Chapter 01

Thesis Paper on: “Financial Statement Analysis On leasing company of Bangladesh
: - A Study on IDLC & Union Capital Limited”
Chapter-01
Introduction
Provided By: Josna Akter, RMBA Major in Finance

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1.1 Introduction
Financial Statement is one the important part of the entire leasing sector. Financial Statement
includes the Balance Sheet, Income statement and other statement which determine the
company’s performance. Financial ratio analysis is the calculation and comparison of ratios
which are derived from information in company’s financial statements. It allowed them to get
a better view of the firm’s financial health than just looking at the raw financial statements.
Financial analysis is the also selection, evaluation and interpretation of financial data along
with other information to assist the investment and financial decision-making. The financial
analyst must select the pertain information, analyze it and interpret the analysis, enabling the
judgments on current and future financial condition and operating performance of the company.
Leasing activity is examined both at microeconomic level, for which it has a direct impact, as
well as at macroeconomic level for which it has both direct and indirect influence. While
considering the macroeconomic level, where leasing activity stands as one of the factors of
economic growth, material production and its supporting infrastructure and services have been
covered. The purpose of this study is to identify potential opportunities of using leasing in the
wealth creation process and its impact on economic growth, and therefore the use of this
activity as a tool to stimulate economic growth. From the majority of indicators that used to
characterize production and economic activity of enterprises working in production,
agriculture, construction and repair industries, influenced by leasing activity, we chose and
analyzed the main and most important ones: capital productivity, materials intensity, energy
intensity. During the study a direct correlation between the index of material consumption and
economic growth rates has been recognized. Leasing activity, as a process of the constant
change of equipment used in the manufacturing process affects the amount of material and
energy intensity at all levels of material production. Replaced equipment is generally more
economical in terms of material and energy consumption, these ones will therefore be
continuously improved, which ultimately has a positive effect on economic growth. Ultimately,
leasing activity has a positive effect on the value of macroeconomic indicators, including
economic growth.

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1.2 Statement of the Problem

Literature review shows that different issues related with lease financing in Bangladesh are
very limited. Though several issues associated with the lease financing in abroad have been
identified but it is difficult to relate these articles with the economy of Bangladesh. Past studies
about the lease financing in Bangladesh only depicts constraints, challenges, advantages in a
smaller content. Studies conducted are not enough to identify the overall situation of lease
financing in Bangladesh, its prospects in future, its contribution to the growth of the economy,
its performance and competition with banks, factors that affect the preference of lease financing
over term loan, efficiencies of banks and leasing companies and the future prospect of operating
lease in Bangladesh. Some studies have identified problems associated with the leasing
institutions, NBFIs and as well as capital market related issues in Bangladesh. The following
problems have been identified:
 Difficulties of leasing companies are higher cost of fund, competition with banks,
investment in portfolio of higher risk, mismatch between asset and liability, weak legal
system, lack of qualified personnel etc.
 Leasing companies financial reporting is not satisfactory and they are not following the
standards.
 Banks and financial institutions problems of SME financing.
 Leased asset recovery problem in case of default and delays in court procedures to
recover the asset.
 Fund raising problem by short term and long term borrowing from money and capital
market.
Evidently none of the studies have focused on the reasons of competition between banks and
leasing companies and the major problems of NBFIs as well as leasing companies to compete
with banks. Whether leasing is the substitution of term financing or not has not been focused
by the previous studies. None of the study has evaluated the efficiencies of leasing companies.
The study will identify the reasons behind the leasing companies to reduce their leasing
business and the reasons behind becoming as the multiproduct institutions. The study will also
identify some of the borrower’s preference of lease financing over term loan despite higher
interest rates. The prospect of operating lease in Bangladesh will also be identified.

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1.3 Significance of the Study

The ultimate objective of this study is to evaluate the leasing companies operating in
Bangladesh in order to judge their relative performance.
The leasing companies, in terms of profitability/operating performance, risk-growth indicators.
Thus, investors (owners), lessees, depositors, competitors, other service seeker-s, can
choose their appropriate leasing company to create long-term relationship. This ranking
may also help both the management/lessor of leasing companies and stakeholders in many
ways.
Some of these are stated as follows:
 Leasing companies having relatively volatile (unstable position) in the industry

are more risky (uncertain) for depositors, and investors. They require higher risk
premium for their deposits and investments respectively. Thus this gives them an idea
about the risk-return criteria of the leasing company so that they can demand
appropriate return from their deposits/investments.' On the other hand, good ranking
leasing company can offer lower deposit rate because of their low risk. Thus, they can
reduce their operating cost and they’re by increase profits by
 Large number of lessees, fund managers does not know leasing companies’ relative
performance. This research helps them to focus on areas where they can add values.
 Positions bring risk-reward opportunities for leasing companies. The leasing companies
that are sliding try to cash in on their historic reputation and borrow for less than they
should. If management of a leasing company finds that their ranking is falling
over years, they can able to search the reasons and can take appropriate measures
to keep the company's position better. In the light of these above significance, it can
be said that this study will have a wide range of use in the leasing sector of
Bangladesh. Management of leasing companies as well as general people
(stakeholders) can use this research in making their right business decisions to
maximize profit and minimize risks.

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1.4 Aim & Objectives

The thesis report is aimed studying and understating the various services by the leasing
company. The main objective is the study of the financial position of the leasing company
IDLC & Union Capital Limited.
There are various objectives in support of this report which are:-
 To know the overall financial activities of IDLC &Union capital limited.
 To know the present situation and growth of IDLC & Union capital limited.
 To study the financial position of the company and operation of IDLC & C Capital
Limited.
 To know the about financial performance of IDLC &Union capital limited.
 To know compare between this two company.
 To make some recommendation based on the company's performance.

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1.5 Scope of the Study

The study mainly attempts to analyze the financial performance of the company selected for
the study. The financial authorities can use this for evaluating their performance in future,
which will help to analyze financial statements and help to apply the resources of the company
properly for the development of the company and IT employees to bring overall growth. The
present study attempt to develop a trend analysis model for Sales and Working Capital and
Profit and Loss Accounts. There can be forecasting to evaluate the overall performance of the
IDLC & Union Capital Limited in future.

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1.6 Research Methodology:

Data Collection Methods
Data collection is a process of collecting information from all the relevant sources to find
answers to the research problem, test the hypothesis and evaluate the outcomes. Data collection
methods can be divided into two categories: secondary methods of data collection and primary
methods of data collection.
Secondary Sources
The thesis report is made base on secondary sources. I have also collected information from
the company profiles, Internet, annual report of Union Capital Limited, Industrial Development
Leasing Company of Bangladesh Limited (IDLC), United Leasing Company Limited and
Uttara Finance And Investment Limited of the year 2015, 2016, 2017, 2018, 2019, and different
article published in the newspapers, journals and magazines.

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1.7 Limitation of the study

Some limitation are found in times of preparing of this report. Those Limitation are describing
below:-
 Due to time limitations many of the aspects could not be discussed in the report.
 The main constraint of the study is inadequate access to information, which has
hampered the scope of analysis required for the study.
 All the employees were always busy with heavy workload, they could provide me very
little time.
 Assessing information of different activities of Union Capital as well as the other
competitors will be a great problem because of confidentiality.
 I carried out such a study for the first time, so inexperience is one of the main constraints
of the study.

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Chapter-02
Literature Review

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Literature Review
Lease Financing: A Conceptual Framework
Leasing, in general, is viewed as a method of financing the acquisition of capital equipment.
Leasing involves a contractual relationship in which the owner (lessor) or an asset or property
grants to a firm or a person (lessee) the use of the asset's services for a specific period of time,
usually for an agreed sum of rent (Weston and Brigham, 1978). Leasing, therefore, enables a
firm to avail the services of a plant or equipment without making the investment or incurring
debt obligation. The firms can use the asset by paying a series of periodic amounts called "lease
payments" or "lease rentals" to the owner of the asset at the predetermined rates and generally
in advance (Harm Levy and Marshall Samuel, 1973). The payments may be made monthly,
quarterly or annually. Often there is no initial deposit or fee. Lease contracts have two parties,
namely, Lessor and Lessee. A lessor may be a leasing company, a manufacturer, a subsidiary
or an associate of a large business organization. A lessee may be a company, cooperative
society, a partnership firm, an individual, government or its agencies (Gupta, 1995, p.2).
The lease must have the following basic characteristics viz.:
A contract of commercial nature between the lessor (owner) and the lessee (the user);
The contract should provide for periodical payment of rentals for using the asset for a fixed
term by the lessee;
On the expiry of the lease term the hirer should return the asset to the owner or dispose it in the
manner desired by the owner.
These characteristics combined together will provide the definition of lease (Verma, 1995, p.
3 1).
Origins and Conceptualization of Leasing
Lease financing was originated in the advanced culture of Middle East with the offering
uncultivated land to the Summation people, as stated earlier, in the southern part of what is
now called Iraq, about 5000 years ago and the concept of lease financing was developed. For
the first time, an agreement was signed giving lease a status through the bank leasing in 370
BC in Athens. Greece was also a pioneer in the development of mine lease. All mines in the
state of Attic belong to the state and were leased through a single authority.
Meaning of Lease Financing
Lease financing enables leasing or renting the services of an asset rather than buying it. It is a
contract whereby the owner of an asset (the lessor) grants to another party (the lessee) the

