BRAC UNIVERSITY

Cost of Capital And Financial Analysis of Beximco

Pharmaceuticals LTD.

Internship Report

Course Code- Bus 699

Submitted To:

Ms. Mahatab Faruqui Senior Lecturer

Faculty of BRAC Business School.

Submitted By:

Marshal Richard

MBA

ID# 10364057

Date Of Submission 20 December 2012

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

It‟s 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 Ltd‟s cost

of capital and measuring ratio‟s, 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 BPl‟s 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

CHAPTER ONE

INTRODUCTION

~ 7 ~

ORIGIN OF THE REPORT:

The report is originated to make a study on the Accounts and Finance procedure and the Cost of capital and

Profitability Analysis of Beximco Pharmaceuticals Limited as a part of the fulfillment of internship program

required for the completion of MBA program of BRAC University. As the part of MBA curriculum this

project is assigned to me by Jamal Ahmed Choudhury, Executive Director, Accounts & Finance and Kamal

Uddin Ahmed, Manager. Accounts & Finance of Beximco Pharmaceuticals Ltd and approved by the academic

Supervisor Ms. Mahatab Faruqui, Senior lecturer of BRAC School of Business.

OBJECTIVE OF THE REPORT:

The general objective of the study is to fulfill the requirement of the Post Graduation under the Masters of

Business Administration program of BRAC University as per university policy. To be more specific, this

study entails the Financial Analysis of Beximco Pharmaceuticals Limited to figure out and observe the

financial performance of Beximco Pharmaceuticals Limited over the past 4 years as also find out the Cost of

Capital of this well known company.

SCOPE OF THE REPORT:

There were huge scopes to work in the field of the report. Considering the dead line, the scope and exposure

of the paper has been wide-ranging. The study, “Cost of Capital and Profitability analysis of Beximco

pharmaceuticals Limited” has covered Beximco Pharmaceuticals Ltd. profit flows. The impact of different

external and internal factors on the flow of profit by BPL has been showed in this report. The Cost of Capital

of BPL has also been showed in this report. By preparing this report it becomes more understandable about

the real condition of the pharmaceutical industry in Bangladesh and the flow of profit through the different

challenge.

METHODOLOGY OF THE REPORT:

The following methodology was followed throughout the study .The study is based on both primary as well as

secondary data.

Data regarding the organization profile collected in the following ways:

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.

~ 8 ~

Data Collection Techniques:

Some of the primary data were collected by observing others doing their jobs.

Much of the primary data were collected by the informal interviewing of the company officials.

Most of the secondary data were collected by the review and study of relevant reports and documents.

ORGANIZATION OF THE STUDY

The report is divided into five parts. The first part is the introductory chapter. The second part covers

organizational part (a brief overview of Beximco Pharmaceutical Limited). The Third part deals with report

part. The fourth part includes overall findings with concluding remarks. The last part provides references.

LIMITATIONS OF THE REPORT:

An enthusiastic effort was applied to conduct the study work and to bring a reliable and successful result from

which proper strategy can be adopted to this report. Some limitations were faced while preparing this report.

Some of those limitations are highlighted below:

All the comments made, conclusion reached and suggestions for possible improvement provided are

purely based on my level of understanding, knowledge and my way of interpreting a particular

statement.

Unable to collect specific information of BPL.

To protect the organizational confidentiality some parts of the report are not in depth.

The report covers only profitability analysis. It does not cover management, marketing, HRM or other

business related issues.

Ratio analysis is done only based on Annual Report.

CHAPTER TWO

OVERVIEW OF THE COMPANY

~ 10 ~

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.

~ 11 ~

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.

~ 12 ~

BOARD AND MANAGEMENT

Beximco Pharmaceuticals Ltd. is managed by the Board of Directors, an Executive Committee and a

Management Committee. Board of Directors is responsible for the corporate governance.

It consists of ten members including the Chairman, A S F Rahman and the Vice Chairman, Salman F Rahman.

