CREDIT RISK GRADING OF

FU-WANG FOODS LTD

COUNTRY WISE TOP 3 EXPORTS

Serial Name ID
1 Shaily Barua 23-024
2 Minhajur Rahman Joy 23-106
3 Md. Foyez Alam 23-155
4 H. M. Rahat Fida 23-187
5 Md. Riaj Morshed 23-197
COMPANY PROFILE

Started its commercial production in August 1997

1 is a public ltd company

Publicly listed with both Dhaka Stock Exchange

2 Ltd and Chittagong Stock Exchange Ltd since the
July of 2000.

The company achieved its ISO-9002 certification

3
on 04th November 1998

With a Paid-up Capital of Tk. 1007.63 Million and a

4 work force of 1659 employees,
USE OF CREDIT RISK GRADING

Standardized approach to assess the quality of the

1 branch or the Bank as a whole

Would be relevant for individual credit selection,

2 wherein either a borrower or a particular facility is rated

Risk grading would also be relevant for surveillance

3 and monitoring
CREDIT RISK GRADING

GRADING SHORT NAME Number

Superior Sup 1
Good GD 2
Acceptable ACCPT 3
Marginal/Watchlist MG/WL 4
Special Mention SM 5
Sub standard SS 6
Doubtful DF 7
Bad and Loss BL 8
Calculation of Credit Risk Grading

1 Financial Risk

2 Business/Industry Risk

3 Management Risk

4 Security Risk

5 Relationship Risk
Calculation of Credit Risk Grading
Financial Risks
2014 2015 2016 2017 2018 2019 Average
Particulars (BDT mn)
Total Liabilities and Equity 1179.30 1343.23 1482.20 1581.86 1752.93 1901.52
Total Equity 838.65 951.78 1038.91 1101.64 1208.85 1297.52
Total Liabilities 340.65 391.46 443.29 480.22 544.08 603.99
Leverage Ratio 0.41 0.41 0.43 0.44 0.45 0.47 0.43
794.41 819.85 767.11 586.79 712.63 981.86
Turnover (net of VAT)
179.47 240.16 203.46 167.42 189.65 253.56
Gross Profit
Gross Profit Margin 0.23 0.29 0.27 0.29 0.27 0.26 0.27
Operating Income 92.65 154.08 120.62 86.52 89.06 139.07
Operating Profit Margin 0.12 0.19 0.16 0.15 0.12 0.14 0.15
Net Profit after tax 59.69 110.05 86.16 61.80 63.41 88.18
Net Profit Margin 0.08 0.13 0.11 0.11 0.09 0.09 0.10
Retention 0.98
Current Assets: 649.32 780.95 873.65 967.76 1139.41 1246.20
Current Liabilities: 262.56 325.45 386.60 384.10 448.50 506.40
Current Ratio 2.47 2.40 2.26 2.52 2.54 2.46 2.44
Operating Profit before
Financial Expenses 104.92 169.90 134.36 101.92 107.16 160.44
Financial Expenses -12.27 -15.83 -13.74 -15.40 -18.09 -21.38
Interest Coverage Ratio -8.55 -10.73 -9.78 -6.62 -5.92 -7.51 -8.18
Sales Growth Rate 0.14 0.10 0.07 0.11 0.08 0.10
Financial Risks

Score
Criteria Weight Actual Parameter Obtained
A. Financial Risk 50%

1. Leverage: (15%) 0.43 13

2. Liquidity: (15%) 2.44 13

3. Profitability: (15%) 14.60% 12

4. Coverage: (5%) 8.18
Total Score- Financial Risk 43 out of 50
Business Risks

B. Business/ Industry Risk 18%

1. Size of Business (in BDT crore) 86.76 5
2. Age of Business 23 3
3. Business Outlook Favourable
3
4. Industry Growth Good (>5% - 10%) 2
5. Market Competition Highly Competitive 0
6. Entry/Exit Barriers Average 1
Total Score- Business/Industry Risk 15 out of 1
Management Risk

C. Management Risk 12%

1. Experience More than 10 years in the related line of business 5
2. Second Line/ Succession Succession within 1-2 years 3
3. Team Work Very Good 3
Total Score- Management Risk 10 out of 12
Security Risk

D. Security Risk 10%

1. Security Coverage (Primary) Registered Hypothecation (1st Charge/1st Pari passu Charge) 3
2. Collateral Coverage (Property Location) Registered Mortgage on Municipal corporation/Prime Area property 4
3. Support (Guarantee) Personal Guarantees or Corporate Guarantee with average financial strength 1
Total Score- Security Risk 8 out of 10
Relationship Risk

E. Relationship Risk 10%

1. Account Conduct More than 3 years Accounts with faultless record 5
2. Utilization of Limit 70.00% 2

(actual/projection)
3. Compliance of Covenants / Full Compliance 2
Conditions
4. Personal Deposits No depository relationship 0
Total Score- Relationship Risk 4 out of 10
Conclusion

Risk Component Weight CRGM CRG Difference

Total Score- Financial Risk 50 46 43
-3
Total Score- Business/Industry Risk 18 13 15
2
Total Score- Management Risk 12 9 10
1
Total Score- Security Risk 10 8 8
0
Total Score- Relationship Risk 10 9 9
0
Total
100 86 85 -1
Rating GD Good
CREDIT RISK GRADING OF
FU-WANG FOODS LTD
Financial Risks

The average ratios are considered for all the actual parameters except the retention
ratio. The retention ratio is calculated using most recent company financial information

There is no sufficient data to calculate Cash Conversion Cycle (CCC). So, the industry
standard value for CCC is used

The company has taken loan from IDLC and two other commercial banks. So we are
assuming the access to credits in other banks is ‘Easy’.

Only company’s Audited financial statements have been used to calculate the CRG.
Business Risks

Size of business is calculated considering the most recent year’s total sales which is BDT
867.58 million
Fu Wang Foods Ltd. was established in 1997, so the age of the business is 23 years
The company is well established in the industry but Covid-19 pandemic and intense
competition. So, the business outlook is slightly uncertain.
The demand nature of the industry is ‘Must Have’ so the growth is sustainable. With
increasing population of the country, the growth rate of Food and Allied industry is also
expected to be increasing.
Market competition is intense with major competitors like ACI Foods Ltd. Square Food
and Beverage, Olympic Industries Ltd, Pran Foods Ltd, and so on.
Barrier to entry is average as companies do not need to take additional complex legal
requirements other than the existing ones
Management Risk

All members of the top management are qualified and

competent. The management body has more than 10 years of
experience in the Food and Allied industry

The succession is not rapid and quick. Succession takes 1-2

years

Fu Wang Foods Ltd. is a local public limited company