Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Issue Manager
Prime Finance & Investment Limited
63, Dilkusha C/A (3rd Floor), Dhaka-1000, Phone: 9563883, Fax: 9563692
E-mail: info@primefinance.net, Website: www.primefinance.net
A Short Look.
2
The Project of Keya Cotton Mills Limited
3
State of the Art technology
4
State of the Art technology
5
Research and Development
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General Information
The Information Memorandum has been prepared by Prime Finance & Investment Limited from information
supplied by Keya Cotton Mills Limited (the Company) and also several discussions with the Chairman,
Managing Director, Directors and related Executives of the Company which is publicly available. The Board of
Directors of Keya Cotton Mills Limited hereby confirms that to the best of their knowledge and belief the
information contained herein is true and correct in all material respects and that there are no other material
facts, the omission of which, would make any statement herein misleading.
No person is authorized to give any information or to make any representation not contained in this Prospectus
and if given or made, any such information or representation must not be relied upon as having been authorized
by Keya Cotton Mills Limited (the Company) or the Prime Finance & Investment Limited (Issue
Manager).
The Issue, as contemplated in this document, is made in Bangladesh and is subject to the exclusive jurisdiction
of the Courts of Bangladesh. Forwarding this Prospectus to any person residing outside Bangladesh in no way
implies that the issue is made in accordance with the laws of that country or is subject to the jurisdiction of the
laws of that country.
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Vision
Mission
To be a leading business group in fashion industry by offering best price & quality services within
2015
Our objective is to maintain the most demanding standard & produce high quality finest product to
exceed customers need & expectation.
Corporate directory
Liaison office
8
Table of Contents
Item Page No.
9
Information related to Public Offer
10
Summary on Offer
Sl.
No. Particulars
2 FV 10.00
11
Use of proceeds
Purpose of Public Issue:
As per decision of Board of Directors meeting held on 3rd May 2010 the IPO proceeds of Keya Cotton Mills Limited would be
utilized for the following purpose:
a. Management of Keya Cotton Mills Limited will take necessary steps to utilize the net proceeds of public offer for
investment in the second unit of Keya Cotton Mills Limited
b. Management of Keya Cotton Mills Limited will take necessary steps For repayment of Bank Loan as outstanding with
Banks and Financial Institute.
The proposal envisages setting up of a Textile Spinning Unit with 39,600 spindles and 720 rotor head at Jarun, Konabari, Gazipur.
The project will be equipped with modern and sophisticated machinery from world best manufacturers in order to produce high
quality Cotton yarns. After implementation of the project, it will create job opportunities for 801 persons. The project is expected to
go into production within 12 months from the date of opening of 1st Letter of Credit for Imported Machinery. The total fixed cost of
the project has been estimated at Tk. 1,809.00 million.
Total 1,809.00
Borowings, Equity support from Banks, Financial Institutes and Others (yet to be arranged)
Total 1,809.00
Mentionable here that the Board of Directors of Keya Cotton Mills Limited in its meeting held on 28th June 2010 decided to
establish a second unit for producing raw cotton in which net proceeds of IPO will be invested.
Keya Cotton Mills Limited will invest Tk. 1500 million of Initial Public Offering for implementing unit II.
The Second Unit of keya Cotton Mills Limited is expected to commence operation by January 2012. The tentative
implementation schedule of the project is presented below:
12
Implementation Schedule of Second Unit of Keya Cotton Mills Limited
Sd/- Sd/-
(Md. Abdul Khaleque Pathan) (Md. Mahbub Alam)
Director & CEO of Keya Cotton Mills Limited Chief Finance officer of Keya Cotton
Mills Limited
B. The proceeds of IPO will be used for repayment of long-term liabilities (Bank loan) and Short term liabilities and
working capital financing as mentioned below:
Sd/- Sd/-
(Md. Abdul Khaleque Pathan) (Md. Mahbub Alam)
Director & CEO of Keya Cotton Mills Chief Finance officer of Keya Cotton
Limited Mills Limited
(C) There are no other contract for which Proceeds of IPO will be utilized
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Company Information
14
Keya Cotton Mills Limited- An Overview
Company at a glance
Keya Cotton Mills Ltd. a Public Limited Company was incorporated in the year 2004 and started commercial production in the
year 2006. Initially the project has established with 37,200 spindles having 23 MT per day production capacity. Currently the
project has production capacity of 30 MT per day. The project has been setup with latest modern machinery imported from
Japan, Switzerland, Taiwan and India. Factory has facilitated with own power generator and also with cogeneration chiller for
controlling exact humidity and temperature. Around 762 persons work in this industry. The industry has equipped with modern
and sophisticated machinery imported from world renowned manufacturers with the view to produce high quality Cotton Yarns.
The Group
Keya Group of Industries is a renowned business Group in the country. The Group has been in the eye of media with its
various products with brand name Keya for the last decade. At present the Group has been managing 10 active large and
small companies including two public limited companies namely, Keya Cosmetics Ltd. and keya Detergent Ltd. The Group
started its journey under the leadership of Mr. Abdul Khaleque Pathan with his brickfield project Khaleque & Co. Ltd. The group
subsequently expanded its activities in the area of soap chemicals, spinning, knit composite, garments and advertisement firm.
Within 17 years of operation the group has became one of the renowned business conglomerates in the country.
The Group is financed by Sonali Bank Ltd., Standard Bank Ltd., Southeast Bank Ltd., Bank Asia, Eastern Bank Ltd., Prime Bank
Ltd., Dhaka Bank Ltd., and United Commercial Bank Ltd. The Group enjoys franchise value in the market and among the
shareholders.
Group Profile
15
As on 30th June 2010 (Figure in Million TK.)
Name of the Companies Assets Liabilities Equity Net Income
Khaleque Knitting & Garments Industries
4,539.91 2,043.75 2,496.16 65.46
(Pvt.) Ltd
Keya Cosmetics Ltd 1,101.90 419.60 682.30 174.99
Keya Spinning Mills Ltd. 5,647.92 4,838.49 809.43 95.25
Keya Detergent Ltd. 544.38 160.81 383.57 55.47
Keya Cotton Mills Ltd. 2983.75 1727.67 1256.08 297.05
Keya Soap Chemicals Ltd. 1,591.43 1,015.64 575.79 25.72
Keya Knit Composite Ltd. 5,561.32 4,085.86 1,475.45 511.50
Keya Yarn Mills Ltd. 3,367.70 3,113.03 254.67 162.64
Capital structure
The capital structure of Keya Cotton Mills Limited before and after IPO will be as under:
Nature of business
The principal activities and operations of the Company are manufacturing & selling cotton yarn.
Names of the customer who purchase 10% or more of the Companys products/service
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Distribution of Products/Services
The Company conducts the business operations under the supervision of Board of Directors and highly skilled management.
The Company operates its business through the Head Office at Jarun, Konabari, Gazipur and Liaison office at Apt. # 6/13,.
Priyo Prangon Tower, House # 19, Road # 17, Kemal Ataturk Avenue, Banani, Dhaka. The Company collects raw materials
from foreign suppliers. After processing the raw materials in the production process the final product is distributed that to the
buyer at due timely.
Sources and availability of raw materials and the names of the principal suppliers
The raw material of the Company is raw cotton, which is fully procured from abroad. The names of main suppliers are
mentioned below:
Water Keya Cotton Mills Limited requires 6 lac liter/ hour of water per hour which is met by its own deep-
tube well.
GAS Keya Cotton Mills Limited requires about 850 m3/hour of gas per annum. Titas Gas Transmission
& Distribution Co. Ltd. (TGTDCL) supplies required gas for the project.
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Board of Directors
& Shareholders
18
Directors and officers
Mr. Abdul Khaleque Pathan, founder of Keya Groupof Industries was born on 14th May 1959 at Jarun, Konabari, Gazipur district.
He is a man of hard working, brilliant, foreseeing, leadership, gentle, creative and enthusiastic. From his young age, he was
very much interested and fond love of doing business. In 1986 he stepped in to the business as an entrepreneur by
establishing a brick manufacturing company named Khaleque & Co. Shortly he had been proved successful and spread
business in the area of Garments & toiletries. Presently Keya Groupof Industries comprises eight companies under the direct
supervision of Mr. Abdul Khaleque Pathan. The core strength of this group is strong financial profitability & quality production.
