RAK

1.1 Overview of the Company

RAK Ceramics has created the largest and most exclusive range of models in the ceramic world with new models offered every month, appealing to all market segments such as interior designers & architects; engineers, major retail chains, corporate, do-it-yourself retailers & home owners; all keeping in mind of course, the end user across the world.

1.1.1 Establishment Year

RAK Ceramics (Bangladesh) Limited, a UAE-Bangladesh joint venture company, was incorporated in Bangladesh on 26 November, 1998
as a private company limited by shares under the Companies Act 1994, later converted into public limited company. The name of the Company was thereafter changed from RAK Ceramics (Bangladesh) Private Limited to RAK Ceramics (Bangladesh) Limited as per resolution passed in extraordinary general meeting on 10 June 2008, certificate issued by the Registrar of Joint Stock Companies dated 11 February, 2009. It is engaged in manufacturing and marketing of ceramics tiles, bathroom sets and all types of sanitary ware. It has started its commercial production on 12 November, 2000. The commercial production of new sanitary ware plant was started on 10 January, 2004. Further expansion of the existing facilities of ceramics tiles plant took place in year 2004, and for tiles and sanitary plant were in year 2007.

Date of Incorporation                     : 26 November 1998

Commencement of Business          : 12 November 2000

Authorized Capital                         : Tk.3000.00 mn

Pre-IPO Paid-up Capital                 : Tk. 1,855.63 mn

1.1.2 Ownership structure

Before IPO

Name of the shareholder	Number of Shares	% of total Shareholding
RAK Ceramics PSC, UAE	167,007,050	85.40
Mr. S.A.K. Ekramuzzaman	18,556,350	9.49
H.H. Sheikh Saud Bin Saqare Al Qassimi	20	0.00001
Mr. Sheikh Omar Bin Saqr Al Qassimi	20	0.00001
Mr. Sheikh Ahmed Bin Humaid Al Qassimi	20	0.00001
Mr. Hamad Abdullah Al Muttawa	10	0.000005
Dr. Khater Massaad	10	0.000005
Mr. Abdallah Massaad	10	0.000005
Mr. Manoj Aheeray	10	0.000005
Institutions, Employees *	10,000,000	5.11
Total	195,563,500	100.00

After IPO

* The company also raised its paid up capital through further issuance of 10,000,000 ordinary shares of Tk 10 to the institutional Investors and its employees vide Securities & Exchange Commission’s letter no. SEC/CI/CPLC-183/09/279 dated 7 October 2009. These shares are subject to one year lock in from the date of issuance of prospectus. Details of the shareholders are as follows: Number of

Name of the shareholder	Number of Shares
Southeast Bank Ltd. MBW	675,000
IFIC Bank Ltd.	625,000
Prime Bank Ltd.	450,000
Prime Finance & Investment Ltd.	125,000
Prime Finance & Investment Ltd. portfolio	407,500
Lankabangla Finance Ltd.	187,500
Lankabangla Finance Ltd. IP A/C	1,740,000
Royal Green Securities Ltd.	625,000
AB Bank portfolio investors account	50,000
AB Bank Limited	250,000
BRAC EPL Stock Brokerage Ltd.	750,000
EPL Port Folio Clients A/C	62,500
IDLC Finance Limited	1,460,000
ICB	375,000
ICB Unit Fund	125,000
TBL selected Investors A/C	1,062,500
TBL Own Portfolio A/C	25,000
Investor’s Portfolio A/C-ID A/C	47,500
Swadesh Investment Management Limited (Investors Account)	7,500
SATCOM It Limited	37,500
Hajj Finance Company Limited	25,000
Century Securities Limited	12,500
RAK Employees	875,000
Total	10,000,000

1.1.3 Offer Size

Details of the Issue:

Description	Ordinary Shares	Face Value per share	Offer Value In Taka	Premium Amount	Amount
Pre-IPO Paid up-capital	185,563,500	10	–	-	1,855,635,000
Public Offering	30,000,000	10	40	9,00,000,000	300,000,000

Paid up Capital after IPO:

Particulars	No. of Ordinary Shares	Face Value (Tk.)	Capital in Taka
Pre-IPO Paid up capital	185,563,500	10	1,855,635,000
IPO	30,000,000	10	300,000,000
Paid up capital after IPO	215,563,500	10	2,155,635,000

