1.

1: Company Overview
We have selected Renata Limited as the company to analyze the financial condition. Here is a short overview of the company. Type of Company: Listed Public Limited (Dhaka Stock Exchange) Main Business: Manufacture and Marketing of Human Pharmaceuticals and Animal Therapeutics. There are two production sites. The Mirpur Site is 12 Acres and Rajendrapur Site is 17 Acres. History: The Company started its operations as Pfizer (Bangladesh) Limited in 1972. For the next two decades it continued as a highly successful subsidiary of Pfizer Corporation. However, by the late 1990s the focus of Pfizer had shifted from formulations to research. In accordance with this transformation, Pfizer divested its interests in many countries, including Bangladesh. Specifically, in 1993 Pfizer transferred the ownership of its Bangladesh operations to local shareholders, and the name of the company was changed to Renata Limited No. of Employees: 2,213 employees. Distributors and Affiliations: Alliance-Partners are Novartis Vaccines BASF( Germany) InterVax, Evans Vanodine(UK)Zinpro(USA) Biomin Laboratories(Singapore) International Presence: Guyana, Jordan, Kenya, Myanmar, Philippines, Hong Kong, Afghanistan, Sri Lanka, Vietnam, and United Kingdom Investment: 100% Shareholding in Renata Agro Industries Limited Bankers: Agrani Bank, Standard Chartered Bank, Eastern Bank, HSBC, Sonali Bank, Citi Bank, and Mutual Trust Bank

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Renata Limited Revenue Contribution by the Business Unit

2009 Non-tax holiday (units-1, 2 & 3 ): Pharmaceutical products Animal health products Animal nutritional products Contact manufacturing Tax holiday (Unit 4): Potent product facility Turnover 2,812,225,147 457,977,880 380,921,700 24,619,707 3,675,744,434 224,987,880 3,900,732,314 2008 2,273,271,291 353,866,196 306,703,184 24,352,730 2,958,193,401 131,553,016 3,089,746,417 2007 1,847,657,270 347,906,018 247,873,674 18,115,128 2,461,552,090 72,622,891 2,534,174,981 2006 1,409,831,257 282,684,842 200,452,328 21,236,000 1,914,204,427 13,527,458 1,927,731,885

Revenue Contribution By the Business Unit 2009

10% 1% 12% Animal health products 77% Animal nutritional products Pharmaceutical products

Revenue Contribution By the Business Unit 2007

1% 10% 14% Pharmaceutical products Animal health products Animal nutritional products 75% Contact manufacturing

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1.2: Bangladesh Pharmaceutical Industry & Its environment

Bangladesh is one of the world's most densely populated countries with its people crammed into a delta of rivers that empties into the Bay of Bengal. In Bangladesh the pharmaceutical sector is one of the most developed hi-tech sectors within the country's economy. After the promulgation of Drug Control Ordinance - 1982, the development of this sector was accelerated. The professional knowledge, thoughts and innovative ideas of the pharmaceutical professionals working in this sector are the key factors for this development. Due to recent development of this sector it is exporting medicines to global market including European market. This sector is also providing 97% of the total medicine requirement of the local market. Leading pharmaceutical companies are expanding their business with the aim to expand export market. Recently few new industries have been established with high tech equipments and professionals which will enhance the strength of this sector. Two organizations, one government (Directorate of Drug Administration) and one semigovernment (Pharmacy Council of Bangladesh), control pharmacy practice in Bangladesh. The Bangladesh Pharmaceutical Society is affiliated with international organizations International Pharmaceutical Federation and Commonwealth Pharmaceutical Association.

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2.1: Comparative Financial Statement of Renata Limited

RENATA LIMITED Comparative Balance Sheet (FROM 2006 TO 2009) ASSETS Non-current assets Property, plant and equipment Capital work-in-progress Investment in subsidiary Other investment Total non-current assets Current assets Inventories Trade and other receivables Advances, deposits and prepayments Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Share capital Revaluation surplus Tax holiday reserve Retained earnings Total equity attributable to equity holders of the company Non-current liabilities Deferred liability-staff gratuity Deferred tax liabilities Total non-current liabilities Current liabilities Bank overdraft Creditors for goods Accrued expenses Other payables Unclaimed dividend Provision for taxation Total current liabilities Total liabilities Total equity and liabilities 2009 1,396,300,867 736,960,533 63,070,376 11,931,079 2,208,262,855 1,075,310,581 343,870,341 80,677,337 143,248,172 1,643,106,431 3,851,369,286 144,598,400 154,596,958 83,346,636 1,824,737,962 2,207,279,956 124,183,595 110,179,135 234,362,730 794,424,620 27,896,925 171,928,847 237,310,646 3,961,604 174,203,958 1,409,726,600 1,644,089,330 3,851,369,286 2008 1,014,435,834 570,277,998 63,070,376 8,377,754 1,656,161,962 959,414,590 344,226,933 79,281,411 123,148,038 1,506,070,972 3,162,232,934 115,678,700 155,075,461 52,862,514 1,338,456,682 1,662,073,357 105,224,160 81,542,581 186,766,741 823,163,615 127,107,689 133,013,604 79,902,838 3,173,467 147,031,623 1,313,392,836 1,500,159,577 3,162,232,934 2007 796,846,754 305,983,441 63,070,376 1,000,000 166,900,571 662,012,145 194,727,875 83,095,822 48,256,978 988,092,820 2,154,993,391 96,398,900 155,553,964 46,862,514 978,790,128 1,277,605,506 88,948,500 71,370,735 160,319,235 361,475,015 37,929,106 98,063,196 123,160,097 2,485,448 93,955,788 717,068,650 877,387,885 2,154,993,391 2006 689,066,469 44,121,037 63,070,376 1,000,000 797,257,882 638,784,952 198,626,085 59,808,451 82,035,371 979,254,859 1,776,512,741 80,332,400 156,018,160 47,451,353 698,510,882 982,312,795 72,656,492 62,661,763 135,318,255 371,848,683 51,607,325 71,050,788 68,360,467 1,792,199 94,222,229 658,881,691 794,199,946 1,776,512,741 2005 399,239,783 139,891,546 63,070,376 602,201,705 388,384,007 162,224,078 32,294,635 89,452,557 672,355,277 1,274,556,982 66,943,700 156,482,355 46,862,514 503,828,634 774,117,203 60,324,000 55,975,450 116,299,450 192,425,445 16,645,268 65,951,508 27,154,025 1,480,753 80,483,330 384,140,329 500,439,779 1,274,556,982

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RENATA LIMITED COMPARATIVE PROFIT AND LOSS ACCOUNT

2009 Turnover Cost of sales Gross profit Other income 3,900,732,314 1,820,496,777 2,080,235,537 8,050,515 2,088,286,052 Operating expenses: Administrative, selling and distribution expenses Operating profit Gain on disposal of property, plant and equipment Interest on over draft Other expenses Contribution to WPPF Profit before tax Tax expenses Current tax Deferred tax Total Tax expenses Net Profit after tax for the year Basic earnings per share(par value of Tk 100) 190,711,707 28,793,936 219,505,643 603,524,452

2008 3,089,746,417 1,526,514,685 1,563,231,732 15,420,344 1,578,652,076

2007 2,534,174,981 1,298,911,334 1,235,263,647 11,734,434 1,246,998,081

2006 1,927,731,885 978,390,209 949,341,676 32,868,293 982,209,969

2005 1,608,555,839 829,197,436 779,358,403 16,957,354 796,315,757

1,118,768,795 969,517,257 930,500 99,513,638 6,752,520 41,151,504 823,030,095

845,169,923 733,482,153 118,000 87,270,665 5,913,520 30,496,000 609,919,968

696,781,673 550,216,408 496,800 57,480,494 3,272,447 23,341,441 466,618,826

577,785,557 404,424,412 1,928,200 39,765,188 2,634,492 16,731,165 347,221,767

479,357,082 316,958,675 260,000 23,002,949 1,173,613 13,654,423 279,387,690

166,444,936 10,329,228 176,774,164 433,145,804

121,815,058 8,880,661 130,695,719 335,923,107

98,232,128 6,858,002 105,090,130 242,131,637

88,164,518 1,345,089 86,819,429 192,568,261

417.38

299.55

348.47

251.18

239.71

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RENATA LIMITED Comparative Cash flow Statement 2009

