l - IDLC Finance Limited
Volume 11 l Issue 3 l March 2015 CONTENTS this issue ECONOMY Development process to slow down for political turmoil Bangladesh becoming a top spot for Muslim travelers COVER STORY 28 28 TRADE Exporters fear growth may drop for unrest More investment required for escalating tea production 30 30 Global demand to coerce home textile investment 02 Bangladesh cement industry is the 40th largest market in the world. Cement, being a bulk commodity, is a freight intensive industry and transporting it over long distances can prove to be uneconomical. For that reason, the industry in Bangladesh is regional in nature. IDLC NEWS BUSINESS Cotton consumption ascended on rising garment export Bangladesh’s Cement Industry: Thriving After Years of Restructuring 32 32 IDLC and USAID arrange a 3 day event in Chittagong titled “Industrial Best Practices for Energy Efficiency” REGULATORY NEWS Banks to turn their back on call money market Central bank imposed on indebted banks 34 34 INTERNATIONAL Facebook bought shopping search engine ‘The Find’ EU to query cross-border e-commerce barriers 37 37 42 IDLC CSR NEWS IDLC organizes an Environment Awareness Workshop for School Teachers MARKET ROUNDUP Commodity Market Roundup Currency Market Roundup 38 39 CAPITAL MAKET REVIEW Market Commentary All rights reserved. No part of this newsletter may be reproduced in any form, by print, photoprint, microfilm or any other means without written permission from the publisher. 44 43 If you have any comments and/or suggestions, please write to us at Design & Printing nymphea mbr@idlc.com IDLC MONTHLY BUSINESS REVIEW Cover Story Bangladesh’s Cement Industry Thriving After Years of Restructuring - Md. Yasin Hossain C ement is one of the major elements on which today’s civilization stands. In academic term, cement could be defined as a fine, soft, powdery-type substance which is made from a mixture of elements that are found in natural materials such as limestone, clay, and sand. When mixed with water, cement sets, hardens and bind other materials together. Color of cement is usually gray, though white cement is also found but comparatively more expensive in usual cases. There are 27 types of common cement which can be grouped into 5 general categories and 3 strength classes: ordinary, high and very high. In addition, some special cement is also available like sulphate resisting cement, low heat cement and calcium aluminate cement. Only cement has the ability of enhancing thickness of concrete which in return provides better bonding among the elements used in a concrete mix. Cement used in construction can be characterized as either hydraulic or non-hydraulic; depending upon the ability of the cement to be used in the presence of water. Following the natural condition of Bangladesh, hydraulic cement (e.g., Portland cement) is more appropriate as the chemical reaction after use allows construction to set in wet condition and protects the hardened material from further chemical attack. The amount of cement consumed by a country is an important indicator for identifying its economic progress while the demand is closely linked to the growth of construction sector. 2 The amount of cement consumed by a country is an important indicator for identifying its economic progress while the demand is closely linked to the growth of construction sector. However, due to long implementation period (around two years) for new capacity building, existing demand scenario may change. This can lead to a fall in cement prices, and the industry could face a downturn, leading to reducing operating rates or shutting down capacities. Global Scenario Cement plays a significant role in the development of national economy. To support the rapid growth of urbanization throughout the world, accumulated world production of cement is increasing in a relentless basis. Research report of international cement review stated that the global demands have doubled within a decade between 2002 and 2012 from 1.8 billion MT to 3.7 billion MT; reflecting a CAGR of 7.4% which was much higher than the CAGR of 4.3% in the previous decade (1992-2002) though 5 year (2007 to 2012) CARG was 6.2% and is estimated to be CAGR of 4.3% for the period 2012 to 2017. According to Mineral Commodity Summaries of January 2015 published by U.S. Geological Survey, estimated World Production and Capacity of cement was 4,080.0 million MT in 2013 which climbs to 4,180.0 million MT last IDLC MONTHLY BUSINESS REVIEW WORLD CEMENT PRODUCTION IN 2009 2.50% 0.40% 2.40% 5.50% year. Continuous increment of cement demand is fueled by rising investments in infrastructure among the developing countries of the world; driven by economic growth and increasing per capita income levels. The world production as well as consumption is dominated by China followed by India; together they account for more than 50% of the total cement produced and consumed in the world. Other major countries are USA, Brazil, Russia, Vietnam, Iran, Turkey and Japan. Capacity expansions in China, India, Saudi Arabia, UAE, 4.60% Turkey, Egypt, and Brazil at a significant level are underway and planned for the next few years. The largest global players are Lafarge (France), Holcim (Switzerland) and Cemex (USA). In the various markets around the world, these companies compete each other and also against strongly-established local producers. 8.60% 0.40% 54.20% 13.40% Following the product’s nature, cement has regional concentration both in production and consumption as transporting over long distances reduce the bottom line profitability of the producers by adding cost which makes cement a regional commodity where lower distribution cost is remunerative for producers. 6.20% Cement consumption varies region wise because the demand-supply balance, per capita income and 1.80% China Oceania Other America India Europe Union Africa level of industrial development differ in each region. In a recently published article, it was mentioned Japan CEMBUREAU USA Other Asia CIS that the per capita cement consumption of Bangladesh is 107 Kg, which is 210 Kg in India, 265 Kg in Pakistan, 310 Kg in Sri Lanka and 570 Kg in Korea. Recently world’s two largest cement makers, France’s Lafarge and Switzerland’s Holcim, agreed to a merger to create a company worth USD55 billion with Source: Global Cement Magazine a presence in more than 90 countries. If it happens then it will change the business dynamics of the industry throughout the world. Bangladesh Perspective There was no cement factory under private ownership in Bangladesh upto the year 1994 as Government forbids the sector and following such inability of production, total demand of cement was fulfilled by imported products. After getting positive Government node several multinational manufacturers as well as local entrepreneurs rushed for capitalizing the windows of opportunity. However, following the capital intensive business nature it took years for the producers to enter in the Greenfield sector. Breakthrough of the industry came when M. I Cement started exporting their product (Crown Cement) in 2003 and within a decade of industry’s birth, aggregate production capacity of the country exceeds its demand. So far, several Bangladeshi manufacturers have experienced to export own brands to seven sister zone & West Bengal of India and there remains a good potentiality to accelerate the export volume. During the year CEMENT DEMAND AND CAPACITY 2002 and 2006, rapid increase of construction works in housing, industry and public sector gave comfort to the local cement manufacturing companies. Afterwards, due to global economic turmoil the cost of all commodities along with the rising fuel price pushes the cost of construction materials including cement. Moreover, Bangladesh’s political instability after 2008 affected the demand of cement, causing stressed 28 2014 25 2013 There are five types of Portland cement used in the world. Among them, two types are produced and used in Bangladesh (type- CEM I and CEM II). CEM I is named as Ordinary Portland Cement (OPC) with 16 no SCM (Supplementary Siliceous Materials; such as fly ash, slag, silica fume etc.) while CEM II is Portland 22 2012 15 Composite Cement (PCC) where SCM or pozzolana is added by replacing a significant portion of clinker. In areas of durability problem such as sulphate or chloride attack, PCC performs better. The basic difference between OPC and PCC lies in the use of raw materials. To produce OPC, 95% clinker is required while in 21 2011 situation for cement manufacturers. The industry got a breathing space during 2010 to 2012 but again faces trouble following the rough socio-political situation. 17.5 PCC percentage of clinker in the mixture stays between 65% and 80%. As a result, PCC is gaining popularity worldwide due to its environmental significance and comparative low cost. Traditionally, OPC was used in Bangladesh and since 2003, production of Portland Composite Cement (PCC) has been started complying 14.5 with the guidelines of European Standard Methods (ESM). 20 2010 13.9 Portland cement is the most common type of cement used in general, not only in Bangladesh but also around the globe. Portland cements can be modified easily, depending on the raw materials used and the process used Demand (Million Metric Tons) Capacity (Million Metric Tons) Source: IDLC Research Report 2013 to combine them. Of the numerous blends of Portland cement, Ordinary Portland Cement (OPC) and Portland Composite Cement (PCC) are mostly used in Bangladesh. PCC is fit for all kinds of construction, while OPC is used in cases where salinity, heat, moisture, weather, etc. related problems are considered for construction works. 3 IDLC MONTHLY BUSINESS REVIEW MARKET SHARE Bangladesh has a high need for basic infrastructure, housing and services which are supported by incremental economic activities, and therefore, a robust growth is expected in the demand for cement. Based on market volume, the cement industry of Bangladesh is the 40th largest market in the world, at present. The country’s increasing urbanization has stimulated the building materials sector and has generated considerable needs for cement. Most of the large cement manufacturing 16% companies operating in Bangladesh undertook capacity expansion plan in last five years, to tap the 10% opportunity. However, due to delay in starting construction of Padma Bridge, current political turmoil, economic slowdown coupled with sliding business of real estate sector, the demand for cement was 52% 8% 7% 7% not increased as per expectation for which the sector may face challenge to ensure economic range of utilization in near future. Cement sector in Bangladesh experiences seasonality. September/October to April/May is the peak Shah Cement Heidelberg season where the demand usually inclines; however, the demand declines during May/June to August/ Meghna Lafarge Holcim Others September (depending on monsoons). Manufacturers gives incentive, commission and foreign trip Source: IDLC Research Report 2013 campaign to target achiever (includes company employed executives and dealers/distributors/traders) over the year while taking promotional activities in off pick season. Following the undifferentiated commodity nature of cement, the industry is characterized as a very high competitive business area, not in Bangladesh but throughout the world. The bargaining power of the customers is limited irrespective of having excess capacity in the sector as most of industry players struggles to achieve economies scale of production. Many national level producers set marginal profit while entering in new regions which pushes regional manufacturers to set back. Moreover, the requirement of high electricity requirement, environmental concerns and entire dependency on imported raw materials eventually put strong barriers for new entrance. To market own products in Bangladesh a cement brand needs to be accredited by BSTI to ensure its quality, weight, and services. Industry Participants Cement is one of the most competitive industries in Bangladesh as it has surplus capacity alongside having the presence of worldwide prominent cement makers including Holcim, Lafarge, Cemex and Heidelberg. Since 1994, more than 120 companies were registered with the Board of Investment as a cement manufacturer; among them around 75 came into operation and of them almost all the small factories (specially in Mongla, Khulna, Jessore and North Bengal areas) were forced to shut the production following their financial inability to compete with national players in the face of rising production costs, location disadvantage and shortage of utility supply. In June 2013, Semen Indonesia, announced that the company is planning to acquire a cement plant in Bangladesh, but so far no movement was reported in mass media in this regard. As per the estimation of Bangladesh Cement Manufacturer’s Association (BCMA), the industry comprises of 95% Grinding Projects and 5% Integrated Projects. Industry specialists estimated the annual demand for cement in the country lies between 18-20 million tons, while the combined production capacity of the active cement producers is more than 36 million ton, almost double of local demand. As capacity exceeds local demand by huge margin, several producers desperately searches new ways to tap new export markets. Still, there are some companies producing for geography concentrated markets only as carrying and familiarizing regional brands in far places is economically burdensome. In spite of excess capacity and tight economic growth, several manufacturers are still involved with capacity enhancement (like Aman Cement Mills Ltd, Shun Shing Group and Olympic Cement Ltd). At present, seven cement companies are listed in the two stock exchanges. The portfolio is made up of two multinationals and five local cement companies. The multinationals are: HEIDELBERG Cement Bangladesh Ltd, which was enlisted on the DSE in 1989 and on CSE in 1995, and Lafarge Surma Cement Ltd., which was enlisted on both exchanges in 2003. Of the local companies, Confidence Cement Limited was enlisted on both exchanges in 1995; Meghna Cement Mills Ltd was enlisted on DSE in 1995 and on CSE in 1996, Aramit Cement Limited in 1998, M. I. Cement Factory Limited in 2011 and Premier Cement Mills Limited in 2013. The Country’s cement sector employs over one lac people, both directly and indirectly. All these with the slower pace of development activities has made cement market growing at lesser pace in recent times and the effect was evident in most front side companies. 4 IDLC MONTHLY BUSINESS REVIEW List of prominent market players Name of the Company Start Access to Production River Akij Cement Company Ltd Aman Cement Mills Ltd Anwar Cement Limited Aramit Cement Limited CEMEX Cement Bangladesh Ltd Confidence Cement Limited 2002 2003 2002 1999 2001 1994 Shitalakshya Meghna Karnaphuli Shitalakshya - Diamond Cement Ltd 1998 Karnaphuli Eastern Cement Industries Ltd 1999 Heidelberg Cement Bangladesh 2000 Ltd Heidelberg Cement Bangladesh 1999 Ltd Shitalakshya Karnaphuli Shitalakshya Affiliated Group Brand Akij Group Aman Group Anwar Group Aramit Group Mexico based CEMEX Confidence Group Malik Group and Habib Group Akij AmanCem Anwar Camel CEMEX Lion Capacity (Million MT/p.a.) 1.20 0.21 0.24 0.21 0.55 0.75 Diamond 1.33 Seven Horse and Seven Horse Supreme 0.54 Ruby 1.45 Scan 1.20 Holcim (Strong, Red and Strong) 2.20 Doreen Group German based Heidelberg Cement Group Holcim (Bangladesh) Ltd 2000 Meghna Holcim (Bangladesh) Ltd 2014 Pashure Lafarge Surma Cement Ltd 2006 Surma M.I. Cement Factory Ltd Madina Cement Industries Ltd 2000 2007 Dhaleshwari Meghna Madina Cement Mills Ltd 1997 Buriganga Meghna Cement Mills Ltd 1996 Pashure Bashundhara Industrial Complex Ltd 2008 Pashure Metrocem Cement Ltd Mir Cement Ltd Mongla Cement Factory Olympic Cement Ltd Premier Cement Mills Limited 2012 2002 2000 1994 2002 2004 Shitalakshya Dhaleshwari Shitalakshya Pashure Kirtonkhola Shitalakshya Royal Cement Limited 2001 S. Alam Cement Limited 2000 Karnaphuli Portman Cements Limited 2005 Karnaphuli Seven Circle (BD) Ltd 2001 Shitalakshya Shun Shing Cement Mills Ltd 2014 Rupsha Hong Kong Based Shun Shing Group Shah Cement Industries Ltd 2002 Dhaleshwari Abul Khair Group Unique Cement Industries Ltd 2001 Fresh Cement Industries Ltd 2010 Meghna Meghna Group Swiss-based Holcim JV between Lafarge and Cementos Mollins GPH Group Madina Group Supercrete, Powercrete Crown Tiger Metrocem Group Mir Group Sena Kalyan Sangstha Kabir Steel Group & BSA Group S. Alam Group 1.74 1.69 0.09 King Bashundhara Group 1.50 Bashundhara 1.00 1.20 Metrocem Mir Elephant Anchor Premier 2.10 0.13 0.18 0.60 1.20 2.40 Royal 1.15 Minar 0.43 Cemex 0.18 Seven Ring 1.60 Seven Ring Shah (Special & Popular) Super Fresh, Fresh, Meghnacem 1.30 5.20 3.60 * The chart is prepared from available secondary data. There are some other manufacturers who are also operative at present in different niche market which includes Ahad Cement Ltd, Alhaj Mostafa-Hakim Cement Industries Limited, Chhatak Cement Company Ltd, Dubai Bangladesh Cement Mills Ltd, Emirates Cement Bangladesh Ltd, Niloy Cement Factory, NGS As capacity exceeds local demand by huge margin, several producers desperately searches new ways to tap new export markets. Cement Industries Limited and Noapara Cement Mills Ltd. While all the manufacturers in Bangladesh producing their own brands, ‘Lafarge Surma Cement Limited’ has a strategic agreement with ‘Madina Cement Industries Ltd’ (MCIL) to manufacture one of their brands namely ‘Powercrete’ using only MCIL’s new facility. Lafarge also has an agreement with ‘Metrocem Cement’ that Lafarge Surma Cement will supply clinker to Metrocem for producing a Portland Composite Cement brand under the name of ‘Duracrete’ for Lafarge Surma. If the recent merger deal between Lafarge and Holcim takes place, then it will reshape the industry dominance in Bangladesh as both the companies already operates own business here. Raw materials Two types of materials are necessary for the production of cement: one rich in calcium or calcareous materials such as limestone, chalk, etc. and one that is rich in silica or argillaceous materials such as clay, 5 IDLC MONTHLY BUSINESS REVIEW AMOUNT OF CLINKER IMPORTED (USD IN MILLION) 2013-14 619 2012-13 487 2011-12 504 2010-11 2009-10 446 333 Source: IDLC Research Report 2013 which are extracted from quarry. There are also various other raw materials used for cement manufacturing (i.e. fly ash, slag, gypsum, mill scale and bauxite). From the basic mineral/natural raw materials, clinker, the main ingredient for producing cement, is produced. The cement manufacturing companies in Bangladesh are highly dependent on imported raw materials including clinker as Bangladesh does not possess adequate mineral resources like limestone, as the land is composed of silt and sediment. Clinker plays the most vital role for ensuring the strength and quality of cement and more than 80% of the clinker used for cement production in Bangladesh is imported. Of the 30 plus cement producers only two have clinker production facility at their own plants. One is Chhatak Cement Factory Ltd, a government owned company, with limited production capacity and another one is Lafarge Surma Cement Ltd. Both factories are situated at Chhatak, Sunamganj. Lafarge Surma Cement Ltd produces approximately 10% of total clinker required for Bangladesh. At present, several local cement manufacturers procured clinker from Lafarge while most of the manufacturers import clinker from China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Thailand and Vietnam. Major cost component of producing cement is incurred from raw material portion where clinker contributed around 65% to 70% of total cost of goods sold. As per data stored in Bangladesh Bank, Bangladesh imported clinker valued USD 12 million in FY 1994-95 which stood at USD 619 million in FY 2013-14. Some manufacturers also use local limestone collected from Sylhet. Majority portion of imported fly ash is sourced from India; slag is imported from China, India, Japan and Singapore while Gypsum is sourced from China, India, Indonesia and Japan. Most portions of imported raw materials from India is imported through Mongla port and several land ports while materials imported from other countries mainly comes through Chittagong port. Following the high contribution of raw materials in the cost structure, any movement in the price of clinker and other raw materials will eventually affect the profitability and performance of the cement manufacturer. One month stock of raw material in hand is literally ideal for smooth production. In most of the factories, clinker is stored under shed while the other materials are stored in open place. Utility expenses account for second highest cost of cement production. Though a large portion of the power requirement is met through national grid, increasingly large companies are attempting to use captive power plants to reduce costs and to have continuous power supply to ensure uninterrupted production. Proportioning of the raw materials for producing cement is based on a series of simultaneous calculations that take into consideration the chemical composition of the raw materials and the type of cement to be produced. American Society for Testing and Materials (ASTM) provides specification C150 for eight types of Portland cement: Types I, IA, II, IIA, III, IIIA, IV, and V, where the “A” denotes air-entraining cement. These cements are designed to meet the varying needs of the construction industry. Manufacturers need to take BDS EN 197-1:2003 certification from BSTI for marketing cement in Bangladesh. Process of production The quality of clinker needs to be good to get better quality cement. Then the clinker is processed in grinding mill where it is grinded to a fine and homogenous powder, named cement. 