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exclusive right to use the asset, usually for an agreed period of time, in return for the payment
of rent.
The term lease finance is used in the sense of leasing business assets such as computers,
manufacturing plants, ships, aircraft, cars, trucks; etc. This enables a business firm to use the
services of an asset without buying it. Lease finance also covers the immovable I property like
buildings, factory sheds, office space, land, etc.
Classification of Lease
Leasing (lease) has developed over the years and has assumed different forms at different
places and times. Nevertheless, leasing is broadly classified as Equipment Leasing and Real
Estate Leasing
Equipment Leasing
Equipment Leasing has been defined as a contract between a lessor and lessee for the hire of
specific assets selected from a manufacturer or vendor of such assets by the lessee.
The lessor retains ownership of the assets and the lessee has the possession and use of the asset
on payment of specified rentals over a period which will cover the depreciation, interest, and
other over heads and a profit margin for the lessor. Equipment leasing is a form of medium and
short-term finance and has grown in importance in mid-seventies in UK and late fifties and
sixties in USA and has gained popularity in India only in eighties and in Bangladesh only in
nineties.
Classification of Equipment Lease
Equipment leasing (also called Leasing Finance) is broadly classified into two types, viz.
 Financial Lease, and
 Operating Lease.
Financial Lease
Financial Lease is a long-term lease on fixed assets; it may not be cancelable by either party.
It is a source of long-term funds and services as an alternative of long-term debt financing. In
financial lease the leasing company buys the equipment and leases it out to the use of a person
known as the lessee. It is a full payout lease involving obligatory payment by the lessee to the
lessor that exceeds the purchase price of the leased property and finance cost.
According to T. M. Clark, "A financial lease is a contract involving payment over an obligatory
period of specified sums sufficient in total to amortize the capital outlay of the lessor and give
some profit". Financial lease has been defined by International Accounting Standards
Committee as "a lease that transfers substantially all the risks and rewards incident to

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ownership of an asset. Title may or may not eventually be transferred." Lessor is only a
financier and is not interested in the assets (Vernia, 1995, p. 33).
According to Verma, a financial lease must have the following features, viz.
1. The lease is not cancelable by the lessee prior to its expiration date;
2. The lessor may or may not provide service, maintenance, and insurance for the asset;
and
3. The asset is fully amortized over the life of the lease.
In addition to the above, a finance lease should meet any one to the following two conditions:
The lease has the use of the asset for 75% or more of the estimated economic life of the leased
property;
The present value at the beginning of the lease term of the minimum amounts Payable under
the lease (exclusive of amounts payable for insurance, maintenance and similar normal
outgoing) is at least equal to 90% of the cost of the leased assets net of investment grants.
In the case of default committed by the lessee in payment of lease money the lessor has recourse
to the leased asset as the owner.
Operating Lease
Operating lease involves high payments of rentals. It is a non-pay-out lease in which the lessor's
obligations include services other than the financing of the purchase price of the leased property
such as maintenance, repair, and technical advice. A good example of an operating or service
lease is a lease for telephone service wherein the Telephone Department renders all such
services for the leased telephone equipment against fixed uniform rentals from the users. The
following features usually characterize an operating
Lease:
1. The lease is cancelable by the lessee priory to its expiration;
2. The lessor provides services, maintenance, and insurance;
3. The sum of all the lease payments by the lessee does not necessarily fully provide for
the recovery of the asset's cost;
4. The lessor has the option to recover cost of another party on cancellation of the lease
by leasing out the asset again.
Operating lease is in vogue in developed nations of West Europe and also in USA. As a matter
of fact, the concept was popularized by the multi-national giants like IBM, and Bell Telephones
in USA, which leased their products to buyers for short-spells. Operating lease is more popular
where lessor is the null fractures PR dealer in the equipment.

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Operating lease is subdivided in to two types –
 Simple operating lease and
 Specialized service lease
The above discussion deals with the simple operating lease. A specialized service lease is an
operating lease in which the lessor assumes absolute responsibilities for repair, maintenance,
and other obligations of ownership.
However, the basic points of difference between financial lease and operating lease are
presented in brief as follows:
Table 1. Difference between Finance Lease and Operating Lease
Points Finance ‘Leases Operating Leases
 Lessor  Lessor acts as a financing  Lessor purchases and leases it
 Specifications of institution out to the lessee
equipment  Lessee selects and acts as lessor's  Lessor purchases at its choice
 Period agent in ordering it  Short period and cancelable
 Maintenance  Normally long term covering the  Lessor
 Component of maximum life of the  Cost of Equipment, interest
rentals  asset and non-cancelable and maintenance chares
 On renewal  Lessee  Same rental
 Type of Assets  Cost of equipment & interest  Consumable items
 Lower rental
 Durable items
Real Estate Leasing
Real estate leasing or a lease of immovable property is a transfer of a right to enjoy such
property, made for certain time, express or implied, or in perpetuity, in consideration of a price
paid or promised, or of money, a share of crop, service or any other thing of value to be rendered
periodically or on specific occasions, to the transfer or by the transferee, who accepts the
transfer on such terms. The transferor is called the lessor and the transferee is called the lessee,
the price is called the premium and the money, share, service or other things to be rendered is
called the rent.
Leasing in Global Perspective
Having a history of about 50 years, leasing is a major force in world capital markets. The size
of world leasing’ market today is estimated at about US$350 billion every year, of which about
more than ll3 is contributed by USA alone. The growth of Asia as major leasing market is
remarkable and notable part is accounted for by Japan. Asian market now outstrips that of
European tries' rank participating in leasing.

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Leasing Practices in Developing Countries

Growth of Leasing, as compared to developed nation, has been slow in developing countries
but it is now established as growing industry in many such countries.
During 1981, the Leasing Association of Singapore was formed. It was the Manila based Asian
Leasing Association, which includes representatives of Asian countries. The China Oriental
Leasing Company commenced operations in 1981 as a joint venture between China and Japan
for import of capital equipment. Brazil adopted leasing legislation in 1091. International
Finance Corporation was involved between 1977 and 1993 in the formation of forty-seven
leasing companies in 26 developing countries viz. In the Republic of Korea (1977), Thailand
(1978), the Philippines (1978). Colombia (1980), Sri Lanka (1980), Uruguay (1980), Jordan
(1981).
Meaning of Financial Statements
Financial statements are the basic and formal annual reports through which the corporate
management communicates financial information to its owners and various other external
parties which include investors, tax authorities, government, employees, etc. These normally
refer to: (a) the balance sheet (position statement) as at the end of accounting period, and (b)
the statement of profit and loss of a company. Now-a-days, the cash flow statement is also
taken as an integral component of the financial statements of a company.
Objectives of Financial Statements
Financial statements are the basic sources of information to the shareholders and other external
parties for understanding the profitability and financial position of any business concern. They
provide information about the results of the business concern during a specified period of time
in terms of assets and liabilities, which provide the basis for taking decisions. Thus, the primary
objective of financial statements is to assist the users in their decision-making. The specific
objectives include the following:
 To provide information about economic resources and obligations of a business: They
are prepared to provide adequate, reliable and periodical information about economic
resources and obligations of a business firm to investors and other external parties who
have limited authority, ability or resources to obtain information.
 To provide information about the earning capacity of the business: They are to provide
useful financial information which can gainfully be utilized to predict, compare and
evaluate the business firm’s earning capacity.

