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Your Guide To Top Investors In Abu Dhabi

Investment is the key to make a business enterprise work. It is important to find the right type of investor at the right time to ensure that you can not only set a foundation but also plan the future. For a business enterprise, there are various channels of investment that an entrepreneur may seek to. Angel investors in one of them.

Wondering who are angel investors and what they do for your business?

Angel investors are known as private investors or seed investors. They are high-net-worth individuals who invest or back up for small startups. The fund angel investors provide you with a one-time investment. These angel investors help you to carry your business or startup in difficult stages too.

Angel investors are those that have excess funds available and are looking for a good return by investing in good ideas. They are beyond traditional investors.

Key benefits of angel investors:

  • An angel investor is an individual who funds startups at the initial stages. Their contribution can help you to take your business to great heights. To focus on the core activities of your business and to make it work, financial support is essential. Angel investors can make things easy for you.
  • Angel investors are the primary source of funding for startups. They listen to the business entrepreneur or startup idea and invest a good amount to give excellent support to new entrepreneurs.
  • Angel investors provide startups or innovators with an opportunity for economic growth.
  • For startups not everyone can invest their capital, angel investors risk their money to build startups in the right way.

List of top investors in Abu Dhabi:

  • Kepler Partners
  • Trove Capital
  • BlackRock
  • International Financial Corporation
  • MFD Holding
  • Amanat Holdings
  • Kohelberg Kravis Roberts
  • Global Infrastructure Partners

Angel investors are also known as informal investors, private investors or business angels. These investors inject capital in startups in exchange for ownership or convertible debt.

Before you can go to connect with an investor, here are a few essential questions to consider:

– From where to find an investor?

– What are the criteria that investors look for in startups?

– How to convince an Abu Dhabi investor to invest in a business?

– What is the fair share of the percentage to allocate to an investor in Abu Dhabi?

– How many shares of a company should an investor own?

– What is considered a good ROI?

To help find the right and the best investor for your business, you can rely on MI Capital. We offer one-stop solutions to businesses when it comes to connecting with an angel investor to funding their venture. Through the use of advanced approach and analysis & pitching skills, our experts guide you to seek funds for your startup. Businesses in Abu Dhabi can reach out to our experts for help to look out for an angel investor who meets their expectations. We make the entire process completely easy and hassle-free for you so that you focus on the idea of establishing it.

Trade Financing

INDIAN BUDGET 2021-22 – SIMPLIFIED FOR YOU

India’s 2021-2022 budget is an exceptional budget plan as compared to previous budget strategies. The Indian Finance Minister Nirmala Sitaraman announced a budget that specifically focuses on infrastructure building and healthcare systems. Budget 2021-2022 is based on six pillars: health and wellbeing, physical and financial capital and infrastructure inclusive development for aspirational India, reinvigorating human capital, innovation and R&D and minimum government and maximum governance. To help you understand the nuances of the FY 2021-2022 year’s budget with a focus on long-term goals and achievement, here are a few key features of the budget 2021-2022 summarized.

In the financial year 2021-22, the Indian government hiked the expenditure budget by 34.46 percent in comparison to the previous year 2020-2021. Where in the previous year it was 4.12 lakh crore, in current year’s budget its value is 5.54 lakh crore.

When it comes to income tax relief for the common man, the government, says no increase in the standard deduction, no raise in the tax slabs which means no change in income tax rates for individuals and corporations.

Healthcare infrastructure was at the top of the budget list. In the year when the world was disrupted by the Covid-19, the finance minister gave attention to the healthcare structure. In comparison, the budget 2020-2021 this year proposed funds for healthcare jumped by 137% which means in 2020-2021 Rs 2,23,846 crore was for healthcare whereas in budget 2021-2022 Rs 94,452 crore was released. There was a special focus on the Covid-19 vaccination and for that Rs. 35,000 crores was marked. The finance minister promised to provide more funds if required.

Signalling a major reform, the has lined up disinvestment for two public-sector banks and one state-owned general insurance company. As a result, the FDI in insurance is deemed to be hiked to 74% from 49% now.

GDP growth is a major factor that contributes to the nation’s financial growth. In the budget 2021-2022, FM projected an estimated 14.4% of growth in GDP.

Key Takeaways

  • New Agri infra cess is applicable from February 2, 2021.
  • The first Budget of the decade with no change in direct taxes.
  • Tax holiday for start-ups for one more year.
  • Privatization of 2 PSU banks and one general insurance company.
  • Divestment remains a major agenda at Rs 1.75 lakh cr.
  • The fiscal deficit is seen at 6.8%.
  • Rs 1.15 lakh crore for railways, privatizing airports.
  • Rs 1.41 lakh crore for Urban Clean India Mission.
  • Rs 64,180 crore spending plan for healthcare over the next six years.

Top Benefits Of Outsourcing Taxation Services To Expert Tax Professionals

Filing taxes is an important part of the business. A business organization may be subjected to various types of taxes. It is vital to file the taxes using the right procedure and on time to deter possible penalties. Quite often business organizations are not in a situation to hire a full-time accountant or tax professional to assist them with tax filing. In such a case, it is always a good idea to take help from outsourcing service providers.

Taxation is not an easy task, it needs proper knowledge and high skills to make it done. As a business owner, when you are focusing on growing your business and clients it can be challenging for you to balance your taxation in the right manner. Outsourcing your taxation services to expert business tax consultants has a myriad of benefits which include hassle-free process, easy tax filing, and cost-saving, otherwise spent hiring a full-time tax accountant.

To help you understand better the various advantages you can draw from outsourcing tax-related services, here is a list of various advantages of outsourcing taxation.

Cost-saving: If you miss filing your tax files then it can cause a big amount of penalties. Professional accountants whom you outsource for your taxation services file your tax file on time to save you from any hefty penalties.

