BEXIMCO PHARMACEUTICALS LTD.

Brief Introduction of the company:

Beximco Pharmaceuticals Ltd (BPL) is a leading manufacturer of pharmaceutical

formulations and Active Pharmaceutical Ingredients (APIs) in Bangladesh. The company is

the largest exporter of pharmaceuticals in the country and its state-of-the-art manufacturing

facilities are certified by global regulatory bodies of Australia, Gulf nations, Brazil, among

others. The company is consistently building upon its portfolio and currently producing more

than 400 products in different dosage forms covering broader therapeutic categories which

include antibiotics, antihypertensives, antidiabetics, antireretrovirals, anti asthma inhalers etc,

among many others.

The company was incorporated in 1976 and commenced operations in 1980 with the

manufacturing and marketing of products of Bayer AG, Germany and Upjohn Inc., USA

under licensing arrangements.

In 1983, the company started manufacturing its own formulations and it launched export

operation in 1992.

In 2005 Beximco Infusions Ltd, the company that produces intravenous fluids, was

amalgamated with the parent company. In the same year it completed the state-of-the-art oral

solid dosage plant in compliance with the US FDA and UK MHRA standards, which has

been approved by major global regulatory bodies.

Today Beximco Pharmaceuticals Ltd. is the largest exporter of pharmaceuticals in the

country and the only company to win National Export Trophy (Gold), the highest national

accolade for export, for record three times.

The company is the largest producer of Metered Dose Inhalers (MDIs) in the country, and the

first to produce CFC free inhalers. BPL is also the first company to produce anti-retroviral

drugs (ARVs) locally.

Credit Policy:

Beximco Pharmaceuticals Ltd (Beximco Pharma) is a leading manufacturer and exporter of

medicines in Bangladesh. They manufactures and markets of pharmaceutical Finished

Formulation Products, Large Volume Parenterals and Active Pharmaceutical Ingredients

(APIs).

Retail involves the process of selling customers goods or services to customers through

multiple channels of distribution to earn a profit. Customer obtained goods from a seller,

vendor or supplier through financial transactions or exchange for money or some other

valuable considerations.

Beximco pharmaceutical didn’t have any credit policy in the year 2014-2016. They might

have several credit policies which they didn’t want to disclose in their financial reports. Since

there were huge volume of account receivables which indicate they have some sort of

policies.

Sources of short term working capital financing:

The main sources of short term financing are short term bank loan, trade credit and accounts

payable. But mostly this consists of Janata Bank Ltd. - Cash Credit-Hypothecation Loan AB

Bank, Principal Branch - OD & LAC Noor Islamic Bank, Dubai - Commodity Murabaha

Facility. The major advantage of borrowing money is it reduces the tax expenditures. But as

long as they want to keep the optimal capital structure, short term loan contributes to form a

good capital mix. Short term loan has always risk of paying higher interest. But they deal

with this problem by very limited term borrowings. They always maintain a certain maximum

amount of credit.

Investment in Stocks as Marketable Securities:

Investment in Shares:
(i) Bangladesh Export Import Co. Ltd.

(ii) Central Depository Bangladesh Ltd. (CDBL)

Liquidity and solvency measurement:

Liquidity ratio:

2016; 2.84

2014; 1.78 2015; 1.73

Current ratio

Current Ratio:

If currents ratio is under 1, it indicates that a company’s liabilities are greater than its assets

that means companies are less solvent. But if current ratio is more than 1, it indicates

company’s assets are more than its liabilities that means companies are more solvent. From

the above graph we can clearly see that, in 2014 current ratio is 1.78 that indicated the ability

to pay obligations. But in 2015 ratio decreases that is 1.73. It means ability to pay obligations

are less than 2014. But in 2016 it increases a lot which is 2.84 that shows the company is

solvent enough to pay off their current obligations. So, The Beximco Pharmaceuticals Ltd. is

solvent enough to pay their current obligations.