6 The natural raw materials (i.e. limestone, chalk, clay, shale, mill scale and bauxite) are crushed to a very fine powder and then blended in the correct proportions for getting the desired variation. This blended raw material is called as ‘raw feed’ or ‘kiln feed’ and is processed in a rotary kiln, where the materials are heated in high temperatures and quickly cooled down. Such movement of temperature begins a series of chemical reaction forming new compounds- silicates, aluminates and ferrites of calcium in the kiln and finally a product named ‘clinker’ is found; the process could be dry, wet, semi-dry or semi-wet according to the state of the raw material. The quality of clinker needs to be good to get better quality cement. Then the clinker is processed in grinding mill where it is grinded to a fine and homogenous powder, named cement. At the time of grinding Gypsum (calcium sulphates- it controls the setting properties of the cement when water is added) and possibly additional cementitious (such as blast furnace slag, coal fly ash, natural pozzolanas, etc.) or inert materials (limestone) are added to the clinker. In addition to compound composition, the fineness of cement also affects its reactivity with water. Limits on fineness of cement are set at the time of grinding and heat evolved on hydration. The blend found after mixing is named as Cement and from the grinding mills the final product is directly conveyed to the silos (silos are the large storage tanks of cement). From the silos, cement is sent to the packaging section where it is packed in small bags (20-50 Kg/bag) or shipped in bulk quantities by IDLC MONTHLY BUSINESS REVIEW FACTORY CONCENTRATION suitable transports. Manufacturer employs their best efforts to ensure product quality at desired level in every stage of production (from the quarry to delivery) with the help of modern technology. Quality Control 2% 8% 12% 16% 62% Dhaka Mongla Chittagong Rajshahi Sylhet Source: IDLC Research Report 2013 Based on raw material quality, production process, and effectiveness of quality control system, a cement production unit incurs 3.0% to 5.0% process loss during grinding, on an average. Manufacturers continuously executes different types of tests to ensure proper mixture, fineness, setting time, comprehensive strength, moisture, residue, packing durability, etc. The quality tests are done in every stage of production on a regular basis to ensure desired output quality. In this regard, manufacturers adopt quality control measures through setting up well equipped laboratory, trained personnel and monitoring system. Pricing The pricing of cement of various producers in the industry are very close to one another due to the homogenous nature of products. Although, bargaining power of the cement manufacturing companies as a whole is comparatively low for over capacity; economies of scales, long relationship with suppliers, location advantage with own transport facility, availability of sufficient captive power supply and brand image give competitive advantage to few big companies to limitedly achieve bargaining power for setting credit terms and price. Location of a cement plant and the cost to transport the raw materials to the plant and the cement to distribution terminals, determines the plant’s competitive position and price in most cases. In Bangladesh, cement prices have been on an upward trend since 2007 which is parallel to the steady increase of clinker costs and fuel price; though the large capacity expansions were expected to weigh down on price realizations by the cement companies due to increasing availability of product. Seasonal factors have high influence on fluctuation in retail price and following the freight cost, cement price are not same throughout the country at a single point of time though the price of cement produced by different players in the industry are very close to one another. Currently, the standard price of one bag (50 kg) cement produced by the multinational & local companies ranges within BDT 420 to BDT 470 per bag. Following import dependency on raw materials, profitability of the sector largely depends on uninterrupted import facility and favorable foreign exchange condition. Gloomy condition in the real estate sector for last couple of years may linger further in response to the current political turmoil, stressing the possibility of significant increase in demand to absorb additional supply. However, implementation of mega projects like Padma Bridge and Government’s initiatives to use RCC pavements in highways may boost the demand up to reach economies scale of production. Distribution dilemma Intense competition in crowded markets such as Bangladesh keeps pressure on cement manufacturers to find effective ways to lower costs. In this industry, logistics is a key cost differentiator and the producer that can master the distribution channel will be the clear winner in the marketplace. Approximately 10 – 15% of the cost of cement can be attributed to the cost of distribution, begins counting from the gates of the cement facility. The key for effective cement distribution lies in the use of modern technology, which can result to achieve better margins while squeezing costs. It is obvious that the movement of cement in bulk is less expensive than movement in small and jumbo bags, since the cost of bagging and debagging is eliminated. However, it is not always possible to move in bulk due to a variety of factors, ranging from location to inadequate or nonexistence of bulk storage and receipt facilities. As an optimum solution, manufacturers use a combination of distribution methods, which includes bulk and bags via road, rail, and inland waterways and also by sea; where the logistics managers have to integrate IT solutions with actual demand and supply and, most importantly, include all options of cement movement and storage into the management cycle. The most inexpensive method of moving cement is in bulk by water; though in Bangladesh, around 85% of cement is transported by road and the remainder by barge. Other factors influencing cement distribution includes market demand, seasonal surges, government policies, political lobbies, connectivity, infrastructure and technology used. 7 TURNING UP THE HEAT Cement is used in everything from payments to skyscrapers- and is a major source of carbon emissions. Alternative sources such as fly ash from coal plants could eliminate the need for any extra heating and use less energy. Clay Sand Limestone 1 2 Limestone is crushed... ...mixed with clay... Most of the carbon emissions come from fuel burned to heat the kiln and from CO2 baked from the limestone. Clinker cooler Kiln 4 3 ... to produce grey nodules of clinker. ... and roasted at 1,500 C in a kiln... Cement storage Gypsum Grinding mill 5 The clinker is mixed with gypsum and ground to a fine powder. 6 The powder is ready to be mixed with water, along with sand, gravel or stone, and used at a construction site. Source: Global Cement Magazine IDLC MONTHLY BUSINESS REVIEW In conversation with Ms. Zebun Nahar Sector Specialist - Cement Industry The cement market is really concentrated as only 10 players has 85 percent market share. (Worked at IDLC Investment Ltd as an Assistant Manager for more than 4 years in the Research wing and also worked at Holcim Bangladesh as Head of Planning & Development for 2 years) Current capacity, capacity utilization and demand scenario - The production of cement depends directly on demand. The demand of the year 2012 was really good. After that, own transportation vehicle, so the supply chain is faster than others. Most cement manufacturers have to rent the trucks for delivery. the downtrend in the cement industry started; the year 2014 was the worst. Most of the local companies survived but, the multinational companies suffered a lot. Suppose, the demand was 70% in 2012, it came down to 50% or less, in 2014. In 2012, most of the companies went for capacity expansion as there was huge demand for cement, but, after increasing the capacity, the demand got very low. The hidden capacity is there but it’s not actually hidden as there are around 12% wastage. We call it waste because of production error. Local producers Vs MNCs - Among the multinational companies and local companies, locals are leading. The market is really concentrated as only 10 players has 85 percent market share. Shah, Meghna, Heidelberg, Lafarge, Seven Rings and Holcim are the key market players. Future demand trend (per capita cement consumption is rising) - The future demand of cement market currently depends on the government infrastructures as the main profit comes from those infrastructures. The other thing about cement industry is that it depends on the plant location. You can only supply cement in the area close to the plant because of high transportation cost. For example, Lafarge leads the Sylhet market as they have a plant there. Increased use by government (mega projects, use of RCC in highways) Vs poor growth in private construction (real estate) - The government infrastructures mainly impact the big players. For example, Hatirjheel project’s exclusive supplier Import dependent industry (uncontrollable macro variables) - The main raw material for cement is clinkers and it is 100% imported. The cement industry is totally Import dependent. Most companies import clinkers by renting a mother vessel which imports for all and that’s how the companies get their own share of clinkers. The only problem faced is during appreciation of dollar price. Environmental hazards - Cement manufacturers can harm the environment at the time of packaging. The production phase does not have any hazard but at the time of packaging lots of dust is created so you need an Environment Clearance Certificate (ECC). There is a specific parameter. At the time of factory inspection, if the authority see you’re creating too much dust they will charge the companies for compensation. Cost of fund (high lending rate) - The cement companies takes short term working capital loans so the interest rate is high. Suppose, the dealer buys in credit and will pay after 15 days so at that time we need working capital loans. Seasonal and regional impact - The seasonal impact is quite high, at the time of rainy season the demand is really low as there is no construction works going on. After this season the demand start getting pace. Usually, peak season starts from September to February. Dhaka has the highest demand and South Bengal has very low demand for cement. for foundation was done by Holcim. After the foundation the rest was done by local companies like Shah, Premier cement etc. Shortage of required power (cost of power is also in a rising trend) - The cement manufactures who have their own captive power plant like Shah cement, get extra competitive advantage in production. However, now that the industry is flat the advantage is of less beneficial. Another thing is the supply of cements. Shah has their Limited post production storage life and Possibility of government intensive to patronize deemed export - Cement can be stored for 7 days as it turns into stone after that time. If it gets contact with water or moisture it will also turn into stone. You only need a dry place to store it. You can store it up to 15 days if the packaging is really good. Cement is also exported from Bangladesh and the Government also provides subsidy to promote cement exporting. 9 IDLC MONTHLY BUSINESS REVIEW PERCENTAGE DEMAND 35% 40% 25% Individual Home Makers Real Estate Developers Government Organization Source: IDLC Research Report 2013 Success Factors Business success of a cement manufacturing organization depends on the following issues The cement industry poses high barriers to entry following very high initial investment, shortage of adequate power supply and regulatory requirement. Competitive advantage of a cement manufacturer could be derived from location of the factory (having access to rivers and national highways), own transport pool (ocean going vessel, inland vessel, truck) to carry raw materials and finished goods, economies scale of production, receivables collection and inventory management efficiency, strong distribution network (dealers and retailers) and effective as well as efficient marketing communication system. In Bangladesh, business operation of the most of the cement manufacturers is geographically concentrated. To gain optimum control in specific vicinity, cement manufacturers establish production facility there. Such initiatives are not only driven by the intention of reducing high transportation cost but also required by the product nature itself as quality of cement starts to diminish after production. A cement manufacturer needs to have strong distribution network in its operating areas to distribute the final product within shortest possible time after bagging. To preserve the post production quality at desired level packaging is the key and following the importance of quality packaging manufacturers often tries to establish own packaging plant. It is not a major concern for Bangladeshi manufacturers regarding import dependency of raw materials as almost all the cement manufacturing companies in the country entirely depends on imported raw materials. Rather, manufacturers need to be cautious regarding product risk arising from market competition. To flank future market competition, manufacturers need to continuously search new use and new market like exporting cement to neighboring countries. To gain extra market share, pricing is a key in the crowded market with excess capacity. Several national level producers practices fluctuating pricing policy between regions to achieve competitive benefits. Continuous supply of electricity is crucial for uninterrupted production of a cement factory. So sourcing of adequate power at minimum cost is a great challenge for a cement manufacturer. Manufacturer needs to practice a 360 degree marketing effort. To grasp the increasing market demand and ensure sustained growth of sales, several manufacturers has customer care centre with adequate marketing personnel to work in the field level to observe, collect and report daily feedback to top management regarding the overall market demand and status (by maintaining relationship with contractor, household owner, and mason by using the different dealers point as office in different places). Manufacturers also need to maintain relationship with PWD, RHD, CMMU, City Corporation, Engineering Office, and Corporate Clients (Retailer, Construction Company) to sell own brands for the large projects. Effective market feedback helps to reduce access production while perfectly fulfills the market demand. To increase the profitability level a manufacturer has to have the capability to face challenges in respect to making room for increased capacity, retaining the cost even after more spending on market and keeping an above average price of its product. Manufacturers have to focus on the product quality in terms of strength and durability. Though, strength is the main focus of quality related issues of cement in the country so far, but manufacturers also need to focus the durability issues in order to ensure overall sustainability. Manufacturer needs to have the ability to brace the seasonal slump of monsoon and to sustain in dull season through effective promotional and market communication activity to revamp the sales. Interest rates of financial sectors are of paramount importance as a driver of construction activity, which has positive correlation with the growth of cement industry. Environmental Impact and mitigation strategies Cement manufacturing causes environmental impacts at all stages of production, use and demolition; starting from emissions of airborne pollution in the form of dust, gases and noise during blasting in quarries to the time of mixing, using and demolition of the concrete when its strength become fragile. Limestone is collected from quarries through blasting results gas, dust and noise; the damage done in countryside 10 IDLC MONTHLY BUSINESS REVIEW from quarrying is irrecoverable. At the time of producing clinker, the primary component of cement, emits carbon dioxide through the calcinations of limestone, accounts for about half the emissions attributable to cement production. The bulk of the other half comes from the energy-intensive process of grinding the raw materials and processing them into cement. Production of required electricity, transportation of materials and operation of machinery also contributed in the industry’s emissions. As people are becoming more environment conscious; and research into sustainable practices and renewable energy proceeds, there is great potential for continued