Save your time: Managing tax reports or files is not an easy task. It can take long hours to complete a tax filing if you do not have proper knowledge about it. Professionals manage your entire cash flow statement to file appropriate taxes. Your time is worthy for you to improvise your business and outsourcing taxation services can save you time.

Resolve your queries and concerns: It is very common to have questions about taxes. Any query about tax can take a few hours to resolve and experts can easily answer your every query or concern.

Simplified process: Tax filing is not a layman’s job. Tax laws are complicated to understand. Professional tax accountants keep themselves updated about any changes in the law so that they can offer you penalty-free taxation solutions.

Peace of mind: Once you outsource experts for handling your taxation concerns, you can live a relaxed and stress-free life.

Avoid errors: An error in tax-filing can lead to penalties as well as a miscalculation. A minor error can cost you a lot. Professional tax advisors hold years of experience to offer you error-free taxation services.

Tax planning: Experts can advise you on the best strategies to make smart tax-saving decisions.

External audit assistance: If you are audited or questioned by the government body, you can easily answer them if your taxation file is prepared by a professional.

For hassle-free taxation services, it is a wise idea to take help from an expert and experienced advisory firms like MI CAPITAL. Our experts can provide you with complete solutions, including tax planning, tax filing, registration or deregistration, VAT, internal audits, etc.

Get in touch with us today!

All You Need To Know About Business Valuation

Be it a merger and acquisition or selling the business, all such situation calls for a business valuation. The process of business valuation is all about estimating the economic value of a business which is often based on a number of factors. The stakeholders of the financial market use the determined value to assess the price they are willing to pay or receive in case of a sale of a business.

Why is a business valuation needed?

A business valuation is essential on various occasions. Some of the typical ones are listed here:

* Business buyout or sale, acquisition or mergers, financing.
* Reporting of taxes: Gift or estate tax, charitable donations.
* Financial reporting: Portfolio valuations, price allocation and derivatives.
* Legal matters: Shareholder disputes, partnership dissolution, bankruptcy.

Key business valuation approach

* Intrinsic Valuation: This is based on assessing the value of what an asset is worth. Instead of relying upon the current market value of a particular asset, an objective financial model is used to determine its value.

* Relative Valuation: In this approach, the price of an asset is compared to the market value of similar assets. This is also known as ‘Comparative Valuation’.

Three Methods Of Business Valuation

There are three main methods of business valuation – asset-based, income-based, market-based.

> Asset-Based Method

The Asset-Based Method of valuation includes doing a sum-up of all assets of a company. The valuation based on this method can be done in two ways:

* Going concern: Also know as the ‘book-value’ approach, this method considers the total assets and total liabilities of the business. Based on the balance sheet, the value of a business is determined.

* Liquidation: This assesses the liquidation value or the net cash that could be received by selling the assets and paying-off liabilities.

> Earning Value Method

The assumption that the value of a business lies in the ability to produce wealth in the future forms the basis of this method. This can be done in two ways:

* Capitalizing Past Earning: The past record of earnings of a company is used.

* Discounted Future Earnings: An average of the predicted future earning is used.

> Market Value Method

This takes into consideration the value of similar businesses that have recently been sold off. This method is useful only if there are sufficient cases using which comparative value can be determined.

Benefits of business valuation

* Determine the right value of a business, its assets and liabilities.
* In case of a resale, business owners can have a good idea of how much will they get if they sell-off the business.
* For mergers/acquisitions, you can negotiate properly and be at an advantage of bargaining.
* The correct business valuation helps in making informed decisions about investments in a venture.

To eliminate the ambiguity and address your concerns about business valuation, the experienced team at MI CAPITAL can assist you with expert advice.

Write to us today and we will be glad to hear from you!

Rajasthan Investment Promotion Scheme – 2019

BACKGROUND

Among many stereotypes about India as a nation, one of the important ones is that the country is not investor friendly. Often, we hear that India lags behind as compared to its counterparts in terms of being an investor friendly for manufacturing or service industries. High taxes, high-interest rates, red-tapism, and policies remaining to be paper tigers instead of actual implementation on grounds are counted upon as factors that are a major hindrance to the nation’s economic growth. Breaking the stereotype, with significant policy shifts over the last few years India has been able to be one of the leading developing countries in the world and pave the way forward for global investment domestically. While digitalization is promoted across all sectors of the economy, ‘Make In India’ has been a milestone initiative by the Government of India. This major national Programme helped the country embark on a journey of self-reliance latently but the pandemic has led to re strengthening it further through a number of other initiatives such as “Vocal For Local” and “Atmanirbhar Bharat”. With this as the backdrop, it has an increasing need of the state governments too in the country to facilitate investors through a welcoming outlook. With greater competition among the Indian states to attract investors for the overall development, there is a growing need for the largest geographical state in the country, Rajasthan, to develop an investor-friendly landscape.

INTRODUCTION

The Government of Rajasthan launched a State Flagship Programme ‘The Rajasthan Investment Promotion Scheme, 2019 (RIPS-2019)’ which came into effect on 17th December 2019 and shall remain in force up to 31st March 2026. The scheme aims to generate employment opportunities and promote rapid, sustainable and balanced economic growth in the state of Rajasthan. While people from Rajasthan have taken the name of the state to greater heights, this scheme is a call upon Rajasthani’s as well as the global investors, for instance, those looking forward to shifting their production from China, to make a comeback for the development of the state. Given the shrink in jobs globally in the times of pandemic, there is certainly a shift in priorities. Therefore, the incentivizing mechanism to the core sectors of the economy combined with the thought given to ‘not-so-prominent’ makes RIPS an allinclusive Programme to address the needs and concerns of the investors.

APPLICABILITY OF SCHEME

Being a one-stop solution to all kinds of challenges that investors may face, the prima facie premise of the scheme makes it a comprehensive solution in terms of its applicability. As mentioned above (in the figure), the RIPS scheme is applicable to new or existing enterprises looking forward to setting up new units or expanding in the manufacturing or service sector. For those enterprises who do not fall under any of the sectors, they would be covered under Customized Package (as discussed in the later part of this article).

