Term Loan Procedures And Performance Analysis Of IDLC Financial Limited
The development of financial market has been deceiving heightened attention from the policy makers in recent years. One explanation lies in the fundamental shift of development strategy reflected in the nearly universal embrace of the private sector as an engine of economic growth, the governments in both developed and developing countries, the international financial institutions which exert tremendous influence on the intelligentsia have all joined together as ardent advocates of private entrepreneurship.
IDLC finance Ltd a leading financial institution of the country achieved significant growth in all areas of business up to 3rd quarter of the year 2011. IDLC began its operation in 1985 as the first leasing company in Bangladesh in 1995. IDLC was licensed as a financial institution by the country’s central bank and during the last two decades the company has grown in tandem with the countries growing economy.
The company also strengthened its presence in the country’s growing stock market with launching a subsidiary – IDLC securities limited which is offering full fledged brokerage service for retail and institutional clients.
1.1 Origin of the Research paper
Since the practical orientation is an integral part of the BBA degree requirement, I was deputed by Jagannath University to IDLC financial limited to take real life exposure of the activities of the organization as a financial institution.
During my research at IDLC financial limited I have come across with different functions of the company. From them I have decided to work in the field of term loan procedures and performance analysis of IDLC financial limited. This paper have been originated the course requirement of the BBA program. I hope the paper will give a clear idea about the activities and role of term loan procedures and performance analysis of IDLC financial limited.
1.2 Objective of the study
The paper will be constructed with an objective to illustrate an overall analysis of the term loan operations and performance of IDLC. However, salient objectives of the paper are:
To develop the contribution of NBFI’s give loans and advances for industry, commerce, agriculture, housing and real estate carry on underwriting or acquisition business or the investment.
v To highlight Rules and Regulations regarding term loan.
v To provide an overall idea about how IDLC Finance ltd perform their term loan operations.
v To assemble the basic structure of term loan operations of IDLC Finance ltd.
v To highlight the performance of IDLC regarding term loan operations.
v To present the term loan based product offered by lDLC.
1.3 Methodology of the study
In order to make the paper as perfect as possible I here used data collection procedures which articulate the way that I have followed in my paper.
Data Collection Procedures:
Data were collected in two ways.
§ Primary ways.
§ Secondary ways
Primary ways of collecting data:
The primary data are those which are collected for the first time and thus happen to be original in character. These types of data were collected from personal conversation with the personnel’s of IDLC and from the various financial documents which were not publicly published by performing my research program there.
These are shown below in diagram-
Secondary ways of collecting data:
The secondary data are those which have already been collected by someone else and which have already been passed through the statistical process. From my paper purpose, secondary data were collected mainly from internet to collect annual papers as well as financial highlights of the company. Another important source was the annual papers of the companies and also from the Year book of Leasing finance association which publishes NBFI’s financial data. So it has been shown in diagram below-
1.4Limitation of the study
There exist some limitations in making the paper. These are stated below:
v There were some restrictions in disclosing some information as it was assumed to be confidential. Therefore I could not include those in my paper.
v Some of the information that I got from secondary sources were not arranged consistently.
v As some companies do not update their web site, therefore it was difficult to get the most recent data.
v Direct observation of the customer service of the company requires extensive time involvement, which may not be possible.
v Organizational personnel’s unwillingness to answer the questions.
v Since Annual paper of 2011 yet to be published almost of all companies so I was in trouble to select time period for financial data analysis.
2.0
Company Information Of
IDLC Financial Limited
2.1 IDLC at a glance
IDLC Finance Limited commenced its journey in 1985, as the first ever leasing company of the country. In 1995, IDLC was licensed as a Financial Institution by the country’s central bank, Bangladesh Bank, following the enactment of the Financial Institution Act 1993. Over the last two decades, IDLC has grown in cycle with the country’s transition into a developing country and has emerged as Bangladesh’s leading multi product financial institution. To summarize the evolving nature of the company, IDLC has changed its name to IDLC Finance Limited from earlier Industrial Development Leasing Company of Bangladesh Limited in August 2007. Since 1985, when IDLC was formed as the pioneering leasing company in Bangladesh, the company continues to evolve as an innovative financial solutions provider. The company is now able to offer its customers, integrated and customized financial solutions – all under one roof IDLC’s wide array of products and services range from retail products, such as home and car loans, corporate and SME products including lease and term loans, structured finance services ranging from syndications to capital restructuring and a complete suite of merchant banking and capital market services.
