ROUND THREE CASE

Union Group Limited

Union Group of Companies Limited is an established company initiated by Safwat Chowdhury.

The company has created a bench mark in the country by being one of the leading conglomerates
and ever since the company started its operations, it opened up many SBUs. Since the inception,
Safwat Chowdhury is serving the role of the CEO of UGCL. Currently the group is mostly famous
for its frozen food business which brings 32% of its revenue, transportation business which entails
28% of revenue, jute business releases 25% of revenue and confectionaries entail 20% of revenue.
The company started out with a turnover of BDT 120mn and grew to an astonishing BDT
24,000mn in the year 2018 due to diversified business and by feeding on consumers trust. The
group’s both B2B sector and B2C sector is quite satisfied as UGCL never compromised with its
service and products and they have made their both customers and consumers king.

In the recent years, UGCL has successfully made new strategic business units; 5 subsidiaries and
3 joint ventures. The group is currently operating with 80% equity and 20% debt-based capital
structure but prefers to maintain 75% equity and 25% debt-based capital structure. So if the group
wants to start a new project, it will have to take 25% debt on the total capital of the new project.

Banks are highly interested in making this company a client since UGCL has a good credit history.

Safwat Chowdhury, has decided to open up a new SBU which will make ceramics products. Safwat
Chowdhury has given a huge task to its Strategic Planning and Analyst Team to prepare a
presentation on the ceramics industry to understand feasibility of the new venture “Uddom
Ceramics”: Your ultimate needs in decoration” The Strategic Planning Team and Analyst Team
will work under a banner name as “Uddipon”.
Task:

Upon receiving the task from CEO; Uddipon along COO, CFO, and CHRO & CMO have decided
to keep the following things in the presentation:

 Industry Analysis
(Demand Analysis, Growth Drivers, Major Competitors, and Segmentation & Risk
Analysis),
 Operations, Marketing, & HR Strategy
(Factory Location, Raw Materials Sourcing, and Product Segmentation, Pricing Strategy,
Marketing Strategy, and Distribution & Management Team),
 Investment Plan
(Investment Size, Capital Structure (Loan & Equity Mix), and Usage of Capital),
 Financials
(Income Statement Forecast, balance Sheet Forecasting, Cash Flow Statements,
Depreciation Schedule, Break-Even Analysis, Cost of Capital, Project Feasibility Test-
NPV, IRR, Net Payback Period (Project Cash Flow basis).
 Recommendation (Whether to invest in the new venture or not and why along with the
investment size?)
HINTS

Here are some guidelines for financial projection. Please note that it is NOT mandatory to make
assumptions based on the given guidelines. You have the flexibility to assume any numbers you
want. However, you need to have a reasonable basis (justification) for your assumptions.

1. To get some idea about the financials (assets, profitability, and working capital requirement) of
a ceramic product manufacturing company, you may study RAK Ceramics, Monno Ceramics, and
DBL Ceramics. You can find the financial statements and annual report in their website. Company
with less market share may have lower margin. Study and research as much annual reports as
possible.

2. Considering UGCL’s good credit history, it can avail term loan at 10% per annum.

3. To calculate Cost of Equity calculation, you may take 10 years Treasury bond rate as risk free
rate. Accepted market risk premium can be in a range of 5%-7%. Depending on the business
nature, BETA can be in a range of 0.8 to 1.2.

4. Normal lifetime of the machinery is 20 years. Company will continue to make maintenance
capital expenditure. Company may take expansion project if it achieves 90% utilization level or
can continue production at maximum utilization.

5. For project viability test, one need to consider at least 10 years project cash-flow. Terminal cash
flow will be 8x of its project terminal EBITDA. Free Cash Flow to Firm (FCFF) has to be used as
project cash flow for capital budgeting purpose.

6. Corporate tax rate for non-listed manufacturing company is 35% and for listed manufacturing
company 25%.
Judging Criteria

 Industry Analysis (20%)

Demand Analysis
Growth Drivers
Major Competitors
Segmentation
Risk Analysis
 Operations, Marketing, & HR Strategy (10%)
Factory Location
Raw Materials Sourcing
Product Segmentation
Pricing Strategy
Marketing Strategy
Distribution
Management Team
 Investment Plan (20%)
Investment Size
Capital Structure (Loan & Equity Mix)
Usage of Capital
 Financials (35%)
Income Statement forecast
Balance Sheet Forecasting
Cash Flow Statements
Depreciation Schedule
Break-Even Analysis
Cost of Capital
Project Feasibility Test-NPV, IRR, Net Payback Period (Project Cash Flow basis).

Rest of the 15% marks will be valued on Presentation capability, Convincing Power, Time Management,
and Defense & Team Co-ordination.

For team co-ordination, every member is expected to know the case and the provided solution. We expect
the team to have uniformity in answer questions.
Submission rules

 DO NOT mention the name of your university, team or any individual participant anywhere in
the submitted excel file. Failure to follow this instruction will result in disqualification.

 Your PowerPoint file must be renamed in this manner “Team name_ Blueprints 5.0 round 3
Submission”

 Your Excel file must be renamed in this manner “Team name_ Blueprints 5.0 Round 3
Submission”.

 The subject line of the e-mail must be mentioned in this manner “Team name_ Blueprints 5.0
Round 3 Submission”.

 The Body of your email must contain the following details: Team name -Team members’ name
(all team members name) -Team Leader’s phone number.

 Email your requirement to the following address: nsufinanceclub@gmail.com

Deadline:

Your solution must reach us by Monday, December 23rd 11:00am.

We wish you all the very best for this round. Submit your solutions with proper justifications. All
the six national teams will compete with one international team from India.

BEST OF LUCK!

For any queries:

Titam Bhattacharjee

General Secretary, NSU Finance Club

+8801757922561