A. Cash flow from operating activities: Collection from customers and other income Payment of VAT Payment to suppliers and employees Cash generated from operation Financing cost Payment of tax Net cash from operating activities 4,524,734,599 -576,244,068 -2,934,353,785 1,014,136,746 -99,513,638 -163,539,372 751,083,736 3,464,026,571 -446,920,865 -2,598,987,823 418,117,883 -87,270,665 -113,369,101 217,478,117 2,885,087,954 -349,947,277 -1,922,429,087 612,711,590 -57,480,494 -122,081,499 433,149,597 2,185,812,587 -264,905,916 -1,727,456,964 193,449,707 -39,765,188 -84,493,229 69,191,290 1,836,005,683 -243,974,768 -1,292,169,955 299,860,960 -23,916,562 -64,488,538 211,455,860

2008

2007

2006

2005

B. Cash flow from investing activities: Purchase of property, plant and equipment Investment in shares Sale proceeds of property, plant and equipment Net cash used in investing activities -642,570,569 -3,553,325 930,500 -645,193,394 -549,504,472 -7,377,754 118,000 -556,764,226 -417,615,371 0 534,000 -417,081,371 -224,799,510 0 1,928,200 -222,871,310 -151,986,364 0 260,000 -151,726,364

C. Cash flow from financing activities: Medium term loan (repaid)/received (net) Dividend paid Net cash from/(used in) financing activities D. Net cash increase (decrease) for the year (A+B+C) E. Opening cash and cash equivalent F. Closing cash and cash equivalent (D+E) -28,738,995 -57,051,213 -85,790,208 20,100,134 123,148,038 143,248,172 461,688,600 -47,511,431 414,177,169 74,891,060 48,256,978 123,148,038 -10,373,668 -39,472,951 -49,846,619 -33,778,393 82,035,371 48,256,978 179,423,238 -33,160,404 146,262,834 -7,417,186 89,452,557 82,035,371 0 -27,398,386 -27,398,386 32,331,110 -135,303,998 -102,972,888

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3.1: Year to Year Change analysis

RENATA LIMITED BALANCE SHEET Year to Year Analysis 2008
ASSETS Non-current assets Property, plant and equipment Capital work-in-progress Investment in subsidiary Other investment Total non-current assets Current assets Inventories Trade and other receivables Advances, deposits and prepayments Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Share capital Revaluation surplus Tax holiday reserve Retained earnings Total equity attributable to equity holders of the company Non-current liabilities Deferred liability-staff gratuity Deferred tax liabilities Total non-current liabilities Current liabilities Bank overdraft Creditors for goods Accrued expenses Other payables Unclaimed dividend Provision for taxation Total current liabilities Total liabilities Total equity and liabilities 1,014,435,834 570,277,998 63,070,376 8,377,754 1,656,161,962 959,414,590 344,226,933 79,281,411 123,148,038 1,506,070,972 3,162,232,934 115,678,700 155,075,461 52,862,514 1,338,456,682 1,662,073,357 105,224,160 81,542,581 186,766,741 823,163,615 127,107,689 133,013,604 79,902,838 3,173,467 147,031,623 1,313,392,836 1,500,159,577 3,162,232,934 1,396,300,867 736,960,533 63,070,376 11,931,079 2,208,262,855 1,075,310,581 343,870,341 80,677,337 143,248,172 1,643,106,431 3,851,369,286 144,598,400 154,596,958 83,346,636 1,824,737,962 2,207,279,956 124,183,595 110,179,135 234,362,730 794,424,620 27,896,925 171,928,847 237,310,646 3,961,604 174,203,958 1,409,726,600 1,644,089,330 3,851,369,286 381,865,033 166,682,535 0 3,553,325 552,100,893 115,895,991 -356,592 1,395,926 20,100,134 137,035,459 689,136,352 28,919,700 -478,503 30,484,122 486,281,280 545,206,599 18,959,435 28,636,554 47,595,989 -28,738,995 -99,210,764 38,915,243 157,407,808 788,137 27,172,335 96,333,764 143,929,753 689,136,352 37.64% 29.23% 0.00% 42.41% 33.34% 12.08% -0.10% 1.76% 16.32% 9.10% 21.79% 25.00% -0.31% 57.67% 36.33% 32.80% 18.02% 35.12% 25.48% -3.49% -78.05% 29.26% 197.00% 24.84% 18.48% 7.33% 9.59% 21.79%

2009

Change Analysis Amount Percent

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RENATA LIMITED PROFIT AND LOSS ACCOUNT Year to Year Change Analysis
2008 Turnover Cost of sales Gross profit Other income Operating expenses: Administrative, selling and distribution expenses Operating profit Gain on disposal of property, plant and equipment Interest on over draft Other expenses Contribution to WPPF Profit before tax Tax expenses Current tax Deferred tax Total Tax expenses Net Profit after tax for the year Basic earnings per share(par value of Tk 100) 166,444,936 10,329,228 176,774,164 433,145,804 299.55 190,711,707 28,793,936 219,505,643 603,524,452 417.38 24,266,771 18,464,708 42,731,479 170,378,648 118 14.6% 178.8% 24.2% 39.3% 39.3% 845,169,923 733,482,153 118,000 87,270,665 5,913,520 30,496,000 609,919,968 1,118,768,795 969,517,257 930,500 99,513,638 6,752,520 41,151,504 823,030,095 273,598,872 236,035,104 812,500 12,242,973 839,000 10,655,504 213,110,127 32.4% 32.2% 688.6% 14.0% 14.2% 34.9% 34.9% 3,089,746,417 1,526,514,685 1,563,231,732 15,420,344 1,578,652,076 2009 3,900,732,314 1,820,496,777 2,080,235,537 8,050,515 2,088,286,052 Amount 810,985,897 293,982,092 517,003,805 7,369,829 509,633,976 percent 26.2% 19.3% 33.1% 47.8% 32.3%

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3.2: Index Number trend analysis

Cash and cash equivalents
Cash and cash equivalents Index Number Change Percent 2005 89,452,557 100.00 2006 82,035,371 91.71 -8.29 -8.29% 2007 48,256,978 53.95 -37.76 -41.18% 2008 123,148,038 137.67 83.72 155.19% 2009 143,248,172 160.14 22.47 16.32%

Cash and cash equivalents

200 150 100 50 53.95 0 2005 2006 2007 2008 2009 100 91.71 137.67 Cash and cash equivalents 160.14

Property, plant and equipment

Property, plant and equipment Index Number Change Percent 2005 399,239,783 100.00 2006 689,066,469 172.59 72.59 72.59% 2007 796,846,754 199.59 27.00 15.64% 2008 1,014,435,834 254.09 54.50 27.31% 2009 1,396,300,867 349.74 95.65 37.64%

Property, plant and equipment

400 350 300 250 200 150 100 2005 2006 2007 2008 2009 100 172.59 199.59 254.09 Property, plant and equipment 349.74

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Retained earnings
Retained earnings Index Number Change Percent 2005 503,828,634 100.00 2006 698,510,882 138.64 38.64 38.64% 2007 978,790,128 194.27 55.63 40.13% 2008 1,338,456,682 265.66 71.39 36.75% 2009 1,824,737,962 362.17 96.52 36.33%