2.2 Vision,Mission,Strategiesobjective, product&service
Vision –
To be the nation’s most preferred financial services provider.
Mission– To lead by example through a commitment that empowers the organization at every level to strive for the highest levels of quality, customer care and stakeholder value.
Goal-
Ø To be the most sought after facilitator in creating wealth
Ø To maximize the value of being our customer ,shareholder or employee
Ø To establish strong regional presence
Ø To optimize contribution to the society
Strategies objective –
Þ Create high quality and strategically balanced portfolios
Þ Provide a range of financial products and services to our customers under one roof
Þ Strengthening our position in capital market operation
Þ Balanced diversification of funding sources
2.3 IDLC Product and Service
To ensure steady and long term growth as well as to sharpen its competitive edge in a changing and challenging business environment IDLC always endeavors to diversify into other financial services which have long term prospects. In 1997it expanded its range of services by introducing housing finance and short term finance which have broadened its customer base and have contributed significantly to IDLC’s growth and profitability. In early 1999, after getting license of merchant banking from securities and exchange commission, IDLC started its operation of underwriting, issuer management, corporate financing and other investment banking related services. The products and services are as follows:-
Loan products
1. Lease Finance
2. Term Finance
3. Domestic Factoring of Accounts Receivable
4. Work Order Finance
5. Corporate Real Estate Finance
6. Real Estate Developer Finance
7. Home Loans with Home Loan Shield
8. Home Equity Loans
9. Car Loans for Individuals
9. Business Loan
10. Machinery Loan
11. Double Loan
12. Festival Loan
13. Personal Loan
Investment Products:
1. Common Equity investments
2. Preferred Equity Investments
3. Bonds
Liability, Products:
Term Deposit Schemes
Debentures
Securitized Bonds
2.4 SWOT analysis
SWOT analysis for IDLC can be described as follows:-
Strengths
Reputation and brand image:
IDLC is well reputed company and has developed a brand image that is recognized by the customers. IDLC is an international joint venture company and its shareholders have long records of sustainability and reliability in their respective fields. IDLC is one of the esteemed through introduction of various innovative products and thus meeting the needs of large corporate clients.
Product portfolio:
IDLC has diverse product portfolio for customers which made them second to none in non banking financial industry.
Quality customer portfolio:
IDLC has a credit risk management department of multinational standard which enables the company to maintain a quality customer portfolio.
Weaknesses:
High cost of fund:
IDLC as any other NBFIs have high cost of fund in comparison to banks. As NBFIs can take deposit for less than one year from any individuals as banks can do, the deposit base of IDLC is not strong enough to reduce the average cost of fund.
More focus on volume :
Although IDLC has department called credit risk management to monitor the asset quality of the company, still the company sometimes for the sake of profit and past relationship provide loans to customers who at the end hamper the portfolio quality of IDLC.
Too much diversification:
Too much diversification of product and services offering hamper the focus on the core services of the organization.
Less people in liability marketing:
IDLC still employs lesser number of workforces for the aggressive liability marketing in comparison to banks and NBFI like DBH.
Opportunities:
Continuity of liberalization:
Government has continued to liberalize the economy towards more market orientation. This encouraged both local and foreign investors to invest in potential sectors. The privatization plan of government is likely to have positive impact on industrialization.
Foreign investment in prospective sectors:
In recent days foreign investment in the various prospective sectors has increased phenomenally. This creates a good opportunity for all financial institutions to enter in the booming new sector.
Local banks inefficiency:
One of the major reasons for thriving of leasing company in Bangladesh is local banks inefficiency of providing project loan. This phenomenon still persists.
Threats
Threat from banks:
In recent times banks are also entering into leasing business which is generally considered as functions of non banking financial institutions.
Regularity control of government
The legal framework of Bangladesh is relatively weak. Lack of effective foreclosure laws and recording system creates possibility of forgery and disputes. This may hinder the loan recovery from the defaulters.
2.5 Corporate social responsibility at IDLC
Corporate responsibility entails a much wider scope of activates than simply corporate philanthropy. It shows an organization’s commitment towards responsible business practices to protect the interest of all its stakeholder groups, without compromising the rights of the future generations. In line with this view, IDLC has always been keen to commit its resources not only towards maximizing our economic profitability but also to offer better quality of life to both our internal and external stakeholder groups.