and more substantial mitigation efforts from the cement sector. Carbon dioxide reduction strategies by the cement industry mainly aim at reducing emissions per ton of cement produced rather than by a plant overall. One area of opportunity is replacing clinker with other mineral components. Research continues toward developing cements that require less energy to manufacture compared to producing Portland cement and that uses more benign raw materials. Approaches include installation of more fuel-efficient kilns, partial substitution of noncarbonate sources of calcium oxide in the kiln raw materials, and partial substitution of supplementary cementitious materials (SCM) for producing Green cement, such as pozzolans. Equipment to reduce dust emissions during quarrying and manufacture of cement is widely used, and equipment to trap and separate exhaust gases are coming into increased use. Environmental protection also includes the reintegration of quarries into the countryside after they have been closed down by returning them to nature or re-cultivating them. To reduce the transport of heavier raw materials and to minimize the associated costs, it is more economical for cement plants to be closer to the limestone quarries rather than to the consumer centers. Although individual plant reserves are subject to exhaustion, cement raw materials, especially limestone, are geologically widespread and abundant, and overall shortages are unlikely in the future. However, growing environmental concerns and increasing cost of fuels of fossil origin have resulted in many countries in sharp reduction of the resources needed to produce cement and effluents (dust and exhaust gases). In manufacturer level, most of the world leading cement manufacturers has taken some steps to reduce CO2 emission. Like, Holcim has been working to incorporate fly ash, a waste material from coal-fired power plants, and slag, a waste by-product of steel manufacturing, into its product portfolio as composite cements. Lafarge is also making efforts to improve efficiency across production, replace dirty fossil fuels with more sustainable energy forms such as biomass, and promote sustainable construction initiatives. In last couple of decades most cities of the world are expanding vertically rather than horizontally to achieve maximum utilization of available space and to ensure future food security by not urbanizing fertile land. In Bangladesh, where population density is high in cities, unplanned urbanization and rapid economic development have fueled the process of urbanization, where cement plays a nonsubstitute role. Future of Bangladesh lies on vertical expansion of city and transportation infrastructure like developed countries. Aggregate cement production capacity of Bangladesh is almost double of the demand which remains very limited space for further capacity expansion for the next couple of years. However, consumption of cement has steadily been rising over the last two decades. In 2010, the International Monetary Fund (IMF) indicated that Bangladesh’s economy had become the 48th largest in the world. United Nations has estimated that the Bangladesh needs at least USD 5 billion per annum for the next 10 to 15 years to build the necessary infrastructure, such as new power stations, roads and bridges, before reaching middle-income status. In line with this strategic vision, the government has undertaken massive programs for infrastructure development in partnership with the private sector. To support the vertical urbanization, roads and highways also needs to be vertical like inclusion of underground tunnel and flyover with existing transportation infrastructure. Furthermore, if the construction works of Padma Bridge continues with current pace according to the latest declaration made by the Government then the total cement industry will achieve a momentum. So, it is obvious that the demand of cement in Bangladesh will increase day by day, until the invention of a better substitute of cement (Md. Yasin Hossain is an Senior Executive Officer of Credit Risk Management at IDLC Finance Limited and currently works at IDLC’s Comilla Branch) 11 IDLC MONTHLY BUSINESS REVIEW Research in Focus Top 10 Emerging Technology of 2015 T echnology is perhaps the greatest agent of change in the modern world. While never without risk, technological breakthroughs promise innovative solutions to the most pressing global challenges of our time. From zero-emission cars fuelled by hydrogen to computer chips modeled on the human brain, this year’s 10 emerging technologies offer a vivid glimpse of the power of innovation to improve lives, transform industries and safeguard our planet. To compile this list, the World Economic Forum’s Meta-Council on Emerging Technologies, a panel of 18 experts, draws on the collective expertise of the Forum’s communities to identify the most important recent technological trends. From zeroemission cars fuelled by hydrogen to computer chips modeled on the human brain, this year’s 10 emerging technologies offer a vivid glimpse of the power of innovation to improve lives, transform industries and safeguard our planet. 12 Fuel cell vehicles “Fuel cell” vehicles have been long promised, as they potentially offer several major advantages over electric and hydrocarbon-powered vehicles. The technology has only now begun to reach the stage where automotive companies are planning to launch them for consumers. Initial prices are likely to be in the range of USD 70,000, but should come down significantly as volumes increase within the next couple of years. Unlike batteries, which must be charged from an external source, fuel cells generate electricity directly, using fuels such as hydrogen or natural gas. Mass-market fuel cell vehicles are an attractive prospect, because they will offer the range and fuelling convenience of today’s diesel and petrol-powered vehicles while providing the benefits of sustainability in personal transportation. Achieving these benefits will require the reliable and economical production of hydrogen from entirely low-carbon sources, and its distribution to a growing fleet of vehicles. Next-generation robotics Although heavily used, these robots are large and dangerous to human co-workers; they have to be separated by safety cages. Robot bodies are becoming more adaptive and flexible, with designers taking inspiration from the extraordinary flexibility and dexterity of complex biological structures, such as the human hand. Robots are becoming more connected, benefiting from the cloud-computing revolution by being able to access instructions and information remotely, rather than having to be programmed as a fully autonomous unit. Robots are ideal for tasks that are too repetitive or dangerous for humans to undertake, and can work 24 hours a day at a lower cost than human workers. There remains the risk that robots may displace human workers from jobs, although previous generations of automation have tended to lead to higher productivity and growth with benefits throughout the economy. IDLC MONTHLY BUSINESS REVIEW Recyclable thermoset plastics > Plastics are divided into thermoplastics and thermoset plastics. The former can be heated and shaped many times, and are ubiquitous in the modern world, comprising everything from children’s toys to lavatory seats. Thermoset plastics however can only be heated and shaped once, after which molecular changes mean that they are “Cured”, retaining their shape and strength even when subject to intense heat and pressure. Due to this durability, thermoset plastics are a vital part of our modern world, and are used in everything from mobile phones and circuit boards to the aerospace industry. As a result, most thermoset polymers end up as landfill. Given the ultimate objective of sustainability, there has long been a pressing need for recyclability in thermoset plastics. Precise genetic-engineering techniques The technique is proven and reliable, and despite widespread public fears, there is a consensus in the scientific community that genetically modifying organisms using this technique is no more risky than modifying them using conventional breeding. These include ZFNs, TALENS and, more recently, the CRISPRCas9 system, which evolved in bacteria as a defense mechanism against viruses. More precise genome editing may allay public fears, especially if the resulting plant or animal is not considered transgenic because no foreign genetic material is introduced. Taken together, these techniques promise to advance agricultural sustainability by reducing input use in multiple areas, from water and land to fertilizer, while also helping crops to adapt to climate change. Additive manufacturing As the name suggests, additive manufacturing is the opposite of subtractive manufacturing. The latter is how manufacturing has traditionally been done: starting with a larger piece of material, layers are removed, or subtracted, to leave the desired shape. Additive manufacturing instead starts with loose material, either liquid or powder, and then builds it into a three-dimensional shape using a digital template. 3D products can be highly customized to the end user, unlike mass-produced manufactured goods. Other medical applications are taking 3D printing in a more biological direction: by directly printing human cells, it is now possible to create living tissues that may find potential application in drug safety screening and, ultimately, tissue repair and regeneration. Bioprinting has already been used to generate skin and bone, as well as heart and vascular tissue, which offer huge potential in future personalized medicine. Emergent artificial intelligence In recent years, AI has advanced significantly: most of us now use smartphones that can recognize human speech, or have travelled through an airport immigration queue using image-recognition technology. Selfdriving cars and automated flying drones are now in the testing stage before anticipated widespread use, while for certain learning and memory tasks, machines now outperform humans. Intelligent machines, having faster access to a much larger store of information, and able to respond without human emotional biases, might also perform better than medical professionals in diagnosing diseases. Long the stuff of dystopian sci-fi nightmares, AI clearly comes with risks - the most obvious being that super-intelligent machines might one day overcome and enslave humans. Distributed manufacturing Distributed manufacturing turns on its head the way we make and distribute products. In traditional manufacturing, raw materials are brought together, assembled and fabricated in large centralized factories into identical finished products that are then distributed to the customer. In distributed manufacturing, the raw materials and methods of fabrication are decentralized, and the final product is manufactured very close to the final customer. In essence, the idea of distributed manufacturing is to replace as much of the material supply chain as possible with digital information. 13 IDLC MONTHLY BUSINESS REVIEW Distributed manufacturing may encourage broader diversity in objects that are today standardized, such as smartphones and automobiles. Product features will evolve to serve different markets and geographies, and there will be a rapid proliferation of goods and services to regions of the world not currently well served by traditional manufacturing. ‘Sense and avoid’ drones Unmanned aerial vehicles, or drones, have become an important and controversial part of military capacity in recent years. So far all these drones have had human pilots; the difference is that their pilots are on the ground and fly the aircraft remotely. The next step with drone technology is to develop machines that fly themselves, opening them up to a wider range of applications. For this to happen, drones must be able to sense and respond to their local environment, altering their height and flying trajectory in order to avoid colliding with other objects in their path. In nature, birds, fish and insects can all congregate in swarms, each animal responding to its neighbor almost instantaneously to allow the swarm to fly or swim as a single unit. With reliable autonomy and collision avoidance, drones can begin to take on tasks too dangerous or remote for humans to carry out: checking electric power lines, for example, or delivering medical supplies in an emergency. Drones are essentially robots operating in three, rather than two, dimensions; advances in next-generation robotics technology will accelerate this trend. Flying vehicles will never be risk-free, whether operated by humans or as intelligent machines. For widespread adoption, sense and avoid drones must be able to operate reliably in the most difficult conditions: at night, in blizzards or dust storms. Unlike our current digital mobile devices, drones will be transformational as they are self-mobile and have the capacity of flying in the three-dimensional world that is beyond our direct human reach. Once ubiquitous, they will vastly expand our presence, productivity and human experience. Neuromorphic technology Computers move data back and forth between memory chips and a central processor over a high-speed backbone. The brain, on the other hand, is fully interconnected, with logic and memory intimately crosslinked at billions of times the density and diversity of that found in a modern computer. With vastly more compute power available for far less energy and volume, neuromorphic chips should allow more intelligent small-scale machines to drive the next stage in miniaturization and artificial intelligence. Potential applications include: drones better able to process and respond to visual cues, much more powerful and intelligent cameras and smartphones, and data-crunching on a scale that may help unlock the secrets of financial markets or climate forecasting. Computers will be able to anticipate and learn, rather than merely respond in pre-programmed ways. Digital genome While the first sequencing of the 3.2 billion base pairs of DNA that make up the human genome took many years and cost tens of millions of dollars, today your genome can be sequenced and digitized in minutes and at the cost of only a few hundred dollars. Many of our most intractable health challenges, from heart disease to cancer, have a genetic component. Cancer is best described as a disease of the genome. With digitization, doctors will be able to make decisions about a patient’s cancer treatment informed by a tumor’s genetic make-up. 14 IDLC MONTHLY BUSINESS REVIEW Career Advice Exclusive interview with Ms Bilquis Jahan Head of Human Resources, IDLC Finance Limited What are the key qualities a fresh graduate need to cultivate before approaching an interview? - We never have sky high expectations from a fresh graduate as they are inexperienced and most likely to be recruited in entry level position. However, to me few things are more important for fresh grads to attract prospective employers Attitude is very important for any candidates Physical posture and gestures should emanate confidence but not over-confidence Seriousness in the candidates Careful consideration in dress-up for the interview Presence of mind regarding the surroundings What do you look in potential candidate? Overall present-ability or sheer talent? - If talent means written exam result only, then perhaps no. The candidate has to do well in other aspects like interview, overall communication skill, presentation skill, positive attitude, etc. But for the lateral entry (which means experience employees from other organization) certain skillets are prime parameter for the selection whereas for fresh graduates, overall presentability will be the key. But over-confidence can be dangerous as this can give wrong signals to the employer. Because often what happens that contestant might think of very high of himself, ended up in frustration as the people who she or he will be working might be much smarter. What are things that need to be addressed in a CV? How important is a CV? - Always keep in mind that employer employs some judgment looking at the CV. So, it is very important for fresh graduates as CV is the first communication with the employer and we all know that first impression is very important. A standard CV should have: Adequate Information Tailored to the need of the particular job Fresh graduate should mark educational qualification first and experience people should focus more on experience. Well organized Practical Career Objective Easy to find information/ Understandability. No Spelling mistakes Does family background of the candidate, gives any upper hand in selection process? - We, in IDLC, believe in equal opportunity so particular family background or class does not get any privilege. However, whatever family, class you belong, it’s your behavior, attitude that sets you apart. It is the personal quality that ensures whether you are fit for the job. It’s very important to nurture progressive mentality in the family which matters the most. Nobody wants to recruit someone who is not in line with But never misunderstand the fact that CGPA alone cannot be the only parameter to select the potential candidates. the belief, ethics or does not fit the culture of the company, because they always have a hard time to cope and perform. How important is CGPA or grade to secure a good job? - CGPA is important as your grade tells a lot about you. This is your evaluation of your academic career in different age and phases over the years. We value CGPA a great deal because we believe it represents your capacity and how dedicated you were to manage your responsibility. What is the acceptable CGPA to you? - Average CGPA of a particular batch usually lifts the standard automatically. All graduates should remember that, it is a competition within your friends as well! So if your CGPA is poorer than most of your friends, you may find yourself in disadvantageous position. But never misunderstand the fact that CGPA alone cannot be the only parameter to select the potential candidates. How the recruitment process has changed from past in recent times. - Not much! Of course, multinational houses adds few additional tests like psychometric test, presentation skill; problem solving capacity working within a group, team work etc but the overall selection process is still the same. To be more precise these tools are means of shortlisting the candidates for final selection. It also ensures transparency in the selection process. It’s a war and all have to fight to prove worthy. What have your hiring strategies been? How do you find talented people for the company? - For fresh position we hire fresh graduates but for senior positions we prefer lateral entry. We usually prefer online job sites to advertise and also replacement departments of the Universities, send their deserving candidates time to time. We usually don’t do advertisement in the newspaper. Internal reference also does help. How important are extracurricular activities for an aspiring new recruit? What are the key differences between one who has lots and one who has none? - Extracurricular activities are always considered plus points, as it means he or she can multitask. But this is not a decisive factor. Once onboard, what are the expectations from an employee? What is the key to success? - Employees are expected to do the tasks assigned to him or her but few things are important to practice to be apart. Level of dedication, being proactive and, not to be late or ask for unnecessary leaves, showing interest in taking additional responsibilities and work as a team member apart from the regular job description needs to be cultivated. Creating a good impression not only within the department but other departments as well. Creating a good impression about the person is very important. Bad impression is very hard to erase rather fresh incumbent need to try to create a good impression which will help the person for the rest of the person. 