The five-member Executive Committee is headed by Mr. Osman Kaiser Chowdhury who is also a member of

the Board of Directors. The Executive Committee is accountable for both operational and financial

performance of the company. This committee is also responsible for budget approval, policy adoption or

changes, new project review, compliance audit etc. The Management Committee comprises of eleven

professionals who are one of the bests in Bangladesh in their own fields. This committee is leaded by Mr.

Nazmul Hasan (MP), Managing Director (MD) who is responsible for the overall management of the

business. This committee reviews and manages day-to-day business operation and recommends strategy

options to the Executive Committee.

The Board of Directors:-

A S F Rahman Chairman

Salman F Rahman Vice Chairman

Nazmul Hassan MP Managing Director

Iqbal Ahmed Director

Mohammad Abul Qasem Director

Osman Kaiser Chowdhury Director

Abu Bakar Siddiqur Rahman Director

Advocate Ahsanul Karim Director

Dr. Abdul Alim Khan Independent Director

Md. Asad Ullah, FCS Company Secretary

The Executive Committee:-

Osman Kaiser Chowdhury Member of the Board of Directors

Nazmul Hassan MP Managing Director

Ali Nawaz Chief Financial Officer

Afsar Uddin Ahmed Director, Commercial

The Management Committee:-

Nazmul Hassan MP Managing Director

Osman Kaiser Chowdhury Member of the Board of Directors

Rabbur Reza Chief Operating Officer

Ali Nawaz Chief Financial Officer

Afsar Uddin Ahmed Director, Commercial

Lutfur Rahman Director, Manufacturing

Zakaria Seraj Chowdhury Director, International Marketing

A R M Zahidur Rahman Executive Director, Production

Shamim Momtaz Executive Director, Manufacturing

Mohd. Tahir Siddique Executive Director, Quality

Jamal Ahmed Choudhury Executive Director, Accounts & Finance

~ 13 ~

PRODUCTS:

The company‟s 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 company‟s 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 anti-

infective, 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 Pharma‟s 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 BPL‟s brands have annual sales in excess of BDT 100 million each.

Block Buster product:

Napa

Highest selling drug in Bangladesh pharmaceutical market in terms of unit.

Neoceptin-R

Highest selling drug in Bangladesh pharmaceutical market in terms of value.

Bextrum/Bextrum

Gold

Emerged as the most admired and highest selling nutritional supplement in

Bangladesh Market in just one year.

Amdocal

Highest selling cardiovascular drug in BD in terms of value.

Tofen Highest selling oral anti-asthma drug in BD in terms of value.

Azmasol

Highest selling mastered dose inhaler in Bangladesh in terms of value.

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,

BPL‟s 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

~ 14 ~

bulk drug unit for producing paracetamol is also located within this site. Company‟s 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.

Consistently Delivering High Quality Products

Today, the name “Beximco Pharma” has become synonymous with „trust‟ and „reliability‟. Quality is its

relentless passion. Quality is ingrained in our values and in all that it does. Beximco Pharma‟s business

processes and practices are designed to achieve quality results that would meet the expectations of patients

and physicians by getting the highest quality products, and of shareholders and stakeholders through achieving

returns. Their three brands - Neoceptin R (Ranitidine), Napa (Paracetamol) and Amdocal are the top three

selling brands in the Bangladesh Pharmaceutical market (“Annual Report,” 2010). There were also 55 new

product launched in 2011, (“Annual Report,” 2011).