Retained earnings
400 350 300 250 200 150 100 100 2005 138.64 2006 2007 2008 2009 194.27 265.66 Retained earnings 362.17

Accrued expenses
Accrued expenses Index Number Change Percent 2005 65,951,508 100.00 2006 71,050,788 107.73 7.73 7.73% 2007 98,063,196 148.69 40.96 38.02% 2008 133,013,604 201.68 52.99 35.64% 2009 171,928,847 260.69 59.01 29.26%

Accrued expenses
300 250 200 150 100 2004 100 2005 107.73 2006 2007 2008 2009 2010 201.68 148.69 260.69

Accrued expenses

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Total assets
Total assets Index Number Change Percent 2005 1,274,556,982 100.00 2006 1,776,512,741 139.38 39.38 39.38% 2007 2,154,993,391 169.08 29.70 21.30% 2008 3,162,232,934 248.10 79.03 46.74% 2009 3,851,369,286 302.17 54.07 21.79%

Total assets
350 300 250 200 150 100 100 2005 139.38 2006 2007 2008 2009 169.08 248.1 302.17

Total assets

Inventories
Inventories Index Number Change Percent 2005 388,384,007 100.00 2006 638,784,952 164.47 64.47 64.47% 2007 662,012,145 170.45 5.98 3.64% 2008 959,414,590 247.03 76.57 44.92% 2009 1,075,310,581 276.87 29.84 12.08%

Inventories
300 276.87 250

200 164.47 170.45

Inventories

150 100 2005

100

2006

2007

2008

2009

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Turnover
2005 Turnover Index Number Change Percent 1,608,555,839 100.00 2006 1,927,731,885 119.84 19.84 19.84% 2007 2,534,174,981 157.54 37.70 31.46% 2008 3,089,746,417 192.08 34.54 21.92% 2009 3,900,732,314 242.50 50.42 26.25%

Turnover
260 240 220 200 180 160 140 120 100 242.5 192.08 Turnover 157.54 100 2005 119.84 2006 2007 2008 2009

Gross profit
Gross profit Index Number Change Percent 2005 779,358,403 100.00 2006 949,341,676 121.81 21.81 21.81% 2007 1,235,263,647 158.50 36.69 30.12% 2008 1,563,231,732 200.58 42.08 26.55% 2009 2,080,235,537 266.92 66.34 33.07%

Gross profit
280 260 240 220 200 180 160 140 120 100 2005 100 121.81 2006 2007 2008 2009 158.5 200.58 Gross profit 266.92

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Operating profit
Operating profit Index Number Change Percent 2005 316,958,675 100.00 2006 404,424,412 127.60 27.60 27.60% 2007 550,216,408 173.59 46.00 36.05% 2008 733,482,153 231.41 57.82 33.31% 2009 969,517,257 305.88 74.47 32.18%

Operating profit
350 300 250 200 173.59 150 100 100 2005 127.6 2006 2007 2008 2009 231.41 305.88

Operating profit

Profit before tax

Profit before tax Index Number Change Percent 2005 279,387,690 100.00 2006 347,221,767 124.28 24.28 24.28% 2007 466,618,826 167.01 42.74 34.39% 2008 609,919,968 218.31 51.29 30.71% 2009 823,030,095 294.58 76.28 34.94%

Profit before tax

350 300 250 200 150 124.28 100 100 2005 2006 2007 2008 2009 167.01 218.31 Profit before tax 294.58

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Total Tax expenses

Total Tax expenses Index Number Change Percent 2005 86,819,429 100.00 2006 105,090,130 121.04 21.04 21.04% 2007 130,695,719 150.54 29.49 24.37% 2008 176,774,164 203.61 53.07 35.26% 2009 219,505,643 252.83 49.22 24.17%

Total Tax expenses

280 260 240 220 200 180 160 140 120 100 100 2005 121.04 2006 2007 2008 2009 150.54 203.61 Total Tax expenses 252.83

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3.3: Common Size Analysis

RENATA LIMITED Common Size analysis Balance Sheet
2009 ASSETS Non-current assets Property, plant and equipment Capital work-in-progress Investment in subsidiary Other investment Total non-current assets Current assets Inventories Trade and other receivables Advances, deposits and prepayments Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Share capital Revaluation surplus Tax holiday reserve Retained earnings Total equity attributable to equity holders of the company Non-current liabilities Deferred liability-staff gratuity Deferred tax liabilities Total non-current liabilities Current liabilities Bank overdraft Creditors for goods Accrued expenses Other payables Unclaimed dividend Provision for taxation Total current liabilities Total liabilities Total equity and liabilities 2008 2007 2006 2005

36.25% 19.14% 1.64% 0.31% 57.34% 27.92% 8.93% 2.09% 3.72% 42.66% 100.00%

32.08% 18.03% 1.99% 0.26% 52.37% 30.34% 10.89% 2.51% 3.89% 47.63% 100.00%

36.98% 14.20% 2.93% 0.05% 7.74% 30.72% 9.04% 3.86% 2.24% 45.85% 100.00%

38.79% 2.48% 3.55% 0.06% 44.88% 35.96% 11.18% 3.37% 4.62% 55.12% 100.00%

31.32% 10.98% 4.95% 47.25% 30.47% 12.73% 2.53% 7.02% 52.75% 100.00%

3.75% 4.01% 2.16% 47.38% 57.31% 3.22% 2.86% 6.09% 20.63% 0.72% 4.46% 6.16% 0.10% 4.52% 36.60% 42.69% 100.00%

3.66% 4.90% 1.67% 42.33% 52.56% 3.33% 2.58% 5.91% 26.03% 4.02% 4.21% 2.53% 0.10% 4.65% 41.53% 47.44% 100.00%

4.47% 7.22% 2.17% 45.42% 59.29% 4.13% 3.31% 7.44% 16.77% 1.76% 4.55% 5.72% 0.12% 4.36% 33.27% 40.71% 100.00%

4.52% 8.78% 2.67% 39.32% 55.29% 4.09% 3.53% 7.62% 20.93% 2.90% 4.00% 3.85% 0.10% 5.30% 37.09% 44.71% 100.00%

5.25% 12.28% 3.68% 39.53% 60.74% 4.73% 4.39% 9.12% 15.10% 1.31% 5.17% 2.13% 0.12% 6.31% 30.14% 39.26% 100.00%

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RENATA LIMITED Common Size Income Statement analysis

2009 Turnover Cost of sales Gross profit Other income Operating expenses: Administrative, selling and distribution expenses Operating profit Gain on disposal of property, plant and equipment Interest on over draft Other expenses Contribution to WPPF Profit before tax Tax expenses Current tax Deferred tax Total Tax expenses Net Profit after tax for the year Basic earnings per share(par value of Tk 100) 4.89% 0.74% 5.63% 15.47% 0.000011% 5.39% 0.33% 5.72% 14.02% 0.000010% 4.81% 0.35% 5.16% 13.26% 0.000014% 5.10% 0.36% 5.45% 12.56% 0.000013% 5.48% 0.08% 5.40% 11.97% 0.000015% 28.68% 24.85% 0.02% 2.55% 0.17% 1.05% 21.10% 27.35% 23.74% 0.00% 2.82% 0.19% 0.99% 19.74% 27.50% 21.71% 0.02% 2.27% 0.13% 0.92% 18.41% 29.97% 20.98% 0.10% 2.06% 0.14% 0.87% 18.01% 29.80% 19.70% 0.02% 1.43% 0.07% 0.85% 17.37% 100.00% 46.67% 53.33% 0.21% 53.54% 2008 100.00% 49.41% 50.59% 0.50% 51.09% 2007 100.00% 51.26% 48.74% 0.46% 49.21% 2006 100.00% 50.75% 49.25% 1.71% 50.95% 2005 100.00% 51.55% 48.45% 1.05% 49.51%

