Case Study

Evince textile Limited’s

initiatives for BMRE expansion
 This is a report on case
study of Evince Textiles

Profile Limited which is the fruit

of our combined effort

Serial No Name Id No Remarks

1 Asif Khan 23-130
2 Farjana Akter Tanni 23-311
3 Md. Nazir Hossain 23-102
4 Md. Ullash Hossen 23-087
5 Mehrun Akter 23-090
6 Mithila Nag 23-051
7 Umme Kulsum Labonno 23-108
Letter of Transmittal

March 25, 2019

Md. Saimum Hossain
Assistant Professor
Department of Finance
University of Dhaka

Subject: Submission of a case on Evince textile Limited’s initiatives for BMRE expansion

Dear Sir,

As assigned, we have collected data from as much as possible to make a case for this course’s
requirement. We sincerely hope that we have successfully completed the requirement of the
course through the submission of this case. We hope that you will accept our case and it will
succeed in reaching your level of expectation. We have strived hard to make this case concise.
But to err is human, so if you identify any discrepancy within the stated information, please
rectify us and we will be grateful to you for this. Thank you for giving the opportunity to apply
our knowledge in the case. It has enriched our domain of knowledge.

Sincerely,

Md. Nazir Hossain

On behalf Group 11
Section: B
Department of Finance.
University of Dhaka
 The Industry: it’s huge

In USA, 10.5 Million Tons of Clothing Is Sent to Landfill

Every Year. That’s about 30 Times as Heavy as The
Empire State Building.

“The purpose of every industrial revolution is to make craft and skills

obsolete, and thereby make people interchangeable and cheap”

Greg Palast
Author and journalist, USA.

One of the largest

industries in the world
Contribution in total
GDP
Around 2 percent
The global textile industry impacts nearly every human being on the planet.
The industry is currently worth nearly US $3 trillion and includes the
production, refinement, and sale of both synthetic and natural fibers used in
thousands of industries. The global textile market is broken into a number of
sectors shown in the chart below.

Growth rate
4.80 percent

Market value
USD 778.2 billion

International trade
USD 296 billion

Value Chain
A value chain is a set of activities that a firm operating in a specific industry
performs in order to deliver a valuable product or service for the market. The
concept of value chain comes from business management and was first
described and popularized by Michael porter in 1985. The value chain of this
industry is a very lengthy process. And here it is:

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Economic Impact of Textiles Industry
It is estimated anywhere between 20 million and 60 million people are employed in the textile
industry worldwide. Employment in the garment industry is particularly important in developing
economies such as India, Pakistan, and Vietnam. The industry accounts for approximately 2% of
global Gross Domestic Product and accounts for an even greater portion of GDP for the world's
leading producers and exporters of textiles and garments.

China is the world's leading producer and exporter of both raw textiles and garments. The United
States is the leading producer and exporter of raw cotton, while also taking the prize for the top
importer of raw textiles and garments.

There are many developing countries ready to crack or climb this list in the near future as their
investment into the textile or garment industry increases. Countries such as Pakistan, Sri Lanka,
Samoa, and a number of South American countries have seen considerable growth in their textile
markets in recent years. As China moves towards a service-based economy, and labor prices
continue to rise, it is logical to assume many garment producers will move away from China and
into developing markets where labor is cheap and readily available.

Top ten textile exporting countries in the world

Countries Exporting values
(in billion USD)
China 110
EU (28) 69
India 17
USA 14
Turkey 11
Korea 10
Chinese Taipei 9
Pakistan 8

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 Hong Kong 8
Vietnam 7

In the Home Country

Though textile industry of Bangladesh has faced a devastating state due to Tazreen Fashion
Factory fire (2012), Rana Plaza collapse (2013), Mirpur Textile Factory fire (2013), the growth of
textile industries is not stopped. Bangladesh has reached 106th position in world market.
Moreover, Bangladesh ranked as the second leading exporter in the world after China in 2015
and it created a new window while investors were interested to invest huge amount in textile
sector. With increment of export textile industry is contributing to create a large workplace for the
unemployment people especially women. Statistics says that there are approximately 4825
garment factories and 5 million workers (85% women). Since Bangladesh has a huge labor sector
with cheap price, it has a possibility to reach top twenty in future. Here is the growth of the textiles
exporting in Bangladesh:

Exporting growth
45 41.49
40
35
30
25
20 15.87
15 10.31 11.21 11.66 9.72
10 5.99
4.11 3.4 3.67
5
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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 The Company: Ups and
[Grab Down
your reader’s attention with a
great quote from the document or
To gain market leadership in the yearn dyed
use this space to emphasize a key
point. To place this text box
woven fabric manufacturing industry.
anywhere on the page, just drag it.]