Adopting Innovation In Manufacturing Process

Beximco Pharma has always been the pioneer in adopting innovative technologies that introduced both

sophistication and scale in our business processes. It also focuses on improving manufacturing efficiency to

meet the challenge of maintaining the bottom line of the business in an ever-changing competitive market

place. (“Annual Report,” 2011)

R&D Capability in Both Formulation And API (Active Pharmaceutical Ingredients)

R&D is another area where Beximco Pharma has already shown capability and led the Bangladesh

Pharmaceutical Market in both formulation R&D and API R&D. Its formulation R&D capability is proven not

only by the consistent quality of its products but also by its ability to introduce hi-tech, specialized products

and dosage forms. The reverse engineering capability of the R&D team has enabled it to introduce innovative

new products to serve the ailing people at home and abroad. (“Annual Report,” 2011)

Domestic and Existing Export Markets

Its past and present performances clearly suggest that it has ample scope to grow even in the domestic as well

as in our existing export markets.

Beximco Pharma has already identified some attractive niche markets where the investment is negligible as

compared to its expected returns in terms of profitability. Once the new OSD (Oral Solide Dosage) plant is

operational and it has the capacity, confidently, it will be able to capitalize on these opportunities and increase

its market share in the domestic market as well as in other existing export markets, (“Annual Report,” 2010).

Professional Management Capability

Beximco Pharma is the pioneer in implementing corporate governance to professionally run a company in

Bangladesh. Beximco Pharma provides an environment which fosters creativity, innovation, self-development

and entrepreneurship. (“Annual Report,” 2010)

~ 15 ~

Sales & Marketing Capability Focused On Brand Building

The major source of competitive advantages of Beximco Pharma is its sales and marketing team. Its marketing

team is composed of innovative people from diverse discipline. Because of the innovative & creative

approach adopted by its marketing team, it has been able to create many vibrant brands like Napa, Neoceptin-

R, Amdocal, Neofloxin, Tycil, Omastin, Azmasol, Bexitrol-F, Atova, Bextram Gold etc. Infact, the ability of

its sales & marketing team to differentiate our brands even in a crowded generic market is Beximco Pharma‟s

major competitive advantage. (“Annual Report,” 2010)

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.

BPL‟s 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 BPL‟s credentials as it explores new

opportunities in the export arena.

National Wide Distribution Network

BPL is found to be performing much better than most others in the industry. Beximco Pharma distribution

network is relatively more extensive in comparison to the top industry players. It covers whole Bangladesh.

Bangladesh has area of 147,570 square-km with over 150 million populations, (“Annual Report,” 2010).

Therefore, national wide distribution Network serves a huge number of target customers and end users

(patients). National wide distribution network is definitely a strong favorable key success factor for Beximco

Pharmaceutical Limited on its own and also relative to its rivals.

~ 16 ~

Relationship with The Doctors

When it comes to physician relationship management, BPL is performing better than most but is still not

performing well enough to take the number one position in this respect. Square Pharmaceuticals Limited,

BPLs biggest competitor has taken the lead in this respect.

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 Pharma‟s 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).

CORPORATE SOCIAL RESPONSIBILITY:

Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship,

responsible business, sustainable responsible business (SRB), or corporate social performance, is a form of

corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in,

self-regulating mechanism whereby business would monitor and ensure its adherence to law, ethical

standards, and international norms. Business would embrace responsibility for the impact of their activities on

the environment, consumers, employees, communities, stakeholders and all other members of the public

sphere. Furthermore, business would proactively promote the public interest by encouraging community

growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of

legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the

honoring of a triple bottom line: People, Planet and Profit. Corporate Social Responsibility (CSR) is an

integral part of Beximco Pharmaceuticals business strategy. Some of the CSR activities undertaken by the

company are showing as follows:-

As a first Bangladeshi Pharma company BPL introducing anti-retroviral medicines for

HIV/AIDS treatment, medicine to combat the virus of bird flu and an oral anti-smoking drug to help

chronic smokers quit smoking.

~ 17 ~

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.

THE REASONS BEHIND BEXIMCO PHARMACEUTICALS

LIMITED SUCCESS:

Sales and Profitability:

With an uninterrupted growth, achieving a 21.6% increase in sales to Tk. 7,890.24 million (2010: Tk.

