Documente Academic
Documente Profesional
Documente Cultură
Letter of Transmittal
December 17, 2013 Professor Dr. Tanbir Ahmed Chowdhury Course Instructor asters of !usiness Administration De"artment of !usiness Administration #ast $est %ni&ersity Dear 'ir Accordin( to your direction, we ha&e "re"ared this )e"ort under the course of *Cor"orate +inance , !A +I- .07/0. It is a1so a re2uirement to com"1ete the course. That is why we "ro&ided fu11 attention and "otentia1 to com"1ete this re"ort. $e ha&e tried to fo11ow a11 the ad&ice and su((estions that you "ro&ided in the c1ass 1ecture. $e ha&e tried our 1e&e1 best to "resent the re"ort accordin( to the &ita1 standards and re2uirements. $e ho"e the re"ort wi11 ser&e its "ur"ose. It wou1d be 3ind of you if you cou1d "ro&ide the necessary feedbac3 and remar3s. 4our coo"eration in this re(ard wou1d be hi(h1y a""reciated. Than3 you. % D. D. D. D. D. # )% A-A P#)5I'9AI+%: I':A 'AI+%: A:A 9A!I: %DDI)A'9AD%: 9A; ATI>%: I':A 20126167.6038 20116367.60.7 20126167.6030 20126167.6031 20116267.60<= 20126167.611<
Acknowledgment
At first, we wou1d 1i3e to than3 a1mi(hty A11ah for he1"in( and showin( us the ri(ht "ath to com"1ete the term "a"er ?ust on time.
!esides, $e than3fu1 our course instructor Professor Dr. Tan&ir Ahmed Chowdhury, who (a&e us the o""ortunity to "re"are this re"ort on *A N A P P RA I S A L
O F T HE D I V I D E N D PO LI C Y O F BA T A S HO E (B A N GLA D E S H ) LT D . 0
under the course of *Cor"orate +inance , !A +I- .07/0. $e are &ery (ratefu1 to our instructor as he "ro&ided us the direction about how the re"ort ha&e to com"1ete and what to"ics and areas ha&e to co&er to ma3e the term "a"er "erfect enou(h. :ecture sheets and c1ass 1ecture that (i&en by the instructor he1"ed us to discuss the sub?ect matter and to e&a1uate the term "a"er. At 1ast, we cannot for(et the 1abs and 1ibrary "ersonne1 of #$% faci1itate us to com"1ete it.
As "er the direction of the course instructor to "re"are the re"ort with (rou" members that be1on(s to each (rou". !ut after the com"1etion of the re"ort we ha&e to say that there are many "ersons in&o1&ed in it. At 1ast, we wou1d than3fu1 to our honorab1e course instructor and a11 the other (rou" members who are associated with this re"ort.
@nce a(ain, our sincere than3 you to a11 the abo&e "eo"1e. 1
$e are (oin( to identify the theory which can be a""1icab1e for di&idend "o1icy to attract the in&estors. To find out the &a1ue of the cor"oration A scatter the im"ortance of its uni2ueness towards a11 the sta3eho1ders, com"etitors and contem"orary cor"oration. 9owe&er, !ATA has a1ready demonstrated its eBce11ence throu(h (ood "roducts to customers, but has not yet deceased his ?ourney to titan its ca"ita1 A Customers "ro&idin( fruitfu1 di&idend. !ata is tryin( to formu1ate an accom"1ished di&idend "o1icy that offers the di&idend after underta3in( the in&estment for eB"andin( the business and financia1 decision.
Prior research )e"ort Different boo3s and "eriodica1s re1ated to the same business sector -ews"a"ers
-othin( is beyond 1imitations. #&erywhere and in e&ery tas3 there must ha&e some sort of 1imitations. $e a1so faced some "rob1ems at the time of "re"arin( my internshi" re"ort as we11. The limitations are
'horta(e of time :ac3 of a&ai1abi1ity of funds ,financia1 bud(et constraints/ Com"anyFs restrictions to disc1ose a11 information
In s"ite of abo&e 1imitations, we ha&e tried with a11 of our efforts to 3now and find out the res"onse "attern of the sub?ect and consu1tation of re1e&ant record and document. Data ha&e reached a fair1y acce"tab1e de(ree of accuracy.