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RENATA LIMITED Common Size Current assets & Current Liabilities

2009 Current assets Inventories Trade and other receivables Advances, deposits and prepayments Cash and cash equivalents Total current assets Current liabilities Bank overdraft Creditors for goods Accrued expenses Other payables Unclaimed dividend Provision for taxation Total current liabilities 56.35% 1.98% 12.20% 16.83% 0.28% 12.36% 100.00% 62.67% 9.68% 10.13% 6.08% 0.24% 11.19% 100.00% 50.41% 5.29% 13.68% 17.18% 0.35% 13.10% 100.00% 56.44% 7.83% 10.78% 10.38% 0.27% 14.30% 100.00% 50.09% 4.33% 17.17% 7.07% 0.39% 20.95% 100.00% 65.44% 20.93% 4.91% 8.72% 100.00% 63.70% 22.86% 5.26% 8.18% 100.00% 67.00% 19.71% 8.41% 4.88% 100.00% 65.23% 20.28% 6.11% 8.38% 100.00% 57.76% 24.13% 4.80% 13.30% 100.00% 2008 2007 2006 2005

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RENATA LIMITED Common Size Analysis of Capital Structure

2009 EQUITY AND LIABILITIES Share capital Revaluation surplus Tax holiday reserve Retained earnings Total equity attributable to equity holders of the company Non-current liabilities Deferred liability-staff gratuity Deferred tax liabilities Total non-current liabilities Current liabilities Bank overdraft Creditors for goods Accrued expenses Other payables Unclaimed dividend Provision for taxation Total current liabilities Total liabilities Total equity and liabilities 20.63% 0.72% 4.46% 6.16% 0.10% 4.52% 36.60% 42.69% 100.00% 26.03% 4.02% 4.21% 2.53% 0.10% 4.65% 41.53% 47.44% 100.00% 16.77% 1.76% 4.55% 5.72% 0.12% 4.36% 33.27% 40.71% 100.00% 20.93% 2.90% 4.00% 3.85% 0.10% 5.30% 37.09% 44.71% 100.00% 15.10% 1.31% 5.17% 2.13% 0.12% 6.31% 30.14% 39.26% 100.00% 3.22% 2.86% 6.09% 3.33% 2.58% 5.91% 4.13% 3.31% 7.44% 4.09% 3.53% 7.62% 4.73% 4.39% 9.12% 3.75% 4.01% 2.16% 47.38% 57.31% 3.66% 4.90% 1.67% 42.33% 52.56% 4.47% 7.22% 2.17% 45.42% 59.29% 4.52% 8.78% 2.67% 39.32% 55.29% 5.25% 12.28% 3.68% 39.53% 60.74% 2008 2007 2006 2005

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3.4: Ratio Analysis

Liquidity Ratio
2005 0.74 0.48 21.08 168.62 2006 1.49 0.31 20.12 188.97 2007 1.38 0.25 17.99 180.26 2008 1.15 0.26 20.53 191.19 2009 1.17 0.23 18.5 201.18

Current ratio Acid test ratio Collection period Days to sell inventory

Figure: Current & Acid test ratio

1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2007 2008 2009 0.48 0.31 0.25 0.26 0.23 0.74 1.49 1.38 1.15 1.17 Current ratio Acid test ratio

Figure: Collection period & Days to sell inventory

250 201.18 200 150 100 50 21.08 0 2005 2006 2007 2008 2009 20.12 17.99 20.53 18.5 168.62 188.97 191.19 180.26 Collection period Days to sell inventory

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The current ratio of Renata Ltd. in 2005 is 0.74 times and in 2006 is 1.49 times, which is lower than the previous year 2005. So liquidity and short-term debt paying ability is worse than the previous year. But from 2007 to 2009 current ratio decrease it is good sign for the company. The Acid-Test Ratio of Renata Ltd. in 2005 is 0.48 times and in 2006 is 0.31 times, which is less than the previous year and year after year it is decrease. Our evaluations of the liquidity ratios suggest that Renatas liquidity position currently is poor. The average selling time of inventories in 2005 is 168 days and in 2006 is 188 days and its increases year to year. Our evaluations of the inventory turnover suggest that Renatas average days to sale the inventories is not good because they need huge time to sale their inventories. Capital Structure & Solvency ratio
2005 0.65 0.15 13.15 2006 0.81 0.14 9.73 2007 0.69 0.13 9.12 2008 0.9 0.11 7.99 2009 0.74 0.11 9.27

Total debt to equity Long term debt to equity Times Interest earned

Figure: Debt to equity ratio

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005 2006 2007 2008 2009 0.15 0.14 0.13 0.11 0.11 Long term debt to equity 0.65 0.81 0.74 0.69 Total debt to equity 0.9

Debt to total equity ratio of Renata Ltd. in 2005 is 64.64%and in 2006 is 80.85%, and its fluctuated up to 2009. Our evaluations of the debt to total equity ratio suggest that Renatas debt to total equity is not good because fluctuated ratio indicated chance of insolvent. But their long term debt to equity ratio stable it may good for them. 20 | P a g e

Return on Investment ratio

2005 16.43% 24.88% 2006 17.77% 27.57% 2007 19.22% 29.73% 2008 18.76% 29.47% 2009 19.27% 31.20%

Return on assets Return on common equity

Figure: Return on Investment ratio

60.00% 50.00% 24.88% 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 2007 2008 2009 16.43% 17.77% 19.22% 18.76% 19.27% 27.57% 29.73% 29.47% 31.20%

Return on common equity Return on assets

Return on Assets ratio of Renata Ltd. in 2005 is16.43% and in 2009 is 19.27%, which is greater than the previous years.Our evaluations of the return on assets suggest that Renatas profitability on assets currently is higher than the industry average. So we think the return on assets of this company is maintaining a good standard. Return on common shareholders equity of Renata Ltd. in 2005 is 24.88% and in 2009 is 31.20%, which is increased after the years.Our evaluations of the return on common shareholders equity suggest that Renatas net income were earned for each taka invested by the owners is higher and day by day it increases.

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Operating Performance ratio

2005 48.45% 19.70% 17.37% 11.97% 2006 49.25% 20.98% 18.01% 12.56% 2007 48.74% 21.71% 18.41% 13.26% 2008 50.59% 23.74% 19.74% 14.02% 2009 53.33% 24.85% 21.10% 15.47%

Gross profit margin Operating profit margin(pretax) Pretax profit margin Net profit margin

Figure: Operating Performance ratio

60.00%

50.00% Gross profit margin Operating profit margin(pretax) Pretax profit margin 20.00% Net profit margin 10.00%

40.00%

30.00%

0.00% 2005 2006 2007 2008 2009

Net profit margin of Renata Ltd. in 2005 is 11.97%, in 2006 it is 12.56%, and up to 2009 it is increased. Our evaluations of the net profit margin suggest that Renatas net income were earned for each taka of sales is increases year to year and it is a good sign for the company to take comparative advantage in the market.

