Total Marks: 100

Time: 4 Hours

Instructions:

1. Check that your question paper contains all the exhibits as mentioned in page 3. The
consecutive page numbering may be found under the base line at the foot of each page.
2. Use the answer script provided by the Institute. Write your name, roll no., registration no.
and name of the subject on the upper portion ofthe cover page of the answer script.
3. Candidates are asked not to write any particulars of identification in any other place of the
answer script and additional pages if taken.
4. Questions must be answered in English.
5. The answer should be referenced to the relevant workings.
6.

Answer script and additional page(s) taken to write answer, used or unused, must not be
removed or taken away from the Examination Hall.

Requirements

& Marks Allocation:

You are Nafis Redwan, a senior articled student of Hassan Jahid & Co., Chartered Accountants. The
senior partner of the firm, Jahidur Rahman FCA has given you an e-rnail detailing of your assignment.
Requirements:
You are required to prepare a draft report to your partner Jahidur Rahman FCA.Your
comprise the following elements:
.:.
.:.
.:.

report should

An executive summary
Your responses to the detailed requirements (a), (b) and (c) set out in Exhibit-I.
State clearly any assumptions that you make.

Marks Allocation:
All of the marks in the Case Study are awarded for the demonstration
broadly as follows:
Requirements

Executive Summary

Requirement
Requirement
Total

skills, allocated

Profession Skills
Assimilat
ing and
using
informati
on

Requirement

of professional

(a) (i)
(ii)
(b)
(c) (i)
(ii)

3
3

Structuring
Problems
and
solutions

Applying
Judgment

Total

Conclusio
ns and
making
recommen
dations

3
3

6
4

10
6

7
5

6
4

3
1
20

3
2
30

3
2
25

2
2
20

Integrative &
multidisciplin
ary skills

15

30
20
12
08
100

1
1
I

15

In planning your report, you should be aware that not attempting one of the requirements, including
an executive summary, will have a significantly detrimental effect on your chances of success. In
addition, as indicated above, all four skills areas will be assessed under each of the four elements of your
report.
You should be clear that marks are awarded for demonstrating your professional
reproducing facts from the case. In order to be successful, you will need to:

skills, not for

Demonstrate your knowledge of the case material and make use of your analysis.
Carryout relevant analysis of the problems and structure your proposed solutions
Apply your judgment on the basis of the analysis that you have carried out
Draw conclusions from your analysis and judgment, and develop them into practical commercial
recommendations.
Ethical issues which may cover the following topicLack of professional independence or objectivity
Conflict of interest among stakeholders
Doubtful accounting or commercial practice or market competition
Inappropriate pressure to achieve a reported result.
Integrative & multidisciplinary

skills may cover the following areas-

Environmental issues
Social, public health, economic and other non-financial
public interest.

issues having bearing upon

LIST OF EXHIBITS

Exhibit

Page
reference

Description

E-mail from Jahidur Rahman FCA, Partner in Hassan Jahid &

Co., Chartered Accountants to you, Nafis Redwan .

4-4

E-mail from Shahir Ahmed, Managing Director of Green Agro

Industries Ltd., a client of your firm, to Jahidur Rahman FCA

5-6

Audited Financial Statements of Green Agro Industries Ltd.

7-8

Investment Plan for 'Cold Chain Project'

9-9

Determination

Market and Similar Stocks Information

Note on the Social, Legal and Government

of food processing industry in Bangladesh

A write-up on Book Building Method

An E-mail from Bangladesh Asset Management

of the offering price for IPO made in early 2013

10-11
12-12

Regulatory

aspects

13-13

14-14
Co. Ltd.

15-15

EXHIBIT-l

Hassan Jahid & Co.

Chartered Accountants
From

: Jahidur Rahman FCA

To

: Nafis Redwan

Re

: Green Agro Industries Ltd.