“People think that the industry is dying, but in reality, it is as strong as ever; it
has just shifted in a new direction. Most people think of textiles as clothes, and
that is all they know, but it is everything artificial arteries to chemically resistant
suits for fire fighters.”

Evince John Hardy

Textiles Artist, Canada

Limited
OVERVIEW

Evince Textiles Limited (ETL) is one of the most diversified and independent
manufacturing conglomerates of apparels and textile in Bangladesh. It was
Imports raw materials incorporated as Private limited company on June 03, 1999 under Company
Exports woven fabric Act 1994 and later converted into a Public limited company on June 04, 2013.
The main function of this company is concentrated in manufacturing, dyeing
and finishing of 100% cotton woven fabrics and exporting the same. Evitex
Contribution in total Fashions Limited was incorporated as its subsidiary on April 11, 2004 under
export companies act 1994 which is concentrated in 100% export oriented
readymade garments.
Around 5 percent
The mission of Evince Textile Limited is to be the most extolled textile
company in Bangladesh through producing as well as supplying qualified
Growth rate products to its existing and potential customers at competitive prices and of
course by maintaining ethical business process so that the stakeholders and
3.65 percent
also the society at large are benefited.
The Company incorporates with the following vision:
Current ratio ▪ To achieve market leadership in the yarn dyed woven fabric manufacturing
1.27:1 company.
▪ To conduct innovation as well as speed as the driving factor for
progression.
▪ Be a good cooperative citizen.
▪ To ensure the eco-friendly environment and follow ethical process.

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Perception Map of ETL’s product

ETL’s products are higher quality product compared to the other Bangladeshi manufacturers. But
the foreign buyers consider its product as cheaper product in finest quality. They consider ETL’s
products as better quality at a lower price. For this reason, ETL’s product exists on the side of
“High quality- Low price” in perception map.

Comparing company’s net profit with previous year

Particulars July 2017 to June 2018 July 2016 to June 2017 Differences/ Variance
(increase or decrease)

Turnover 2,411,293,016 2,326,845,444 84,447,572

Cost of goods sold 1,914,906,428 1,813,125,037 101,78

Gross profit margin 20.59% 22.08% -1.49%

Net profit margin 6.95% 7.92% -0.98%

Net profit after tax 169,000,000 144,000,000 25,000,000

EPS 1.06 0.91 -0.15

By seeing this chart, we can say that company’s turnover is increased in a good amount as
compare to previous year and it is good sign for expanding the business. But when we see the
cost of goods sold, in 2017-18 the cogs are increased more than previous year. Due to this reason
the gross profit margin is also decreased from 22.08% to 20.59%.

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 Turnover Cost of Goods Sold

2016 2016

2017 2017

2018 2018

1650 1850 2050 2250 2450 1650 1750 1850 1950

There remain some reasons behind increasing company’s cost and these reasons are following:

• The price of raw-materials as well as utility cost like Gas & fuel are increased.
• Bank interest rate is also increased as compared to previous year.
• This company has started to make workers profit participation fund and worker’s fund
(WPPF & WF) provisions this year.
• Selling price of fabric is reduced in the international market.

Performance
Evince maintained a constant growth in export turnover with 2441.29 million (tk.) compared to
2326.84 million (tk.) in previous year. Although Evince’s size of export turnover was far lower than
its two major industry competitors, it obtained a net profit 7% of sales in which it performed better
than its industry benchmark (5.30%-Square Textiles Ltd.). It declared EPS 1.6 tk. per share last
year. It has also maintained enough solvency to meet immediate creditor’s claim (current ratio -
1.16).

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 The Case in BMRE of Existing Project

The Way to Get Started is to Quit Talking and

Begin Doing.