EXCEPTIONS TO THE SCHEME

The activities not covered by the RIPS Scheme are:

✓ Investment for manufacturing tobacco, tobacco products and pan masala.
✓ Investment made in cow beef processing units.
✓ Investment made in retail/trading activities.
✓ Any activity which is prohibited by Central/State laws.

BENEFITS OF THE SCHEME

With multiple benefits, the scheme focuses upon growth in investment in Rajasthan as well as employment generation in the state.

Type of Benefits Sectors

General Benefits All Sectors – Manufacturing or Service Enterprise.
Special Additional Benefits Thrust Sectors*, including:

✓ Benefits to MSME sectors
✓ Sector-wise benefits to Manufacturing Enterprise.
✓ Sector-wise benefits to Service Enterprise.
✓ Benefits for Social Infrastructure.
✓ Benefits to Enterprises in Backward and Most Backward Areas.
✓ Customized Package.
✓ Capital Subsidy on Zero Liquid discharge-based treatment plant.

*Thrust Sector Includes the Following Sectors –

✓ Agro-Processing Sector
✓ Bio-Technology Sector
✓ Ceramic and Glass Sector
✓ Dairy Sector
✓ Defence Sector
✓ DMIC Area (Delhi-Mumbai
Industrial Corridor)
✓ Electric Vehicle (EV)
✓ Food Processing Sector
✓ Solar Equipment’s Sector
✓ Medical Device Manufacturing Sector
✓ Leather, Footwear and Accessories
Sector, Gems & Jewellery Sector
✓ Mineral Sector
✓ Handicraft Sector
✓ Industrial Gases Sector
✓ M- Sand Sector
✓ Textile Sector and Apparel Sector
✓ Start-ups
✓ Wind Turbine Manufacturing Sector
✓ Auto-Component Sector,
✓ Electronic System Design Manufacturing
(ESDM) Sector,
✓ Chemical Sector,
✓ Petrochemical Sector,
✓ Petroleum Ancillary and Pharmaceutical
Sector
✓ MSME Sector

General Benefits

Investment Subsidy of 75% of State Tax due & deposited, for seven years.
Employment Generation Subsidy in the form of reimbursement of 50% of employer’s contribution towards
employees EPF and ESI, for seven years:

Provided that the Employment Generation Subsidy in the form of reimbursement of 75% of employer’s
contribution towards EPF and ESI shall be granted

✓ For employees belonging to Women, Schedule Caste (SC), Schedule Tribe (ST), Person with disability
(PWD); and
✓ For all employees if the enterprise is providing more than 75% direct employment to persons domiciled in
Rajasthan.

Exemption from payment of 100% of Electricity Duty for seven years
Exemption from payment of 100% of Land Tax for seven years;
Exemption from payment of 100% of Market Fee (Mandi Fee) for seven years;

Exemption from payment of 100% of Stamp Duty:

✓ On purchase or lease/sub-lease of land and construction or improvement on such land; and
✓ On purchase or lease/sub-lease of floor area/space in any constructed commercial building for setting up
of enterprise in IT Sector or Apparel Sector or Industry 4.0

Exemption from payment of 100% of conversion charges payable for change of land use and conversion of
land.

Additional benefits to Thrust Sectors

Capital Subsidy: On investment made (Mainly on capital goods procured), or Interest Subsidy: On interest
rates and payment.

Investment Subsidy: On state taxes.

Employment Generation Subsidy: On EPF and ESI.

The thrust sectors include various activities that promote sustainable or inclusive development such as electric vehicles, solar equipment, biotechnology, and wind turbine manufacturing. As evident from a global shift in perspective, it is not possible to rely on conventional sources of energy such as coal. Therefore, through the additional benefits for the thrust sectors, the state government is facilitating the reliance on renewable sources of energy. The MSME sector covered under the scheme is also directed towards sustainable development in
terms of water conservation and green subsidy.

SERVICE SECTOR

The following enterprises are covered under the service sector:

The general benefits of the manufacturing sector (as listed in the scheme) are applicable to the service sector as well. The RIPS Scheme, being an all-inclusive scheme, gives emphasis on all sectors of the economy including the backward and most backward areas.

POWER TO GRANT CUSTOMIZED PACKAGE

Despite extensive coverage under the aforementioned sectors, if any sector is left out then a customized package can be granted (as shown below).

Being the all-in-one solution provider, the RIPS Scheme makes it easier for investors to get easy and fast approvals through one screening committee rather than passing through various government departments. With single-window clearance, the scheme certainly helps investors with timely approvals instead of being caught into red-tapism. The RIPS lays a red carpet for global investors as well as the people from the state to be active participants in the holistic and integrated development of the state.

CONCLUSION

With one of the lowest income tax rates (15% for New Manufacturing Units) in the world accompanied by benefits under the RIPS, make Rajasthan an attractive destination for investors to start or expand their business. In fact, the state government has given thought to several sectors in the RIPS including, MSME,
Service Sectors, Start-ups. With single-window clearance for permissions to be taken from 18 departments permissions, simplified online process, single committee decision either at the district or state level and the complete online tax compliances are some important factors that make Rajasthan a land of investment for all.

ABOUT MI CAPITAL

MI CAPITAL and MI CONSULTING group comprises of a team of experts who work together to serve clients on
a broad range of advisory services including Corporate Finance, Transaction Support Services, Debt Advisory,
M&A and Private Equity Advisory Services, Economic Substance Regulation (ESR) Advisory Service, Value
Added Tax (VAT) Advisory Services, Accounting Services, Company Formation Services. Our team has decades
of combined experience and a track record of successfully delivering solutions in diversified market
conditions. Our presence in the region and deep relationships with the eco system allows us to provide our
clients with efficient business solutions. Our Advisory board consist of senior profile people with decades of experience in financial services industry with presence or reach in multiple countries providing strategic value addition to our clients.

