Course Name: Investment Banking & Lease Finance

Course code: FIN 4103

Topic Name:
A Brief Analysis on Financial Performance of selected Investment Banking
Companies in Bangladesh

Submitted To
Professor Md. Sogir Hossain Khandoker, PhD
Adjunct Faculty

Submitted By
Ayesha Saberin 17221010
Raisa Binte Huda 17221058
Quazi Nahin Mubassira 17221074
Anika Tabassum 17221092
Md. Ajmul Fuad 17221094

DEPARTMENT OF BUSINESS ADMINISTRATION IN FINANCE & BANKING

FACULTY OF BUSINESS STUDIES
BANGLADESH UNIVERSITY OF PROFESSIONALS

Date of Submission: June 15, 2020

 Letter of Transmittal

June 15, 2020

Dr. Mohammad Sogir Hossain Khandoker
Professor
Department of Finance
Faculty pf Business Studies
Jagannath University

Subject: Submission of Term Paper

Dear Sir,
With due respect I would like to present you our term paper on “Financial Performance of Some
Selected Investment Banking Companies of Bangladesh” It has been completed as a part of
Investment Banking & Lease Finance course. The purpose of this term paper is to show a
comparative analysis among Lankabangla Investments Ltd, MIDAS Investment Ltd, MTBL
Capital Ltd and Janata Capital & Investment Ltd. of Bangladesh to prove who is operating in a
better and efficient way.
We consider ourselves very privileged to prepare this report under your supervision. This has been
a great opportunity for us to have a practical experience of learning the application and significance
of ratio analysis and DuPont analysis. We are so grateful to you for your valuable guidelines and
continuous support.
Therefore, we hope that you would be kind enough to accept our term paper and give judicious
advice on our effort.

Sincerely,
Ayesha Saberin (17221010)
Raisa Binte Huda (17221058)
Quazi Nahin Mubassira (17221074)
Anika Tabassum (17221092)
Md. Ajmul Fuad (17221094)

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 Statement of Authorship

This paper does not incorporate any previously published information or materials from any other
author or researcher, or any other institution. The details and analysis found in this paper were not
published by any entity other than the information with references. Therefore, this paper is done
entirely by this paper's authors.

Furthermore, it is understandable that this paper might be used or reproduced by any other authors
or third parties to detect plagiarism.

Date
15/06/2020

Signature
Ayesha Sabein
Raisa Binte Huda
Quazi Nahin Mubassira
Anika Tabassum
Md. Ajmul Fuad

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 Acknowledgement

At the very beginning we would like to express our heartfelt gratitude to the Almighty to give us
the strength to complete this term paper with sound health in this pandemic and within the given
time.

Throughout this term paper, some of our well-wishers and friends helped us complete the term
paper through learning and understanding. We are extremely grateful to those people.

We did this term paper under the supervision of our honorable course teacher Dr. Mohammad
Sogir Hossain Khandoker, professor at Jagannath University, whose ongoing guidelines helped us
to complete this term paper properly and in time.

Moreover, we would like to thank our parents for whom we are here today and have the opportunity
to write this term paper and improve our learning.

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 Executive Summary

This study is the overall representation of financial performance and position of 4 booming
investment companies of Bangladesh. The companies are – Lankabangla Investments Ltd.,
MIDAS Investment Ltd., MTBL Capital Ltd. and Janata Capital & Investment Ltd. The company
profiles, annual financial statements, objectives and functions clearly indicate them as the booming
companies of Bangladesh investment banking industry.

This study contains 4 chapters in total. The Chapter2 basically shows the current state and situation
of investment banking industry in Bangladesh. It shows a brief history and background of this
industry too.

Chapter2 shows the perspectives of other researchers and writers regarding investment companies’
functions, situation in Bangladesh, their performance, significance in BD economy etc. Moreover,
regarding the methodologies, formulas and techniques used for this study have also been cited in
this section.

Chapter3 incorporates all the profile information, like mission, vision, objectives, functions of the
selected 4 companies. It also gives the company overviews and establishment information about
the mentioned companies.

Chapter4 is the major part of this whole study. It shows the analytical and quantitative financial
analysis among the 4 stated investment companies. This section includes 2 parts, one is ratio
analysis and the other one is DuPont analysis. Here, ratio analysis shows both horizontal and
vertical data and analysis of the 4 companies. Total 6 years’ financial data (2013-2018) have been
used for this whole study. All the data are found from the annual reports of these companies, which
are attached in the appendix section. Then comes, the DuPont analysis among 4 investment
companies. Here, the actual ROE or return of these companies are analyzed and discussed. Because
DuPont analysis shows the actual ROE after deducting all the direct and indirect costs related with
the ratios.

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 Table of Contents

Letter of Transmittal ................................................................................................................... i

Statement of Authorship ............................................................................................................. ii
Acknowledgement .................................................................................................................... iii
Executive Summary .................................................................................................................. iv
Chapter 1 Introduction ................................................................................................................1
1.1. Background of the Study ...............................................................................................2
1.2. Problem Statement of the Study ....................................................................................2
1.3. Objective of the Study ...................................................................................................4
1.4. Methodology .................................................................................................................4
1.5. Scope and Rational of the Study ....................................................................................4
1.6. Limitations of the Study ................................................................................................5
Chapter 2 Literature Review:.......................................................................................................6
Chapter 3 Investment Companies in Bangladesh .........................................................................9
3.1 Overview of the Assigned Companies ......................................................................... 11
3.2 Objectives and Functions of the Assigned Companies ................................................. 14
Chapter 4 Financial Analysis ..................................................................................................... 21
3.1 Ratio Analysis ............................................................................................................. 21
4.2 DuPont Analysis ......................................................................................................... 29
Chapter 5 Conclusion ................................................................................................................ 36
References ................................................................................................................................ 37
Appendix .................................................................................................................................. 38
Objectives of Investment Banking in Bangladesh ........................................................... 38
Laws & Regulations of Investment Banking in Bangladesh ............................................ 39
Financial Statements ....................................................................................................... 43
 Chapter 1 Introduction

Investment Banking is a specialized financial institution that helps individuals, organizations and
governments collect capital money by underwriting as an agent for securities issuing clients.
Investment bank does not take deposits and it is concerned with financial capital allocation. It
mainly plays an important intermediary role in allocating resources. Several other investment
banks concentrate in the division of industry in general. Many investment banks also have retail
operations that assist individual, small clients. There are no appropriate specialized investment
banks through Bangladesh, but most commercial banks have their own wings to offer investment
banking services to their customers and various parties.

As a bit of history, the U.S. created the Glass-Steagall Act after the Stock Market Crash of 1929,
restricting banks from taking both deposits and underwriting securities. Banks were forced to
choose between commercial banking and investment banking. In 1999, the Gramm-Leach-Bliley
Act abolished Glass-Steagall, which allowed banks to take deposits when underwriting securities.
And in 2008, it marks the bottom of the development of the exceptional banking system since all
US investment banks had to change into commercial banks during the financial crisis.

At birth Bangladesh inherited an interest-based banking system, introduced earlier here when the
country was a part of the British colony. Bangladesh has seen a new banking trend both
domestically and abroad since its inception. Investment Banking tries in Egypt were successful.
Naser Social Bank was in the process of establishment, following the Mit Ghamar model. we took
4 investment banks for our report, these 4 investment banks are, Janata Capital and Investment
Ltd, Lankabangla Investments Ltd, MIDAS Investment Ltd, MTBL Capital Ltd. This study aims
at evaluating past performance, revealing current financial position, and comparing the
performance of these sample banks based on DuPont analysis. This study will also help selected
banks' policy makers to identify financial strengths and weaknesses and support short- and long-
term forecasts, increasing the profit from related factors and taking remedial action for financial
stability.

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1.1. Background of the Study
In the merchant world, Merchant Development Bank and members of Merchant Banks were
established at national level during the 1970s. The merchant groups at home were working actively
to accept Islam as the full code of life. They considered investment banking in an immediate mode
of ready introduction. Two "Merchant Economics Research Bureau" and "Bangladesh Merchant
Bankers Association" professional organizations took proactive measures to successfully
implement on merchant economics and banking to a group of bankers and arranged some national
and international seminars to motivate local and foreign people so that investors could come
forward to develop investment banking in Bangladesh. A number of Muslim entrepreneurs
working under the aegis of Muslim Businessman Society validated their professional and right-
thinking activities. The body has focused primarily on motivating equity capital for the emerging
investment banks. And in Bangladesh, Bangladesh 's merchant banks are effectively regulated by
the Securities and Exchange Commission (SEC) and submissively by the Bank of Bangladesh.
Investment banks serve as middlemen between investors and issuers. The issuer sells securities to
investor bankers, who sell the securities to investors in turn. The securities are owned by
investment banks until offered for sale. Investment banks in Bangladesh offer resources for
companies looking to collect long-term funds through with a variety of functions that include. Due
to the ongoing and dedicated work of the above groups and individuals, and the Government's
active support.

