Financial Report Analysis of  Midas Finance Limited

Executive Summery

 Midas Finance Limited is established in 1993 with a view to establishing a new way of deposit as a leading non-banking financial institution in Bangladesh. Midas Finance Limited is a leading operating enterprise in Bangladesh in the field of deposit keeping. Technical support provided by Bangladesh Bank Limited, Lack of sufficient executives especially in treasury department that hampers the deposit sanctioning process in time. MIDAS takes relatively more times in providing the certificates to the clients. It seriously discourages the persons who are interested to keep deposit here .mode of honors check, checking of different legal documents etc. Head office takes so longer time in processing and approval of certificates of the deposits. MIDAS does not provide certificates to all deposits like double money term deposit money builder’s term deposit .So the client loss their faith and not interested to keep deposits.

INTRODUCTORY   BACKGROUND

INTRODUCTION

MIDAS Financing Ltd. is leading financial institution of the country licensed by Bangladesh Bank under the financial institutions Act 1993.Midas is the name of at least three members of the Royal House of Phrygia.  MIDAS Housing Loan Scheme has been launched to fulfill the dream of the limited income people by extending financial support in the form of term loan for constructing a house and/or purchasing an apartment/readymade house/commercial space. This report has been done as per the requirement for successful completion of business communication course. Exposure to the business world was the primary objective of this report. The report focuses on Financial Report as I was assigned with this topic.

The objective of my study work is to learn about overall financial report and deciding the characteristics and features of their products of MIDAS. I have tried my level best to find out characteristics and features of their products. The company has different categories of product; which features are attractive to the clients. But it was not well designed process how to reach to the clients. I tried my supreme to find the financial effect through ratio analysis of the products that maintaining in MIDAS.

Statement of MIDAS

Protect shareholders’ capital as well as maximize the value of the Organization. Provide competitive compensation package to the employees who constitute the back-bone of the management and operational strength of the company.

Repay the loans taken from banks and financial institutions in lime. Fulfill the responsibility to the nation through regular payment of taxes. Avoid malpractice and anti-environmental unethical and immoral activities and corrupt dealings. Maintain a congenial working environment. Practice good governance in every sphere of activities covering full I disclosures and reporting to shareholders, hold AGM and distribute dividend in time and disseminate price sensitive information.

Objectives of MIDAS

  1. The present study has been designed to achieve the following objectives:
  2. The first objective is to know about the MIDAS financial report Policy as a private non-banking organization.

III. Secondly MIDAS how manages its financial tools with rules and regulations of Bangladesh Bank.

IV. To find out barriers or bottlenecks in collecting the overall financial analysis and maintaining process.

  1. To recommend on those problems.

Financial Objectives

  1. To be the most preferred financial services provider;
  2. To maximize the value of being our customer, shareholder or employee;

III. To build and retain a team of highly skilled human resources through talent hunting, nurturing, training, developing and motivating through rewarding to deliver the highest level of customer service;

IV. To build state-of-the-art technological framework for ensuring faster, accurate, timely and risk calculated operations capable of coping with ever increasing financial and operational complexities;.

Strategic Objectives

I. Enrichment & expansion of financial offerings by introducing new product and service lines through proper diversification and customization of existing products & services for ensuring maximum market coverage to meet & exceed stakeholders’ needs & expectations;

II. Continuous improvement in operational processes through technological advancement, employee capacity building through human resources development programs, thereby ensuring effective and efficient utilization of resources to maximize the value of the company;

Features of MIDAS

  1. Safe & Secured;
  2. High Return;(rate of interest 12% )
  3. Flexible/Diversified Deposit Scheme tailored to your needs;
  4. Providing service in fair and friendly environment
  5. 100% compliance of the term and conditions relating to the schemes
  6. Prompt repayment on completion of the duration of the schemes and so on
  7. 15%-30% down payment
  8. Loan size Tk.25,000/- to Tk.200,000/-
  9. Interest payment periodically (Monthly/Quarterly/Half-Yearly/Annually) as per client choice;
  10.  Guarantee of service authority
  11. No incidental costs;

The study was based on primary and secondary data. In order to prepare practical training report various source and method of data collection was used

Nature of Sources data

In this report only secondary data have been used. For both the Organizational part and Project part, quantitative information from the Annual reports of MIDAS and qualitative information from other literature regarding the division and their functions, operations were used. So, only the secondary data were utilized. While I was conducted the study I collected various types of secondary data. Data has been collected through different sources, by talking with the responsible officers, organization’s annual report, and from different circular published by Bangladesh Bank for non-banking organization and their own circular.