 2016; 1.93

Quick ratio
2014; 1.25
2015; 1.15

Quick ratio:

Quick ratio (or Acid test ratio) measures how much of current assets company holds against

its current liabilities ignoring its inventories. If we look at the graph, we will see the

fluctuation of quick ratio of The Beximco Pharmaceutical Ltd. In the year of 2014 it was

quite good that is 1.25 but in the year 2015 it decreases, again in the year of 2016 it increases

a lot which is 1.93. However, if we compare 2014, 2015 with 2016 we can know that they

are sufficient enough to pay off their current liabilities. Moreover, compares to Current ratio,

the Quick ratio is much lower; it means that current assets are highly dependent on inventory.
 2016; 5798904000

2014; 3658531677 Net working capital

2015; 3530085111

Net working capital ratio:

NWC indicates higher the value, the more solvent business is. If we get negative value it

indicates we are not enough solvent. The value fluctuates over these 3 years. In 2014, the

value was more than 2015. But in 2016, the value is more than both 2014 & 2015 that

indicates positivity of Beximco Pharmaceuticals Ltd. Company. The company is solvent

enough to pay off its current liabilities by its current assets.

Asset management ratio:

2016; 2.75

Inventory turnover ratio

2015; 2.47
2014; 2.45

Inventory turnover ratio: It defined as how many times the entire inventory of a company

has been sold during an accounting period, is a major factor to success in any business that

holds inventory. It shows how well a company manages its inventory levels and how

frequently a company replenishes its inventory. In general, a higher inventory turnover is

better because inventories are the least liquid form of asset. We can see from the graph that

inventory turnover ratio has increasing trend which is better for Beximco Pharmaceuticals

Ltd.
 2016; 0.46

2015; 0.42
Total asset turnover ratio

2014; 0.39

Total Asset Turnover Ratio:

The asset turnover ratio is an efficiency ratio that measures a company’s ability to generate

sales from its assets by comparing net sales with average total assets. In other words, this

ratio shows how efficiently a company can use its assets to generate sales.
Here from the graph we can see the increasing trend. So, it shows Beximco Pharmaceuticals

Ltd. has enough ability to generate sales from its assets.

2015; 8.38

2014; 8.02

Accounts receivables turnover

2016; 7.51

Accounts Receivables Turnover Ratio:

Accounts receivable turnover ratio simply measures how many times the receivables are

collected during a particular period. It is a helpful tool to evaluate the liquidity of receivables.

In 2014 the ratio is 8.02. In 2015 it is 8.38 that show enough liquidity of receivables. But in

2016, it decreases a lot that shows receivables are not collected at a time and liquidity of

receivables is not efficient.

 2016; 18.48

2014; 17.06
Accounts payable turnover

2015; 15.87

The accounts payable turnover ratio:

It shows how many times a company pays off its average accounts payable within a given

year. The accounts payable turnover ratio is a liquidity ratio used by management to

understand how a company handles its owed payments. We can see the fluctuations over the

years from the graph. Compare to 2014 & 2015; 2016 is in better position which is 18.48.

2016 shows Beximco Pharmaceuticals Ltd. Company pays off its average accounts payable

within a given year very efficiently.

 2014; 149.14
2015; 147.63

Days inventory held

2016; 132.6

Days Inventory Held (DIH):

In 2014, The Beximco Pharmaceuticals Ltd. had a DIH of 149.14 days. That means inventory

held in the balance sheet for 149.14 days. After that, in 2015 and 2016 the day’s inventory

held kept decreasing and in 2016 it becomes 132.60 which means it takes 132.60 days to sell

its average balance of inventory. Generally, a lower (or shorter) DIH is preferred so it’s a

good scenario.
 2016; 48.58

2014; 45.52
Days sales outstanding

2015; 43.55

Days Sales Outstanding (DSO):

Day’s sales outstanding measures how many days a firm waits to collect its credit sales.