The investment companies of Bangladesh are mentioned in the 3rd chapter of this paper.

1.2. Problem Statement of the Study

An Investment bank's financial performance is very important. In fact we can't even think without
profit of any Investment bank. It is enormous to show the value of Investment banks. The issuance
of stocks and bonds is one of the primary means of raising capital for a company. But executing
such transactions requires special expertise, from pricing financial instruments in a way that
maximizes revenue to regulatory requirements navigating. Usually that is where an investment
bank gets into the picture. Investment banks are essentially a bridge between the big companies
and the investor. Their primary roles are to advise companies and governments on how to meet
their financial challenges and help them obtain financing, whether from stock offers, bond issues,

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or derivative products. The bank will recommend the best way to raise funds, given the current
investment climate. The investment firm can also help with the use of sophisticated financial
models to determine how to price those instruments. In the case of a stock offer, its financial
analysts will look at a variety of different factors – such as earnings potential and management
team strength – to estimate how much a company's share is worth. If the company offers bonds,
the bank will look at the prevailing interest rates for similarly rated companies to find out how
much lenders will need to be paid for. Investment banks also offer advice on the scenario of a
merger or acquisition. Although some of their more sophisticated offerings have given a bad
reputation to investment banks, these firms play an important role in assisting companies, and
government agencies make informed financial decisions and collect the capital needed. Issue
Management role of merchant banking allows capital market to increase equity supply and
businesses to raise money from the market to expand their operations. A merchant bank is said to
be a full-fledged merchant bank in Bangladesh that carries out all of the above-mentioned activities
covering Issue Management, Underwriting, and Portfolio Management and providing Corporate
Advisory Services. BRAC EPL Investments Limited is one of Bangladesh's full-service merchant
banks providing a range of Investment Banking services including traditional merchant banking
activities such as Issue Management, Corporate Advisory, Corporate Finance, Underwriting and
Portfolio Management. IDLC Finance is another leading full-service merchant bank in Bangladesh
that started its back-up merchant banking operations in 1999. A number of commercial banks also
perform investment banking functions in Bangladesh, in addition to the ICB. The Securities and
Exchange Commission (SEC) has fixed Tk 25 crore as the minimum paid-up capital requirement
for full-fledged merchant banks. The Securities and Exchange Commission, through the Merchant
Bankers and Portfolio Manager Rules 1996, defined the minimum paid-up capital needed for
various merchant banking activities. For issue management the minimum paid-up capital will be
Tk 2.5 crore, the minimum paid-up capital will be Tk 12.50 crore for underwriting problems and
portfolio management. For issue managers, underwriters and portfolio managers, the SEC has a
code of conduct and is empowered to suspend or cancel the registration certificate because of its
violation.

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1.3. Objective of the Study

The objectives of this paper are given below –

• to study thoroughly about the mentioned companies

• to evaluate the companies’ performance with both qualitative and quantitative data
• to analyze the financial statements of the company and perform Ratio analysis and DuPont
analysis

1.4. Methodology
This paper consists of financial analysis of 4 investing banking companies’ 6years data (2013-
2018). Here we did ratio analysis of 11 types and compared the 4 companies amongst themselves.
From liquidity ratio we did current ratio analysis. From leverage ratio we did debt-equity and
interest coverage ratio analysis. From activity ratio we did net asset turnover ratio. From
profitability ratio we did gross profit margin, net profit margin, operating expense ratio, ROE, EPS
and P/E ratio. These are done to analyze the operations of the companies and compare which did
the best in which year how and why.

Also, we did DuPont analysis. The DuPont model breaks down Return on Equity (ROE) into a
more detailed expression which overcomes the shortcomings or loopholes of conventional ROE.
It is used to analyze a company’s ability to increase its return on equity. In the other words, this
model breaks down the return on equity ratio to explain how company can increase their return for
investors. DuPont analysis interprets the basic ROE ratio in such a manner so that it provides a
great insight into the performance of the bank. Regarding this fact, the researchers have taken the
challenge to use this model for measuring performance in terms of profitability of selected
commercial banks in Bangladesh.

1.5. Scope and Rational of the Study

This study aims to analyze the 4 investment companies - Lankabangla Investments Ltd., MIDAS
Investment Ltd., MTBL Capital Ltd. and Janata Capital & Investment Ltd. as a whole in order to
know its environment, products offered, financial strengths etc. The main concern is to present the
above-mentioned companies with a quantitative financial condition of 6 fiscal years until 2018.

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1.6. Limitations of the Study
Some limitations were faced during the making of this term paper, these are –

• lack of whole knowledge of the techniques and tools used for analysis
• lack of proper data
• lack of the current financial statements of the year 2019

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 Chapter 2 Literature Review:

Investment banks do deliver market participant information in the capacity of M&A consultancy
services, as these financial institutions are specialized in knowledge generation and value
determination Enterprises. This consultation service can lead to a more efficient company taking
over a lesser amount Efficient enterprise which, in turn, adds economic efficiency (Iannotta,2010).

Academic literature on finance suggests there are five networks where financial services are
available Intermediaries such as investment banks have the potential to impact economic growth:
Investment control, risk management, savings mobilization and exchange of products and services
promoted (Levine,2004).

During an IPO, there are three main ways to price a security through book building, fixed-price
method, or auction. Investment banks, latest by mixing fixed-price and open-price methods, use
the hybrid approach. This investment banks price-setting mechanism is a very important function
as it provides information, particularly on prices, which are necessary for coordinating effective
decision-making in economics (Merton & Bodie, 1995).

An investment bank's other core activity is the provision of advisory services during a merger &
acquisition (M&A) and/or the restructuring of companies. The main one, during an M&A the task
of an investment bank is to collect and evaluate information concerning the companies concerned;
suggest ways to structure the deal and help its customers negotiate trial. The possibilities in general
are –

i. Sale side transactions in which a business or division is sold off or merged,

ii. Purchase side transaction where an entire company or division of the company is involved
in purchasing,
iii. Capital restructuring or debt restructuring
iv. Aggressive defense / acquisition (Stowell, 2010).

Horizontal analysis is a technique for the analysis of financial statements which calculates absolute
change and percentage change in value of each line item of a financial statement over one or more

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accounting periods. Horizontal analysis may have been carried out on any financial statement, in
other words balance sheet, statement of revenue, statement of cash flow and statement of changes
in equity of the shareholders. Horizontal analysis helps to compare the rate of change in the
performance or financial position of two or more companies of various sizes. Horizontal analysis
on individual items of the financial statements may also be performed. (Irfan Ullah, 2013).

Vertical analysis is a method for the analysis of financial statements in which each line item in a
financial statement, typically the balance sheet and the income statement, is represented as a
percentage of the financial statement's base number. Vertical analysis on cash flow statement can
also be done. The base calculation is total assets for the balance sheet, total sales for the statement
of profits and total net cash flow for a statement of cash flow. Vertical analysis helps to compare
the performance and financial position of two companies of varying size. A vertically examined
financial statement can appear visually in a pie chart. (Irfanullah, 2013).

DuPont analysis is an extended examination of return on equity of a company which analyzes Net
Profit Margin, Asset Turnover and Financial Leverage. In simple words, it breaks down the ROE
to analyze how corporate can increase the return for their shareholders. This analysis helps
compare similar companies with similar ratios. It will help investors to measure the risk associated
with the business model of each company. This analysis is very important for investors as it
answers the question what is causing the ROE. (Elearnmarkets, 2016).

Industry analysis is a type of case research approach used to analyze a business or industry sector
with a aim of generating new information relevant to it. Industry and Company Analysis are two
types of case studies used to systematically analyze the business model / issues of an industry or a
company by either identifying research-oriented issues and evaluating them in order to generate
new insights or to find a better way to solve problems related to such issues. (Aithal, 2017).