Date

: 02 December 2014

Dear Nafis,
We have received an e-rnail from Shahir Ahmed, Managing Director, Green Agro Industries Ltd. (GAIL), a large
Food Processing company incorporated in Bangladesh in 2004, which I have attached to this e-mail (Exhibit 2).
The Board of GAIL raised capital through initial public offerings (IPO) in early 2013 at Taka 25 per share with
premium ofTk. 15 each to meet increasing need of working capital and repayment of partial bank loan. During this
time GAIL shares were valued on net assets value (NA V) and earnings per share (EPS) methods and disclosed
estimated future earnings growth and dividend pay-out per share, which in turn was not achieved due to number of
uncontrolled external reasons, which inter alia are mentioned in exhibits attached herewith. Now the management of
GAIL rethink to address few business impediments on priority basis to boost company's revenue and shareholders
earnings and dividends. As part of their plan GAIL management intended to make new investments in 'Cold Chain
Project' and introduced a new product called 'Ready to-Eat Line of FrozenFood Products'.
The Board of Directors (BOD) of the company convinced the shareholders in the recent EGM held in September
2014 that, it is necessary to finance the cold chain project raising of funds either through right issue of shares at a
minimum premium of Tk. 15 per share, or if the existing shareholders do not exercise the said right offer, the
management shall go for 'Follow on Public Offering' (FPO). We are approached to carry out a review of
company's financial statements and other information contained in the exhibits (Exhibits 2-8) herewith and
determination of 'offering price' for FPO to the general public. The BOD and the management of GAIL is
confidently hoping to get higher premium than Tk. 15 per share if the option of FPO is exercised. We are neither
current nor past auditor of GAIL. But, one of our partners, before joining in our firm, was the auditor of the
company until 30 June 2012 when he was practicing singly. However, the chairman of BOD of GAIL is personally
known to me and Mr. Shahir Ahmed, Managing Director of GAIL confirmed the undersigned taht they had
internally decided to appoint our firm as the external auditor from the financial year 2016.
It is to be mentioned here that one of our investment bank clients Bangladesh Asset Management Co. Ltd.
(BAMCL) is keen to bid in FPO of GAIL shares under book building method and they also sought our professional
services (Exhibit -9) on the maximum offer price in the bid to acquire shares of GAlL.I would like you to engage in
this assignment and prepare a report to the Board of Directors of GAIL for which you should:
(a) Draft a report to the Board of Directors of GAIL:
(i)
Evaluating IPO 2013 price stating whether the said IPO pricing was correctly determined and
commenting on the genuineness of the shareholders concern expressed in recent EGM of GAIL;
(ii)
Determining the 'indicative offer price' for the proposed right issue or FPO under book building
method to finance cold chain project after reviewing the company's financial statements,
investment plan and other information contained in the exhibits attached herewith.
(b) Criticality evaluates the strengths, weaknesses, opportunities and threats (SWOT) of the company
suggesting the ways of converting the weaknesses in to the strengths and threats to opportunities.
(c) Evaluate the professional and ethical issues involved in:
(i)
(ii)

Analysing operational issues of GAIL highlighting risk factors that might be threat to run the
business as a going concern;
Accepting the consultancy assignment proposed by our investment bank client BAMCL. You
should address all the risks and benefits of the request including possible impact for the firm.

I look forward to receiving your draft report on or before 20 December 2014.

Best regards

JaVlL~uy

~VlVVtafl\,
4

EXHIBIT - 2

GREEN AGRO INDUSTRIES LTD.

From

: Shahir Ahmed, Managing

To

: Jahidur Rahman FCA

Re

: Green Agro Industries

Date

: 20 November

Director

Ltd.

2014

Dear Mr. Rahman,

Green Agro Industries Ltd. (GAIL) was incorporated in August 2004. The company has been processing over sixty
varieties of frozen food products such as Chicken Nuggets, Chicken Burger Patty, Beef Burger Patty, French Fries,
Tortilla, Tempura, Chicken Cutlet, Fish Cutlet, Meat Ball, Lentil stuffed Tortilla, Potato stuffed Tortilla, Somosa,
Vegetable Puff, Stuffed Potato Balls, Fish Fingers, Fish Ball, Spring Roll, Pop Corn Chicken, It exports to
Australia, Saudi Arabia, UAE, North America and EU countries.
The production capacity of GAIL is 4000 metric ton per hour and currently it is running with 65% capacity
utilization. GAIL is the only TESCO (Largest British multinational Grocery in the world) approved food processing
factory in Bangladesh. As on June 30 2014, the capacity utilization of Snacks, Vegetable and Fish processing items
were 57%, 66% and 67% respectively. GAIL raised funds ofTk. 250 million through Initial Public Offerings (IPO)
in early 2013 and made following disclosures on profitability and dividend payments in IPO Prospectus:
YIE
30 June

Sales
(Taka in '000)

Net profit after tax

(Taka in '000)

2011

265,876

67,520

5.00 (actual 5.00)

Dividend Per share in

Taka

2012

439,031

93,853

6.50 (actual 6.50)

2013

970,850

218,925

6.50 (actual 5.00)

2014

985,020

203,695

7.50 (actual 5.00)

