Why NRI

investments
in Kerala Fail?

Ameen Ahsan
strategy consulting
Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

It is the dream of every single NRK (Non Resident Keralite) to settle

in Kerala, one day. And for that they always wish to have a solid
investment that gives them the financial security.
Few NRKs have succeeded in achieving this goal. But a large
number has failed miserably. And fearing a similar failure, an even
bigger population of NRKs have not yet invested.
Ameen Ahsan, business strategist & consultant, wishes to highlight
few major issues that causes these failures, and few suggestions
on how it can be averted. The findings and suggestions are based
on Ameen Ahsans interaction with a number of NRIs, investors
and promoters.
Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

This presentation covers,

1. Mistakes in Selecting A Business Idea
2. Mistakes in Selecting Promoters
3. Mistakes in Investment Evaluation
4. Mistakes in Investing
5. Mistakes in Finalizing Contracts
6. Mistakes in Management
Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Mistakes in Selecting A Business Idea

Assuming that Kerala is like Gulf Countries
Everyone knows it, but at important times, most
people forget.
How things work in Gulf countries, does not
happen in Kerala
In Kerala, for anything to happen it takes more
time, effort and will power
Assuming that Keralites tastes are like those of NRIs in
Gulf
NRIs often make the mistake of assuming that
what clicks in Gulf will click in Kerala as well
This may not be so for all situations, as many
factors can cause a reverse preference back
home

Solution:
Look before you leap
Do a proper research by seeking local
knowledge, personal research or get
professional advise

Having a Dream project that is unfeasible

It is important to have a dream, and work hard
for it. But the dream should be realistic and
feasible
Running behind a dream without proper research
can lead to big budget business failures
Not doing a market survey or market study
Most NRIs make the mistake of investing in a
business or new concept without doing a market
study
Only when a study is done, can the NRI know if
his concept has potential or not
Investing in a Glamour Business
Some NRIs get attracted by Glamour businesses
(businesses that give prestige value to the
owners). But most glamour businesses are not
that profitable and are heavily competed

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Mistakes in Selecting Promoters

Falling in for Guaranteed Profit schemes and
Monthly Profit Distribution schemes
These days, one gets to see many monthly fixed
profit and profit guaranteed schemes
Only very few business models can support this
system
Most such systems are devised by desperate
promoters seeking investment without proper
planning (as was evidenced by few recent
business collapses)
In such cases, ask the promoter how he can
assure such returns, during bad times and low
seasons.
Always remember, desperate and fraudulent
promoters always target greedy investors. Be
wise.

Solution:
Look before you leap
Ask for explanations, facts and
supporting proofs

Falling in for words not actions

Some Promoters who approach NRI investors are
very good at words
They may not have any reports to prove their
assumptions, nor they may posses any
experience to back their claims
Beware! Always look for hard facts and prior
experience of the promoters
Falling in for vague unsupported statistics from
promoters
Some promoters will present some numbers
which look very promising
These numbers can be assumptions or based on
some reports
If assumptions, ask for explanations . Always
assume below average business performance for
your calculation to be on safer side
If the numbers are based on some reports make
sure you read that report

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Mistakes in Investment Evaluation

Not having a detailed Project Report (even if the
promoter is an expert)
Many a times, Investors do not know anything
about the business they invest and hence are at
the mercy of the promoters
A detailed project report explains what a business
is, how it should be managed, how the process
flows, and what risks it faces
This is a must, if the investor and promoter are
new to this business.
Even if the promoter is experienced, it is a must
for the investor to know A to Z of the business he
is going to invest his hard earned savings
A project report will educate the investor and the
promoters cannot fool him

Solution:
Ask the promoter for Project Reports
with detailed financial study as well as
Risk Analysis, for any business (its your
right)

Not having a Financial Study

Most promoters are not experts in financial
planning, and hence decide capital requirement
by simple calculations.
When business commences operation all
calculations go wrong, and the investor will be
compelled to invest more
A detailed financial study, under various business
scenarios help the investor to know in advance,
financial implication under various scenarios.
Make sure the investor has a financial feasibility
report that shows investment requirement and
profitability under various business scenarios
Not having a Risk Assessment
Promoters usually under-play risk elements
But investors should know of all risks , from the
highly possible ones to the remote ones
Investors should also know what remedial actions
does a promoter have, when faced with such
risky situations

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Mistakes in Investing
Heavy investment into a single project
Some investors do the mistake of investing major
part of their savings into a single project,
assuming that they will make huge profits.
In reality, if this business fails (which can always
happen to any business), the investor loses
everything
Investors should diversify their risk, by investing
small amounts in a number of businesses
This will ensure that even if some business fails,
not all will be lost