15 IDLC MONTHLY BUSINESS REVIEW Analysis Monitor MasterCard Index of Women’s Advancement 2015: Bangladesh a shining example of women employment Women in Asia Pacific A Snapshot of Work, Life and Equality in 2014 In celebration of International Women’s Day, MasterCard is releasing a special edition of research focusing on women’s well-being across Asis Pacific. In addition, MasterCard also announced the results of its annual Index of Women’s Advancement. Entering the Workforce Balanging Work and Life Getting an Education Becoming Leaders B angladesh has made significant progress in women’s employment thanks to better education and wider opportunities. The 2015 Index of Women’s Advancement marks the MasterCard’s effort in tracking the progress of women towards gender parity based three main indicators that were derived from additional sub-indicators: employment (workforce participation, regular employment), capability (secondary education, tertiary education) and leadership (business owners, business leaders, political leaders). The results reveals that the progress made by women towards gender parity in the majority of the 16 markets in Asia Pacific is sluggish with the large gaps in Leadership and to a lesser extent. Employment, remaining prevalent and an ongoing area of concern. Although opportunities exist for women to pursue higher levels of education (reflected through the high scores for Capability), labor market conditions are not always conducive for them in seeking employment. Drawing on the results of MasterCard’s latest Women’s Well Being Index Survey for 2014, it is noted that despite the slow progress made by women, the perception of their overall wellbeing in life remains optimistic. This could be attributed to their particularly high resilience in life from threats such as violent and financial crime, natural disasters and pollution, as well as their ability to cope with stress both at home and at the workplace. Capability As an indicator of Female to Male Secondary and Tertiary School Gross Enrolment Rate (GER) ratio, the Capability sub-index reflects the degree of women’s access to education and acquisition of knowledge assets as compared to their male counterparts. Of the three sub-indexes, Capability remains the strongest indicator of Asia Pacific women’s advancement towards gender parity for the 9th consecutive year. With the exception of Korea (85.9 points), the Capability index scores for all Asia Pacific countries are above 90.0. Employment As an indicator of Workforce Participation and Regular Employment, the Employment sub-index measures the female to male ratio of participation in economic activity and access to regular employment. The results show Employment remaining as the second strongest sub-index over the 9-year period from 2007 to 2015 with 4 markets scoring higher than 90.0 points: New Zealand (91.3), China (91.2), Australia (90.8) and Taiwan (90.2). With the exception of Indonesia (78.4), the Philippines (76.5) and Malaysia (75.9), women across most of Asia Pacific are making some progress towards being as economically active as their male counterparts, scoring above the 80-point mark. 16 IDLC MONTHLY BUSINESS REVIEW Leadership As a measurement of the female-to-male ratio in business ownership, business leadership and political participation, the Leadership sub-index reflects women’s progress in the business, economic and political sectors as compared to their male counterparts. Of the 3 main sub-indexes, Leadership remained the weakest from the previous year (and also over the 9-year period) with New Zealand (50.6) and the Philippines (50.1) being the only two countries having more than 50 women business/government leaders for every 100 male business/ government leaders. The latest results also indicate that the ratio of female-to-male Thai business/government leaders has declined markedly from 33.5 to 23.7, while that in Singapore picked up slightly from 40.9 to 41.5. SOUTH ASIA Women in all 5 South Asian markets continue to advance, with the overall index scores improving from 2013. The largest increase in advancement score is observed in Nepal (up 35.7 points to 71.8) due to the representation of women in politics. In fact, of the 5 markets in South Asia, Nepalese women made the most progress towards gender parity in terms of political participation. In contrast, women in Pakistan advanced the least in business and politics (Leadership score of only 3.5) and in labor force participation, placing them in the lowest rank in South Asia. Employment South Asian women’s progress towards gender parity in terms of labor force participation and regular employment remains sluggish. With a score of 96.0 (unchanged from the previous year), Nepal has the highest Employment score in the region, followed by Bangladesh (83.3, up 0.3 points), India (59.8, unchanged), Sri Lanka (46.2, up 0.1 points) and Pakistan (41.4, up 0.4 points and lowest in South Asia). Capability Within South Asia, the sub-index of Capability continues to be the strongest among the 3 components measured. Specifically, women in Sri Lanka outshine their regional peers in terms of gender parity towards the acquisition of basic and advanced knowledge assets relative to men – this is reflected through the score of 100.0 for the 7th consecutive year. Similarly, Nepalese women show impressive strides in enrolment for secondary and tertiary education with the Capability score rising from 90.0 the previous year to 93.5 (up 47% since 2007). Leadership The results of MasterCard’s latest Women’s Well Being Index Survey for 2014, we note that despite the slow progress made by women, the perception of their overall wellbeing in life remains optimistic. The latest women’s advancement index for Leadership shows that with the exception of Nepal, most of the women in South Asia are making slow progress in business and political representation. In terms of business ownership, Nepalese women have the highest representation in the region (72.4 women out of every 100 men) compared to their regional peers (Sri Lanka at 13.4, India at 13.2, Bangladesh at 11.7 and Pakistan at 0.5). Summarizing South Asia In general, we observe progress towards gender parity among South Asian women to be largely sluggish. With the exception of Nepal, women are mostly economically inactive and lack political empowerment. This is reflected in the low ‘Employment’ scores in India (59.8), Sri Lanka (46.2) and Pakistan (41.4) and extremely low ‘Leadership’ scores of 3.5 in Pakistan, 12.1 in Bangladesh, 16.8 in India and 14.5 in Sri Lanka. Within the region, Nepal remains the strongest market with an overall index score of 71.8, an achievement that is mostly attributed to their much stronger leadership participation score of 41.2 as compared to their South Asian peers. The results from the 2015 MasterCard Index of Women’s Advancement (MIWA) underscore the incremental steps made by women towards gender parity in Capability (knowledge assets). Efforts made by women in South Asia are especially commendable, as is reflected in the increase in Capability scores in Bangladesh (up 1.1 point to 87.6), Nepal (up 3.5 points to 93.5) and Pakistan (up 1.2 points to 89.2). In Asia Pacific, women’s solid traction towards gender parity in basic and advanced knowledge is promising in the markets of Philippines, Thailand, New Zealand and Vietnam where Capability scores of 100 have been achieved consecutively since 2007 (2009 for Vietnam). 17 Entrepreneurs’ Corner IDLC MONTHLY BUSINESS REVIEW Ligion Herbal Ltd. Natural Superlative Quality Ligion Herbal Ltd. started with a business philosophy centered upon flexibility and the goal to meet complete customer satisfaction. It was established in the year 1995. Ligion Herbal Ltd. is a well known name in the herbal cosmetics marketing arena. For the last 20 years, Ligion Herbal have been catering to the cosmetic needs of the patrons through top quality herbal products and are determined to continue the same unequaled performance in the future. Owner : Ms. Tania Haque Year of Establishment : 1995 Website : www.ligionherbalbd.com Main Product : Number of Factory : 2 Number of Employees : 500 Mehedi & various herbal products etc. MBR: Tell us something about the origin, growth and success of ‘Ligion Herbal’. Ligion Herbal: Ligion Herbal started its journey back in 1995, when we explored the fact that there was a lack of local herbal products around the country. We ourselves did courses on herbal products from India, and launched our first product Herbal Shampoo. Then, after a few months we introduced Uptan. We faced a lot of problems while introducing Uptan because most people at that time didn’t have any idea what the product was. My husband and I took the challenge positively and made it workout smoothly, that’s basically the story of Ligion Herbal Ltd. MBR: How much investment does an aspiring entrepreneur require for starting herbal product’s business? Ligion Herbal: A total investment of BDT 50 lac to one crore is required to start herbal product’s business. The capital investment is high because there are a lot of players in the market with similar products. So, in order to sustain in the market in the long run starting the business with that much capital is necessary. MBR: What is the most challenging aspect of a herbal company? Ligion Herbal: The challenging fact about herbal company back then was that people wasn’t aware of the concept of herbal products. We had to help them understand that herbal products are completely safe with no side effects and also that there are no chemical involved. However, nowadays people are more conscious about themselves and their perception toward herbal products changed. MBR: How do you manage to create value for the customers? Ligion Herbal: For the last 20 years, we are trying to highlight the fact that our products are 100% herbal. People can differentiate our products from other products as Ligion Herbal provides the best quality in the market. 18 Ms. Tania Haque Partner, Ligion Herbal Ltd. IDLC MONTHLY BUSINESS REVIEW MBR: Are people outside Dhaka using herbal products too? Which are the successful markets for Ligion Herbal? Ligion Herbal: We are getting the same positive response from outside Dhaka too. The successful markets for Ligion Herbal are Chittagong, Mymensingh, Tangail, Rajshahi, and of course our capital Dhaka. MBR: A number of appalling herbal products are being sold in the market around the country. How has this impacted your business? Ligion Herbal: A few years back, some substandard companies and their flawed products slightly harmed the reputation of other highquality local herbal products in the short run. However, eventually the good companies retained there position in the market because they didn’t compromise with their quality and overcame the situation. MBR: In all of your work experience, which accomplishment are you the most proud of and why? Ligion Herbal: The thing that I am most proud of is that I am a woman entrepreneur. I can do a lot for other women. Most of the workers in my two factories are women. They are outstanding at their work. MBR: Any advice for the young entrepreneurs. Ligion Herbal: Any new entrepreneur must have a strong will power, honesty and should maintain the quality of their products. MBR: According to you, how has Bangladeshi cosmetics market evolved over the time? Ligion Herbal: There is a positive change in the people of Bangladesh for using local consumer products. It was only possible because of big corporate companies who are working hard to make better products for their country. The trend toward local products is shifting and in a few years people will depend less on imported products. MBR: How do you plan to shape coming years of Ligion Herbal? Ligion Herbal: We were only manufacturing a few products, however, we are planning to diversify to more day to day based products that a person needs from morning to night. Very soon we will be launching men shaving foam, after shave, etc. So, adding more products to the cart is our next bid move. MBR: How are you planning to overcome the current political situation? Ligion Herbal: The current situation hasn’t been a problem for our business as the product we make is not perishable and also our supply chain hasn’t been disrupted. Our customers will get our products, the same way they used to get it before. 19 New Initiatives in Market IDLC MONTHLY BUSINESS REVIEW F-Commerce f-commerce F acebook commerce (F-commerce) refers to e-commerce that is facilitated by the Facebook social media platform. Facebook is a major enterprise, with hundreds of millions of users and nearconstant media exposure. F-commerce seeks to use elements of Facebook to drive sales. Those who analyze F-commerce often distinguish between transactions that take place on a Facebook page and those that use Facebook Open Graph, a tool for fusing third-party websites with Facebook’s site. Some companies set up dedicated Facebook stores to capture sales from Facebook users, while others set up sophisticated promotional ads to direct Web users toward some other sales venue. The list of companies pursuing F-commerce is extensive and most marketing experts agree that the volume of future F-commerce will grow into many billions of dollars annually. More than 30 million small businesses have pages on Facebook globally, and they are making money on the site using tools from profiles. Commerce on Facebook benefits from a feeling of community, of interacting with friends or people with shared interests on groups. Facebook has created some tools to help people take advantage of the network. Facebook offers click to purchase with a buyer’s information stored and ready to buy with a single click. The companies have seen significant business growth. In the perspective of Bangladesh, f-commerce industry is nascent. It was analyzed that initially people started f-commerce business as time pass but after a while most of the people got serious about this as it is trendy and is growing. The f-commerce industry is still not properly structured however, if proper support, training on customer service, customer query management, lead time, etc. is given, this industry can surely boom in no time. Though, until now the industry is even smaller than any micro industry. On February 7, 2015, a two day “National F-commerce Summit 2015” was organized at Dhaka by Geeky Social Advantage. The objective of F-commerce Summit was to help F-commerce businesses to flourish and translate their potential into reality. It was a national level summit where entrepreneurs, policymakers, industry insiders, media, domain experts was brought under one roof to discuss and create a unified voice for these businesses for the ultimate goal of economic prosperity of our beloved motherland Bangladesh. The Summit mainly focused on popularizing the term F-commerce amongst the entrepreneurs of Bangladesh who are conducting their business through social media, notably Facebook. The prime purpose of the event was to recognize five successful F-commerce entrepreneurs in Bangladesh, to understand the hurdles faced by F-commerce businesses in Bangladesh and ways to solve them and to enlighten the audience about the major operational issues in F-commerce. 20 IDLC MONTHLY BUSINESS REVIEW MBR: Please briefly say something about yourself and your career. Md. Saimum Hossain: I completed my studies both bachelors and masters from University of Dhaka. I started my career as an Investment Analyst in a global hedge fund firm which had some allocation in Bangladesh. I worked there for 6 months. Then, I joined IDLC as a Management Trainee and worked there for nine months, I was placed in IDLC Securities within the first four months of my rotation. I worked there in a research team for five months. I left IDLC and joined University of Dhaka as a faculty and I am still working there. Later, I again joined IDLC as a consultant in the same team. That’s all about my corporate career. I was an entrepreneur even before I started my corporate career. I started Geeky at June 2013 to provide research and planning support to emerging businesses. After sometime, we start Geeky Social from February 2014 and most of our clients belonged to f-commerce. Md. Saimum Hossain Head of Strategy Geeky Social Advantage MBR: What prompt you to become an entrepreneur? Md. Saimum Hossain: We work in the same way an offline advertising agency works, the only difference is, our delivery channel is not offline (billboards, television commercials, etc) its online or social, i.e. we promote our activities using social networking sites like Facebook, Twitter, Linkedin, etc platform. MBR: Please tell us something about your firm Geeky? Md. Saimum Hossain: Even though, I am a finance graduate, I always had the passion for branding, communication & marketing. Also, I had a zeal for technology too. Hence, mashing up these two factors Digital Marketing became inevitable. At Geeky Social, we help brands especially smaller brands make better marketing decision and promote those brands using social media. We have to come up with new products to attract our customer with various packages. MBR: Please comment on Geeky’s social advantage, organization’s activities? Md. Saimum Hossain: The key activities of Geeky are social media campaign or strategic campaign, which has high impact with low frequency, community management and social content development is also our specialty. We additionally manage live events, for example, we covered the Digital World event. We took photos, recorded quotes and updated the facebook page instantly during the event. We already covered 6 big events till now. Geeky also works on data research and analytical report on f-commerce industry mapping. MBR: What are the problems of f-commerce? Md. Saimum Hossain: The pitfalls of f-commerce are customers’ credibility and the payment system; in Bangladesh COD (cash on delivery) payment system is used whereas globally the payments are always done in advance. MBR: If you put the f-commerce industry in Porter’s five forces for analysis, what will be the outcome? Md. Saimum Hossain: Threat of new entrant is very high as the capital requirement is very low; it’s as simple as opening a facebook page, taking photos of your products, uploading photos, selling products and delivering the product to the customer. Bargaining power of supplier is quite high as most of the business doesn’t have their own production facility so they usually purchase from a different source or imports the products from abroad. The supply chain is fragmented. Bargaining power of buyer is medium as some products sold online, don’t have very good quality. Also, the customers have limited options so it was supposed to be low however, most products sold through f-commerce are luxury items not necessity goods. So, the sale usually depends on the need of the customer. Industry Rivalry among business is very less as the market is fragmented. It’s a complete blue ocean not a red one. Threat of substitute product or services is medium as the most closest is e-commerce. Our main focus is to gradually shift from f-commerce to e-commerce. 