2015

990,324

246,471

8.00

2016

999,905

300,695

8.90

GAIL couldn't grow in last 3 years as expected due to the volatile macroeconomic
conditions in the country and
international credit crunch and financial instability in the West. As a result the market price of GAIL shares in DSE
has dropped to Tk. 15 per share and shareholders are very much aggrieved on the Board of Directors (BOD) and the
auditors of the company. Based on the information disclosed in DSE market review of June 2012 (beta 1.50, risk
free rate of return 7%, and market return 14%), the shareholders expected required rate of return was 17.50% when
the prospectus was issued for IPO made in early 2013. Eventually, GAIL is not in a position to declare expected
divided in following years as projected in IPO prospectus. In these circumstances the management of the company
desired to review company's financial statements and business stability to make a sustainable business strategy.
The consumers are avoiding now buying of fruits and processed foods because of their doubtful minds on the
traders of using formalin and other toxic preservative in the processed foods, which might be a key reason of
dropping sales of GAIL in recent years.
GAIL management considers that most of the street side restaurants are unhygienic or proper restaurants are very
much expensive or homemade food in hot pot is highly inconvenient. Day by day, people are being more and more
aware on food hygiene, as can be seen from the exponential growth in the bottled mineral water which in the past
was thought to be a luxury but today it has proved to be a necessity. The women are quite busy either with their
own profession or development of their kids. Even they' don't have joint family support and servant at home.
Considering these factors GAIL has identified the potential and introduced for 'Ready to-Eat Line of Frozen Food
Products' for the corporate offices and working people which alone are a massive market opportunity. Convenience
of longer shelf life and round the year availability will be ensured at international hygiene standard. GAIL intends
to serve local and exotic dishes from daily meals to cuisines at very affordable price. In this regard GAIL besides
introducing 'Ready to-Eat Line of Frozen Food Products' wants to establish a backward linkage
'Cold Chain
Project' .

Investment Plan
The Board of Directors (BOD) of the company convinced the shareholders in the recent EGM held in September
2014 that, it is necessary to finance the cold chain project raising of funds either through right issue of shares at a
minimum premium of Tk. 15 per share, or if the existing shareholders do not exercise the said right offer, the
management shall go for 'Follow on Public Offering' (FPO). The BOD and the management of GAIL is confidently
hoping to get higher premium than Tk. 15 per share if FPO is exercised. From the attached exhibit -4 you might
notice that cold chain project will require Tk. 200 million. The BOD of GAIL expects to fix the share premium for
FPO as high as possible in order to keep the outstanding number of shares lower to project higher EPS and ROI in
FPO prospectus.
The company will first approach to BSEC for obtaining approval for right issue at premium ofTk. 15 per share and
if GAIL fails to obtain BSEC approval, company will go for follow on public offering (FPO) to finance 'Cold
Chain Project' and it is assumed that GAIL will utilize full capacity to produce' Ready to-Eat Line of Frozen Food
Products'. Since the company could not perform (in terms of revenue, earnings and dividend growth) as projected
in the prospectus issued for IPO made in early 2013, premium price approval from BSEC might be challenging and
the existing shareholders may not exercise 'right offer at premium'. Therefore the company prefers to issue
prospectus for FPO which we believe that your firm can easily handle all the related challenges.

Valuation of Shares
The existing shareholders in EGM blamed the company auditor for fabricated valuation of shares with manipulated
EPS and DPS projections in the IPO Prospectus published in early 2013. It is therefore BOD of GAIL decided to
value shares for the proposed FPO to finance the 'Cold Chain Project' by applying credible share valuation methods
by an independent professional accounting firm. You know that Al-Hadee & Co., a proprietary Chartered
Accountant firm was the auditor of GAIL for the financial years up to June 2012 who also carried out the valuation
works of the company for issuing the IPO prospectus in early 2013. Since the proprietor of the AI-Hadee & Co. is
now working with your firm as a partner, the BOD of GAIL has decided to engage your firm for the share premium
valuation and other related services in connection with the proposed FPO. It may be noted that GAIL shareholders
appointed ABC & Co., Chartered Accountants, a partnership firm, as auditors for the financial years 2013 and 2014
(and also for 2015).
Financial Statements and relevant Documents
I am attaching company's audited financial statements (Exhibit-3), Investment Plan for 'Cold Chain Project'
(Exhibit-4), Determination of the offering price for IPO made in early 2013(Exhibit-5), Current market and similar
stocks information (Exhibit-6), a note on the social, legal and government regulatory aspects of food processing
industry in Bangladesh (Exhibit-7),and a write-up on book building method (Exhibit-8) are attached herewith for
your reference, review and consideration.
Finally, I am requesting you to review the company's financial performances and business strategies and issue a
report to the Board of Directors of GAIL covering the following:

Evaluation of IPO 2013 price stating whether the said IPO pricing was correctly determined and
commenting on the genuineness of the shareholders concern expressed in recent EGM of GAIL;

Determination of the 'indicative offer price' for the proposed right issue or FPO under book building
method to finance cold chain project after reviewing the company's financial statements, investment plan
and other information contained in the exhibits attached herewith.