Mr. Pathan never compromise with the product quality and always adopt modern technology, method, procedure which helps
in emerging local & foreign markets.
Mr. Abdul Khaleque Pathan attends many workshops, seminar, trade fair within the country and abroad organized by ministry
of commerce, federation of chambers, trade development association etc.
He has traveled many countries in the world like India, Singapore, Japan, Thailand, Saudi Arabia, UAE, Philippines, Malaysia,
Hong Kong, China, USA , UK and so many.
Mr. Abdul Khaleque Pathan was awarded as Commercially Important Person (CIP) for the year 1998 and 1999 for outstanding
performance done through Khaleque Knitting & Garments Ind. (Pvt.) Ltd., Khaleque Knitting & Garments Ind. (Pvt.) Ltd. also
achieved Export Trophy in the year 1996 and 1997.
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Directors involvement in other organization(s)
Sl. Name of Director Name of the Organizations Status
No.
01 Mrs Feruza Begum Keya Detergent Limited Director
keya Spinning Mills Limited Chairman
Keya Cosmetics Limited Do
Keya Soap Chemicals Limited Do
Keya Knit Composit Limited Do
Khaleque & Co. (Pvt.) Limited Do
Khaleque Knitting & Garments Inds Limited Do
Keya yarn Mills Limited Do
Keya Sweaters Limited Do
02 Mr. Abdul Khaleque Pathan Keya Detergent Limited Chairman
keya Spinning Mills Limited Managing Director
Keya Cosmetics Limited Do
Keya Soap Chemicals Limited Do
Keya Knit Composit Limited Do
Khaleque & Co. (Pvt.) Limited Do
Khaleque Knitting & Garments Inds (Pvt.) Limited Do
Keya Yarn Mills Limited Do
Keya Sweaters Limited Do
03 Mrs. Khaleda Pervin Keya Detergent Limited Managing Director
keya Spinning Mills Limited Director
Keya Cosmetics Limited Do
Keya Soap Chemicals Limited Do
Keya Knit Composit Limited Do
Khaleque & Co. (Pvt.) Limited Do
Khaleque Knitting & Garments Inds (Pvt.) Limited Do
Keya Yarn Mills Limited Do
M. P. Sweaters Limited Chairman
Keya Sweaters Limited Do
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Involvement of Directors and Officers in Certain Legal Proceedings
No director or officer of the Company was involved in any of the following types of legal proceedings in the last ten years:
(a) Any bankruptcy petition filed by or against any company of which any officer or director of the issuer company filing the
prospectus was a director, officer or partner at the time of the bankruptcy.
(b) Any conviction of director, officer in a criminal proceeding or any criminal proceeding pending against him.
(c) Any order, judgment or decree of any court of competent jurisdiction against any director, officer permanently or
temporarily enjoining, barring, suspending or otherwise limiting the involvement of any director or officer in any type of
business, securities or banking activities.
(d) Any order of the Securities and Exchange Commission, or other regulatory authority or foreign financial regulatory
authority, suspending or otherwise limiting the involvement of any director or officer in any type of business, securities or
banking activities.
2 M A Kashem Shareholder 34, Kamel Ataturk Avenue, Awal Center, 1,500,000 2.27%
(17th Floor) Banani, Dhaka
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3 Nazmul Ahsan Farid Shareholder Adalatpara Tangail 250,000 0.38%
5 Md. Shariful Islam Shareholder Bhuyian Mansion, Room-9, (3rd Floor), 6 200,000 0.30%
Motijheel Dhaka-1000
6 Sarder Munsef Hossain Shareholder 89/60 RK Mission Road, Gopibag 150,000 0.23%
Dhaka-1203
7 Kamrun Nahar Shareholder Sena Kalyan Bhaban, Suit 1706/B (17th Floor) 140,000 0.21%
195, Motijheel C/A, Dhaka-1000
8 Shaarat Fasion Wear Ltd. Shareholder Jarun , KonaBari, Gazipur 120,000 0.18%
9 Mominul Islam Sangram Shareholder House-30, Road-9A, Dhanmondi, Dhaka 110,000 0.17%
10 One Multipurpose Co-operative Society Ltd. Shareholder 313, East Kazipara, Mirpur Dhaka 100,000 0.15%
12 Major Syed Golam Wadud (Rtd.) Shareholder 797, Ibrahimpur, Kafrul, Dhaka-1206 100,000 0.15%
th
13 Md. Zainul Shareholder Sena Kalyan Bhaban, Suit 1706/B (17 Floor) 100,000 0.15%
195,
Motijheel C/A, Dhaka-1000
14 Zillur Rahman Shareholder House# 20 Road# 13/A Flat# A-5, 100,000 0.15%
Dhanmondi, R/A Dhaka
15 Mrs. Razia Rashid Shareholder C/O Syed Golam Mostafa, 797 100,000 0.15%
Ibrahimpur, Kafrul, Dhaka-1206
16 Md. Mustafizur Rahman Shareholder House# 45, Road# 25, Gulshan 100,000 0.15%
17 Chowdhury Ashik Mahmud Bin Harun Shareholder Apt# A3, Building no. 6, Road No. 2, 100,000 0.15%
Chairmanbari, Banani, Dhaka
18 Garments Export Village Ltd. Shareholder Maa Tower, KBM Road Tongi I/A, Tongi, 100,000 0.15%
Gazipur
19 Mustafizur Rahman Shareholder A-7, 1/4 Block-C, Lalmatia, Dhaka-1207 100,000 0.15%
21 Mohammod Ruhul Amin Shareholder 330/E East Nakhalpara, Tejgaon, Dhaka-1208 70,000 0.11%
22 Mrs. Roseline Talukder Shareholder House# 50, Road# 1, Sector-9, UttaraModel 70,000 0.11%
Town, Dhaka
23 Md. Kamal Uddin Shareholder House# 346/1/A (2nd Floor) West Rampura, 60,000 0.09%
Dhaka
24 Ms Tansin Keya Shareholder 59,960 0.09%
26 Md. Ahsanul Kabir Shareholder EO, TDM, FCMD, Sonali Bank Ltd. HO, Dhaka 50,000 0.08%
27 Umma Kulsum Shareholder B-31216 Khilgaon R/A Taltola, Dhaka-1219 50,000 0.08%
28 Monowara Sultana Shareholder B-7/E-3, Officers Quarter, Ideal Zone, 50,000 0.08%
Motijheel, Dhaka-1000
29 Md. Motahar Rahman Shareholder 438, Nort Shahjahanpur, Dhaka-1217 40,000 0.06%
30 Md. Sazzadur Rahman Shareholder 16/C Volatank Road, Jessore 30,000 0.05%
31 Sk. Ashrafur Rahman Shareholder 38, West, Banrandi Road, Kadamtal, Jessore 30,000 0.05%
32 Farida Zaman Irin Shareholder House# 719, West Nakhalpara, Dhaka 20,000 0.03%
33 Husne Ara Hussain Shareholder Enayatpuri Tower, 17 Bir Uttom K M Sha 20,000 0.03%
(Green Road) Dhaka
34 Quazi Arham Uddin Shareholder One Bank Ltd. Br, Monuara Mansion, Dhohar, 15,000 0.02%
Dhaka
35 Md. Abu Sayeed Shareholder 14, Chamilibag, Flat-4B Shantinaga Dhaka- 15,000 0.02%
1217
22
36 Md. Mahmud Hasan Shareholder 45, New Eskaton Dhaka 15,000 0.02%
38 Ferdausi Begum Shareholder Korobi-9, Azimpur Judges Quarter, Dhaka 10,000 0.015%
41 Bishnu Pada Paul Shareholder SNM Securities Ltd. 9/E Motijheel C/A DSE 10,000 0.015%
Anex Building Room-732, Dhaka
42 Md. Tajul Islam Shareholder 88, Arambag, (5th Floor) Dhaka 10,000 0.015%
43 Muhammad Asiful Haque Shareholder 1215 Block B, Motalib Plaza, 8 Paribag, 10,000 0.015%
Dhaka
44 Abdullah Al Mamun Shareholder 70 SK Mojib Road Amena Plaza (2nd Floor) 10,000 0.015%
Agrabad Chitagonj
45 Badrun Nesa Khanam Shareholder 272/8 Baten Nagar, 1st Colony, Lalkuti, 10,000 0.015%
Mirpur-1, Dhaka-1218
46 Mala Rani Paul Shareholder C/O SNM Securities Ltd. 9/E Motijheel C/A, 5,000 0.0075%
DSE Annex Building,Room-732, Dhaka
(*As per Schedule X certified by Register of Joint Stock Companies and Firms (RJSC) as on 21/11/2010)
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Management
24
Description of other Senior Executives and Officers
Name Designation Date of Joining Educational Name(s) of
in The Company Qualification organization(s) where
worked during the last
five years
Mr. Abdul Khaleque Pathan Director & CEO 15.06.2004 S.S.C Keya Cotton Mills Limited