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 To provide information about cash flows: They are to provide information useful to
investors and creditors for predicting, comparing and evaluating, potential cash flows
in terms of amount, timing and related uncertainties.
 To judge effectiveness of management: They supply information useful for judging
management’s ability to utilize the resources of a business effectively.
 Information about activities of business affecting the society: They have to report the
activities of the business organization affecting the society, which can be determined
and described or measured and which are important in its social environment.
 Disclosing accounting policies: These reports have to provide the significant policies,
concepts followed in the process of accounting and changes taken up in them during
the year to understand these statements in a better way.
Types of Financial Statements
The financial statements generally include two statements: balance sheet and statement of
profit and loss which are required for external reporting and also for internal needs of the
management like planning, decision-making and control. Apart from these, there is also a need
to know about movements of funds and changes in the financial position of the company. For
this purpose, a statement of changes in financial position of the company or a cash flow
statement is prepared. Every company registered under The Companies Act 2013 shall prepare
its balance sheet, statement of profit and loss and notes to account thereto in accordance with
the manner prescribed in the revised Schedule III to the Companies Act, 2013 to harmonise the
disclosure requirement with the accounting standards and to converge with new reforms. With
regard to this, the Ministry of Corporate Affairs (MCA) had prescribed a (Revised) Schedule
VI to the Companies Act, 1956 (vide Notification dated 28.02.2011). It is applied to the
financial statements prepared for all financial periods beginning on or after April 01, 2011 by
the Indian Companies.
Accounting Practice for Leases in Bangladesh
No specific accounting standards for the lessor, and/or lessee have yet been established in
Bangladesh by the competent authority. The Generally Accepted Accounting Principles
(GAAP) are being followed under which the leased assets are being shown in the book of
the lessor while the rental payments are considered as revenue expenditure by the lessee.
Accordingly, depreciation on such assets is charged in the books of the lessor although the
accounting depreciation may differ from the depreciation stipulated in the tax law (Islam,
1999). According to Viond Kothari (known as Guru of leasing in India), "Bangladesh has so

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far; not implemented the International Accounting Standard no. 17. Neither has any similar
standard been enunciated by the institute (competent authority). Hence, Bangladesh continues
to adopt the operating lease accounting method that is, the lessor capitalizes assets leased, and
depreciated in the lessor's books. The entire rentals received by the lessor are treated as the
lessor's income, and the lessee's expenses. Such a method leads to a significant distortion,
particularly when the leases are structured." All leasing companies, at present operating in
Bangladesh, provide the facility of lease financing (Financial Lease) only. No one is providing
the facilities of Operating Lease though they are adopting the accounting method of the latter
rather than the former in preparing the financial statements, which need due attention of the
regulatory authority.

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Chapter-03
Organizational Background

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An Overview of the “IDLC & Union Capital Limited

3.1 IDLC Company Overview:
IDLC Finance Limited, the first leasing company of Bangladesh, was established in 1985. Its birth
was actually a collaborative effort between several local and multinational financial institutions
e.g. International Finance Corporation (IFC), German Investment and Development Company
(DEG), Kookmin Bank, Korea Development Financing Corporation, The Aga Khan Fund for
Economic Development, The City Bank Limited, IPDC of Bangladesh Limited, Sadharan Bima
Corporation. With the evolution of this company the initial foreign shareholding of 49% was
gradually being withdrawn. The local sponsors were taking the shareholding positions of the
company and finally in 2009 there was no foreign shareholding of the company.
IDLC Finance Limited started its journey, in 1985, as the first leasing company of the country with
multinational collaboration and the lead sponsorship of the International Finance Corporation (IFC)
of the World Bank Group. Technical assistance was provided by Korean Development Leasing
Corporation (KDLC), the largest leasing company of the Republic of South Korea. IDLC which
has now emerged as Bangladesh’s leading multi-products financial institution, has amongst its
external share-holders, international development agencies such as Aga Khan Fund for Economic
Development (AKFED) and German Investment and Development Company (DEG) besides the
IFC. The other foreign sponsors including Kookmin Bank of the Republic of Korea in addition to
KDLC and all these institutions together hold 47.3%% of the company’s shares. Five Bangladeshi
financial institutions- The City Bank Ltd, Sadharan Bima Corporation, Mercantile Bank Ltd,
Eskayef Bangladesh Ltd, Reliance insurance Ltd and the general public hold the remaining 52.7%.
IDLC is the listed member of Dhaka Stock Exchange.
The unique institutional shareholding structure comprising mostly of financial institutions helps
the company to constantly develop through sharing of experience and professional approach at the
highest policy making level.
IDLC offers a diverse array of financial services and solutions to institutional and individual clients
to meet their diverse and unique requirements. The product offerings include Lease Finance, Term
Finance, real estate Finance, Short term Finance, Corporate Finance, Merchant Banking, term
Deposit Schemes, Debentures, and Corporate Advisory Services.
The vision of IDLC Finance Limited is to become the best performing and most innovative
financial solutions provider in the country. To achieving this vision and goal it is important to
taking due care of all of our constituents, particularly the shareholders, customers and workforces.
The corporate philosophy is discharge their functions with proper accountability for actions and
results and blind themselves to the highest ethical standards.

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3.2 Historical Background of IDLC

In 1985 IDLC started its journey as a single product lease financing company with 5 staff
members. Within 33 years IDLC come to light as the largest multi-segment and multiproduct
NBFI in the country.as a reputed financial brands in the financial industry, IDLC finance
limited company holds a very powerful and diversified stability in corporate, Capital market
segments, retail and short and medium loan(SME). Today, it has three other fully owned
subsidiaries. It serves over 50000 clients by 41 major touch points. It serves almost 24 cities
of the country. Above of 1300 employee give their full effort every day in corporate finance,
capital market segment, SME finance and Consumer finance. Serving over 45,000 clients.
They strive to help people achieve their dreams - the dream of owning a home, the dream of
sending their children to a bigger school, the dream of going on a picnic in the family car, the
dream of starting a business, or that of expanding it, the dream of generating more employment,
the dream of taking the nation to greater heights. However, it would be constricting to say that
they are merely in the financing business, as they try to do something more to this extent, what
really drives them is not only the number of people they employ, or the number of customers
they serve, but the number of lives they have touched. While profits are important to them,
they also take immense pride in being the reason for countless smiles. From 1985 till now
journey of IDLC it becomes now one of the biggest Non-Banking Financial organizations in
Bangladesh [3].
3.3 Subsidiaries
IDLC Investment Limited
As per the requirement of the Bangladesh Securities & Exchange Commission (BSEC), IDLC
has formed a separate subsidiary on May 19, 2010 with the name and style ‘IDLC Investments
Limited’ in order to transfer its activities in merchant banking. The license of this company
was obtained from BSEC on August 02, 2011 and commencement of its business was on
August 16, 2011. The main businesses of IDLC are mainly portfolio management, issue
management, underwriting of securities and advisory services [3].
IDLC Securities Limited
IDLC securities Limited, is a well-managed and fully owned subsidiary by IDLC; it offers full-
fledged international standard brokerage services for its retailing and institutional clients. It has
predominantly reserved seats on both Dhaka Stock Exchange and Chittagong Stock Exchange
Limited as well. It also has a Depository Participant (DP) of Central Depository Bangladesh
Limited (CDBL) [3].

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IDLC Asset Management Limited
IDLC Asset Management Limited is another fully owned subsidiary of IDLC Finance Limited
with its headquarters in Dhaka, Bangladesh amongst many others. Asset management services
are offered hers, which currently consist of Mutual Funds proposed to several individuals and
institutions [3].
Vision
Become the best financial brand in the country [3].
Mission
Focus is on quality growth, superior customer experience and substantial business practice [3].
Strategic Objective
 Expand of its talent pool.
 Fully leverage the core banking platform.
 Optimize distribution points.
 Expand and bring verity to funding sources.
 Expand sales and service competence in the consumer division.
 Survivable growth in SME portfolio.
 Pay more attention to top-level customers in the corporate section.
 Integrate capital market project and upgrade capacities.
 Support globally acknowledged corporate administration and maintainable business
practices.
Core Values
 Integrity
 Customer Focus
 Trust and Respect
 Equal Opportunity
 Eco-accommodating
 Passion Simplicity
Code of Conduct and Ethical Guidelines
 Act with Honesty, capability, grace and in a moral way when dealing clients, Inspect,
connects, offices and general society.
 Act and desire others to act in a professional and moral way that will think about
sympathetically IDLC workers, their calling and on IDLC on the bad times.
 Attempt to keep up and build up the capability of all in the business.

