PROFILE OF A COMPANY

PANNA BATTERY LIMITED

BUS 101

Group Report

Section 05

Prepared For

Mr. Anwar Sadat Shimul (AwS)

Lecturer

Department: School of Business

Prepared By

Salman Rashid 1220444630

Md. Ziaul Islam1221019030

Md. Rabius Suny 1220287037

Naushin Nusrat 1220121030

Nabila Nur Us Saba1221030030

Oli Ullah Chowdhury1220357030

Letter of Transmittal

July 31, 2012

Mr. Anwar Sadat Shimul,

Here is the group report on the Company profile and its current problem & solution that you asked us to prepare as a part of requirement for our BUS 101 course.

In presenting this report, we have our level best to include all information and explanation to make the report informative and comprehensive.

It was a very enriching and enthralling for us to prepare this report. Our report writing skills have improved a lot while doing it. If further any report is required, we will be available by any means.

Thank you sir for believing in us and giving us this opportunity.

Sincerely,

____________________________

Naushin Nusrat Md. Ziaul Islam

____________________________

Salman RashidRabius Suny

_______________________________

Oli Ullah ChowdhuryNabila Nur Us Saba

Acknowledgment

We would like to acknowledge and extend our heartfelt gratitude to the following persons who have made the completion of this report possible: Our faculty, Mr. Anwar Sadat Shimul, for his in valuable guidance, encouragement and support. Mr. Animesh Samaddar, Deputy Manager[accounts and finance] of Panna Battery without whom this report would not have been a success. His invaluable suggestions and information have taught us much and as a result our preparing this report has been a very positive and up lifting experience.Our friend, Naushin Nusrat who helps us a lot to make this report easier.Most especially Allah, who made all the things possible.

Table of Contents

Serial No.

Article

Page No.

0 Letter of Transmittal 2

Acknowledgment 3

1 Company Profile 5

1.1 Mission 5

1.2 Vision 5

1.3 Corporate objective 5

1.4 Activities 6

1.5 Initial Finance 6

1.6 Market Review 6

1.7 Market Share 7

2 Business Analysis 8

2.1 Risk Management 9

3 Problem 10

4 Solution 11

5 Conclusion 12

Reference 12

1. Company Profile

Panna Battery Limited (hereinafter referred to as 'PBL' or 'the company') is involved in manufacturing batteries for using in the house hold appliances, motor vehicles including car battery and rechargeable batteries. PBL is one of the business units of Panna Group. The company was incorporated as a private limited company on July 13, 2006 under the Companies Act, 1994 with authorized and paid capital of Tk. 30.00 million and Tk. 1.00 million respectively and started its commercial operation since its incorporation. Presently the company distributes under different brand names called VOLVO,PANNA and GREEN POWER through Panna Distributions Ltd. (PDL). Being a private limited company, the ownership is concentrated within the family members of the entrepreneur Mr. Al-Haj Md. Lokman Hossain who has around three decades of business experience in Battery manufacturing sector. The ownership of PBL is shared by Mr. Al-Haj Md. Lokman Hossain (70%), Mrs. Jonaky Begum (10%), Mr, Md. Abul Bashar Khan (10%) and Mr. Md. Shahid Khan (10%). PBL is controlled under a common management structure which is guided and supervised by the Managing Director, Mr, Lokman Hossain. The factory is located at Kamrangirchar, Dhaka and the Head Office of the company is located at Nasir Trade Centre (Level - 12), 89 Bir Uttam C.R. Datta Road, Dhaka - 1205.

1.1 Mission

Panna Group is committed to provide quality products to its customers as per international standards and best suited to local environment at affordable prices.

1.2 Vision

To make concentrated efforts for improvements in productivity and elimination of wastages by total quality control.

1.3 Corporate objective

Panna has adopted the strategy of developing a major Bangladesh-based manufacturing business through procurement of raw materials locally and from abroad. They continuously make concentrated efforts for improvement in productivity and elimination of wastages by total quality control.The business unit originally penetrated the group by participating in a syndication Term Loan arrangement in financing Altu Khan Jute Mills Ltd, a Composite Jute manufacturing unit for processing of raw jute and manufacturing of different jute goods like Jute yarn of different counts, Hessian cloths & Sacking cloths. The ultimate target was to get into Panna Battery business, the highest revenue generating unit of the group. At present, EBL will share business with Prime Bank, IDLC and BRAC Bank, with the long term plan to maximize EBLs share in business.

