ID# 10364057
Letter of Transmittal
20 December 2012 Ms. Mahatab Faruqui Senior Lecturer BRAC BUSINESS SCHOOL BRAC University 66, Mohakhali Dhaka-1212 Subject: Submission of Internship Report Dear Sir I am submitting an internship report titled for Cost of Capital And Financial Analysis of Beximco Pharmaceuticals LTD. Your guideline has been followed in every aspect of preparing this report. I have really enjoyed working on this project and I hope that my work would meet the level of your expectation. Any query on this report is appreciated. Thank You.
Yours Sincerely
Marshal Richard
ID#10364057 Brac Universiry
ACKNOWLEDGEMENT
Its difficult for me to thank all of those marvelous people who have contributed something of them to this report. There are of course some very special people who cannot go without mention. At first I express my gratitude and indebtedness to my academic supervisor Ms. Mahatab Faruqui for her continuous guidance, important advice, encouragement and suggestion during the preparation of the report. I thank of her for sparing her valuable time to read the report. Then, I express my sincere gratitude to Mr. Jamal Ahmed Choudhury, Executive Director, of BPL for his guidance, constants supervision and constructive suggestions. Without his help this report might not have been a comprehensive one. I would also like to thank Mr. Kamal Uddin Ahamed, Manager, Accounts and Finance. Without his help I cannot prepare my report so informative. I have bothered him so many times in connection with my works, both during and after normal working hours. Finally I am grateful to all the cooperative staffs of the Accounts Department of BPL. As also I would like to give thanks especially to my friends & many individuals, for their enthusiastic encouragements and helps during the preparation of this report and for their assistance in typing and proof reading this manuscript.
EXECUTIVE SUMMERY
This internship report includes the process of reviewing and evaluating a Beximco Pharmaceuticals Ltds cost of capital and measuring ratios, thereby gaining an understanding of the financial shape of the company and enabling more effective decision making. Cost of capital analysis of Beximco Pharmaceuticals express the companies cost of using funds provided by creditors and share holders. This analysis belongs to two so called method- 1. Capital asset pricing (CAPM) method and another is 2. Dividend growth model. By analyzing CAPM method lots of factors have considered such as Beta factor, risk free rates, interest rates and weighted of the capital structure of BPL and so on. On the other hands, by analyzing dividend growth model; dividend of 2000 to 2011 and its growth rates has been considered as also the current market price of BPls share. This report prepared to make a thorough analysis of the annual report of Beximco Pharmaceuticals Ltd (BPL). The report mainly highlights the results of various ratio analysis of the company. In order to make the analysis more informative, inter-firm comparisons have also been provided by performing ratio analysis of other leading pharmaceutical companies in Bangladesh. It is hoped that the report would provide a reliable & effective insight into the performance of the particular company. I have taken all the reasonable care to ensure the quality of the report and I hope that it includes all the necessary information which is in the scope of my ability. I would like to express that my effort for this report will provide a better picture regarding the subject matter of the study. Finally I come up for some recommendation which is suitable for Beximco Pharmaceuticals future prospect.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION.............................................................................................................. 6 ORIGIN OF THE REPORT: .................................................................................................................................. 7 OBJECTIVE OF THE REPORT: ............................................................................................................................ 7 SCOPE OF THE REPORT: .................................................................................................................................... 7 METHODOLOGY OF THE REPORT: .................................................................................................................... 7 ORGANIZATION OF THE STUDY ........................................................................................................................ 8 LIMITATIONS OF THE REPORT: ......................................................................................................................... 8 CHAPTER TWO: OVERVIEW OF THE COMPANY ................................................................................ 9 HISTORICAL BACKGROUND:.......................................................................................................................... 10 VISION: .......................................................................................................................................................... 11 MISSION: ........................................................................................................................................................ 11 CORE VALUES: .............................................................................................................................................. 11 BOARD AND MANAGEMENT .......................................................................................................................... 12 PRODUCTS: .................................................................................................................................................... 13 CORPORATE STRATEGIES: ............................................................................................................................. 13 CORPORATE SOCIAL RESPONSIBILITY: .......................................................................................................... 16 THE REASONS BEHIND BEXIMCO PHARMACEUTICALS LIMITED SUCCESS: ................................................... 17 CHAPTER THREE: DESCRIPTION OF JOBS ......................................................................................... 19 DEPARTMENTS OF BEXIMCO PHARMA .......................................................................................................... 20 BRIEF DESCRIPTION OF ACCOUNTS & FINANCE DEPARTMENT ..................................................................... 20 HIGHER AUTHORITY OF ACCOUNTS AND FINANCE DEPARTMENT: .............................................................. 21 WORK EXPERIENCE IN BPL ........................................................................................................................... 23 CHAPTER FOUR: COST OF CAPITAL AND RATIO ANALYSIS........................................................ 24 COST OF CAPITAL ANALYSIS: ........................................................................................................................ 25 RATIO ANALYSIS: .......................................................................................................................................... 30 COMPARATIVE ANALYSIS ............................................................................................................................. 35 CONCLUSION ........................................................................................................................................ 37 KEY FINDINGS ...................................................................................................................................... 38 RECOMMENDATION .......................................................................................................................... 39 REFERENCES ........................................................................................................................................ 40
Primary Source
Careful observation of various activities of related section of that particular department. Discussions with the officials of Accounting and Finance department.