The Investment Corporation of Bangladesh (ICB), one of Bangladesh 's major investment banks,
plays a leading role in developing the country's capital market. ICB's main roles include
merchandising activities and unit fund and mutual fund activities. It has an Investor Account
Scheme that offers credit facilities for sales and transactions for small investors in Dhaka and
Chittagong stock exchanges listed shares. This also helps investors obtain reasonable returns on
investment in sound securities and provides to small investors with institutional support for
purchasing and selling of stock. (Rahman,2011)

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GDP represents a country's economic growth over the year, playing both a direct and an indirect
role in Bangladesh economy's overall GDP growth. As investment banking over years rendered
direct and indirect investments in Bangladesh's economic growth. The increase in amounts as years
go by and contribute healthily to GDP growth. (Hossain, Ahamed, Saha, 2016).

There is a significant scope for Bangladeshi investment bank to compete in global market. Several
studies have shown that investment banks play a major role along with government and in public
finance. (Hossain,2014).

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 Chapter 3 Investment Companies in Bangladesh

In Bangladesh there are currently running investments banks are 62. These are –

i. AAA Finance & Investment Ltd.

ii. AB Investment Ltd.
iii. Abaci Investments Limited
iv. AFC Capital Ltd.
v. Agrani Equity and Investment Ltd.
vi. AIBL Capital Management Ltd.
vii. Alliance Financial Services Ltd.
viii. Alpha Capital Management Ltd.
ix. Asian Tiger Capital Partners Investments Limited
x. Banco Finance and Investment Ltd.
xi. Bangal Investment Ltd.
xii. BD Finance Capital Holdings Ltd.
xiii. BetaOne Investments Limited
xiv. BLI Capital Ltd.
xv. BMSL Investment Ltd.
xvi. BRAC EPL Investment Ltd
xvii. CAPM Advisory Ltd.
xviii. Citizen Securities & Investment Ltd.
xix. City Bank Capital Resources Ltd.
xx. Cosmopolitan Finance Ltd.
xxi. EBL Investments Ltd.
xxii. EC Securities Ltd.
xxiii. Exim Islami Investment Ltd.
xxiv. FAS Capital Management Ltd.
xxv. First Security Islami Capital & Investment Ltd.
xxvi. Grameen Capital Management Ltd.
xxvii. Green Delta Capital Ltd
xxviii. GSP Investment Limited
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 xxix. Hal Capital Limited
xxx. ICB Capital Management Ltd.
xxxi. IDLC Investments Ltd.
xxxii. IIDFC Capital Ltd.
xxxiii. IL Capital Ltd.
xxxiv. Imperial Capital Ltd.
xxxv. Islami Bank Capital Management Limited
xxxvi. Jamuna Bank Capital Management Ltd.
xxxvii. Janata Capital and Investment Ltd.
xxxviii. LankaBangla Investments Ltd.
xxxix. Meghna Capital Management Ltd.
xl. MIDAS Investment Limited
xli. MTB Capital Ltd.
xlii. NBL Capital and Equity Management Ltd.
xliii. NDB Capital Ltd.
xliv. NRB Equity Management Limited
xlv. PLFS Investments Ltd.
xlvi. Prime Bank Investment Ltd.
xlvii. Prime Finance Capital Management Ltd.
xlviii. Race Portfolio & Issue Management Ltd.
xlix. Riverstone Capital Limited
l. Roots Investment Limited
li. Rupali Investment Ltd.
lii. Sandhani Life Finance Ltd.
liii. SBL Capital Management Ltd.
liv. Shahjalal Equity Management Limited
lv. Sonali Investment Ltd.
lvi. Sonar Bangla Capital Management Ltd.
lvii. Southeast Bank Capital Services Ltd.
lviii. Strategic Finance Limited
lix. Swadesh Investment Management Ltd.

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 lx. Trust Bank Investment Ltd.
lxi. UniCap Investments Ltd.
lxii. Uttara Finance Capital Management Limited

In this paper, total 4 investment companies (Lankabangla Investment Ltd., MIDAS Capital &
Investment Ltd., MTB Capita Co. Ltd. and Janata Capital & Investment Ltd) are included to
analyze their financial performance and industrial position.

3.1 Overview of the Assigned Companies

▪ Lankabangla Investment Ltd.

LankaBangla Investments Limited is a leading investment banking company issue management in

the country which provides corporate advice and Services for portfolio management. This is a
wholly owned subsidiary of LankaBangla Finance Limited, one of the top Non-Banking
companies Bangladesh Financial Institutions. In Bangladesh, LBIL was incorporated with the
Registrar of Joint Stock Companies and Firms (RJSCF), vide no. C 83568/10 as a private limited
company under the Companies Act, 1994, dated 29 March 2010. LBIL was the first merchant bank
to offer discretionary portfolio management services to its parent company, LankaBangla Finance
Limited, back in 1997. The Company got merchant Banking license on 2 January 2011 and by the
Securities and Exchange Commission Spun off its separate merchant banking operation. The
company was transformed into a public limited Company effective June 12 th, 2013. LBIL has put
itself self-popular in Bangladesh's investment banking arena its broad range of services, including
the primary market Management Resources and Portfolio Resources.

And as the Primary Market Services (PMS) wing of LankaBangla Investments Limited provides
comprehensive Issue Management Services (ie. Private placement, initial public offer, direct
listing, allocation of assets, repeat public offering, listing of debt and asset-backed securities
Securities), Strategic Advisory Services Registrar for services sprovided and signing up for public
offerings. The PMS team has a vast array of expertise in managing issues and providing
consultancy services in almost all sectors of the stock exchanges, in particular fuel & power,
engineering, IT, cement, services and real estate, textiles, banking and insurance LBIL does not
deliver the finest problem management services helps consumers not to increase the value of their

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companies but also assists in increasing the provision of quality capital market shares by listed
good companies. LankaBangla Investments Limited 's Primary Market Services Department is
specialized in providing one-stop equity financing solutions for corporate clients that include
expert corporate advisory services, creative financial solutions to manage funds by structuring
financial strategies, detailed implementation and full access to the capital markets LBIL possesses.

Vision

Our vision is to develop into the finest investment bank in Bangladesh by achieving the highest
benchmark in service quality, corporate governance, human capital, knowledge, market insight
and use of technology.

▪ MIDAS Investment Ltd.

MIDAS Investment Limited is a subsidiary company of MIDAS Financing Limited, completed its
2nd year of commercial operaon as a full-fledged merchant bank performing in the areas of
merchant banking, porolio investment, underwring and issue management. The MIDAS
Investment Ltd was registered with the Joint Stock Companies & Firms under the Cornpones Act
1994 of 09 April 2012. The Company was formed to operate the Merchant Banking activities.

Mission:

• To assist in bringing high quality technology driven innovative service to our customers.
• To ensure satisfaction to our clients, stakeholders and employees.
• To maintain ethics, accountability and transparency in all levels through maintaining
corporate governance.
• To contribute to keep sustainable growth of socio-economic development through capital
market in Bangladesh.

Vision:

• Our vision is to be one step ahead towards excellence in all aspect. Client’s satisfaction is
our key consideration by providing quality services and adding value ensuring optimum
level of professionalism.

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▪ MTB Capital Ltd

It is wholly owned subsidiary by Mutual Trust Bank Limited, it entered as a private limited
company in Bangladesh. As an investment bank, MTB Capital does so many investments related
work. Mainly MTBCL was established to develop new opportunities and satisfy merchant banking
demand. Cooperation and value-added programs are provided by the organization to its trusted
customers.

Mission & Vision

MTB Capital is one of the reputed merchant banks in Bangladesh. It started functioning in the field
of capital market as market intermediary. To establish sustainable capital market as well as
ensuring economic growth of the country. MTBCL aims to seek out niches and unresolved
demands for merchant banking services.

▪ Janata Capital & Investment Ltd.

Janata Bank Limited, Bangladesh's second largest commercial bank, operates through 904
branches including 4 UAE branches across the U.S. It is linked to 1239 foreign correspondents
worldwide. Janata Bank Limited also has two subsidiaries in Italy named Janata Exchange
Company srl, and Janata Capital and Investment Company Limited. This bank has a contribution
of about 8 per cent to the country's institutional financing. Janata Capital and Investment Ltd is a
subsidiary of Janata Bank. Janata Bank has launched merchant banking operations with the
following specific advantages as part of its efforts to diversify its product portfolio and also to play
a more active role in the capital market:

• Suitable Resource Base

• Huge numbers of skilled employees
• With its large branch banking network and branches located at important locations both at
home and abroad.
• Suitable facilities for networks with a large number of computerized branches.
• Advantages to attracting international portfolio investors via NRB branch recently opened.
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Mission

Maintaining stable growth strategy by providing innovative and quality services to the valued
customers, attaining highest level of professionalism, performing operations with high standard of
business ethics and ensuring good corporate governance with the ultimate aim of creating a vibrant,
sustainable and strong capital market in Bangladesh.