“The purpose of life is the expansion of happiness. It is the goal of every other
goal. Ben Henretig has embarked on an ambitious project to document a
country and culture that has embraced happiness as a part of its national
policy.”

Deepak Chopra

Balancing American author and public speaker

Modernization
Rehabilitation Effluent Treatment Plant
Expansion Green business concept has been the concern of the leading manufacturing
companies for last few decades while China has topped the position. But for
the concern of buyers, Evince Textiles Ltd. are planning to set up an Effluent
Total Investment Treatment Plant (ETP) which is used to manage the waste water and purify
this for reusing and releasing safe water. The buyers are unwilling to trade
BDT 703.7 million
with the company unless they install an ETP in their factory. A 3.6 MLD (Million
Liter per Day) MBR Effluent Treatment has been chosen to be installed for the
purpose. The proposed brand new ETP has a market value of BDT 45 million
Major Part
that will be being installed gradually through this year. The company also is
Effluent Treatment expecting that their order list will improve while installing this plant.
Plant

Allocating the Investment amount

Production
Since they were converted as a public limited company in 2013, they have
Increasing 50% been working for their expansion. Now they are going for modernization and
expansion their existing facilities for BMRE project. It has been disclosed by
the company in Daily Star & Financial Express after published on DSE on
Financing Source October 08, 2018. The whole project will cost the company approximately
Bank Loan 703.70 million. The project will be broken down into two segments named as
(a) capital machineries and equipment, (b) Building and civil construction. The
Equity
ETP will be under both civil construction and capital machineries segments.
The rest of the amount will be used for building and capital machineries. This
investment will help the company enhancing its current production level by
50% as the estimation of the management.

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Source of Financing
80% of 703.7 million will be financed by loan from Modhumoti Bank for 8-10 years depending
on approval of Bangladesh Bank. The interest rate varies from 10%-11.5%. The rest 20% of project
cost will be collected from retained earnings. The Board of Directors have foregone this year’s
remuneration for this investment purpose. The retained earnings have the same cost as the cost of
equity. The company didn’t pay any cash dividend last year. Rather they issued bonus share of
BDT 144 million on October 30, 2017. The machineries and equipment will be depreciated on
depreciation rate stated in IAS-16.

Costing for the investment

Production costs mainly include cost of raw materials they import, wages and salaries paid to
production employees, utility expenses, depreciation of production machineries, labor charges
and so on. The management efficiently categorizes the cost among variable and fixed costs. The
variable costs basically include raw material and factory overhead. In 2017-18 fiscal year, per unit
raw material was BDT 74.73 and per unit factory overhead BDT 37.05. On the other hand, they
are BDT 75.30 and BDT 36.30 respectively in 2016-17. Some part of factory overhead goes to
the fixed portion of costing but we recognize that in the variable portion. But the production is not
all about a manufacturing company. It has to incur administrative, selling and some other
expenses to deliver its product to the door of the customer. The past few years selling and
administrative expenses are given below.

2017-18 2016-17 2015-16 2015 2014

81.7 million 98.7 million 91.6 million 98.4 million 101.5 million

So, the trend shows a declining selling and administrative expense except for the year 2016-17.
One of the most favorable sides of the company is that the turnover of the company has increased
compared to last year for increasing in production. But the company has also experienced a lower
selling price of BDT 141.25 from BDT 148.84.

Working Capital Management

Basically, the company uses L/C of average 90 to 120 days for both exporting and importing. As
the turnover of the company is larger in respect of the costs of capital, they invest a lot of money
as working capital. The Account Receivable s are carried forward at their original invoiced value
amount. Management considered the entire bills receivable as good and is collectable and
therefore, no amount was provided as bad debt in the current period’s account. The data below
shows the investment in the current assets.

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 2017-18 2016-17 2015-16

Account Receivable
1323 1213 1248
& Inventories

Account Payable &

957 824 691
Short-Term Loan
(In Million BDT)

The inventory of the company includes raw material, work-in process goods and finished goods.
The company had a large stock of inventory at the end of June, 2018. The management efficiently
manages its inventory so that it doesn’t get piled up.
The top management is concerned while taking this project. They want to analyze the pros and
cons about the project that is the cash flows, profitability, pay back time and so on.

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