6,490.85 million). In 2011, BPL significantly enhanced its prescription share in sales of the formulation

products and maintained, as expected, growth in all its key therapeutic segments. Sales of BPL; Active

Pharmaceutical Ingredients (APIs) also recorded a significant 37.1% growth to reach Tk. 486.91 million

(2010: Tk. 355.24 million). However, its impact on the overall profitability of the company is currently low

because of a low gross margin predominantly due to the high cost of import of intermediate materials to

manufacture these APIs. In 2011, export sales grew by 18.1% to Tk. 390.32 million (2010: Tk. 330.54

million).

Along with sales growth, Beximco Pharma also achieved a marked growth in profit in 2011. BPL‟s pre-tax

profit increased 23.2% to Tk. 1,677.85 million (2010: Tk. 1,361.53 million). Gross margin as percentage of

sales however, slightly declined to 48% as against 48.9% for the prior period. This was due principally to

depreciation in the value of the Taka against the Dollar and the high level of domestic inflation. However,

with BPL‟s constant drive to contain costs and effective profit optimization strategies, the negative impact of

rising cost on profit has been kept to the practicable minimum.

(<http://www.advfn.com/news_Beximco-Pharmaceuticals-Ltd-AGM-Statement_52957815.html>)

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.

Research & Development (R&D) and New Products

Beximco Pharma continuously focused on strengthening its R&D capabilities. There have been a series of

positive developments in the year under review. BPL has inducted in our existing pool of talent two highly

experienced professionals from overseas.

~ 18 ~

BPL‟s 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).

Investments for Sustainable Growth

Expansion of metered dose inhaler (MDI) plant has added significant further capacity raising the total

manufacturing capacity to 20 million canisters. Two other projects, namely facilities for dry powder inhalers

(DPI) and pre-filled syringe products were also successfully completed and became operational. Amino acid

unit also started commercial operation in 2011. Facilities for liquid lyophilized products and powder for

suspensions and sachets are nearing completion. Other projects are progressing as planned.

Beximco Pharma has always been a pioneer in adopting innovative technologies. This brings both

sophistication and the potential to sustain growth to our business. Over the past couple of years BPL have

made considerable investments in facilities and processes to improve productivity, drive growth and achieve

excellence in operations. A number of such projects that can drive future growth are in its investment plan.

Alongside investment in manufacturing facilities, BPL are equally focused on investing in products, markets

and most importantly our human resource to ensure both the sustainable growth of our business and a

meaningful return for its valued shareholders.

CHAPTER THREE

DESCRIPTION OF JOBS

~ 20 ~

DEPARTMENTS OF BEXIMCO PHARMA

BPL operates its business through extensive departmentalization as needed for specified effectiveness of the

tasks. The business activities of BPL are directed, controlled and monitored from the head office of Beximco

Pharmaceuticals Ltd. Being a leading Pharmaceutical company in the country it employs a good number of

people in different departments to keeps its business thriving. The major operational departments of BPL are

as follows:

Manufacturing:

Production

Quality Control

Quality Assurance

Production Planning

Research and Developments

Engineering

Warehouse

General Admin

Project

Selling, Manufacturing and Distribution:

Domestic Marketing

International Marketing

Sales

Distribution

Inventory Planning

International Regulatory Affairs

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

BRIEF DESCRIPTION OF ACCOUNTS & FINANCE

DEPARTMENT

The activities of the Accounts and finance department are carried over by talented and adequate person. The

functions of Accounts and Finance department are carried over five sections. Actually proper control purpose,

they subdivide their functions to the several sections. The sections of Accounts and Finance department are as

follows:

IOC&BP

Financial Accounts- Strategic Business Unit (SBU)

Financial Accounts- Non- Strategic Business Unit

Treasury

Tax and Payroll

Leasing and Legal Affairs

~ 21 ~

HIGHER AUTHORITY OF ACCOUNTS AND FINANCE

DEPARTMENT:

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.