Secondary Source
Organizational Brochures/ Annual Reports. Online information. Different BPL publications. Other relevant written materials.
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HISTORICAL BACKGROUND:
Beximco Pharmaceutical Ltd. is a leading edge pharmaceutical company based in Dhaka, Bangladesh and is a member of the Beximco Group. The history of pharmaceutical business of the company dates back to the early 70s, when it started to import market and distribute medicines from world renowned companies like Upjohn Inc. of USA and Bayer AG of Germany. Since the very beginning, the company was highly successful in generating increased demand for its products which eventually justified local production. It completed its registration in 1976 and started its operation in 1980 by manufacturing and marketing licensee products of Bayer AG of Germany and Upjohn Inc. of USA. After its initial years of struggle it broke ground with the launching of its own products in 1983. In 1985 BPL was listed in Dhaka Stock Exchange (DSE) as a Public Limited Company. The journey continued and barrier after barrier were crossed, challenges were faced and overcome to transform BPL into what it is at present. Now it has grown to become nation's one of the leading pharmaceutical companies, supplying more than 10% of the country's total medicine need. In the process, it was enlisted in Chittagong and London Stock Exchange. Today Beximco manufactures and markets its own `branded generics' for almost all diseases from AIDS to cancer, from infection to asthma, from hypertension to diabetes for both national and international markets. It manufactures a range of dosage forms including tablets, capsules, dry syrup, powder, cream, ointment, suppositories, large volume intravenous fluids, metered dose inhalers etc. in several world-class manufacturing plants, ensuring high quality standards complying with the World Health Organization (WHO) approved current Good Manufacturing Practices (cGMP). Beximco also contract manufactures for major international brands of leading multinational companies. Beximco has a strong market focus and is anticipating continued future growth by leveraging business capabilities and developing superior product brands and markets. In particular it is very interested in developing a strong export market in USA and Europe. To meet the future demand it has invested over US 50 million dollar to build a new state-of-the-art manufacturing plant, confirming to USFDA and UK MHRA standards. This new plant will also offer contract-manufacturing facility to leading pharmaceutical companies, especially from Europe and US.
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VISION:
Be one of the most trusted, admired and successful pharmaceutical companies in the region with a focus on strengthening research and development capabilities, creating partnerships and building presence across the globe.
MISSION:
Committed to enhancing human health and well being by providing contemporary and affordable medicines, manufactured in full compliance with global quality standards. Do continually strive to improve its core capabilities to address the unmet medical needs of patients and to deliver outstanding results for shareholders.
CORE VALUES:
Its core values define who they are; those guide themselves to take decisions and help realize their individual and corporate aspirations. Commitment to quality: They adopt industry best practices in all their operations to ensure highest quality standards of their products. Customer satisfaction: They are committed to satisfying the needs of their customers, both internal and external. People focus: They give high priority on building capabilities of our employees and empower them to realize their full potential. Accountability: They encourage transparency in everything they do and strictly adhere to the highest ethical standards. They are accountable for their own actions and responsible for sustaining corporate reputation. Corporate social responsibility: They actively take part in initiatives that benefit society and contribute to the welfare of people. They take great care in managing their operations with high concern for safety and environment.
