt to firm’s capital structure, to putting a dagger to steering wheel of your car.   Dagger- which points towards your stomach- would motivate you to drive carefully but at the same time the risk of damaging yourself is very serious when someone else hits you- even if you are driving carefully.

Thursday, May 19, 2016

Investment in Dubai realty sector

Dubai presents lucrative investment opportunities for Asian investors in real estate sector. The proximity of Dubai to these countries along with good rental yields is the main attraction. Moreover, Dubai offers unique opportunity of earning tax free gains.

Furthermore, the deteriorating law and order situation in many of surrounding countries is another reason which boosted Dubai’s property market. Affluent investors from gulf including Syria, Lebanon, Iraq, and other Arab countries have flocked to Dubai.

Investors from non-Arab countries too have benefited from its property market. The data from Dubai Land Department shows that Pakistani investors, during 2015, has invested AED 8 billion in Dubai, which is more than AED 7.588 billion, invested during 2014.

India has topped the list of largest investor. The amount invested by Indians during 2015 is AED 20 billion which is more than AED 18.123 billion, invested by Indians during 2014. 
Burj khalifa
UK citizens are second largest investors in Dubai’s property market. The amount invested by U.K. investors, during 2015, is AED 10 Billion. Previous year investors from U.K. invested AED 9.318 billion.

The improvements made by UAE Govt., after 2008 crisis, helped build investor confidence. Steps like increase in property transfer fee sidelined speculators. Furthermore, Escrow account added another layer of security for genuine investors.