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INTRODUCTION

Internship is an agreement between an university and an organization that provides an

opportunity for a student to work in an organization for a temporary period of time, so

that he/she can get a real life experience about the corporate life. This internship report is

based on the “Prospect Of Merchant Banks In Bangladesh” and the report was

prepared from the prospect of a newest investment in recent times, “BRAC EPL

Investments Ltd”. While working on the main topic of the project additional research

was also done about the organization. The growth analysis and the SWOT analysis was

also prepared. Based on the work experience in BRAC EPL Investments Ltd. it was easy

to comment that it was the fastest growing investment bank in Bangladesh and the details

will be discussed later on the report, and it also represents the prospects of Merchant

Banks in Bangladesh.

In order to strengthen the capital market of Bangladesh the newest initiative of the

government and the regulatory bodies has been to promote merchant banking. The capital

market of Bangladesh has yet to find a solid ground and the investor confidence in the

market is not significantly high, especially after the stock market crash in 1996.

Observing the poor performance of the market over the years the government has taken

initiatives to reform the market. One of such step is to allow banks and financial

institutions offering other financial and banking services to open up their merchant

banking wing.

Since merchant banking is a quite new concept in financial system in Bangladesh and

significantly differs with traditional banking, there is lot of scopes to explore and develop

the industry. At the same time for financing larger investments, investors need to know

the functions and usefulness of merchant banking. General investors also can be

benefited investing through merchant banking service like portfolio management.

Although merchant banks are not providing all range of service that they can do, but day

by day they are enlarging their service area in the capital market of Bangladesh

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BRACEPL is a new name in Bangladeshi investment

environment. Their main dream is to bring a revolutionary change in the investment

atmosphere, it is the subsidiary of BRAC Bank. It has an established brand image among

the Bangladeshi people so we can assume that by using the Brand image and the service

quality we can win the investment market. To obtain that dream BRACEPL started their

journey on February 2010. BRACEPL got their license on 17 th February 2010. It is

mentionable that BRACEPL has already a dedicated team to win the market.

Objective of the Study:

Finding the Organizations Mission, Vision and strategy

Analysis of the organization

Analysis of CSD (Customer Service Department)

Discuss the growth and the future prospect of the organization

Discuss the prospect of Merchant Banks in Bangladesh

Discuss the Importance of Merchant Banks

Discuss 10 cases that happened during the internship period

Recommendation to the organization

Significance of the study

This report will be very helpful to many individuals including students studying in

Finance as they will get to know about the future of Investments Banking in Bangladesh.

then it will be helpful to employers and employees as they will also get an idea about the

sector. Managements as they will get to learn about the strengths, weaknesses,

opportunity and the threats that the organization will face during the operation. General

investors in the stock market.

The topic is significant for the student as he will be able to understand the gap between

classroom learning and actual job conditions. During the course of the study, the student

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will get the opportunity to know how the stock market

works. Therefore, this report will stand as a supporting

document that the student can show to prove his knowledge and skills on the topic. Then

the student can also use this experience to work in any other financial institution in

future.

This report also includes a SWOT analysis of BRAC EPL Investments, stating the

strengths and weakness and the opportunities that they can aim for in the market and the

threats that they presently face and also the future threats.

Expected Findings and Hypothesis

As this is a new organization, one of the main findings that was expected to seek out was

the prospect/demand of merchant banks in Bangladesh. It could be further narrowed

down to the point that “do people really like to enjoy margin loan facility while they

trade.” The growth of BRAC EPL Investments Ltd and the all their accomplishments will

later prove the point. In the process it is also intended to find some other useful

information about the organization like the strategy that they are following, their goals,

organizational structure, future plans, their SWOT analysis, etc.

Moreover, as required in the Internship course outline, it is also required to give at least

10 Case Studies where it is needed to mention about some events/incidents of the

organization. Here, a brief description about the incident will be given stating whether it

was a happy or a problematic situation, how it was solved, the persons involved, how it

was solved, the functional & financial impact on the company and finally

Recommendation.

Vision

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As BRAC EPL Investments Ltd. is a Subsidy of BRAC

Bank, it shares the same corporate vision: “Building

profitable and socially responsible financial institution focused on Market and Business

with Growth potential, thereby assisting BRAC and stakeholders to build a just,

enlightened, healthy democratic and poverty free Bangladesh”.

But even after that BRAC EPL Investments Ltd has a vision of its own: “To be the

Number 1 Investment Bank in Bangladesh”

Mission

To assist in bringing high quality service to our customers and to participate in the

growth and expansion of our national economy. To set high standards of integrity and

bring total satisfaction to our clients, shareholders and employees. To become the most

sought after Investment Bank in the country and to reach all prospective clients

throughout Bangladesh.