 

Dubai Forensic Accounting Services

FORENSIC AUDIT SERVICES BY MI CAPITAL

Dubai Forensic Accounting Services

MI Capital Services

IFRS 9 Modelling at MI Capital

IFRS 9 Modelling

Trade Finance Processes

Trade Finance Processes: Consultancy Services & Audit

Trade Finance Processes

Hybrid Security

Hybrid Security – The Most Preferred and Popular Financial Instrument

What are Securities?

Securities are a financial instrument used by companies to raise capital.

In the corporate world, there are 3 major types of securities that can be categorically defined. They are differentiated based on their function and mode of operation.

– Equity Securities

– Debt securities

– Derivative securities

With Equity securities, the investors attain ownership in the companies. The most common type of these instruments is the stocks of a company.

With debt securities, the company can borrow from the public to raise its capital. Bond is the most common instrument used as debt security.

Derivative security depends on another underlying instrument and derives its value based on the other instrument. A contract is one of the examples of derivative security.

What are Hybrid Securities?

Another security that does not fit into any of these 3 categories. This is called Hybrid security. A hybrid security is a combination of more than one type of financial instruments. A stock and a bond together is an example of a hybrid security.

Hybrid Securities are often referred to as ‘hybrids’. They can be bought or sold either in the exchange or through a brokerage. A hybrid security is relatively a new concept yet is very popular due to its advantages.

Advantages of Hybrid Security

– Hybrid securities provide a high yield since the rate of return is higher than most senior debts.

– They are less volatile because the distribution of market returns is pre-determined and much regular.

– They have a diverse nature. As they are not bound to any specific category of securities, the overall risk involved is diversified, and thus guarantees attractive returns.

Disadvantages of Hybrid Security

– The only disadvantage of hybrid securities is its complexity. It is more complicated than investing in equity or bond security.

Types of Hybrid Securities

There are many different types of hybrid securities. The following are the most widely used.

1. Convertible Bond:  These bonds come with the power to get it converted to stocks of the same company.

2. Preferred Shares: These are also called preference stocks. In case of bankruptcy, the company pays off these shares first, before they pay the common shares.

3. Mezzanine Financing: This is a type of hybrid security where a lender gives a loan to a company and later can assume ownership by acquiring shares in case of default by the company.

4. Toggle Notes: This is a kind of security where the company has an option to defer payments of bonds in exchange for a higher rate of interest. This mainly occurs when the company is undergoing a short-term cash-flow crisis.

5. Warrants: This type of security allows, but not compels, the investors to buy or sell their shares on or before a particular date for a specific amount. Life of warrants is usually 10-15 years.

Each type of hybrid security has a unique risk involved and at the same time also has reward characteristics. Many other new types of hybrid securities are being introduced all the time in an attempt to meet the needs of sophisticated investors.

Angel Investment

Angel Investment – A Must Know Details

The investment made by a private individual, with high net worth and business experience for a new business is known as Angel investment. Such an investor is called an Angel Investor. An angel investor directly invests part of their capital in a new and growing unquoted business. Capital funding for a start-up business is usually provided by an angel investor, as an exchange to convertible debt or ownership equity. Start-up businesses need angel investors the most as they might not be supported by many investors in the initial stages.

The Angel investors are not venture-capitalists. They essentially differ in the ownership of the money that they use to invest. Angel investors always use their own money for investment as they are usually affluent. But Venture Capitalists do not invest their own money in companies. Also, they will not be able to accommodate small deals in large numbers.

The importance of angel investors also increases, as the traditional sources such as bank loans are limited keeping in mind the risks involved and other considerable costs. Angel Investors may also be called as angel funders, business angels, informal investors or private investors.

Angel investors could either be an individual investor or the investment can also be made in syndicates. In such cases, one of the angels in the syndicate will take the lead role. Apart from capital funding, angel investors also provide management experiences, required skill sets and many contacts that the entrepreneur would need. Good angel investors are said to provide Smart and Patient Capital.

Angel Investors do play a very important role in the economy of a country. In many countries, angel investors constitute the largest source of external funding for ventures that are newly established. They provide risk capital and greatly contribute to the growth of the economy and the related advances in technology.

Spreading awareness about angel investors’ activities and policies not only increases the likelihood of new ventures to survive but also could have a significant effect on an entrepreneurial economy.

Here are a few points to keep in mind that help persuade an angel investor for a company’s capital funding.

–  The growth potential of the company is one of the key factors. If the company promises 5 to 10 times growth, angels are sure to get attracted.

–  Have unique ideas and a proven good team to execute those ideas.

– Connect with other entrepreneurs to know what their investors expect and how they got them to invest.

– Being around accelerators is also one of the great ways to attract angel investors.

– Learn more about the angel you want to associate with. They need to invest, the sector they are interested in investing with, etc.

– Have a thorough knowledge of the industry you are serving. Investors would want to have a clear picture of your business plan and strategies to overcome hurdles in the industry.

– Always be realistic. Never overestimate the business’s worth. Let the valuations be based on measurable parameters.

– Prepare a transparent financial statement that includes legal structure, ownership and outstanding debts of the company.

Most of the Angel Investors themselves may be entrepreneurs. They surely will have valuable advice after going through ups and downs of managing their own business. They become investors to give back. Thus angel investment helps and encourages young entrepreneurs and supports them in their path ahead and also contributes to a great extent to the economy of the country they are a part of.

Small Business Funding

6 Alternative Small Business Funding Solution

Small Business Funding Solution

Investment Banking

Investment Banking – A Boon For Organisations

Investment banking is a segment of banking operation which plays an important role in raising the capital of an individual business or for an organization. They help new firms to go public. They also play a role as intermediaries between the investors and security issuers. The main purpose of investment banking is to create capital for companies, governments, and other entities.