Vision

To become the effective largest merchant bank in Bangladesh to support the development of capital
market and to be a leading merchant bank in South Asia.

3.2 Objectives and Functions of the Assigned Companies

Objectives

Lankabangla Investment Ltd.

• to support the aspirations of customers, employees and stakeholders with objectivity,

knowledge, insight, and experience by:
• delivering exclusive and flexible equity and investment solutions to customers to meet
the unique needs of each individual or corporate body.
• create long-term value for clientele and stakeholders and the community as a whole.
• ensuring excellence in corporate governance and strong ethical conduct.
• building capacity through recruitment and development of highly qualified personnel
and through effective utilization of state-of-the-art technology.

MIDAS Investment Ltd.

• focus to the customer- we value and care for our customers’ needs.
• integrity and trustworthiness- we uphold integrity and trustworthiness in our every business
operation.
• transparency- we always maintain highest level of transparency to meet the expectations
of our stakeholders.
• innovation- we promote creativity.

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 • sustainability- we do business to achieve long term goal.
• community- we contribute to our society by being active, responsible and generous.
• teamwork- we work together to deliver excellent services to our stakeholders

MTB Capital Ltd

• to carry out the business as Issue Manager, Underwriter and Portfolio Manager

Janata Capital & Investment Ltd.

• Endeavour to diversify its product range

• To play more important role in the capital market
• Maintain strong capital
• Sense of belonging (ownership)
• Team spirit
• Human touch with clients
• Managerial efficiency
• Innovative thinking
• Free from corruption
• Improve on-line banking
• Improvement of IT infrastructure
• Broadening of deposit base
• Expedite cash recovery
• Making all branch profitable
• Improved training program
• Boost up foreign remittance
• Ensure chain of command and Discipline
• Correct estimation of borrowers’ demand
• Proper valuation of security
• Customers preference
• Synthesis of mass banking and elite banking
• Avoid loan sanctioning bureaucracy

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 • Aware gender sensitivity
• Aesthetic branch infrastructure.
• Service mind set

Functions

Lankabangla Investment Ltd.

LBIL as a premier investment bank has positioned itself prominently in the investment baking
arena of Bangladesh’s capital market with its wide range of services in corporate advisory, issue
management and portfolio management services. As an investment bank, LBIL is offering 3
services or packages currently, their providing services are given below:

• Portfolio Management Services: Our Portfolio management Services refers to investment

in different kinds of securities such as equity and debt securities. This package also provide
some offers, these are: Margin Account, Non-Margin Account, AlphaPlus, LankaBangla
Nishchinto.
• Primary Market Services: LBIL provides assistance to institutional clients seeking to
raise funds through Issue Management, Capital Raising & Private Placement. Theis
package also provide some offers to its customers, these coffers are: Issue Management
Services, Corporate Advisory Services, Registrar to the Issue Services, Underwriting
Services, PMS Team Profile.
• Investment Banking Services: The Investment banking wing of LBIL aspires to be the
leading trusted Corporate Advisor and Investment Banker to its clients. This package also
provides some offers to their customers, these are: Services, Case Stories, IBS Events, IBS
Deals, IBS Team Profile.

MIDAS Investment Ltd.

For the customer, MIDAS Investment ltd is providing some products and services where, they
divided the products into 3 parts and the below mentioned last one is the only major service. These
are-

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 • MIDAS Silver: This is for those customers who has excess money to invest but has no
thirst for the margin. For them MIDAS is giving -Cash account, no margin facility.
Customer can open an account with Tk. 500 opening fee. They are giving 0.40% trade
commission with management fee which is very flexible for the customer. And they are
also providing investment opportunities with minimum Tk. 1 Lac, no early withdrawal fee.
• MIDAS Gold: It is for those customers who wants to take margin facilities but does not
have a big bucket of portfolios. So, for them MIDAS is serving margin account with not
large portfolio appetite. For this, customer have to open an account with Tk. 500 opening
fee and have to give 0.40% trade commission. But in gold package customer also have to
give 1% of management fee and 14% of margin interest rate. And this package's investment
account is much larger than silver package. Customers have to give minimum 5 Lac – 50
Lac for investment account with no early withdrawal fee.
• MIDAS Platinum: And the last package is for those customers who wants to take margin
facilities but does not have a large bucket of portfolios. For them MIDAS providing margin
account with not large portfolio appetite. Then opening account fee is same as silver and
gold which is Tk. 500 with 0.40% trade commission. And the customer also has to pay for
management fee which is 1% and margin interest rate 14%. And for this platinum package
then minimum investment account start with more than 50 Lac with no early withdrawal
fee.
• NITA (Non-Resident Investors Taka Account) is a facility that is provided to non-resident
individuals/institutions including non-resident Bangladeshi nationals who are interested in
trading Bangladeshi.

MTB Capital Ltd

As an investment bank MTB Capital gives its customer some services, which are given below –

• Issue Management: Deals with those organizations who want to raise capital from
institution & public investors through IPO, BOND, Right Issue, and Repeat IPO. At the
same time providing corporate advisory services including accounts preparation, tax, VAT
& RJSC related works.

17 | P a g e
 • Underwriting Management: We are giving the guarantee to the issuer company to buy
proportion of any unsold shares when an issue is offered to the public, provided that the
minimum subscription required by SEC has been sold to the public. An underwriter can
underwrite 5 times of its capital.
• Corporate Advisory: Provides advisory, consultancy and audit service for the following
job/ services on behalf of our valued clients; project counseling, advisory services for
mergers and acquisitions, corporate restructuring, structured finance advisory, set-up of
good corporate governance, company secretarial matters, advisory of income tax, vat,
customs etc. preparation of accounts, audit of accounts, assets valuation, provide assistance
for preparing credit rating document, assist to engage lawyers/experts for
legal/professional opinion or remedy if needed.
• Portfolio Management: We provide discretionary, non-discretionary and NRB portfolio
services under SEC Merchant Banker & Port-folio manager rules 1996) for our valued
clients. Clients can sell and buy securities on both the Exchanges (DSE & CSE) through
MTB Securities Limited and Square Securities Management Ltd. MTBCL has three types
of Portfolio Management accounts. (Under SEC Merchant Banker & Port-folio Manager
Rules 1996); they are: Discretionary, Non-Discretionary, MTB Green Cap.
• Margin Loan: MTBCL provides brokerage margin to facilitate leverage on your
investment. We provide margin trading facility as per Margin Rules 1999. A customer has
to go through proper credit evaluation to get margin loan. Loan limit is guided by the
prevailing rules and regulations set by the regulatory authority. A margin loan management
committee determines the margin limits of investors. The committee periodically
announces the marginable stocks. Investors have to utilize their margin facilities in the
selected stocks only.
• NRB Trading Facilities: Non-Resident Bangladeshis (NRB) can invest into the
Bangladeshi Capital Market from anywhere in the world A Non-resident Investor Taka
Account (NITA) will be opened with any preferred custodian bank e.g. HSBC, BRAC
Bank etc. This will allow 100% repatriation of investment, capital gains and dividend. NRB
clients can apply for IPOs as well as buy and sell shares in the secondary market. They can
use Internet trading facilities (to be introduced shortly), e-mail, fax or phone to place trade
orders.

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Janata Capital & Investment Ltd.

• Issue Management
The best professional services will be rendered while acting as issue manager, issue
management involves a variety of activities, starting with the persuasion of the prospective
issuer and ending with the listing of securities with the stock exchanges, Janata Bank
Limited is committed to performing these functions with the utmost care and to the full
satisfaction of the issuer companies.

• Underwriting
With its large capital base, Janata Bank Limited will be able to manage high-volume
underwriting activities enabling the major companies to go public.
• Portfolio Management
They initially plan to continue with the portfolio discretionary account of investors. The
portfolio management shall subsequently be expanded with the introduction of the
following schemes:

i. Banks account for discretionary portfolio.

ii. The investment fund management system is discretionary for high net worth
investors.
iii. Profit-sharing risk management system for losses (subject to SEC approval)

• Services to be rendered to the investors for management of their portfolios:

i. Assisting in the creation of an Efficient Portfolio to generate maximum return with
minimum risk.
ii. Keep up to date on market movement including particular risk and market risk.
iii. To provide portfolio diversification advice to reduce future risks.
iv. Serving as Securities Custodian.
v. Providing margin lending facilities.
vi. Providing more recommendations relevant to investments.