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The Board of Directors:A S F Rahman Salman F Rahman Nazmul Hassan MP Iqbal Ahmed Mohammad Abul Qasem Osman Kaiser Chowdhury Abu Bakar Siddiqur Rahman Advocate Ahsanul Karim Dr. Abdul Alim Khan Md. Asad Ullah, FCS Chairman Vice Chairman Managing Director Director Director Director Director Director Independent Director Company Secretary
The Executive Committee:Osman Kaiser Chowdhury Nazmul Hassan MP Ali Nawaz Afsar Uddin Ahmed Member of the Board of Directors Managing Director Chief Financial Officer Director, Commercial
The Management Committee:Nazmul Hassan MP Osman Kaiser Chowdhury Rabbur Reza Ali Nawaz Afsar Uddin Ahmed Lutfur Rahman Zakaria Seraj Chowdhury A R M Zahidur Rahman Shamim Momtaz Mohd. Tahir Siddique Jamal Ahmed Choudhury Managing Director Member of the Board of Directors Chief Operating Officer Chief Financial Officer Director, Commercial Director, Manufacturing Director, International Marketing Executive Director, Production Executive Director, Manufacturing Executive Director, Quality Executive Director, Accounts & Finance
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PRODUCTS:
The companys diverse product portfolio encompasses a wide variety of therapeutic categories, including antibiotics, analgesics, respiratory, cardiovascular, central nervous system, dermatology, gastrointestinal etc. BPL currently produces 235 generics in 426 strengths and dosage forms and many of the companys brands are consistently occupying leading positions in their respective therapeutic categories. In 2011 Beximco Pharma introduced 40 new generics in a total of 55 presentations, five of which were launched for the first time in Bangladesh. Also included seven ophthalmic drops, three HFA asthma inhalers and also drugs in categories such as, three cardiovascular, two multivitamins, two musculoskeletal, two antiinfective, and one anti-diabetic, among others. The three HFA-based inhalers which were launched for the first time in Bangladesh in 2010. Also introduce for first time into the market was a formulation of Paracetamol 665 mg. Napa Extend. Beximco Pharmas Growth prospects remain excellent with key blockbuster products such as Napa and Neoceptin-R in its portfolio. In 2010 Napa and Neoceptin R ranked 2nd and 4th respectively on the national Top Five list. More over ten of BPLs brands have annual sales in excess of BDT 100 million each.
CORPORATE STRATEGIES:
Distinguished Manufacturing Capability
In 1980 it was small in operation but big in dreams and passionate with its vision - building a healthier tomorrow where people will live longer, healthier and happier. Located at Tongi, near the capital city Dhaka, BPLs manufacturing site is spread over an area of 20 acres, which houses a number of self-contained production units including oral solids, metered dose inhalers, intravenous fluids, liquids, ointments, creams, suppositories, ophthalmic drops, injectables, nebulizer solutions etc. (<http://www.sagia.gov.sa/en/Archive/SAGIA/Partner-companies/Beximco-Pharmaceuticals-Ltd-/ >) The
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bulk drug unit for producing paracetamol is also located within this site. Companys penicillin API and formulation units are situated at Kaliakoir, a few kms from the main site. The plant and machinery throughout the site have been designed by and procured mostly from renowned European companies. Beximco Pharma has its own utility infrastructure to ensure adequate generation and distribution of purified water at all times. The installed capacity of power generation is 8MW. There is also liquid nitrogen generation facility on site.
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Global Strategy
Beximco Pharma always took the leading, proactive and pioneering role in exporting pharmaceuticals from Bangladesh. Beximco Pharma commenced its international operations with the export of API to Hong Kong in 1992 and formulation products to Russia in 1993. The company has received the National Export Trophy (Gold) for an impressive three times. Since then, BPL has taken greater strides over the years to increase its footprints in international markets. In 2010, BPL successfully ventured into several new countries including South Africa (via contract manufacturing) and Netherlands Antilles, and registered 45 products in overseas markets. The company achieved export revenues of Tk 330.54 million, up 21.47% over 2009. The current expansion of this overseas portfolio includes prioritizing and directing marketing operations to focus more on highly regulated markets such as the European Union (EU), USA, Australia and GCC member countries for value added generics. As of 2010 Beximco Pharma has 322 products registered in Asia, 91 in Africa, five in Central and Latin America, and 22 in Middle East, while we are actively taking measures to register our products in attractive branded generic markets such as the CIS states and the EU countries. BPLs products are highly trusted for their quality by physicians and consumers at home and abroad. With this acclamation BPL is supplying different formulations from its portfolio to renowned hospitals and institutions including Raffles Hospital, Heathway Medical Group & K. K. Women and Children Hospital in Singapore; Asthma Drug Facility (ADF) in France; CENABAST in Chile; and MEDS and Kenyatta National Hospital in Kenya. BPL is constantly investing in its state-of-the-art manufacturing facilities to significantly expand its capabilities to meet the regulatory requirements of developed countries. (Annual Report, 2010). BPL has pursued approvals from different drug regulatory authorities, e.g. TGA (Australia), GCC (Gulf Council), ANVISA (Brazil) and INVIMA (Colombia), which highlights BPLs credentials as it explores new opportunities in the export arena.