Determination of offering price

Face Value	Tk. 10.00
Indicative Price	Tk. 40.00
Price Band	Tk. 32 – 48
No of EII Registered	175
Total Participants in the Bid	168
Total no. of Bids	192
Highest bidding Price	Tk. 48
Lowest bidding Price	Tk. 40
Weighted Average Price (applicable for EII quota allotment)	Tk. 48
Cut off Price (applicable for General Public, NRB and Mutual Funds)	Tk. 48

1.1.4 Flotation cost

Serial no	Description	Basis of fees	Amount of TK (Approx)
Issue Management Fees:
01	Manager to the Issue Fee	1% of the total amount raised	10,000,000
02	VAT against Issue Management Fees		1,500,000
Listing Related Expenses:
03	Prospectus Submission Fee to DSE		5000
04	DSE & CSE Listing- Initial Fees	@ 0.25% on Tk. 100 million and 0.15% on the rest amount of paid up capital; maximum Tk. 2 million for each exchanges	4,000,000
05	DSE and CSE Annual Fee
SEC Fees:
06	Application Fee		10,000
07	SEC Consent Fee	fee @ 0.15% on entire offer	1,800,000
IPO Commission:
08	Underwriting Commission	Commission @ 0.5% on Underwritten Amount	3,000,000
09	Bankers to the issue fee	Bankers to the issue fee	3000000
10	Credit Rating Fees		750000
11	Legal Fees		500,000
12	Auditor Certification Fees		500000
CDBL Fees and Expenses: At actual
13	Security Deposit		500000
14	Annual Fee		100000
15	Documentation Fee		2500
16	Connection Fee		6000
17	IPO Fees	@.025% of issue size	300000
Printing and Post Public Offer Expenses: Estimated
18	Publication of Prospectus		600,000
19	Abridge Version in 4 daily newspaper		200000
20	Printing of Forms		350000
21	Registrar to the Issue Fee		700000
22	Post Issue Management Fee		4300000
23	Lottery Conduction		750000
24	BUET for Lottery conduction		250000
25	Binding of All applications		50000
26	Satcom Software for share management		100000
27	Courier		250000
28	Physical Distribution of Allotment and Refund		200000
29	Publication of Notice		100000
30	Stationeries & Others		50000
Grand Total			34,023,500

1.1.5 Underwriter Agreement

Principal terms and conditions of underwriting agreement

1. If and to the extent that the shares offered to the public by a prospectus authorized hereunder shall not have been subscribed and paid for in cash in full by the closing date, the company shall within 10 (Ten) days of the closure of subscription call upon the underwriter in writing with a copy of said writing to the Securities and Exchange Commission, to subscribe for the shares not subscribed by the closing date and to pay for in cash in full for such unsubscribed shares in cash in full within 15(Fifteen) days of the date of said notice and the said amount shall have to be credited into shares subscription account within the said period.

2. If payment is made by Cheque/Bank Draft by the underwriter it will be deemed that the underwriter has not fulfilled his obligation towards his underwriting commitment under the agreement, until such time as the Cheque/Bank Draft has been en-cashed and the company’s account has been credited.

3. In any case within 7 (Seven) days after the expiry of the aforesaid 15(Fifteen) days, the company shall send proof of subscription and payment by the underwriter to the commission.

4. In the case of failure by the underwriter to pay for the shares under the terms mentioned above, the said underwriter will not be eligible to underwrite any issue, until such time as he fulfills his underwriting commitment under the agreement and also other penalties as may be determined by the commission may be imposed on him.

5. In case of failure by any underwriter to pay for the shares within the stipulated time, the company/Issuer will be under no obligation to pay any underwriting commission under the agreement.

6. In case of failure by the Company to call upon the underwriter for the aforementioned purpose within the stipulated time, the Company and its Directors shall individually and collectively be held responsible for the consequence and/or penalties as determined by the Securities and Exchange Commission under the law may be imposed on them.

Commission for the underwriters

The company shall pay to the underwriter an underwriting commission at the rate of 0.5% of 50% of the IPO amount of the issue value of shares underwritten by them out of the Public Issue.