Limitation of MIDAS

The following limitations are apparent in this report:

  1. Time constraints were one of the most important factors that imposed restrictions on conducting the study extensively.
  2. Scarcity of Secondary Data
  3. Limitation of Scope was another important point that was faced during execution of the study.
  4. Privacy or reluctance to disclose confidential data was another important problem.
  5. Cost constraints.

Uses of Data

Non-banking sector is a robust and sensitive area. A non- banking organization has different products; Different services and different customers. Different departments of a bank perform different activities. However, scope of the study is limited within specific area of an organization that is Midas Finance Limited.

Vision

To be a leading financial institution of the country with diversified financial services contributing towards development of an enterprising society. To be the nation’s most sought after facilitator in creating, nurturing and maximizing value to the stakeholders, the society, and the environment.

 Mission

I to provide value added financial services to valued customers, strictly maintaining the ethical standard in financial operation. To lead by example through a committed team of nurtured resources fostering ownership that motivates thriving towards excellence in knowledge, systems, processes and procedures, thereby empowering the organization on at every level to deliver the highest quality of product, customer care, and stakeholder value keeping environmental safety a priority

Corporate focus

To give emphasis on continuous development and value addition to become a real friend of entrepreneurs and remain competitive in the financial service sector

Divisions of MIDAS

All policy formulations and subsequent execution are done in the Head Office. It comprises of 10 (ten) major divisions namely Treasury Division, Credit & Investment Division, Accounts Division, Human Resources Division, Marketing, Division, Credit Administration Division, Information Technology Division, Research and Development Division, Audit and Compliance Division, Training and Development Division. Besides these main divisions, there are 7(seven) branches including Dhaka, Chittagong and Sylhet branches to look after the non-banking operations. The structures and sanctions of each of the divisions of MIDAS are described below:

  • Treasury Division
  • Credit & Investment Division
  • Accounts Division
  • Human Resources Division
  • Marketing Division
  • Credit Administration Division
  • Information Technology Division
  • Research and Development Division

Legal Entity

1. Proprietorship

2. Partnership

3. Private Limited Company

MIDAS services

Loan Product:

  • Lease  Finance
  • Term Finance
  • Domestic Factoring of Accounts Receivable
  • Bill/Invoice Discounting
  • Work Order Finance
  • Corporate Real Estate Finance
  • Real Estate Developer Finance
  • Home Loans with Home Loan Shield
  • Home Equity Loans
  • Car Loans for Individuals
  • Personal Loan
  • Machinery Loan
  • Business Loan

Investment Product:

  • Common Equity investments
  • Preferred Equity Investments
  • Bonds

 Liabilities Product:

  • Term Deposit Schemes
  • Debentures
  • Securitized Bonds

Corporate Service:

  • Project Finance Appraisal
  • Project Loan Syndication
  • Working Capital Arrangement
  • Syndication Agency services
  • Refinancing arrangements

Merchant Banking and Portfolio Management Services:

  • Capital Investment
  • Max Capital Investment
  • IPO Advisory
  • Issue Management

Deposit Schemes Categories

Midas offers various Deposit Schemes with attractive rate of return. Under this there are 4(four) types of Term Deposits:

Cumulative Term Deposit

Under this scheme customers Deposit will turn into a desirable amount through accumulation of interest. The minimum tenure of the scheme is at least 2 years. If their deposit amount is Tk.100,000 the receivables on maturity.

 Periodic Return Term Deposit

Under this scheme customer can draw the interest periodically (Monthly/Quarterly/Half- yearly/Annually) keeping the original deposited amount intact.

Periodic Return Term Deposit Rate & Amount:

Tenure Monthly Quarterly Half-Yearly Annually
1 Year1,2293,7257,47515,000
Rate14.75%14.90%14.95%15.00%
2 Years1,1883,6007,22514,500
Rate14.25%14.40%14.45%14.50%
3 Years1,1883,6007,22514,500
Rate14.25%14.40%14.45%14.50%

MIDAS Double Money Term Deposit

The investment amount would be Tk.100,000 (one lac) and multiple thereof.

The investment amount of the depositors will be double and repaid on completion of a term of 6 years. Suppose, if you invest Tk. 1,00,000 (one lac), you will get Tk. 2,00,000 (two lac) just after completion of 5 years 8 months

Credit Facility

The investors may avail loan up to 90% of the deposit amount. Tax will be deducted at source as per income Tax regulations.