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Financial Strength
BPL has considerable financial strength in comparison to most but Incepta is not far behind while Square Pharmaceuticals has substantial financial strength as well. Relative Financial strength is something that BPL should always try to monitor after all this the criteria on which corporations choose financial decisions regarding its debt/equity mix (capital structure of a firm),maturity structure (maturity of assetsand liability), method of financing investment projects (project appraisal or capital budgeting) and other decisions with a goal of maximizing the value of the firm i.e. the value of the shareholders wealth.
Strong Relationships
Through Beximco Pharmas eyes, at the core of every successful partnership is a professional relationship based on mutual trust and respect. Beximco Pharma recognizes and understands that Its alliances and partnerships are a core component to accomplishing its strategic global aspirations. Beximco Pharma believe that the right alliances can contribute appreciably to the achievements of Its partners as well as to its own vision and sustainable growth. Beximco Pharma has a successful track record of partnerships and alliances with global MNCs such as GSK, Aventis, Bayer AG, Upjohn Inc and Ciba. The company has successfully established its brand value within the medical community. The company seeks to further reinforce its relationships with all major stakeholders in the healthcare value chain. BPL differentiates itself by providing value added, academic services to the medical community in the form of seminars and symposia, clinical meetings, scientific publications and the like. Beximco Pharma engaged in constant communication with doctors to ensure prompt feedback and meet any requests for academic services, (Annual Report, 2010).
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Food and Medicine donation during different natural disasters. Sponsoring, organizing & participating many cultural and sports events like Corporate Cricket League, SAAF Football Championship, Inter-School Handball tournament, Open air concert etc. Publishing posters-banners-festoons, arranging rallies-seminars-conference etc. on AIDS, Diabetes, Smoking, Cancer, Asthma, Birds Flu etc. Beximco Pharmaceuticals Ltd. manufactures CFC-free Metered Dose Inhalers among the few pharmaceuticals in the world.
Overseas Business:
Certification of the relevant manufacturing facility by the duly accredited authorities is the first step of the enduring process of the export of pharmaceutical products. Our manufacturing facilities have been approved by a number of major regulatory authorities. In 2011 we received GMP (Good Manufacturing Practice) accreditation from the Austrian Agency for Health and Food Safety (AGES) for our oral solid dosage and ophthalmic manufacturing facilities. This is another testimony of our manufacturing excellence and important progress towards achieving targeted exports into the regulated European markets.
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BPLs R&D team successfully introduced 40 new generic formulations in 55 different dosage forms and strengths. During this year Beximco Pharma launched combination therapies such as NapaDol(R) (Paracetamol+Tramadol), Dinovo(R) (Naproxen+Esomeprazole) and Glipitia(R)M (Sitagliptin+Metformin). Beximco also outsourced some R&D services to develop certain specialized products for regulated markets, (Annual Report, 2010).
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Manufacturing:
Production Quality Control Quality Assurance Production Planning Research and Developments Engineering Warehouse General Admin Project
Other Departments:
General Management Accounts and Finance Corporate Secretarial Service Procurements Internal Audit Human Recourses Project Management and Business Developments Department of Engineering and Technology
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Executive Director
Manager, Treasury
IOC&BP:
The extended form of IOC& BP is Industrial operation control & budget planning. This section does the Costing and Budgeting of BPL. Their work is not bounded to the costing and budgeting functions only. They provide information to the planning, marketing, purchasing and others departments for proper decision making. This section of accounts and finance department does the reporting to the management. They prepare different types of cost reports. Activities of this department are as follows: Prepare imported material cost sheet. Allocate Overhead to the product. Determine Manufacturing cost of a product. Prepare different types of budgets such as Production budget, Purchase budget, Departmental budget etc. Prepare different types of report such as imported report, COGS report & Production report. Product profitability report, biggest loser report etc. Provide proper data to the planning department relating to costing. Help to control inventory. Identifies the cost centers. Does the inventory valuation. Etc.