1.4 Activities

Panna Battery Ltd (PBL) is the battery manufacturing unit of the group and one of the leaders in the battery manufacturing industry in Bangladesh. For PBL battery, containers are made initially by Panna Plastic Ltd, one of the concerns of the Group with well equipped technical support from Europe and Taiwan. The market for electronics goods are growing day by day. Especially the battery market has been enhanced significantly. Due to the growth of solar energy, battery requirement has increased significantly since battery is the key element to store solar energy. Moreover use of battery driven motorbike & three-wheelers are increasing day by day. Thus battery requirement is increasing at the same pace.

1.5 Initial Finance

Al-Haj Md. Lokman Hossain, Managing Director is the key person and founder of Panna Group. He started business in 1980 under the name of Lokman Traders where his main business was trading of raw lead. Later he formed the company Panna Battery Limited in 2006 which is involved in manufacturing all kinds and sizes of battery for household appliances, automobiles and industrial battery for different uses. Later the company expanded its business by forming other sister concerns in the name of Panna Plastic Limited (2008), Panna Distribution Limited (2009), Panna Powertech Limited (2008) to streamline its business processes. Currently Panna Group has banking facilities with a number of banks in the form of long-term finance as well as working capital facilities. However, the initial finance mainly came from contribution of their sponsors. Later when the business grew, it was a necessity to go for debt-financing to expand its business.

1.6 Market Review

The history of battery industry is not so long as Bangladesh is known as an importer of battery products until the mid 80s. Up to the pre-liberation war/ the domestic demand of battery products was fulfilled by importing from outside. Basically we had number of distributors of batteries in our country that used to market the products. There were numerous reasons for that but the most likely were the lack of motivation from the govt. policy makers in that era and the absence of proper expertise to make the battery products. But it does not mean that we did not have any battery producer in our country at that time. Rather the manufacturers did not have the adequate funding or financing through which this sector could get a momentum. After such a slow start for such a vital product, the need to have a full-fledged battery manufacturer is pronounced as the demand started to rise sharply and eventually after post liberation war, the renowned battery producer, Rahimafrooz emerged with the acquisition of Bangladesh operations of Lucas UK in 1980. They were the only company that produced the industrial batteries in 1985. At that time the battery they produced, were completely absorbed by the local customers and in 1992 for the first time Bangladesh was able to export home-made batteries, manufactured by the Rahimafrooz. The Bangladesh Accumulated Battery Manufacturer Association (BABMA), the apex body of the country's battery manufacturers/ has 24 members across the country. Bangladesh currently produces 1 million battery products every year. At present, after meeting the domestic demand, Bangladesh has been exporting to about 12 countries. The cost of production is still high as most raw materials of this product are imported and 45 per cent are value added. If the manufacturer can reduce the production cost then they can increase our export volume quickly as the demand for our products is increasing day by day. Lead acid batteries find wide application in motor cars, trucks, aircrafts, ships, submarines, railways etc. The major user of the product is in automobiles for providing energy for ignition of the engine and lighting. In addition it is also used for uninterrupted power supply for computers/ emergency lights for houses, telephone systems, power tools, communication devices, as power source for mining and material handling equipments, hospitals etc. A new application of the product has emerged today in electric vehicles. The average life of this battery is approximately 1 to 2 years but batteries will be needed throughout the life of the vehicle or the machineries in use. This indicates that ready market of the product will always exist.

1.7 Market Share

The market for electronics goods are growing day by day. Especially the battery market has been enhanced significantly. Due to the growth of solar energy, battery requirement has increased significantly since battery is the key element to store solar energy. Moreover use of battery driven motorbike & three-wheelers are increasing day by day. Thus battery requirement is increasing at the same pace.

