Investing through mutual funds and its benefits

In an article, I have written about benefits of diversification. But small investors face the problem of spreading out their small investing capital across different industries. If you are small investor you cannot diversify effectively owing to variety of factors like having to pay service fees like brokerage commission, minimum investment to be made in one particular security.

The solution to above mentioned problems can be solved by investing through mutual funds. Mutual funds are investment vehicle made up of pool of moneys collected by large number of investors for the purpose of investing in securities, bonds and other financial markets instruments.

There are many benefits of investing through mutual fund. When you invest through mutual funds, you get to enjoy the benefits of diversification. Your mutual fund asset manager has enough capital to invest across variety of assets, hence delivering you the benefit of diversification.

Another benefit of investing through such vehicle is enjoying economies of scale. Your fund can bargain discounted prices for investments. Moreover, other favorable terms can also be agreed because of increased collective bargaining power.

Your fund manager is a professional manager who has learnt about investing through experience and university learning. He is therefore better able to manage your money in a professional style. He can diversify using various statistical techniques. The third advantage of investing through mutual funds is being able to use the skills of professional manager.

There are as many as 40 mutual funds registered with SECP. You can invest in any of the funds mirroring your preferred style of investing.

Some of the funds use aggressive style of investing. They try to generate more returns but the down side is that they are more risky. Some others are income funds, which target generating regular income along with securing your capital.

There are sector funds which invest in specific geographical territory or specific industry e.g. energy mutual funds invest only in stocks and bonds of energy companies. They don’t invest in other industries. As a fund become more specific towards particular territory or industry, its ability to diversify reduces. Try to invest in funds which have consistent track record of generating returns. Although the returns generated by mutual funds are dependent on performance of stock markets.   

There are two types of funds 1. Open ended mutual funds 2. Closed ended mutual funds

Open ended funds are available over the counter and bought and sold on demand. Their net asset value (NAV) is calculated at the end of every trading day whereas closed ended funds are those which are only available on the stock market and has fixed number of shares.

How Sugar industry can help ease Pakistan's energy crisis

Taking too much sugar may be bad for your health, but not for your country. Sugar industry can help ease the energy crisis faced by Pakistan for more than a decade.

The energy shortage is growing with ever increasing population and rising domestic consumption.  The production gap can be met by mobilizing sugar mills to produce electricity. The bagasse produced by sugar mills can be used to produce thermal energy for onsite use as well as production of electricity.

In many countries of the world sugar mills are earning more from selling electricity than they earn from selling sugar. Sugar industry is second largest, with 89 mills; agro based industry of Pakistan after textile and therefore offers tremendous potential to fill the energy gap.

A sugar mill crushing 2000 tons cane can produce 9 MW of electricity after meeting its own requirement. The total estimated power potential of Pakistan’s sugar industry is 2000MW. The cost of producing electricity is very low as the fuel (bagasse) is available at no cost. The raw material need not to be transported so considerable savings can be made on transportation head. Transportation losses can also be reduced as bagasse power plants are decentralized. Moreover, there is zero carbon dioxide emission as bagasse is a biomass. During combustion biomass re-releases carbon dioxide into the air.

Most of the sugar mills in Pakistan use bagasse to heat inefficient boilers of 26bar. The Indian sugar industry is using 50bar boilers, which uses half as much bagasse as used by 26bar boiler to produce the same megawatts of energy.

The high pressure boiler (80-100bar) available in Pakistan cost from 700 million rupees to 1 billion rupees. The high investment involves make it unfeasible for using these boilers only for 120 days, the cane crushing season. For the rest part of the year sugar industry wants to utilize coal and other biomass fuels like rice bran, corn cobs.

Cherat Cement announced expansion plan

Cherat Cement, on Monday, announced it would install a third cement production line at its existing site in Nowshera. Cement manufacturers are announcing expansion plans in the wake of growing cement demand.

CPEC is expected to generate additional cement demand of 1.5-3 million tons per annum

The new plant is expected to have an annual production capacity of 2.1 million tons, taking the company’s total output to 4.5 million tons a year. The company’s total production capacity is about 10% of the current installed production capacity in Pakistan.