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 • Features of present investor’s discretionary portfolio account
Janata Bank Limited is responsible for controlling investment portfolios of individuals,
companies, banks and financial institutions.

Janata Bank's merchant banking unit shall provide investors with a margin loan in
compliance with SEC directives for investment in both the primary and secondary security
markets. The management of the portfolio shall be at the discretion of the investors.

Investors should develop diversified portfolios to minimize risk and optimize returns.

20 | P a g e
 Chapter 4 Financial Analysis

This paper includes two sections of analysis. 6 investment companies are taken for this analysis
which are – Lankabangla Investment Ltd., MIDAS Capital & Investment Ltd., MTB Capita Co.
Ltd. and Janata Capital & Investment Ltd. The whole analysis has been conducted with 6 years of
data of financial year 2013-2018. All the data are taken from the respective companies’ annual
reports of 6 financial year, which all are given in the appendix part of this paper.

One is ratio analysis, where total 11 financial ratios are used to evaluate the performance of the
selected 4 investment companies of Bangladesh. This ratio analysis part also includes 2 types of
analysis – Horizontal Analysis & Vertical Analysis. Horizontal analysis shows each of the
companies’ own timeline of progress throughout the period of 2013-2018. And on the other hand,
vertical analysis shows the comparison among 4 companies’ financial performance of 2013-2018.
Vertical analysis basically shows the industrial analysis among the selected 4 investment
companies considering the year 2018 as the base year.

The second part of the analysis is the major focus of this paper, which is DuPont analysis. DuPont
analysis is basically the upgraded and more specified version of ROE. This analysis explains the
ROE ratio through multiplying 5 broader ratios and their means of each of the 4 companies and
shows the overall company performance and growth. DuPont analysis figures out the each of the
corners of a company and evaluates its actual wealth maximization trend and returns on equity
after excluding all other burdens and expenses. Under this analysis, an overall industrial analysis
and comparison is also given which identifies the top scorer and best performer among 4 selected
companies of the investment banking industry.

3.1 Ratio Analysis

Total 11 financial ratios are calculated under 4 categories of financial ratios. These 11 ratios
separately analyze every stage of performance of the 4 investment companies through data tables
and graphs. Both trend analysis and industrial comparative analysis has been shown in this section.
It is important to mention that in this section, year 2018 has been considered as the base year for
analysis purpose.

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Liquidity Ratio:

Current Ratio

1. Current ratio
2013 2014 2015 2016 2017 2018
LankaBangla 1.45 1.38 1.16 1.05 1.09 0.99
MIDAS 6.32 7.61 7.03 4.57 5.38 2.53
MTB 1.01 1.03 0.98 0.79 0.73 0.62
Janata 4.91 5.08 5.23 2.42 2.72 2.45

The above table shows the current ratio scenario of the 6 mentioned investment companies. Where
the first company, Lankabangla shows a gradual decline till year 2016. In 2017, the trend saw a
slight recovery, which is not that mentionable. And in the last year, 2018, it got the poorest current
ratio (.99) in this 6 year of trend which is very disappointing. It means, the Lankabangla Investment
ltd. has .99 Tk of current asset against 1 Tk of current liabilities. Which tells, Lankabangla
Investment is nor properly liquidated and there is a high chance that it might face a bankruptcy.
Because this firm doesn’t have enough current asset to pay off its current liabilities. It might be
the result of investing more in other projects. But the liquidation system is not in its favor at all.

Secondly, MIDAS Investment ltd. followed a moderate trend of current asset over the last 6 years.
And in the most recent year, it had a very satisfactory result (2.53). It shows that in 2018, this firm
had 2.53 Tk of current asset against its 1 Tk of current liabilities, which means there is no chance
to fail at paying off its debtors.

MTB Capital Ltd. had a continuous decrease in its current ratio trend for the mentioned 6 year of
trend. Only in 2013 & 2014 it had a safety level of current asset. But from year 2015 it continued
to be below 1, where the risk of bankruptcy stays. In the last year, it had only .62 Tk of current
assets against its 1 Tk of current liabilities, which is not enough to pay off the current debts.

Lastly, Janata Capital & Investment in the first 3 years had excess level of current asset, which
surely avoids the debt burden scenario but at the same time shows a lot of idle assets in its fund.
But then from 2016-18 JCIL’s current ratio was moderate and above the safety level.

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So, from the above discussion and the data of base year (2018), MIDAS Investment’s current ratio
is the highest (2.53). So, it means MIDAS Investment has the most efficiency in liquidity
management among these 4 companies. Because the safe position is when a firm has 2 Tk of
current asset against its 1 Tk of current liability. So, MIDAS Investment (2.53) and Janata Capital
(2.45) was enough liquidated and efficient in the year 2018. And MTB Capital (.62) and
Lankabangla Investment (.99) was below the safe zone and very inefficient in terms of liquidity
management.

Leverage Ratio:

Debt-Equity Ratio

2. Debt-Equity Ratio
2013 2014 2015 2016 2017 2018
LankaBangla 5.39 5.70 6.36 3.82 2.59 2.14
MIDAS 7.16 7.20 8.01 1.38 7.72 14.18
MTB 15.75 16.15 15.84 15.36 16.18 17.57
Janata 0.26 0.24 0.25 1.75 0.65 0.51

From the above table, it is clear that MTB Capital finances more with debt rather than equity
among these 4 companies. And Janata Capital & Investments the least and very lower amount of
debt to finance its business. Lankabangla is also in the standard level. But other 2 companies use
debt in a excessive and risky level to finance its business.

In the year 2018, MTB Capital shows the highest debt-equity ratio (17.57) compared to the other
4 companies. It means MTB Capital finance its business with 17.57 Tk of debt and 1 Tk of equity.
Here, the ratio is a blessing from this perspective – debt cuts off the tax burden with interest, so
higher debt financing means there is chance of earning higher profits. But on another note – if the
debt source is not properly maintained and utilized, there is high risk of being failed to pay off the
debts. But the efficiency can only be measured after knowing the state of its shareholders earnings
(EPS) and the net profit ratio of this firm. But in general sense, comparing to other companies, it
can be said that MTB Capital is more leveraged compared to other 4 companies.

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And considering the base year (2018), the best situation is of JCIL. Because compared to other
companies, the debt-equity ratio of JCIL (.51) is within the general standard (below 1.5 is
appreciable). The ratio shows that JCIL finances with .51 Tk of debt and 1 Tk of equity. The lesser
debt is good from one perspective that the lesser the debt is, the lesser the risk of facing bankruptcy.
So, in this perspective, JCIL is the under leveraged company among these 4 companies.

Moreover, MIDAS Investment (14.18) is also near to MTB Capital’s debt-equity ratio. So, it’s a
very risky situation is also alike MTB. And Lankabangla Investment (2.14) according to the
general standard (above 1.5) is not fully enough leveraged, but comparing its competitors, it is
holding the second position here.

Interest Coverage Ratio

3. Interest Coverage Ratio

2013 2014 2015 2016 2017 2018
LankaBangla -1.78 0.05 -1.41 -1.14 -0.60 0.05
MIDAS 0.12 0.36 0.45 0.26 -0.55 -0.40
MTB 0.29 0.34 0.33 0.29 0.28 0.21
Janata 0.00 418.87 1.03 -0.35 0.41 0.82

This ratio evaluates how many times a firm can repay its interests with the EBITD amount over a
year.

The above table shows a very disappointing scenario as all the companies in the recent years got a
below standard interest coverage ratio. The greater the interest coverage ratio, the more times the
firm pays off its interests over the year.

But considering the base year, the most interest coverage ratio is earned by Janata Capital &
Investment Ltd. The ratio means, JCIL with the EBITD amount paid its interests .82 times over
the year 2018. But it doesn’t carry any vale because it is below the minimum standard level. And
all other 3 companies are also below minimum standard level and MIDAS is the inly one who had
a negative figure and failed to pay its interest in 2018.

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Activity Ratio:

Net Asset Turnover

4. Net Asset Turnover Ratio

2013 2014 2015 2016 2017 2018
LankaBangla 0.31 1.74 0.86 0.68 3.92 7.60
MIDAS 1.21 1.27 1.58 0.38 0.35 0.45
MTB 0.49 0.38 0.48 1.30 -6.66 -1.02
Janata 19.98 24.53 12.85 12.11 20.96 19.12

The above table shows an ups & down situation in all the companies’ net asset turnover ratio.