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Asset Utilization ratio

2005 17.98 17.08 2.13 11.5 1.26 2006 22.48 17.89 1.91 20.95 1.26 2007 38.9 20.01 2 14.48 1.29 2008 36.05 17.54 1.88 7.05 1.16 2009 29.29 19.46 1.79 5.97 1.11

Cash turnover Account receivable turnover Inventory turnover Working capital turnover Total assets turnover

Figure: Asset Utilization ratio

36 31 26 21 16 11 6 1 2005 2006 2007 2008 2009 Cash turnover Account receivable turnover Inventory turnover Working capital turnover Total assets turnover

Inventory turnover ratio of Renata Ltd. in 2005 is 2.13 times, in 2006 is 1.91 times, and in 2009 it is 1.79, which is lower than the previous year 2005. It is bad for Renta that they cannot sell their inventory effectively. Accounts receivables turnover ratio of Renata Ltd. in 2005 is 17.08 times and in 2009 is 19.46 times, which is grater than the previous year 2005. Our evaluations of the account receivables turnover suggest that Renatas average days to collect its credit sale currently increases and it is better for the company. Total assets turnover ratio of Renata Ltd. in 2005 is 1.26 times and in 2009 is 1.11 times, which is lower than the previous year 2005. Our evaluations of the total assets turnover ratio suggest that Renatas plant and equipment to help generate sales is decrease than the previous years. 23 | P a g e

Market Measure
2005 Dividend payout % Price Earnings Ratio - (PER) 24.33 18.02 2006 23.22 14.81 2007 20.09 25.8 2008 20.03 20.8 2009 20.37 28.87

Dividend payout ratio

25 24 23 Percantage 22 21 20 19 18 2005 2006 2007 2008 2009 20.09 20.03 20.37 Dividend payout % 24.33 23.22

Price Earnings Ratio

35 30 25 Times 20 15 10 5 0 2005 2006 2007 2008 2009 18.02 14.81 25.8 20.8 Price Earnings Ratio (PER) 28.87

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Dividend payout ratio of Renata Ltd. in 2005 is 24.33%, in 2006 is 23.22%, and in 2009 it is 20.37 % which is less than the previous years. Our evaluations of the dividend payout ratio suggest that Renatas earnings distributed in the form of cash dividends is decrease than the previous years. Price-earnings ratio of Renata Ltd. in 2005 is 18.02 times and in 2009 is 28.87 times, which is greater than the previous years. Our evaluations of the price earnings ratio suggest that Renatas price of each share of common stock to earning per share is increases and its good for the company because investor will be motivated from this.

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3.5: Corporate voluntary disclosure

Corporate voluntary disclosure refers to information made available at the discretion of the corporation. The extent of voluntary disclosure is influenced by changes in the attitudes in society, economic factors and behavioral factors such as the particulars corporate culture. Voluntary disclosure items may be classified into historical, current and predictive items, depending on the past, present or envisaged performance of the company. In Bangladesh, both Company Act of 1994 and Securities and Exchange Rules of 1987 are two important legislations for corporate disclosure. The Companies Act 1994 provides the basic requirements for disclosure and reporting applicable to all companies incorporated in Bangladesh (Government of Bangladesh, 1993). The Act requires companies to prepare financial statements in order to reflect a true and fair view of the state of affairs of the company. Chart of voluntary Disclosure

Board of Directors Name Syed Humayun Kabir Syed S Kaiser Kabir, Description Chairman of the Board of Directors since 1972 CEO & Managing Director since 2002, Chairman Renata Agro Industries Limited Dr. Sarwar Ali, Sajida Humayun Kabir Hasanat Khan, Md. Shafiul Alam Mr. Manzoor Hasan, Mr. Md. Fayekuzzaman Board Member since 1994 Board Member since 2000 Board Member since 2000 Company Secretary since 1998 Board Member Board Member Audit committee Dr. Sarwar Ali - Director Syed S. Kaiser Kabir CEO & Managing Director Md. Ziaul Haque khondker - Director Manzoor Hasan Independent Director Chairman Audit Committee Member Member Member 26 | P a g e

Board leadership structure Renata Limited Leadership structure is dual leadership structure because Renatas chair of the board of directors and CEO positions held by different persons. The extent of voluntary disclosure is positively related for firms with a dual leadership structure. Board Size Renata Limited has eight board member with more directors, the collective experience and expertise of the board will increase, and therefore, the need for information disclosure will be higher. Ownership structure Directors: Mr. Syed Humayun Kabir Mr. Kaiser Kabir Mr. Sajida Humayun Kabir Dr. Sarwar Ali Mr. Md. Humayun Kabir Mr. A. Hasanat Khan CFO & Company Secretary: Mr. Md. Shafiul Alam Head of Internal Audit: Executives: Mr. M. Alamgir Hossain Mr. Manzur Aziz Dr. Sayma Ali Mr. Khalil Musaddeq . Dr. Md. Iqbal Hossain Shareholders holding 10% or more voting interest: Sajida Foundation Business Research International Corp 32 Shares 137 Shares 0 Shares 0 Shares 0 Shares Holding 633 Shares 1,233 Shares 0 Shares 80 Shares 0 Shares 0 Shares 3,175 Shares 0 Shares

737,447 Shares 366,221 Shares

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3.6: Level of CSR disclosures

The level of CSR disclosures was very poor and inadequate in our country. Research found that though 97 percent of companies made some form of CSR disclosure, the volume disclosed was very low. Renatas, corporate social responsibility (CSR) means caring their own employees, assisting disadvantaged members of our society, and building a sustainable environment. Renatas CSR are as follows Healthcare for Employees and their Families: The Renata health program covers all permanent employees, their spouses, and children. This comprehensive program includes surgery, hospitalization, as well as routine doctor visits. (Expenditure during 2008: Taka 11,723,092) Scholarship for Meritorious Students: HOPES (Helping Organization for Promising and Energetic Students) runs a scholarship programmed for meritorious students. Renata Limited sponsored students for studying Medicine under the aegis of this programmed. A Productive Life for Special People: Renata has a programmed for employing persons with physical and intellectual limitations. Under this programmed 16 persons have been employed in the packaging line for animal health products. City Beautification: Under the aegis of the Metropolitan Chamber of Commerce and Industries (MCCI) Renata contributes to an island beautification project stretching from the Farmgate to the Prime Ministers office. We see Renatas CSR was very low. They only cover few things but many things they can be do like Social welfare, Employment generation, power plant, and so many things that should do. 28 | P a g e

3.7: List of operating activities, investing activities & Financing activities

Operating Activities Net Income Inventories Trade and other receivables Accrued expenses Other payables Total Tax expenses Advances, deposits and prepayments Capital work-in-progress Creditors for goods

Investing Activities Investment in subsidiary Other investment Property, plant and equipment

Financing Activities

Dividend Interest on over draft

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3.8: Summary of Cash inflows and Outflows

RENATA LIMITED Summary of Cash inflow & outflow 2009

Cash inflow Collection from customers and other income Sale proceeds of property, plant and equipment Medium term loan received (net)

2008

2007

2006

2005

4,524,734,599 930,500 0

3,464,026,571 118,000 461,688,600

2,885,087,954 534,000 0

2,185,812,587 1,928,200 179,423,238

1,836,005,683 260,000 0

Total cash inflow

4,525,665,099

3,925,833,171

2,885,621,954

2,367,164,025

1,836,265,683

Cash outflow
Payment of VAT Payment to suppliers and employees Financing cost Payment of tax Purchase of property, plant and equipment Investment in shares Dividend paid Medium term loan (repaid) 576,244,068 2,934,353,785 99,513,638 163,539,372 642,570,569 3,553,325 57,051,213 28,738,995 446,920,865 2,598,987,823 87,270,665 113,369,101 549,504,472 7,377,754 47,511,431 0 349,947,277 1,922,429,087 57,480,494 122,081,499 417,615,371 0 39,472,951 10,373,668 264,905,916 1,727,456,964 39,765,188 84,493,229 224,799,510 0 33,160,404 0 243,974,768 1,292,169,955 23,916,562 64,488,538 151,986,364 0 27,398,386 0

Total Cash outflow

D. Net cash increase (decrease) for the year (A-B) E. Opening cash and cash equivalent F. Closing cash and cash equivalent (D+E)

4,505,564,965

3,850,942,111

2,919,400,347

2,374,581,211

1,803,934,573

20,100,134 123,148,038 143,248,172

74,891,060 48,256,978 123,148,038

-33,778,393 82,035,371 48,256,978

-7,417,186 89,452,557 82,035,371

32,331,110 -135,303,998 -102,972,888

The net change of cash flow is positive from year 2008 to 2009 which indicates that during the years the firm has more cash inflow than outflow. But in 2006 to 2007 it was negative so, it can be said that the company has grown strongly over the years.