Whom IDLC are taking care of
3.0 Formation of Term Loan in IDLC
3.1 why IDLC for term loan
Previously all NBFI’s earning source was only lease financing, but after the emergence of the NBFI sector in our country, NBFI’s begin to diversify their business activities and as a result various kinds of products and services take place to expand the business activities of NBFI’s. I have previously stated those products and services. Term loan is one of these products and services. As a leading player of NBFI sector in our country, IDLC’s term loan operations are increasing day by day and customers are satisfied with that. The main reasons for choosing IDLC for term loan are?
- Quick Service
- Healthy Relationship with Clients
Quick Service: – Clients who need fund immediately or within shortest possible time, better go to IDLC for a term loan. Because:
Strong Relationship with client:-
IDLC is good at maintaining a long term relationship with clients. This helps clients to get loans with reasonable conditions and IDLC for expanding the business activities.
3.2 Potential Client looks for
IDLC seeks out prospective clients regarding term loan operations though appropriate marketing strategy. Through proper Advertising and industry research IDLC finds out who needs’ loan and who can repay loans without any confrontment. IDLC retains customers with its best efforts.
3.3 Term loan practice
Prospective client search. (appropriate marketing)
IDLC’s sales executives are always looking for prospective clients for the term loan. They do research on the market prospect and the conditions of possible clients’ business. Based on their research they try to identify the trend of the economy and based on this trend analysis they plan their loan portfolio.
Information checklist based on requirement
Whenever a client wants to take loan from IDLC they provide them an information checklist based on their requirement. If the information provided by the client is considerable then they go for further processing otherwise they reject the loan proposal.
Document submission
If a prospective client passed through the information checklist process then the client is asked to submit some documents which
are required for further assessment. These documents vary in case to case.
Appraisal paper
After the submission of all documents the sales executive who bring the client to IDLC prepares an appraisal paper in which he/she gives his/her expert opinion about the loan proposal.
CIB paper
For assessing a loan proposal IDLC has to verify the proposer’s credit paper provided by the Credit Information Bureau (CIB). CIB provides necessary about the credit condition of the proposer. This CIB paper is very much important for assessing a loan proposal. If the paper is favourable for the proposer only then IDLC go for further assessment. Otherwise they reject the proposal immediately.
Justification through credit policy
After getting positive paper from CIB IDLC justify the loan proposal through its own credit policy. If the proposal complies with the credit policy of IDLC then they approve the loan otherwise the proposal is rejected.
Sanction of loan
After justifying the loan proposal the loan is sanctioned to the proposer.
Document preparation
After sanctioning the loan IDLC officials prepare the documents for the loan signing. Sign after preparing the documents required both the parties sign the document and the loan is provided to the client.
Internal control (credit administration)
Internal Control & Compliance Committee addresses operational risk and frames and implements policies to encounter such risks. The Committee assesses operational risk across the Company, as a whole, and ensures that an appropriate framework exists to identify, assess and manage operational risk.
3.4 Approval of term loan
Term loan is one of the main operations in IDLC Finance Ltd. Basically term loan is given to prospective and profitable customers. Finding out prospective customers by undertaking appropriate marketing and advertisement is one of the potentials of this company. IDLC has to maintain some rules and regulations and some defensive measures to justify a loan application. Certain factors are investigated before approving a loan to a borrower. A different dimension is applicable here. The 7 Cs of credit is an important aspect for perceiving a borrower.
7Cs of’ credit
Character:
IDLC must be comfortable with the borrower’s integrity and confidence in his willingness to repay the loan. Certain questions are important here, Has IDLC met the customer? What is his reputation in the community? Is he an upstanding guy or is he a dead beat? IDLC may consider checking references with other business-owners with which the customer does business.
Credit History:
Credit history of borrower is another important element to consider before approving a loan. IDLC would never loan money to an candidate without first checking his or her credit history. As a potential creditor, IDLC also has the legal right to obtain the borrower’s credit paper and examine it in determining whether or not the institution can risk extending the credit.
Career History:
IDLC asks about the borrower’s business. Is it a successful business venture? Has he been in it for a while? Has he had failed business ventures in the past? His past successes or failures may be determinative of his future business success.