21 Spotlight on Startup IDLC MONTHLY BUSINESS REVIEW SINGULARITY LIMITED Mir Shahrukh Islam Co-Founder & Managing Director, SINGULARITY LTD. S ingularity is not a contemporary or conventional startup which pitches ideas, raising valuation, takes funding from investors, etc. Singularity started like a startup; however, without the investor’s part. Mir Shahrukh Islam stated his venture with his own money, not his family’s funding or bank loan. He is an undergraduate student, currently in his 4th year at Islamic University of Technology (IUT) studying Electrical Engineering. He is expecting to be a graduate this September. He was involved in many extracurricular activities from college life. Shahrukh started his business when he was in college, that time he had no idea about where to go from there, what to do, etc. He generally had no idea which company was better than others. He always had the passion of doing something different. As a freelanced individual, he and his friend Zafir Sharifee (Cofounder of Singularity), used to work in various online freelance projects. He worked for Spellbound, AsiaTech, etc. Then, they thought they should start their own firm because the work they were doing, nobody in the market was doing as freelancers. They understood the basic technology and could integrate it with marketing tools. Thus, Singularity was born. So, at a certain point, when Shahrukh had the feeling of developing his career, he already had a firm with stable cash flow. 22 IDLC MONTHLY BUSINESS REVIEW When Shahrukh first went to open an account in the name of Singularity Limited, the account manager “The space for innovation, doing something great for the humanity while bringing a tangible change in life cannot be achieved being a jobholder.” started laughing at him as he was carrying a backpack and wearing t-shirt and jeans. At that time, he had no idea about name clearance, RJSC registration, Trade License, etc. The account manager told him he needs to show all the documents necessary for opening a private limited company’s account. Hence, it took him close to one and a half months to open a bank account. For him, the lack of information for running a going concern was the biggest challenge while starting his firm. Singularity started developing & selling creative kaos and technological animation things. However, the cofounders retained the earnings instead of spending it, and when their saving summed up to become a good amount of investment; they rented a small office with some equipment and dropped off their portfolios at big MNCs. The companies called up and gave them work and they in turn expanded their creative, operation and finance team and developed a sustainable business model. They have four divisions’ studio & motion graphics, software & mobile applications, website & online solutions, robotics & hardware solutions and so on. Within six months they were serving more than 300 clients. The first time in Bangladesh, they developed vehicle tracking system, and recently, they had an agreement with a telecom giant where that telecom firm will sell the products in its name and Singularity will be its technology partner. The future plans of Singularity include some applications as a tool for digital experience. They are planning to bring a cloud application in the country. They want to investigate animation, so that it can create a better experience for the people. Besides Singularity, Shahrukh is working on Bondstein, their hardware manufacturing company, currently they are working on secured calling bells. They want to be the largest Digital Marketing content provider in Bangladesh, while touching very digital citizen’s life. Shahrukh’s family or friends never discouraged him on being an entrepreneur, one thing they wanted was to be careful and handle the pain of being failure. He has the confidence in him that if he fails in something he can rise back immediately. His family encourages him a lot because he manages two offices, goes home to do his studies and assignments, go to university to attend classes and exams, etc. all by himself. The only concern from his family is to have a healthy life and have contingency plans. Shahrukh was a young achiever of the Daily Star’s “Digital on 24”. He is one of the founders of IM SME, they received Bangladesh Brand Forum Communication Award, and then he was also one team member of the winning team in IIT Mumbai International Robotics Championship. 23 IDLC MONTHLY BUSINESS REVIEW Economy at Import Monetary and credit developments Highest: Industrial Raw Materials, 38% Others Consumer goods 12% 23% Net Foreign Assets of banking system 1673 Net Domestic Assets of banking system 38% 9% Industrial raw materials 9% Spread of lending & deposit rate 5739 5.31 Currency outside banks 5.21 5.22 5.15 820 5.13 5.14 9% 5.12 5.1 5.06 6593 Deposits Capital machinery Machinery for misc. inds. 0 Petroleum & petro.prodts. Sector-wise import as of July - Jan 2015(%) 1000 2000 3000 4000 5000 6000 7000 45% (in billion USD) 3.00 Highest: Woven garments, 41% 40% 40% 41% 35% 30% 2.50 25% 2.00 1.49 1.50 1.02 1.28 1.24 1.17 1.34 1.01 1.03 1.23 1.06 1.21 1.26 Aug Sep Oct Nov Dec Jan 1.18 1.18 20% 14% 15% 1.00 10% 1.24 0.50 1.17 5% 3% 2% 0% 0.00 July Feb Remittance decreased by USD 0.06 billion in February'15 compared to January'15 24 Jute 5.06 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 export 2014-15 5.09 Monetary and credit developments as of December 2014 (in Billions of BDT) remittance 2013-14 5.17 Knitwear Woven garments Frozen food Category-wise breakdown of exports January 2015 Others IDLC MONTHLY BUSINESS REVIEW at a Glance Liquidity position:scheduled banks Import credit development Highest: Private Banks (Other than Islamic) 42% 1% 8% Liquidity State owned Banks 12% 36% Private Banks (Other than remittAnce Islamic) Private Banks (Islamic) Foreign Banks 42% inflation Specialised Banks Total liquidity assets for December 14 was BDT 2268.81 billion inflation kEY INFO Inflation rate in January 2015 declines as food inflation decreases The implementation of the annual development program (ADP) fell significantly by 49% in January 2015 from December 2014. In January, BDT 3,364 crore of the ADP allocation was spent, against BDT 6,586 crore in December 2014. 10.00% 9.00% 8.00% 8.81% 6.00% 4.00% 5.26% 5.37% Export 8.84% 5.23% 8.96% 5.16% 8.95% 9.09% 5.45% 5.71% 8.00% 7.94% 5.76% 5.63% 7.67% 5.74% 7.63% 5.84% 7.16% 6.44% 6.48% 6.01% 49% 2.00% 0.00% Dec -13 Jan-14 Feb -14 Mar -14 Apr -14 May -14 Food Inflation (point to point) Jun-14 Jul-14 Aug -14 Sep -14 Oct -14 Nov -14 Non-Food Inflation (point to point) 25 IDLC MONTHLY BUSINESS REVIEW Buzzword Mobile Payment and Near field communication (NFC) M -payment (mobile payment) is a point-of-sale payment made through a mobile device, such as a cellular telephone, a smart phone, or a personal digital assistant (PDA). Using m-payment, a person with a wireless device could pay for items in a store or settle a restaurant bill without interacting with any staff member. So, for example, if a restaurant patron wanted to pay quickly and leave the restaurant on time to get to an appointment, the bill could be paid directly from the table - without waiting for a server to bring the check. The patron would simply connect to the cash register with a wireless device, punch in the table number and bank personal identification number (PIN), and authorize payment. According to Orange Mobile Payment (a Danish company), the entire transaction should take no more than 10 seconds. Using m-payment, a person with a wireless device could pay for items in a store or settle a restaurant bill without interacting with any staff member. 26 Near field communication (NFC) technology enables simple and safe two-way interactions between electronic devices, allowing consumers to perform contactless transactions, access digital content, and connect electronic devices with a single touch. Whether swiping your smart phone at the checkout lane in the grocery store, waving it over a display at a local museum, or bumping phones with a friend to share the latest games, near field technology lets you pay, play, and learn easily. From its humble roots in radio-frequency identification to its growing market across the world, learn about this rapidly expanding technology that could replace the need to carry multiple credits and debit cards at once. Overview The earliest m-payment trials were based on the wide area network (WAN) used for cellular phones. That meant, however, that users had to pay cell phone charges to make a payment, and also had to punch in long sequences of digits each time. Other technologies tested enable less cumbersome procedures. Palm and Verifone will use infrared (IR) data transmission for their initial trials. Among the other technologies being used are Bluetooth, WiFi, and RFID, a short-range transmission system. Public key infrastructure (PKI) encryption - considered to be necessary for secure m-commerce in general - is currently being incorporated into digital wireless networks and into an increasing number of wireless devices, a trend that is likely to increase consumer confidence in m-payment’s security. IDLC MONTHLY BUSINESS REVIEW In developing countries mobile payment solutions have been deployed as a means of extending financial services to the community known as the “unbanked” or “underbanked,” which is estimated to be as much as 50% of the world’s adult population, according to Financial Access’ 2009 Report “Half the World is Unbanked”. These payment networks are often used for micropayments. The use of mobile payments in developing countries has attracted public and private funding by organizations such as the Bill and Melinda Gates Foundation, USAID and MercyCorps. M-payment is already being used in some parts of the world, including Europe and Asia. In North America, a series of trials are scheduled for late 2001. Commerce Systems, a company based in Kingston, New York, and Nokia jointly developed a cellular phone m-payment system that is being tested in a trial with two United States restaurant chains. One small complication hindering wide-spread acceptance of m-payment is the distinction that credit card companies make between transactions where the card is physically present at the point of sale and those where it is absent - for example, when you use your credit card for transactions over the telephone or your computer’s Internet connection. For payments in what are considered “card not present” situations, credit card companies charge the merchant a higher transaction fee. Whether m-payment would qualify as a “card present” situation or not has not yet been determined; that decision may depend on the degree of confidence credit card companies have in the security of m-payment. NFC complements many popular consumer level wireless technologies, by utilizing the key elements in existing standards for contactless card technology (ISO/IEC 14443 A&B and JIS-X 6319-4). NFC can be compatible with existing contactless card infrastructure and it enables a consumer to utilize one device across different systems. Extending the capability of contactless card technology, NFC also enables devices to share information at a distance that is less than 4 centimeters with a maximum communication speed of 424 kbps. Users can share business cards, make transactions, access information from a smart poster or provide credentials for access control systems with a simple touch. NFC’s bidirectional communication ability is ideal for establishing connections with other technologies by the simplicity of touch. For example, if a user wants to connect a mobile device to a stereo system to play music, he can simply touch the device to the stereo’s NFC touch point and the devices will negotiate the best wireless technology to use. Mobile Payment and NFC Application NFC devices can be used in contactless payment systems, similar to those currently used in credit cards and electronic ticket smartcards, and allow mobile payment to replace or supplement these systems. With the release of Android 4.4, Google introduced a new platform support for secure NFC-based transactions through Host Card Emulation (HCE), for payments, loyalty programs, card access, transit passes, and other custom services. With HCE, any app on an Android 4.4 device can emulate an NFC smart card, letting users tap to initiate transactions with an app of their choice. Apps can also use a new Reader Mode so as to act as readers for HCE cards and other NFC-based transactions. On September 9, 2014, Apple also announced support for NFC-powered transactions as part of their Apple Pay program. Apple stated that their version of NFC payment is more secure than competitors because Apple Pay implements tokenization of its data in order to encrypt it and protect it from unauthorized use. The iPhone 6 line is the first set of handsets from Apple to support NFC, and will use Apple Pay for payment services. In 2011, handset vendors released more than 40 NFC-enabled handsets with the Android mobile operating system and support for the Google Wallet mobile payment service. Google Wallet is officially supported on most NFC equipped mobile devices running Android 4.4 Kit Kat which introduced Host Card Emulation for NFC payments. The iPhone 6 line is the first set of handsets from Apple to support NFC, and will use Apple Pay for payment services. BlackBerry devices have also supported NFC using BlackBerry Tag on a number of devices running BlackBerry OS 7.0 and greater. Mastercard has added further NFC support for PayPass for the Android and BlackBerry platforms, enabling PayPass users to make payments using their Android or BlackBerry smart phones in addition to a partnership between Samsung and Visa to include a ‘paywave’ application on the Galaxy S4 smart phone. Microsoft added native NFC functionality in their mobile OS with Windows Phone 8, as well as the Windows 8 operating system. Microsoft provides the “Wallet hub” in Windows Phone 8 for NFC payment, and can integrate multiple NFC payment services within a single application. 27 IDLC MONTHLY BUSINESS REVIEW Economy ADP SPENDING IN 2014-15 (IN CRORES OF BDT) 6586 Dec 5470 Nov 3413 Oct 3209 Sep Aug 1969 Jul 1847 Top 10 (minister/Divisions) Local Government 3364 Jan Development process to slow down for political turmoil l Source: Implementation Monitoring and Evaluation Division (IMED) ADP Expenditure(In crores of taka) Dec-14 Jan-15 Change In % 1280 681 -47 Power 911 394 -57 Bridges 1584 24 -98 Primary and Mass education 109 197 81 Railway 191 441 131 road Transport and highways 506 197 -61 Health and Family welfare 160 106 -34 Energy and Mineral Resources 306 254 -17 Education 335 281 -16 Housing and Public works 245 18 -93 Source: Implementation Monitoring and Evaluation Division The implementation of the annual development program amplified every month until December of the current fiscal year, but fell significantly, by 49%, in January from the previous month. In January, BDT 3,364 crore of the ADP allocation was spent, against BDT 6,586 crore in December, according to the government’s Implementation Monitoring and Evaluation Division (IMED). According to the IMED, during July-January, BDT 25,858 crore of the ADP money was spent, up from BDT 21,857 crore in the same period a year ago. Lead economist at the World Bank’s Dhaka stated that ADP implementation usually remains slow at the beginning of a fiscal year, but it gathers momentum during the dry season. Bangladesh becoming a top spot for Muslim travelers l Rank Destination Score 1 Malaysia 2 Turkey 83.8 73.8 3 United Arab Emirates 72.1 4 Saudi Arabia 71.3 5 Qatar 68.2 6 Indonesia 67.5 7 Oman 66.7 8 Jordan 66.4 9 Morocco 64.4 10 Tunisia 64.3 Source: Global Muslim Travel Index According to a study, Bangladesh has found a place among the world’s top destinations for Muslim travelers due to its availability of Muslim-friendly services and facilities. The Global Muslim Travel Index 2015 developed by MasterCard, a payment network provider, and Crescent Rating ranked Bangladesh 18th on the list of destinations. The Muslim travel market forecasted to be grown to 150 million visitors a year by 2020, and their annual spending would reach about USD 200 billion, according to the study. Around 108 million Muslim travelers spent USD 145 billion globally, representing 10% of the entire travel economy. Muslims has become an important consumer market for the entire world. They would become an increasingly important segment for businesses across all sectors. The study also stated that the Muslim population has been growing rapidly and expected to become 26.5% of the world’s population by 2030. Travel continues to be a core passion for consumers and the index would prove to be a trusted resource for this important, fast-growing traveler segment. Not surprisingly, Saudi Arabia saw the highest number of Muslim arrivals of 10.2 million people in 2014, followed by Turkey at 8.1 million people. 