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 Use rational care and exercise free skillful judgment.
 Permit others to perform their expert commitments.
 Keep balancing on learning and agree to each single materials law, quality and controls.
Exhibited all incompatible circumstances
 Pertinent professionals and expert qualities and provide expert administrations as per
IDLC strategies.
 Respect gives to individuals and whom they work with. Also respect the protection of
client and others with whom they work.
3.4 Product and Service Basket
Small and Medium Enterprises (SME) Finance
 Small Enterprise Finance
 Small Enterprise Loan/ Lease
 Seasonal Loan
 IDLC Purnota – Women Entrepreneur Loan
 SME Shachal Loan
 Revolving Short Term Loan
 Commercial Space Loan
 Commercial Vehicle Loan
 IDLC Udbhabon
 SME Deposit
Medium Enterprise Finance
 Medium Enterprise Loan /Lease
 Commercial Vehicle Finance
 Machinery Lease
 Revolving Short Term Loan
 Commercial Space Loan
 Commercial Vehicle Loan
Supplier and Distributor Finance
 Factoring of Accounts Receivable
 Bill/ Invoice Discounting
 Work Order Financing
 Distributor Financing

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Corporate Divisions
 Corporate Finance
 Lease Financing
 Term Loan Financing
 Commercial Space Financing
 Project Financing
 Short Term Loans (to meet working capital requirements)
 Specialized Products (for meeting seasonal demand)
 Green Financing
Structured Finance Solutions
 Debt Syndication (Local & Foreign Currency)
 Working Capital Syndication
 Agency & Trusteeship
 Fund Raising through Zero Coupon & Coupon Bearing Bonds
 Commercial Paper
 Arrangement of Private Equity n& Preference Shares
 Corporate Advisory for Mergers& acquisitions and Joint Venture Making
 Preparation of Feasibility Study
Green Banking Solutions
 Over 50 products offered under Green Banking and Sustainable Finance department
as per Bangladesh Bank Green Refinance scheme
Consumer Finance
 Loans
 Home Loans
 Car Loans
 Personal Loans
 Loan against Deposit
Deposits
 Flexible Term Deposit Package
 Regular Earner Package

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Capital Markets Operations
 IDLC Securities Limited Products
 Cash Account
 Margin Account through IDLCT Investments Limited and other enlisted merchant
banks
 Easy IPO
 Premium Brokerage for High Net worth Individuals (HNIs) an institutional and
foreign invest Services
 Trade execution through the Dhaka and Chittagong stock exchanges
 Custodial and CDBL services
 Bloomberg terminal for foreign clients
 Research and Advisory Services
IDLC Investments Limited Products
 Margin Loan
 Discretionary Portfolio Management Services
 Corporate Advisory
 Issue Management
 Underwriting
IDLC Asset Management Limited
 Mutual Funds Portfolio Management
3.5 Overview of Union Capital Limited:
Established in 1998, UCL Financial Group is a diversified financial service provider based in
Dhaka. UCL has operations in both the principal segments of financial market: Capital market
and financing & investment activities. Together with its principal subsidiaries, UniCap
Securities Limited and UniCap Investments Limited, UCL Group offers a wide range of
complementary investment products like term/lease finance, SME finance, real estate finance,
equity finance, etc., brokerage services, issue management, underwriting, portfolio
management and corporate advisory services. Union capital is the largest financial group it was
established in 1988 based in Hong Kong. They began activities more than 16 years ago in
Bangladesh.
3.6 Mission & Vision of Union Capital Limited:
Our Mission
Our mission is supported by two fundamental principles that provide the foundation for all of
our activities: Ethical principles and Core Values. Attaining our mission requires superior and

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continually improving performance in every area and at every level of the Group. Our
performance will be guided by clear and concise strategic objectives for each business unit.
UCL Group is a fast growing financial institution in the community where we work. Our
mission is to be the best run, customer focused, integrated financial institution with a unique
and inclusive employee culture. We are committed to returning superior value to our
stakeholders. We will achieve this through leadership in innovation, an absolute focus on
customers and operational excellence.
Shareholders our responsibility to our shareholders is to effectively manage our physical,
financial and human resources to increase shareholders’ value through employee commitment
to excellence.
Customers we are dedicated to serve our customers and we believe our first responsibility is to
our customers. We will strive to meet our customers’ need by providing high quality product
and services of superior value. We believe our customers’ success determines our future.
Employees we provide responsible leadership and a clear vision of the future to all of our
employees. We expect our people to maximize their potential, to consistently achieve a high
level of performance. We will provide a safe, productive work environment in which each
employee will be treated as an individual with fairness, dignity and respect. We will recognize
and reward creativity, individual initiative and superior achievement.
Community we provide quality products and services to meet the needs of the society. We will
maintain high ethical standards, obey all laws, and respect local customs.
Environment we work together with all stakeholders to reduce our environmental impact by
embedding the environment into our business and by involving our employees, our customer
and our community.
Our Vision
Our vision is to become a leading and sustainable financial institution providing integrated
financial services that reflects its principles and values by aligning with our mission giving
special focus on enhancing value through excellence in performance and good governance for
our stakeholders. Our Shareholders Maximizing shareholders’ wealth achieving superior
performance; Our Customers Developing strong and mutual beneficial relationships working
closely with our customers; Our Employee’s Providing a safe and supportive working
environment for our employees; Our Community Be good citizens supporting community
initiatives in health, education, arts and socio-economic development; Our Environment
Protecting our environment and benefiting the community where we work.

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3.7 Our core Values of Union Capital Limited:

Our Core values drive UCL employees and management in delivering results to our
shareholders, clients and the community we operate in. Pursuing and living up to these values
is a responsibility we take great pride in. We believe our strength is rooted in our core values:
putting integrity first, building trust, working together, pursuing excellence, ensuring
transparency, embracing challenge and serving our community. These values are our legacy
and our future. We never lose sight of our founding principles and our proud heritage. Our
business is always evolving but we’ll always stay true to who we are. They always have been.
They always will be. Since its inception, UCL Group has been governed by its core values.
They shape the culture and define the character of our company. They guide how we behave
and make decisions. This is just one of the many ways that we continually reinforce the values
on which this company was built.
 Integrity
 Trust
 Teamwork
 Openness
 Transparency
 Excellence

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Chapter-04
Findings & Analysis

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4.1 Financial Performance Analysis of IDLC:

Financial Highlights (IDLC Finance Limited and its subsidiaries)

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4.2 Ratio Analysis:

3.3.1 Liquidity Dimension
3.3.1.1 Current Ratio
Year 2019 2018 2017 2016 2015
Ratio 1.06 1.12 1.18 1.17 1.22
Current Ratio
1.25
1.22
1.2 1.18
1.17
1.15
1.12
1.1
1.06
1.05
0.95
2019 2018 2017 2016 2015
Current Ratio
Figure: Graphical overview of Current Ratio of IDLC
In simple terms, current ratio is a liquidity ratio that measures whether a firm has enough
resources to meet its short term obligations or not. If we evaluate the last 5 year’s current ratio
data of IDLC finance Limited, we find that their ability to repay the loan is declining year by
year. In the year of 2019, if they liquidated their current assets, them they would have 1.06
BDT for fulfilling 1 BDT short term liability.

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3.3.2 Profitability Dimension
3.3.2.1 Net Profit Margin
Year 2019 2018 2017 2016 2015
Ratio 0.1239 0.1784 0.2184 0.1904 0.1609
Net Profit Margin

Net Profit Margin
0.2184
0.1904
0.1784
0.1609
0.1239
2019 2018 2017 2016 2015
Figure: Graphical overview of Net Profit Margin of IDLC

Net profit margin refers how much return a firm generates from their interest income. In the last
five years, their net profit margin fluctuates from one year to another year. If we consider the
fluctuation from 2017 to 2018, then we have found that both the interest income and noninterest
based income had been declined from 2017 to 2018. IDLC needed to spend less interest expense
compared to the year of 2017 which lead them to the decrease net profit after tax.
Decreased interest rate may be one of the reasons behind it. That’s the reason of getting higher net
profit margin in 2017 and similarly, we can describe the reasons of net profit margin fluctuation.

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3.3.3 Operating Profit Margin
Operating Profit Margin
Year 2019 2018 2017 2016 2015
Ratio 0.232 0.2869 0.3784 0.3428 0.3243
Operating Profit Margin

0.3784
0.3428
0.3243
0.2869
0.232
2019 2018 2017 2016 2015
Figure: Graphical overview of Operating Profit Margin of IDLC

Operating profit margin for IDLC refers that how much return it generates from the revenue
through interest income, non-interest based income before deducting the tax and provision.
Similar like net profit margin, we found the fluctuate rate in the last five years and in the year
of 2019, IDLC generates 23.2% profit before provision from their revenues or get 0.232 BDT
from 1 BDT revenue. If we consider only the fluctuation from 2017 to 2018, we can give the
similar reason that described in the case of net profit margin rate fluctuation from 2017 to 2018.