Core Values

Our Strength emanates from our owner - BRAC. This means, we will hold the following

values and will be guided by BRAC as we do our work.

Value the fact that one is a member of the BRAC family

Creating an honest, open and enabling environment

Have a strong customer focus and build relationships based on integraty,

superior service and mutual benefit

Strive for profit & sound growth

Work as team to serve the best interest of our owners

Relentless in pursuit of business innovation and improvement

Value and respect people and make decisions based on merit

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Base recognition and reward on

performance

Responsible, trustworthy and law-abiding in all that we do.

Overview of the Company

BRAC EPL Investments Limited and BRAC EPL Stock Brokerage Limited are two

premier members of the Bangladesh capital markets. On top of our expertise and

achievements, we take pride in our strong commitment toward the development of the

Bangladesh capital markets. We have unwavering faith in the potential of Bangladesh.

We also believe that an efficient, vibrant and transparent capital market shall strongly

contribute to the overall development of Bangladesh. The two companies commenced

operation in their present state in October 2009. The predecessors of these companies

were known as Equity Partners Limited (EPL) and Equity Partners Securities Ltd

(EPSL). respectively. EPL and EPSL were established in 2000. EPL as a merchant bank

established itself in offering novelty initial and secondary offerings, including many

“first” and “largest” offerings. EPSL has been particularly successful in attracting foreign

portfolio investment and transacted in excess of 80% of all foreign portfolio investment

in Bangladesh. These companies are part of an international network of brokers that

provide trading and research services to fund managers focused on emerging markets.

BRAC Bank acquired 51% of both the companies in 2009. BRAC Bank is one of the

fastest growing banks in Bangladesh. A member of BRAC Enterprises, the Bank operates

under a "double bottom line" agenda where profit and social responsibility go together as

it strives towards a poverty-free, enlightened Bangladesh.

Product and Services (BRAC EPL INVESTMENTS)

Background

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Issue ManagementPortfolio

Management

Rights/Debt Non-Discretionary Discretionary A/C

Cap Invest

IPO Mgt. Underwriting

Managed Cap Invest

Merchant Banking Division

Since inception, BRAC EPL has achieved an unparalleled

reputation as a leading local provider of brokerage and

financial advisory services by maintaining a high level of professional expertise and

integrity in its client relationships. BRAC EPL focuses on a broad range of industries,

including manufacturing, food, broadcasting, building materials, technology and

communications. The firm seeks engagements with well-managed companies that exhibit

a sustainable competitive advantage.

BRAC EPL delivers a whole range of Investment Banking services including traditional

merchant banking activities such as Issue Management, Underwriting, Portfolio

Management and Structured Finance solutions. BRAC EPL also provides value-added

services such as Wealth Management, Corporate Advisory and Corporate Finance. The

institution offers investment services to non-residential Bangladeshis (NRB) as well.

Scope of Services:

1. Capital Markets: The Capital Markets group at BRAC EPL is responsible for

providing equities research and conducting wealth management business.

Equity Research: Thorough. Actionable. Conviction.

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Wealth Management: Patient. Informed.

Long-term Focus.

2. Portfolio Management: BRAC EPL has a team of highly dedicated and competent

professionals who provide high quality service and manage Clients’ portfolios.

BRAC EPL places the interests of the Client before its own and it has espoused elevated

standards of professional conduct to safeguard the interest of its Clients. BRAC EPL

brings a depth and breadth of knowledge of the Bangladesh capital market that is

unmatched by any other merchant bank. BRAC EPL has largely invested in technological

infrastructure for efficient order processing and administering the investments of the

Clients. BRAC EPL is also continually striving to enhance its IT facilities to benefit the

Clients. We offer portfolio management through the following accounts:

a) “Cap Edge” Non-Discretionary Portfolio Account: Cap Edge is a dynamic

investment account that provides investors with the entire range of non-

discretionary portfolio management services including:

b) “MCE” Managed Cap Edge: To be introduced shortly.

3. Investment Banking:

The Investment Banking team at BRAC EPL consists of professionals with expertise in

the equity and debt capital markets, providing issue management, structured finance and

corporate advisory services to clients. We offer services in the following arena:

Issue Management and Underwriting of Public Offering

We provide issue management and underwriting services for-

Initial Public Offering (IPO)

Repeat Public Offering (RPO)

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Rights Issue

Direct Listing, etc.