They raise capital by selling securities and by underwriting the issuance of new equity shares. These operations are much different from commercial banking, where they focus on deposits and commercial loans.

An Investment bank offers various financial services for their clients. These include trading of derivatives, foreign exchange, fixed income, commodity, etc. They also perform advisory services for mergers and acquisitions. Initial Public offerings are also performed by Investment banks and they trade on securities and issue or sell bonds on behalf of the client. They also perform leveraged finance which involves lending money to firms for the purpose of purchasing assets and settlement of acquisitions. Restructuring is also a part of investment banking which includes improving the structures of the companies to improve efficiency and enable it to maximize profit.

Investment bankers, in addition to handling IPOs, act in various advisory capacities for their clients. They offer advice to corporations on whether they can take the company public or should raise their capital through alternative means. They regularly advise their clients on all aspects of corporate financing.

So, Investment banking has a major role in assisting corporate and government agencies to obtain capital financing. As financial advisors, they help their clients to price capital, and to thoughtfully allocate their resources and also to manage their investments.

Investment banking is truly the most complex financial mechanisms in the world. They serve a variety of purposes for the business entities they deal with.

The following scenario explains how does an investment bank is able to earn money through acquisition advisories that they provide.

Let’s assume a company plans to buy another company. But this company is unsure about the net worth of the company which it wants to buy. Hence they are unable to make correct judgments about the long-term benefits this venture will bring in to them, with respect to revenue, costs, etc.

The role of the Investment banking, in this case, will be to determine the company’s value through due diligence and settle the deal by helping the company that wants to buy with the preparation of necessary documents and also ensuring the deal is done on the appropriate time for maximum benefits. Here, the Investment bank becomes responsible for the business valuations, as the deal will be based on the result of the business valuation done.

In this case, the Investment bank works on the buy side. There could also be some other investment banks that could have been working on the sell side. Thus, the earnings of the concerned investment banks shall depend on the total net worth of the deal made.

This is just one of the examples of the various services provided by Investment banking. They maintain the balance between organizations and make seemingly difficult decisions made possible.

Debt Capital Market

Debt Capital Markets – The Preferred Source of Corporate Funding

What is the Debt Capital Market?

It is a market where funds are raised for companies and governments through debt security trading. This also includes the trade of corporate bonds, government bonds, certificates of deposit, preferred stock, credit default swap, etc.

The working capital finance of a company largely depends on capital markets. The two main forms of debt financing include selling of bonds or obtaining long-term loans from individuals, banks, and other financial institutions.

To raise equity capital, a firm sells a percentage of ownership and does not pay any interest. But to raise debt capital the firm would borrow funds and then will pay the interest on those funds. Though it is similar to a loan or mortgage, when it comes to organizations, they are done at a much larger scale. This is how Debt Capital differs from Equity Capital.

Any company, agency, sovereigns or even a supranational approach the debt capital market team, or the DCM Team for advice pertaining to debt capital raising.

Typically, the role of a junior-level banker of a DCM Team will be to

  • Pitch in clients and potential clients and answer their queries
  • Execute debt issuances for them
  • Provide information to other groups on request
  • Update market trend slides and
  • Document recent deals made.

In Debt capital market the volume is higher and the margin in lower when compared with the equity capital market. This is also because the global credit markets are larger than the global equity markets as the deals happen within a few days compared to the equity market deals which take weeks or even months. This also facilitates a number of deals to happen, making the market very large.

So, investment banks here charge very less compared to other services like IPO, etc. This is compensated with a higher number of deals.

The debt capital market is preferred because debt cost usually is between 4% to 8% compared to the equity cost being 25% or more. Debt is also a safer option as there are other alternatives to rely upon when the company does not perform well.

The structure of Debt capital markets Team depends on the banks along with the nature of services they provide.

Some banks combine Debt capital market with Leveraged Finance.

Some banks divide their team as corporate issuers and government issuers. They may be again divided based on industry verticals.

There will also be a syndicate team, as in equity capital market, that is responsible for order allocation among investors and builds bond offering books.

Thus, while considering the various options available for corporate financing, the debt capital market stands out to be the best in terms of process time and also with its less risk nature.

Private Equity Advisory

Private Equity Advisory

Private Equity Advisory

Corporate Governance

Importance of Corporate Governance And Its Benefits

Corporate governance is simply the way in which a corporation is governed. It is a system by which the companies are directed and controlled. This system makes the Board of Directors responsible for their company’s governance.

The board directors, managers, employees, and shareholders have a strong professional relationship. Corporate governance ensures Transparency, Accountability, and Security which are the basis for the understanding among the stakeholders.

Here, the rights of all stakeholders are recognized by the company and facilitate co-operation from all of them for the company’s development and financial stability.

Good corporate governance maintains investors’ confidence. Hence, capital raising is done efficiently and effectively. It also lowers the capital cost and has a positive impact on the share price. Thus it ensures corporate success and economic growth.

The fundamental objective of corporate governance is that it enhances shareholders’ value and the stakeholders’ interests are protected by performance improvement.

Various other elements that are considered and worked upon in corporate governance include rule of law, responsiveness, orientation towards consensus, Effectiveness, and Efficiency, Equity and Inclusiveness, and Participation, Discipline, Independence, Fairness and Social responsibility.

A company that takes care of these different elements of corporate governance is sure to outperform other companies. They will be able to attract more investors which aids in further growth of the finance of the company.

Corporate governance, through mutual agreements, respects the rights of shareholders and investors that are established by law.

Corporate governance is actually a framework of rules and procedures through which, enterprise decisions are made and the controllers are held accountable for their decisions.

A set of corporate governance principles was developed and endorsed by the ministers of ‘The Organisation of Economic Cooperation and Development’. Accordingly, Corporate governance will promote transparent and efficient market-based valuations and also be consistent with the rule of the law. It will clearly articulate the supervisory, regulatory and enforcement authorities through the division of responsibilities.