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3.3.4 Return on Total Equity
Return on Total Equity
Year 2019 2018 2017 2016 2015
Ratio 0.1247 0.15919 0.1808 0.1992 0.1875

0.25
0.1992
0.2 0.1875
0.1808
0.15919
0.15
0.1247
0.1
0.05
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Return on Total Equity of IDLC

It is known to us that return on equity refers the income the shareholders generate from their
invested capital or it indicates how well a company uses investment to generate earning growth. If
we evaluate the last five years ROE of IDLC, we found fluctuate rate and if we consider time period
of 2017 and 2018 then we will notice that from 2017 to 2018 ROE decreasing rate is rate 2.161%
and from 2017 to 2019 ROE decreasing rate is 5.61%. I found that both the shareholders’ equity
and net profit had been decrease in year 2018 and 2019, for this reason ROE had been decreased
because of more decreased rate of net profit. For increasing ROE firm should use their asset more
efficiently.

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3.3.5 Return on Total Asset
Return on Total Asset
Year 2019 2018 2017 2016 2015
Ratio 0.01448 0.01988 0.02379 0.02244 0.01987
Return on Total Asset

0.025 0.02379
0.02244
0.01988 0.01987
0.02
0.015 0.01448
0.01
0.005
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Return on Total Asset of IDLC

Return on total assets or ROA indicates how efficiently a firm uses its total assets to generate
net income. If we see the above table regarding the information of IDLC, we find that return
on total asset of IDLC declining over years. This declining rate is almost 0.05% 0ver 5 years.

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3.3.6 Gross Profit Margin
Gross Profit Margin
Year 2019 2018 2017 2016 2015
Ratio 0.4094 0.4787 0.6025 0.5524 0.5062
Gross Profit Margin

0.7
0.6025
0.6
0.5524
0.5 0.4787
0.4094
0.4
0.3
0.2
0.1
0.01987
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Gross Profit Margin of IDLC

Gross profit margin refers how much operating income a firm can generate from the total
revenue or the profit earned before deducting the operating expenses. If we evaluate the above
table of EBL, we find the fluctuate rate of gross profit margin over the five years, but in the
last years we have found an increasing rate of it. In 2019, IDLC earns 40.94% gross profit from
the revenue earned or if the revenue is 1 BDT, then IDLC earned 0.4094 BDT gross profit. If
we consider only the period from 2018 to 2019, we have found that increase rate of operating
income was less than the increased rate of total revenue which lead to the decreased gross profit
margin of 2019.

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3.3.7 Cost to Income Ratio
Cost to Income Ratio
Year 2019 2018 2017 2016 2015
Ratio 0.4332 0.3948 0.3719 0.3793 0.3592
Cost to Income Ratio

0.6
0.5062
0.5
0.4332
0.3948
0.4 0.3719 0.3793
0.3
0.2
0.1
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Cost to Income Ratio of IDLC

Cost to income ratio refers the operating expenses against the operating income or how much
expenses a firm need to spend for generating the operating income. If we take the last five
year’s information of IDLC, we have found cost to ups and downs cost to income ratio and in
the year of 2019, for generating 1 BDT operating income; IDLC needed to spend 0.43 BDT as
operating expenses. In the last three years 2015, 2016 & 2017, the ratio was almost similar, it
can be said that IDLC might manage their cost well in those years. But in 2018 and 2019
compare to operating income their cost getting increased.

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3.3.8 Interest Income to Total Operating Income
Interest Income to Total Operating Income
Year 2019 2018 2017 2016 2015
Ratio 0.8314 0.725 0.636 0.7232 0.745
Interest Income to Total Operating Income

0.9
0.8314
0.8
0.745
0.725 0.7232
0.7
0.636
0.6
0.5
0.4
0.3
0.2
0.1
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Net interest income to total operating income of IDLC
This ratio simply refers how much net interest income a firm generates from their total
operating income. We have found that operating income of IDLC consists of interest income,
investment income, commission and other income after deducting the interest expense. After
deducting interest expense from interest income, we have found the net interest income and in
the year of 2019, IDLC had 0.8314 BDT net interest income from 1 BDT total operating
income. If we consider just one period from 2018 to 2019, we can say that in this period the
net interest income had been increased, the increased rate of net interest income was more than
the operating income which lead to increase ratio from the previous period.

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3.3.9 Return on Capital
Return on Capital
Year 2019 2018 2017 2016 2015
Ratio 0.1448 0.1988 0.2379 0.2244 0.1987
Return on Capital
0.25 0.2379
0.2244
0.1988 0.1987
0.2
0.15 0.1448
0.1
0.05
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Return on Capital of IDLC

Return on capital (ROC) ratio measures the return that an investment generates from the capital
contribution or how much return a firm generates from the invested capital. This ratio shows
the effectiveness of a firm for turning capital into profits. From the above bar diagram, we have
found fluctuate rate of this ratio in the last five years for fluctuate amount of capital and net
profit after tax. In the year of 2019, we have found that IDLC generated 14.48% % return from
their invested capital or we can say in another way that, from 1 BDT invested capital, they
earned 0.1448 BDT. If we consider only the period from 2018 to 2019, we have found the
decreased amount of ROC. Though amount of invested capital had been increased from 2018
to 2019, still IDLC net profit after tax had been declined which helped us to make a conclusion
that they didn’t efficiently use their invested capital to generate more return.

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3.3.10 Solvency Dimension

Debt to Equity Ratio
Year 2019 2018 2017 2016 2015
Ratio 7.547 7.004 6.595 7.873 8.431
Solvency Dimension
9
8.431
7.873
8 7.547
7.004
7 6.595
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Debt to equity ratio of IDLC

Debt to equity ratio refers the leverage position of a firm or how much debt is used for financing
compared to the financing through the shareholders’ equity. If we evaluate the last five year’s
debt to equity ratio of IDLC, we can see the dependency of IDLC on debt had been increasing
than the equity for financing or they are relying more on deposits for the funding. In the year
of 2019, their amount of debt is 7.54 times more than the equity financing. This ratio indicates
that they were able to attract more and more customers for depositing their fund. On the other
hand, it negatively affects the solvency because of the high amount of debt over the equity.

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3.3.11 Total Debt to Total Asset Ration
Total Debt to Total Asset Ration
Year 2019 2018 2017 2016 2015
Ratio 0.876 0.8751 0.8683 0.8873 0.8939
Total Debt to Total Asset Ration

0.9
0.895 0.8939
0.89
0.8873
0.885
0.88
0.876
0.8751
0.875
0.87 0.8683
0.865
0.86
0.855
2019 2018 2017 2016 2015
Figure: Graphical overview of Total Debt to Total Asset Ration of IDLC

Total debt to total asset ratio refers the proportion of total debt over the total assets. It is known
to all that the major sources of fund. That’s the reason we have found a high proportion of debt
of IDLC in the last five years over the total assets and the proportion had been increasing year
by year. Debt to equity ratio supports this fact. In the year of 2019, IDLC had 87.6% debt over
the total assets. Higher proportion creates burden for the repayment over the periods which
negatively affect the solvency condition of IDLC.

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3.3.12 Loan to Deposit Ration

Loan to Deposit Ration
Year 2019 2018 2017 2016 2015
Ratio 1.11 1.15 1.15 1.26 1.15
Loan to Deposit Ration

1.4
1.26
1.2 1.15 1.15

1.11
1
0.8939
0.8
0.6
0.4
0.2
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Loan to Deposit Ration of IDLC

Loan to deposit ratio refers how much loans are issued against the deposited fund collected
from the depositors. This ratio can show the solvency picture of a firm. If we evaluate the last
five year’s data of IDLC, we have found that they had been issuing more loans against the
deposits and it is very good indication for better solvency of firm. In the year of 2019, they
issued 1.11 BDT loan against 1 BDT deposits. This ratio indicates that they are enough capable
to cover the deposits.

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3.3.13 Equity Multiplier
Equity Multiplier
Year 2019 2018 2017 2016 2015
Ratio 8.62 8.00 7.59 8.87 9.43
Equity Multiplier
10
9.43
8.87
9 8.62
8
8 7.59
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Loan to Deposit Ration of IDLC

In simple terms, equity multiplier is a measure of firm’ financial leverage. Higher equity
multiplier indicates that a larger portion of total asset is financed with debt. If we evaluate the
above bar diagram, we can find the increasing rate of equity multiplier for the last five years
and IDLC was carrying a high rate of EM in all the years which indicates the more dependency
on debt rather equity. In the year 2019, IDLC had 8.62 times more financing by debt than
equity.