The Bata Shoe (Bangladesh) Ltd. was founded in 1894 by Czech business an To as Bata in the city of !lin. Today the Bata is a s"#awling geo$cent#ic co "any enco "assing o"e#ations in o#e than %& count#ies a#ound the wo#ld and is ((B)) ac#oss fi*e continents. +n Bangladesh, Bata sta#ted its o"e#ation in 19-.. Bata Shoe (Bangladesh) Ltd. (he#einafte# #efe##ed to as /Bata/0/the co "any/0/the "a#ent co "any/) is a "ublic co "any li ited by sha#es. +t was inco#"o#ated in Bangladesh in 19%. unde# the Co "anies 1ct 191'. The add#ess of the #egiste#ed office of the co "any is Tongi, 2azi"u#, Bangladesh. The co "any is one of the o"e#ating co "anies of wo#ldwide Bata Shoe 3#ganization (BS3). The sha#es in the co "any a#e listed in both 4ha5a Stoc5 67change (4S6) and Chittagong Stoc5 67change (CS6). The co "any is ainly engaged in anufactu#ing and a#5eting of leathe#, #ubbe#, "lastic, can*as footwea#, hosie#y and accesso#ies ite s as well as finished leathe#. The co "any is one of the la#gest ta78"aying co#"o#ate bodies cont#ibuting T5. 1.1% billion (yea# .&11) which #e"#esents a""#o7i ately %&9 of ta7 "aid by the enti#e footwea# secto# of Bangladesh. :ith a "#oduction ca"acity of 11&,&&& "ai#s of shoes daily, the co "any also has a facility with an out"ut of ; illion s<ua#e feet of leathe# annually. en, wo en and child#en. +nte#nationally o entous Bata int#oduce a nu be# of designe#s= collections fo# Bubblegu ode#n tanne#y anaged by ' (eaningful Business )nits
#enowned b#ands such as Bata Co fit, (a#ie Clai#e, >ush ?u""ies, Scholl, @i5e, e#s, Sanda5, :einb#enne# and B=fi#st a#e a few na es that testify to the change towa#ds b#anded shoe a#5eting in Bangladesh. S"ecialized shoe catego#ies such as
athletic shoes ha*e been ta#geted th#ough de*elo" ent of the ?owe# b#and. )nco "#o ising <uality with st#i5ing designs ha*e "ut Bata shoes in a 5ey "osition to a""eal to diffe#ent seg ents of consu e#s. Bata has 1' :holesale de"ots co*e#ing Bangladesh. )nde# these de"ots '9& A:4 (Aegiste#ed :holesale 4eale#s) and ;;' 4S? (4eale# Su""o#t ?#og#a ) sto#es a#e 1
co
T#eat ent ?lant (6T?) has been set u" to "#o*ide a "ollution f#ee en*i#on ent fo# both wo#5e#s and the locality. ?a#tne#shi"s with othe# *olunta#y and cha#itable o#ganizations a#e anothe# "#o inent featu#e of Bata=s co#"o#ate social #es"onsibility.
continue to #etain the "#ofits within the co "any, o# they can "ay out the "#ofits to the owne#s of of di*idends. 3nce the co "any decides on whethe# to "ay di*idends, they ay in tu#n i "act on in*esto#s ay be of two ty"es. a#5ets. 4i*idends #efe# to that "o#tion of a on stoc5holde#s di*idend *a#ies. 4i*idend ay establish a so ewhat "e# anent di*idend "olicy, which and "e#ce"tions of the co "any in the financial ?#efe##ed Stoc5 4i*idend is fi7ed and focus on Co
fi# =s ea#nings which a#e "aid out to the sha#eholde#. 4i*idend "olicy
"olicy #efe#s to the "olicy chal5ed out by co "anies #ega#ding the a ount it would "ay to thei# sha#eholde#s as di*idend. These "olicies sha"e the attitude of the in*esto#s and the financial a#5et in gene#al towa#ds the conce#ned co "any. :hat the co "any decided what will be thei# di*idend "olicy de"ends on the situation of the co "any now and in the futu#e. +t also de"ends on the "#efe#ences of in*esto#s and "otential in*esto#s. :e a#e going to find out about the di*idend "olicy of Bata th#ough this #e"o#t.