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Treasury:
Treasury dept deals with banks and bill it also looks after the cash planning and management. Core Function of Treasury Accounts Wing: Fund management. Maintaining banking transactions loan and leases.
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Method:
1. Capital Assets Pricing Model ( CAPM) 2. Dividend Growth Model
Determine the proportion of each sources of the capital that will be raised. Estimate the marginal cost of each sources of capital.
Cost of Equity:
r = + ( )
Where: r = the return from the investment. = the risk free rate of return. = the beta value of the investment, a measure of the systematic risk of the investment. = the return from the market.
Essentially, the equation is saying that the required return depends on the risk of an investment. The starting point for the rate of return is the risk free rate (Rf), to which you need to add a premium relating to the risk.
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Calculation:
Risk Free Rate of Return:
The rate of interest on a security that is free of all risk. The market risk free rate of return is the return an investor could reasonably expect if they invested their money in a riskless investment. As the market rarely offers a riskless investment, a proxy for the risk free rate is applied. Most commonly, the return that investors can receive on government bonds is used as a proxy.
Cov( Ri , RM )
2 ( RM )
The market risk premium is the rate of return earned on a well-diversified portfolio of assets over the risk free rate. The market risk premium is scaled (using CAPM) measuring the risk of the asset relative to a market index. For My calculation; I took weekly closing stock price and closing index price of DSE for 2011. The beta value of Beximco Pharmaceuticals Ltd was as determined to be 0.87 for 2011. As calculating covariance of a security with the market = 0.00325814 and the variance of the market return = 0.003759528. The weekly closing stock return of BPL and weekly market returns of DSE data of 2011 are as follows This data considers on 29 December 2011 to 02 January 2011.
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9.21% -1.01% 4.06% 0.84% -2.25% -2.80% -3.38% -9.60% 5.43% 8.58% 8.57% 14.67% 5.80%
4.56% -5.27% -1.82% -2.17% 1.54% -1.53% -0.75% -4.98% -1.10% 1.26% 4.22% 3.18% 4.62%
1.27% -3.41% -3.59% 15.42% 0.37% 1.18% -7.62% -6.19% -7.70% 18.51% -13.33% -0.37% -5.93%
3.04% -3.85% -3.42% 22.30% -6.42% -2.12% -9.21% -8.39% -3.53% 16.75% -16.49% -2.06% -6.86%
-1%
Weekly Stock and Market Return
0.25 0.2
I consider Govt Treasury bill rate as a risk free rate which is 5.67%. As we know that last 3 years market index fall rapidly and daily closing index rates shows unstable, so that market return is -1%. Final calculation is as follows:
Cost of Debt:
By definition cost of debt is the amount of interest being paid by a company on all of the debts that it has incurred. Company will use various bonds, loans and other forms of debt, so this measure is useful for giving an idea as to the overall rate being paid by the company to use debt financing. The measure can also give investors an idea as to the riskiness of the company compared to others, because riskier companies generally have a higher cost of debt.
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Formula:
Kd = kd (1-T)
Here,
For BPL perspective, Dividend = 5% of Tk.100 = Tk. 5 Price of share = Tk. 100 Cost of preference share; Kp
= 5/100 = 5%.
We = Weighted of equity
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Wd = Weighted of debt Wp = Weighted of preference share For BPLs WACC = 30%*0.09%* + 22%*11% + 48%*5% = 4.9% 2. Dividend Growth Model:
The second is Dividend growth model of dividend discount model.
P0=
Here, P0 = Current share price D0 = Current dividend g = Expected growth rate of dividends r = Required rate of return on the market
Calculation:
Year 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 Dividend rate 21.00% 20.00% 15.00% 30.00% 15.00% 15.00% 15.00% 30.00% 20.00% 20.00% 15.00% 20.00% Amount 2.1 2 1.5 3 1.5 1.5 1.5 3 2 2 1.5 2 Dividend growth 5% 33% -50% 100% 0% 0% -50% 50% 0% 33% -25%
Avg. growth
9%
P0 = Tk. 93.6 (Market price as per annual report 2011) D0 = 2.1 g = 9% r=?