Criticality evaluation of the strengths, weaknesses, opportunities and threats (SWOT) of the company
suggesting the ways of converting the weaknesses in to the strengths and threats to opportunities.

Evaluation of the professional and ethical issues involved in analysing operational issues of GAIL
highlighting risk factors that might be threat to run the business as a going concern; and

I look forward to receiving your report on or before 20 December 2014.

Yours sincerely

SVt~Vtty AVtVt,teol
6

Green Agro Industries Ltd.

EXHIBIT -3

Statements of Financial Position

As at 30 June
Amount in Taka
Iparticulars

2014

2013

2012

Sources of Fund
Shareholders'

Equity

Share Capital

350,000,000

350,000,000

100,000,000

Revaluation Surplus

225,346,706

225,346,706

107,064,709

Share Premium

375,000,000

375,000,000

Retained earnings & share premium

400,065,956

285,296,406

102,084,854

1,350,412,662

1,235,643,112

309,149,563

77,513,179

60,466,447

284,802,109

4,720,834

3,415,422

Long-term

liabilities

Term Loan against machinery

Deferred tax liabilities
Leasehold obligation

Application

7,252,367

7,252,367

3,662,100

89,486,380

71,134,236

288,464,209

1,439,899,042

1,306,777,348

597,613,772

of Fund

Long term Assets

Property, plant and equipment

955,764,222

658,044,917

316,058,702

Lease hold assets

32,448,900

12,434,489

3,943,994

Deferred Expenses

41,360,345

Investment
Current

15,377,639

241,829,935

152,517,018

1,029,573,467

927,686,980

472,519,714

90,668,970

43,330,434

21,251,804

Assets

Inventories
Advances, deposits and prepayments

94,657,085

91,053,563

5,209,490

257,372,032

273,246,067

110,876,857

10,570,691

7,251,863

7,567,139

693,692

446,505

13,275,232

453,962,470

415,328,432

158,180,522

Accounts and other payables

2,502,801

980,147

474,779

Accruals and provisions

6,224,710

714,710

2,012,442

11,733,435

17,727,113

28,300,000

5,649,386

2,883,962

2,299,242

13,696,053

10,101,621

Trade Receivable
Export incentive receivable
Cash and bank balance
Current

Liabilities

Provisions for income tax

Cash credit loan
Current maturity of long term loan
Current maturity of Lease obligation
NET CURRENT
TOTAL ASSETS

ASSETS

3,830,510

3,830,510

43,636,895

36,238,063

33,086,463

410,325,575

379,090,368

125,094,058

1,439,899,042

1,306,777,348

597,613,772

Green Agro Industries Ltd.

Statement of Profit or Loss and other Comprehensive Income
For the years ended on 30 June
Amount in Taka
2_0_1_4__

1..-__

....11

2_0_1_3__

2_0_12

Sales
Less: Cost of goods sold
Gross Profit

526,526,457
245,772,730
280,753,727

397,014,918
149,360,471
247,654,447

291,278,129
100,847,163
190,430,966

Export Incentive
Other income

2,682,758
2,380,325
5,063,083
285,816,810

1,945,724
1,898,761
3,844,485
251,498,932

3,401,970
1,211,361
4,613,331
195,044,297

35,625,744
14,046,791
49,672,535

34,129,305
12,684,286
46,813,591

17,392,735
14,776,808
32,169,543

4,442,103
27,351,841
204,350,331

5,409,474
199,275,867

138,132,187

67,359,947
4,720,834
72,080,781
132,269,550

44,253,626
3,415,422
47,669,048
151,606,819

42,200,000
5,417,000
47,617,000
90,515,187

132,269,550
3.78

49,104,733
200,711,552
5.73

90,515,187
9.05

Total operating Income

Administrative & Selling & distribution expenses

Administrative expenses
Selling & distribution expenses

Loss in investment
Financial expenses

Net profit before income tax

Less: Provision for income tax
Provision for current tax expenses
Deferred tax expenses

Net profit after tax

Capital gain from sale of investment

Total comprehensive income

Earning Per Share (EPS)

15,287,982
9,454,585

EXHIBIT-4

Investment Plan for 'Cold Chain Project'