The#e a#e so e a#gu ents both fo# and against the di*idend "ay ent decision of a fi# . 1 ong the so e a#gu ents su""o#t that the di*idend decision is not i "o#tant in dete# ining the fi# =s *alue. But in the othe# hand, so e a#gu ents di#ectly o""ose this decla#ation. So e theo#ies a#e desc#ibed flowingly in this #ega#d.
(i)
should not lose any o""o#tunity of in*est ent which would yield a #etu#n (+AA) in access of
cost (:(CC). +t also i "lies that the di*idend #e"#esents an ea#ning #esidual #athe# than an acti*e decision *a#iable that affects the fi# =s *alue.
(ii)
This theo#y was gi*en by (eto#n >. (illa# D E#anco (odigliani ((D() which suggests, B+n a "e#fect wo#ld, the *alue of a fi# ea#nings st#ea solely by the ea#ning "owe# and #is5 of its assets and that the
between di*idends and inte#nally #etained funds does not affect this *alue.
(iii)
This theo#y was de*elo"ed by (y#on F. 2o#don D Linte# that tells Stoc5holde#s "#efe# cu##ent di*idend. +t also tells that the#e is a di#ect lin5 between 4i*idend ?olicy of the fi# a#5et *alue. Eunda ental to this "#o"osition is that Bi#d$in 8the$>and a#gu ent suggests that 1
in*esto#s a#e #is5 a*e#se D attach less #is5 to cu##ent as o""osite to futu#e di*idends o# ca"ital gains. 1 ong the theo#ies abo*e fi#st two suggest that the di*idend decision is i "o#tant in dete# ining the fi# =s *alue whe#e the last one goes against this decision.
(i)
The di*idend "olicy #atio indicates the "e#centage of if each a ount ea#ned that is dist#ibuted to the owne#s in the fo# Share / EPS :ith a constant$"ayout$#atio di*idend "olicy, the fi# "e#centage of ea#nings a#e "aid to owne#s in each di*idend "e#iod. The "#oble sha#e "#ice. with this "olicy is that if the fi# =s ea#nings d#o" o# if a loss occu#s in a gi*en ay be low o# e*en none7istent which could ad*e#sely affect the fi# =s "e#iod, the di*idends
(ii)
The #egula# di*idend "olicy is based on the "ay ents of a fi7ed a ount di*idend in each "e#iod. This "olicy "#o*ides the owne#s with gene#ally "ositi*e info# ation, the#eby in ea#nings has occu##ed. )nde# this "olicy, di*idends a#e ne*e# dec#eased. unce#tainty. 3ften, fi# s that use this "olicy inc#ease the #egula# di*idend once a "#o*en inc#ease
(iii)
So e fi# s establish a low$#egula#$and$e7t#a di*idend "olicy, "aying a low #egula# di*idend su""le ented by an additional di*idend when ea#nings a#e highe# than no# al in a gi*en "e#iod. By calling the additional di*idend an e7t#a di*idend, the fi# ho"es. This "olicy is es"ecially co ea#nings. 1 a*oids gi*ing sha#eholde#s false on a ong co "anies that e7"e#ience cyclical shifts in
Ca"ital St#uctu#e consists of autho#ized Ca"ital, "aid u" Ca"ital, sha#e #ese#*e D #etained ea#nings. Ca"ital st#uctu#e of Bata f#o following tableG SL. No. Capital Components 2008 2009 20 0
20
20 2
1utho#ized Ca"ital 2 ! " ?aid u" Ca"ital Statuto#y #ese#*e #etained earnin$s
,ther -inan.ial Per-orman.e /ndi.ators SL. No. Total 1ssets .48'.4& .%...9; .9.&.4 & 2 ! Loans D 1d*ances 4e"osits ''&.1. 484-4.-4 '9'.4' '.,919.% " Total 6<uity 9%..&; 11.&.;& 1.-&.8 1'.&.. 18;4.&& 1 '98.1& 19,.;. '11..; '98&.&. ; 4&...; 18,98; ;--.%' 1%,'98 /ndi.ators 2008 2009 20 0 20 20 2
The following table will show the fi*e yea#=s data of Bata Shoe (Bangladesh) Ltd. which includes @et +nco e, Aetained 6a#nings, and 4i*idend ?ayout Aatio, ?e#centage of 4i*idend, 6?S and Sha#e "#ice. Based on the analysis of these statistics the inte#fe#ences ha*e been d#owned in the following sections.