28 IDLC MONTHLY BUSINESS REVIEW Natural disasters may jeopardize Bangladesh manufacturing l Natural disasters can be a serious issue for Bangladesh’s aspirations to become a manufacturing core for investors leaving China, featured among the world’s 100 cities most exposed to natural shocks. Dhaka, the country’s biggest manufacturing center, came in at 35 of UK-based risk Analytics Company Verisk Maple croft’s annual list of 100 most exposed cities, which helped organizations identify and compared risks to populations, economies, business and supply chains. According to the research, natural hazards constitute one of the most severe disrupters of business and supply chain continuity, and also threaten economic output and growth in some of the world’s key cities, especially for those located in the emerging markets. Over the coming years, high-risk countries are expected to host increasingly large volumes of trade. With foreign investment continuing to flow into countries highly exposed to natural hazards, those which would unable to demonstrate robust resilience might lose an element of their competitiveness. The company decision-making over sourcing locations or market entry was increasingly influenced by issues such as strength of infrastructure and institutional robustness. WB to stream USD 200 million loans for rural poor people l The World Bank provided USD 200 million in loans to lighten poverty for around five million people in rural Bangladesh. According to the Washington-based lender, the loan under the Nuton Jibon Livelihood Improvement Project would benefit people of the poorest upazilas in 21 districts and support livelihoods by increasing access to market through business partnerships and funding small rural infrastructure. It would also work on nutrition awareness, agricultural knowledge and continue to focus on youth job opportunities. Bangladesh has made remarkable progress in reducing poverty, with 16 million people coming out of poverty in the last one decade, according to WB’s country director. Yet, poverty remained a daunting development challenge, as there are still around 47 million poor people. The project would cover around 2,500 new villages in 12 districts in addition to the about 3,200 villages supported under the Social Investment Programme Project-II. Project that started as a pilot in two of the poorest districts of Bangladesh in 2003 and gradually extended to 14 more districts. Selected Economic Indicators l Item Period/As of Value/ bn Period/ As of Value/ bn +/(-)% Foreign Exchange Reserve (USD) February'15 23.03 January'15 22.04 4.49% Workers’ Remittances (USD) February'15 1.18 January'15 1.23 -4.54% Revenue Collection (BDT) January'15 107.85 December'14 113.38 -4.88% Broad Money (M2) (BDT) January'15 7385.27 December'14 7412.48 -0.37% Reserve Money (RM) (BDT) January'15 1396.33 December'14 1391.44 0.35% Total Domestic Credit (BDT) January'15 6709.91 December'14 6737.35 -0.41% Credit to Private Sector (BDT) January'15 5418.82 December'14 5434.07 -0.28% Source: March 2015, Selected Economic Indicators, Bangladesh Bank 29 IDLC MONTHLY BUSINESS REVIEW Trade EXPORT SECTORS (IN % OF TOTAL EXPORT) 2% 10% 4% 3% Garments Jute Frozen foods More investment required for escalating tea production l Leather Others Due to falling production, Bangladesh’s status has changed to tea importing country from an exporting country. More investment, resolution of land disputes and low interest bank loans are needed for the tea industry to renovate the lost pride of the sector. MONTHLY RECEIPTS (IN BILLIONS) 2.88 Dec'14 2.41 Nov'14 Sep'14 Aug'14 In spite of the growing political and financial unrest alike, the country’s apparel industry has maintained a stable positive growth over the first eight months of the fiscal year. Although the situation may not remain as auspicious for the rest of the period, fears garment exporters. The growth might be short lived, and the impacts of the unrest and turmoil would soon be evident on the garment exports. President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has vented that the industry was supposed to reap the benefits of the reforms that had been undertaken previously, but with the current situation the chances of even reaching the export target for 2014-15 was rapidly faltering. 81% Source: Export Promotion Bureau Oct'14 Exporters fear growth may drop for unrest l 1.95 2.55 2.15 Source: Export Promotion Bureau Bangladesh Tea Board stated that Bangladesh could earn significant amount of foreign currency through exporting high quality tea. The government has taken an initiative to implement the strategic plan, Vision 2025, aiming at development of the country’s tea industry and boosting the export of tea, according to the Ministry of Commerce. Bangladesh has huge potential to increase the production of tea as the soil of some northern districts is suitable for the cultivation of tea. Tea Research Institute has already developed 18 varieties of highbred, 4 biclonal and one polyclonal seeds to boost tea production. In 2013, Bangladesh produced 66.26 million kg of tea from 58,719 hectares of land against the local demand of 64 million kg, according to the papers presented at the workshop. The demand for tea has increased by 3.23% a year while production has increased by 2% only, according to statistics of Tea Research Institute. Bangladesh to import 7000MW from neighbors l As stated by Ministry of Power and Energy, Bangladesh has planned to import 6000-7000 MW of power from Nepal, Bhutan and India. Therefore, the plan to double the future import of electricity from neighboring countries is recast. Power Division under the Power, Energy and Mineral Resources organized the workshop to evolve strategies for development of the country’s power and energy sector which was attended by top officials from both private and public entities in the sector. Bangladesh Energy Regulatory Commission (BERC), Power Secretary, Power Development Board (PDB) and Petronbangla were also present at the workshop. Bangladesh planned to import 6000-7000 MW from neighbors as part of the regional cooperation. Investment in handicraft to double in five years l Despite having some impediments including absence of proper policy and others logistic support, the local handicraft industry has made significant improvement over the years. According to sector insiders, the total investment in the sector has doubled to BDT 60 billion in the last five years as many entrepreneurs mainly women are gradually getting engaged in business. The handicraft industry’s annual turnover was estimated to be around BDT 15 billion. The sector has contributed to employment generation of nearly 5.0 million people, where 80% are women. Although export performance of handicraft sector was insignificant, the overall earning was not lower as the Export Promotion Bureau data did not include leather, jute-made product, wooden furniture and jute yarn in it. According to the Export Promotion Bureau data, export earnings from handicraft sector amounted to USD 7.50 million in 2013-14 fiscal year, up from USD 6.16 million one year earlier. During the last eight months of current fiscal year, the earning is USD 4.97 million. The most exportable items are baskets which are made of jute, cane, sea grass, date leaves and sugar palm leaves, clay product including terracotta, terracotta tali, Satoronjee, jute shopping bag, and jute gardening product etc. 30 IDLC MONTHLY BUSINESS REVIEW SHRIMP AND FISH EXPORTS VOLUMES (IN TONS) 3361 Jan 2890 4106 Nov 4322 4492 Oct 5500 5569 Sep 6030 5220 5692 Aug Due to the ongoing political turmoil, a sharp fall in the value of the euro and the Russian ruble against the dollar has hit the frozen food industry firmly. According to exporters, prices of black tiger shrimp, the major frozen food item that went to the European markets, have slumped 42% to USD 5.25 a pound from August last year. Bangladesh earned USD 638 million by exporting 55,074 tons of frozen food, including shrimp, in fiscal 201314. Overall, shipment fell 5% year-on-year to 32,800 tons in July-January of this fiscal year, according to the Bangladesh Frozen Foods Exporters Association. The earnings dropped 5% to USD 397.6 million during the period from the same period a year ago, according to Export Promotion Bureau. 4477 4405 Dec Frozen food exporters in an inflexible area l Shrimp exporters had to face a liquidity crisis as they cleared their stock at 40% lower than the procurement prices. The ongoing political turmoil has dealt another blow to the frozen food processors by affecting transportation of raw and processed shrimp and fish. Due to the instability, most buyers are not placing new orders. The most startling thing was that the amount of inventories fell and incurred losses of around BDT 600 crore for selling shrimp at reduced prices and for the problems in transportation of raw and processed products. To ride out the problem, the association demanded that the government should increase cash subsidy for frozen food export to 25% from 10% now. 5573 Jul 5939 2013-14 Rice imports goes up to four-year high l 2014-15 Source: Bangladesh Frozen Foods Exporters Association Rice imports strike a four-year high as traders find foreign produce cheaper mainly from India. According to food ministry data, private traders imported 8.73 lakh tons of rice between July 1, 2014 and March 2, 2015, which was the highest since fiscal 2010-11. In December last year, a parliamentary panel advised the food ministry to take steps to discourage imports. According to the traders and millers, import soared in the current fiscal year due to a zero-duty facility for rice import and higher production of medium quality rice in India. Increasing trend in import have put millers in a tight spot as the demand for locally grown coarse and medium quality rice has come down. As per Bangladesh Bureau of Statistics, Bangladesh produced 3.44 crore tons of rice in fiscal 2013-14, up from 3.38 crore tons a year ago. The government also shipped 25,000 tons of rice to Sri Lanka early this fiscal year, due to stockpile on the increased output. The Bangladesh Auto, Major and Husking Mills Association, which has around 17,000 members, reported that they were demanding the government discourage imports to protect local millers and farmers. 31 IDLC MONTHLY BUSINESS REVIEW Business Cotton consumption ascended on rising garment exports l As per the president of Bangladesh Textile Mills Association, the country’s cotton consumption would continue to rise given the buoyant forecast for apparel exports. The garment exporters were looking to hit the USD 50 billion-mark by the end of 2021. According to BTMA, in fiscal 2004-05, the country imported three million bales of cotton but within a span of ten years the country’s consumption doubled. Cotton import registered 8% growth to 5.6 million bales in fiscal 2013-14 and 6% the previous year. Currently, the local spinners and weavers have the capacity to consume 10 million bales of cotton, but they were unable to go into full production due to inadequate supply of gas and power to industrial units. Yet, the 400 local spinners could supply 90% of the demand for raw materials for the knitwear sub-sector of the apparel industry and 40% for the woven sub-sector. Farmers poorly paid, shortchanged by traders l Fruit and vegetable growers, given their inadequate staying power with perishables, are among the hardest-hit in the economy .The blockade and shut-downs over a long period have put the farmers in double hazard. In the first place, gluts of perishable produces have been left to wither in the fields or just dumped to rot. In addition to the blow, the supply chain disruptions have jabbed at the growers and consumers alike; they now have to deal with a new phenomenon of exploitation. The wholesalers, taking advantage of higher transport costs, are cashing in on the abnormal situation in two ways: they are paying low to the growers and marking up prices for the consumers. In the process, the traders are skimming profits alright, apparently making the most of both worlds: shortchanging farmers on the one hand, and having the consumers pay higher prices. For, after deducting input, labor, and transport costs and stockists’ commission, a potato producer would get BDT 5.5 per kg which does not even cover his production cost. Global demand to coerce home textile investment l Good quality, commitments, low production cost, cheaper wages, duty-free access to some developed countries were the factors that weigh in favor of Bangladesh. 32 Despite the downside regarding European Union’s GSP facility to Pakistan and current political turmoil, a growing global demand was instigating increasing entrepreneurial endeavors in the sector. Newer opportunities were emerging ahead as buyers from China are shifting to Bangladesh. Good quality, commitments, low production cost, cheaper wages, duty-free access to some developed countries were the factors that weigh in favor of Bangladesh for the retailers to source from here. According to the industry insiders, European Union GSP facility for Pakistan, appreciation of the local currency against the US dollar and depreciation of EU currency against US dollar and lingering political turmoil were considered to be the major impediments to the country’s home textile exports. Bangladesh would probably face strong competitive pressure from Pakistan in home textile trade, according to a recent study conducted by Bangladesh Foreign Trade Institute (BFTI). Therefore, Bangladeshi made home textiles were lagging behind Pakistan in terms of cost competitiveness. The sector could not flourish to the expected level due to lack of the government policy support, while financial institutions like banks did not come up with funds as it did for the garment sector. The industry needed capacity building to capitalize on the upcoming opportunities to take a sizeable part of the world’s home textile market, according to businesspeople. IDLC MONTHLY BUSINESS REVIEW GOLD PRICE (BHORI 11.66 GRAMS/TAKA) 2015 2015 2014 2014 2014 2014 2014 2014 2013 2013 2013 2013 44506 45998 Gold price drops l Due to a turn down in domestic demand for jewelry and the value of the precious metal in the global market, the prices of gold have dropped 3.24% since January 22. The metal is now vending at BDT 44,506 a bhori, a price level it has reached twice since April 2013. As stated by president of Bangladesh Jewelry Manufacturers and Exporters Association, annual demand for gold jewelry in Bangladesh fell to 16 tons in 2014 from 45-50 ton in 2004. 44506 According to Bloomberg Global, gold prices had reached a record high of USD 1921.17 an ounce on September 6, 2011. In the international market, gold prices recently declined by around USD 40 an ounce. In Europe, gold prices fell almost 1% to a three-month low as the dollar raised to a near 12-year peak versus the euro, on renewed expectations of a mid-year hike in US interest rates. In London, gold dropped to USD 1,155.6 an ounce in early trade, while silver fell to its lowest in two months at USD 15.57 an ounce. While entering Bangladesh, a traveler can bring up to 100 grams of gold jewelry without paying any tax and duty under baggage rules. 45707 47165 48389 47223 48389 46932 Processed chicken market to warm up l 48389 49555 50721 Source: Bangladesh Jewellers Samity The high-ceilinged demand for easy and hygienically-prepared foods among the urban middle class was pulling in large investors to the processed chicken and ready-to-cook frozen foods sector. Local poultry giant Kazi Farms recently entered the segment to grab a pie of the BDT 150-crore market that was growing by more than 20% a year. People’s lifestyles were changing due to their rising incomes and higher economic growth of the country. Kazi, with its strong presence in poultry breeding and feed market entered the market as part of its plan to expand business and provide hygienically prepared and safe chicken-based foods to consumers. The market has been growing for the last ten years, but it gained momentum in the last two-three years due to an increase in the number of operators and people’s rising interest in convenient foods. 33 Regulatory News IDLC MONTHLY BUSINESS REVIEW Banks to turn their back on call money market l Call Money Rate 8.41 7.77 7.93 6.65 8.57 8.21 6.86 6.52 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Source: Bangladesh Bank As per bankers, overall transactions on the call money market have dropped drastically as lender banks prefer lucrative alternatives for higher earnings. According to central bank’s statistics, the overall turnover on the inter-bank money market fell more than 47% to BDT 27.96 billion on March 25 from BDT 53.29 billion on March 16. A senior official of a leading state-owned commercial bank, reported that they prefer to invest their excess funds in inter-bank Repo and term deposits for higher earnings than that from the call money market. The lender banks easily lend their funds on the inter-bank Repo market by charging interest rates between 8.00% and 8.50%. Some lender banks are also investing their funds in cash-hungry banks and non-banking financial institutions (NBFIs) in the form of inter-bank placement, generally known as FDR to receive higher interests than that from call money. The private bankers stated that Bangladesh Bank discourages offering higher rates on the call money market without assigning any reason so that the excess funds are invested in both inter-bank Repo and inter-bank placement. Central bank imposed penalty on indebted banks l Bangladesh Bank (BB) was likely to impose commitment failure fee against the scheduled banks which would not settle the overdue inland and foreign bills of letters of credit in due time. The central bank was thinking about the amount of commitment failure fee to be imposed on the banks. The BB earlier took initiative to settle the overdue inland and foreign bills by deducting funds from the indebted banks’ current accounts maintained with the central bank. As stated by the BB official, the central bank earlier issued show-cause notice to a number of banks and imposed financial penalty on them as they did not settle the bills in due time. However, BB was to bring discipline in inland bills settlement in the banking sector as banks were still maintaining a large amount of overdue bills. For this reason, the BB has taken move to impose commitment failure fee against the indebted banks to force them to settle their overdue inland bills in due time to the creditor banks. At one stage in 2013, the overdue inland bills stood at around BDT 4,000 crore in the banking sector. The BB official hoped that discipline in the overdue bills in the country’s banking sector would return when the central bank would implement its new decision. BB loosen up provisioning requirement for banks’ mutual fund investment l Due to the recent price collapse of the mutual funds, Bangladesh Bank (BB) has recently reduced the provisioning requirement of banks for their investment in mutual funds. BB has recently announced that banks would not require maintaining provision against their investment in a mutual fund if the cost price of a unit equals or goes below 85% of market price or net asset value of the unit. The provision would be calculated based on two formulas; the first one would consider the provision based on cost price and market price. The second one would consider the difference between the cost price of a unit and 85% of the net asset value. This directive would be only be applicable for the closed end mutual fund. For the open ended one, however, the banks would have to maintain provision if the unit of the fund equals or went over 85% of the net asset value of the unit. The price of many of the mutual funds had slumped in recent times amid bearish trend in the capital market, resulting in losses of the banks and their subsidiaries, according to the central bank. 34 IDLC MONTHLY BUSINESS REVIEW Central bank gave job shield for NBFI CEOs l Bangladesh Bank has taken initiative to give job protection for managing directors and chief executive officers of non-bank financial institutions as the boards of directors of the NBFIs were able to suspend their MDs and CEOs on their own consideration without taking approval from the central bank. According to the chief of the association of the NBFIs, they would apply to the central bank to take measures in this regard citing that the boards of scheduled banks have to take approval from the BB to eliminate their CEOs and managing directors. BB governor with chief executive officers and managing directors of the NBFIs at the central bank headquarters, warned the NBFI CEOs of taking disciplinary measures against their chairman, directors and chief executives if they continued to commit financial corruption. BB set restriction on debit card annual fee l Bangladesh Bank set restrictions on annual fee of debit cards offered by scheduled banks as some of them enforce excess charge on their clients for using the product. According to BB official, the central bank was likely