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3.3.14 Efficiency Dimension
Asset Utilization Ratio
Year 2019 2018 2017 2016 2015
Ratio 0.1168 0.1114 0.1089 0.11787 0.125
Efficiency Dimension
0.13
0.125
0.125
0.12
0.11787
0.1168
0.115
0.1114
0.11 0.1089
0.105
0.1
2019 2018 2017 2016 2015
Figure: Graphical overview of Asset utilization ratio of IDLC

Asset utilization ratio how much revenue is generated by a firm from every dollar of assets that are
invested. More return indicates the high efficiency of a firm. If we see the above bar diagram, we
can see a decreasing rate of asset utilization ratio of IDLC from year 2015 to 2018.
Though revenue was increasing in those five years, still the increasing rate was less than the
increasing rate of total assets which lead to the decreasing rate of this ratio. We know that, interest
income is one of the major components of total revenue that affects the total revenue.
We can say, because of the decreased rate of spread, increased rate of interest income was not
enough to provide the increased asset utilization ratio. If we consider the year 2019, we can see that
by investing 1 BDT in asset, IDLC was capable to generate 0.1168 BDT revenue.

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3.3.15 Loan Utilization Ratio
Loan Utilization Ratio
Year 2019 2018 2017 2016 2015
Ratio 0.1517 0.1329 0.1243 0.1343 0.1494
Loan Utilization Ratio

0.16 0.1517
0.14 0.1329 0.1343

0.1243 0.125
0.12
0.1
0.08
0.06
0.04
0.02
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Loan Utilization Ratio of IDLC

Loan utilization ratio refers how much income can be generated from issuing loan. From the
above bar diagram, we can see the increasing rate of loan utilization ratio of IDLC from the
year 2016 to 2019 and in the year 2019, they earned 0.151 BDT from issuing loan of 1 BDT or
generated 15.17% earning from issuing loan. Compare with the year 2016 the ratio getting
increase in 2019 by 1.74%.

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3.3.16 Market Dimension
Price Ratio
Year 2019 2018 2017 2016 2015
Ratio 11.23 16.51 20.02 12.33 16.56
Market Dimension
25
20.02
20
16.51 16.56
15
12.33
11.23
10
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Price Ratio of IDLC

Price ratio refers how much investors are willing to pay per dollar of reported profits. This
price ratio shows the growth prospective of a firm so that higher ratio is a good sign, because
investors would be ready to give more to buy the shares of that firm. If we evaluate the last five
year’s date regarding this ratio for IDLC, we have found that from the 2015 to 2018, they had
to face very much fluctuation in price ratio. In the year of 2017, there was a sharp jump of
market price of per share which lead the IDLC to achieve a high price ratio in this year and the
rate is 20.02% for per dollar of reported profit. But in year 2019 this ratio falls to 11.23% This
low price ratio is a bad sign for collecting less funds from the investors in the future which will
decrease the total equity to total asset ratio and so, it would increase burden of debt.

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3.3.17 Dividend Yield Ratio
Price Ratio
Year 2019 2018 2017 2016 2015
Ratio 0.07709 0.0572 0.0351 0.0526 0.0393
Dividend Yield Ratio

0.09
0.08 0.07709
0.07
0.06 0.0572
0.0526
0.05
0.0393
0.04
0.0351
0.03
0.02
0.01
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Dividend Yield Ratio of IDLC

Dividend yield ratio is the ratio that measures the amount of cash dividends distributed to the
ordinary shareholders’ relative to the market value per share. It helps the investors to analyze
their return on investment in stock. If we compare the last five year’s value of DPS and market
price per share of IDLC, we get fluctuate dividend yield ratio. If we consider only the period
from 2018 to 2019, we can see an increased dividend yield because of low market price in that
year. Dividend yield was 7.70%. low market price per share indicates the low demand of their
share, that’s why they paid more dividend yield in the year 2019 by doing this they become
more attractive to investors.

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3.3.17 Dividend Payout Ratio
Price Ratio
Year 2019 2018 2017 2016 2015
Ratio 0.8663 0.82938 0.7042 0.6493 0.651
Dividend Payout Ratio

1
0.9 0.8663
0.82938
0.8
0.7042
0.7 0.6493 0.651
0.6
0.5
0.4
0.3
0.2
0.1
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Dividend Payout Ratio of IDLC

Dividend payout ratio refers how much earnings per share is given as dividend per share to the
investors. It is very obvious that investors will prefer high dividend payout ratio. Last five
year’s data of IDLC have showed us the fluctuate rate of this dividend payout ratio because of
the changes of earning per share and company’s own policy also affects it. In the year of 2019,
IDLC paid 86.63% dividend of their total earning per share as a dividend.

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3.3.18 Earning Per Share
Earning Per Share
Year 2019 2018 2017 2016 2015
Ratio 4.51 5.76 6.13 5.49 4.5
Earning Per Share

7
6.13
6 5.76
5.49
5
4.51 4.5
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Earning per Share of IDLC
Earnings per share is the portion of a firm’s profit allocated to each of the ordinary shares. EPS
can be calculated from net income available to ordinary shareholders and then it need to be
divided by total number of ordinary shares outstanding in the market. From the above bar
diagram, we can see fluctuate rate of EPS over the last five years because of the differences of
net income and number of shares outstanding. In year of 2019, the common shareholders of
IDLC have earned 4.51 taka on every share they held.

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3.3.19 Price Earnings Ratio
Price Earnings Ratio
Year 2019 2018 2017 2016 2015
Ratio 10.07 12.11 13.91 8.05 10.96
Price Earnings Ratio

16
13.91
14
12.11
12
10.07
10
8.05
8
6
4.5
4
0
2019 2018 2017 2016 2015
Figure: Graphical overview of Price Earnings Ratio of IDLC

The P/E ratio measures the relationship between a company's stock price and its earnings per
share of stock issued. P/E ratio can be used to find out whether the stock you are looking to
purchase is overvalued or undervalued. The P/E ratio shows what the market is willing to pay
today for a stock based on its past or future earnings. According to sources Financial
Institutions P/E ratio average was 14.66 in year 2019. In 2019 IDLC PE ratio was 10.07.
According to these financial ratios IDLC Finance Limited's valuation is way below the market
valuation of its sector. The (current) company valuation of IDLC Finance Limited is therefore
way below its valuation average over the last five years.

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4.4 Findings of Financial Performance Analysis of IDLC:

• The total asset growth rate of IDLC is differ every year. In year 2019 total asset growth
rate increased in compare to 2017. Within 5 years the total asset growth rate is 14.9%.
• The long-term liabilities vary during the year of 2015 to 2019. Compare to year 2015
the long term liability increased almost 40%.
• IDLC total deposit growth rate increased from 2015 to 2019 and it indicate that it can
attract more new investors.
• Operating income of IDLC increased over years.
• IDLC operating expense and financial expense increasing over years but comparing
with operating expense IDLC financial expense is increasing more. This increasing rate
is almost 3.78% over 5 years.
• Also comparing with total income growth rate IDLC expense growth rate is high in this
5 years.
• After the subtraction of taxes, net profit of the company continuously increased. And it
motivates investors to invest on IDLC.
• The total number of shareholders of the company also increasing over years
• Lease Finance growth rate and current asset growth rate is negative over these 5 years.
• As the total shareholders increase, equity of shareholders also increased but as the
income get fall from the last year they had to retain less fund and distribute 80% of their
net income to their shareholders to retain the investors and to attract more new investors.
• ROA declined during the period from 2015 to 2019 and in 2019 this return rate is lower
than the industry average. So it can be said in 2019 they are not able to managing the
firm asset effectively.
• ROE is observing higher than the industry average in year 2015 to 2017. Therefore,
IDLC seems much more lucrative to its shareholder. But in 2018 and this rate getting
declined because of declining rate of net income.
• EPS of IDLC getting increased during the year 2015 to 2017 but in 2018 to 2019 EPS
get declined.
• Dividend payout ratio of IDLC increased repeatedly and this encourage more
shareholders to invest in the company.
• IDLC debt to total asset is higher than the industry average. This is not a good sign as
IDLC now depends more on leverage.

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• IDLC Debt to Equity ratio also differ during the year 2015 to 2019 and this ratio is
increasing over years and IDLC using more debt than Equity in 2018 and 2019. The
ratio was higher than the industry average. So IDLC became more profitable, as well
as becoming riskier and less solvent than the industry average.
• Fin. Expense coverage ratio of IDLC is lower than the industry average from year 2015
to 2017 but in 2019 this ratio getting decline and investors may not seem it as a good
signal.
• Capital adequacy ratio of IDLC was less than the industry average. So it was less
favorable than other company to the shareholders
• P/E ratio of IDLC kept on repeatedly falling. So it was riskier and their growth was
very poor in year 2019.
• As the loan to deposit ratio is less than the industry averages the profitability of IDLC
was also less than their industry in the last year.
• Over year IDLC current ratio decline and it now become lower than the industry
average. And it indicates that their liquidity condition is not so good than before.