The farmers produce huge vegetables, fisheries etc. in the season which are not fully consumed by the people in
season. But on the other hand in off season there is very little supply in the market which trends the product price
very high. If there would be sufficient storage facility at an affordable cost to them, they could save their products
to sale them at a regular price which may also keep the local market at a stable price. Green Agro Industries Ltd.
has planned to setup cold chain Project in Bangladesh which would be the first time in the country. The company
has vast experience in the field of agro base business and frozen ready to cook food items and also in logistics
business for last eight years. The Management of GAIL felt very closely the necessity to develop a cold chain
infrastructure in the country in addition to Ready to-Eat Line of Frozen Food Products. Cold Chain Project will be a
backward linkage of Ready to-Eat Line of company's Frozen Food Products.
The GAIL wants to contribute in backward linkage and forward linkage of agricultural produce. GAIL will hire 300
acres of land and will produce vegetables, fruits, fisheries so that they can avoid food adulteration, harmful
preservatives, additives, colours, etc. The soil in the project requires different categories of fertilizer, insect killer to
produce bumper production. The Company is planning to set up a cold chain. A central cold storage depot will link
2 Cold Storages at -30 Degree Centigrade temperature up to +10 degree centigrade. In line with this, a Central
warehouse is planned to be set up in Dhaka city or nearby. Necessary transportation system will be engaged to carry
frozen products. The estimated cost for establishing Cold Chain Project would be around Tk. 200 million.
Revenue and Income summary from cold chain project
Amount in million Taka
Year -1

Year -2

Year-3

Year -4

Year -5

Revenue

137

185

224

243

255

Gross Profit

62

101

129

142

147

Net Profit before Tax

33

47

73

80

90

Net Profit after tax

21

30

46

50

56

A cold chain is a logistics system, which helps in maintaining and providing a series of facilities for ensuring ideal
storage conditions for the perishables from the point of origin to the point of sale. A well developed and efficiently
organized cold chain reduces wastage, spoilage and helps keep the perishables intact thereby helping to maintain the
quality of the harvested food products ultimately making the whole system cost effective which ensures highest
quality to the end user. Post-harvest loss of agricultural, fisheries, dairies, livestock and poultry sector in
Bangladesh is at a very alarming stage, just alone in the horticulture sector in Bangladesh it is at an alarming 44%
of the total produce, which is the primary cause for such drastic variation in price in the local market. Fishery sector
suffers massive threat of usage of formalin, also growth of poultry and dairy sector suffers due to absence of
temperature controlled transportation.
The cold chain will generate revenues mainly from the storage space and longer shelf life of perishable products of
Green AgI'OIndustries Ltd. as well as product from similar business operators from other industries like poultry,
fisheries, pharmaceuticals, dairy etc. which will be maintained and distributed by this network. Rental charges for
cross country transportation will also generate revenues from internal cost savings and external service rendered
commercially to other operators requiring low temperature management logistics. The entire cold chain operation
model is being designed and will be operated under technical supervision and assistance from USAID.
To avoid Post Harvest loss, farmers are using Formalin which is harmful for the human body, at the same time
because of formalin usage; Bangladesh is also facing challenges while exporting to the International Market.
A Cold Chain is not only a Logistic System but it is also an integral part of a Country's Infrastructure. Due to the
absence of a Cold Chain every year the country is wasting hundreds and thousands of Crores taka worth of produce.
A Cold Chain can have a positive impact on this national issue as well as it will have a major contribution to the
country's GDP. A Cold Chain plays a vital role in providing and storing the essential food commodities to mitigates
the challenges created by natural disasters as well as maintaining seasonal price stability in the Market.

EXHIBIT

-5

Determination of the offering price for IPO made in early 2013

Green Agro Industries Ltd. is a leading processed food company of Bangladesh. The Net Asset Value (NA V) and
Earning Based Value (EBV) may be used in determining the indicative price of the shares of the company. Net
Asset Value (NA V) gives asset-backing
to the shares of the company. Earnings Per Share (EPS) indicates
profitability against shares of the Company. Earnings-based
Value and Book Value-based Value of similar stocks
have been taken to estimate a theoretical fair price, considering market demand for the shares of the Company. The
average price derived from the four valuation methods, giving equal weight, is the indicative offer price for the
shares of Green Agro Industries Ltd. to be issued through the IPO under Book Building Method. Different methods
to determine the fair price per share of the Company are presented below:

1 -Net Asset Value (NAV) based price per share:

Method

Particulars

Amount

A. Share Capital as at 30 September 2012

B. Reserve and Surplus as at 30 September 2012
C. Revaluation reserve as at 30 September 2012

100,000,000
325,877,505
250,000,000

D. Total Shareholders' Equity as at 30 September

E. Number of shares as of30 September 2012

2012 (A+B+C)