Market Share of Battery:

Competitors

Market Share %

Rahimafrooz

45%

Navana

12%

Panna Battery

12%

Hamco

11%

White Products

15%

Others

5%

Source: White Products & Electronics Ltd. Year 2011

1. Business Analysis

Lead acid batteries are the most commonly used rechargeable batteries today. Batteries are made of five basic components, i.e. a resilient plastic container; positive and negative internal plates made of lead, plate separators made of porous synthetic material; electrolyte, a dilute solution of sulfuric acid and water, better known as battery acid; lead terminals and the connection point in the battery. Lead acid battery manufacturing plants are equipped with all facilities for battery manufacturing. Battery assembly combines the plates, container, and other parts into a functional battery. Battery charging is also an important part of assembly. The plates are stacked either by hand or by machine so that positive and negative plates alternate with an insulating separator in between. After the plates have been stacked, they are joined with small connecting parts and burned together to form cell elements or groups. After workers place all the groups in the battery case, the straps are fused together using a torch or high electrical power source. After that the battery is packed and placed in a plastic case. As PBL procures the major raw materials from its allied concern for which the company enjoys uninterrupted supply of raw materials. PBL has huge land area at its production site which provides good storing capacities that facilitates the company to provide uninterrupted supply throughout the year against fluctuating and seasonal demand of battery.

As a manufacturing company, PBL produces lead acid battery, automotive dry charge battery, inverter battery, UPS battery, solar battery, electric vehicle battery, IPS and pure lead as a finished product. PBL distributes all its finished products through its distribution company PDL (sister concern). But PBL has no formal agreement with PDL for purchasing of battery and IPS only for onward sale and marketing of the same products as a sole distributor. Thus, the ultimate relationship of PBL with PDL is seller and buyer respectively. PDL collects the order from the customer and quote a price to PBL. The PBL in turn supplies the finished goods as per that quotation. The pricing strategy for outsider is based on market price however; the price for internal transfer is certain percentage lower than market price. PBL supplied goods to sister concerns with 30 days credit facilities and it receives the cash within the stipulated time period. PBL's payment policy is in line with receivable policy i.e, within 30 days which it tries to clear the payable. All kinds of product distribution, marketing and selling are responsible by the PDL. PBL receives its cash after receiving final bills from end users.

1.1 Risk Management

Currently most of the part of the country has been facing gas crisis which is very essential for manufacturing industry for uninterrupted production. However, at present the plant has sufficient gas pressure. As per Government decision of limiting the gas supply throughout the week, the company might face difficulties.

PBL's basic raw materials are lead metal, container, separator, plate and others. Lead poisoning is considered the most serious environmental health hazard to children and it is one of the most significant contributors to occupational diseases. Lead causes symptoms ranging from loss of neurological function to death depending upon the extent of exposure. On the environmental aspects lead smelter are the causes of soil, water and air pollution. PBL has taken steps to reduce the environmental hazard by establishing on ETP plant.

PBL sources of basic raw materials are from local and international market. It collects wastage battery and recycles it for reuse. PBL also recycle Rahimafrooz batteries and it takes just processing fees. However, it can collect raw materials from international market also. So it has less raw material supply risk.

2. Problem

Panna Group started its journey in 1980 with trading wood coal under the name of Lokman Traders, a proprietorship concern of Al-Haj Md. Lokman Hossain, who is the key person and founder of Panna Group. After that they started the business of Processing of Lead/Oxide from scrap battery under the name of Medina Metal & Chemical. Then they extended the business to the manufacturing of Batteries under the name of Panna Battery Co. in the year 2005 which was converted to a Limited Liability Company in the name of Panna Battery Ltd. in the year of 2006. PBL markets its product in the name of VOLVO. VOLVO battery has marked its strong presence in the market for quality and reliability in a short span of time. Panna Group has now Panna Distribution Ltd, Panna Plastic Ltd, Panna Powertech Ltd under its umbrella. They decided to diversify their business by establishing a jute mill to produce primarily jute yarn seeing its strong growth potential.