1.1.6 Lead Underwriter

Initial Public Offering (IPO) is for 34,510,000 Ordinary Shares of Tk. 10/- each, at an issue price Tk. 48/- each, amounting to Tk. 1,380,400,000/- (Taka One Billion Six Hundred Fifty Six Million Four Hundred Eighty Thousands Only). 20% of the said offering i.e. 6,900,200 ordinary shares has been subscribed by Eligible Institutional Investors through Book Building Process. As per SEC’s guideline 50% of the remaining 27,608,000 ordinary shares i.e. 13,804,000 ordinary shares at an issue price of Tk 48/- each amounting to Tk. 662,592,000/- (Taka Six Hundred Sixty Two Million Five Hundred Ninety Two Thousand Only) has been underwritten by the following institutions:

Name of Underwriters	Number of shares Underwritten	Amount(TK.)
ICB Capital Management Ltd.	1,000,000	48,000,000
Prime Bank Ltd.	1,000,000	48,000,000
Trust Bank Ltd.	1,000,000	48,000,000
Eastern Bank Ltd.	1,000,000	48,000,000
Southeast Bank Ltd.	1,000,000	48,000,000
LankaBangla Finance Ltd.	1,000,000	48,000,000
Prime Finance & Investments Ltd.	1,000,000	48,000,000
Bangladesh Mutual Securities Ltd.	1,000,000	48,000,000
Green Delta Insurance Co. Ltd.	1,000,000	48,000,000
BRAC EPL Investments Limited	2,402,000	115,296,000
IDLC Finance Ltd.	2,402,000	115,296,000
Total	13,804,000	662,592,000

1.1.7 Long term debt

The Company has not issued any debt securities and has no future plan as such within six months. But borrowings as at 30 June 2009 Tk.315,000,000 as at 30 June 2008 Tk.420,000,000

2.1 Analysis and Interpretation

2.1.1 Ownership dilution

In 30 June 2008 to 30 June 2009 the company does not declared any stock dividend and does not issue any right share. So there is no ownership dilution into the RAK ceramics (Bangladesh) Ltd.)

2.1.2 EPS dilution

Particular	Period ended 30 June 2009	Period ended 30 June 2008
Earnings per share (EPS) for the period	10.99	21.03

EPS diluted to TK 10.04 per share.

2.1.3 Changes in market share

In the Period ended 30 June 2008 number of ordinary share 6482503 and in the Period ended

30 June 2009 number of ordinary share 12962290. 

2.1.4 Comparison of performance (before and after)

Particular	Period ended 30 June 2009	Period ended 30 June 2008
Earnings per share (EPS) for the period	10.99	21.03
Price Earning Ratio (P/E)

Solvency Ratio:

	Period ended 30 June 2009	Period ended 30 June 2008
Liquidity Ratios
Current ratio	1.05	1.12
Quick ratio	0.60	0.55
Times interest earned	3.96	3.68
Debt-equity ratio	0.13	0.20
Operating Ratios
Accounts receivable turnover ratio	7.16	11.64
Assets turnover ratio	0.42	0.76
Inventory turnover ratio	0.94	1.70

3.1 Conclusion

From the above justifications, it may be seen that the Indicative Price is reasonably set considering the net asset value, future earning power, and risk aspects of the company. One point that needs to be mentioned here is that valuation is not timeless. However, we reasonably expect that the value that we have derived for RAK will remain valid for next twelve (12) months.

3.2 Recommendation

Financial statements are most significant part of a company because financial statement analysis involves a comparison of a firm’s performance with that of other firms in the same line of business, which usually identified by the firm’s industry classification. The analysis is used to determine the firm’s financial position so as to identify its current strength and weakness and to suggest actions the firm might pursue to take advantage of the strengths and correct any weakness. Here is our recommendations about this company are as follows:

Ø  In 30 June 2008 to 30 June 2009 the company does not declared any stock dividend and does not issue any right share. So there is no ownership dilution into the RAK ceramics (Bangladesh) Ltd.)

Ø  EPS diluted to TK 10.04 per share.

Ø  In the Period ended 30 June 2008 number of ordinary share 6482503 and in the Period ended 30 June 2009 number of ordinary share 12962290.