 Shareholders

Capital Structure

Authorized Capital: 200,000,000 Ordinary Shares of Tk.10 each Tk. 2,000,000,000.00 Paid-up Capital: 60,134,338 Ordinary Shares of Tk.10 each Tk. 601,343,380.00 Reserve Fund (Statutory) Tk. 118,490,854.00

Category of Shareholders

The shareholding structure of MIDAS consists of Commercial Banks, Investment Bank, Corporate & prominent Industrialists from home & abroad. The current structure is The organization structure and corporate of Midas Finance Limited (MIDAS) strongly reflect its determination to establish, uphold and gain a stronger as an organization which is customer-oriented and transparent in its management.

  1. Board of Directors: The Board of Midas Finance Limited consists of 11(eleven) members, elected from the sponsors of the nonbanking organization.
  2. Board Committees: The Board of Directors who also decides on the composition of each committee determines the responsibilities of each committee.
  3. Executive Committee: The committee has 8 (eight) members.
  4. Audit Committee: All internal audit facts are executives by the audit committee. The committee has 4 (four) members.
  5. Management Committees: Under management committee there are 11 (eleven) members and also there are 8 (eight) committees. These are:
  6. Human Resource Committee: There are 4 (four) members.
  7. Internal Control and Compliance Committee: There are 10 (ten) members.
  8. Management Credit Committee: There are 5 (five) members.
  9. Anti Money Laundering Compliance Committee: There are 5 (five) members.
  10. Asset Liability Management Committee: There are 8 (eight) members.
Category Shareholders

As on 30.06.2012

No. of Shares

Percentage of total Shares

Sponsors

30,907,360

51.40%

Non resident

666,483

1.11%

Companies & Institutions

11,105,028

18.47%

General Public

17,455,467

29.03%

Total:

60,134,338

100.00%

 

MIDAS’s Structure of Finance:

Midas Finance Limited (MIDAS) has indeed, completed another successful year of its journey towards its goal by way of stretching maximum and achieving its best. Figures of September-end-2012 speak for themselves the steady growth in its fundamental indicators over the past few years. Table below shows the comparatives figures:

Cash Flow Statement of Dec, 2012

 Financial Statement Analysis

Midas Finance Limited (MIDAS) is a joint venture financial institution established with multinational collaboration is in operation since 1997 having license from Bangladesh Bank under Financial Institutions Act, 1993. MIDAS Financing Limited started operation in Call Money Market from April, 2005 with a small amount of fund. Now it is gradually increasing day by day and still dominating in the lending side. Interested Bank and Non-Bank Financial Institution are cordially invited for making call money transaction with us.

MIDASSL (Formerly known as Vanik Bangladesh Securities Ltd) started its stock broking business in 1997 trading on the Chittagong Stock Exchange (CSE) Ltd, while commencing trading on the Dhaka Stock Exchange (DSE) in 1998. The company was renamed Midas Securities with effect from 27 April 2005 following a restructuring of the company.

Bangladesh With the assets of 22,380.00 million BDT, the nonbanking organization has diversified activities in deposits; invest in business and credit cards. Midas Finance is playing an important role in providing lease in all market segments of customers, individuals, Small & Medium Enterprises, Commercial Houses, Large Corporate organizations. The total amount of lease has been provided 16,659.83 million BDT till its main investing projects are automobiles, etc. the policy has gained popularity among consumers.

Classification of Ratios:

Ratio may be classified into the five categories as follows:

Liquidity Ratios

 Current Ratio

Quick Ratio

Activity Ratios

Average Collection Period

Total Asset Turnover

Debt Ratios

Debt Ratio

Debt to Equity

 Times Interest Earned

Profitability Ratios

Gross Profit Margin

Net profit Margin

Operating Profit

Earnings per Share

Return on Assets (ROA)

Liquidity Ratios

Current Ratio

The current ratio, one of the most commonly cited financial ratios, measures the firm’s ability to meet its short-term obligations. It is expressed as follows:

Table-1

2008

2009

2010

2011

     = == =

 

     =1.09:1    =1.65:1    =1.68:1     =1.54:1

Interpretation: In the above from Table-1 & Graph-1 of Current Ratio is showing that in 2011 MIDAS is 1.54:1 where in 2008 was 1.09:1. After seeing the graph, I can say that MIDAS is in the highest position from 2008 to 2011.

 Quick Ratio

The quick ratio is similar to the current ratio except that it excludes inventory, which is generally the least liquid current asset.