675,877,505
10,000,000

F. Net Asset Value (NAV) Per Share as of 30 September 2012 (DIE)

Method

2 -Price

based on Earning

(Taka)

67.59

per Share (EPS):

The Company's operational performances and financial results reflect its growth, financial strength, earning and
prospects that help investors in making informed investment decision. These are summarized as follows:
Financial

Years

Net Profit after tax

(Taka)

No. of outstanding
shares of Tk. 10 each

Earnings per share

(EPS) (Taka)

30-Sep-12

60,742,919

35,000,000

6.94'"

30-Jun-12

90,515,187

10,000,000

9.05

30-Jun-11

13,169,104

10,000,000

1.32

30-Jun-l0

10,502,894

10,000,000

1.05

-602,331

5,000,000

(0.12)

34,865,555

14,000,000

2.49

30-Jun-09
Average

'" Diluted and annualized

The weighted average net profit for last 4.25 (four and one quarter) years stands at Taka 3.48 crore and weighted
average EPS stands at Taka 2.49. Ifwe consider the share price on the basis of price/earning multiple of22.45 (DSE
market review, June 30, 2012), the earning-based value of shares of the Company at a weighted average EPS of
2.49 stands at Taka 55.90.
Method
Sl.

3 - Price Based on PIE Ratio of Similar

Company

No.
a
I
2
3
4
5
6

b
Apex Foods Limited
Fine Foods Limited
Rahima Foods Limited
National Tea Co Ltd.
Beach Hatchery Ltd.
Fu-Wang Foods Limited
Simple Average

Face
Value
c
100
10
100
100
10
10

Stocks:
EPS for the
year ended
30 June 2012

d
15.01
0.88
3.03
156.78
1.53
1.07

Market Price
(January-June
2012:
6-Month Average)
e
1147.00
95.93
552.71
4658.71
90.32
77.13

F'rzure In
. T a ka
PIE Ratio

f=e+d
76.42
109.02
182.41
29.71
59.09
72.09
88.11
10

Determining the Fair Value of share of Green Agro Industries Limited:

2.49

Average EPS
Representative PIE Multiple (X)
Fair Value (Taka)

88.11
219.39

Method 4 - Price Based on Price to Book value (P/BV) of Similar Stocks:

SI.
No.

Company

a
1
2
3
4
5
6

Apex Foods Limited

Fine Foods Limited
Rahima Foods Limited
National Tea Co Ltd.
Beach Hatchery Ltd.
Fu-Wang Foods Limited

Face Value
(Taka)

NAV(Taka)

Market Price
(6-Mon Av)
(Taka)

PIBV
Ratio

c
100
10
100
100
10
10

d
703.63
11.15

e
1147.00
95.93
552.71
4658.71
90.32
77.13

f'=e+d
1.63

49.53
502.87
1l.l5
12.64

Simple Average

8.60
11.16
9.26
8.10
6.10
7.48

(Source: DSE Monthly Review)

Determining the Fair Value of share of Green Agro Industries Limited:

NA V (Diluted)
Representative PIBV Multiple (x)
Fair Value (Taka)

67.59
7.48
505.57

Finding and Calculation of the fair Price of share of GAIL:

Particulars
Price
Price
Price
Price

based
based
Based
Based

Average

Amount
on Net Asset Value (NA V)
on Earning per share (EPS)
on PIE Ratio of Similar Stocks
on PIBV Ratio of Similar Stocks

67.50
55.90
219.39
505.57
212.09

Based on the above calculation, GAIL's per share price comes to over Tk. 212. However, we recommend fixing the
share price conservatively for IPQ @ Taka 25.00 per share including a premium of Taka 15.00 per share.

11

EXHIBIT -6

Current Market and Similar Stocks Information

Market and industry EPS and PIE Ratio
The market capitalization of all securities listed in DSE Ltd. as on 05 December 2014 was Tk. 2,490,590 million
and market PIE Ratio is 15.90 where general DSE Index was 4128.