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3.9: Analysis of Depreciation

Depreciation is charged on all fixed assets on straight-line basis and over the following periods except freehold land.
RENATA Limited Analysis of Depreciation 2005 2006 2007 619,228,840 933,335,359 1,087,231,153 219,989,057 244,268,890 290,384,399 26,093,234 30,743,333 47,935,482 1,608,555,839 1,927,731,885 2,534,174,981

Gross Plant assets Accumulated depreciation Depreciation expense Turnover Accumulated depreciation as a percentage of gross plant assets Annual depreciation as a percentage of gross plant assets Annual depreciation as a percentage of sales

2008 1,371,913,067 357,477,233 67,620,834 3,089,746,417

2009 1,846,411,103 450,110,236 93,918,503 3,900,732,314

35.50%

26.20%

26.70%

26.10%

24.40%

4.20% 1.60%

3.30% 1.60%

4.40% 1.90%

4.90% 2.20%

5.10% 2.40%

Analysis of depreciation
45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 2005 2006 2007 2008 2009 Annual depreciation as a percentage of gross plant assets Accumulated depreciation as a percentage of gross plant assets

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Annual depreciation as a percentage of sales

3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2005 2006 2007 2008 2009 Annual depreciation as a percentage of sales

In the graph we see accumulated depreciation as a percentage of gross plan assets is running low year to year. That means Renata have high maturity Plant assets, and they can use this for long time. In case of sales we see there is no fluctuation of sales in terms of change in depreciation expense. And we also see that the percentage is stable from 2005 to 2009. In case of annual deprecation as a percentage of gross plant assets is also stable. From 2005 to 2009 it was stable that means we easily say company use straight line method in case of calculating the depreciation.

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4.1: Prospective Analysis

Forecasted Income Statement Step 2010 Forecast 4,924,582,970 1 2,538,622,521 3 2 2,385,960,449 8,050,515 4 2,394,010,964 2009 3,900,732,314 1,820,496,777 2,080,235,537 8,050,515 2,088,286,052

Turnover Cost of sales Gross profit Other income

Operating expenses: Administrative, selling and distribution expenses Operating profit Gain on disposal of property, plant and equipment Interest on over draft Other expenses Contribution to WPPF Profit before tax Tax expenses Current tax Deferred tax Total Tax expenses Net Profit after tax for the year Basic earnings per share(par value of Tk 100)

5 6 7 8 9 10 11

1,412,419,339 1,118,768,795 981,591,625 969,517,257 930,500 96,039,332 6,752,520 41,151,504 833,243,463 930,500 99,513,638 6,752,520 41,151,504 823,030,095 190,711,707 28,793,936 219,505,643 603,524,452

12 13

222,229,592 611,013,871

417.38

Selected Information Sales growth Gross profit margin Administrative, selling and distribution expenses/Sales Interest on over draft/ Bank overdraft Income Tax expense/Profit before Tax

26.25% 48.45% 28.68% 12.09% 26.67%

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Calculating these assumptions, Renatas Projected Income Statement for 2010 is present in the above. The following are the steps in the projection of this statement. 1. Sales: 4,924,582,970 = 3,900,732,314 X 1.2625 2. Gross profit: 2,385,960,449 = 4,924,582,970 X 48.45%

3. Cost of Sales: 2,538,622,521 = 4,924,582,970 - 2,385,960,449 4. Other income = Unchanged. 5. Administrative, selling and distribution expenses: 1,412,419,339 = 4,924,582,970 X 28.68% 6. Operating profit : 981,591,625 = 2,394,010,964 - 1,412,419,339 7. Gain on disposal of property, plant and equipment = Unchanged 8. Interest on over draft = 96,039,332 = 794424620 X 12.09% 9. Other expenses = Unchanged 10. Contribution to WPPF = Unchanged 11. Profit before tax = 833,243,463 = 981,591,625 - 930,500 - 96,039,332 - 6,752,520 41,151,504 12. Tax expenses = 222,229,592 = 833,243,463 X 26.67%
13. Net Profit after tax for the year: 611,013,871 = 833,243,463 - 222,229,592

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Forecasted Balance Sheet

Step ASSETS Non-current assets Property, plant and equipment Capital work-in-progress Investment in subsidiary Other investment Total non-current assets Current assets Inventories Trade and other receivables Advances, deposits and prepayments Cash and cash equivalents Total current assets Total assets EQUITY AND LIABILITIES Share capital Revaluation surplus Tax holiday reserve Retained earnings Total equity attributable to equity holders of the company Non-current liabilities Deferred liability-staff gratuity Deferred tax liabilities Total non-current liabilities Current liabilities Bank overdraft Creditors for goods Accrued expenses Other payables Unclaimed dividend Provision for taxation Total current liabilities Total liabilities Total equity and liabilities Forecast 2010 2009

1 2 3 4

1,878,396,506 736,960,533 63,070,376 11,931,079 2,690,358,494 1,191,841,559 288,324,530 80,677,337 257,675,788 1,818,519,214 4,508,877,708 144,598,400 154,596,958 83,346,636 2,435,751,833

1,396,300,867 736,960,533 63,070,376 11,931,079 2,208,262,855 1,075,310,581 343,870,341 80,677,337 143,248,172 1,643,106,431 3,851,369,286 144,598,400 154,596,958 83,346,636 1,824,737,962

5 6 7 26 25 24 8 9 10 11 12 13 14

2,818,293,827 2,818,293,827 124,183,595 111,546,400 235,729,995 794,424,620 27,896,925 217,056,133 237,310,646 3,961,604 174,203,958 1,454,853,886 1,690,583,881 4,508,877,708 124,183,595 110,179,135 234,362,730 794,424,620 27,896,925 171,928,847 237,310,646 3,961,604 174,203,958 1,409,726,600 1,644,089,330 3,851,369,286

15 16 17 18 19 20 21 22 23

Selected Information Account receivable turnover Inventory turnover Capital Expenditure CAPEX/Sales Tax payable/Tax expense Accrued expense/ Sales

17.08 2.13 381,865,033 9.79% 50.19% 22.69

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After calculating these assumptions Renatas projected Balance Sheet for the year 2010 is present in the above. The following are the steps in the projection.

1. Property, plant and equipment: 1,878,396,506 = 1,396,300,867 + (4,924,582,970 X 9.79% 2. Capital work-in-progress : Unchanged 3. Investment in subsidiary: Unchanged 4. Other investment: Unchanged 5. Inventories: 1,191,841,559 = 2,538,622,521 / 2.13 ( Inventory turnover) 6. Trade and other receivables: 288,324,530 = 4,924,582,970 / 17.08( Account Receivable turnover) 7. Advances, deposits and prepayments: Unchanged 8. Share capital: Unchanged 9. Revaluation surplus: Unchanged 10. Tax holiday reserve: Unchanged 11. Retained earnings: 2,435,751,833 = 1,824,737,962 + 611,013,871 12. Total equity attributable to equity holders of the company: 2,818,293,827 = 144,598,400 + 154,596,958 + 83,346,636 + 2,435,751,833 13. Deferred liability-staff gratuity: Unchanged 14. Deferred tax liabilities: Unchanged 15. Bank overdraft: Unchanged 16. Creditors for goods: Unchanged 17. Accrued expenses: 217,056,133 = 4,924,582,970 / 22.69 18. Other payables: Unchanged 19. Unclaimed dividend: Unchanged 20. Provision for taxation: Unchanged 21. Total current liabilities: 1,454,853,886 = 794,424,620 + 27,896,925+ 217,056,133 + 237,310,646 +3,961,604 + 174,203,958 22. Total liabilities: 1,690,583,881 = 1,454,853,886 + 235,729,995 23. Total equity and liabilities: 4,508,877,708 = 1,690,583,881 + 2,818,293,827 24. Total assets: 4,508,877,708 = Total liabilities and equity 36 | P a g e