Percentage of EPS Dividend ..&.&& ..&.&& .;&.&& .;&.&& .%;.&& '..8; '..8; '9.%4..'4 49.1.
Table
(i)
#et Inco$e
o#e uch oney is left o*e# afte# all of the 1
@et +nco e (@+) indicates a co "any=s total ea#nings o# "#ofit. @et +nco e is e*en i "o#tant than sales because it tells the in*esto# how
o"e#ating costs a#e subt#acted f#o co 2ear 2008 2009 20 0 20 20 2 co "any is o*e# a "e#iod of ti e.
sales.@et inco e can be dist#ibuted a ong holde#s of as an addition to #etained ea#nings. This nu be# Net /n.ome 3(45 ""96" &6'02 ""96"0%6""& &"!69'06&!0 &806% '60&! %' 69 %6!0! easu#e of how "#ofitable the
The following table is showing the net inco e fo# Bata Shoe (Bangladesh) Ltd. f#o .&&8 to .&1..
the yea#
-&& &&&& && ,&& &&&& && +&& &&&& && !&& &&&& && *&& &&&& && )&& &&&& && (&& &&&& && '&& &&&& && & (& &( &&. (&'& (& '' (&'( $et incom e
Inter%retation
E#o the abo*e table, we can see that the @+ of Bata Shoe (Bangladesh) Ltd. inc#eased in .&&8. o#e on essential consu able ite s o#e But it fall slightly in .&&9. 4u#ing that ti e was significantly affected because of global econo ic #ecession. The#efo#e, consu e#s concent#ated instead of footwea#. (o#eo*e#, elect#icity sho#tage th#oughout the count#y has inte##u"ted "#oduction. This is why g#owth was negati*e. 1s the @+ inc#eased, the co "any got o""o#tunity to decla#e di*idend afte# satisfying thei# e<uity financing need.
(ii)
Retained !arnings
Aetained ea#nings a#e the "o#tion of net inco e which is held by the co "any fo# #ein*est ent. The co "any does so to inc#ease the g#owth #ate of the co "any. 3n the othe# hand the co "any can decla#e di*idend instead of #etaining the net inco e.
20 0 20 20 2
Inter%retation
E#o the cha#t abo*e it can be seen that Bata Shoe (Bangladesh) Ltd. "#efe##ed to #etain its uch "o#tion of its inco e. +t inco e "#e*iously. But in the #ecent yea# it did not #etained that
indicates the co "any the co "any is t#ying to follow di*idend #ele*ance theo#y in #ecent yea#s.
(iii)
Dividend payout ratio is the f#action of net inco e a fi# The di*idend "ayout #atio is a #elati*ely si "le calculationG
Dividend payout ratio = Cash Dividend per Share / EPS 4i*idend ?ayout Aatio hel"s us to dete# ine whethe# it is following di*idend #ele*ance theo#y o# di*idend i##ele*ance theo#y.
2ear
EPS
2008 2009 20 0 20 20 2
,& 1&&2 +& 1&&2 !& 1&&2 *& 1&&2 )& 1&&2 (& 1&&2 '& 1&&2 & 1&&2 (&&(&& . ( &'& (&'' (&' ( D ividend #ay3out ratio
Inter%retation
E#o the abo*e table, we can see that the di*idend "ayout #atio dec#eased each yea#. This was uch as the inc#ease in 6?S. This due to the inc#ease in Cash 4i*idend which was not as
indicated that Bata Shoe was t#ying to #etain its ea#ning fo# futu#e e7"ansion needs. +nc#easing of 6?S indicates that in*esto#s a#e #is5 a*e#se. They ta5e the cash di*idend and that=s why ea#ning "e# sha#e inc#eased g#adually this "#efe#ence of in*esto#s leads to the 8ordon and Lintner9s dividend relevan.e theory which indicates a di#ect #elationshi" with cash di*idend and ea#nings "e# sha#e.