Table-2

2008

2009

2010

2011

=

=

=

=

 

         =0.52:1        =0.02:1          =0.04:1        =0.02:1

Interpretation: In the above from Table-2 & Graph-2 of Current Ratio is showing that in 2011 MIDAS is 0.02:1 where in 2008 was 0.52:1. After seeing the graph, I can say that MIDAS is in the lowest position from 2008 to 2011.

Activity Ratios

Total Asset Turnover

The total asset turnover indicates the efficiency with which the firm uses its assets to generate sales. Total asset turnover is calculated as follows:

Table-3

2008

2009

2010

2011

 =

=

=

=

 

         =0.04 times        =0.05 times          =0.06 times        =0.06 times

Interpretation :In the above from Table-4 & Graph-4 of Total asset turnover  is showing that in 2011 MIDAS is 0.06 times where in 2008 was 0.04 times. After seeing the graph, I can say that MIDAS is in the highest position from 2008 to 2011.

Debt Ratios

Debt Ratio

The debt ratio measures the proportion of total assets financed by the firm’s creditors.  The ratio is calculated as follows:

Table-4

2008

2009

2010

2011

      =     =        =        = 
      =  20.13%    = 85.52%      = 82.49%     = 82.58%

Interpretation: In the above from Table-5 & Graph-5 of Debt ratio is showing that in 2011, MIDAS is 82.58% where in 2008 was 20.13%. After seeing the graph, I can say that MIDAS is in the high position from 2008 to 2011.

Debt to Equity

The debt to equity ratio is a financial ratio indicating the relative proportion of shareholders equity and debt used to finance a company’s assets. The debt to equity ratio is calculated as follows:

Table-5

2008

2009

2010

2011

    =    =    =     =
     =20.13%    =85.52%    =82.49%     =82.58%

Interpretation: In the above from Table-6 & Graph-6 of Debt to Equity is showing that in 2011, MIDAS is 82.58% where in 2008 was 20.13%. After seeing the graph, I can say that Midas is in the highest position from 2008 to 2011 rather.

Times Interest Earned

Times Interest earned provides an indication of the company’s ability to meet interest payments as they come due.

Table-6

2008

2009

2010

2011

=

=

=

=

          = —          =2.36          =11.56          =10.55

Interpretation :In the above from Table-7 & Graph-7 of Total asset turnover  is showing that in 2011 MIDAS is 10.55 times where in 2009 was 2.36 times. After seeing the graph, I can say that MIDAS is in the highest position from 2009 to 2011.

Profitability Ratios

 Gross Profit Margin

The gross profit margin measures the percentage of each sales dollar remaining after the firm has paid for its goods. It is calculated as follows:

Table-7

2008

2009

2010

2011

     =    =    =    =
     =19.32%    =47.56%    =62.05%    =58.34%

Interpretation: In the above from Table-8 & Graph-8 of Gross Profit Margin is showing that in 2011, MIDAS is 58.34%% where in 2008 was 19.32%. After seeing the graph, I can say that MIDAS is in the highest position from 2008 to 2011.

Net Profit Margin

The net profit margin measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes and preferred stock dividends, have been deducted. The net profit margin is calculated as follows:

Table-8

2008

2009

2010

2011

     =    =    =    =
     =14.54%    =36.24%    =64.11%    =33.70%

Interpretation: In the above from Table-3 & Graph-3 of  Net Profit Margin  is showing that in 2011, MIDAS is 33.70%% where in 2008 was 75.25%. After seeing the graph, I can say that LC is in the low position from 2007 to 2011.

Operating Profit Margin

The operating profit margin measures the percentage of each sales dollar remaining after all costs and expenses other than interest, taxes and preferred stock dividends are deducted. It presents the “pure profits” earned on each sales dollar. It is calculated as follows:

Table-9

2008

2009

2010

2011

====
      =19.32%      =67.68%       =70.52%       =63.87%

Interpretation: In the above from Table-5 & Graph-5 of Operating expense ratio is showing that in 2011, MIDAS is 47.51% where in 2008 was 27.60%. After seeing the graph, I can say that Operating expense ratio of Midas is fluctuating from 2008 to 2011.

Earnings per Share (EPS)

The firm’s earning per share (EPS) is generally of interest to present or prospective stockholders and management. It is calculated as follows:

Table-10

2008

2009

2010

2011

$66

$61.41

$71.64

$2.31

Interpretation: In the above from Table-11 & Graph-11 of Operating expense ratio is showing that in 2011, MIDAS is $2.31 where in 2008 was $66. After seeing the graph, I can say that earning per share of Midas is lowest from 2008 to 2011.