ALTU KHAN JUTE MILLS LTD (AKJML), a sister concern of PANNA Group, was established as a private limited company in July 06, 2008 located at Parikkhitpur, Modhukhali, Faridpur. The cost of the project and its mean of finance is given in the next page:

Fig in million Taka

Particulars

Amount

%

Syndicated Term Loan (Including IDCP)

649.08

70%

Equity

278.16

30%

Total Project cost

927.24

100%

The project cost was supposed to be financed by Syndication Loan led by a leading private commercial bank. However, the lead bank couldnt manage the syndication in due course and thus the management of Panna Group decided to fund the project from own source. The problem aroused when they actually diverted fund from Panna Battery Limited to fund the project. Most of the fund came from Panna Battery Limiteds financial partners which were actually disbursed as working capital facilities for Panna Battery.

The project has gone into commercial operation partially from September 2011. Almost 80% Machinery has been installed, few in the pipeline. At 100% capacity utilization, the proposed unit would be capable to produce 19500 MT of jute yarn per year in 300 working days and 3- shifts per day basis.

The problem however was caused because of a significant portion of fund being diverted from their main battery business. When you invest your short term loan i.e working capital for long term purpose, the chance of repaying the loan within the stipulated time becomes impossible because there is no chance of cash flow from a long term project which is yet to see light of commercial operation and thus revenue generation.

The result was obvious and most of the loans disbursed on account of Panna Battery Limited and its different sister concerns were not repaid in due time and thus got classified. As per Bangladesh Bank guidelines, if a short term loan is not repaid within 90 days from the date of its expiry, it is considered to be classified. As the loans got classified, the banks were more cautious in disbursement of fund to the group concerns. Some of their financial partners even froze their accounts. Thus Panna Battery Limited was hugely hampered in their day to day business as bank financing was hard to get by. The battery business mainly depends upon purchase of raw lead/scrap battery from different suppliers for which huge cash is required. Thus it is not possible to meet up the huge demand of the market in the peak season i.e summer if sufficient purchase of raw materials is not done. This is one of the problems that Panna Battery Limited was facing due to poor management and diversion of the fund to a new project.

3. Solution

As per discussion with Panna Battery officials, we have come to find out that the situation is improving. The jute mill project has already gone into commercial operation in 2011 and they have already exported jute yarns to Russia and other European countries. More export orders are at hand and with the present capacity, its becoming hard for them to meet the existing orders. In the meantime, they are in process of availing re-financing for the capital investment from a state-owned commercial bank. The government is currently emphasizing on more jute mill projects to increase the export of jute products and thus getting financing from state-owned commercial bank will be easier now. If the loan is sanctioned, they could easily repay their existing overdue loans and the freeze on disbursement will be withdrawn with immediate effect. Considering the peak season of battery and IPS sales, they are emphasizing on making the most in this season by investing more in battery production to meet the current market demand.

4. Conclusion

Whenever a company tries to diversify their business portfolio from the existing line of business, they need to be more cautious. First of all, the group was specialized in battery production and sales as the sponsors had lots of experience in this sector. Then they tried to expand their business to a completely new industry where they had no experience at all which can be risky as the projects viability mainly depends upon the management and experience of the sponsors. Secondly, investing a huge amount of money in the jute mill, mostly by diverting fund was risky as it hampered their existing business. Although a new project depends both upon equity and bank finance, it was unwise to divert fund from one business to the other. Panna Group has a good reputation in the market for their quality products which they should to try to capitalize by expanding their business and cater the increasing the market demand. They share the 2nd spot with Navana Battery right behind Rahimafrooz. They should try to grab the business of Rahimafrooz by not only meeting the demand of the local market, but also cater the demand of international market by emphasizing more on exporting. Similarly, Altu Khan Jute Mills can also be a success if they can diversify their product line from jute yarns to jute sacks, gunny bags, jute hessian cloths etc. as these products have huge demand both in the local market as well as abroad.

Reference:

Term paper format, http://www.experiment-resources.com/research-paperoutline.html

Company profile and business analysis, http://pannagroupbd.com/

Risk management, Contemporary Business 13th edition.

Market review and analysis, Annual report[2010-2011] Panna Group of Industries

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