Solution:
Spread your investment
Minority stakes
See Kerala as a long term investment

Majority shares in a local business

As an NRI investor, you can never be involved in
the day to day affairs of a business based in
Kerala
In such cases, you should never hold the major
share in that business.
This is because, the promoter in such cases will
be holding a minority stake, and will lose little if
the business fails. Also, if the business makes
profit, he earns less. Hence his commitment will
be less as well
Expecting quick profits like in Gulf
In Kerala, NRI investors should not expect quick
profits like Gulf
In Kerala, an average business takes 1-2 years to
break even, and more than 5 years to pay back
(depending on the industry)
But investing in Kerala is a long term investment,
it grows by the year

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Mistakes in Finalizing Contracts

Surprisingly, Investors dont read!
From our experience, we have found that only a few investors take time to read through the
ownership agreements like partnership deeds, or memorandums
They usually trust the promoters ,Chartered Accountants or Lawyers who prepare them
In fact, ownership documents should be prepared by understanding the nature of the business and
forecasting the possible complications like succession, changes in management people (few among
the many issues)etc. To ensure that all areas are covered, the investors have to read through and
think deeply how it is going to affect his share, control and interest in the firm in the future under
various scenarios

Solution:
Read the agreements in detail
Consult professional advisors to ensure
that, in all future scenarios, the investor
is secure
Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Mistakes in Management
Engaging Relatives as Managers
Many NRIs do the mistake of engaging their
relatives to manage their business, this is a
dangerous mistake that can spoil business as well
as family relationships
Leave the day to day management to professional
employees, and if necessary keep a mature,
honest and reliable relative as a director to
monitor their performance on a periodic basis
(without any direct role in the business)
Assuming Kerala is cheap to operate
Doing business in Kerala has many hidden and
unpredictable costs, all of which has to be
considered

Solution:
Spread your investment
Minority stakes
See Kerala as a long term investment

Two Accounts trap

Some promoters convince the investors that they
need to keep 2 accounts to evade taxes
This is not only illegal and can cause legal
complication to the firm when caught
But also gives opportunity to promoters to
maintain a corrupt accounting system, in which
the investor can also be cheated!
In group businesses, where investors are involved
(especially NRI), accounting should be
professional and transparent. This is possible only
in businesses that pay taxes as per law
Assuming qualified and un-qualified manpower is
easy to get
As we understand, Kerala does not have
unemployment, but it has a large population of
unemployable youth and youth not willing to
work
Getting qualified and unqualified manpower who
are dedicated is a challenge in Kerala, as most
such candidates are looking for jobs overseas

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Conclusion
Kerala is a great place to invest. There are many successful business groups in Kerala. But
you have to take care of the following;
For an NRI, it is always safe to invest in the business promoted by successful local players (as they
know the market better than the investor); and not go for own businesses by employing managers
As an NRI investor who is a silent investor, never be the major share holder
Never invest your full savings in a single project, spread it.
Never invest by taking short term loans from others, or banks
If you are going to start a new business, make sure that you do a market study/ survey, financial
feasibility study, operations study and risk assessment (totally called as project report). In case you
are not an expert in the same, nor you have time, then engage a reliable experienced business
consulting firm to do it for you.
If you are approached by a promoter with a project, invest only if he has a convincing business
plan or project report to show you. If the report was prepared by a professional consulting firm,
then contact them to get more details
Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Capella Ventures, is a business strategy advisory firm specializing in providing

business research and project report services to upcoming projects in Kerala.
Capella
Ventures
is based
in Calicut
Mr. Ameen
Ahsan, provides
various
servicesand headed by professionals who have
for
upcoming businesses
projects
international
exposureand
and
have in
delivered quality research works to a number
Kerala,
like,across Kerala.
of clients
Project
If you Conceptualization
have any comments on this presentation or wish to know more about
Feasibility Studies
Capella Ventures, then please write to ceo@capellaventures.in
Project Reports
strategy consulting
Business Plans
Turnkey Implementation of Projects

Ameen Ahsan

Or you can contact us at,

If you wish to know more about Mr. Ameen

CapellaorVentures
Ahsan
about this report, please feel free
Sandy
Nook
Building,
to
contact
him,
via, Customs Road,
Calicut 32, Kerala, India
Tel: 0091 495 4022224
Email:
Mobile:info@capellaventures.in
+9995 900 800
Web:
Email:www.capellaventures.in
info@ameenahsan.com
Facebook: www.facebook.com/Ameen.Ahsan.M

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com

Thank you.

>> if you like this presentation. Please forward it your friends.

Ameen Ahsan Strategy Consulting | +9995 900 800 | info@ameenahsan.com