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4.5 Union Capital Limited:

Balance Sheet
Particular 2019 2018 2017

Property & Assets Cash 157,033,401 153,147,421 108,533,347
In hand (including foreign currencies) 103,093 94,000 82,910
balance with Bangladesh bank 156,930,308 153,053,421 108,450,437
Balance with other banks 1,049,943,557 584,665,126 269,184,538
In side Bangladesh 1,049,943,57 584,665,126 269,184,538
Outside Bangladesh - - -
Money at call and short notice - - -
Investment 1,620,829,86 1,488,135,388 1,627,749,03
Government - -
Others 1,620,829,86 1,488,135,388 1,627,749,03
Loans , advances and leases
Loans , advances and leases 15,644,01823 14,739,579,04 10,748,602,9
Fixed assets including land, building 29,253,671 24,186,716 18,243,065
Other assets 1,764,655,14 1,184,609,203 1,133,276,73
Non-banking asset - -
Total assets 20,265,73322 18,174,322,89 13,905,589,6
Liabilities and Capital Liabilities
Borrowings from other banks 2,815,301,89 2,985,042,73 1,988,792,06
Deposit and other account
Term deposits 10,712,74907 9,695,588,74 7,374,991,73
other deposits 1,086,037,70 1,009,852,80 461,863,431
Total Deposit and other account 11,798,78627 10,705,44184 7,836,855,24
Other liabilities 3,157,718,23 2,676,662,004 2,069,276,30
Total liabilities 17,771,80749 16,367,149,30 11,894,923,9
Shareholders' equity
Ordinary share capital 1,329,902,86 1,209,002,586 1,099,093,20
Preference share capital 500,000,000 - -
Statutory reserves 364,815,071 323,835,724 281,817,425
Revaluation reserved 102,024,360 102,024,360 505,500,000
Retained earning 197,184,426 172,313,739 124,254,553
Total shareholders' equity 2,493,926,63 1,807,176,409 2,010,665,27
Non-controlling interest 180 149 170
Total liabilities &shareholders' equity 20,265,73322 18,174,322,89 13,905,58906

52 | P a g e
Common Size Statement
Profit And Loss Account
Particular Year 2019 Year 2018 Year 2017
Interest Income 2,027,270,101 1,914,919,640 1,428,774,949
Interest on Deposit 1,343,948,222 1,342,351,271 1,057,469,365
Net interest Income 683,321,879 572,568,369 371,305,584,
Investment Income -100,802,483 71,828,356 27,394,754
Fees ,Commission, Exchange 162,517,165 214,085,792 174,552,634
Other Operating Income 56,612,548 30,226,665 33,079,076
Total Operating income 801,649,109 888,709,182 606,332,049
Salaries And Allowance 109,812,338 97,444,653 64,970,210
Rent , Taxes , Insurances 32,552,380 25,373,808 18,679,585
Legal Expense 2,372,138 832,018 804,662
Postage , Stamp, Telecommunication etc. 4,424,755 3,525,415 3,323,908
Stationary , Printing , Advertisement 5,298,840 10,541,211 7,933,556
Managing Director Salaries 3,158,710 7,920,000 7,080,000
Directors Fee 1,631,500 1,598,000 1,111,500
Auditors' fees 316,250 327,750 304,750
Depreciation And Repair Company 13,677,283 9,802,768 10,997,948
Other Expenses 38,209,253 34,649,736 26,912,497
Total Operating Expenses 211,453,447 192,015,359 142,118,616
Profit Before Provision 590,195,662 696,693,823 464,213,432
Provision For Loans And Investment
General Provision 12,811,685 188,120,423 134,982,012
Specific Provision 106,762,766 66,188,524 109,589,808
Provision For Diminution of -13,942,436 -6,103,370 11,051,020
Investment
Total Provision 105,632,015 248,205,576 255,622,840
Total Profit Before Provision 484,563,647 448,488,247 208,590,592
Provision For Taxation
Current Tax 251,996,473 247,563,918 69,093,869
Deferred Tax -1,580,403 937,537 -2,263,275
250,416,070 248,501,455 66,830,594
Net Profit After Taxation 234,147,577 199,986,792 141,759,998
Appropriations -1,580,403 937,537 -2,263,275
Statutory reserved 40,979,347 42,018,299 27,748,814
Dividend paid on share 47,397,261 - -
Retained Surplus 145,770,989 157,968,493 114,011,163
Attribution to
Ordinary share holder to the company 186,750,285 199,986,813 141,759,977
No-controlling interest 31 -21 21
Earnings per share 1 1.5 1.17

53 | P a g e
3.12 Ratio Analysis of Union Captain Limited

Cash Position
Cash + Marketable Securities Current Liabilities 0.121654058 0.119885 0.064212
Cash + Marketable Securities Sales 0.87697402 0.85710270 0.441585
Cash + Marketable Securities Total Asset 0.0877275 0.0903077 0.04537
1.2
0.8
0.6
0.4
0.2
0
2019 2018 2017
cash +marketable securities/current liablities cash+marketable securities/sales

cash+marketable securities/total asset
Interpretation
All the above the calculation we see the overall cash position of the increased from 2017 to
2019 which is better for the firm.

54 | P a g e
A Table of Liquidity Ratio of Union Captain Limited
Quick Ratio Cash +Short term Marketable 1.303895 1.2702297 1.3278
Security + Account Receivable Current
Liabilities
Current Ratio 1.26397 1.2392203 1.29803
Current Asset Current Liabilities
100%
90%
80%
70% current asset/current liablities
60%
50%
cash+short term marketable
40% securities+a/c
receivable/current liabilities
30%
20%
10%
0%
2019 2018 2017
Interpretation
There is no significant change in cash position in 2019, 2018 and 2017

55 | P a g e
Working Capital of Union Captain Limited
Working capital from 1.90292171186 1.71027 2.049603

operation
Sales
Working capital from 0.190357 0.180201 0.210593
operation
Total assets
Cash flow from 0.21594 0.309806 0.305320

operation
Sales
Cash flow from 0.0216019 0.032642 0.03137
operation
Total assets
2.5
cash flow from operation/total
asset
2
cash flow from operation/sales
1.5
working capital from
operation/total asset
1 working capital from
operation/sales
0.5
0
2019 2018 2017
Interpretation
Above the graph we see that the highest position of the firm in 2016 it decreased in 2018 and
gradually the cash position increased in 2019.

56 | P a g e
Debt Service Coverage of Union Captain Limited
Operating income 0.621576 0.690414 0.6119348

Annual interest
payment
Cash flow operation 0.3394426 0.46088 0.44026
Annual interest
payment
0.7
0.6
0.5
0.4
operating income / annual
0.3 interest payment
0.2
0.1
0 cash flow from operation /
2019 2018 2017 annual interest payment
Interpretation
Highest debt services coverage of the firm in 2018. But it’s getting down at 2019 which is not
good for the firm.

57 | P a g e
Profitability of Union Captain Limited
Profit Margin 0.1154989 0.104436 0.09921
Net income
Revenue/sales
Return Equity 0.0938871 0.110662 0.07050
Net income
Shareholder equity
Return on Asset 0.011553 0.011003 0.0101944
Net income
Total Asset
0.3
0.25
0.2
0.15
0.1
0.05
0
2019 2018 2017
net income / sales net income / shareholder equity net income / total asset
Interpretation
In 2019 the profitability of the firm is getting down from 2018. In the 2018 the firm has highest
profitability ratio. Firm should take corrective action to increased profitability.