Capacity:
Regarding this aspect of giving loan, IDLC must ask certain questions. In what capacity is the credit going to be used in his business? Is it part of borrowers’ inventory? Will the use of goods enable him to generate sufficient funds to repay IDLC and any other creditors? IDLC may consider going over his inventory records with him. The faster he moves his inventory, the more likely his business is a success.
Capital: Certain questions are material here, what is the borrower’s financial
net worth? A customer with a positive net worth can survive low cash flow times in his business and still pay creditors invoices.
Collateral:
IDLC may consider extending only “secured credit.” This usually means having the customer pledge real estate or his inventory in exchange for providing the credit. If he defaults on the loan, IDLC gets the pledged property. IDLC makes sure the property hasn’t been pledged before.
Conditions:
IDLC always makes sure the conditions of the sale are clear and in writing, signed by the borrower. This includes payment dates and amounts. If he defaults on any of the conditions, IDLC’s collection efforts will go much more smoothly if the conditions of the credit are clear.
3.5 Credit Risk Management in IDLC
Credit risk is the possibility that a borrower or counter party will fail to meet agreed obligations. Thus managing credit risk for efficient management of a financial institution (FI) has become the most crucial task. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, and consolidation it is essential that FI’s have robust credit risk management policies and procedures that are sensitive and responsive to these changes. At IDLC, credit risk may arise in the following forms:
- Default risk
- Exposure risk
- Recovery risk
- Counter party risk Related party risk
- Legal risk & Political risk
To encounter and mitigate credit risk the following control measures are in place at IDLC:
Ø Multilayer approval process
Ø Policy for maximum sector and group exposure limit
Ø Policy for customers maximum asset exposure limit
Ø Mandatory search for credit paper from Credit Information Bureau
Ø Looking into payment performance of customer before financing
Ø Annual review of clients
Ø Adequate insurance coverage for funded assets
Ø Vigorous monitoring and follow up by Special Assets Management Team
Ø Strong follow up of compliance of credit policies by Operational Risk Management Department
Ø Taking collateral
Ø Seeking external legal opinion
Ø Maintaining neutrality in politics and following arm’s length approach in related party transactions
Ø Regular review of market situation and industry exposure
3.6 Loan upper limit
IDLC can give term loan to a client up to a 30,00,00,000 BDT. Maximum amount of a term loan arrangement is based on IDLC’s total equity. IDLC gives loan to a client up to a certain percentage of
its total equity. This percentage varies from 15-20%. If conditions of a term loan contract are fair enough, IDLC is able to sanction a loan of full amount of the maximum. However the loan upper limit is totally based on borrowers’ financial ability.
3.7 Determination of Interest rate of a term loan
Interest rate determination of a term loan is very important. IDLC has various kinds of term loan arrangements. Most of these loans have tenure of 3-7 years. IDLC values their customers. So, for the convenience of prospective clients in a term loan arrangements, IDLC sets interest rate on term loan based on customer requirements.
Predetermined interest rate rather than fixed
IDLC determines the interest based on relationship with the clients. A long term relationship with customer can have an impact on interest rate determination. To retain prospective clients, IDLC sets lower interest rate for a term loan. Another feature is that, Interest rates are predetermined rather than fixed. Interest rates are negotiated with the borrowers and the borrowers can get the loan with the negotiated interest rates. Interest rates are negotiated and predetermined before the term loan is sanctioned to a borrower. IDLC offers competitive interest rates to their customers for a term loan, so that customers can receive a loan with a suitable interest rate, this helps both the customer in receiving a loan with relatively low interest rate and IDLC to gain a competitive advantage in the market.
Asset Liability Management Committee (ALCO) of ‘IDLC
The Asset Liability Committee (ALCO) of the Company assesses the changes in interest rate, market conditions, carries out asset liability maturity gap analysis, re-pricing of products and thereby takes effective measures to monitor and control interest rate risk.
3.8 Equal monthly installments of a term loan
A borrower can repay a term loan by equal monthly installment basis. Based on certain information, like, how much loan a borrower needs, what will be the tenure of the loan and predetermined interest rates a borrower can know what will be the equal monthly installments of that loan. By providing this information in the EMI calculator of IDLC a borrower get to know what will be the equal monthly installments. EMI calculator looks as follows:
3.9 Structured settlements of a term loan
The structured settlements of a term loan are originated by IDLC for the convenience of the borrower to repay the loan in a term-loan arrangement in a comfortable way. Through these settlements, borrowers can repay the loan by equal monthly installments however they want.