25. Total current assets: 1,818,519,214 = Total assets noncurrent assets (4,508,877,708 2,690,358,494) 26. Cash & Cash equivalent: 257,675,788 = 1,818,519,214 - 80,677,337 - 288,324,530 1,191,841,559

Projected Cash flow

Amount

Net Income Items to adjust income to cash flows Decrease in Receivables Increase in Inventories Increase accrued expense Increase tax liabilities Net Cash flow from operation Capital expenditure Net cash flow from Investing Net cash flow from financing Net Change in cash Beginning Cash Ending Cash

611,013,871

55,545,811 (116,530,978) 45,127,286 1,367,265 596,523,255 (482,095,639) (482,095,639) 114,427,616 143,248,172 257,675,788

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4.2: Growth Analysis Growth rate

2006 Turnover Gross profit Net Profit after tax for the year 20% 22% 26% 2007 31% 30% 39% 2008 22% 27% 29% 2009 26% 33% 39%

45% 40% 35% 30% 26% 25% 20% 15% 10% 5% 0% 2006 Turnover 2007 Gross profit 2008 Net Profit after tax for the year 2009 20% 22% 22% 31% 39% 33% 30% 27% 29% 26% 39%

From our calculation Renatas growth rate is not constant, growth rate fluctuated year to year but it is increases. Their Net income growth rate for the year 2009 is 39%, which is greater than the previous year where in 2008 it was 29%. On the other hand sales growth rate increased from 22% to 26% but in 2008 it was 31%. It may cause for seasons and so many things or may cause for inefficiency of sales.

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4.3: Analysis Return on Common Equity

2005 ROCE 31.20% 2006 29.47% 2007 29.73% 2008 27.57% 2009 24.88%

Disaggregate ROCE
NOA NOPAT RNOA NFO Average NFO NFE NFR Spread Average SE LEV Disaggregate ROCE with Leverage 834441203 231,379,833 27.73% (1,372,838,753) (1,372,838,753) 49,756,819 -3.62% 31.35% 2,207,279,956 -0.621959507 8.23% 1054969287 295,229,821 31.25% (607,104,070) (989,971,412) 43,635,333 -4.41% 35.66% 1,934,676,657 -0.511698639 13.00% 1366554006 401,657,978 33.17% 88,948,500 (259,077,785) 28,740,247 -11.09% 44.27% 1,469,839,432 -0.176262644 25.37% 1767297517 535,441,972 34.17% 784,984,722 436,966,611 19,882,594 4.55% 29.62% 1,129,959,151 0.386710095 45.63% 2331463551 707,747,598 34.53% 1,557,346,348 1,171,165,535 11,501,475 0.98% 33.55% 878,214,999 1.333574963 79.28%

For calculating Net operating assets we considered total assets as a operating assets and total current assets & deferred tax as a operating liabilities. After subtracting operating liabilities from operating assets we find NOA. For calculating Net operating profit after tax the equation was total operating profit multiply by the (1 Tax rate) .We considered tax rate is 27 %. And calculating NOPAT we divide it by the Average NOA and we find RNOA. Net Financial expense (NFE) easily calculate to multiply Interest expense with (1- interest rate). We assume that interest rate was 50%. Net Financial obligations (NFO) calculate from subtracting Shareholders equity from the Net operating assets (NOA). Then Net Financial Rate (NFR) calculates by Net financial expense (NFE)/ Average Net Financial Obligation. To calculate Spread the equation was Spread= RNOA- NFR. And to calculate Leverage the equation was LEV= Av. NFO/ Av. SE. Finally we calculate the disaggregate ROCE= RNOA + (LEV x Spread) From our calculation we find that from 2005 to 2007 Renatas leverage was negative that means in those year Renatas financial leverage decrease the return on equity. But In 2008 and 2009 Renatas spread was positive that means company get benefit from the fincial leverage and it 39 | P a g e

increase the return on common equity. It is better for the Renata to maintain their Spread positive because positive Spread increases the shareholders wealth.

4.4: Free Cash Flow

RENATA LIMITED Free Cash flow Statement 2009 Net cash from operating activities Purchase of property, plant and equipment Dividend paid Free cash Flow 751,083,736 (642,570,569) (57,051,213) 51,461,954 2008 217,478,117 (549,504,472) (47,511,431) (379,537,786) 2007 433,149,597 (417,615,371) (39,472,951) (23,938,725) 2006 69,191,290 (224,799,510) (33,160,404) (188,768,624) 2005 211,455,860 (151,986,364) (27,398,386) 32,071,110

Positive free cash flow reflect that the amount available for business activities after allowance for financing and investing requirements to maintain productive capacity at current levels. We see that Renata has both positive and negative free cash flow for different year. Like in 2005 their fee cash flow was positive that means in 2005 they meet their all financial obligation easily. But in 2006 to 2008 we see their free cash flow was negative that means in that period company was not meet their financial obligation they may invest huge in the production facility to improve production. But if we see in 2009 company get their free cash flow positive and it is good sign for the company they can meet their all expenditure and also paid the dividend easily.

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4.5: ALTMAN Z-SCORE Implication

The Z-score formula is use for predicting bankruptcy of a company. The lower the score, the higher the chance of bankruptcy. Companies with Z-Scores above 3 are considered to be healthy and, therefore, unlikely to enter bankruptcy. Scores in between 1.2 and 2.9 lie in a gray area. Z = 0.717X1 + 0.847X2 + 3.107X3 + 0.420X4 + 0.998X5 Where: X1 is working capital total assets X2 is retained earnings (profit) total assets X3 is EBIT total assets X4 is Shareholders equity Total assets X5 is sales total assets
2009 X1 X2 X3 X4 X5 Z-score 2008 2007 2006 2005

0.191 0.474 0.240 0.573 1.013 2.534

0.180 0.423 0.220 0.526 0.977 2.382

0.142 0.454 0.243 0.593 1.176 2.679

0.025 0.393 0.218 0.553 1.085 2.356

0.110 0.395 0.237 0.607 1.262 2.680

In our calculation we see Renata have low probability of bankruptcy because there Z-score is between 1.2 and 2.9 in each and every year.

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5.1: Assumptions to analysis the Financial Statement

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5.2: Crucial Factor

Qualitative factors:
Strengths Local Market Size is Tk- 5000 cores in which Renata 137.62crores. Market Size is better because more than 240 Manufacturing Industries in Bangladesh including some world class manufacturing industries that are providing 97% of the total medicine requirement of the local market. Huge Distributors and Affiliations Partners like Novartis Vaccines (Rabipur, Vaxem HiB, and Agrippal), BASF, Germany (Animal Nutrition Products), InterVax, Canada (Meningococcal Vaccine), Evans Vanodine, UK (Disinfectant), Zinpro, USA (Metal Amino Acid Complexes), Biomin Laboratories, Singapore (Mycotoxin Binders and Nutraceuticals), Bomac Laboratories, New Zealand (Veterinary Products) 80% Raw Materials are imported; most of them are from India & China and 20% Raw Materials are manufactured by the Local Companies. So, Raw Materials are available in the market

Weakness: Lack of Hi tech Quality control Laboratory In case of market Share, Local Company SQUARE is the number one where RENATA in the Seven. Incorrect method for collecting resources and inventory management Lack of asset management and debt. Minimum profit in comparison with others