to impose annual charge between BDT 300 and BDT 400 for all types of debit cards of the banks in a bid to popularize more the online-based transaction. The banks forced annual charge on the debit cards between BDT 300 and BDT 2,000 which was impeding to accelerate the card-based transaction through automated teller machine and point-on-sale. BB official further added that the central bank would also take an initiative to allow the clients to enjoy the debit card service without any annual fee if they make a certain amount of transaction through their cards. In addition, the BB imposed restriction on card and PIN replacement fees for the banks as the charges were also high considering the existing rate. According to the latest BB data the banks issued 7,285,805 debit cards and 577,864 credit cards and 102,787 prepaid cards as of September 30, 2014 while they set up 6,035 ATM booths and 26,140 POS terminals. Charging less transaction fee on debit cards would increase the usage of debit cards that would eventually reduce the use of printed currency note and coin. 35 Entrepreneurs’ Assistance Tool IDLC MONTHLY BUSINESS REVIEW Import Registration Certificate I mport is an integral part of present day business. To start an importing business in Bangladesh, is a common trend for many new entrepreneurs. In the present time, import and export trade dominate the world economy. For establishing an import business in Bangladesh, one must need Import Registration Certificate (IRC). Many young entrepreneurs now are involving in the import and export business. These businesses are easy to start, need comparatively low investment and can earn higher rate of profit. The main import goods in Bangladesh are capital machinery, raw materials of garments products and pharmaceuticals. The IRC are issued by The Chief Controller of Import and Export (CCI&E), under the Ministry of Commerce in Bangladesh. How to collect Import Registration Certificate in Bangladesh? Requirements of a new importer for getting Import Registration Certificate (IRC): Application in a prescribed form. Valid Trade license. Membership certificate of the respective trade organization or Membership from the Chamber of Commerce & Industry. Registered partnership deed/Memorandum and Articles of Association along with Certificate of Incorporation. Two copies attested photograph of the applicant(s). Affidavit from 1st class Magistrate. Asset Certificate of the applicant(s). Ownership deed or Lease deed of the office premises along with rent receipt. Bank solvency certificate. Tax Identification Number (TIN) Certificate. Money receipt of requisite fee. Any other document as required. After submission of the application by the intending importers for IRC alongwith the papers mentioned above and deposit of requisite fees, on being satisfied, the Chief Controller of Import & Export (CCI&E) issue IRC to the Industrial Consumers or Commercial importers with their half yearly/yearly entitlement mentioning item of commodities. Import Registration Fees Catagory First Value of Annual Import (BDT) Registration fees (BDT) Renewal fees (BDT) 5,00,000 5,000 Second 25,00,000 10,000 3,000 6,000 Third 50,00,000 18,000 10,000 Fourth 1,00,00,000 30,000 15,000 Fifth 5,00,00,000 45,000 22,000 Sixth Above 5,00,00,000 60,000 30,000 Source: The Register of Joint Stock Companies & Firms (RJSC) Contents of an IRC Validity period & issue date mentioned Name of the importer mentioned Sometimes amount limited Sometimes item limited. Name of the Bank (LC) Exempted persons from Registration as an Importer In terms of the Importers (Registration order 1981), no person can import goods into Bangladesh unless registered with the CCI&E or exempted from the provision of the said order. Personal user needs no registration. They may import beyond USD 5,000/- with the permission from CCI&E. 36 IDLC MONTHLY BUSINESS REVIEW International Facebook bought shopping search engine ‘The Find’ l Facebook expanded its reach in the e commerce realm by acquiring the popular shopping search engine ‘TheFind.com’. The website has been helping people find the suitable and proper shopping solution for the last nine years and has recently decided to join forces with most popular social networking website Facebook. The Find members hope to wield their technological competency to make the ads on Facebook “more relevant”. Facebook has been relentlessly looking for better ways to provide information to its valued customers and this acquisition was just another step towards their ultimate goal of making information ubiquitous. ‘The Find’ is everything you need when shopping, to quickly decide what to buy and where to buy it from. The operation base of ‘The Find’ in Silicon Valley may move to Facebook’s campus in Menlo Park, California. EU to query cross-border e-commerce barriers l The EU’s competition announced plans for a probe into whether companies were creating barriers to stop consumers buying online from other countries. Although half of all EU consumers shopped online last year, only 15% bought from sellers based in other member states in the 28-nation bloc. It was high time to remove remaining barriers to e-commerce, which was a vital part of a true digital single market in Europe. European consumers might be prevented from accessing a particular website based on their residence or credit-card details. After the initial general probe was completed next year the Commission could then take on specific cases of “restrictive business practices and abuse of dominant market positions.” Europe as a bloc was the world’s biggest economy, but despite its 500 million potential consumers it largely remained a divided continent of 28 distinct economies, especially when it came to media and the Internet. Across the EU, digital services like music streaming site Spotify or shopping behemoth Amazon, often remain confined to national borders, with separate accounts required from one country to another. Twitter bought live stream app maker Periscope l Twitter purchased the maker of the video streaming app Periscope, amid what seems to be surging interest in live video sharing. Twitter did not release details about the deal, but media reports said Twitter was paying between USD 50 million and USD 100 million for the app, which was in the testing phase and has only been available by invitation. The news comes amid growing interest in live video sharing, and a rush of users to another streaming app called Meerkat. It was not immediately clear if Twitter would maintain Periscope as an independent app or integrate it into the messaging platform. A developed nation is a prosperous nation. At IDLC, we help you contribute to this process. We are in the business of financing happiness. 37 IDLC MONTHLY BUSINESS REVIEW Market Roundup Commodity Market Roundup Global food price lowest since July 2010 l 2002-2004-100 250 2011 230 2012 210 2013 190 2014 2015 170 J F M A M J J A S O N D Source: Food and Agricultural Organization The global food prices in February 2015 were nearly 1% below its revised value for January and 14% lower than in February 2014. The prices of cereals, meat and, especially, sugar, dipped last month, while they remained steady in the case of oils and rebounded sharply in the case of dairy products. Cereal price declined by 3.2% from January, primarily driven by the prices of wheat, coarse grains and rice, but the decline was most pronounced for wheat, reflecting continued improvement in the 2015 wheat production prospects, amid already large world inventories. Prices of oils and fats averaged 156.6 points in February from January 2015. The small gain was driven by palm oil, reflecting recent floods that impaired production in Malaysia and the prospect for a surge of consumption in Indonesia following a hike in domestic biodiesel subsidies. Dairy products saw a rapid rise of 8 points or 4.6% over January 2015. Whole milk powder registered the strongest increase, followed by skimmed milk powder and butter; cheese quotations remained unchanged. Meat price decreased to 187.4 points in February, only 1.4% than its revised value from January. The reduction was caused by lower bovine and ovine meat quotations, while poultry meat prices were unchanged and those of pig meat recovered after eight straight months of decline. Sugar price fell down 10.6 points or 4.9% from January. The decline mainly reflected improved crop prospects in Brazil, the world’s largest producer and exporter of sugar, following recent rainfalls in the main producing region of the country. Global oil market – Monthly Overview l Organization of the Petroleum Exporting Countries (OPEC) has published its Monthly Oil Market Report on March 16, 2015. The OPEC Reference Basket (ORB) ended February over 20% higher than the previous month, amid a pickup in prompt demand from Europe and Asia and optimism that oil prices may have reached a bottom. The ORB improved USD 9.68 to USD 54.06/b during the month, though still significantly down from a year ago. Crude oil futures defied fundamentals and moved up sharply after seven months of a declining streak that ended with values down by almost 60%. Despite a continuing imbalance in the global crude market, oil futures bounced back, supported by improving physical demand, supply outages and speculation that low crude oil prices have begun to affect US tight oil production. The ICE Brent contract surged USD 9.04 or 18% m-o-m to USD 58.80/b. The Nymex WTI contract was up USD 3.40 or 7.2% at USD 50.72/b. Meanwhile, speculative bets on higher ICE Brent prices further increased net length, but sentiment was less bullish on US crude. The Brent-WTI spread widened, as growing US crude stockpiles resulted in less of an increase in the Nymex WTI front-month contract. The Brent premium to WTI widened to above USD 8/b in February. 38 IDLC MONTHLY BUSINESS REVIEW Currency Market Roundup (April, 2015) Money Market l The Bangladesh interbank call money rate was around 7.00% – 7.50% on April 05, 2015. Foreign Market l Local: The USD/BDT rate was steady and was range bound as on April 04, 2015 as it was last business day of the year. Trading volume was steady with more cross currency transactions. International: The dollar tumbled on Friday after a significantly weaker-than-expected U.S. jobs report that will increase speculation over whether the U.S. Federal Reserve holds off tightening monetary policy for longer than expected. U.S. employers added the fewest jobs in more than a year in March amid signs the economy has been hurt by the dollar’s climb to multi-year highs. Non-farm payrolls rose by 126,000 last month, the smallest gain since December 2013 and well under the 245,000 economists had forecast. The unemployment rate held at a 6-1/2 year low of 5.5%. The euro shot up over 1 percent after the report to a one week high of USD 1.10270 before drifting to USD 1.09750, a gain of 0.88% on the EBS trading platform. Trading volumes were very thin owing to the Easter holiday weekend that has much of Europe closed and skeletal staffing at U.S. banks. U.S. stock markets are closed. Treasury Bill/Bond Auction Information l Auction Date Tenure & Name of the Securities Sale Value (in BDT mn) Weighted Average Yield (%) 3/10/2015 30-day BB Bill 7166.203 5.25 3/9/2015 91 days T.Bill 7860.085 7.17 3/2/2015 182 days T.Bill 7083.308 7.65 3/9/2015 364 days T.Bill 8335.752 8.03 3/4/2015 2 yr T.Bond 4360.5 8.5 3/11/2015 5yr T.Bond 7500 9.45 2/18/2015 10yr T.Bond 3883.9 10.85 2/25/2015 15yr T.Bond 1500 11.4 2/25/2015 20yr T.Bond 1500 11.97 * Sale value not applicable, Face Value used. Source: Bangladesh Bank Financial Sector Prices l The spread of weighted average lending and deposit rate declined to 5.06% in January, 2015 which was 5.21% in December, 2014. The weighted average call money rate in the interbank market went down from 8.57% in January 2015 and stood at 8.21% in February, 2015. Bangladesh Bank has changed repo and reverse repo rate at 7.25% and 5.25% respectively, following a declining revision by 50 basis point effective from February 1, 2013. Exchange and Forward Rates l (As of April 04, 2015) Major Currency Exchange Rates Major Currency Exchange Rates BC Sell BDT TT Buy BDT BC Sell BDT TT Buy BDT USD 78.00 77.00 CAD 64.59 61.49 EUR 86.71 82.71 HKD 10.10 9.60 INR 61.96 1.25 Currency Currency Exchange Rate of Some Currencies Currency Currency Per USD BDT per Currency GBP 117.28 113.28 SGD 58.86 55.98 PKR 101.90 0.76 AUD 61.53 58.57 AED 21.32 20.27 LKR 133.15 0.58 JPY 0.68 0.64 SAR 21.49 20.46 CHF SEK 84.08 9.20 80.01 8.75 THB 32.41 2.39 DKK 11.49 10.92 KWD 261.12 248.20 MYR 3.67 21.12 Source: Standard Chartered Bank. 39 IDLC MONTHLY BUSINESS REVIEW Insight Analysis l Smartphone use *1,644 British adults surveyed between February and April 2014 % reporting use by hour of the day, over a week* By age group By device 16-34 55+ 35-54 Smartphone 00:00 60 21:00 Radio TV 00:00 100 21:00 03:00 40 03:00 60 20 20 18:00 06:00 15:00 09:00 18:00 06:00 15:00 09:00 12:00 12:00 Source: Ofcom Earth is rapidly becoming a planet of the phones. Today two billion phones are in use worldwide, and this number is expected to double by the end of the decade. By then nearly 80% of adults will have a device in their pocket with the processing power that would have passed for a supercomputer not too many years ago. To get an idea how much time people will then spend on their smartphones it helps to look at today’s young people: the chart shows that they report much more use during all times of the day than older generations. In total, according to Ofcom, the British telecoms regulator, those aged between 16 to 24 years use their device nearly four hours a day; those aged between 55 to 64 only half as much. When comparing overall screen time however, the smartphone still has some catching up to do to match the allure of longer established technologies like television. International Commodity Prices l Commodity Unit Crude Oil Gold Silver Nickel Tin Lead Aluminium Zinc Copper Barrel Ounce Ounce Tonne Tonne Tonne Tonne Tonne Tonne Price March 20, 2015 (USD/unit) 45.72 1183.10 16.17 13955.00 16930.00 1758.50 1763.00 2015.00 5920.00 Price 26 February 2015 (USD/unit) 45.15 1281.25 17.83 14375.00 19500.00 1845.00 1818.00 2090.50 5490.00 Change +/(-) 0.01 -0.08 -0.09 -0.03 -0.13 -0.05 -0.03 -0.04 0.08 Source: LBMA; Worldal; WTRG Management Change l Banks, Fis and Other Organizations Name Abdul Hafiz Choudhury Kamran Idris Chowdhury Syed Waseque Md Ali Touhidul Alam Khan Mohammad Jalaluddin Md Hashem Chowdhury Zara Jabeen Mahbub 40 Position Chairman Vice Chairman Managing Director Deputy Managing Director Deputy Managing Director Additional Managing Director Head of Communications and Service Quality Organization Green Delta Insurance Co. Ltd. Green Delta Insurance Co. Ltd. First Security Islami Bank Ltd. Prime Bank Ltd. Bangladesh Development Bank Mutual Trust Bank Ltd. Brac Bank Ltd. IDLC MONTHLY BUSINESS REVIEW International Economic Forecast Year on year percentage change GDP 2015 2014 2016 CPI 2015 2014 2016 Global (PPP Weight) 3.2% 3.2% 3.5% 3.6% 3.3% 3.6% Advanced Economies 1.8% 2.3% 2.6% 1.6% 0.4% 1.9% Euro Zone 0.9% 1.4% 1.8% 0.4% -0.1% 1.2% Developing Economies 4.4% 4.0% 4.4% 5.5% 5.9% 5.3% Forecast as of March, 2015. Source: Wells Fargo Securities, LLC International Market Movement l % Change on Markets Index Mar 11th United States (DJIA) Dec 31st, 2014 One Week 17635.4 In Local currency In USD -2.6 -1.1 -1.1 United States (S&P 500) 2010.2 -2.8 -0.9 -0.9 United States (NAScomp) 4849.9 -2.4 2.4 2.4 China (SSEA) 3448.2 0.3 1.7 0.8 Japan (Nikkei 225) 18723.5 0.1 7.3 6.1 Britain (FTSE 100) 6721.5 -2.9 2.4 -1.0 Canada (S&P TSX) 14739.2 -2.3 0.7 -7.6 Germany (DAX) 11806.0 3.6 20.4 6.5 Hong Kong (Hang Seng) 23718.0 -3.1 0.5 0.4 India ( BSE) 28659.2 -2.5 4.2 5.0 Pakistan (KSE) 32539.6 -2.1 1.3 0.1 Singapore (STI) 3378.6 -1.1 0.4 -4.2 Source: The Economist Selected Economic & Financial Indicators l Global domestic product Country United States Consumer prices % change on year-on-year Current account balance Latest 12 months, $bn % of GDP 2015 Interest rates, % 10-year gov’t bonds, latest Latest qtr 2015 latest 2015 Unemployment rate, % 2.4 2.2 3.2 -0.1 0.3 5.5 -388.1 -2.2 2.13 China 7.3 6.1 7.2 1.4 1.5 4.1 213.8 2.1 3.36 Japan -0.8 1.5 1.1 2.4 1.0 3.6 40.1 1.7 0.44 Britain 2.7 2.2 2.6 0.3 0.5 5.7 -163.0 -4.3 2.04 Canada 2.6 2.4 2.1 1.0 1.1 6.6 -39.3 -2.5 1.50 France 0.2 0.3 0.9 -0.4 0.1 10.2 -21.1 -1.1 0.53 Germany 1.5 2.8 1.6 0.0 0.2 6.5 286.4 7.1 0.21 Russia -0.3 0.0 -3.5 16.7 12.5 5.5 56.6 4.6 12.60 1.65 Hong Kong 2.2 1.5 2.5 4.1 3.3 3.3 7.7 2.3 India 7.5 4.0 6.6 5.1 6.0 8.8 -27.4 -1.6 7.76 Singapore 2.1 4.9 3.1 -0.4 0.4 1.9 58.8 22.6 2.45 Brazil -0.2 0.3 0.0 7.7 7.2 5.3 -90.4 -4.1 13.2 Mexico 2.6 2.7 2.9 3.0 3.9 4.4 -26.5 -1.8 5.99 *% change on previous quarter, annual rate. ** The Economist poll or Economist Intelligent Unit estimate/forecast. Source: The Economist. 41 IDLC MONTHLY BUSINESS REVIEW IDLC News IDLC and USAID arrange a 3 day event in Chittagong titled “Industrial Best Practices for Energy Efficiency” l IDLC Finance Limited in association with USAID-CCEB Program arranged a three day long event in Chittagong titled “Industrial Best Practices for Energy Efficiency” on 3rd to 5th March, 2015. The program was entitled for the sponsors, entrepreneurs, plant engineers, CFO, compliance managers and other relevant personnel. Energy efficient initiatives such as efficient lighting system and electronic appliances, installation of energy efficient boiler, use of variable frequency drive (VFD) type motor system, waste heat recoveryetc have immersed as an important tool for energy management. The program focused on Energy scenario, potential of energy efficiency at industrial level, options for modifications, low cost financing source and availability of other incentives. Focusing in industry specific agendas, program of 3rd March was held at Hotel Peninsula for the sponsors, engineers and finance personnel of textile sector. Similar sessions were carried out on 5th March for Frozen Food and Steel industry. As a part of in house capacity development, prospect and mechanism for financing EE projects was illustrated in IDLC Chittagong office. The objective of the workshop was to raise awareness amongst industry owners and plant engineers on the opportunities to improve energy efficiency and its relative cost effectiveness. Mr. Mahbubul Alam, President of Chittagong Chamber of Commerce and Industry inaugurated the program as chief guests. Engr. ManzareyKhorshed Alam, Chairman of Institute of Engineers Bangladesh (Chittagong Centre) were present as special guest. Senior officials of IDLC Finance Limited and USAID CCEB program was also present during the three daylong event. It is to be mentioned that IDLC and USAID-CCEB have partnership to promote industrial energy efficiency and creating scope for availing low cost fund under Bangladesh Bank green refinancing scheme. 