The step up approach:
In term loan arrangement having tenure of 3 years with an EMI of 20000 BDT, a borrower may pay lower amounts than 20000BDT in prior years and then he can pay higher amounts than 20000BDT in following years.
A hypothetical step up format would look like following
The step down approach:
In this type of settlement, borrower can pay higher amount than EMI in prior years, later he can pay lower amounts than EMI in order to repay the loan.
A hypothetical step down format would look like following
4.0
Performance of IDLC
4.1 Operational performance of IDLC during 2010
The company’s diversified operations and subsidiary saw a handsome growth during the year 2010. SME’s in Bangladesh have been making a significant contribution to the country’s economy. There is large gap between their needs and access to reasonably priced funds. Under this back drop, IDLC has taken an initiative small and medium sized business enterprises.
The mode of financing of SME division of IDLC includes lease, term loans, short term financing through factoring, bill discounting etc. During 2010 SME division has disbursed BDT 2.712 million against BDT 1820 million in 2009 showing a robust growth of 63%. As on December 31, 2010 the SME asset size of the company stands at BDT4144 million compared to BDT 2544 million at December 2009.
Company’s corporate finance division which provides mainly lease and term loans to large corporate houses has disbursed BDT1633 million during 2010 compared to BDT 1929 million during 2009. The year end asset of the division stands at BDT 4638 million. As the corporate financing continued to face stiff competition from commercial banks as regard to the pricing.
The personal finance division of the company deals mainly with real estate finance and also provides personal and car loans to some very selective clients. During 2010, this division disbursed BDT 2439 million compared to BDT 2066 million in 2009. The total asset portfolio of the division at the year end stands at BDT 6611.
4.2 Financial performance of IDLC during 2010
IDLC has completed a very successful year in 2010. consolidated operating results during 2010 are summarized below:
| Particulars | 2010 | 2009 | Growth % |
| Operating income | 3027 | 1913 | 58.26% |
| Operating expenses | 946 | 490 | 93.26% |
| Total operating profit | 2081 | 1423 | 46% |
| Net profit after income tax | 1327 | 822 | 61% |
| Earning per share | 221 | 137 | 61% |
IDLC continues to be recognized as the leading multi product NBFI’s in Bangladesh and is both a bench- mark and a role -model for all competitors. The company’s diversified business strategies; strong compliance culture and the energy and commitment of its staff have combined to generate exceptional results in 2010.
4.3 Business review
Lease and loans
Amid intense and increasing competition amongst the financial institution as well as the commercial banks. IDLC maintained its leadership position in the market. During 2010, company disbursed BDT 4345 million in lease and term loans compared to previous year’s BDT 3750 million, showing a growth of 16%. The lease and term loans portfolio at the end of the year saw a marginal growth of 6% over the previous year. This year company concentrated more on acquiring better quality financial assets rather than volume achievement for its own sake. The company expects to continue its drive to diversify its client base, maintain portfolio quality and improve service quality.
Lease and term loan
Taka in million
Real estate finance
Although the real estate and housing industry experienced a setback during 2010 with fall in sales due to non – availability of electricity and gas connections as per government decision and hile
in apartment price, IDLC housing finance operation witnessed a reasonable growth of 15% in disbursements. Revenue of the operation also witnessed growth of 15%. The housing finance assets as at the close of the year stood at BDT 5605 million , 17% higher than the previous year.
Real estate finance
BDT in million
Car loans
During the year under paper, company disbursed BDT 150 million a against precious years disbursement of BDT 148 million. This operation has earned revenue of BDT 56.09 million during the period. This business is facing enormous competition from commercial banks, which are able to offer lower rates and spend large amounts of money on aggressive marketing campaigns conjunction width a large sales force and branch network.