The rights of the shareholders will be protected. These include ownership registration, share transfer, timely update of information on the corporation, participation in shareholder meetings, voting, and sharing the profits of the corporation.

It also ensures all shareholders, including minority and foreign shareholders, are treated equally and have effective redress for any violation of their rights. Self-dealing and Insider trading shall not be permitted. It also prohibits the key executives and members of the board to carry out transactions that directly affect the corporation.

The corporate governance framework encourages active co-operation between corporations and stakeholders to create jobs, wealth and financial sustainability.

It also ensures accurate and timely disclosure of all material matters related to the corporation which includes ownership, performance, financial situation, and governance of the company are made available.

The effective monitoring of management by the board, the board’s accountability to the company and shareholders and strategic guidance of the company are all also ensured by the corporate governance framework.

Make sure that your company adheres to all the rules of corporate governance so that everything is legit.

Infrastructure Investment Needs

Decisive Factors of Infrastructure Investment Needs

Why do we need a Financial Investment? Because, it ensures all our dreams turn real, be prepared for unexpected expenses and make our future secure. It also controls our spending pattern and makes us decide how and what amount should be spent so there is sufficient money for the future.

Let us consider a home buyer. What would be the investment amount needed to own a house? The question may seem simple. But that depends on various factors. The location, the neighborhood, size of the house, materials used for flooring, the faucets, the builder, the realty agent, the banker and of course the negotiation skills of the buyer with all of them and so on.

Such is the case when estimating the infrastructure investment of a country. The ambition of the country and the potency in following that ambition plays a major role in deciding the proportion of investment of the country. Budget constraints hold an important role in investment desires. This is true whether it is a home buyer or a country.

Infrastructural needs should be the reconciliation of what the society aspires and how much society can afford. We have so far been focusing on the quantity of money spent on infrastructure. It’s time we start to focus on the quality and objectives of our spending. When a developing country plans for new infrastructures, the costs estimated by 2030 per year could be between 2% to 8% of GDP.  This also depends on both the quality of services and the quantity and also on the spending efficiency of countries.

There are three scenarios:

In a scenario where the expenditure is low, countries have modest ambitions and high potency. These countries are compelled to pay 2% of GDP each year to generate new capital funding and can satisfy the basic water needs and sanitation facilities and will be able to achieve universal access by the year 2030. They will be able to provide electricity facilities for basic needs only and energy efficiency will be a priority. They will also be able to provide public transport facilities and taxes on fuel could be increased to encourage people to use public transport as much as possible.

In a scenario where expenditures are low, the country’s ambitions are found high and their potency is low. They are required to spend 8% of GDP each year. This helps them safe water to be accessible to all and so is sanitation. Electricity facilities can be increased from the basic needs to a much higher level. Transportation facilities can be improved to meet the needs of the urban dwellers’ use of their own private vehicles.

In a preferred scenario, countries realize that water facilities, sanitation facilities, and electricity are to be provided to all. Focus is also given to greater mobility, food security, protection from floods and decarbonization. They spend about 4.5% of GDP each year on new infrastructure. With this, they will be able to achieve all the above. These countries are also seen spending 2.7% of GDP in addition to infrastructure maintenance. Smart maintenance not only generates savings but also the cost of the total life-cycle is reduced. Transport, water, and sanitation allow up to 50% of savings through this method.

 So, it becomes very important to know what the countries are actually spending.

In the year 2011, the expenditure of developing countries on infrastructure capital investment was nearly 4% of GDP. There will also be a considerable difference in this average across regions.

It is important to note that, the estimated amount of 4.5% spending achieves full decarbonization. The investment paths for full decarbonization wouldn’t be at a higher cost than the polluting alternatives. Hence, infrastructure financing figures need not scare you. With informed decisions, infrastructure related, sustainable development can be achieved as it makes the goals possible.

Services Offered In An Advisory

Services Offered In An Advisory

Services Offered In An Advisory

Capital market

Capital Market Covers Four Services

Capital Market

Features Of Corporate Finance

Features Of Corporate Finance

Features Of Corporate Finance

Middle Eastern Debt Issuance

Middle Eastern Debt Issuance Up 53% in H1

Middle Eastern issuance of debt has increased 53 percent year-on-year to $57.4bn in the first half of 2017, its best start to the year in decades, according to Thomson Reuters.

In its report, the company said the increase marked the best first half since 1980 and came thanks to Saudi Arabia’s $9bn bond issuance in April and Kuwait’s $8bn issuance in March.

The two countries accounted for 21 percent and 18 percent of the activity by value respectively.

However, Thomson Reuters said it did not reflect positively on Middle Eastern banking fees, which were down 15 percent compared to the same period last year to $462.1m.

This was despite an 88 percent increase in debt capital markets underwriting fees to $136.9m, with debt accounting for 30 percent of the overall Middle Eastern investment banking fee pool – “the highest first-half total in the region since our records began in 2000”, according to the firm.

MENA region managing director at Thomson Reuters, Nadim Najjar, said capital market fees increased by 36 percent to $39.7m, with M&A transactions fees accounting for $98.0m – a 20 percent decrease since last year and the lowest H1 total since 2012.

“Syndicated lending fees declined 41 percent year-on-year to $187.6m, a three year low,” Najjar said

Completed M&A advisory fees accounted for 21 percent and equity capital markets underwriting fees 9 percent, he added.

HSBC earned the highest investment banking fees in the Middle East at $29.2 m, or 6.3 percent share of the total.

The value of announced M&A transactions with any Middle Eastern involvement increased by 8 percent to $20.1bn with energy and power deals accounting for 41 percent of the total.

Despite this, the report highlighted that domestic and Inter-Middle Eastern M&A declined by 46 percent and outbound M&A activity declined by 13 percent.