Considering the base year, the most satisfactory performance is Janata Capital’s performance
(19.12). It interprets that JCIL has turned over its net assets 19.12 times over the period of 2018.
Lankabangla has the ratio of 7.60 times which is not so satisfactory compared to JCIL but it
somehow gained the second position in this ratio. And MIDAS and MTB has a very poor net asset
turnover.

Working Capital Turnover Ratio

5. Working Capital Turnover Ratio

2013 2014 2015 2016 2017 2018
LankaBangla 0.99 1.09 1.05 1.16 1.38 1.45
MIDAS 6.32 7.61 7.03 4.57 5.38 2.53
MTB 0.64 1.03 0.98 0.79 0.73 0.62
Janata 4.91 5.08 5.24 2.42 2.72 2.45

Working capital turnover ratio measures a firm’s operating efficiency, how efficiently and
effectively a firm conducts its day to day activities and maintains a good balance between current

25 | P a g e
assets and current liabilities. It shows how many times a firm turns over its working capital over
the year.

MIDAS Investment Ltd. has the highest working capital ratio (2.53 times) in the base year among
4 of the companies. And MTB Capital has the lowest and below average amount and also is out of
the race in this case.

Profitability Ratio:

Gross Profit Turnover

6. Gross Profit Ratio

2013 2014 2015 2016 2017 2018
LankaBangla -115.54% 32.61% -17.57% -90.06% -72.66% 12.42%
MIDAS 15.98% 27.96% 29.43% 20.63% 9.63% 13.99%
MTB 3.34% 3.09% 3.55% 2.94% 2.44% 2.30%
Janata 100.01% 100.01% 100.02% 100.02% 100.02% 100.06%

Janata Capital unbelievably tops the above table with a consistency of 100% gross profit over the
whole 6 years of period. It means it so beautifully and efficiently utilized its sales methods, policies
and also the direct costs.

On the other hand, Lankabangla Investment and MIDAS Investment had respectively 12.42% and
13.99% gross profit in the base year, which is very poor compared to JCIL. And MTB Capital here
is in the below line of the table.

Operating Expense Ratio

7. Operating Expense Ratio

2013 2014 2015 2016 2017 2018
LankaBangla 72.02% 21.46% 27.01% 26.76% 22.03% 9.46%
MIDAS 16.73% 27.07% 22.34% 30.61% 30.26% 19.15%

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 MTB 2.67% 2.80% 3.01% 3.46% 3.30% 4.02%
Janata 22.44% 17.43% 61.19% 146.52% 68.95% 55.65%

Operating expense ratio is related to net profit ratio, which is analyzed in the next paragraph.

Here, the most cost carrier company is Janata, but it cannot be surely said if it is ineffective. Rather,
it depends upon its net profit. But it general perspective, considering the base year, JCIL faced the
highest operating cost and MTB is in the below position.

Net Profit Turnover

8. Net Profit Ratio

2013 2014 2015 2016 2017 2018
LankaBangla -389.82% 1.16% -166.70% -218.35% -106.61% 2.26%
MIDAS 1.06% 20.33% 21.75% 14.67% -55.09% -46.08%
MTB 11.06% 16.28% 12.86% 12.66% 9.90% 6.38%
Janata 27.20% 40.86% 29.06% -49.61% 17.00% 29.82%

JCIL here also tops the NPT table, though it faces loss in year 2016. But in the recent year, 2018,
it has the highest NPT (29.82%) among the 4 companies. But the net profit is comparatively very
low than its GPT which was 100.06% in 2018. So, it means it had a greater amount of operating
costs than COGS which made its NPT lower. And the previous table is the proof that where JCIL
had the highest operating expense (55.65%). But it somehow held the top position here also.

Lankabangla and MTB had an average NPT. But MIDAS Investment faced a loss (-46.08%) in
the year 2018.

Return on Equity

9. ROE
2013 2014 2015 2016 2017 2018

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 LankaBangla -121.31% 0.98% -96.87% -59.54% -24.30% 0.94%
MIDAS 0.79% 15.13% 23.15% 4.66% -21.04% -41.18%
MTB 13.85% 18.35% 15.61% 17.40% 15.74% 10.52%
Janata 1.18% 2.56% 1.14% -4.69% 3.18% 6.46%

The main focus of this report is ROE calculation. But it is broadly discussed and analyzed through
DuPont analysis in the next section of analysis.

For brief summary, only considering total equity and net profit, forgoing all other costs and based
on the conventional ROE calculation, MTB got the highest ROE in 2018. It means, MTB generated
10.52 Tk of equity for 100 Tk of net profit. JCIL is in the second position with 6.46 Tk of equity
return. Lankabangla’s performance is not satisfactory in this part, compared to its competitors.
MIDAS Investments got a negative value, which is it couldn’t generate any equity out of its net
profit.

Earnings Per Share

10. EPS
2013 2014 2015 2016 2017 2018
LankaBangla -2.37 0.02 -2.56 -3.12 -0.11 0.01
MIDAS 0.09 1.81 2.20 0.41 -1.62 -2.98
MTB 3 3.89 3.3 3.7 3.12 1.86
Janata 0.12 0.26 0.24 -0.46 0.33 0.64

EPS is a very important tool to measure the shareholders’ earnings per share, and shareholders
performance refers to the firm’s wealth maximization which is the ultimate goal of a firm.

Here, the only consistent EPS earner is MTB Capital Ltd. Even, in 2018 it has the highest EPS
(1.86 Tk) among 4 companies. It means, MTB earns 1.86 Tk per share. It refers to its share value.

Lankabangla and JCIL’s earnings are not that satisfactory compared to MTB, but the worst
situation is of MIDAS, which faced a negative figure against its share.

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Price/Earnings Ratio

11. P/E Ratio

2013 2014 2015 2016 2017 2018
LankaBangla -4.22 500.00 -3.91 -3.21 -90.91 1000.00
MIDAS 111.11 5.52 4.55 24.39 -6.17 -3.36
MTB 12 10.13 6.99 5.27 6.34 5.01
Janata 83.33 38.46 41.67 -21.74 30.30 15.63

P/E ratio shows the relation between stock price and earnings. Its shows how much an investor is
willing to pay in a stock per its earnings. Higher P/E means the stock is overvalued and lower P/E
means the stock is undervalued.

Here, considering the base year, 2018, Lankabangla Investment has the most overpriced P/E ratio
(1000 Tk). And positively the lowest P/E ratio holder is MTB capital (5.01 Tk). JCIL is staying in
the middle position but MIDAS got a very bad performance. MIDAS’s negative P/E ratio indicates
that its shares has no value in the market, or no investors is willing in investing in its shares.

4.2 DuPont Analysis

Tax Burden Ratio
LankaBangla Midas MTB Janata
2013 0.76 1.04 0.41 0.79
2014 1.01 1.03 0.50 0.74
2015 1.00 0.88 0.60 1.07
2016 1.00 0.76 0.59 0.75
2017 1.00 0.86 0.88 0.72
2018 1.00 0.13 0.68 0.64

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 Mean 0.96 0.78 0.61 0.78

Tax Burden Ratio

120%

100%

80%

60%

40%

20%

0%
Mean

LankaBangla Midas MTB Janata

Tax burden ratio measures how much of the pretax profits remain with the company after paying
taxes. Similarly, an increase in tax burden will decrease the tax burden ratio, which in turn will
decrease the ROE. Table shows that average tax burden ratio of LankaBangla is 96%, which is
highest among all companies indicating better performance in managing tax efficiency where
MTB’s average tax burden ratio is 61%, which is lowest among all companies indicating as least
performer in managing tax efficiency.

Interest Burden Ratio

LankaBangla Midas MTB Janata
2013 0.03 -0.76 0.15 0.44
2014 -1.59 -1.45 0.20 0.28
2015 7.45 0.17 0.22 -0.59
2016 3.31 0.09 0.20 0.50
2017 0.02 0.09 0.20 1.00

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 2018 2.23 0.09 0.20 1.00
Mean 1.91 -0.30 0.19 0.44

Interest Burden Ratio

250%

200%

150%

100%

50%

0%
Mean

-50%

LankaBangla Midas MTB Janata

Interest burden ratio measures how much of the company’s operating profits are left over after
making interest payments. An increase in interest payments will increase the interest burden and
lower the interest burden ratio as the EBT in the numerator will be much smaller than the EBIT in
the denominator. A lower interest burden ratio will result in decrease the ROE. However, it is
found form Table that average interest burden ratio of LankaBangla is 191%, which is highest
among all companies indicating better performance in managing interest efficiency MIDAS’s
average interest burden ratio is -30%, which is lowest among all companies indicating as least
performer in managing interest efficiency.