Car loan
Tk in million
Term finance
Revenue from term financing has also increased in 2010. we can notice an upward trend in term finance activities of IDLC. Portfolio of term finance has increased 956 million BDT to 4207 million BDT
Term finance
TK in million
4.4 Contribution to national economy
IDLC finance limited commenced its journey in 1985 as the first leasing company in the country. With its pioneering role, IDLC has made the lease financing popular in the country and developed the leasing industry, which has a total investment more than 250 billion now, as a vibrant financial intermediary in the medium term financing segment in the country. IDLC is continuously increasing its focus on financing to small and medium enterprises, the engine for growth for any developing economy.
During the year under paper, the company has deposited BDT 575 million to the government exchequer as corporate income tax, withholding tax and vat.
4.5 IDLC’s business activities
From a business perspective, both existing businesses and new projects in the country suffered from serious energy shortages in 2010. Not surprisingly, new and investment opportunities were relatively scarce. With everybody running after the same clients, the smaller non – banking financial institution sector faced even more competition from the much larger commercial banking sector than in previous years.
Traditional term- lending and leasing businesses, particularly in the corporate clients segment struggled to grow. IDLC’s treasury took advantage of inter bank liquidity and were successful in managing down the cost of funds. The capital market segment leveraged off the massive stock market growth and has generated record revenues. IDLC’s consolidated assets, at 2010 year end stood at BDT 26.9 million a 19% growth over 2009. An aggressive deposit program was initiated in the second half of 2010 and by year end , customer deposits had reached the BDT 12.4 billion mark -27% higher than the previous year. IDLC earned a consolidated net profit of BDT 1327 million in 2010 – 61% growth over the previous year.
Consolidated earnings per share grew by 61% to BDT 221.18 – compared to previous year’s BDT136.98. As at December 31.2010, the company’s equity had increased by 54% to BDT 3.7% billion over the previous year.
Portfolio composition
4.6 Analysis of financial performance
4.6.1 Ratio analysis
The analyses of the financial performance of the four selected Bangladeshi leasing company of last four years are presented below with their average performance and the ratio.
Debt equity ratio
This ratio is calculated to measure the relative proportions of outsiders’ funds and shareholders funds invested in the company.
Table ; – Debt equity ratio
| Year | IDLC | PRIME | LANKBANGLA | UNITED |
| 2007 | 9.54% | 4.97% | 8.68% | 6.6% |
| 2008 | 8.32% | 3.94% | 7.79% | 6.6% |
| 2009 | 8.4% | 4.05% | 5.4% | 5.9% |
| 2010 | 6.30% | 2.13% | 3.03% | 4.7% |
Debt equity ratio shows a favourable or unfavourable financial position of the concern depends on the industry and the pattern of earning. A low ratio is generally viewed as favourable from long term creditor’s point of view, because a large margin of protection provides safety for the creditors.
Chart: – Debt equity ratio in the last 4 years
From the above mentioned figure it is found that IDLC financial company highest with 9.54%, 8.32% and 8.4 % in 2007, 2008 and 2009 respectively. LANKABANGLA and UNITED also performed above the average where PFI performed always below average. For this segment of analysis higher score provided to the company with lower percentage in every year.
The sore of companies under this ratio are as follows –
| Company | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 1 | 2 | 3 | 4 | 10 |
| PRIME | 4 | 8 | 12 | 16 | 40 |
| LANKABANGLA | 2 | 4 | 9 | 12 | 27 |
| UNITED | 3 | 6 | 6 | 8 | 23 |
Table- Sore of companies debt equity ratio
Return on equity ratio
This ratio is a measure of the percentage of net profit to equity shareholders fund.
Table- Return on equity ratio
| Year | IDLC | PRIME | LANKABANGLA | United |
| 2007 | 27.59% | 34.76% | 41.23% | 14.6% |
| 2008 | 28.43% | 36.75% | 40.94% | 14.0% |
| 2009 | 41.05% | 49.72% | 35.24% | 13.5% |
| 2010 | 43.64% | 64.97% | 35.49% | 26.2% |
It measures a firm’s efficiency at generating profits from every unit of shareholders’ equity. ROE shows how well a company uses investment funds to generate earnings growth. Higher percentage of ROE refers higher efficiency in using equity fund. The ROE of the company are presented in the following chart.
Chart: – Return on equity ratio of the last 4 years
The information shows that LANKABANGLA ROE was much higher in the last two years with 41.23% and 40.94% respectively but it had been decreased in 2009 and 2010 years. PFI was in top with 49.72%% and 64.97%% in 2009and 2010 respectively but it was below the average in 2007, 2008 and 2009 IDLC and UNITED. For this ratio higher score will be provided to the organization with higher percentage as higher percentage means higher efficiency of the organization.