Financial Accounts SBU:

The major function of this section is to prepare financial report. They prepare the financial report of Beximco

Pharma. There is a manager to monitoring the activities of this section. The major activities of these sections

are as follows:

Preparation of Financial Report for External Reporting.

Preparation of Monthly Financial Report.

Preparation and publishing quarterly, half yearly and yearly Financial Report.

Chief Financial

Officer

Executive

Director

Manager,

Financial

Accounts

(SBU)

Deputy

Manager,

IOC & BP

Manager,

Treasury

Senior

Manager,

Tax and

Trust

Manager,

Legal and

Compliances

Sr.Asst. Manager,

Financial Account

(Non SBU)

~ 22 ~

Recording of Export Sales Earnings.

Financial Accounts Non SBU:

This section does the works of some associate company of Beximco Pharma. These supporting companies are

as follows:

Shuktara Printing Ltd.: Shuktara Printing Ltd. supplies the printing materials to the BPL. For leaflet

and other printing materials are needed for drug are supplied by Shuktara printing Ltd. though it is

unable to supply all printing materials needed.

Bangladesh Antibiotic Industry Ltd.: Bangladesh Antibiotic Industry Ltd. (BAIL) supplies basic

chemicals to the BPL. There is a manufacturing unit to Kaliakoir near to Gazipur to produce

antibiotic. There is a responsible person who prepares financial reports and all recording related to

BAIL. They also deal with the other pharmaceutical company to supply materials. This services also

known astoll services.

I & I services Ltd.: I&I services Ltd. provides distribution services to the BPL. Through 20 depots

they deliver drugs to the chemist. There is a central depot to control all the depot and services.

Pharmatek chemicals Ltd.: They provide Chemicals to the BPL. Pharmatek supplies Napa raw

materials to the BPL. There is a responsible person to control, reporting and recording all transactions

relating the Pharmateck chemicals Ltd.

Tax and Trust:

The Tax and Payroll section of Accounts and Finance department deals with the taxation and Payroll services

to the company. The major activities are as follows:

Salary disbursement to the employee.

Loan against salary to the employee.

Provident fund related activities.

Salary Tax.

Income tax of the company.

Legal and Compliances:

This section of Accounts and Finance deals with the legal issue of the BPL. The Major activities of this

section are as follows:

Trade license of the company including the International selling.

Value added tax related activities.

Drag license related activities.

New product Copyright.

Trademark related activities.

Boiler permission Renewal.

Chemical Certificate related issue.

Land related activities

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.

~ 23 ~

Party payments employee payroll.

WORK EXPERIENCE IN BPL

I worked in the Accounts and Finance department as an intern for about two months in Beximco

Pharmaceuticals Ltd (BPL). During my internship in BPL, I was not only got the work experience which I

expected but also the opportunity to take a close look at BPL's business as well as its culture and values,

which helped me to further understand how a established company works.

During this period of internship, I have experienced different aspects of the accounts work, including the

internal control, industrial costing, daily receives and payments system, payroll accounts, LC monitoring, Bill

of entry, MRR, PTG file maintenance, Budgeted Product price entry, Payment clearance etc. Every day I

have new things to learn and work on.

My Supervisor and mentors review my work during the internship. My supervisor gave suggestions and

feedback on my work almost every day, helping me to do the work better. I also communicated with my

fellow interns to listen to their suggestions and comments on my work. In this process of learning, I gradually

enriched my knowledge in Accounts and Finance and improved my communication skills.

At the very beginning of my internship, I was not that clear about my future and my career. After the

internship experience at BPL, I felt more confident in my future. In a word, my intern experience at BPL was

fascinating, interesting and valuable.