Return on Assets (ROA)

The return on total assets (ROA), measures the overall effectiveness of management in generating profits with its available assets. The return on total assets is calculated as follows:

Table-11

2008

2009

2010

2011

====
       =3.02%       =1.86%        =4.09%        =2.07%

Interpretation: In the above from Table-1 & Graph-1 of ROA is showing that in 2011, MIDAS is 2.07% where in 2008 was 3.02%. After seeing the graph, I can say that MIDAS is in the low position from 2008 to 2011.

Return on Equity (ROE)

The return on common equity (ROE), measures the return earned on the common stockholder’s investment in the firm.  Return on common equity is calculated as follows:

Table-12

2008

2009

2010

2011

====
       =13.35%       =12.84%       =23.34%       =11.89%

Interpretation: In the above from Table-2 & Graph-2 of ROE is showing that in 2011, MIDAS is 11.89% where in 2008 was 13.35%. After seeing the graph, I can say that MIDAS is in the lowest position from 2008 to 2011.

Performance of last five years
 

Taka in Million

 
Particulars

2004-05

2005-06

2006-07

2007-08

2008-09

Loan/Lease/Investment
Portfolio: (i) No.
(ii) Amount

2415

2587

2345

2290

2549

627.72

1026.41

1272.62

2020.31

2388.63

Amount Disbursed

423.38

706.93

744.59

1272.43

1128.45

Amount Recovered

315.57

424.13

545.55

729.87

1117.04

Deposit Received

171.63

175.70

321.00

297.85

(33.85)

 

CONCLUSION

In Bangladesh commercial Banks have spread their command in financial system, but we have to recognize the fact that non-Bank Financial Institutions are also significant for smooth economy. Company like MIDAS is providing some additional and dynamic financial services which helped them to become well known. In one hand they are providing support for those financial sectors that was not served by commercial bank. As an efficient company MIDAS helps in minimizing risk which in turn helps the economy as a whole. As MIDAS becoming stronger and efficient day by day it can be hoped that if they get necessary support from government it will be able to play a more historic role in the economic development of Bangladesh.

I also find that Midas specialize in providing you with instant cash through the purchase of accounts receivable or debts outstanding which is a financing technique known as Factoring. Factoring moves your cash flow forward creating immediate cash to improve your financial position and increase your purchasing power.

As the Non-banking financial institution it is searching for new area of business and collect information about the potential sector as well as to prepare strategy for getting competitive advantage.

Lastly, I can said that the Non-banking financial institution have huge opportunity to increase business and profit in the Bangladeshi economic. Its plan should be innovative to do these jobs.

Recommendations

 Summary of major findings

The following problems or shortage are observed.

  1. Lack of sufficient executives especially in treasury department that hampers the deposit sanctioning process in time.
  2. MIDAS takes relatively more times in providing the certificates to the clients. It seriously discourages the persons who are interested to keep deposit here. mode of honors check, checking of different legal documents etc. Head office takes so longer time in processing and approval of certificates of the deposits.
  3. MIDAS does not provide certificates to all deposits like double money term deposit, money builder’s term deposit. So the client loss their faith and not interested to keep deposits.
  4. MIDAS does not give premature withdrawal like bank; or if allowed premature withdrawal then charges some extra charges, which discourage the clients to keep money here.
  5. MIDAS only like to invest in business sectors; they do not eager to invest in private sectors. Which minimize the opportunity of their profit maximizing.
  6. MIDAS does not provide any extra benefits to the existing client for keeping deposit here again. That’s discouraging them to keep relationship with the organization.

MIDAS should provide the certificate of the all type of deposits.

  1. Deposit process and giving certificates should be faster.
  2. The invest sector should be the moderate and more.
  3. The deposit policies should be revised to moderate and made easy for the clients.
  4. MIDAS also should concentrate on the promotion activities; that all levels of client know about their services.

Bibliography

  • Midas, F. L. (2007). Annual Report. DSE: Midas Finance Limited.
  • Midas, F. L. (2008). Annual Report. DSE: Midas Finance Limited.
  • Midas, F. L. (2009). Annual Report. DSE: Midas Finance Limited.
  • Midas, F. L. (2010). Annual Report. DSE: Midas Finance Limited.
  • Midas, F. L. (2011). Annual Report. DSE: Midas Finance Limited.

Midas Finance Limited