Mr. Syed Noorul Alam Executive Director 15.06.2004 M. Com. Keya Cotton Mills Limited
(Finance) &
Company Secretary
Mr. Mahbub Alam Chief Finance Officer 2.05.2010 ACA STS Group
Bashundhara Group
Keya Cotton Mills lImited
Mr. Shafiqul Alam Sr. General Manager 15.06.2004 B.Sc.in Textile Keya Cotton Mills limited
(Factory) Engineering
Mr. Rezaul Haque Deputy Manager 15.06.2004 M.Com Keya Cotton Mills limited
(Store)
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Financial Performance
26
Plan of operation and discussion of financial condition
Internal and external sources of cash
Internal Sources of Cash (as per audited accounts)
Particulars 30-09-2010 30-06-2010 30-06-2009 30-06-2008
Share Capital 660,000,000 600,000,000 247,000,000 247,000,000
Share Money Deposit - - 205,000,000 -
Share premium 58,200,000 - - -
Tax Holiday Reserve 174,375,049 174,375,049 124,358,563 106,673,778
Proposed Stock Dividend - - 148,000,000 -
Retained Earnings 428,843,513 343,289,130 64,861,622 160,005,791
Revaluation reserve 138,418,403 138,418,403 - -
Total 1,459,836,965 1,256,082,5 789,220,186 513,679,569
External Sources of Cash (as per audited accounts)
Particulars 30-09-2010 30-06-2010 30-06-2009 30-06-2008
Long term Loan /Term Loan 669,508,545 676,403,865 444,164,154 604,034,004
Short term Loan 731,321,199 844,455,079 652,001,221 455,430,048
Current Portion of Long term Loan 128,294,407 99,024,770 - -
Lease Liability - - 143,854,865 175,125,625
Accepted Liability - - - 101,405,145
Total 1,529,124,151 1,619,883,7 1,240,020,2 1,335,994,82
The following machines have been procured from the Phoenix Finance and Investment Limited (Formerly Phoenix Leasing Co
Ltd.), Union Capital Limited and LankaBangla Finance Limited on financial lease commitment basis:
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Transactions with holding /subsidiary company or associate company and the Issuer
The issuer has no holding/subsidiary company. So no transaction was arise in this respect during the year 2009-2010.
Considering voting right of 20% or more in another company there are only two companies namely Keya Spinning mills Limited and
Khaleque Knitting & Garments Ind. Ltd. are the associate company of Keya Cotton Mills Limited as per Para 4 of BAS 28.
The shareholding Structure in two companies is given below:
Besides this, there exist common directorship in some companies which considered as related party such as:
The transaction has been made during the accounting period with above companies as follows:
28
Keya Yearn Mills Shareholder & NA NA NA NA NA NA
Limited
Common
Directorship
Khaleque Knitting Shareholder & NA NA NA NA NA NA
& Garments Ind.
Ltd. Common
Directorship
Description of property
The Company has setup its factory at Jarun, Konabari, Gazipur and has also setup a liaison office at Apt.# 6/13,.Priyo Prangon
Tower, House # 19, Road # 17, Kemal Ataturk Avenue, Banani, Dhaka. The Company possesses the following fixed assets:
1. The plant and other property as shown above are located at Jarun, Konabari, Gazipur and are purchased in brand new condition.
2. The properties of the company have been owned by the company through own financing and lease & loan financing.
3. The entire property is owned by the company. The Company avail bank loan against mortgage of property from the National
Bank Limited in order to repay lease liability of different NBFIs which was taken earlier. The entire project of Keya Cotton Mills
Limited are registered mortgaged to National Bank Limited, Gulshan Branch, Dhaka an amount of Tk. 75.85 crore.
4. The company acquired plant and machinery by lease financing but subsequently the company repay the lease liability.
Currently the company has no lease liability against any property in this respect.
Revaluation of Assets
The company revalued its fixed assets (land) for the 1st time in the year 2010 as per Board Resolution dated on 3rd May 2010
Reserve is created by the sum of revaluation surplus and transferred the equal amount to the equity as per the provision of
BAS-16.
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Auditors Disclosure regarding revaluation of fixed asset
The first revaluation of the company was made on 22 June 2010 by the Asian surveyor Limited . The report was signed by the
Mr. K.C. AICH, Executive Director of Asian Surveyor Limited.The valuation has been made for reflection of actual value of
asset. The revalued amount was incorporated in the accounts as on 30 June 2010. The summary of revaluation is shown
below:
Particulars of Asset Book Value as on Addition during Revaluation Surplus Revalued Book Value
30.06.2009 the year as on 30.06.2010 as on30.06.2010
Land 89,596,345 97,750 138,418,403 228,112,498
Sl. Particulars of Assets Asset Value before revaluation Asset Value After revaluation
No. (Amount in Tk.) (Amount in Tk.)
A. Land 89,694,095 228,112,498
Net Tangible Assets per Ordinary Share (considering re-valuation reserve) 22.12
(1,459,836,965/ 66,000,000)
Net Tangible Assets per Ordinary Share (without re-valuation reserve) 20.02
(1,459,836,965-138,418,403)/66,000,000
A Special report regarding any allotment of shares to the Directors and Subscribers to the
Memorandum of Association and Articles of Association for any consideration otherwise
than for cash
Paid up capital structure of Keya Cotton Mills Limited stands as on 30 June 2010:
A) Considering Cash:
Paid-up capital as existing New allotment Total paid up Face value Amount in Tk.
on (No of Share)
15-06-2004 100,000 nil 100000 100/- 10,000,000
*The Board of Directors in its meeting held on 13th September 2008 decided to denominated face value of share from existing
Tk. 100 to Tk. 10 per share. Subsequently the shareholders of the company in the EGM held on 13 September 2008
unanimously approved the change in face value of share.
30
B) Otherwise than Cash
Paid-up capital existing New allotment Total paid up Face value Amount in Tk.
as on (No of Share)
21-11-2010* 45,200,000 14,800,000 66,000,000 10/- 660,000,000
(Bonus Share)
The Paid Up Capital of the Company as on 30th June 2010 stands at Tk. 600,000,000, i.e., 60,000,000 nos. ordinary share @
Tk. 10 per share. The Board of Directors in its meeting held on 5th June, 2010 decided to raise paid up capital through capital
raising by issuing 6,000,000 shares of Keya Cotton Mills Limited. Subsequently the company applied to Securities and Exchange
Commission (SEC) on 15 June 2010 for capital raising.
Upon getting Consent from the Securities and Exchange Commission (SEC) vide their letter no SEC/IPO/CPLC-161/2008/50
Date: June 27, 2010 the share money by way capital raising of Tk. 120,000,000 (i.e.,6,000,000 ordinary shares of Tk. 20 each
including premium of Tk.10 per share) fully collected and deposited the same in the Southeast Bank Limited & National Bank
Ltd. All the related returns filed to The Registrar of Joint Stock Companies and Firms and certified copy withdrawn respectively.
The paid up capital of the Company thus stands at Tk.660,000,000, i.e 66,000,000 nos. of Ordinary share @ Tk. 10 per share.