CHAPTER FOUR

COST OF CAPITAL AND RATIO ANALYSIS

~ 25 ~

COST OF CAPITAL ANALYSIS:

The cost of capital is the companies cost of using funds provided by creditors and share holders. A company‟s

cost of capital is the cost of its long time sources of fund: common share holder equity, debt and preferred

equity. The cost of each sources reflect the risk of the invested in. A company that invested in assets having

little risk in producing income will be able to bear lower costs of capital then a company that invests in assets

having a higher risk of producing income.

Method:

1. Capital Assets Pricing Model ( CAPM)

2. Dividend Growth Model

1. The Capital Asset Pricing Model (CAPM):

The process of estimating cost of capital

Cost of Equity:

r 𝑒= 𝑅𝑓+ ß (𝑅𝑚–𝑅𝑓)

Where:

r 𝑒 = the return from the investment.

𝑅𝑓= the risk free rate of return.

ß = the beta value of the investment, a measure of the systematic risk of the investment.

𝑅𝑚 = 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.

Determine the proportion of each sources of the capital that will be

raised.

Estimate the marginal cost of each sources of capital.

Calculate the weighted avg. cost of capital.

~ 26 ~

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.

Beta (Systematic Risk):

Beta measures the responsiveness of a security to movements in the market portfolio (i.e., systematic risk).To

better understand the relationship with the market index and the stock price volatility, Beta calculation is

commonly used by the financial analysts. Beta can be thought of as the tendency of a security's returns to

respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A

beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1

indicates that the security's price will be more volatile than the market.

Market Risk Premium:

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.

Excess Stock

return

Excess Market

return

Excess Stock return Excess Market

return

-0.95% 0.48% 0.80% 1.23%

-0.52% 4.64% -5.99% -3.76%

1.71% 1.38% 3.22% 4.15%

-3.21% -5.81% 1.04% 6.76%

-3.99% -2.54% -7.13% -5.60%

11.93% 3.99% 1.09% 1.88%

1.01% -0.81% -7.18% -4.86%

-1.88% -1.88% -7.04% -2.50%

-7.64% -4.26% 1.61% -2.29%

-0.21% -0.42% -2.86% -3.03%

-4.10% -2.78% -4.86% -2.36%

-5.00% -3.09% 0.58% 2.97%

)(

)(2

,

M

Mi

R

RRCov

~ 27 ~

9.21% 4.56% 1.27% 3.04%

-1.01% -5.27% -3.41% -3.85%

4.06% -1.82% -3.59% -3.42%

0.84% -2.17% 15.42% 22.30%

-2.25% 1.54% 0.37% -6.42%

-2.80% -1.53% 1.18% -2.12%

-3.38% -0.75% -7.62% -9.21%

-9.60% -4.98% -6.19% -8.39%

5.43% -1.10% -7.70% -3.53%

8.58% 1.26% 18.51% 16.75%

8.57% 4.22% -13.33% -16.49%

14.67% 3.18% -0.37% -2.06%

5.80% 4.62% -5.93% -6.86%

Avg. market return -1%

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 Equity of BPL; K 𝒆 = 5.67% + 0.87[-1% - (5.67%)] = 0.09%

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.

-0.15

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

Wee

kly

Sto

ck R

etu

rn

Weekly Market Return

Weekly Stock and Market Return

~ 28 ~

Formula:

Kd = kd (1-T)

Here,

Kd = Cost of debt

kd = Before tax % cost of debt

T = Tax rate

To calculate cost of debt of Beximco Pharmaceuticals I was analyzed its annual report of 2011. Here I found

that BPL has three secured long terms borrowings- (a) Project Loan; (b) Interest and PAD Block and c)

Obligation under Finance Leases. Those Loans carrying interest at 13% to 15% per annum, is repayable in

quarterly installments ending by 2017. For my own calculation I assume, kd = 15%. As we know that

Beximco is a publicly traded company hence the applicable Tax Rate is 27.50%.