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For BPLs WACC = We*Ke+ Wd*Kd + Wp* Kp = 30%*11.45% + 22%*11% + 48%*5% = 8.26%
RATIO ANALYSIS:
1. Liquidity Ratio:
Liquidity ratio measures the ability of the firm to meet its obligations. These ratios establish relation between cash and other current asset and current liabilities. Creditors to evaluate the creditworthiness of the firm use these ratios. These ratios also provide revels managements policy in managing liquidity position of the firm. The Liquidity ratio we can satisfy on the three ratios, those are: Current ratio Quick ratio or acid test
Current Ratio:
Current Ratio indicates the ability of a company to achieve its short-term obligations, where short-term obligations indicate those obligations that are due within a year or within the operating cycle. Current ratios are extent to which the assets that are expected to cash cover the claims of short-term creditors. Current Ratio = Current Assets / Current Liabilities
2011 2.70
2010 2.46
2009 2.98
2008 1.10
Analysis: In the table we see that in 2008 the ratio is only 1.10 times, in the 2009 increases to 2.98 times and in the 2010 decreases to 2.46 times and again increase in 2011 by 2.70. This ratio gives us a gross idea of
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liquidity position of the company. This ratio includes Inventory, which is considered two steps from cash. Thats why it doesnt tell us the actual liquidity position of the firm to meet its obligations.
Quick Ratio:
Quick ratio is most important measure of liquidity than the current ratio. Because inventories which are the least liquid of the current assets from the ratio. It is essential for a company to realize its ability to pay the short-term obligation, without knowing on the sales of inventory because they are the assets on which losses are mostly in the event of liquidation. Quick ratio = (Current assets - Inventory) / Current Liabilities
2011 1.83
2010 1.67
2009 2.24
2008 0.52
Analysis: The quick ratio has increase over the year 2009 than 2010 decreases aging 2011 increases. Thus, it would seem that in the last year BPL was much better position in 2011.
2. Activity Ratio:
Activity ratios are used to evaluate the competence, which the company manages and utilizes on its asset. This ratio also calls the turnover ratios because they indicate the speed with which the assets are transformed or turnover into sales. A proper balance between assets and sales generally reflects on that the assets. The Activity ratio we can satisfy on the three ratios, those are: Receivable turnover Inventory turnover Assets turnover
Receivable Turnover:
Receivable turnover ratio indicates the rate of receivable to turn into cash. It indicates the level of outlay in receivables wanted to continue the company's sale stage. This also events of the helpfulness of the company's credit strategy. Receivable turnover (RT) = Sales / Accounts Receivable Receivable turnover in Days= 365 days/ RT
Analysis: For Beximco, Receivable Turnover is 7.96 times in 2008 and 2011 is 8.07. Also Receivable
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Turnover in Days has decreased in 2011. So BPLs receivables are now considerably quicker in turning over than before and this is good news for investors and the internal management.
Inventory Turnover:
The liquidity of the companys register can be considered by this ratio. Its ratio indicates how many periods it is needed to twist inventory of sales on a standard. This event on the efficiency of the companys inventory organization. Inventory Turnover (IT) = Cost of goods sold / Avg. inventory average Inventory Turnover in Days (ITD) = 365 Days/ IT
Analysis: For Beximco Pharma, the average IT value is about 1.66. From 2008 to 2011 the ITD value decreased in 2011 and the value was 190.15 days. ITD is decreased in 2011 at a satisfactory level which is also indicates better performance in that years.
Assets Turnover:
Assets turnover ratio indicates to the capability of the companys to create sales using the asset appropriately. The underutilized assets raise the companies require for the expensive finance. By the achieving a skyscraping turnover a companies cut cost and increase final profit of the proprietorship. Assets Turnover = Sales / Average Total Assets Average Total Assets = (Beginning Total Assets + Ending Total Assets)/2
2011 0.36
2010 0.31
2009 0.28
2008 0.30
Analysis: Here we see that total assets turnover has decreased in 2010 and 2009 compare to 2011. Sales and total assets increase in 2011, 2010. But compare to 2009 and 2008; ratio is slightly dropped in 2009. After that it was recovered marginally.