The company was already working on its second production line, expected to have capacity 1.3 million tons. This plant is expected to come online in the second half of fiscal year 2016-17.

Cherat Cement Company Limited (CHCC) was established in 1981. CHCC started manufacturing, marketing and sale of Ordinary Portland Cement in 1985. At that time, the company had the production capacity of 1,100 tons per day, which was increased to 3,300 tons per day in 2005 after subsequent up gradations earlier.

The company supplies cement to the northern block; Punjab, KP, FATA and adjoining areas and exports its cement to Afghanistan and Indian Punjab. The company’s plant is strategically located, about 52 kilometers away from Peshawar, near the Pak Afghan border and this proximity to the border allows for lower distribution costs than its competitors.

Cherat Cement’s latest expansion plan will be entirely financed by debt, costing close to Rs13 billion, according to JS Research. This production line may become operational by year 2020. The company also intends to bring another Waste Heat Recovery along with the new line, according to the JS Research report.

The establishment of its first Waste Heat Recovery (WHR) in 2010, a Tyre Derived Fuel Processing Plant in 2012 and a Refuse Derived Fuel Processing Plant in 2013 helped company achieve fuel efficiency—now company is deriving more than one-third of its energy free of costs.                                                                                                            

Growing international demand for Paksitani halal food

Keeping in view the growing international halal food market, Fauji meat limited has set up 75 million USD halal abattoir and meat processing plant, in Karachi.  This 47 acre spread facility has daily production capacity of 100 ton meat, of which 85 tons would be beef, in both chilled and frozen categories.

Halal food is the one which is prepared and is hygienic, in accordance with the principles of Sharia.

The demand for halal products is growing at a 10.8% annually, and is expected to reach 3.7 trillion dollars till 2019. Halal food makes up the largest share of this halal products industry.

Pakistan, is ideally located, to take benefit of this opportunity as consumers in gulf countries have huge liking for Pakistani halal stuff, especially the meat.

With 2nd largest buffalo and 8th largest cattle herd, Pakistan is endowed with valuable live stock. In mutton category Pakistan has 4th largest goat herd and has 9th largest number of sheep in the world. India, situated at the border, has earned more than 4.7 billion dollars from exports of buffalo meat in the fiscal year ended in 2015.

FPCCI president Abdul Rauf Alam, while talking to a private newpaper, said that world leading suppliers for halal products including high quality meat, poultry, dairy products and other foods are Australia, Brazil, Canada, Indonesia, India, Malaysia, Philippines,  Thiland, New Zealand and United States. He further added that USA and Australia are biggest halal beef exporter while Brazil and France are the largest halal poultry meat exporter in the Middle East.

Thailand has become 5th largest global halal food producer.

With more than 700 billion dollar market size halal food is expected to attract 2 billion consumers, both Muslim and non-Muslim.

Global market size for halal food is more than 700 billion U.S. dollars

Businesses around the world have started producing halal food to reduce costs. The daily Mail online in this report said that many major Supermarket chains and restaurants, in U.K., sell halal meat to keep their costs low as it can be eaten by both Muslims and non-Muslims alike

Fauji meat is eyeing lucrative foreign markets but equally important is to market these branded and packaged products to domestic consumer as well. This will not only be good for Fuji meat in long term but also for Pakistan’s halal meat industry.

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.

Pakistan's Logistic Giant

Agriculture sector contributes a lion share in Pakistan’s GDP. But presently Pakistan’s 40% agricultural produce is lost because of bad logistic infrastructure. And this company is experimenting with ways to provide logistic services to Pakistani agriculture sector with only three to four percent loss.

Starting from four employees, it now has over 400 people as its employs. With 700 customers including many national and multinational companies, it takes care of whole process of logistics including shipping, trucking and warehousing.