Source – http://gulfbusiness.com/middle-eastern-debt-issuance-53-h1/

Capital Raising

Capital Raising – A Key Challenge for Business Growth

For any typical business, access to appropriate funding is a major challenge. Many businesses struggle due to cash flow, lack of access to working capital, or probably due to wrong funding solutions not suited to nature or cash flow profile of the business. Many businesses struggle to grow beyond a threshold due to sub-optimal funding strategy.

Global financial uncertainty continues to cause anxiety amongst issuers and providers of capital. Corporates fear that future funding needs may not be met, while providers of finance worry about their capital positions and are not confident about funding corporates in a fast-changing business environment.

We have seen recently in UAE number of trading business houses “running away” leaving behind a significant amount of bad loans for the banks. Bankers, Financial Institutions and Investors are becoming more and more cautious thereby choking the flow of funds to even genuine business houses.

Broadly speaking, capital needs for a typical business can be categorized into Debt and Equity Capital with each of them having their merits and demerits. I will outline a few guidelines that can help to prepare your business for efficient capital raising (Debt / Equity) and tapping the diversified pool of liquidity:

  1. Think BIG -> Plan your funding roadmap: Relying purely on Private Sources for capital needs limits the business growth. Many successful large business houses could not have grown to their present size without being able to raise capital through multiple and large liquidity pockets i.e. Financial Institutions (Banks / NBFCs) and further through Capital Markets (Debt and/or Equity)
  2. Clearly Define your Funding Strategy: While developing and defining a Funding Strategy for business, Management must deliberate on following major factors: What is the most appropriate Capital Structure for the business?; What is the optimum level of leveraging / gearing for the business?; Rely purely on debt solution or expand through diluting equity stake?; What sort of debt instrument or combination of debt instruments is best suited for the business?; How much of working capital is required?; CAPEX Funding v/s Working Capital Funding Cash flow Management – debt profile or maturity is in sync with operating cash flow generation of the business?
  3. Identifying the right level of debt for the business: Both Under leveraged Balance sheet and Over Leveraged Balance sheet are not considered good for the business: The degree to which a business is utilizing borrowed money is defined as Financial Leverage. Companies that are highly leveraged may be at risk of bankruptcy if they are unable to make payments on their debt; they may also be unable to find new lenders in the future. Financial leverage is not always bad, however; it can increase the shareholders’ return on investment and often there are tax advantages associated with borrowing. Generally, business owners with a very low-risk mindset end up in an underleveraged business. A Behavioural argument suggests that a business may also become inefficient due to under leveraging, as the lenders may also help and create appropriate checks and balance for the business and bring financial discipline which is very important for the continued growth of the business.
  4. Identification of Right Funding Solution / Instruments: Many businesses fail due to the implementation of poor funding strategy/solution. For e.g. an Infrastructure project with a payback profile of say 10 years should not ideally be funded with a Term loan with three years of maturity. The cash flow profile of the business should be matched with the debt maturity profile. We have seen a number of countries/businesses getting into the financial crisis due to the wrong funding solution. Also, the optimum cost of funding can be achieved by applying the right funding solution. For e.g. an equipment purchase may be cost efficient if financed through lease financing compared to business loans. Similarly, procurement of a Capital Asset with ECA backed financing can be more cost efficient compared to a normal business term loan.
  5. Continuous Planning and Financial Discipline: Ability to raise capital (debt or Equity) to fuel business growth is a virtue. This requires years of planning and financial discipline. It cannot be an overnight solution. Careful planning and preparation are critical for a successful capital raising initiative. Companies have to plan well in advance and put in place dedicated resources and advisors to work in a focused manner. This includes but not limited to following key considerations and preparations: Implementation of Corporate Governance Mechanism; Documentation of policies and procedures; Transparency – Keeping Investors / Potential Investors Informed Audited Financial Statements Clean Audit Reports; Working with right set of Auditors and Advisors Clean Financial History of the company as well as promoters; Management Profiles; Banking Relationships; Management Accounts and reports; Public Profiling of the company; Risk Management framework, Internal Controls; Market Timing: Keep yourself ready and approach the market when the market is right for you
  6. Clear demonstration of the usage of the Capital: When a company issues new Debt or Equity, the borrower/ Issuer should be able to clearly articulate the specific purpose of the required new capital. The most common purposes of new debt include the following: To Fund CAPEX; To Fund OPEX / Working Capital; To Fund Growth / Expansion; To Acquire New Asset; To REFINANCE existing loan with a relatively cost-efficient loan; To REFINANCE existing Debt with a better structured debt more suited to the cash flow profile or capital structure;

Audited financial statements are subject to a series of judgment. Bankers, Investors or Analysts rely on Audited Books of Account, along with other due diligence which they generally perform. For those reasons – bankers, financial institutions and Analysts are more and more willing to accept reports from reputed Audit Firms and Advisors only. Bubble, crisis, contraction, and recovery are stages of the business cycle that keep repeating. Capital flow is closely linked to the economic cycle. In stricter market conditions, a robust business model, strong balance sheet, readiness to embrace greater investor scrutiny and accepting higher financing costs might be required. You can certainly achieve your objective with thorough planning and careful execution. Better get this right the first time, it becomes more difficult after one failed attempt. “Timing is Key” – Pitch it carefully. Keep your financial history clean and make it a competitive process by networking with the right set of bankers, financial institutions, and investors.

Be Transparent and Truthful: The financial markets are becoming more and more intelligent to see through any “Smart Accounting” or “Window Dressing”

Alternative Funding Options For SMEs

Alternative Funding Options For SMEs

The role of the SME sector in generating employment cannot be denied in any economy and more so in the UAE where SMEs contribute to about 90% of the total employment. One of the major challenges faced by SMEs is to get funds from banks for their working capital requirements and for capital expenditure. In the UAE, only 4% of the total bank lending is in SME sector. Approximately 77% of SMEs in Dubai have no access to bank lending.