Cost of Debt of BPL; Kd = 15 %( 1 – 27.50%) = 11%

Cost of preference share:

Kp = 𝑫𝒊𝒗𝒊𝒅𝒆𝒏𝒅

𝑷𝒓𝒊𝒄𝒆 𝒐𝒇 𝒔𝒉𝒂𝒓𝒆

For BPL perspective,

Dividend = 5% of Tk.100 = Tk. 5

Price of share = Tk. 100

Cost of preference share; Kp = 5/100 = 5%.

Capital Structure of 2011

Capital Amount Weight

Share capital 2,517,678,100 30%

Long term debt 1,890,074,651 22%

Preference share 4,100,000,000 48%

Total 8507752751 100%

Weighted Avg. Cost of capital:

WACC = We*Ke+ Wd*Kd + Wp* Kp

Here,

We = Weighted of equity

~ 29 ~

Wd = Weighted of debt

Wp = Weighted of preference share

For BPL’s 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= 𝑫𝟎 𝟏+𝒈

𝒓−𝒈

Here,

P0 = Current share price

D0 = Current dividend

g = Expected growth rate of dividends

r = Required rate of return on the market

Calculation:

Year Dividend rate Amount Dividend growth

2011 21.00% 2.1 5%

2010 20.00% 2 33%

2009 15.00% 1.5 -50%

2008 30.00% 3 100%

2007 15.00% 1.5 0%

2006 15.00% 1.5 0%

2005 15.00% 1.5 -50%

2004 30.00% 3 50%

2003 20.00% 2 0%

2002 20.00% 2 33%

2001 15.00% 1.5 -25%

2000 20.00% 2

Avg. growth 9%

P0 = Tk. 93.6 (Market price as per annual report 2011)

D0 = 2.1

g = 9%

r = ?

Required Rate of Return of BPL; r = [2.1(1+9%) /93.6] + 9% = 11.45%.

~ 30 ~

For BPL’s WACC = We*Ke+ Wd*Kd + Wp* Kp

= 30%*11.45% + 22%*11% + 48%*5% = 8.26%

Summary of cost of capital

Cost of capital of Beximco Pharmaceuticals Ltd.

CAPM Method Dividend growth method

Cost of equity = 0.09% Cost of equity = 11.45%

Cost of debt = 11% Cost of debt = 11%

Cost of preference share = 5% Cost of preference share = 5%

WACC = 4.9% WACC = 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 management‟s 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

Ratio 2011 2010 2009 2008

Current

ratio

2.70 2.46 2.98 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

~ 31 ~

liquidity position of the company. This ratio includes Inventory, which is considered two steps from cash.

That‟s why it doesn‟t 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

Ratio 2011 2010 2009 2008

Quick ratio 1.83 1.67 2.24 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

Ratio 2011 2010 2009 2008

Receivable turnover 8.07 7.90 7.01 7.96

Receivable turnover in Days 45.25 46.19 52.04 45.87

Analysis: For Beximco, Receivable Turnover is 7.96 times in 2008 and 2011 is 8.07. Also Receivable

~ 32 ~

Turnover in Days has decreased in 2011. So BPL‟s 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 company‟s 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 company‟s inventory

organization.

Inventory Turnover (IT) = Cost of goods sold / Avg. inventory average

Inventory Turnover in Days (ITD) = 365 Days/ IT

Ratio 2011 2010 2009 2008

Inventory Turnover (IT) 1.92 1.79 1.59 1.35

Inventory Turnover in Days

(ITD)

190.15 203.91 229.58 271.12

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 company‟s to create sales using the asset appropriately.

The underutilized assets raise the companies require for the expensive finance. By the achieving a sky-

scraping 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

Ratio 2011 2010 2009 2008

Asset turnover 0.36 0.31 0.28 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 firm‟s 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:

~ 33 ~

Gross Profit margin on sales.

Return on asset or Return on Investment.

Return on common stock equity.