EBIT Margin Ratio

LankaBangla Midas MTB Janata
2013 0.91 0.58 1.04 0.85
2014 0.67 0.37 1.01 0.82
2015 -0.29 0.96 0.95 0.79

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 2016 -0.50 0.99 0.88 0.78
2017 0.68 0.96 0.83 0.57
2018 -1.75 0.92 0.83 0.43
Mean -0.05 0.80 0.92 0.71

EBIT Margin Ratio

100%

80%

60%

40%

20%

0%
Mean

-20%

LankaBangla Midas MTB Janata

EBIT margin measures the effect of earnings before interest and tax (or EBIT margin) on ROE.
This ratio evaluates the effect of a company’s core business operations on its ROE. It measures
how much EBIT a firm can generate from total revenue. It is a measure of company profitability
that gives information about a company’s earning ability. Increase in EBIT margin is mainly due
to growth of revenue and good cost control. Decrease in EBIT Margin in largely result from
reduction in revenue and higher operating cost. It is found from table that MTB’s average EBIT
margin is 92%, which is better than other companies. On the other hand, LankaBangla’s average
EBIT margin is -5%, which leads the company to take the last position among other companies.

Asset Turnover Ratio

LankaBangla Midas MTB Janata

2013 0.13 0.06 0.09 0.14

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2014 0.06 0.04 0.08 0.11

2015 0.06 0.04 0.07 0.03

2016 0.08 0.12 0.01 0.03

2017 0.13 0.09 0.06 0.05

2018 0.05 0.09 0.07 0.03

Mean 0.09 0.07 0.06 0.07

Asset Turnover Ratio

10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Mean

LankaBangla Midas MTB Janata

Asset turnover ratio is used to determine how efficiently a company uses its assets to generate
revenue. As a general rule, the higher the ratio the better the company is performing. Lower Asset
turnover ratio indicated that the company isn’t using its asset efficiently and most likely have
management problems. This gives investors and creditors an idea of how a company is managed
and uses its assets to generate revenue. Table reveals that LankaBangla’s average asset turnover
ratio is 9%, which is highest and MTB’s average asset turnover ratio is 7%, which is lowest among
all the companies. However, the calculated results also show that most of the companies average
turnover ratio is 11%.

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 Equity Multiplier Ratio
LankaBangla Midas MTB Janata
2013 3.14 15.18 18.57 1.51
2014 3.59 8.72 17.18 1.65
2015 4.82 8.08 16.36 2.75
2016 7.36 9.01 168.44 1.25
2017 6.70 8.20 17.15 1.24
2018 6.39 8.16 16.75 1.26
Mean 5.33 9.56 42.41 1.61

Equity Multiplier Ratio

45

40

35

30

25

20

15

10

0
Mean

LankaBangla Midas MTB Janata

Equity multiplier ratio measures financial leverage of a company. The equity multiplier ratio
indicates whether a company finances its assets through debt or equity. The higher the equity
multiplier, the more leveraged the company is, or the more debt it has in relation to its total assets.
However, the decrease in leverage ratio will decrease the ROE due to non-optimal use of leverage.
Table reveals that MTB’s average equity multiplier ratio is 42.41 which is highest among all the
companies. On the other hand, Janata Bank’s average equity multiplier ratio is 1.61, which is
lowest among all the companies.

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 ROE
LankaBangla Midas MTB Janata
2013 24% 7% 2% 53%
2014 28% 12% 3% 45%
2015 21% 11% 4% 39%
2016 14% 8% 0.00 60%
2017 15% 10% 5% 58%
2018 16% 2% 4% 51%
Mean 20% 8% 3% 51%

ROE
60%

50%

40%

30%

20%

10%

0%
Mean

LankaBangla Midas MTB Janata

Therefore, an increase in either of these component ratios will increase the ROE. The final ranking
on Table shows that Janata Bank has achieved highest average ROE of 51% and secured the first
position followed by LankaBangla 20% and MIDAS 8%. On the other hand, MTB has achieved
lowest average ROE of 3% and therefore secured the last position among the selected companies.

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 Chapter 5 Conclusion

Investment banker plays a critical role in channeling the company's financial surplus into
successful investment avenues. Thus, before choosing an Investment Banker, one must agree on
the services for which it is being approached. Selecting the right intermediary who has the
necessary skills to meet the needs of the client will ensure success. It can be said that this project
has helped me to understand all the details about Investment Banking and Investment Banking.
Future of how the Bangladesh economy will grow. Investment banking, therefore, It can be
considered as a key financial institution in the Bangladeshi financial system.

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References

• (n.d.). Retrieved from Wkipedia: https://en.wikipedia.org/wiki/Economy_of_Bangladesh

• (n.d.). Retrieved from Investopedia: www.investopedia.com

• (n.d.). Retrieved from Midas Investment Limited : https://midasinvbd.com/

• Janata bank Annual Reports . (n.d.). Retrieved from Janata Bank :

https://www.jb.com.bd/about_us/annual_report

• LankaBangla Downloads . (n.d.). Retrieved from LankaBangla:

https://www.lankabangla.com/downloads/

• MIDAS FInace Annual Reports . (n.d.). Retrieved from MIDAS Finace Limited :
http://www.mfl.com.bd/index.php/home/annual_reports

• Mutual Trust Bank Annual Reports . (n.d.). Retrieved from Mutual Trust Bank :
https://www.mutualtrustbank.com/investor-relations/annual-report/

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Appendix

➢ Objectives of Investment Banking in Bangladesh

An investment bank is basically a middleman between investor and issuer, and it helps its clients
raise capital by providing debt and equity. It also has some all sorts of financial services. Top 10
investment banking functions are listed below –

• Structuring of derivatives: Derivatives commodity requires a great yield rate and a good
margin thus involves a lot of risks. Investment bank manages these derivatives with a
single- and multiple-securities policy.
• Corporate Finance: It helps companies raise capital through manner of equity or debt and
advise businesses on their optimal debt ratio or equity ratio.
• Managing Risks: It helps businesses handle financial risks — currency, liquidity, default,
etc. And also transfer funds across time, industry and geography.
• Mergers & Acquisition Advisory: its main objective is to set acquisition goals for large
corporations, help small businesses protect themselves from being acquired by a big
company. Then Design multibillion-dollar acquisition deals once an appropriate target has
been identified. Also help with leveraged buyouts and help in post-merger integration if
the deal is successfully concluded. This step is often more complicated than the deal itself-
it requires several things aside from finance-HR/ legal / IT.
• Sales & Shops: According to market making it significantly raise market liquidity by
acting as high-priced institutional securities buyers (bonds / stocks etc).
• Managing Assets: Advise firms on what to do with their surplus funds.
• Credit research: Carry out a thorough research and publish these reports on other
companies / industries / economies and provide these entities with a "credit rating" to help
others decide whether they are worth investing in.
• Investment Management: Investment advice given based on the objective of the client,
the credit risk of the client, the amount of investment and the time span. Investment
management is divided as private clients, private wealth management, wealth management
based on customer segment.

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 • Merchant banking: An investment bank also provides consultancy to its customers. They
provide consultancy in financial, marketing, legal and managerial matters. This serves as
an enterprise financial engineer
• Securitized Products: Companies often pool capital instruments these days-from
mortgages to credit card receivables-and sell them as fixed-income products to investors.
An investment bank will recommend income streams to be "securitized," assemble the
assets and market them to institutional investor.