Bank
Financial Institutions
Mutual Fund
Pharmaceuticals & Chemicals
Engineering
Cement
Fuel & Power
Services & Real Estate
Food & Allied
IT Sector
Textile
Travel & Leisure
Ceramic
Telecommunication
Tannery Industry
Paper & Printing
Insurance
Miscellaneous
Jute
Total

325,043
146,583
34,904
232,098
106,632
94,363
276,899
10,375
132,610
5,138
89,729
34,318
20,378
306,207
16,921
566
610,444
46,503
579
2,490,590

395
126
75
454
506
114
362
55
252
45
1,023
82
157
194
115
2
480
99
7
4,543

8.69%
2.77%
1.65%
9.99%
11.14%
2.51%
7.97%
1.21%
5.55%
0.99%
22.52%
1.80%
3.46%
4.27%
2.53%
0.04%
10.57%
2.18%
0.15%
100%

4.1
3.06
7.84
1.61
1.7
2.64
3.44
2.65
0.67
9.06
3.00
3.02
2.76
4.07
1.59
1.68
1.16
0.82
1.16

13.73
21.50

-2.75
2.25
-16.61
22.59
29.88
8.91
2.26
17.41
33.23
-1.79
4.50
-6.44
-2.58
1) .34
38.76
62.84
62.32
-3.99
3.18

18.05
20.15
18.06
10.78
25.69
12.50
24.16
13.37
17.26
25.32
20.62
14.73
66.46
15.09
13.86
23.41
15.90

It is expected that the DSE market index may not go down further; instead it may continue or go up from present
level.
Market risk and expected return:
The expected beta (P) for Green Agro Industries Ltd. is 1.70. The average risk free rate of return is 6.50%. The
average market return from investment in similar securities (comprising of dividend and capital gain yield) is
12.50% per annum. (Source: DSE Market review Nov 2014).

The similar stock's market price and EPS in DSE

SI.
No.

Company

b
Apex Foods Limited
Fine Foods Limited
Rahima Foods Limited
National Tea Co Ltd.
Beach Hatchery Ltd.
Fu-Wang Foods Limited

2
3
4
5
6

Face Value
(Taka)

NAV(Taka)
30 June 2014

c
10
10
10
10
10
10

d
80.63
14.15
6.95
53.28
12.15
13.64

Market Price
(January -June 2014: 6Month Average)
(Taka)
e
104.00
65.93
45.71
405.87
70.32
57.13

EPS for the

year ending
30 June 2014
f
1.51
0.88
0.30
1.57
0.15
0.11

12

EXHIBIT-7

A Note on the Social, Legal and Government Regulatory

aspects of food processing industry in Bangladesh
The news titled "Too
summarized as under:

many cooks spoil the broth"

reported by 'The Daily Star' on 15 September

2014 is

Laws abound, but they have failed to ensure food safety mostly for a lack of enforcement and coordination among
the government bodies responsible for preventing food adulteration. As many as 15 ministries and their agencies are
tasked with enforcing more than a dozen laws to check contamination in the production, processing and marketing
of food items. The roles and responsibilities
of the government authorities are not clearly defined in the laws.
Above all, there is neglect on the part of the regulatory authorities in enforcing these laws. There are more laws than
required but none is properly implemented. Many of the government officials working on food safety are corrupt.
Whenever the civil society organizations or the media raise the contamination issue, the authorities blame it on the
shortage of manpower assigned to monitor the markets; the existing workforce is not working sincerely either. In
the wake of reports on rampant use of harmful chemicals, additives and ripening agents, the government in October
last year enacted a law replacing the age-old Pure Food Ordinance, 1959 to bring all food safety issues under one
umbrella. The Safe Food Act (Nirapad Khaddyo Ain) 2013 provides for the formation of a unified authority styled
National Pure Food Authority that will work in coordination with different ministries concerned to address all
issues and complaints
relating to adulteration
and hygiene. But the government
has yet to issue a gazette
notification. The experts' views on safety of food processing and marketing are:

People have seen nothing but some sporadic actions, mainly anti-adulteration
drives, for example setting
up checkpoints in June 2014 around the capital to check the entry of formalin-tainted
fruits into the capital
only for a few days. There is no clear road map to food safety. The government seems insincere in dealing
with the matter. There is no cell or centre where someone can lodge complaints about adulteration.
Consumers are not left with much choice.
People should refrain from buying fruits and other food items that can be avoided in daily consumption,
and that would create pressure on unscrupulous businessmen.
Campaigns against food adulteration may be carried out across the country and leaflets warning people of
health impacts may be distributed to pressurise the government into taking up the matter seriously.