31
Industry Overview and Risk
32
Industry overview
Textile sector of Bangladesh is playing a very important role in the economic development of the country by earning huge
foreign exchange which is next to wage earners remittance. Besides creation of employment opportunities and supporting
government policy of poverty alleviation, textile sector has become the accelerator of economic growth. Over more than a
decade, the sector experienced significant development and export earnings of textile and clothing increased considerably. The
knitwear sectors export earnings stood at $ 6.4 billion while wovens was $6.1 billion during the last year. Keeping the
momentum, Bangladesh has already become one of the major suppliers of clothing in EU market. The sector also has
remarkable contribution to GDP (around 10%) as around 77% of the export earnings come from this sector. At this moment
100% demand for raw materials for knit RMG are being met by local sources side by side it fulfills the requirements for
domestic fabric and yarn.
Since after liberation, the number of spinning mills gradually increased over the years. The country has 1350 textile mills with
cumulative investment of TK. 400 billion which is the biggest industrial sector. Spindle capacity increased to 7.2 million having
yarn production capacity of 1600 million kg. Loom capacity also increased to 5000 million having fabric production capacity of
1600 million meters. Considerable size of backward linkage industry has been established for which knit sub sector also
achieved phenomenal growth. The achievement so far made was possible due to permitting textile machinery at zero duty/tax
and other incentives. However, due to significant involvement of capital machineries, the sector, on an average, is highly
leveraged having 70% borrowing in the capital structure.
Bangladesh also emerged as a significant supplier of Denim cloths and Home textile products to the European market. This has
become possible due to availability of local raw materials-particularly cotton yarn which are being produced mainly from waste
cotton. In spite of that Denim fabric manufacturers are experiencing problems due to no specific rate of wastage for denim
fabric, high duty/tax of spare parts of denim machines, delay in obtaining utilization permission (UP), delay in realizing money
from exported fabrics etc.
The demand for clothing continues to be in increasing trend due to increased population. However, the production of yarn and
cloths are not being increased in line with demand resulting to considerable demand-supply gap. However, due to irregular gas
supply, textile production started reducing which resulted to maximum 50% production loss. The problem started since March
2009 and nowadays has reached to worst situation in Dhaka, Chittagong, Gazipur, Savar and Narayangonj zones. At the time
of recovering from the impact of global recession, the gas crisis has been a big menace for the sector which can even cause
the loss of the international market. Despite the fact, we have ample scope to consolidate the sector to explore maximum
benefit out of it for which fair deal by the government in terms of infrastructure, utilities, policies, financial support and
necessary market protection from illegal entry of textile raw materials and finished good is required.
The Company is operating in a field involving a great deal of external/internal risk factors and the management of Keya Cotton
Mills Limited perceives the risk factors which are as follows simultaneously: -
Management perception
Although the company has availed loan facilities from financial institutions, management of the Company is expectant that
interest rate fluctuation will not deeply affect profitability of the company. On the other hand, the company is going to raise
fund from capital market for repayment of loan, which will further reduce their interest rate risk exposure.
Management perception
Import of the machinery/raw materials may be affected by the local currency devaluation.
Industry risks
The company is operating in a highly competitive industry. Textile is the largest industrial sub-sector in Bangladesh. It
contributes highest in the countrys total export earnings, gives employment to over four million people, meets the second
basic need for clothing of the country and contributes around 50% of the industrial value addition. But after phasing out of the
MFA, the global textile trade is now free from quota restriction. The phasing out of MFA has created a tough competitive
environment, where Bangladesh is now competing the countries like China, India, Pakistan, Indonesia, Thailand, Vietnam etc.
countries that is very strong in production of textile goods. All sectors of the textile industry face many of the same challenges.
These problems include lack of power, obsolete technology, low capacity utilization, lack of machinery maintenance, a
workforce that is not adequately trained, problems with labor unrest and militancy, political unrest causing disruption such as
hartals, and a lack of working capital.
33
Management perception
The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both
yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental
steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the
global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for
textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting,
dyeing, printing and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to
ensure quality products at competitive prices. In recent years, there has been a great deal of private initiative regarding
investment in the backward linkage industries, taking advantage of the low cost of labor and power in the country and high
local demand. The private sector investment in this sector, further boosted by government's various incentives, is likely to take
the backward linkage industries to a better position where they can provide the necessary competitiveness to the entire textile
industry to survive successfully in the free world market.
Management perception
The country enjoys Most Favored Nation status and has signed bilateral trade and investment treaties with 16 countries in
North America, Asia and Europe. Investors can also take advantage of the generalized-system of preference (GSP) which
allows duty-free access to the European Markets. Since 1990, the Government has embarked on a highly successful
macroeconomic, stabilization program with balance of payments much improved, foreign exchange reserves and export
earnings increased.
Management perception
The project is equipped with worlds modern and latest machinery and technology and to cope with the pace in harmony with
modern textile world the Company is continuing modernization program of its machinery.
Management perception
Unless any adverse policies are taken, which may materially affect the industry as a whole; the business of the Company will
not be affected. Government emphasizes on the growth of Yarn Industry to boost up the export of RMG. Yet the promoters
and the sponsors have endeavor to convince the policy makers for adopting favorable terms & conditions, which will eventually
help the yarn manufacturers of Bangladesh to compete with the low cost locations in the global arena.
Management perception
The company can prosper in a situation of political stability and a congenial business environment. Political turmoil and the
disturbance are bad for the economy and so also for us.
Operational Risk
Difficulty in raw material import, increase of raw material price, strikes or other disruption within production premise may
hinder regular flow of operational activities.
All sectors of the textile industry face many of the same challenges. These problems include lack of power, obsolete
technology, low capacity utilization, lack of machinery maintenance, a workforce that is not adequately trained, problems with
labor unrest and militancy, political unrest causing disruption such as hartals, and a lack of working capital.
34
The textile industry in Bangladesh is growing rapidly from last two decades. Number of companies are operating in our country
which creates intense competition in the industry. The major market competitors of the textile industry are as follows:
35
General Information
36
Lock-in on Sponsors Shares
All issued shares of the issuer at the time of according consent to public offering shall be subject to a lock-in period of three
years from the date of issuance of prospectus or commercial operation, whichever comes later.
Provided that the persons, other than Directors and those who hold 5% or more, who have subscribed to the shares of the
Company within immediately preceding two years of according consent, shall be subject to a lock-in period of one year from
the date of issuance of prospectus or commercial operation, whichever comes later.
G. Shareholding Above 5% of the Directors- Lock In period 03 years
Sl. Name of Shareholder Status No. of Amount % of Last Date of Period of Lock In
No. Shares hold Taka holdings Allotment Issuan from the Date of
date ce of Issuance of
Prospe Prospectus
ctus
Director 03 years
01 Mr. Abdul Khaleque Patahn 25,730,120 257301200 38.99% 2/03/2010
& CEO
I. Shareholding Above 5% of Subscriber to the Memorandum and/or General Shareholder- Lock in period 03 years
Sl. Name of Shareholder Status No. of Amount % of Last Date of Period of Lock In
No. Shares Taka holding Allotment Issuan from the Date of
hold s date ce of Issuance of
Prospe Prospectus
ctus
General 2/03/2010
06 Keya Cosmetics Limited 6,300,810 63,008,100 9.55% 03 years
Shareholder
Subscriber to 2/03/2010 03 years
Khaleque knitting & Garments
07 the 1,330,2267 133,022,670 20.15%
Industries (Pvt.) Ltd.
Memorandum
Subscriber to 2/03/2010 03 years
08 Keya Spinning Mills Limited the 14,346,963 143,469,630 21.74%
Memorandum
33,950,040 339,500,400 51.44%
J. Shareholding below 5% of Subscriber to the memorandum and/or General Shareholder- Lock In 03 year
Sl. Name of Shareholder Status No. of Amount % of Last Date Period of Lock In from
No. Share Taka holdings Allotment of the Date of Issuance
s hold date Issua of Prospectus
nce of
Prosp
ectus
Subscriber to
03 years
the
01 Khaleque & Co (Pvt. ) Ltd 79,960 799,600 0.12% 2/03/2010
Memorandu
m
Total 79,960 799,600 0.12%
37
K. Shareholding below 5% of General Shareholder- Lock In 01 year
38
Refund of Subscription Money
As per SEC Notification Dated February 9, 2010, the issuer shall refund application money to the unsuccessful applicant of the
public offer by any of the following manner based on the option given by the applicant in the application form;-
a) Through banking channel for onward deposit of the refund money into the applicants bank account as provided in
the respective application form for subscription; or
b) Through issuance of refund warrant in the name and address of the applicant as provided in the respective
application form for subscription: Provided that, in case of deposit into the applicants bank account, the applicant
will bear the applicable service charge, if any, of the applicants banker, and the issuer shall simultaneously issue a
letter of intimation to the applicant containing, among others, the date and amount remitted with details of the bank
through and to which bank such remittance has been effected.
