RANCON INFRASTRUCTURE AND ENGINEERING LTD.

Rancon Real Estate Division

31 October’19
Snapshot of Company’s ongoing product
Internal Audit Review of Ongoing project
Line Hard ware (BDT 84.65 crore)
1.5 MCCB (BDT31.39 crore)
River Crossing Tower (BDT 13.54 crore)

Presented by :
INTERNAL AUDIT, RANCON GROUP

INTERNAL AUDIT October 31, 2019

OVERALL REVIEW OUTCOME:
 Status as on 28 October 2019
• Line hardware (84.65 crore project): First line hardware project still not completed though
it was supposed to complete by 15 October’19
• 1.5 MCCB (31.39 crore project): Only 4.5 % (Galvanizing ) and 16 % (fabrication) of recent
project has been completed (in ton) though the whole project was supposed to be completed
by 9 Dec’19
• Rivers crossing tower project (13.54 Crore): 12 % of the project has been completed,
project completion date 21 August’20
 Almost 45 ton zinc of current project (1.5 MCCB) has been used in previous project ( 84.65 crore
BDT), the estimated market price of which BDT 1.21 crore. Annexure-01
 Overall RIEL profitability: RIEL overall profitability may turn into losses if we fail to complete the
project within 31st December’19 Annexure-02
 No formal JV agreement between RIEL and Mollah Traders for ‘river crossing tower project’ though
project signed with REB 21st August’19 and project work started accordingly Annexure-03
 As per last EBM, RIEL expected to be awarded 10 tenders in three categories, while only 1 tender has
been achieved till to date, which may turn to loss company up-to 30 June’20. Annexure-04
 Rancon Infrastructure and Engineering Limited
Project: 1.5 MCCB
Statement of ZINC Consumption
As on 30 October 2019
Amount in
Particulars
(Kg)
Total Purchased 76,893.0
Stock in Hand 4,781.0
Already Issued 72,112.0
Less: Stock required in BATH (Furnace)* 10,000.0
Used in Production 62,112.0

Assumption
Used in 1st Contract (BDT 84.84 Crore) 45,000.0
Used in 2nd Contract (BDT 31.40 Crore) 17,112.0
Used in Production 62,112.0

* Information Provided by RIEL Management.

 Rancon Infrastructure and Engineering Ltd
Overall estimated company profitability
Considering following date
As per RIEL As per IA. project closing on
Tender No.Of Project
Particulars Floating Project WO Value closing on 9 31 December'19 15 January'20
Time s Dec'19
Amount(TK) Amount(TK) Amount(TK) Amount(TK)
Existing Line Hardware Jan'19 2 313,951,784 24,367,609 17,309,809 12,016,444
Existing Cross Arm Apr'19 1 46,939,500 2,122,779 1,629,276 1,258,525
Existing River Crossing
Aug'19 3 78,938,205 - - -
Tower
Total Projected profit - 439,829,489 26,490,389 18,939,085 13,274,969

Head Office Expense - - - 12,000,000 12,000,000 12,000,000

Finance Cost on RPL
- - - 7,000,000 7,000,000 7,000,000
Loan
Total - - - 7,490,389 (60,915) (5,725,031)
1. No formal JV agreement between RIEL & Mollah Traders:
Contract agreement has been signed with REB on 21st day of August’19, As per the contract,
river crossing project has to be completed by 21st day of August’20 and NOA issued by REB
on 25-07-19, but no formal contract has been signed with sole JV party, Mollah traders. JV
agreement usually states rules and responsibility of each party to the contract, as well as time
place of execution. However, no such formal agreement has been signed till our review date
29-09-19

Potential risk(s) consequences:

 Lack of clarity whether contract term have been agreed
 Lack of clarity about roles & responsibility of each party
 Some terms of contact may agree, but others are not
 Business relationship may severely hampered if dispute arise

Recommendation

We recommend that a formal contract agreement should be signed before implementation of

contract clearly stating obligation & responsibilities, performance, liabilities of each party to
the contract to avoid misunderstanding about future dispute between the party.
Revised Profitability of all project including expected up-to Q2 2020 BDT Crore
Tender Floating Delivery No. of
WO Value Q4 2019 Q1 2019 Q2 2019 Total
Time Time Projects
Existing Line Hardware 19-Jan 19-Nov 2 31.4 2.44 2.44
19-Sep 20-Feb
Projected Line Hardware Dec 19 and Q4
20-Jun 2 36 2.79 2.79
20
Line Hardware Sub-total 4 67.4 2.44 0 2.79 5.23

Existing Cross Arm 19-Apr 19-Nov 1 4.7 0.22 0.22

19-Sep 20-Feb
Projected Cross Arm Dec 19 and Q4
20-Jun 3 15 0.68 0.68
20
Cross Arm Sub-total 4 19.7 0.22 0 0.68 0.9

Existing River Crossing Tower 19-Jun 20-Jun 3 7.9 0.48 0.48

Projected River Crossing
19-Aug 20-Sep 1 4.05 0.56 0.56
Tower
River Crossing Tower Sub-
4 11.95 0 0 1.04 1.04
total
Total Project Profit from All
21 99.05 2.66 0 4.51 7.17
Projects
Head Office Expenses 1.2 1.2 1.2 3.6
Finance cost on RPL Loan 0.7 0.7 0.7 2.1
Total Projected Profit from
21 165.48 0.76 (1.90) 2.61 1.47
Q4 19 to Q2 20
Loss from Existing Line
18-Jan 19-Sep 5 84.64 (3.86)
Hardware Project up to Sep
Total Projected Profit up to
26 250.12 0.76 (1.90) 2.61 (2.39)
Q2 2020
 Thank you
Md. Nazrul Kabir Chowdhury
GHIA

Md. Siddiqur Rahaman

Manager, IA. Real Estate Division

S.M. Ala uddin

Asst. Manager. Rancon Real Estate Division