The score sheet of companies are provided below
Table – sore of companies return on equity ratio
| Company | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 2 | 4 | 9 | 12 | 27 |
| PRIME | 3 | 6 | 12 | 16 | 37 |
| LANKABANGLA | 4 | 8 | 6 | 8 | 26 |
| UNITED | 1 | 2 | 3 | 4 | 10 |
Return on asset ratio
This ratio is calculated to measure the profit after tax against the amount invested in total assets to ascertain whether assets are being utilized properly or not. Higher the percentage of return, higher the proper utilization of assets.
Table- Return on asset ratio
| year | IDLC | PRIME | LANKABANGLA | UNITED |
| 2007 | 2.37% | 4.92% | 4.89% | 1.824% |
| 2008 | 2.50% | 5.71% | 4.66% | 1.748% |
| 2009 | 4.11% | 8.89% | 5.54% | 1.858% |
| 2010 | 5.35% | 16.85% | 8.80% | 4.08% |
Chart: – Return on asset ratio of the last 4 years
Form the above chart it can be said that UNITED and IDLC lost its efficiency in the recent years. In 2008, 2009 and 2010 PFI was in the highest position with 5.71%, 8.89%, 16.85respectively where in 2008, 2009 and 2010 LANKABANGLA also hold the highest position with 4.66%, 5.54% and 8.80% respectively. For this ratio higher score will be provided to the organization with higher performance as higher percentage means higher efficiency of the organization in using assets. The score sheet of companies are provided below –
Table – sore of companies return on asset ratio
| Year | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 2 | 4 | 6 | 8 | 20 |
| PRIME | 4 | 8 | 12 | 16 | 40 |
| LANKABANGLA | 3 | 6 | 9 | 12 | 30 |
| UNITED | 1 | 2 | 3 | 4 | 10 |
Earning per share
This helps in determining the market price of equity shares of the company and in estimating the company’s capacity to pay dividend to its equity shareholders. The performance and prospects of the company are affected by earning per share. If earning per share increases, there is a possibility that the company may pay more dividend or issue bonus share.
Table- earning per share
| Year | IDLC | PRIME | LANKABANGLA | UNITED |
| 2007 | 50.50 | 5.99 | 5.47 | 27.22 |
| 2008 | 67.73 | 6.21 | 9.81 | 28.95 |
| 2009 | 237 | 10.60 | 14 | 30.72 |
| 2010 | 221.18 | 19.13 | 32 | 71.64 |
Chart- Earning per share of the last 4 years
The chart shows that EPS of IDLC highest during the years in 2008, 2009 and 2010 with Tk 67.34, Tk 136.98, Tk 221.18 respectively where in 2010 it was leaded by LANKABANGLA with Tk 32 and the EPS of UNITED had been increase in last three years. For this ratio higher score will be provided to the organization with higher percentage as higher percentage means higher efficiency of the organization. The score sheet of companies are provided below-
Table :- sore of companies earning per share
| Company | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 4 | 8 | 12 | 16 | 40 |
| PRIME | 2 | 2 | 3 | 4 | 11 |
| LANKABANGLA | 1 | 4 | 6 | 8 | 19 |
| UNITED | 3 | 6 | 9 | 12 | 30 |
Total scoring and ranking
According to the analysis the total score of the each company and ranking the company according to the score are provided in the following chart: –
| Company | DER | ROE | ROT | EPS | Total | Ranking |
| IDLC | 10 | 27 | 20 | 40 | 97 | 3rd |
| PRIME | 40 | 37 | 40 | 11 | 128 | 1st |
| LANKABANGLA | 27 | 26 | 30 | 30 | 113 | 2nd |
| UNITED | 23 | 10 | 10 | 19 | 62 | 4th |
According to the analysis it is found that PRIME company has achieved the highest score and the best ranking followed by LANKABANGLA, IDLC and UNITED respectively.
4.6.2Growth rate analysis
Growth rate analysis is the most important tool of business expansion comparison. In this study growth rate was calculated on the basis of base year 2006 Score and position are determined under the following percentage.