1. A Non-Resident Bangladeshi shall apply either directly by enclosing a foreign demand draft drawn on a Bank payable at
Dhaka, or through a nominee by paying out of foreign currency deposit account maintained in Bangladesh or in Taka,
supported by foreign currency encashment certificate issued by the concern Bank, for the value of Securities applied for
through crossed Bank cheque marking Account Payee only.
2. The value of Securities applied for by such person may be paid in Taka or US Dollar, UK Pound Sterling or Euro at the rate of
exchange mentioned in the securities application form.
3. Refund against over subscription shall be made in the currency in which the value of securities was paid for by the applicant
through Account Payee bank cheque payable at Dhaka with bank account number, Banks name and Branch as indicated in
the securities application form. If the applicants bank accounts as mentioned in their IPO Application Forms are maintained
with the Bankers to the Issue and other bank as mentioned above, refund amount of those applicants will be directly
credited into the respective bank accounts as mentioned in their IPO Application forms.
Availability of securities
Offer
1. Shares
Particulars No. of shares Amount in Tk.
A. 20% of IPO of Ordinary Shares of Tk (*) each including a premium of Tk (*) per share 10,000,000 (*)
shall be reserved for Eligible Institutional Investors through Book Building Method
B. 10% of IPO i.e. 5,000,000 Ordinary Shares of Tk (*) each including a premium of Tk (*) 5,000,000 (*)
per share shall be reserved for Non Resident Bangladeshis.
C. 10% of IPO i.e. 5,000,000 Ordinary Shares of Tk (*) each including a premium of Tk (*) 5,000,000 (*)
per share shall be reserved for Mutual Funds and Collective Investment Schemes
registered with the Commission.
D. The remaining 60% of IPO i.e. 30,000,000 Ordinary Shares of Tk (*) each including a 30,000,000 (*)
premium of Tk (*) per share shall be opened for subscription by the General Public.
Total 50,000,000 (*)
2. All shares as stated in clause 1.A, 1.B, 1.C and 1.D shall be offered for subscription and subsequent allotment by the
Issuer, subject to any restriction, which may be imposed, from time to time, by the Securities and Exchange Commission.
3. Under the clause 1.A the institutional investors will be allotted securities on a prorate basis at the weighted average price
of the bid that would clear the total number of securities being offered to the institutional investors.
4. The securities offered to the investors under clause 1.B, 1.C and 1.D will be at the cut off price determined during the
book building process.
5. In case of over-subscription under any of the categories mentioned in 1.B, 1.C and 1.D the Issue Manager shall conduct
an open lottery of all the applications received under each category separately in accordance with the letter of consent
issued by the Securities and Exchange Commission.
6. In case of under-subscription under any of the 10% categories mentioned in 1.B and 1.C, the un-subscribed portion shall
be added to the general public category and, if after such addition, there is over-subscription in the general public
category, the issuer and the issue manager shall jointly conduct and open lottery of all the applicants added together.
7. In case of under-subscription of the public offering, the un-subscribed portion of securities shall be taken up by the
underwriter(s).
8. The lottery as stated in clause (5) and (6) shall be conducted in presence of representatives form the Issuer, the Stock
Exchanges, and the applicants, if there be any.
39
Application for subscription
1. Application for shares may be made for a minimum lot for 100 ordinary shares to the value of Tk. (*) and should be
made on the Companys printed application forms. Application form and prospectus may be obtained from the registered
office of the Company, members of Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. or from the Bankers
to the Issue. In case adequate forms are not available, applicants may use photocopied/cyclostyled/hand written/typed
copies of the forms. Applications must not be for less than 100 shares. Any application not meeting this criterion will not
be considered for allotment purpose.
2. Joint application form for more than two persons will not be accepted. In the case of joint application each party must
sign the application form.
3. Application must be in full name of individuals or limited companies or trusts or societies and not in the name of firms,
minors or persons of unsound mind. Applications from insurance, financial and market intermediary companies must be
accompanied by Memorandum and Articles of Association.
4. An applicant cannot submit more than two applications, one in his/her own name and another jointly with
another person which is applicable for both Non-resident Bangladeshi (NRB) as well as other than Non-
Resident Bangladeshi Applicants. In case an applicant makes more than two applications, all applications
will be treated as invalid and will not be considered for allotment purpose. In addition, whole or part of
application money may be forfeited by the Commission.
5. Bangladeshi nationals (including Non-Resident Bangladeshi (NRB) nationals working abroad) and Foreign nationals shall
be entitled to apply for shares.
6. Payment for subscription by investors other than Non-Resident Bangladeshi (NRB) may be made to the said
branches/office of the Banks mentioned below in Cash/Cheque/Pay Order/Bank Draft. The Cheque/Pay Order/Bank Draft
shall be made payable to the Bank to which it is sent and be marked Keya Cotton Mills Limited and shall bear the
crossing A/C Payee Only and must be drawn on a Bank in the same town of the Bank to which application form is
deposited.
7. All completed application forms together with remittances for the full amount payable on application shall be lodged by
investors other than Non-Resident Bangladeshis (NRB) with any of the Branches of the Bankers to the Issue.
In case of any additional issue of shares for raising further capital the existing shareholders shall be entitled to Right Issue of
shares of in terms of the guidelines issued by the SEC from time to time.
Dividend policy
There is no limitation to pay dividend to common or preferred stock holders because of provisions in debt instruments or
otherwise.
The profits of the Company shall be divisible among the members in proportion to the shares held by them respectively.
40
Subject to above the Company in the General Meeting may declare a dividend to be paid to the members according to
their respective rights and interests in the profits and may fix the time for payment.
No larger dividend shall be declared than is recommended by the Directors but the Company in the General Meeting may
declare a smaller dividend. No dividend shall be payable except out of the profits of the year or any other undistributed
profits and no dividend shall carry interest as against the Company. The declaration of the Directors as to the amount of
net profits of the Company shall (subject to the certificate of the auditors) be conclusive.
The Directors may from time to time pay to the members such interim dividends as in their judgments the position of the
Company justifies.
A transfer of shares shall pass to the transferee the right to any dividend declared but not paid thereon before the
registration of the transfer.
In case of non-refund of the subscription money within the aforesaid fifteen days, the company directors, in addition to the
issuer company, shall be collectively and severally liable for refund of the subscription money, with interest at the rate of 2%
(two percent) per month above the Company rate, to the subscribers concerned.
The Issue Managers, in addition to the issuer company, shall ensure due compliance of the above mentioned conditions and
shall submit compliance report thereon to the Commission within seven (7) days of expiry of the aforesaid fifteen (15) days
time period allowed for refund of the subscription money.
Trading and settlement regulation of the stock exchanges shall apply in respect of trading and settlement of the
shares of the Company.
41
Rules and Regulation
42
Book Building Method
Book building method
Book Building is a process used by companies raising capital through Public Offerings to aid price and demand
discovery. It is a mechanism where, during the period for which the book for the offer is open, the bids are collected
from institutional investors at various prices, which are within the price band approved by the Securities and Exchange
Commission. The process is directed towards only eligible institutional investors. The bidding is 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 offer price for initial public offering is cut-off price, the
lowest price offered by the bidders at which the total issue is exhausted.