The company was started by Abid Butt in 2005, who earlier worked for a French logistic giant Geodis. At that time, in Pakistan, no one was available to provide end to end solution, so initial idea was to provide all services including trucking, warehousing and shipping etc by the same company. This led the company’s name being e2e supply chain management (pvt.) ltd. i.e. end to end supply chain management (pvt.) ltd. In 2011 butt’s company had around 76 million us dollars in annual revenues. The company grew 1918% from 2008 to 2010 and was nominated as Pakistan’s fastest growing private company by AllWorld network in 2012. Initial investment in e2e supply chain management (Pvt.) ltd. was arranged by him and his friend and was 1 million rupees (nearly 20000 us dollars at that time) each.

Company’s founder Abed butt is a LUMS graduate with a major in economics and also holds an MBA from INSEAD. After graduating from LUMS, Pakistan’s leading business school, Abid worked for Maersk. Later on he joined Geodis, and was posted in Paris.

He started his business from Karachi, Pakistan’s industrial and commercial heart. He started his entrepreneurial career by resigning from Geodis, risking a steady career growth. At that time he was making 15000 euros per month.

Related Links

allworld

money matters jang

Waste Management entrepreneur

Pakistan generates nearly 56000 tons of solid waste daily in urban areas only, and it is increasing at the rate of 2.4% annually. This solid waste is an opportunity for entrepreneurs.

This waste can be recycled, used to produce liquefied petroleum products, or electricity.  There are advanced waste-to-energy conversion technologies that are commercially viable and sustainable. Presently Fauji Cement Company is using municipal solid waste to produce electricity.

Garbage is not only a cheap source of producing electricity but it can also be used to produce fertilizers. It is profitably being converted to fertilizer by an entrepreneur from Lahore.

Asif Farooqi is a green entrepreneur. He is CEO of waste buster, a waste management company. He is the pioneer of the waste management business in Pakistan.

Some years earlier he started with 6 donkey carts that collected waste from house to house. Now his business waste buster has 200 garbage collection vehicle and employees 3000 people. His business is not only about making money but also conserving environment as well.

Mr. Farooqi informed in a report of al Jazeera that what started from six donkey carts has become a business employing three thousand people and all this money is generated from waste. His men collect garbage and other waste from narrow streets of Lahore and deliver to factory through garbage collection vehicles. His waste management plants separate garbage into organic, plastic and metals to produce liquefied petroleum products, and fertilizers for farmlands. 

Asif Farooqi holds masters degree in environmental engineering from northwestern university, USA with specialization in waste management. He has more than 20 years of experience in the field of environmental engineering. His company waste buster is based in Lahore. Many contracts have been won by the waste busters in Karachi and other cities of Pakistan.

 related links.

dawn

south asia investor review

al Jazeera

Success achieved by Pakistani bloggers.

Income diary has a post named ‘20 top blog sales’ that has a list of blogs that were sold for millions. In recent past a name of Pakistani blog appeared in ‘top earning blogs’ on incomediary. According to incomediary Saad Hamid’s blog Sizlopedia was making 11000 us dollars per month.

Blogging has become common in Pakistan and there are many successful bloggers in Pakistan. Recently another success has been achieved in this area by Pakistanis. Gagism.com, a humor blog, co-founded by Farrukh Zafar and Salman Saeed, has been acquired by an Australian firm for rupees 10 million (105000 us dollars approximately).  Presently gagism has a team of 6 members including two founders. 

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Pakistanis in retail and wholesale sector worldwide

Pakistan is 6^th most populous country in the world. This country is having huge growing middle class. Size of retail and wholesale market is above 40 billion us dollars per annum. To benefit from this huge sector many international retail and wholesale companies have moved in Pakistan. Metro cash and carry, makro, hyperstar etc. are some names that are active in Pakistan’s retail and wholesale sector. 

Although Pakistan has huge retail sector, but still Pakistan has not produced any international chain of supermarkets. The size of majority of retailers is small and competition among them is tough. Retail sector contribute very little to state exchequer despite having a large share in GDP. Total contribution to state exchequer is approximately 125 million rupees while 50 million is contributed by canteen store department, chain of retail outlets managed by defense ministry.
Pakistan has huge diaspora. nearly 7 million Pakistanis are living in different countries of the world. there are nearly 1 million Pakistanis in united states. In United Kingdom nearly .7 million Pakistanis are living.