3. Profitability Ratio:
There are many measures of profitability, which relate the returns of the firm to its sales, assets, or equity. As a group, these measures allow the analyst to evaluate the firms earnings with respect to a given level of sales, a certain level of assets, or the owners investment. This ratio specify the capacity of the company to survive difficult circumstances, which might occur from a number of basis, such as declining price, increasing cost and declining sale. The Profitability ratio we can justify on the three ratios, those are as follows:
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Gross Profit margin on sales. Return on asset or Return on Investment. Return on common stock equity. Price earnings ratio
Profit margin on sales ratio offered information as regards a companys success from the action of core trade. Ratio gives you an idea about the success relation to sales on after the cost of goods sold is removing. Its could be used as a pointer of the good organization of the manufacture action and relationship between cost of manufacturing goods and selling price. Gross Profit margin = Gross Profit / Sales Net Profit Margin= Net Profit after Tax/ Sales
Analysis: In this case the gross profit margin ratio has little bit fluctuated throughout the year of 2008 to 2011, but at the same times net profit margin shows quite stabile, which is very good sign from on investors point of view. It means that management has able to handle the operating cost and other cost. As a result company has generated more profit.
Return on asset compute the success of a company by using the advantage to create to get self-governing of the financing of those assets. Its compute consequently divides financing action from working and invests tricks. Return on Investment = Net Profit after Taxes / Average Total Assets
2011 5%
2010 5%
2009 4%
2008 4%
Analysis: In that particular segment we see that, return percentage is same in 2011 to 2010 and 2009 to 2008. That indicates Beximco Pharma doing well return for investors.
Return on common stock ratio indicates the amount of, which the company is capable to exchange in service income into an after tax income that finally can be maintain by the investor. It is a helpful ratio for investigate the capability of the companys administration to understand a sufficient come back on the capital invest by
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the proprietors of the company. Return on common stock equity = Net Profit after tax / Common stockholders equity
2011 7%
2010 7%
2009 6%
2008 5%
Analysis: Return on equity increased from 2008 and after 2009 return shows 7%. So, its good news for BPL that its present ROE is better than previous year.
Price earnings ratio does analysis in discussing the investment possibility of a given enterprise uses an offquoted statistic? This is computed by dividing the market price of stock by its earnings per share. Price earnings ratio = Market price of stock / Earning per share
Ratio Market Price of Stock Earnings per share Price earnings ratio
Analysis: As a well-established organization its earning per share is increasing day by day. We see that after 2009 EPS is increasing; in 2011 it reaches Tk 4.76. Its a good sign for company reputation and investors will be interested to invest on this company. But at the same time P/E ratio dropped significantly. This is a bad sign for Beximco. So company should aware of their P/E ratio.
Debt ratio maintain how much of the companys total assets have been financed by the lending.
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2011 17%
2010 18%
2009 19%
2008 24%
Analysis: we see that the percentage of ratio has decreased from 2008 to 2011 in the Beximco Pharma Company because their asset was increased at a higher rate than from the last year. If any company debt ratio decreases day by day it is a good position for those for the company.
This ratio provides an indication of the margin of safety between financial obligations and the net income thus it provides an indication of the available protection to creditors. Failure to meet this obligation can bring legal action by the companys creditors, possibly resulting in bankruptcy. Time interest earned (TIE) = Profit before interest and Tax / Interest charged
2011 2.96
2010 2.68
2009 3.49
2008 3.34
Analysis: In this dissuasion we realize that the higher ratio of time interest earned, it indicated the Company has higher ability to pay the interest from their opportunity income. We see that ratio is quite fluctuating over the last few periods. So Beximco Pharma should aware of it.
COMPARATIVE ANALYSIS
Ratios in 2011 Current Ratio Quick Ratio Beximco
2.70 1.83
Liquidity Ratio
Square
1.50 0.96
Renata
0.73 0.26
Glaxco
2.05 0.95
Activity Ratio
Beximco
8.07 times 1.92 times 0.36
Square
15.06 times 2.22 times 0.78
Reneta
8.06 times 1.48 times 0.73
Glaxco
8.33 times 1.89 times 1.97
Ratios in 2011
Gross Profit Margin Net Profit Margin
Beximco
48% 15.19%
Square
43% 43%
Reneta
52% 17%
Glaxco
28% 6%
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Return on Investment 5% Return on common stock 7% equity Price earnings ratio 19.66
Ratios in 2011
Debt to total assets Time interest earned
Beximco
17% 2.96
Square
30% 9.42
Reneta
0 0
Glaxco
45% 150.39
As comparison, we see that above the ratios comparatively BPL doing better performance than the other three establishes company. Although BPL should be more focused on their liquidity ratio because their ratio says they have enough idle money in hand.