Another report under the title "Cold Chain can save food supply chain" The Daily Star reported on 13 September
2014 that when Brazil, the Philippines and the Caribbean countries have been supplying banana, a highly
perishable fruit to the other corners of the world, Bangladesh cannot do so even within its small boundaries without
using toxic preservatives.
Also. countries like the US, Canada, Brazil, China and Australia transport fruits,
vegetables, fish. meat and other perishable foods from one part or the country to another sometimes the distance
being thousands of miles=-without
using any toxic additives. So why cannot Bangladesh do the same despite being
a very small country where the distance between its northernmost
and southernmost
tips is a mere (i00 krn?
Multiple independent studies show serious infrastructure and logistic: problems. lack of cold storage and transport
facilities, premature harvest, profit mongering of businesses. and the absence of a licensing and monitoring
authority for commercial farming are behind unbridled food contamination
in Bangladesh. Developed countries
have much improved infrastructure in the supply chain. mostly due to the existence of an effective cold chain from
harvesting products to sale to the end consumer.
The most effective way of preserving and keeping food items fresh after harvest is to store those in suitable
temperatures.
Some fruits and vegetables can be preserved for several months at cool temperatures.
Freezing
products straight after harvest is also a common method used around the world mostly for highly perishable
products fish. meat and some vegetables. This provides a very long shelf life, but it requires an effective cold chain
infrastructure. A social research revealed that Bangladesh started using formalin I 0-1 ~ years ago when fish began
to be imported from Myanmar. Initially. the use of formalin on fish was very limited, but it became rampant when
businessmen saw it could stop fish from rotting for days. Later, Bangladesh learnt using other preservatives in fruits
and vegetables from our neighboring country.
There are many laboratories across USA. Australia and other developed countries to test food at farms and
restaurants. J .ocal government bodies are so strong that they can raid any farm or restaurant at any time for test.
Bangladesh needs to set up laboratories to frequently test the quality of foods at the farm level. The newspaper
suggested to the government to strengthen local government. such as union and upazila parishads. to do the job.

13

EXHIBIT- 8

A write up on Book Building Method

Book Building is a process through which an issuer attempts to determine the price to offer its security based on
demand from institutional investors. Under the process, the price of an IPO/FPO share will be determined through
an automated bidding to be participated by different financial institutions and then the share will be opened for the
IPO/FPO participant at the cut-off price determined during the book building process. The bidding will be handled
through a uniform and integrated automated system of the stock exchanges, or any other organization as decided by
the Commission, especially developed for book building method. The entire procedure of price discovery under
book building method is delineated below:

The issuer/issue manager shall issue invitation to the eligible institutional investors, both in writing and
through publication in at least 5 (five) widely circulated national dailies, giving at least 10 (ten) working
days time, to the road show/presentation/seminar
indicating time and venue of such event.

The invitation letter shall accompany

an information
document containing
all relevant information
covering the proposed issue of the issuer. The eligible institutional investors shall submit indicative price
to the issuer/issue manager, signed jointly by the Chief Executive Officer (CEO) and the Financial
Analyst, highlighting the factors taken into consideration in support of the indicative price, within the next
3(three) working days of the said road show/presentation/seminar;

The indicative price band

issuer and the PIE ratio of
formal price building with
institutional investors shall

Issuer in association with issue manager and eligible institutional investors quote an indicative price in the
prospectus with the rationale for such price and submit the prospectus to the Commission with copy to the
stock exchanges.

The indicative price range shall be determined as per price indications obtained from at least 15 (fifteen)
eligible institutional investors covering at least 3 (three) different categories including at least 5 (five)
merchant banks of such investors.

No institutional investor shall be allowed to quote for more than 10% of the total security
subject to maximum of 5 (Five) bids. The volume and value of bid at different prices will
the monitor of the said system without identifying the bidder. The institutional bidders
security on pro-rata basis at the weighted average price of the bids that would clear the
securities being issued to them.

The securities will be offered to the general

determined during the book building process.

will be fixed based on the past performance, expected future earnings of the
other peer companies in the industry. The indicative price shall be the basis for
an upward and downward band of 20% of indicative price within which eligible
bid for the allocated amount of security.

investors,

NRBs

and Mutual

Funds

offered for sale,

be displayed on
will be allotted
total number of

at the cut-off price

14

EXHIBIT- 9

Bangladesh Asset Management Co. Ltd.

E-Mail
From

: Nairn Chowdhury, CEO

To

: Jahidur Rahman FCA

Re

: Bidding in FPO of Green Agro Industries Ltd. Shares

Date

: 02 December 2014

Dear Mr. Jahid,

We have received an e-mail from Shahir Ahmed, Managing Director, Green Agro Industries Ltd. (GAIL), a large
Food Processing company incorporated in Bangladesh in 2004 regarding their planning to float a follow on public
offering (FPO). GAIL invited us to participate in budding process under Book Building Method.
We, therefore, requested you to provide us consultancy service on determination of tentative cap price for bidding.
The required information in this regard is available in GAIL web site www.gailbd.com under 'Follow on Public
Offerings' (FPO) which is similar to the Exhibits 3-6 for your review and action.
Your professional fee would be Tk. 500,000 (taka five lakh) only for these services.
I look forward to receiving your report on or before 20 December 2014.
Best regards

15