Many Pakistani businessmen abroad are involved in retail and wholesale business. This is because Retail business doesn’t needs a person to have any experience or specified level of education. Many Pakistani owns convenience stores abroad. The US convenience store market is monopolized by Pakistanis and Indians. In United Kingdom many Pakistanis are active in retail and wholesale sector. E.g. Pak supermarket is owned by Khalid Hussain. United wholesale grocer was owned by Muhammad Sarwar and his brother Muhammad Ramzan. Sir Anwer Pervaiz owns Bestway cash and carry. Najib Khan owns food retailing business in United Kingdom. Syed Qamar Reza owns 12 outlet of retail24 in United Kingdom.

Pakistanis are not only active in retail sector of USA and UK but also Middle Eastern countries. Abdul Razzaq Yaqoob owns chain of jewelry outlets. He also has started ARY cash and carry.

industries produced Pakistani billionaires

According to Forbes technology is the sector that has produced highest number of billionaire in United States after investment. The leading sector in the rest of the world according to Forbes is investment while fashion and retail ranks second.

GlobalTop 10 Industries Producing Forbes Billionaires

1. Investments: 143
2. Fashion & Retail: 123
3. Real Estate: 102
4. Diversified: 97
5. Technology: 90
6.  Manufacturing: 85
7. Energy: 78
8. Finance: 77
9. Food & Beverage: 69
10. Media: 64

Pakistan has a list of rupee billionaires, although completeness and correctness of this list is doubted. Although it is difficult to know which sector produced how many billionaires in Pakistan. But it can be seen from the list that majority of Pakistani billionaires come from diversified, textile and fashion, investment, landholdings, overseas business and media.

Big business houses in Pakistan used to invest in diversified sectors to manage risk.

Pakistan has huge textile and fashion industry and is growing at a high rate. Many fashion designers have started doing business on a global scale. Names like Maria b. Hassan Shehryar Yasin etc are having retail outlet around the world and their clients include many rich and famous people including family members of royal families. Fashion retail outlet like Chenone is having its retail outlets in different cities of the world.

Pakistani stock exchange is best performing stock exchange in the world. It has generated good returns for investors. Many international investors are also investing in Pakistan’s stock exchange. Pakistan has many mutual funds which provide opportunity to household investors to invest in stock exchange.

Pakistan has large land holdings since the colonial era and families manage to keep these large land holdings in their own families through inter-cousin marriages.

Many Pakistani billionaires have got their massive wealth from overseas business and investment in other countries. Sir Anwer Perwaiz is one such billionaire who got his wealth by establishing bestway group in UK.

Media is another such area where Pakistani billionaires have stakes. Jang group owned by Mir family is well known to have earned their wealth from their media business. Electronic media is a recent entry in this field As Pakistani government started issuing licenses to private television channels.

Pakistan's retailing industry big names

Pakistan’s retail market is estimated at over $42 billion a year. There are many international names in our retail and wholesale sector including metro, makro etc. There are many national brands as well that are busy in retailing business. Names of national retail businesses are given below along with brief introduction.

Canteen store department

Canteen store department is a chain of retail stores all over the country. This chain is run by Pakistani ministry of defense for the purpose of welfare. CSD sells a wide variety of products. Generally these are purchased in bulk by CSD and sold at concessional rates. Now CSD is open to all citizens of Pakistan but previously it was open only to government employees especially members of armed forces. Currently there are more then 100 shops owned and managed by the department.

RAHAT bakers

Rahat is a chain of bakeries in twin cities. There are 5 bakeries in twin cities of Islamabad and Rawalpindi. All 5 bakeries are owned and managed by noon brothers.

Savour foods

Savour is a chain of food retail outlets selling primarily rice dishes.

Gourmet bakers

Gourmet is a retail chain of bakeries. There are over a 100 stores in Lahore.