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CONCLUSION
Beximco Pharmaceuticals LTD is a well-established and leading Pharmaceuticals company of our country. The company is run by an experienced and innovative management group, who utilize their knowledge, talent and experience to the best of their ability for the development of the company. So far my report I have tried my level best to identify the actual cost of capital and the profitability analysis of BPL. I have tried to imply my acquired knowledge from the Investment Management and Managerial Finance course and also tried to comply with theoretical technique, procedure and system utilized with the practical scenario. This Report evaluative method of determining the past, current and projected performance of BPL along with the comparative analysis of the related rival company like Square Pharma, Renata and GlaxcoSmith Kline. My analysis enables organizations to assess their current operating performance, review the state of the economy and determine how they will perform in the future.
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KEY FINDINGS
Work related:
Accounts and Finance Department run by high professionals, experience and skill personals. Accounts maintained by modern tools such as MAPICS" for its transaction processing purpose. "MAPICS" is the acronym of "Management Accounting Planning Information Control System". It is a DOS based Modular software introduced by IBM Corporation. BPL uses the following modules of MAPICS: General Ledger. Budget Preparation. Financial Ratio Analysis. Fixed Asset Accounting. Accounts Receivable. L C Monitoring System.
In addition, MS Excel2007 is broadly used by the accounts department for various purposes; such as: Payroll account maintenance Daily receives and payments maintenance; Financial reporting; LC monitoring ( Mastering files) Forecasted Product rate Pending bill List Departmental Budget Sister concern transactions and so on.
Finance and Accounting department is one of the most important departments of BPL, they are responsible to make profit for the organization. Finance and Accounting department maintain the entire legal requirement in processing all the transactions.
Financial:
There are positive relationship exists among assets, sales and net income. The recent liquidity position of BPL is very high, which reflect company has more idle money. Growth rate of the BPL is satisfactory. BPL should concern about their falling market price of share. The recent liquidity position of BPL is very high, which reflect company has more idle money.
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RECOMMENDATION
It is not easy to recommend some suggestion to enhance the performance level of the organization like BPL. Although I have tried to find out some shortcoming regarding operational and other aspects. On the basis of my observation I would like to present the following recommendations: BPL should utilize their assets properly by investing them in more profitable projects as there liquidity is higher than actual need. They should increase their dividend payout ratio, to maximize the wealth of shareholders. They should be careful about the market price of share, because the price of share would decrease. BPL should make a proper budget plan for further investment. Inventory turnover ratio of BPL is quite low. The company could compute turnover of the major categories of inventory to see if there is excessive investment in any specific components of the inventory and then take the appropriate action to rectify the problem. BPL needs to strike a healthy balance between debt and equity; too much debt financing would mean a high financial risk, while too little debt financing would mean that the company may have difficulty raising sufficient funds. BPL needs to be more efficient in collecting receivables. It should review its credit policy and make any necessary adjustments to encourage prompt payment. Further improve its return on investment (ROE), the company needs to take advantage of profitable investment opportunities and be more efficient at managing its expenses.
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REFERENCES
Beximco Pharmaceuticals Limited: <http://www.beximco-pharma.com/ > Beximco Pharmaceuticals Limited: Annual Report 2007-2011. [Online]Available at: < http://www.beximco-pharma.com/investor-relations/financial-reports/annual-report.html > Square Pharmaceuticals Limited: Annual Report 2011. [Online] Available at: < http://www.squarepharma.com.bd/financial-reports.php > Beximco Pharmaceuticals Ltd: Building A Healthier Tomorrow. Articles Base. August 04, 2010. [Online]Available at: < http://www.articlesbase.com/medicine-articles/beximcopharmaceuticals-ltd-building-a-healthier-tomorrow-2956604.html > Habib, Anamul & Alam, Zahedul. (2011) Business Analysis of Pharmaceutical Firms in Bangladesh: Problems and Prospects VolumeVI, Number01, January-June, 2011. Fisher,D.E & Jordan,R.J (2012). Security Analysis and Portfolio Management (6th Edition). Prentice-Hall. Riley,F & Brown,K (2011). Investment Analysis and Portfolio Management (8th Edition). China Renmin University Press Pub. CliffsNotes.com. Ratio Analysis. 14 Dec 2012 <http://www.cliffsnotes.com/study_guide/topicArticleId-21248,articleId-21213.html>. Majumder, T.H & Rahman,M.M(2009) Financial Analysis of Selected Pharmaceutical Companies in Bangladesh. European Journal of Business and Management ISSN 22221905 (Paper) ISSN 2222-2839 (Online).
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