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PROJECT REPORT

B A H R I A U N I V E R S I T Y I S LA M A B A D
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Submitted to:
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 OSAMA BIN SAIF
MBA 3.5 YEARS
GROUP MEMBERS
01-220191-026

01-220191-026
01-220191-026

Muneeb Ali Muhammad

Muhammad
Khan Irfan
Farhat Habib

Muhammad Muhammad Fariha Ramal

Yasir Idrees Kamran Alvi
Part 1: Corporate Governance Analysis
Who run the company: Top management, owners?
Following are the persons who are in the top management.

Mr. Sikandar Mustafa Khan Chairman

Syed Muhammad Irfan Aqueel Chief Executive

Mr. Latif Khalid Hashmi Director
Mr. Sohail Bashir Rana Director

Mr. Laeeq Uddin Ansari Director

Mian Muhammad Saleem Director

Mr. Saad Iqbal Director

Mrs. Ambreen Waheed Director

Mr. Muhammad Faisal Azeem Company Secretary

Mr. Sohail A. Nisar Chief Financial Officer

Who monitors: Board of Directors, Regulatory Authorities, Government, Equity

investors, Bondholders, Banks, Lenders?
Audit Committee has the main authority which is passed on to Board’s Committee for Group
Supervision (BCGS) monitors Board of Directors, Regulatory Authorities, Government,
Equity investors, Banks, and lenders.

Rules of the game: Is it rigged in favor of the incumbent managers? Stockholders

have powers.
No, it does not rig in favor of the incumbent managers, and shareholders have the power as
they select the Audit committee and from the Audit committee the power is passed on to the
BCGS (Board’s Committee for Group Supervision), who has the authority to supervise the
Board Committees, Board of Directors, Chairman, Company Secretary, and Chief Executive
who then manage the managers of different departments.

Board Composition: Age and Tenure, Background, Connection to company and

CEO
 Mr. Syed Muhammad Irfan Aqueel
has been the Chief Executive
Officer at Millat Tractors Limited
since January 2012 and serves as
its Executive Director. Mr. Aqueel
has been with the Millat Group for
the last 7 years. He has 23 years’
experience in the chemical process
industry. He has diverse
Syed
experience in operations, project
Muhammad (CEO) 9.42yrs
management, commercial, human
Aqueel
resources, and general
management positions. He is
Director at Millat Equipment Ltd.
Mr. Aqueel serves as a Director on
the Board of Karachi Tools Dies &
Moulds Centre Ltd, Karachi. He
served as a Non-Executive
Director at Bolan Castings Ltd.,
since October 2014
He has been a Director of Millat
Tractors Ltd. (“Company”) since
1992 and serves as its Non-
Executive Director. He had served
as a Company Secretary of the
Non-
Company from 1992 to July 31,
Mian Saleem Executive 29.42yrs
2017. He has been with Millat
Director
Tractors since 1967. He served as
an Executive Director of
Marketing & Administration and
General Manager of Finance &
Accounts at Millat Tractors Ltd.
Mr. Ahsan Imran Shaikh serves as
Director at Millat Tractors Limited
since March 22, 2021. He served
as the Director of Technical at
Ahsan Shaikh Director 0.25yr Millat Tractors Ltd and served as
its General Manager Production.
Mr. Shaikh served as the Deputy
General Manager, I.P.D of Millat
Tractors Ltd.
Mr. Sikandar Mustafa Khan serves
as Chairman of the Board at Millat
Tractors Limited (MTL) since
Mr. Sikandar Chairman 1991 and served as its Chief
30.42yrs
Mustafa Khan of the Board Executive Officer since October
1985. He serves as the Chairman at
Millat Equipment Limited and
Millat Industrial Products Ltd.
Ambreen Independent 3.42yrs She has been an Independent
 Director of Millat Tractors Limited
Waheed Director
since 2018.
He joined Millat Tractors Limited
in 1983 and has since been
associated with it in various
capacities. He is Director at Millat
Non-
Equipment Limited and TIPEG
Laeeq Ansari Executive
Intertrade DMCC. He has with
Director
great experience in the automobile
sector in Pakistan. He serves as a
Non-Executive Director of Millat
Tractors Ltd.

Board Operations: Chairman of the Board, Meeting frequency, Attendance, Able

to monitor top managers?
Mr. Sikandar Mustafa Khan is the Chairman of the Board, so he leads the meeting,
Meeting frequency is once a year as Annual general meeting, other small meetings are
also conducted to supervise the managers.

Investor Analyst Activity: Buy Side: Biggest stockholders, their history on

corporate governance, Sell Side: Who are the analysts that track the firm? What
are their views? Activist: Are there any activist investors in the mix? How active
are they?
Mr. Laeeq Ansari and Mr. Sikandar Mustafa Khan with the share of 7.75% and 7.61%
respectively are the biggest stakeholder. History of Mr. Laeeq Ansari is that he
joined Millat Tractors Limited in 1983 and has since been associated with it in various
capacities. He is Director at Millat Equipment Limited and TIPEG Intertrade DMCC.
He has with great experience in the automobile sector in Pakistan. He serves as a Non-
Executive Director of Millat Tractors Ltd and history of Mr. Sikandar Mustafa Khan
is the he serves as Chairman of the Board at Millat Tractors Limited (MTL) since
1991 and served as its Chief Executive Officer since October 1985. He serves as the
Chairman at Millat Equipment Limited and Millat Industrial Products Ltd.
Rules of the game: Voting structure, Multiple classes, Golden Shares? Corporate
Charter: Takeover clauses (anti-takeover amendments), Voting rules (proxies,
voting at meeting), Nominating rules.