The steps including book building method are as under:
a) Issuer shall invite for indicative price offer from the eligible institutional investors through proper disclosure,
presentation, document, seminar, road show, etc.;
b) Issuer in association with issue manger and eligible institutional investors shall quote an indicative price in the
prospectus and submit the same to the Commission with copy to the stock exchanges;
(c) Such indicative price range shall be determined as per price indications obtained from at least five eligible
institutional investors covering at least three different categories of such investors;
(d) Rationale for the indicative price must be included in the prospectus i.e. the issuer is required to disclose in
detail about the qualitative and quantitative factors justifying the indicative price;
(e) The indicative price shall be the basis for formal price building with an upward and downward band of 20%
(twenty percent) of indicative price within which eligible institutional investors shall bid for the allocated
amount of security;
(f) Eligible institutional investors bidding shall commence after getting consent from the Commission for this
purpose;
(g) If institutional quota is not cleared at 20% (twenty percent) below indicative price, the issue will be
considered cancelled unless the floor price is further lowered within the face value of security:
Provided that, the issuers chance to lower the price shall not be more than once;
(h) Prospectus will have to be posted on the Websites of the Commission, stock exchanges, issue manager and
issuer at least two weeks prior to the start of the bidding to facilitate investors to know about the company
and all aspect of offering;
(i) No institutional investor shall be allowed to quote for more than 10% (ten percent) of the total security
offered for sale, subject to maximum of 5 (five) bids;
(j) Institutional bidding period will be 3 to 5 (three to five) working days which may be changed with the
approval of the Commission;
(k) 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;
(l) The volume and value of bid at different prices will be displayed on the monitor of the said system without
identifying the bidder;
(m) The institutional bidders will be allotted security on pro-rata basis at the weighted average price of the bids
that would clear the total number of securities being issued to them;
(n) Institutional bidders shall deposit their bid with 20% (twenty percent) of the amount of bid in advance to the
designated bank account and the rest amount to settle the dues against security to be issued to them shall be
deposited within 5 (five) working days prior to the date of opening subscription for general investors;
43
(o) In case of failure to deposit remaining amount that is required to be paid by institutional bidders for full
settlement of the security to be issued in their favor, 50% (fifty percent) of bid money deposited by them
shall be forfeited by the Commission. The securities earmarked for the bidder who defaulted in making
payment shall be added to the general investor quota.
(p) General investors, which include mutual funds and NRBs, shall buy at the cut-off price;
(q) There shall be a time gap of 25 (twenty five) working days or as may be determined by the Commission
between closure of bidding by eligible institutional investors and subscription opening for general investors;
(r) Subscription for general investors shall remain open for the period as specified by the Commission;
(s) General investors shall place their application through banker to the issue; and
(t) All application money shall be kept in a separate escrow account opened with a designated bank with prior
intimation to the Commission. Issuer will not be allowed to utilize such money until all the process of issue is
completed and Commissions consent to this effect is obtained.
Amendment in the Public Issue Rules 2006 vide the to the Securities and Exchange Commission Notification
no SEC/CMRRCD/2008/186/57/Admin/--------- date August 01, 2010 states that
(a) 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;
(b) The issuer, in consultation with the issue manager, shall quote its own indicative price in the prospectus based on
the indicative prices so obtained from the eligible institutional investors:
Provided that the quote of the indicative price in the prospectus shall not exceed the arithmetic mean of the price offers
so obtained from the eligible institutional investors;
(c) The prospectus shall simultaneously be submitted to the Commission and the stock exchanges along with the due
diligence statements issued by all concerned;
(d) If any issue fails to get indicative prices from at least 15 (fifteen) eligible institutional investors covering at least 3
(three) categories, including at least 5 (five) registered merchant bankers, the whole process shall be cancelled, which
may be repeated with prior permission of the Commission;.
The price discovery process for determining indicative price of security will involve the following institutional investors
registered with or approved by the Commission in this regard:-
(a) Merchant bankers excepting the issue manager concerned to the proposed issue
(b) Foreign institutional investors registered with or approved by the Commission
(c) Recognized pension funds and provident funds
(d) Bank and non-bank financial institutions under regulatory control of Bangladesh Bank;
(e) Insurance companies regulated under Insurance Act, 1938 (Act No. IV of 1938)
(f) Institutional venture capital and institutional investors registered with or approved by the Commission
(g) Stock Dealer registered with the Commission and
(h) Any other artificial juridical person permitted by the Commission for this purpose.
44
Determination of Indicative
price
45
Determination of Indicative price
The offering price of ordinary shares of the Keya Cotton Mills Limited is Tk. 60 each (including premium of Tk. 50 per share for
face value of Tk. 10 each).
The Net Assets Value (NAV) is based on historical accounting book value of companys net assets. This is determined on the
basis of the figures appearing in the audited balance sheet as at 30th September, 2010 as follows:
The companys operational performance and financial results reflect its growth, financial strength, earning and prospects that
help investors in making informed investment decision. The operational and financial results are summarized as follows:
Financial Year Turn Over Net Profit After No. of Share EPS
(As on 30th June ) (Tk.) Tax (Tk.) Tk. 10 Basis
*Annualize Figure
The weighted average net profit after tax for the last 5 (five) years 2005-06 To 2009-10 stands at Tk 160.43
million and the weighted average EPS stands at Tk. 4.91.
Earning based Value per share based on Market P/E as on 30 September 2010=4.91X26.29
=129.08
Earning based Value per share based on Sectoral P/E as on 30 September 2010=4.91X55.89
=274.42
Earning based Value per share based at current EPS on Market PE as on 30 September 2010=5.49X26.29
=144.33
46
If we consider the share price on the basis of DSE overall price earning multiple of 26.29, the earning based
value of shares of the Company at average EPS of 4.91 stands at Tk. 129.08, and the earning based value of
shares of the Company at current EPS of 5.49 stands at Tk. 144.33.
From the above it is clear that market price of prospective similar companies of textile sector is on average
Tk 74.66.
From the above calculation the fair value of share under different method stands at Tk 78.04. After
following conservative approach we considered expected price of Keya Cotton Mills Limited Tk 60 per
share including Tk 50 premium per share.
47
Audited Accounts as on
30th September 2010
48
AUDITORS REPORT
TO THE SHAREHOLDERS
OF
KEYA COTTON MILLS LIMITED
We have audited the accompanying financial statements of KEYA COTTON MILLS LIMITED, which
comprises the Statement of Financial Position as at 30 September, 2010 and the related statement of
comprehensive income and statement of cash flows for the year then ended, and a summary of significant
accounting policies and other explanatory notes.
Managements Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, the Securities and Exchanges
Rules 1987 and other applicable laws and regulations. This responsibility includes: designing, implementing, and
maintaining internal control relevant to the preparation and fair presentation of financial statements that are free
from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting
policies; and making accounting estimates that are reasonable in the circumstances.
Auditors Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our
audit in accordance with Bangladesh Standards on Auditing (BSA). Those standards require that we comply with
ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditors judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion:
In our opinion, the Financial Statements prepared in accordance with Bangladesh Financial Reporting Standards,
give a true and fair view of the state of the companys affairs as at 30 September 2010 and of the results of its
operations and its cash flows for the period then ended and comply with the Companies Act 1994, the Securities
and Exchanges Rules 1987 and other applicable laws and regulations.
Further to our opinion in the above paragraph, we state that:
(i) We have obtained all the information and explanations which to the best of our knowledge and belief
were necessary for the purpose of our audit and made due verification thereof;
(ii) in our opinion, proper books of account as required by law have been kept by KEYA COTTON
MILLS LIMITED so far as it appeared from our examination of those books;
(iii) the companys Statement of Financial Position ,Statement of Comprehensive Income and its Statement
of Cash Flows dealt with by the report are in agreement with the books of account and returns;
(iv) the expenditure incurred was for the purpose of the companys business.