(iv)
4i*idend Aate is calculated by di*iding cash di*idend by face *alue of sha#e .1fte# analyzing 9 4i*idend of the last ; yea#s, we ha*e found that Bata Shoe (Bangladesh) Ltd. has not de.lared any Sto.4 Dividend to its sha#eholde#s. 1 stoc5 di*idend is "aid when a co "any needs to "#ese#*e funds to finance #a"id g#owth. Since, Bata is an established fi# I it has nu e#ous sou#ces fo# funding. This could send a "ositi*e signal to in*esto#s thin5ing that Bata has enough financing "owe# fo# futu#e g#owth, which we can see by obse#*ing the inc#ease in its sha#e "#ice fo# the last ; yea#s. >e#e the face *alue is T5.1&. 1
, && + && ! && * && ) && ( && ' && & (&& (&&. (&'& (&'' (& '( D ividend 2dividend S tock #rice in D S 0
Inter%retation
The table shows that the #ate at which Bata is offe#ing Cash 4i*idend is <uite att#acti*e. This acti*ity can be att#ibuted to the cause that Bata Shoe is t#ying to att#act "e#centage of di*idend "ay ents. o#e in*esto#s to in*est a#5et th#ough high in the co "any=s stoc5. They a#e t#ying to gi*e a "ositi*e signal to the stoc5
The Cha#t gi*en beside de"icts that sto.4 pri.e o- :ata ;as lo; when #ate of di*idend was lowe# in 2008 and 2009. Then the inc#easing #ates of di*idend #esults g#adually inc#ease of a#5et "#ice. >ighest the co left afte# a#5et "#ice g#owth #ate occu# f#o .&1& to .&1.. >e#e we can follow di*idend ent acco#ding to di*idend i##ele*ance theo#y as it says di*idend should be "aid whate*e# is eeting all a*ailable in*est ent decision. +n last two yea#s fi#
than "#ofit co "a#e to last fou# yea#s. +n .&11, the or$ani<ation pre-erred to $ro;th of the that inc#eased thei# basic ea#ning "owe#. +t att#acted those sha#eholde#s who we#e inte#ested a7i ize the basic ea#ning "owe#, stability of di*idends D g#owth of the fi# .
(v)
share.
6a#nings "e# Sha#e (6?S) a#e the amount o- money ea#ned by a co "any e1pressed in per
Eollowing Cha#t "#o*ides the info# ation of 6?S of Bata Shoe (Bangladesh) Ltd. in diffe#ent yea#s.
EPS
'..8; '..8; '9.-4..'4 "9. 2
8ro;th 375
!2.8& + 2!.'& / 2!.'& = 00 = !87 !2.8& + !2.8& / !2.8& = 00 = 07 !9.%% + !2.8& / !2.8& = 00 = 2 7 "2.!" + !9.%% / !9.'% = 00 = %.'"7 "9. 2 + "2.!" / "2.!" = 00 = %7
* &2 ) !2 ) &2 ( !2 ( &2 ' !2 ' &2 ! 2 & 2 (&&(&&. ( &'& ( &'' ( &'( 4 rowth 52 6
Inter%retation
E#o the abo*e table we can see that f#o 2008 to 20 2, 6?S is in.reasin$ which is good fo# both the fi# and fo# the sha#eholde#s. But the #ate of inc#easing is not *e#y constant. +t is
fluctuating du#ing this ti e "e#iod. 6?S in .&&8 and .&&9 is sa e. 6?S has inc#eased substantially and highest a ount of inc#ease in the yea# of .&1& because of high a ount of net inco e.