42 IDLC MONTHLY BUSINESS REVIEW IDLC CSR News IDLC organizes an Environmental Awareness Workshop for School Teachers l In continuation to the Environmental Awareness Campaign for School Children, IDLC jointly with LEADS started the second phase of the program. To make this campaign successful through active participation from both the children and the respective school authorities, a half day workshop was organized for the school teachers at Dhanmondi’s Ambala Inn in March 24, 2015. A number of 30 teachers from 20 different schools of Dhaka participated in the workshop and exchanged their opinions. The workshop focused on issues such as environmental pollution and mitigation measures; responsible consumption of natural resources; adoption of the 3R principle of Reduce, Reuse and Recycle to minimize wastage etc. Moreover it helped to bring the schools on board and plan ahead to conduct the sessions throughout the year. Ms. Bilquis Jahan, Head of HR, IDLC Finance Limited inaugurated the event on behalf of the CEO & Managing Director Mr. Selim R. F. Hussain. Mr. Mehbuboor Rahman, Assistant Manager, Green Banking Desk, Corporate Division was also present during the program. Mrs. Romina Dewan, Executive Director, LEADS conducted the whole session. 43 Capital Market Review IDLC MONTHLY BUSINESS REVIEW March turned out to be another painful month for the economy as well as the equity market of Bangladesh. Political situation remained the protagonist of the play and acted against the betterment of the markets. As the major political parties are yet to reach an agreement, future of its economy remain bleak and uncertain, failing to instill confidence among investors. Although, city corporation election and indirect participation of the major opposition gestured a way out, investors may have perceived it inadequate. Under this chaotic circumstance, risk premium went even higher, discounting equities deeper to an apocalyptic zone. After the agonizing downtrend throughout the month, all the indices shrank, with DSEX losing 233 points (4.9%), DS30 losing 44 points (2.5%) and DSES losing 28 points (2.5%). The closing value of the three indices were 4,530, 1,728 and 1,103, respectively. The whole month had seen a series of short falls interrupted by sharp rises in index. However, the rises had been meager to offset the incessant decline in indices. Over the month, DSEX lost 233 points, which was the worst correction in the first quarter of 2015. DS30 and DSES also accompanied the prime index in the downfall. By the end of first quarter, DSEX eroded 6.9%, while DS30 and DSES both eroded 4.1%. The month also continued the draught of turnover averaging BDT 2.8 bn per session as against BDT 2.9 bn per session in February. Meanwhile, during the month ADB cut its growth forecast for Bangladesh to 6.1% from 6.4% in their earlier forecast considering the loss incurred to the economy in the first quarter. During March, two new scrips and one mutual fund debuted. SHASHADNIM and ZAHEENSPIN both of the new debutants were listed in Textile sector. SHASHADNIM appreciated 20% from its offer price, while ZAHEENSPIN rose 131% from its offer price during March. Meanwhile, almost after one and half year a new mutual fund ATCSLGF got listed. Investors’ overall aversion to mutual funds punished the debutant. The fund lost 26% during March sliding down to a P/NAV ratio of 62%. Fuel & Power and Pharmaceuticals remained in the center of investors’ attraction this month, each capturing 16% of the month’s total turnover. On the other hand, Telecommunication and Pharmaceuticals soared by 6.3% and 4.1%, respectively against the downturn in broad market. Meanwhile, Large Caps (+0.96%) offered solace to the investors among all the cap classes. Monthly Market Statistics l Advance/Decline (March, 2015) Index Movement (March, 2015) Index Point Change % Change YTD change DSEX 4,530.5 -232.7 -4.9% -6.9% DS30 1,728.5 -43.9 -2.5% -4.1% DSES 1,103.1 -27.8 -2.5% -4.1% Top Ten Gainers’ List (March, 2015) Top Ten Gainers All Category Advanced Declined Unchanged 55 261 7 Top Ten Losers’ List (March, 2015) Top Ten Losers 31-Mar-15 26-Feb-15 % Change 31-Mar-15 26-Feb-15 % Change RECKITTBEN 1,648.4 1,267.3 30.1% FIRSTFIN* 12.2 17.4 -29.9% IFADAUTOS 65.3 51.1 27.8% RUPALIBANK* 41.0 54.9 -25.3% POPULARLIF 168.5 137.0 23.0% MODERNDYE 74.5 96.5 -22.8% ACI 535.2 436.0 22.8% ABBANK* 23.5 30.0 -21.7% 42.0 35.0 20.0% PHENIXINS 24.0 30.6 -21.6% 1,431.7 1,198.2 19.5% FEKDIL 20.2 25.7 -21.4% KPCL 64.7 56.9 13.7% BGIC 16.0 20.3 -21.2% NITOLINS 27.0 24.0 12.5% LANKABAFIN* 31.6 40.0 -21.0% PROGRESLIF 76.7 68.6 11.8% CITYBANK* 16.9 21.3 -20.7% PRAGATILIF 110.1 98.8 11.4% DUTCHBANGL* 78.4 98.8 -20.6% SHASHADNIM* MARICO *% change includes post record date effects 44 IDLC MONTHLY BUSINESS REVIEW Top Ten by Value (March, 2015) Top Ten (Value) 31-Mar-15 Value (BDT 26-Feb-15 % Change Mn) 116.40 -1.6% 3,159.9 LAFSURCEML 114.5 SPCL 184.9 188.70 GP 358.2 ACI 535.2 SHASHADNIM* IFADAUTOS Market Capitalization 50,000 2,877.2 40,000 335.30 6.8% 2,868.7 30,000 436.00 22.8% 2,707.0 42.0 35.00 20.0% 2,336.6 65.3 51.10 27.8% 2,119.6 MJLBD 133.7 127.20 5.1% 1,956.4 SQURPHARMA 263.1 263.80 -0.3% 1,688.2 OLYMPIC 222.3 225.90 -1.6% 1,625.5 SAPORTL 55.1 62.00 -11.1% 1,598.4 USD in Mn -2.0% *Price of March 04 2015 USD in mn 20,000 10,000 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 - DSE Turnover and DSEX BDT in mn Lowest P/E and Lowest P/NAV ratio Turnover 1JANATAMF 42.0% PUBALIBANK 5.5x TRUSTB1MF 43.2% ALARABANK 5.5x DBH1STMF 43.4% BDT Bn GP 483.7 BATBC 1.50% 6.8% 0.00% 3.1% 45.8 -0.3% LAFSURCEML 133.0 -1.6% -1.50% 82.4 -5.6% TITASGAS 2.3 -2.7% -2.50% RENATA 0.8 0.6% -3.00% MARICO 5.1 19.5% BERGERPBL 8.2 7.0% 35.3 -1.6% Mcap (All) Mcap (Equity) Turnover BDT Bn 31-Mar-15 3,172.3 3,217.2 - Mid Large -0.92% -1.38% -2.89% -3.33% -4.00% Recent Corporate Declaration l Company name 26-Feb-15 Small -3.50% Market Statistics (March, 2015) Unit Mini -1.00% -2.00% Market Stat Micro -0.50% 189.4 OLYMPIC 0.96% 0.50% % Change SQURPHARMA ICB - Market Cap Class wise Stock Movement 1.00% Top Ten Market Capitalization (March, 2015) Mar… 5.2x Feb-… 41.4% MTB Dec… PHPMF1 Jan-… 5.0x Nov… 41.4% BANKASIA Oct-… 40.9% IFIC1STMF Aug… MBL1STMF 5.0x - Sep-… 4.9x FAMILYTEX 1,000 2,000 Jun-… SIBL 2,000 4,000 Jul-14 40.7% Mar… POPULAR1MF Apr-… 4.8x 6,000 May… UCBL 3,000 8,000 Feb-… 40.6% Dec… EBLNRBMF Jan-… 4.4x Nov… TRUSTBANK 4,000 10,000 Oct-… 40.3% Aug… LRGLOBMF1 Jun-… 4.0x 5,000 12,000 Jul-13 ONEBANKLTD Index DSEX 14,000 May… 40.2% Mar… NCCBLMF1 Apr-… 3.9x Feb-… SOUTHEASTB Top Ten Mkt Cap DSE Turnover (BDT Mn) 16,000 Sep-… Lowest Price/NAV Jan-… Lowest P/E AGM Date Record date SD CD Rupali Insurance Company Ltd. 27.04.15 08.04.15 5% 10% -1.4% United Insurance Limited 26.04.15 09.04.15 10% 30.04.15 09.04.15 55% % Change USD Bn 40.8 41.4 -1.4% Apex Footwear Limited BDT Bn 2,589.7 2,661.7 -2.7% Islamic Finance and Investment Ltd. 14.05.15 09.04.15 4% 8% USD Bn 33.3 34.2 -2.7% Phoenix Finance and Investment Ltd. 21.05.15 13.04.15 20% BDT Mn 2,923.5 2,680.2 9.1% USD Mn 37.6 34.4 9.1% Jamuna Bank Limited Rights 04.05.15 15.04.15 19% *SD = Stock Dividend **CD =Cash Dividend. 45 IDLC MONTHLY BUSINESS REVIEW Sector Indicators (March, 2015) l Annualized PE Trailing PE Price/BV Sector Performance March Telecommunication 182.7 6.3% 19.5% 24.4x 24.4x 10.0x 6.3% Pharmaceuticals & Chemicals 462.9 15.8% 14.1% 24.2x 27.3x 6.3x 4.1% Bank 276.3 9.4% 13.7% 6.9x 5.5x 0.8x -11.3% Fuel & Power 453.0 15.5% 12.6% 12.1x 11.2x 5.2x 0.4% Food & Allied 142.9 4.9% 9.4% 30.1x 29.3x 6.4x 3.4% Cement 195.2 6.7% 7.1% 35.4x 33.3x 3.9x -2.5% Sectoral Indicators Sector Turnover(BDT Mn) NBFI % of Total Turnover Industry Cap (Equity) 94.7 3.2% 6.2% 17.2x 14.8x 1.5x -8.8% Engineering 369.0 12.6% 4.2% 19.8x 19.4x 2.9x -2.0% Textile 303.6 10.4% 3.3% 11.2x 11.3x 1.7x -7.2% Miscellaneous 97.3 3.3% 2.7% 31.7x 35.6x 2.9x 5.0% Life Insurance 43.1 1.5% 2.2% N/A N/A N/A 1.8% Non Life Insurance 17.0 0.6% 1.3% 9.8x 10.4x 1.4x -12.9% Tannery 31.8 1.1% 1.0% 25.3x 22.5x 3.9x -2.8% Travel & Leisure 24.4 0.8% 0.9% 13.9x 12.3x 0.6x -16.3% Ceramics 14.4 0.5% 0.8% 31.4x 33.1x 1.4x -4.5% 110.9 3.8% 0.7% 37.2x 29.5x 1.9x -8.9% 68.6 2.3% 0.2% 16.6x 18.1x 1.5x -0.9% Paper & Printing 8.1 0.3% 0.1% 11.5x 8.4x 1.4x -8.0% Jute 4.0 0.1% 0.0% N/A N/A 0.2x -1.0% 22.9 0.8% - - - - 0.7 0.0% - - - - - 2,923.50 100.0% 100.0% 15.8x 14.4x 4.9x - Services & Real Estate IT Mutual Funds Corporate Bond - Weekly (Mar 22 - Mar 25, 2015) Mutual Funds Update l Following table exhibits the Open-End Mutual Funds (8) in order of YTD change in NAV. Sl No Name of Mutual Funds 1 CAPM Unit Fund 2 ICB AMCL Unit Fund 3 Bangladesh Fund 4 ICB AMCL Converted First Unit Fund 5 Initial Fund Size (BDT mn) 100 Re-Purchase Price Selling Price Effective Date* NAV % Change in NAV from last week YTD Change in NAV Fund Manager 101.0 104.0 29-Mar-15 106.2 2.4% 2.1% CAPM 100 256.0 261.0 29-Mar-15 255.9 0.0% 0.1% ICB AMCL 50000 108.0 111.0 29-Mar-15 107.7 -0.2% 0.0% ICB AMCL 500 10.7 11.0 29-Mar-15 10.7 -3.6% -3.6% ICB AMCL ICB AMCL Pension Holders' Unit Fund 100 190.0 195.0 29-Mar-15 189.8 -5.4% -7.3% ICB AMCL ACAML 6 MTB Unit Fund 1000 9.5 9.6 29-Mar-15 9.6 -2.4% -8.6% 7 Prime Financial First Unit Fund** 200 97.0 100.0 1-Apr-15 100.1 -0.4% N/A PAMC 8 Shandhani Life Unit Fund 500 N/A N/A N/A N/A N/A N/A Alif AMCL * For ICB AMCL, ACAML amd CAPM, effective date is the date from which repurchase price, selling price and NAV are applicable. For PAMC and Alif AMCL, effective date is the date until which repurchase price, selling price and NAV are applicable. ** Sale and repurchase of Prime Financial First Unit Fund remains closed each Thursday. Weekly (Mar 22 - Mar 25, 2015) Mutual Funds Update l Following table exhibits the Closed-End Mutual Funds (40) in order of YTD change in NAV based on latest NAV/unit as on March 25,2015. On the basis of Price/NAV, 39 Mutual Funds out of 40 were traded below their respective NAV. NCCBLMF1 and LRGLOBMF1 had the lowest Price/NAV and both were traded at 60% discount. 1STPRIMFMF was traded at higher multiple than others, 38%premium. Last week, NAV of 9 Mutual Funds decreased, 29 Mutual Funds increased and 2 remained unchanged. On the other hand, price of 26 Mutual Funds decreased, 6 increased while 8 remained unchanged. On an average, price of Mutual Funds decreased by 1.61% while NAV increased by 0.38% from previous week, against a 0.92% increase in DSEX over the week. In terms of price changes, 6 Mutual Funds outperformed DSEX over last week. Among all the asset managers, AIMS outperformed most in terms of change in NAV of its funds, adding an additional 1.01% on an average over Mutual Funds managed by it. 46 IDLC MONTHLY BUSINESS REVIEW DSE Code Name of Mutual Funds %Change of %Change in Price (Jan Latest NAV/ YTD Change Performance against "Redemption Price/NAV Price from NAV from last Year" 22, 2015) unit in NAV DSEX (YTD) last week week "Fund Manager" 1STICB 1st ICB M.F. 1051.9 1707.8 61.6% -4.0% 1.4% 11.4% Outperformed 2015 ICB 3RDICB 3rd ICB M.F. 225.9 355.3 63.6% -3.7% 0.8% 9.6% Outperformed 2015 ICB -4.2% 0.2% 1.4% Outperformed 2020 RACE 1JANATAMF First Janata Bank Mutual Fund 4.6 10.7 43.0% NLI1STMF NLI First Mutual Fund 8.4 12.7 66.3% 0.0% 0.4% 1.2% Outperformed 2022 VIPB ABB1STMF AB Bank 1ST Mutual Fund 5.6 11.8 47.5% -1.8% 0.5% 0.3% Outperformed 2022 RACE SEBL1STMF Southeast Bank 1st Mutual Fund 8.2 12.2 67.2% 1.2% 0.1% 0.0% Outperformed 2021 VIPB POPULAR1MF Popular Life First Mutual Fund 4.5 10.8 41.7% -2.2% 0.2% -0.2% Outperformed 2020 RACE EXIM1STMF 6.6 10.8 61.3% 4.8% 1.0% -0.5% Outperformed 2023 RACE EXIM Bank 1st Mutual Fund FBFIF First Bangladesh Fixed Income Fund 6.0 10.7 56.1% -1.6% 0.2% -0.5% Outperformed 2022 RACE PHPMF1 PHP First Mutual Fund 4.3 10.1 42.4% 0.0% 0.0% -0.7% Outperformed 2020 RACE GRAMEENS2 Grameen One : Scheme Two 10.5 18.4 57.1% -1.9% 1.0% -1.0% Outperformed 2023 AIMS AIMS1STMF Aims 1st M.F. 26.7 36.0 74.2% -0.7% 1.0% -1.4% Outperformed 2015 AIMS 2NDICB 2nd ICB M.F. 268.5 294.5 91.2% 1.9% 0.4% -1.4% Outperformed 2015 ICB TRUSTB1MF Trust Bank 1st Mutual Fund 4.6 10.4 44.1% -2.1% 0.0% -2.1% Outperformed 2019 RACE GRAMEEN1 Grameen Mutual Fund One 21.9 29.7 73.8% -0.5% 1.4% -2.2% Outperformed 2015 AIMS AIBL1STIMF AIBL 1st Islamic Mutual Fund 4.4 9.8 44.9% -2.2% 0.2% -2.4% Outperformed 2021 LR Global EBLNRBMF EBL NRB MUTUAL FUND 4.2 10.1 41.5% -4.5% -0.2% -2.4% Outperformed 2021 RACE 4THICB 4th ICB M.F. 279.1 69.1% -5.6% -0.6% -2.6% Outperformed 2015 ICB IFIC1STMF IFIC Bank 1st Mutual Fund LR Global Bangladesh Mutual Fund LRGLOBMF1 One 5THICB 5th ICB M.F. 192.8 4.3 10.4 41.4% -2.3% -0.4% -2.7% Outperformed 2019 RACE 4.0 9.9 40.3% 0.0% -0.6% -4.2% Outperformed 2021 LR Global 239.4 75.2% -4.8% 0.3% -4.2% Outperformed 2016 ICB -0.1% -4.3% Outperformed 2019 RACE 180.0 EBL1STMF EBL First Mutual Fund 4.7 9.7 48.6% 4.4% RELIANCE1 RELIANCE ONE MUTUAL FUND 6.3 11.9 53.0% -3.1% 0.3% -4.3% Outperformed 2021 AIMS GREENDELMF Green Delta Mutual Fund 4.2 9.7 43.4% -2.3% -0.2% -4.4% Outperformed 2020 LR Global IFILISLMF1 IFIL Islamic Mutual Fund-1 5.9 9.3 63.2% 3.5% 0.8% -4.5% Outperformed 2019 ICB AMCL MBL1STMF MBL 1st Mutual Fund 4.0 9.5 41.9% 0.0% -0.1% -5.0% Outperformed 2021 LR Global ICBSONALI1 ICB AMCL Sonali Bank Limited 1st Mutual Fund 6.1 9.4 65.1% -4.7% 0.4% -5.2% Outperformed 2023 ICB AMCL 7THICB 7th ICB M.F. 81.4 103.8 78.4% -5.1% 0.4% -5.4% Outperformed 2016 ICB 8THICB 8th ICB M.F. 63.8 69.3 92.1% -3.3% 0.2% -5.7% Outperformed 2016 ICB DBH1STMF DBH First Mutual Fund 4.1 9.4 43.4% -6.8% -0.2% -5.8% Outperformed 2019 LR Global 6THICB 6th ICB M.F. 57.8 57.9 99.9% -1.2% 0.3% -5.9% Outperformed 2016 ICB NCCBLMF1 NCC Bank Mutual Fund 1 3.9 9.7 40.2% -2.5% -0.5% -7.8% Underperformed 2022 LR Global PRIME1ICBA Prime Bank 1st ICB AMCL Mutual Fund 4.3 7.8 55.2% 2.4% 0.5% -7.8% Underperformed 2019 ICB AMCL PF1STMF Phoenix Finance 1st Mutual Fund 4.4 7.3 60.1% -2.2% 0.7% -8.3% Underperformed 2019 ICB AMCL ICB2NDNRB ICB AMCL 2nd NRB Mutual Fund 6.7 10.2 65.8% -6.9% 1.6% -8.5% Underperformed 2018 ICB AMCL 4.3 7.6 56.9% 0.0% 0.9% -9.2% Underperformed 2019 ICB AMCL 19.1 22.5 84.7% 0.0% 1.3% -9.8% Underperformed 2017 ICB AMCL ICB Employees Provident MF 1: ICBEPMF1S1 Scheme 1 ICB1STNRB ICB AMCL 1st NRB Mutual Fund ICB3RDNRB 4.1 7.1 58.1% -2.4% 0.3% -9.9% Underperformed 2019 ICB AMCL ICBAMCL2ND ICB AMCL Second Mutual Fund ICB AMCL Third NRB Mutual Fund 4.7 7.9 59.5% 0.0% 0.4% -10.5% Underperformed 2019 ICB AMCL 1STPRIMFMF Prime Finance First Mutual Fund 12.8 9.3 138.1% 0.0% 0.9% -12.4% Underperformed 2015 ICB AMCL 47 Investment Insight IDLC MONTHLY BUSINESS REVIEW Olympic Industries Limited Olympic Industries Limited (DSE: OLYMPIC) 525 325 275 225 Forward PE* – OLYMPIC 36.5x Trailing PE* – OLYMPIC 28.3x 125 Forward PE – Food & Allied Sector 29.7x 25 Financials (BDT mn) 2013 2014 6M, 2015** Revenue Gross Profit Operating Profit Net Profit After Tax Total Asset Total Equity 7,093 1,822 931 615 3,694 1,732 7,922 2,283 1,185 869 5,049 2,522 4,190 1,262 598 486 5,431 2,754 **Year ends on June 30 Growth 2013 2014 6M, 2015 Revenue 18% 12% 4% Net Profit after Tax 32% 41% 20% Per share (BDT) 2013 2014 6M, 2015 3.88 10.91 5.48 15.90 3.06 17.36 Restated EPS BVPS Others 2013 2014 6M, 2015 Gross Profit Margin Operating profit margin Net profit margin ROA ROE Stock Dividend Cash Dividend 26% 13% 9% 20% 42% 50% 10% 29% 15% 11% 20% 41% 35% 20% 30% 14% 12% - Source: DSE; HY & Annual Reports of OLYMPIC and Research, IDLC Investments Ltd. Terminologies Free Float : % of total shares not owned by Sponsors/ Directors, and Govt. Forward PE: Based on Annualized Earnings of the latest declared quarter Trailing PE : Based on Latest 12 Months Earnings Mar-15 Feb-15 Dec-14 Oct-14 Nov-14 Sep-14 Jul-14 Aug-14 Jun-14 Apr-14 Mar-14 Jan-14 Feb-14 Dec-13 Sep-13 Nov-13 Jul-13 75 Aug-13 * Based on earnings of 6M, 2014 175 Jun-13 68.5% Apr-13 Free Float (%) 375 May-13 158.7 OLYMPIC 425 Jan-13 Total Number of Share (mn) DSEX 475 Mar-13 223.5 Rebased Price Current Price (March 25, 2015) Company Profile Olympic Industries Limited was incorporated as Bengal Carbide Limited in 1979. Later on, in 1982, it commenced Battery manufacturing. The company got listed in DSE in 1984 and in CSE in 1996. Back in 1996, the company commenced its Biscuit manufacturing unit. In 2012, the company executed supply agreement with GlaxoSmithKline for the production of Horlicks brand products. The company shifted its business focus to Biscuit & Confectionary products which is currently the primary revenue line. Now, OLYMPIC is a manufacturer and marketer of Dry Cell Battery, Biscuit & Candy, Confectionary and Ball pen items. At present, the company is running 7 Biscuit production lines. Key Revenue Drivers & Company Insight In 2014, OLYMPIC’s top line was BDT 7,922 mn, where 93.3% of total revenue came from Biscuit & Confectionary unit which was 91.7% in 2013. The product line of the company contains flagship brands Energy Plus and TIP. OLYMPIC’s production capacity of Battery, Biscuit & Confectionary and Ball Pen was 117.8 mn pcs, 100,336 MT and 147.6 mn pcs, respectively. But due to less demand in the market, the company utilized its capacity by 42%, 59% and 42%, respectively in 2014, leaving higher growth potential in both top and bottom line. Meanwhile, the company added some capacity to Biscuit and Confectionary unit through its two new Biscuit lines (6 & 7) by 5,000 and 7,500 ton per day, during later part of 2014. Revenue from batteries contributes 4% of the company’s top line, as battery sales growth was 2%. Additionally, Ball pen contributed 2% of the top line but sales decreased by 25% than 2013. Financial Performance During 2014, Revenue grew by 12%, while bottom line growth was 41%. Gross, Operating and Net Margin increased to 29%, 15% and 11% compared to 26%, 13% and 9%, respectively in the previous year. Low cost of raw material attributed to expansion in profit margins. In 6M, 2015 the company recorded an increase in Gross and Net Profit Margin while Operating Profit Margin shrank slightly. Revenue grew by 4% at that period with 20% growth in the Net Profit after Tax. Recently, the company has reported net profit after of Tk. 485.78 million with consolidated EPS of Tk. 3.06 for the period of six months (July’14 to Dec’14) as against Tk. 405.79 million and Tk. 2.56, respectively for the same period of the previous year. DISCLAIMER This Document has been prepared and issued by IDLC Investments Limited on the basis of the public information available in the market, internally developed data and other sources believed to be reliable. Whilst all reasonable care has been taken to ensure that the facts & information stated in the Document are accurate as on the date mentioned herein. Neither IDLC Investments Limited nor any of its director, shareholder, and member of the management or employee represents or warrants expressly or impliedly that the information or data of the sources used in the Document are genuine, accurate, complete, authentic and correct. Moreover, none of the director, shareholder, and member of the management or employee in any way is responsible about the genuineness, accuracy, completeness, authenticity and correctness of the contents of the sources that are publicly available to prepare the Document. It does not solicit any action based on the materials contained herein and should not be construed as an offer or solicitation to buy sell or subscribe to any security. If any person takes any action relying on this Document, shall be responsible solely by himself/herself/themselves for the consequences thereof and any claim or demand for such consequences shall be rejected by IDLC Investments Limited or by any court of law. 48 50
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