Sd/-
Dhaka, Chartered Accountants
49
KEYA COTTON MILLS LIMITED
STATEMENT OF FINANCIAL POSITION
as at 30th September, 2010
30-Sep-10 30-Jun-10
ASSETS Notes Taka Taka
Non-Current Assets 1,998,093,887 1,967,285,556
Property, Plant & Equipment net of accumulated
depreciation 3 1,266,532,975 1,285,846,874
Pre-Production Expenses 4 2,570,244 2,937,422
Investment 5 728,990,668 678,501,260
Current Assets 1,129,408,780 1,016,462,065
Inventories 6 272,832,775 195,131,536
Current Account with Sister Concerns 7 51,868,804 31,933,076
Accounts Receivable (Annexure-I) 720,809,861 643,414,169
Investment in listed Companies Shares 8 17,887,063 4,254,884
Advance, Deposit & Prepayments 9 50,611,510 130,227,176
Cash and Cash Equivalents 10 15,398,767 11,501,224
TOTAL ASSETS 3,127,502,667 2,983,747,621
These financial statements should be read in conjunction with the annexed notes
50
KEYA COTTON MILLS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
for the period from 1July to 30 September, 2010
These financial statements should be read in conjunction with the annexed notes
51
KEYA COTTON MILLS LIMITED
STATEMENT OF CASH FLOWS
for the period from 1 July to 30 September, 2010
52
KEYA COTTON MILLS LIMITED
STATEMENT OF CHANGES IN EQUITY
For the period from 1 July to 30 September, 2010
Share capital - - - - - - -
Capitalization of Profit - - - - - - -
Sd/- Sd/-
Chairman Managing Director Company Secretary
53
3 Property Plant & Equipment
Figures in Taka
Cost Depreciation Written Down Value
Addition Rate Charged
Particulars As on Revaluation As on As on As on As on As on
during the % during the
01-07-2010 Gain 30-09-2010 01-07-2010 30-09-2010 30-09-2010 30-06-2010
period period
Land & Land Development 228,112,498 - - 228,112,498 - - - - 228,112,498 228,112,498
Building & Other
Construction 140,517,441 53,500 - 140,570,941 5 27,730,271 1,410,508 29,140,779 111,430,162 112,787,170
Plant & Machinery* 1,296,958,637 6,000 - 1,296,964,637 7.5 369,899,865 17,382,464 387,282,330 909,682,307 927,058,772
Furniture & Fixture 61,729 - - 61,729 10 20,273 1,036 21,309 40,420 41,456
Office Equipment 411,002 2,300 - 413,302 15 135,357 10,423 145,780 267,522 275,645
Motor Vehicle 14,776,614 - - 14,776,614 20 8,561,260 310,768 8,872,028 5,904,586 6,215,354
Electrical & Gas Installation 15,956,211 - - 15,956,211 10 5,804,415 253,795 6,058,210 9,898,001 10,151,796
Sundry Assets 1,884,097 24,000 - 1,908,097 10 679,913 30,705 710,618 1,197,479 1,204,184
Total 1,698,678,229 85,800 - 1,698,764,029 412,831,355 19,399,699 432,231,054 1,266,532,975 1,285,846,875
Total as at 30 June' 2010 1,559,421,276 838,550 138,418,403 1,698,678,229 328,859,397 83,971,958 412,831,355 1,285,846,874 1,230,561,879
* Total Plant and machinary is Tk. 1,296,958,637 of which amounting to Tk. 18,53,06,509 is under Finance Lease.
54
KEYA COTTON MILLS LIMITED
Notes to the Financial Statements
For the period from 1 July to 30 September 2010
Keya Cotton Mills Limited (the Company) was incorporated in Bangladesh on 15 June, 2004 vide registration no. 531333428
with the Registrar of Joint Stock Companies and firms as a Public Limited Company under Companies Act, 1994.
Registered Office and Principal Place of Business:
The Companys registered office and the factory are located at Jarun, Konabari, Gazipur sadar, Gazipur.
Its principal activities and operations are production and sale (deemed export) of cotton yarn.
Basis of Preparation
The financial statements are prepared under the historical cost convention, except land, which is measured at valuation
basis.
The specific Accounting Policies selected and applied by the companys management for significant transactions and
events that have a material effect within the framework of BAS-1 Presentation of Financial Statements in preparation
and presentation of financial statements. The accounting policies set out below has been applied consistently to all
periods presented in these financial statements.
In compliance with the requirements of BAS 18 Revenue, revenue is recognized only when the products are invoiced
and dispatched to the customers;
In compliance with requirements of BAS-28 Investment in Associates Under the equity method, the investment in an
associate is initially recorded at cost.
Subsequently, the carrying amount of the investment is increased or decreased to recognize the investors share of the
profit or loss of the investee after the date of acquisition. The investors share of the profit or loss of the investee is
recognized in the investors profit or loss.
55
2.6.2 Deprecation of fixed assets
Depreciation has been charged on addition from the date of acquisition date and no depreciation is provided on
retirement/disposal of assets. Depreciation was computed using diminishing balance method. The costs an accumulated
depreciation of depreciable assets retired or otherwise disposed of are eliminated from the assets and accumulated
depreciation.
The annual depreciation rates applicable to the principal categories are:
Basis of revaluation
Valuation of land has been done on 22 June 2010 by an independent valuer (M/S.Asian Surveyors Ltd.) taking the
location, size, industrial importance and the facilities available in and around into account. A local enquiry about the value
of such land normally being purchased and sold in the locality has also been conducted. The revaluation report has
approved by the directors in the Board Meeting held on 28 June 2010.
Interest on loan is treated in line with the requirement of BAS 23 Borrowing Cost. Interest on loan for ongoing projects
is shown under project in progress as interest during construction (IDC) and project to date IDC is capitalized after
completion of the project. Interest on loan for completed project is charged in the statement of comprehensive income as
expenses in the period in which it is expired.
Lease payments made under finance leases (excluding cost for services such as insurance and maintenance) are
recognized as expense in the statement of comprehensive income on a straight-line basis and the reduction of the
outstanding liabilities as per the requirements of BAS 17- Leases
Inventories comprise Raw Materials, Finished Yarn, Waste Cotton, Stores & Spares, Stores-in-transit and Work in process.
They are stated at the lower of cost and net realizable value in accordance with BAS 2 - Inventories after making due
allowance for any obsolete or slow moving item. The costs of inventories are assigned by using weighted average cost
formula. Net realizable value of work in Process is determined after deducting the estimated cost of completion and
estimated costs necessary to make the sale from estimated selling price.
2.10 Taxation
Current tax
Income tax is calculated and provision is made in accordance with the provisions of Income Tax Ordinance & Rules -1984.
The corporate tax rate for Textile Sector is 15%. Current Tax provision has been made for Reporting Period (July to
September 2010).
Deferred Tax
Deferred tax is recognized using the balance sheet method. Deferred tax arises due to temporary difference deductible or
taxable for the event or transactions recognized in the income statement
2.11 Provision
In accordance with the guidelines as prescribed by BAS 37 Provisions were recognized when all the following criteria
are met:
When the Company has a present obligation as a result of past event;
When it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation; and
56
Reliable estimates can be made of the amount of the obligation.
Provision for Workers Profit Participation Fund has been made @ 5% of net profit after charging the contribution and
such contribution provided as per provision of Labour Law -2006 and payable as defined in the said law.
Contingent assets are current or possible asset, arising from past events and whose existence is due to the occurrence or
non-occurrence of one more uncertain future event, which are not within the control of the company. But there is no
Contingent Assets & Capital expenditure commitment of the company for the period ended on 30 September 2010.
Transactions denominated in foreign currencies are translated in to Bangladesh Taka and recorded at rates of exchange
ruling on the date of transaction in accordance with BAS 21 - The Effects of Changes in Foreign Currency Rates.
Foreign currency monetary assets and liabilities at the balance sheet date are translated at the rates prevailing on that
date. Exchange differences at the balance sheet date are charged /credited to the Statement of Comprehensive Income,
to the extent that this treatment does not contradict with the schedule XI of Companies Act 1994. This schedule required
all exchanges gains and losses arising from foreign currency borrowings, taken to finance acquisition on construction of
fixed assets, to be credited / charged to the cost/value of such assets.
The Company calculates Earnings Per Shares (EPS) in accordance with BAS 33 Earnings per Shares which has been
shown on the face of the Statement of Comprehensive Income.
The following steps have been taken for implementation of an effective internal control
Procedure of the company:
A strong internal control and compliance division has been formed with a view to establish a well-designed system of
internal control.
Regular review of internal audit with view to implement the suggestion of internal auditors in respect of internal control
technique.