58 | P a g e
Union Capital Limited
Trend Statement
Profit and Loss account
Particular year 2017 year 2018 year 2019
Interest Income 100 134.02% 141.88%

Interest on Deposit 100 126.93% 127.09%
Net interest Income 100 154.2% 184.03%
Investment Income 100 262.19% -367.96%

Fees ,Commission and exchange 100 122.64% 93.104%
Other Operating Income 100 91.37% 171.14%
Total Operating income 100 146.57% 132.21%
Salaries And Allowance 100 149.98% 169.01%

Rent , Taxes , Insurances 100 136% 174.26%
Legal Expense 100 103.39% 294.79%
Postage , Stamp,
Telecommunication etc. 100 106.06% 133.11%
Stationary , Printing ,
Advertisement 100 172.86% 66.79%
Managing Director Salaries 100 111.86% 44.61%
Directors Fee 100 143.76% 146.78%
Auditors' fees 100 107.54% 103.77%
Depreciation And Repair
Company 100 89.13% 124.36%
Other Expenses 100 128.74% 141.97%
Total Operating Expenses 100 135.11% 148.78%

Profit Before Provision 100 150.08% 127.13%

59 | P a g e
Provision For Loans And
Investment
General Provision 100 139.36% 9.49%

Specific Provision 100 60.4% 97.42%
Provision For Diminution in value
of Investment 100 -55.22% -126.16%
Total Provision 100 97.09% 41.32%

Total Profit Before Provision 100 215% 232.3%
Provision For Taxation
Current Tax 100 358.3% 364.71%
Deferred Tax 100 -41.42% 69.82%
Net Profit After Taxation 100 141.07% 165.17%
Appropriations
Statutory Reserved 100 151.42% 147.68%
Dividend on paid of share 100 - -
Retained Surplus 100 138.55% 127.85%

60 | P a g e
Chapter-05
Recommendation &
Conclusion

61 | P a g e
5.1 Recommendations:
• IDLC should need to improve its current Ratio. Because over year this ratio is
declining.
• They need to increase their ROA by using their total asset more efficiently by doing
this they can increase their net income.
• From 2015 to 2019 IDLC total revenue decline because of increasing total expenses.
For this reason, IDLC should maintain their operating and financial expenses more
efficiently so that they can maximize their total net income.
• From 2017 to 2019 ROE decreasing rate in 5.61%. To attract more shareholders and
maintaining a good will IDLC should increase ROE. IDLC should give more attention
on increasing ROE as it is one of the main indicator of company performance.
• IDLC should also be careful about it because it is responsible as the main indicator of
company’s performance.
• IDLC need to maintain an optimal capital structure where debt and equity will be used
in a balance between risk and return where they can ensure optimum return and
minimum risk.
• IDLC should need to follow loan to deposit rules given by Bangladesh Banking case of
crisis related liquidity.
• The management should focus on increasing their P/E ratio because it is a major
exponent of financial institutions performance. Management should give effort to
increase net income every year as well as earning availability for Common shareholders
by doing this it will increase confidence level of Investors and P/E ratio will increase.
• Over years from 2014 to 2019 their net current asset growth is negative so they should
give more concentration for make this growth positive and main a positive liquidity
position
• Comparing with others NBFI, IDLC price earnings ratio is quite low. So they should
give more concentration on it

62 | P a g e
5.2 Conclusions:
Leasing industry is a prosperous sector in Bangladesh. The leasing companies on the average
are doing pretty well in our country. Leasing companies has gained its popularity for several
reasons. The first and most important of all is that leasing can be thought of as an alternative
source of fund which is most of the cases cheaper, and for the companies which don’t have a
high credit rating or a visible positive past track record, this may be the main source of
financing. Another thing is, lease is an alternative to investment. If you need a particular asset
for running or expanding your business, you may choose to lease it rather than purchase it.
At last, it can be concluding that IDLC financial company is most reputed non-banking
financial company in Bangladesh. In this report, from the year 2015 to 2019 financial
performance of IDLC has been examine and evaluated as well as comparison with other some
NBFI also shown for a better understanding of IDLC performance in the financial market. After
analysis various positive and negative sides of the IDLC finance limited company has come
forward. The analysis shows that IDLC finance limited performed poorly in the year 2019
compare to the other years. Some suggestion is given to the management of this company base
on the problems that are identified. IDLC can become a most superior and leading financial
company in Bangladesh if the management of IDLC finance limited solve this problem more
efficiently. By doing this they can also achieve their company vision which is to become the
best financial brand in Bangladesh. Besides, they should perform more CSR activities so that
it helps them to improve their company reputation as well as to ensure their long-term
sustainability.
Over the analysis we see that both firm z-score are in distress zone which is not good for firm.
Both the firm should take corrective action to solve this problem otherwise it will be big threat
for the firm.
Union capital and IDLC both the company have a good name in Bangladesh. They provide
different types of service different types for different types of customer.

63 | P a g e
5.3 References:
1. Financial highlight, leasing company
2. Annual report of IDLC finance ltd. 2017, 2018 and 2019.
3. Financial statement analysis book of George foster
4. www.investopedia.com/terms/f/financial-statement-analysis.asp
5. https://en.wikipedia.org/wiki/Financial statement analysis
6. Annual report of union capital limited 2017, 2018 and 2019
7. Kieso. Principles Accounting, Life publishers (12th edition). Dhaka, Bangladesh. 2018.
8. Gitman Lawrence J. Principles of Managerial Finance, Prentice Hall series in finance.
(13th Edition).New Delhi, 2017-2019.
9. Altman, Edward Handbook of Corporate Finance, John Wily and Sons, New York, 1986
pp11-41.
10. Choudhury, A. Quadir, “Leasing in Bangladesh- An Overview”, The Bangladesh
Observer, 1999, December 03, Dhaka.
11. Anderson, Paul, F. and Martin J. D. “Lease vs. Purchase Decision: A Survey of Current
Practices”, Financial Management, Vol.6, spring, pp.1979, 41-47.
12. Choudhury, T. A. “An evaluation of the performance of commercial banks in
Bangladesh”, Ph.D. thesis. 1990.
13. Clark, T. M. Leasing, McGraw Hill, London, 1976.
14. Cooper, R. A. and A. J. Weeks, Data Models and Statistical Analysis, Heritage Publish,
New Delhi, India, 1983, P-400.
15. Fabozzi, Frank J. Equipment Leasing –A Comprehensive Guide for Executives, Dow
Jones – Irwin Inc., USA, 1981, P-248.
16. Annual report-2015, 2016, 2017, 2018, 2019-IDLC Finance Limited.
17. Financial Highlights | IDLC at <<https://idlc.com/financial-highlights.php#financial-
heighlight-idlc-finance>> [Last Visited 25 June 2020 at 12:06 AM]
18. Financial performance analysis of IDLC at <<
http://dspace.uiu.ac.bd/handle/52243/778>> [Last Visited 25 June 2020 at 12:36 AM]
19. IDLC tries to solve the problem of people and profit comes as a logical by product in
that process at<<http://www.fintechbd.com/idlc-tries-to-solve-the-problem-of-people-
and-profit-comes-as-a-logical-by-product-in-that-process/>>[Last Visited 25 June
2020 at 6:12 PM]
20. Disclosures under Pillar |||-Market Discipline at

64 | P a g e
<<file:///C:/Users/HP/Downloads/A1Internship%20report%20work/sj5Bsr6SavSQM
OvBr9bBr9.pdf>>[Last Visited 25 June 2020 at 6:22 PM]
21. Performance evaluation of IDLC Finance Limited
<<http://lib.ewubd.edu:8080/bitstream/handle/123456789/1652/Md._Jahirul_Khan.pd
f?sequence=1&isAllowed=y>>[Last Visited 28 June 2020 at 1:36 AM]
22. The world of IDLC <<https://www.idlc.com/the-world-of-idlc.php>> [Last Visited 28
June 2020 at 1:28 AM]

65 | P a g e

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Thesis Paper on: “Financial Statement Analysis On leasing company of Bangladesh

: - A Study on IDLC & Union Capital Limited”

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

1.2 Statement of the Problem

Provided By: Josna Akter, RMBA Major in Finance

1.3 Significance of the Study

 Leasing companies having relatively volatile (unstable position) in the industry

Provided By: Josna Akter, RMBA Major in Finance

1.4 Aim & Objectives

Provided By: Josna Akter, RMBA Major in Finance

1.5 Scope of the Study

Provided By: Josna Akter, RMBA Major in Finance

1.6 Research Methodology:

Provided By: Josna Akter, RMBA Major in Finance

1.7 Limitation of the study

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Leasing Practices in Developing Countries

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

An Overview of the “IDLC & Union Capital Limited

Provided By: Josna Akter, RMBA Major in Finance

3.2 Historical Background of IDLC

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

3.7 Our core Values of Union Capital Limited:

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

4.1 Financial Performance Analysis of IDLC:

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

Provided By: Josna Akter, RMBA Major in Finance

4.2 Ratio Analysis:

Figure: Graphical overview of Current Ratio of IDLC

Provided By: Josna Akter, RMBA Major in Finance

Net Profit Margin

2019 2018 2017 2016 2015

Figure: Graphical overview of Net Profit Margin of IDLC

Provided By: Josna Akter, RMBA Major in Finance

Operating Profit Margin

2019 2018 2017 2016 2015

Figure: Graphical overview of Operating Profit Margin of IDLC

Provided By: Josna Akter, RMBA Major in Finance

Return on Total Equity

Return on Total Equity

Figure: Graphical overview of Return on Total Equity of IDLC