Price earnings ratio

Gross & Profit Margin:

Profit margin on sales ratio offered information as regards a company‟s 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. It‟s

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

Ratio 2011 2010 2009 2008

Gross Profit Margin 48% 49% 47% 50%

Net Profit Margin 15.19% 16.20% 12.83% 13.60%

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 investor‟s

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 Investment/ Asset (ROI):

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

Ratio 2011 2010 2009 2008

Return on Investment 5% 5% 4% 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 equity (ROE):

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 company‟s administration to understand a sufficient come back on the capital invest by

~ 34 ~

the proprietors of the company.

Return on common stock equity = Net Profit after tax / Common stockholders’ equity

Ratio 2011 2010 2009 2008

Return on common stock equity 7% 7% 6% 5%

Analysis: Return on equity increased from 2008 and after 2009 return shows 7%. So, it‟s good news for BPL

that its present ROE is better than previous year.

Price earnings ratio (P/E):

Price earnings ratio does analysis in discussing the investment possibility of a given enterprise uses an off-

quoted 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 2011 2010 2009 2008

Market Price of Stock 93.6 135.1 155.8 167.7

Earnings per share 4.76 4.18 3.5 3.61

Price earnings ratio 19.66 32.32 44.51 46.45

Analysis: As a well-established organization it‟s earning per share is increasing day by day. We see that after

2009 EPS is increasing; in 2011 it reaches Tk 4.76. It‟s 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.

4. Debt Coverage Ratio Debt ratios are calculated to judgment the long-term financial position of the company. This ratio indicate,

mix of funds provided by owners and lenders, the manner in which the assets are finance, the extent of earning

that is magnified or leveraged by use of debt and finally the extent of limited stakeholders control over the

company.

The Debt-coverage ratio we can satisfy on the three ratios, those are:

Debt to total assets.

Time interest earned.

Debt to total assets:

Debt ratio maintain how much of the company‟s total assets have been financed by the lending.

~ 35 ~

Debt to total asset = Total debt / Total Asset

Ratio 2011 2010 2009 2008

Debt to total asset 17% 18% 19% 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.

Time interest earned:

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 company‟s creditors, possibly resulting in bankruptcy.

Time interest earned (TIE) = Profit before interest and Tax / Interest charged

Ratio 2011 2010 2009 2008

Times interest earned 2.96 2.68 3.49 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

Liq

uid

ity

Rati

o

Ratio’s in 2011 Beximco Square Renata Glaxco

Current Ratio 2.70 1.50 0.73 2.05

Quick Ratio 1.83 0.96 0.26 0.95

Act

ivit

y

Rati

o

Ratio’s in 2011 Beximco Square Reneta Glaxco

Receivable Turnover 8.07 times 15.06 times 8.06 times 8.33 times Inventory Turnover 1.92 times 2.22 times 1.48 times 1.89 times

Assets Turnover 0.36 0.78 0.73 1.97

Pro

fita

bil

ity

Rati

o Ratio’s in 2011 Beximco Square Reneta Glaxco

Gross Profit Margin 48% 43% 52% 28%

Net Profit Margin 15.19% 43% 17% 6%

~ 36 ~

Return on Investment 5% 10.16% 12.12% 11.71%

Return on common stock

equity 7% 18% 27% 20%

Price earnings ratio 19.66 25.25 25.03 28.37

Deb

t

Cover

a

ge

Rati

o Ratio’s in 2011 Beximco Square Reneta Glaxco

Debt to total assets 17% 30% 0 45%

Time interest earned 2.96 9.42 0 150.39

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.

~ 37 ~

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.

~ 38 ~

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.

~ 39 ~

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.

~ 40 ~

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/beximco-

pharmaceuticals-ltd-building-a-healthier-tomorrow-2956604.html >

Habib, Anamul & Alam, Zahedul. (2011) “Business Analysis of Pharmaceutical Firms in

Bangladesh: Problems and Prospects” Volume–VI, Number–01, 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 2222-

1905 (Paper) ISSN 2222-2839 (Online).

= END =