➢ Laws & Regulations of Investment Banking in Bangladesh

Bangladesh's merchant banks are effectively regulated by the Securities and Exchange
Commission (SEC) and submissively by the Bank of Bangladesh. Investment banks serve as
middlemen between investors and issuers. The issuer sells securities to bankers who sell the
securities to investors. The following laws are given below –

• Securities and Exchange Ordinance 1969: Stock and Exchange Ordinance 1969 is a
significant milestone in the legal history of stock market rules and regulation in
Bangladesh. For the first time ever, this Ordinance has demonstrated the need for' investor
protection' within the region's regulatory securities market regime. The following
Ordinance made by the President is hereby published for general information: To provide
for protection of investors, regulations of Capital Markets and issues and dealings in
Securities. Whereas it is expedient to a) Provide for the protection of investors, b)
Regulations of capital markets and c) Issue and dealings in securities and for matters
ancillary thereto. And, in terms of oversight and procedures, the Ordinance always believed
in getting everyone into equality. The other important factors that bought revolutionary
changes were the preservation of credit, trade rates, and registration.
• Securities and exchange commission 1987: In compliance with the Securities and
Exchange Rules of 1987, a listed company in Bangladesh must also have its accounts
audited within 120 days of the end of the financial year and send a copy of its audited
financial statements to the BSEC and the stock exchanges shall take place within 14 days
of the date of the auditor's report, except where the Commission fills in and approves a
request for extension. Violations of these Regulations, i.e. non-compliance with IAS and

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 violations with regard to the filing of financial statements, are affected by anomalies
relating to the annual financial statements. Under the Act, the Commission has provided
for the supervision of statutory auditors in the event that they fail to carry out their
professional duties. Under this sub-rule, if the Commission considers the audit firm
seriously liable for not conducting an audit in the manner legally required, the Commission
may consider a Chartered Accounting Company unable to conduct an audit in a listed
security for a maximum duration of 5 years.
• Securities and exchange commission 1993: After the 1929 stock market crash, the
Securities and Exchange Commission Act of 1933 was established and passed into law to
protect investors. The bill has two main objectives:
a) ensuring greater transparency of financial statements so that investors can make
informed investment decisions; and
b) laying down laws against misrepresentation and fraudulent stock market practices.
A mandatory prospectus pursuant to this law must include certain details such as- A
description of the assets and operations of the company, a description of the protection
provided, executive management information and, lastly, financial statements certified by
qualified accountants. The act is regulated by the Securities and Exchange Commission,
established by the Securities Exchange Act of 1934 a year later. Since its formation several
amendments have been passed to the Securities Act of 1933. This was the first Federal law
to control the stock market. The act took power away from the states and put it into the
hands of the federal government. The act also established a standard set of rules to
safeguard investors from all problems. The 1933 Securities and Exchange Commission Act
was designed to provide for transparency of corporate financial statements. This act also
established regulations on securities markets against misrepresentation and fraudulent
activity.
• Merchant Banking Rules:
In compliance with the Securities and Exchange Commission Rules of 1996, each merchant
bank must present to the regulator at least one IPO proposal every two calendar years. The
Securities and Exchange Commission adopted changes to the rules regulating merchant
banks and portfolio managers in 1996, prohibiting merchant banks from naming or
dismissing their managing directors and chief executives without their prior permission.

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 Following coverage on the media, the rules were revised after taking opinions from people
and stakeholders. This was done to bring clarity and effectiveness to the service of the
merchant banking. In addition, the stock market regulator relaxed the provisional rules for
investing merchant banks in mutual funds. Today, as with other financial institutions, the
merchant banks will retain the provision depending on the net asset value of the funds. The
clause would be equal to the difference between a mutual fund's purchase price and the net
asset value of 85 per cent of the fund. The net value of the assets is determined based on
the current market price. The decision should offer some relief to the merchant banks as
they must now hold a lower limit. They have adopted a new set of rules for small-capital
companies which will soon be publishing a gazette for them. The commission also expects
to release a letter rebuking AM Securities and Financial Services for failing to file on-time
annual financial statements.
• Public issue rules: With few amendments, the Bangladesh Securities and Exchange
Commission released Public Issue Rules 2015, and the previous regulation was Public
Issue Rules 2006, now repealed. BSEC approved the final amendment to a number of rules
to speed up the process of capital raising through initial public offerings and a 10% increase
in the quota facility for general investors. IPO can be rendered using any of the following
methods:
a) fixed price method, if provided at par value
b) book-building process, if provided above by par value According to the final amendment
to the public issue rules, 2015, a company will not be allowed to apply for a public issue
without using 80 per cent of its previously issued shares. A company issue will be cancelled
if, under the fixed price process, the overall demand is below 65 per cent. Under the fixed
price system, the size of the public issue must be minimum Tk50 crore after IPO, whereas
the size of the public issue under the book building process must be at least Tk75 Crore.
The commission also increasing the existing one-year lock-in provision for private
placement shareholders to a term of two years, to be assessed from the first trading day of
the issue. Under the fixed price system, the IPO allocation facility for general investors
rose from the present 40% to 50%, while under the book building process it rose from 30%
to 40%. Under the book building system, the quota facility for qualifying investors was
reduced to 50 percent from 60 percent, while under the fixed-price method it was cut to 30

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 percent from the existing 40 percent. Any bidder's name and price quotation must not be
reflected in book building system and the bidder must buy the number of shares at the rates
he / she quotes for. Under the scheme of book building the investors must buy the shares
at the agreed auction prices. In addition, the quantity and price of the shares will be as per
what the bidders are going to offer them.
• Bond issue rules: A bond is a fixed income asset reflecting a loan to a borrower made by
an investor. They have many options when the companies need to secure funding. There
are conventional choices such as applying for a bank loan but in the process many
businesses turn to bond over issuing equity or taking bank loans because bond provides
some advantages. They have advantages over other solutions such as receiving finance
loans. A security must be registered with the Securities and Exchange Commission before
a proposal from banks to propose plans and rates for bond issuance and selling offers to
the public known as an initial public offering starts.
• Right issue rules: Fresh shares offered to existing shareholders in relation to their current
interest in the company's share capital are referred to as "rights shares" popularly referred
to as rights issue. In the issue of rights, the shareholders are entitled for registration as a
credit rating company under rule 3 may apply to the Commission for registration under
certain rules in Form. A preceding registration form would require a fee of twenty-five
thousand takas as application processing fee. The commission is liable for registration if
satisfied after such enquiry then the claimant. Where the Commission considers that a
credit rating firm has violated any clause or otherwise failed to fulfill any requirement of
the ordinance and where it considers it appropriate in the public interest to do so, the
Commission may, by order in writing, cancel or suspend the registration of a credit rating
company, or any rule or direction made or issued thereunder.

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➢ Financial Statements

Figure: Statement of Financial Position for the Year 2018 of Lankabangla Investments Ltd.

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 Figure: Statement of Profit ad Loss for the Year 2018 of Lankabangla Investments Ltd.

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 Figure: Statement of Financial Position for the Year 2016 of Lankabangla Investments Ltd.

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 Figure: Statement of Profit and Loss for the Year 2016 of Lankabangla Investments Ltd.

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 Figure: Statement of Financial Position for the Year 2014 of Lankabangla Investments Ltd.

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 Figure: Statement of Profit and Loss for the Year 2014 of Lankabangla Investments Ltd.

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 Figure: Consolidated Statement of Financial Position for the Year 2013 of Midas Financing
Limited

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Figure: Consolidated Statement of Profit and Loss for the Year 2013 of Midas Financing Limited

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 Figure: Consolidated Statement of Financial Position for the Year 2014 of Midas Financing
Limited

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Figure: Consolidated Statement of Profit and Loss for the Year 2014 of Midas Financing Limited

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Figure: Consolidated Statement of Profit and Loss for the Year 2015 of Midas Financing Limited

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 Figure: Consolidated Balance Sheet for the Year 2015 of Midas Financing Limited

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 Figure: Consolidated Balance Sheet for the Year 2016 & 2017 of Midas Financing Limited

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Figure: Consolidated Statement of Profit and Loss for the Year 2016 & 2017 of Midas Financing
Limited

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 Figure: Consolidated Balance Sheet for the Year 2018 of Midas Financing Limited

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Figure: Consolidated Statement of Profit and Loss for the Year 2018 of Midas Financing Limited

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 Figure: Highlights of Mutual Trust Bank Ltd

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 Figure: Consolidated Balance Sheet for the Year 2013 of Mutual Trust Bank Ltd

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 Figure: Consolidated Balance Sheet for the Year 2013 of Mutual Trust Bank Ltd

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 Figure: Consolidated Profit and Loss Statement for the Year 2013 of Mutual Trust Bank Ltd

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 Figure: Consolidated Profit and Loss Statement for the Year 2013 of Mutual Trust Bank Ltd

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Figure: Statement of Financial Position for the Year 2018 of Janata Capital and Investment Ltd.

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 Figure: Statement of Profit and Loss for the Year 2018 of Janata Capital and Investment Ltd.

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Figure: Statement of Financial Position for the Year 2016 of Janata Capital and Investment Ltd.

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 Figure: Statement of Profit and Loss for the Year 2016 of Janata Capital and Investment Ltd.

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 Figure: Statements for the Year 2014 of Janata Capital and Investment Ltd.

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 Figure: Statements for the Year 2014 of Janata Capital and Investment Ltd.

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