Meaning, this measure tells company’s receivables management that how many days on

average their credit sales remain uncollected. In The Beximco Pharmaceutical Ltd. DSO has

been fluctuating over the years. In 2015 it was less than 2014. But again it increases in 2016

that is 48.58. A high DSO value means that it takes a company more days to collect its

accounts receivable.
 2015; 23.01

2014; 21.39
Days payables outstanding

2016; 19.75

Days Payable Outstanding (DPO):

We can see the fluctuation over the years from above graph. DPO (Days payable outstanding)

measures the duration that company take to make payments to its suppliers. Now, in terms of

Beximco Pharmaceutical Ltd. if we look at the chart, we can see the different performance in

this aspect. In 2014 DPO was 21.39 which increased to 23.01 in 2015 but again decreased to

19.75 in 2016. A higher value indicates most efficiency of cash management, so falling of the

DPO is a bad sign indeed. Thus, we can say by looking at The Beximco Pharmaceutical Ltd.

performance in this aspect isn’t satisfactory enough and they aren’t efficient enough.
 2014; 194.66

2015; 191.18

operating cycle

2016; 181.18

Operating Cycle:

In 2014, The Beximco Pharmaceutical Ltd. needed 194.66 days to cover its operating cycle.

It means that the company had a required of 194.66 days for a manufacturer's cash to be

converted into products plus the time it takes for those products to be sold and turned back

into cash. After that, there is a decrease movement in 2015 & 2016 of the amount of days

needed for operating cycle. It means that The Beximco Pharmaceutical Ltd. is working more

efficiently than before.

 2014; 173.27

2015; 168.17

Cash conversion period

2016; 161.43

Cash Conversion Period:

The cash conversion cycle is a cash flow calculation that attempts to measure the time it takes

a company to convert its investment in inventory and other resource inputs into cash. In other

words, the cash conversion cycle calculation measures how long cash is tied up in inventory

before the inventory is sold and cash is collected from customers. The graph shows that in

2014, CCC was 173.27 days. It means the Beximco Pharma Ltd. took more days to convert

its investment into inventory and other resources into cash. But over the years it is

decreasing. In 2016 it took 161.43 days to convert which is a good sign of a firm.
Cash Based Liquidity Measures:

2016; 2529479121.75

2015; 2138458855.5

2014; 1813632627
Operating cash flow

Operating Cash Flow:

If we look at the graph, we can see the operating cash flow of The Beximco Pharmaceutical

Ltd. increases over the period of time which indicates that company is able to generate

sufficient positive cash flow to maintain and grow its operations.

 2016; 0.17

Cash conversion efficiency

2014; 0.16 2015; 0.16

Cash Conversion Efficiency:

Cash conversion efficiency (CCE) is a measurement of a liquidity that actually measures how

much of company’s sales are converting into operating cash flow. If we look at the graph, we

can see that for 2014 and 2015 the CCE was constant. After that it increases which indicates a

good condition of The Beximco Pharmaceutical Ltd. and it has effective working capital

management.
 2014; 0.01 2016; 0.01

Cash ratio

2015; 0

Cash Ratio:

The cash ratio is calculated as the stock of cash held on balance sheet scaled by total assets.

That is, it measures the portion of the company’s assets that is kept as free cash (some idle

cash) or those that can instantly be converted into cash.

However, let’s have a look on company’s cash ratio figures. The chart here shows that,

company is quite consistent in holding cash as a proportion of its total assets in 2014 & 2016

which is 0.01. In 2014, it used to hold 0 Taka of each 1 Taka worth of assets as cash.
 2016; 14.73

2014; 13.29

Cash burn rate

2015; 7.73

Cash Burn Rate:

Cash burn rate (CBR) is a measure of liquidity that measures how many days a company can

cover up its average expenses with the cash in hand. While giving attention to above chart

and schedule we analyzed, company was able to cover up its ongoing expenses with cash in

hand and continue its business for 13.29 days in 2014 However, this fell down to 7.73 but

again increased to 14.73 days for the next year.

Net Present Value of the company:

After calculating the ratios, the DIH, DSO and DPO figures revealed (shown in the excel

calculation) and considering WACC to be 10% company’s NPV has been calculated. The

graphs are shown below:

 2016; 6132300970.12

2015; 5398660547.3

2014; 4572334444.38

NPV (daily)

NPV (daily):

The left chart in the illustration shows the daily net present value of the company based on

the relevant information of DIH, DSO, DPO, SALES, COGS and WACC (shown in excel

calculation). It has a progressive trend (positive upward trend) that defines company’s NPV is

increasing from year to year in daily basis.