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Quantitative factors
Analyzing the liquidity ratios we can see that Renata does not have adequate short term solvency. It is identified that during 2007 and 2008, Renata was holding excessive stock of inventory. In 2008, there was a huge rise in the level of inventory around 52.42%. However, the pile up of huge amount of inventory that may become its competitive advantage in an inflationary economy as it may enjoy in the future. This is good news for the investors and this fact is reflected in the higher market price of Renata than its book value per share from 2005 to 2009. According to the asset management ratios conducted it is fair to say that Renata has room for improvement when it comes to inventory management, credit policy management. But when we look at the asset turnover ratio, it is higher than the market. This indicates improving sales of Renata. Consequently this has contributed theoretically poor DSO and inventory turnover ratio. In case of debt management ratio it is obvious that Renata is highly levered company but then again as we mentioned before during 2005 and 2006 the company invested heavily for expansion purpose via debt financing. Given the scope of market both locally and internationally this was necessary to cope up with the increasing demand but good news is that the company is utilizing this loan efficiently and effectively. When it comes to profitability the company is in very encouraging position. Profit margin wise Renata has been increasing at steady mode despite being lower than the market. As per ROA and ROE investors would be extremely happy because it at par with the competitor and above respectively. Furthermore Renata has very good EPS and steady dividend payout ratio which will be eventually helped the company to increase the stock price. Overall the market ratio also show healthy sign as Book value par share and market value ratio show greater competence than the market which cause the company share price to higher.

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5.3: Summary Evaluation and Inferences

A percent change analysis shows how two items changed as a percentage from one period to another period. We see Renata Ltd growth is very high and it is important for manager to take better decision for the future. In Index number trend analysis we see for cash & cash equivalent the change is negative in 2006 and it was -8.29 and in 2007 it was worse to -37.76 but 83.72 in 2008 the change became positive but in 2009 it was again decrease to 22.47. But we can say that their cash trend is better. In case of Property, plant and equipment the trend is positive and its increase day by day. Retain earnings, gross profit, total assets and turnover trend is positive and its also increases year to year.

For analysis the financial conditions of Renata Limited we can separate the financial statements (ratios) of Renata Limited into six different parts - liquidity ratios, Capital structure & Solvency ratio, Return on investment ratio, Operating performance ratio, Asset utilization ratios, and Market measure ratios. These ratios can be used to evaluate the overall condition of any company. Here we providing the summary evaluation about Renata Limited based on the liquidity ratios, asset management ratios, debt management ratios, and profitability ratios. In case of liquidity ratios, their current ratio is decreased than the previous year. Side by side their quick ratio is decreased than the previous year. So we can say that for current ratio Renta have some little idle money. But in case of quick ratio at the present rate it is not possible for the company to pay its bills as they come due. In case of asset management their inventory turnover in days is higher than the previous year. This suggests that inventory stocks of Renata Limited are higher than they need to be. Side by side DSO is in better position in comparison with previous year. Their debt to equity ratio is higher than the previous year and they have to maintain the standard. In case of profitability position of this company return on assets is increased than the previous year. Return on equity is decrease than the previous year but both are higher than the industry average. Net profit margin is increase than the previous year. So we can say that, overall the companys profitability position is good. 45 | P a g e

In case of voluntary disclosure we see Renata Ltd shows many things like broad members, audit committee, Board size, Ownership structure and so many things. But in case of Corporate social responsibility they only done few things like city beautification, students merit sponsors. By analysis the depreciation we see Renata have huge plant assets for long term production and the sales is not fluctuated by the change in depreciation expense. By calculating Z-score we see Renata have low probability of bankruptcy. At last we conclude that, their financial condition is not bad and need to keep the wheel of prosperity for future.

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6.1: Recommendation
Financial statements are most significant part of a company because financial statement analysis involves a comparison of a firms performance with that of other firms in the same line of business, which usually identified by the firms industry classification. The analysis is used to determine the firms financial position so as to identify its current strength and weakness and to suggest actions the firm might pursue to take advantage of the strengths and correct any weakness. Here is our recommendations about this company are as follows: Renata Ltd. has liquidity ability 1.49 times to pay the short term debt for 1, which is higher than the prior years. They have a little amounted of idle money which they opportunity to invest. Our evaluations of the acid test ratio suggest that Renatas liquidity position currently is poor. Renatas acid test ratio seems inadequate. The average selling time of inventories in 2005 is 168 days and in 2006 is 188 days. So their turn over rate is very high in the company, which is harmful for the country. So they should need to maintain the standard. Our examination of the return on assets suggests that Renatas profitability on assets currently is higher than the industry average. We think the return on assets of this company is maintaining a good standard. So they should try to keep the stability. Our assessment of the total assets turnover ratio suggests that Renatas plant and equipment to help generate sales is higher than the prior years. We think the total assets turnover of this company is satisfactory. Our evaluations of the debt to total equity ratio suggest that Renatas debt to total equity currently is higher than the previous year. So they should maintain this permanence. Our opinion of the return on common shareholders equity suggests that Renatas net income were earned for each taka invested by the owners is higher than the previous year. We think the return on common shareholders equity of this company is maintaining a good standard. So they should maintain this immovability. Our evaluations of the net profit margin suggest that Renatas net income were earned for each taka of sales is higher than the prior years. So they should maintain their net profit volume. 47 | P a g e

Our evaluations of the dividend payout ratio suggest that Renatas earnings distributed in the form of cash dividends is lower than the prior years. So we think the time dividend payout ratio of this company is maintaining a goods standard.

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6.2: Conclusion
The whole point of the thorough analysis conducted on Renata Limited was to asses this entity in terms of liquidity, profitability, solvency, cash health, comparison with prior years. And to analyze the common size, year to year change, Index number trend, forecasting Financial Statements, and calculating Z-score, it would safe to say that Renata Limited is a company with great potential for the future. As it is since the beginning, this entity has come a long way. During 2005-2006, it has taken made big investments for expansion of its operations and as of today, the company has been running quite successfully both in Bangladesh and abroad, particularly in Sri Lanka. Furthermore, to vouch for its success, the company has been able to hold a very good price in the stock market. Although not yet as a large a business entity as Square Pharmaceuticals, but it is competing well at par with the local pharmaceutical giant. In fact, in various aspects mentioned in the report, Renata has proved to be in rather more suitable condition compared to its competitor in question.

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6.3: Appendix

Year to Year change = (Current year- Previous year) / Previous year X 100 Index number trend = Current year / Base year X 100 Common Size for Balance Sheet = Each components / Total assets X 100 Common Size for Income Statement = Each components / Sales X 100 Common Size for Current assets = Each components / Total current assets X 100 Common Size for Current Liabilities = Each components / Total current Liabilities X 100 Common Size Capital Structure = Each Components / Total Liabilities and equity X 100 Inventory turnover = Cost of goods sold /Average inventories Acid test ratio = (Current assets Inventories)/ Current liabilities Inventory Turnover in Days = Days in the year/ Inventory turnover Account receivable turnover = Net credit sales/ Average net receivables. DSO = Days in the year/ Account receivable turnover Return on Assets = Net income /Average total assets Total assets turnover ratio = Sales/ Average total asset Debt to total assets ratio = Total debt/ Average total assets. Debt to total equity ratio = Total debt/ Total stockholder equity. Return on common shareholders equity = (Net income Preferred dividend) Average common equity Net profit margin = Net income/ Net sales Price-earnings ratio = Market price per share/ Earning per share Time interest earned ratio = Net operating profit /Interest expense Dividend Payout Ratio = Cash dividend/ Net income Z-score = 0.717 X1 + 0.847X2 + 3.107 X3 + 0.420X4 + 0.998X5

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6.4: Reference

Book- Financial Statement Analysis, 9th edition, John J.Wild, K.R. Subramanyam, Robert F. Halsey Annual Report, Renata Limited., Financial year 2005-2009 http://www.renata-ltd.com/

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