(vi)
*hare Price
1 share pri.e is the "#ice of a single sha#e of a nu be# of saleable stoc5s of a co "any. 3nce the stoc5 is "u#chased, the owne# beco es a sha#eholde# of the co "any that issued the sha#e. 2E0# 2008 2009 20 0 (&'' (&'( Share pri.e '.&.%& ;.8.'& -48.&& .7<..0 !.-1*& 8#,>(? 375 '.&.% 8 ..'.- 0 ..'.; J 1&& K 4'.4.9 ;.8.'& 8 '.&.%0 '.&.%J 1&& K -4.%'9 -48$ ;.8.'& 0 ;.8.'& J 1&& K ...-;9 .7<.. 6 8=<.0 G 8=<.0 H 100 I ,7.83/J !.-1*& 3 !.-1!& 7 !.-1!&8'&& 9 5'1+,62
Table Share #rice of ! years
,& & +& & !& & *& & )& & (& & '& & & 3'&& (& &(&&. (& '& (&' ' ( &'( S hare #rice 4rowth
The table abo*e shows that the g#owth of sha#e "#ice was not *e#y stable. E#o
2008 to 20
the
sha#e "#ice inc#eased. But in .&1. the sha#e "#ice dec#eased. Sha#e "#ice has inc#eased substantially and hi$hest a ount of inc#ease in the yea# of .&1& because of high a ount of net inco e. 1 high net inco e bea#s a "ositi*e sign to the sha#eholde#s and thus they bid thei# sha#e "#ice u". This #esults "#ice inc#easing.
The findings of the study a#e as followsL. The co "any "aid cash di*idend o*e# last fi*e yea#s, and shows that di*idend was not stable o*e# ti e. 4u#ing .&&8 to .&11 Bata Shoe (Bangladesh) Ltd. "aid on an a*e#age -&9 of thei# net inco e as di*idend. +n the following yea#s fi# tea used uch of thei# ea#nings fo# #ein*est ent. anage ent 1cco#ding to 4i*idend Aele*ance the stoc5 "#ice of Bata should fall. But the
could able to con*ince the stoc5holde# that they cut thei# "ayout "e#centage fo# the
"u#"ose of accele#ating the g#owth and o*e#co ing the #unning #ecession. Conse<uently thei# stoc5 "#ice went u". Custo e#s= achie*e in*esto#s "#efe# in*esto#s. +n the yea# .&&8 and .&&9 the fi# that will "e# it the fi# to used the #esidual di*idend odel to set "ayout #atio at a le*el eet its Einancing #e<ui#e ents with A6. o#e o# less fi7ed eans the tendency of a fi# to att#act a set of in*esto#s who li5e its ost of the di*idend "olicy. + n c a s e o f B a t a S h o e ( B a n g l a d e s h ) L t d .
+t is found that though Bata shoe does not "#actice any "a#ticula# di*idend "olicy but the #elati*ely "#actice #elates to Regular Dividend Policy because it is decla#ed di*idend (#anging f#o ..9 to .;9)
Bata shoe (Bangladesh) Ltd. should continue to follow di*idend #ele*ance theo#y fo# thei# futu#e g#owth and att#act Sha#e holde#. They should follow any "a#ticula# di*idend "olicy so that in*esto#s can assu e thei# e7"ected #etu#n on the basis of thei# "#efe#ence (Sho#t te# Sha#e holde# will be able to calculate the e7"ected #etu#n a#5et "#ice. Bata shoe should "#ice. o# Long te# ). o#e accu#ately that will affect the
aintain constant di*idend that is the "ositi*e signal to inc#ease sha#e aintain high di*idend "olicy.
Bata Shoe (Bangladesh) Ltd. t#ied to "#o*ide highest "ossible di*idend fo# its in*esto#s. +t always t#ied to "#o*ide di*idend fo# its in*esto# without conside#ing a la#ge a ount in*est ent. :e can see the Bata Shoe (Bangladesh) Ltd. is in the of Bata Bangladesh is not ea#n high di*idend f#o atu#ity stage of business life cycle. The in*esto# in*est ent. ?eo"le also ha*e a t#end to uch inte#ested in long te#
the Dividend #elevan.e (heory which indicates that the in*esto#s conside# cu##ent di*idends as less #is5y than futu#e di*idend and futu#e gain.
1nnual Ae"o#t of Bata Shoe 3:an$ladesh5 Ltd. (.&&8$.&1.). Prin.iples o- @ana$erial Ainan.e by Law#ence F.2ita an$. 1&Th edition, Essentials ,- @ana$erial Ainan.e by Scott Basely D 6ugene E. B#ingha www.batabd.co
www.d&e%d'org