Part 2: Risk and Return Analysis

Cost of Equity:
 Dividend Growth Model:
Historical Dividend Growth Rates:
We are using the data of last 5 years (2015-2020) for calculating the historical dividend
growth rate.

G 1 +G 2+ G 3+G 4 +G 5
G=
5

−0.04762+0.9+ 0.263158−0.29167−0.41176
G=
5
G = 8.242149 %

Cost Of Equity:

D1
K e= +g
P0

50 ( 1+ 8.242149 % )
K e= + 8.242149 %
706.16
K e =15.90629 %

How risky is the company’s equity?

Company’s equity is not that risky as the Dividend Payout ratio is 115.85% and dividend
cover is 0.86 means the shareholders will get the dividend in next year also.

Cost Of Equity:
The company relied completely on equity to finance its operations and does not hold any
long-term loans except for SBP long term financing facility against salaries.
How risky is the company’s Debt?
Company is mostly relying on its equity, and it does not have a lot of debt, the debt they take
is from SBP against salaries.

What is company’s current cost of capital?

The company’s cost of capital will be the same as the rate of cost of equity K e due to there are
not much debt of the company and the debt that company have are taken from SBP against
the salaries. So
Cost of capital = 15.90629 %

Part 3: Investments
How good are the projects that the company has on its books currently?
The projects that the company is has on its books currently are really good and effective
because the company is looking forward towards the market trends and market
competitiveness.
Company is currently working on
 the Development of 4WD models of MF-360 and MF-375 for Export Purposes
 Successfully developed Millat 03- and 04-cylinder Green Engines Stage IIIA, Stage
III, respectively.
 Diversification through investment in Hyundai Nishat Motors (Private) Limited

Are the projects in the future likely to look like the projects in the past? Why or why
not?
In Future company will probably go with the same strategy as there is a downfall in the sales
of the company and overall downfall in the sales of the tractor industry so, for the revival of
economy will depends on government economic policies to facilitate the industries to
overcome the economic challenges due to Covid-19 and devaluation in Pakistani Rupees.
MTL is cautiously optimistic about its sales outlook in the next financial year. To overcome
the situation the Company is endeavoring for new sales avenues and at the same time
adopting cost-cutting measures.

Part 4: Capital Structure Choices

What are the different kinds of financing used by the company to raise funds?
Millat Tractors Pvt Ltd is basically an equity driven company as almost all its capital is raised
from its shareholder equity before Year 2020 it has Zero Debts about 3% debts in Year 2020
and this 3% debt is taken form SBP long term financing facility against salaries. Company do
go for short term borrowings from time to time but that too in very little amounts.
So, we would say that our Company mainly raised funds through Shareholders Equity.

How large, in qualitative/quantitative terms, are the advantages/disadvantages to this

company from using debt?
We cannot discuss about the advantages or disadvantages of using the debt by our company
as our company is an equity driven company as the capital structure of the company is
comprises of 93% equity and 3% debt that too taken from SBP against salaries.

Does your firm have too much or too little debt?

 Relative to the sector?
 Relative to the market?

Relative to the Sector

Our company has too little debt as compared to other companies in tractor industry as the
mail competitor Al-Ghazi Tractors ha a financial leverage of 0.75 means they are financed by
75% debt and 25% equity
Relative to the Market
In relation to the market, we would say that our company has too little debt as the company is
financed by 97% equity and 3% debt.

Part 5: Dividend Policy

How has the company returned cash to its owners? Has it paid dividends or bought
back shares?
Company has given the dividends to the shareholders, Rs. 30 (300%) final dividend and Rs.
20 (200%) interim dividends mean total of Rs. 50 (500%) given to the owners as dividends.

Given your firm’s characteristics today, how would you recommend that they return
cash to stockholders (assuming they have excess cash)?
According to the current conditions of the firm, we would recommend that the company
should return cash in the form of dividend to the shareholders, because due to the downfall in
the profits of the tractor industry the company may need the cash in the future.
Given its dividend policy and the current cash balance would you recommend the firm
to change its dividend policy?
No We would not recommend the company to change its dividend policy, yes I would
recommend them to lower the rate of return on stocks, otherwise the policy is good.

Part 6: Valuation
What is the value of equity in this firm? How does this compare to the market value?
Value Of Equity:
Value of equity is basically a difference of total asset and total liability of the company
Value of Equity=Total assets−Total Libilities
Value of Equity=10,804,612,000−(6,400,770,000+331,766,000)
Value of Equity=4,072,076 , 000
Market Value:
A company’s Market Value of Equity is the current market price of company’s share
multiplied by the number of all outstanding shares in the market. The market value of equity
is also known as market capitalization.
Market Value=Outstanding Shares× Current PerShare price
Market Value=49829200× 706.16
Market Value=35,187,387,872