Growth rate of paid up capital
Table: – Growth rate of paid up capital
| Year | Idlc | Prime | Lankabangle | United | |||
| 2007 | 133.33% | 110.% | 100% | 100% | |||
| 2008 | 166.67% | 154% | 110% | 110% | |||
| 2009 | 200% | 215.59% | 126.5% | 125.71% | |||
| 2010 | 400% | 301.84% | 151.8% | 251.42% | |||
Chart: – Growth rate of paid up capital
The highest growth rate of paid up capital was IDLC Company with 133.33%, 166.67%, 200% and 400% during 2007, 2008, 2009 and 2010 respectively and also PFI was highest rate with 215.59%and 301.84% during 2009 and 2010. Growth rate of paid-up capital of LANKABANGLA and UNITED was average rate during 2007 and 2008 but UNITED growth rate of paid up capital was increased in 2009 and 2010. Higher score provided to the company with higher percentage in every year. Higher score are distributed for higher rate as following:-
Table: – Score of companies growth rate of paid up capital
| Company | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 4 | 8 | 6 | 16 | 34 |
| PRIME | 3 | 6 | 3 | 12 | 24 |
| LANKABANGLA | 1.5 | 3 | 12 | 4 | 20.5 |
| UNITED | 1.5 | 3 | 9 | 8 | 21.5 |
Lankabangla and United are in the joint position in 2007. That why the score of 2nd and 3rd position are equally divided among them by adding the two score.
Growth rate of total investment
Table: – Growth rate of total investment
| Year | Idlc | Prime | Lankabangla | United |
| 2007 | 184% | 120% | 21.86% | 117.93% |
| 2008 | 265.52% | 146.64% | 35.39% | 122.17% |
| 2009 | 483.17% | 267% | 22.38% | 123.50% |
| 2010 | 435.85% | 334.5% | 36.80% | 260.43% |
Chart: – Growth rate of total investment
From the above figure shows that Growth Rate of total Investment of IDLC Company was the highest with 184%, 265.52%, 483.17% and 435.85% in 2007, 2008, 2009 and 2010. Rate of PFI Company was over in last four years but rate of UNITED was higher than the LANKABANGLA in last four years and rate of LANKABANGLA also was below in last four years. Score sheet of companies are provided below:-
Table: – score of companies growth rate of total investment
| Company | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 4 | 8 | 12 | 16 | 40 |
| PRIME | 3 | 6 | 9 | 12 | 30 |
| LANKABANGLA | 1 | 2 | 3 | 4 | 10 |
| UNITED | 2 | 4 | 6 | 8 | 20 |
Growth rate of total deposit
Table :- Growth rate of total deposit
| Year | IDLC | Prime | Lankabangla | United |
| 2007 | 144.24% | 143.50% | 221.21% | 214.97% |
| 2008 | 260.8% | 147.08% | 321.52% | 267.98% |
| 2009 | 307.77% | 312.87% | 239.83% | 402% |
| 2010 | 386.24% | 253.97% | 259.10% | 415% |
Chart: – Growth rate of total deposit
From the above chart, it can be described that growth rate of Total Deposits of LANKABANGLA was the highest with 221.21% and 321.52% in 2007 and 2008 respectively but the rate was below in 2009 and 2010 than the other company’s. Rate of UNITED was above with 214.97%, 267.98%, 402% and 415% in last four years but the rate of IDLC and PFI was below in 2007 and 2008. In 2009 and 2010 the rate of IDLC was over with 307.77% and 386.245 in 2009 and 2010. Score sheet of companies are provided below:-
Table:-score of companies Growth rate of total deposit
| Company | 2007 | 2008 | 2009 | 2010 | Total |
| IDLC | 2 | 4 | 6 | 12 | 24 |
| PRIME | 1 | 2 | 9 | 4 | 16 |
| LANKABANGLA | 4 | 8 | 3 | 8 | 23 |
| UNITED | 3 | 6 | 12 | 16 | 37 |
Growth rate of total equity
Table: – Growth rate of total equity
| Year | Idlc | Prime | Lankabangla | United |
| 2007 | 131% | 127.53% | 119.58% | 110.73% |
| 2008 | 149.19% | 184.96% | 147.65% | 122.61% |
| 2009 | 251.48% | 366.67% | 219.56% | 135% |
| 2010 | 387.78% |