In such a scenario, alternative funding options will remain an integral part of SME’s financial toolset as credit for them remains constrained. An OECD Scoreboard, which assessed access to finance for SMEs in 34 countries, found that though bank lending is still the main source of finance for small businesses, bank lending hasn’t recovered to pre-crisis levels. The OECD report points out that alternative instruments such as crowdfunding and factoring are gaining traction, but warns that high levels of non-performing loans will continue to hamper bank’s willingness to lend to SMEs.

In the UAE, there are few government-backed initiatives to support SMEs, the notable amongst them being the Khalifa Fund and Mohammed Bin Rashid Establishment for SME Development (MBRE). However, most of the aforementioned institutions aim to fund UAE nationals.

In light of SMEs not getting easy access to funds from banks, what are the alternative funding options available for SMEs? I would like to highlight a few alternative funding options for SMEs in UAE.

Factoring

Factoring can provide a quick and easy alternative funding to business. Factoring companies can fund part of the working capital cycle swiftly. There are several advantages of factoring. Notable ones are:

Factoring is possible for export sales to advance 80% to 90%

  • Factoring could potentially be non-recourse financing
  • Financing without providing additional securities
  • Improve your balance sheet ratios
  • Factoring company does a collection of receivables & book-keeping on your behalf
  • Factoring companies deal with your customers in different Jurisdictions and speaking different languages

However, factoring can only provide part of your working capital needs and the factoring solution is available only when you are dealing with good customers. The cost of financing for factoring can be on the little higher side compared to bank financing due to insurance cost involved and potentially higher cost of capital for such factoring companies.

Lease Financing

One of the most popular asset financing products in most of the industrialized world is leasing. Business houses procuring cars, equipment, machinery, IT hardware, healthcare equipment, shipping vessels, etc. may require significant capital to procure such assets. Such assets can better be funded through leasing compared to bank loans. Vendors (who are selling such equipment) can also offer lease financing solutions to their customers by tying up with leasing companies. Some of the key advantages of lease financing are:

No additional collateral required.

  • The cost of lease finance is competitive with traditional credit, given the increased security held by lessors and the low transaction costs of processing a lease.
  • Leasing also offers matched maturity of assets/liabilities.
  • Islamic compliance: Leasing is seen as an interest- free product and considered the same as a rental.
  • Leasing enables companies to match income and expenditure.
  • Leasing also has advantages of a quick decision-making process, flexibility, and negotiability.
  • Leasing deals may make less use of the restrictive covenants that appear in more traditional forms of lending.
  • Where lessors have asset knowledge or relations with suppliers, lessees may “outsource” certain tasks (such as negotiating with suppliers), reducing costs and risks.
  • Leasing enables investment in equipment that can modernize production and improve productivity and profitability.
  • Due to reduced upfront costs, leasing frees up capital for other business needs.

In the UAE, other than banks, there are few leasing focused companies providing lease finance solutions directly to customers as well as by tying up with vendors (who are selling such leasable assets). For vendors, tying with a right lease finance company can potentially be a game changer for their business. Vendors selling high-value assets on credit terms can offer different payment options to their customers with the help of such leasing companies, whilst at the same time, significantly reduce their working capital tied up in the receivables.

Crowd – Funding

Crowd-funding can be a cost-effective way for businesses to raise funds and evidence suggests that its popularity is growing among businesses globally. The level of crowd-funding awareness across the globe has increased significantly over recent years. Policy makers and media have significantly contributed to raising this global awareness. This trend will continue into 2016 leading to a significant rise in the number and diversity of crowd-funding sites. In the UAE as well, there are emerging crowd-funding platforms providing an alternative funding solution for the SME sector. Crowdfunding is still a relatively new concept in the UAE and few businesses have obtained finance using it to date. But, as awareness of crowdfunding will grow in the region, it has the potential to become a viable alternative to a bank loan.

Unlike traditional financing methods, where businesses try to raise large amounts of money from a few financial institutions or individuals, in crowdfunding, a business utilizes an online platform to target a larger number of potential funders.

This usually involves creating a profile of your business project on a crowdfunding website, before inviting people to lend, invest or donate money to help make it a reality. Each funder pledges a small proportion of the overall funding, which is then pooled together with other funders until the target amount is reached.

It is not a new idea – in reality, crowdfunding is just an updated version of collective fundraising or a co-operative. However, because it’s based online, crowdfunding provides access to a virtually limitless pool of potential funders, improving access to finance for businesses in a way that simply would not have worked a few years ago.

Finally, Apart from the above options discussed, there are other alternative funds/financing companies providing working capital finance, project-based mezzanine financing, and last mile financing solutions to companies in the region. We have come across a few good businesses who are struggling due to erratic pullout recently by their relationship banks, putting significant pressure on their working capital cycle. There are some clients in niche sectors, not able to find bank funding because such clients are not the focus of banks generally. The alternative available options can potentially help in financing / refinancing efforts. There are alternative financing companies tapping on the opportunity currently being provided by the banking sector in the UAE.

financing in UAE

RAKBANK partners with MI CAPITAL to provide Tax and Accounting Advisory to Business Customers

Dubai – MENA Herald:

The National Bank of Ras Al Khaimah (RAKBANK) has partnered with MI CAPITAL, a leading corporate finance and business advisory firm. The partnership will bring specialized services to RAKBANK Business Banking customers through a dedicated channel. Customers will have access to VAT and accounting advisory, VAT compliance tools, in-house accounting and remote accounting services.

RAKBANK partners with MI CAPITAL

Working Capital Finance

MI CAPITAL tie up with LIC Housing Finance Asset Management Company

Gulf investors will now be able to tap the $88.23 billion (INR6 trillion) affordable housing market following a tie-up between MI CAPITAL, a Dubai-based financial institution dealing in corporate finance, capital restructuring, mergers and acquisitions, and Life Insurance Corporation Housing Finance Ltd. Asset Management Company (LICHFLAMC).

MI CAPITAL tie up with LICHFLAMC

Testimonial

Testimonial