Bareeze

It’s a high-end fashion retailer. It is the chain of retail stores across Pakistan, India, UAE, Malaysia, and United Kingdom.

Chenone

Chenone is Chain of fashion stores having 20+ stores in Pakistan and Middle East. Chenone offers fashion clothing, foot wear, bed linen, kitchen accessories, and furniture.

Imtiaz supermarket

Imtiaz supermarket is a chain of supermarket in Karachi serving 60,000 to 70,000 people per week. Currently there are two supermarkets in Karachi with plans to grow further.

Naheed supermarket

It is another supermarket targeting middle class just like imtiaz supermarket. This supermarket attracts nearly 4000 customers daily.

Greenvalley supermarket

Greenvalley is a high-end supermarket chain, recently started by bahria town (pvt.) Ltd.

Sauda sulf

Sauda sulf is a chain of departmental stores in twin cities of Islamabad and Rawalpindi. Presently it has two flagship stores located in F-11 markaz, Islamabad and another one in chaklala scheme-3, Rawalpindi.

Pace shopping mall

Pace has 5 branches in Lahore, 1 in Gujrat and 1 in Gujranwala. Pace is owned by Mrs. Aamna Taseer, widow of slain governor Salman Taseer.

Cosmo
cosmo express and cosmo cash and carry are two types of retail outlets owned by sohrab group.

Pakistani movies entrepreneur

Shoaib Mansoor, very creative Pakistani film director, writer, and producer. He had produced many dramas for Pakistan television in the beginning of his career. He had written, directed, produced drama serial ankahi, fifty fifty, alpha bravo Charlie, sunehredin and gulls &guys. Alpha bravo Charlie and sunehre din were about military life in Pakistan army and were produced in collaboration with ISPR. He was the man behind vital signs. He was the mentor of junaid jamshaid, lead singer of vital signs.

In 2007 movie khuda kay liya was released. It was written directed produced by Shoaib Mansoor. The cost of movie was 1 million USD i.e. 60 million rupees at that time. Traditionally films in Pakistan costs rupees 3 to 5 crore i.e. half a million dollar.

This movie proved instant success and did business of 2.5 million us dollars.

In 2011 another film bol was released under the banner of geo films. This movie broke all the records of highest earning films in Pakistan. Within is 6 days of its release, it earned rupees 62.792 million rupees. Sahara one network acquired seven years satellite rights of this film for rupees 70 crore i.e. nearly 10 million USD.

Shoaib Mansoor is presently working on another project. He has earned money by providing good entertainment. His films and dramas are not only entertaining but also educative. Shoaib Mansoor or Shoman as he calls himself is a real genius of Pakistani business.

From small broiler farm to an empire

In his college days, when other students were dreaming of huge salaries, beautiful life, he saw the demand and filled it. He is the true entrepreneur. In 1964 he started a small broiler farm of 1000 chicks. This was a patriotic act by this daring entrepreneur to fulfill the protein needs of his fellow men and women. His first flock was reared in a spare shed at his family’s edible oil business. This small initiative of Khalil Sattar later became K&N chicken.

K&N chicken a name trusted not only by Pakistanis but also by many foreigners. K&N stands for the name of Khalil and his wife. Halal certified chicken is not only supplied to Pakistani consumers but also too many other countries. Many international food outlets, in Pakistan, purchases slaughtered chicken from K&N chicken. K&N not only incubates and grow chicken but also slaughter according to Islamic method. The whole process from breeding to serving chicken is carried on by K&N, to make sure that consumer get the healthy and clean food.

The company is also exporting chicken meat to other countries. But it has to face tough competition from subsidized meat from Europe. The company is doing well in value addition to remain competitive.

Pakistan presently has nearly 387 million poultry and quality of Pakistani halal chicken is best in the world. To enhance productivity of Pakistani farmers K&N has also introduced another breed of chicken i.e. Cobb 500 in Pakistan. This breed has resulted in superior performance on low density rations, lowest feed conversion ratio, highest growth rates, highest livability, most feed efficient, best broiler uniformity and competitive breeder performance. Cobb 500 is most widely used breed around the world.