2016; 22382898540950.8

2015; 19705110997642.3

2014; 16689020721973.2

NPV (perpetuity)
NPV (perpetuity):

The chart right to it is the NPV of the perpetual effect to the company. Like as to the daily

effect of NPV its perpetual effect on the company has also the upward progressive trend. And

this really makes sense because, as there is no downfall in NPV’s daily effect throughout the

years (2014 to 2016), so definitely the perpetual effect will have such a trend. So, it’s

straightforward.

NPV outflow (daily)

2014; -6067131690

2015; -6921540884

2016; -7872122665
 2016; 14004423635

2015; 12320201432

2014; 10639466135

NPV inflow (daily)

NPV Inflow and Outflow (Daily):

If we look at both of the graphs, we can see that The Beximco Pharmaceutical Ltd. is

performing and managing its operation quite better as their NPV Inflow ( Daily) is increasing

over the time and their NPV Outflow ( daily) is decreasing which is a good sign for them.

Cash discount policy:

Beximco Pharmaceuticals Ltd. doesn't offer credit discount. As we can observe from part B

by analyzing DPO and DSO of the companies we found that Beximco Pharmaceuticals Ltd.

paying off the debt much early than collecting receivables. That is actually incurring heavy

cost on them. They should be much cautious about paying the supplier off that early ,

retaining cash for operation as much as possible. But if the firm offer cash discount, they can

also inspire and motivate their customer to clear their payment early. They can lessen the

days by offering discount or premium on early payment. Customer and client can be

motivated to clear payment early this way which can surge the cash flow of this firm.
According to me, this is actually a good decision not to offer a cash discount because if we

look at their DSO over the years we will see that they have upward slope DSO which

indicates that they are not efficient enough to collect their receivables. In this situation if they

offer cash discount which is risker for them. It might hamper their overall business

performance. So, not offering cash discount is a very good decision by the management.

Overall Analysis of the Beximco Pharmaceutical Ltd.:

The current ration of The Beximco Pharmaceutical Ltd. fluctuates and in 2016 it is in the

higher position, that means their performance is satisfactory and enough good. As, in the year

of 2016, they have upward slope current ratio which indicates that they are paying off their

short term obligation with their short term assets quite well. However, when we look at the

quick ratio it is much lower than Current ratio which means their current assets greatly

dependent on the inventory. But still quick ratio represents the positive and satisfactory

results over the years especially in 2016. Net working capital also represents the firm’s

solvency over the years.

The Inventory turnover is increasing over the years which are a good sign for the Beximco

Pharmaceuticals Ltd. We can see the increasing trend for the Total Asset Turnover ratio that

represents enough ability to generate sales from its assets of Beximco Pharmaceuticals Ltd.

Then the Accounts Receivables Turnover has downward slope in 2016 which indicates their

liquidity of receivables aren’t efficient enough. From the Accounts Payable Turnover ratio,

we can see that The Beximco Pharmaceuticals Ltd. pays off its A/P very efficiently. The DIH

shows the lower ratio that is a good scenario for the Beximco Pharmaceuticals Ltd. But the

DSO in 2016 shows upward slope which indicates that they aren’t efficiently managing A/R

and taking more time to collect money from their receivable’s. Then the DPO result shows
the unsatisfactory and inefficient result for the Beximco Pharmaceuticals Ltd. Then there is a

decreasing movement in the number of days needed for Operating cycle which means The

Beximco Pharmaceutical Ltd. is working more efficiently than before. Cash conversion

period also represents a good sign of the firm.

The Operating Cash Flow has upward slope over the 3 years which indicates that company is

able to generate sufficient positive cash flow to maintain and grow its operations. However,

the Cash ratio is lower in 2015 and constant in 2016 which represents that this firm utilizing

their cash efficiently. Also CCE represents a good condition and effectiveness of working

capital management of the firm. The Cash Burn rate has increased in 2016 which shows firm

has more money to operate day to day expenses.

Then the NPV (Daily) and NPV (perpetuity) has progressive trend also the NPV inflows are

more than outflows. This is very good scenario for The Beximco Pharmaceutical Ltd.

As an advice I can say that the Accounts receivables and DSO need an improvement for the

betterment of the firm.