To establish an effective management system that includes planning, organization and supervising culture in the factory
as well as at Head Office.
57
30-Sep-10 30-Jun-10
Taka Taka
4 Pre Production Expenses
Opening 2,937,422 4,406,134
Less: Adjustment During the period 367,178 1,468,712
2,570,244 2,937,422
Management has decided to write off Preproduction expenses within next five years from the year of 2007-08.
5 Investment
Long Term Investment Shares ( Note: 5.1) 5,100,000 5,100,000
Long Term Investment in Associated Company (Note: 5.2) 323,890,668 273,401,260
Investment in Share Money (KYML) 400,000,000 400,000,000
728,990,668 678,501,260
6 Inventories
Raw Cotton & Packing Materials 110,952,416 32,709,836
Work-in-Process 16,759,890 16,394,690
Finished Goods 134,120,222 134,964,009
Stores & Spare Parts 11,000,248 11,063,001
Total 272,832,775 195,131,536
The quantity (those are possible to describe) and value of the above items are narrated in Annexure - II
Total Market Value of Listed Companies Shares as on 30.09.2010 is Tk. 2,70,25,545. So, no provision has been
made against these shares.
58
30-Sep-10 30-Jun-10
Taka Taka
9 Advance, Deposit & Prepayment:
Advance
Advance for Land 5,607,554 21,350,087
Advance income tax 857,616 474,509
Advance against Purchase 865,047 963,165
Union Capital Limited - 301,310
Materials in transit 777,291 64,147,510
Software Supply 1,680,000 1,680,000
9,787,508 88,916,581
Deposit
Titas Gas 2,799,800 2,799,800
Margin Deposit in Bank 37,464,242 37,950,835
40,264,042 40,750,635
Pre-payments
Margin for Bank Guarantee 559,960 559,960
11 Share Capital
Authorized Capital
25,00,00,000 Ordinary shares of Tk. 10/- each 2,500,000,000 2,500,000,000
2,500,000,000 2,500,000,000
59
30-Sep-10 30-Jun-10
Taka Taka
During the period Paid up Capital increased by Tk. 60,000,000/= due to allotment of new shares at a price of
Tk.20 each (including premium Tk.10 each) as per decision of the Board Meeting held on June 5, 2010 and
getting approval from the regulatory authority.
Details of Share holding position including percentage of holding is shown in Annexure -III
The above Share Premium is collected from issuance of 60,00,000 nos. Ordinary Shares @ Tk. 10 each and
Income Tax @ 3% has been paid on it as per Income Tax rules.
The company has completed tax holiday tenure of five years at 31, January '2010. That is why, no reserve has
been maintained against this tenure.
14 Revaluation Reserve
Opening Balance 138,418,403 -
Addition during the period
Revalued value of Land - 228,112,498
Less: Acquisition cost - 89,694,095
- 138,418,403
Total 138,418,403 138,418,403
During the period no revaluation of Fixed Assets has been done. As a result no revaluation reserve has created
this period.
15 Retained Earnings
Opening 343,289,130 244,255,705
Add: Profit During the Period 85,554,383 247,033,425
428,843,513 491,289,130
Less: Capitalization of Profit - 148,000,000
Total 428,843,513 343,289,130
16.1 The above loan received on January'2010 from National Bank Limited, Gulshan Branch. Rate of interest is 13%
and repayable by 20 equal quarterly installments of Tk.54,735,000/= each within 5 years. Main Security against
this loan is Mortgage of 481 decimal land with factory shed and building (present and future).
60
30-Sep-10 30-Jun-10
Taka Taka
Provision for Workers Profit Participation Fund has been made @ 5% of net profit after charging the
contribution but before tax of the company and is payable to workers as per provision defined in the Labour
Law 2006.
61
30-Sep-10 30-Jun-10
Taka Taka
The Short term loan were sanctioned by the Southeast Bank Limited (Gulshan Branch) for 180 days with a
revolving limit of Taka. 360,000,000 and is usually renewed on annual basis .The interest rate is subject to
change from time to time. Such loan is secured against project finance security.
62
30-Sep-10 30-Sep-09
Taka Taka
23 Sales
Export 376,362,632 312,217,645
Total 376,362,632 312,217,645
All the sales of the company are 100% exported and those are made against back to back L/C. During the
period of July to September 2010, total export were US$ 55,34,745.Those sales are converted in to BDT time to
time at the date of transaction rate.
63
30-Sep-10 30-Sep-09
Taka Taka
25 Administrative Expenses
Salary & Allowances 225,852 353,526
Business Development 7,900 20,700
Printing & Stationery 272 1,600
Conveyance 5,400 6,027
Telephone & Fax 10,500 5,000
Directors' Remuneration 550,000 508,800
Entertainment - 63,450
Fees & Professionals 872,320 79,280
Plantation & Gardening 195,266 -
Training Expenses - 7,000
Documentation - 1,700
Preproduction Expenses written off 367,178 367,178
Deprecation 387,994 419,649
Total 2,622,682 1,833,910
26 Financial Expenses
Interest on Bank & Other Financial Interest 38,845,388 39,235,141
Bank Charges and Commission 1,183,120 1,211,085
Exchange Fluctuation 55,291 67,106
Total 40,083,799 40,513,332
During the period Tk. 5,38,79,584/= (Tk.48,04,34,616 -Tk.42,65,55,032) has arisen as Taxable Temporary
Difference and Deferred Tax calculated on @ 15%
64
30-Sep-10 30-Sep-09
Taka Taka
30 Earning Per Share (EPS):
Earning per share (EPS) for the previous year have been restated as per BAS 33: "Earnings per share" because
subsequent period 14,800,000 nos. shares were issued as stock dividend.
65
31 Disclosure as per requirement of schedule XI,Part - II of Companies Act. 1994
A. Employee position as per schedule XI , Part II, note 5 of Para 3 ( as on 30 September 2010)
Salary Range Officer & Staff Worker Total Employee
Factory Head Office
Below 3000 - - 13 13
Above 3000 41 4 511 556
Total 41 4 524 569
B. Payment to Directors (as remuneration) as per requirement of schedule XI, Part II, Para 4
b. Commission or other remuneration payable separately to a managing agent or his associate -Nil
c. Commission received or receivable by the managing agent or his associate as selling or buying agent of other concerns
in respect of contracts entered into such concerns with the company - Nil.
d. The money value of the contracts for the sale or purchase of goods and materials or supply of services, entered into by
the company with the managing agent or his associate during the financial year.
g. Pensions, etc.-
1) Pensions - Nil
2) Gratuities - Nil
3) Payment from Provident Fund - Nil
4) Compensation for loss of office - Nil
5) Consideration in connection with retirement from office - Nil.
C. Plant Capacity and Capacity Utilization as per requirement of schedule XI, Part II, Para 7
Details of Capacity has given below:
34 Disclosure as per requirement of schedule XI, Part - I ( A. Horizontal Form) of Companies Act. 1994
Accounts Receivable
F.In regard to sundry debtors the following particulars' shall be given separately:-
(II) Debt considered good for which the company hold no security other than the debtors personal security
There is no such debt in this respect as on 30 September' 2010.
(III) Debt considered doubtful or bad
The company does not make any provision for doubtful debts as on 30 September '2010, because of the fact that
sales/export are being made on 100% confirmed L/C basis with fixed maturity dates.
(VI) The maximum amount due by directors or other officers of the company
There is no such debt in this respect as on 30 September '2010.
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35 Approval of the financial statements:
These financial statements were authorized for issue in accordance with a resolution of the
company's Board of Directors on November 04' 2010.
36 General
The annexed financial statements are presented in Bangladeshi currency (Taka), which have
been rounded off to the nearest Taka.
39 Contingent Liabilities
There is a contingent liability of Bank Guarantee amounted Tk 55,99,600 (Taka fifty five lac
ninety nine thousand and six hundred only) issued in favour of Titas Gas Transmission
and Distribution Company Ltd from Southeast Bank Limited, Gulshan Branch.
67
Annexure-I
Accounts Receivable
As on 30 September, 2010
A. Dues below Six (6) Month
68
SWOT Analysis of Keya Cotton Mills Limited
69
THANK
YOU
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