Our issue management services include/ cover:

Capital Restructuring

Structuring the size of the public offer

Determine issue price

Valuation of the Issuer Company using various techniques of financial

modeling

Assist in the preparation of relevant documents for public offer

Facilitate Private Placement

Co-ordinate the work of other professionals, i.e. lawyers, credit rating

agencies and accounting firms

Ensure compliance with the regulatory authorities

Liaising with the regulatory authorities on all issues regarding the public

offer

Arranging bankers to the issue

Arranging the underwriting syndication

Structured Finance and Corporate Advisory

BRAC EPL, with its depth of understanding of the Bangladesh Debt Capital

Market- Evolution, Regulations & Regulatory bodies, Relationship with

Intermediaries and investors, has developed a unique capability to help companies

execute their project financing and debt strategies. Members of the BRAC EPL

Structured Finance team have been credited with pioneering unique and

innovative transactions.

Our wide range of advisory services in this domain includes:

Advising corporations, institutions and sovereign entities on the structure

of new debt issues and the refinancing of existing obligations

Advising on debt market opportunities and conditions

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Arming our clients for negotiations with

bankers and investors

Sharing our knowledge of the range of potential financiers, their appetite

and their attitude to credit, pricing and structure

We have the expertise to raise debt and quasi equity through:

Preference shares

Loan syndication

Corporate bonds

Redeemable bonds

Convertibles and equity linked products

Asset-backed securitization

Private equity

In the recent years, alternative investment asset classes such as private equity

have become increasingly important pools of capital in the global financial

system. BRAC EPL believes that Bangladeshi companies and entrepreneurs are

now willing to take the next step and accept private equity as a means of

financing. With economic fundamentals improving, improved political

environment due to the recent steps taken by the government, regulatory

framework evolving and open dialogues between private and public sectors taking

place, this seems to be a good time for private equity investors to look out for

opportunities. We provide the following services in this regard:

Formulating business plans

Conducting due diligence

Attracting and selecting investors

Providing legal and institutional support

Debt restructuring

Creating project documents

Mergers and Acquisitions

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BRAC EPL acts as an intermediary for

Bangladeshi/offshore investment and joint-venture

transactions, aligning the goals of those who seek and provide investment and

joint-venture opportunities in Bangladesh.

Our research programs are adept at identifying prospective M&A opportunities,

particularly Bangladeshi family-run businesses, non-core businesses within a

range of companies, and under-performing public companies. As the buyer's

agent, BRAC EPL assists with the development of a bidding strategy, identifies

appropriate opportunities and handles due diligence, negotiations and closing.

As the seller's agent, BRAC EPL typically prepares a detailed information

package, organizes on-site inspections, conducts presentations to prospective

investors and over-sees negotiations. BRAC EPL's knowledge of the markets it

serves, combined with thorough analysis and documentation, enables the firm to

provide clients with the best available information on which to base merger and

acquisition decisions.

Portfolio Management Department

As an intern I was assigned to work on the Customer Service Department (CSD) of

Portfolio Management Department (PMD). In the Initial stage I was only assigned to the

Customer Service Department, later during the job rotation I was taught the basic of all

the other departments, including accounts, settlement, trade and sales and branch

operation. But my primary job responsibility remained at the Customer Service

Department. The main product of PMD to till date is the product called the “CAP

EDGE”. The description of the Product is as follows:

"Cap Edge" Non-Discretionary Portfolio Account

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I) “Cap Edge” Non-Discretionary Portfolio Account:

Cap Edge is a dynamic investment account that provides

investors with the entire range of non-discretionary portfolio management services

including:

Minimum balance requirement to start Portfolio Investment Account. (It has one

of the minimum initial deposits in the current market, Taka 1 Lac Only)

Loan Interest and Management Fees are very competitive.

Efficient execution of trades. (Spacious trading floors were designed in every

branch for the comfort of the clients and a strong tele-trading facility was

established so that the clients could trade via phone)

Extension of margin loan enabling the investors to earn enhanced return.

Collecting dividend and bonus shares on behalf of clients.

Subscription of the rights issues.

Completion of dematerialization process.

Keeping the securities in safe custody.

Major Features of Cap Edge:

Cap Edge Clients shall have absolute discretionary power to make investment

decisions.

The Portfolio Manager shall provide all support for efficient execution of trades.

Clients will be allowed to invest only in the vigilantly selected securities

approved by the Portfolio Manager.

Fund Transfer facility in case of the same Bank Account of the Portfolio

Manager will be in place.

Facilities for the Clients to enhance their return on investments through

leveraging, the Portfolio Manager will extend margin loan to the Clients.

All the securities purchased for the Clients shall remain in lien in favor of the

Portfolio Manager.

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0

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

Asset Under Management

The Clients will have access to the various research

materials on market, industry and companies

prepared by the independent research team of the Portfolio Manager.

Investment in Cap Edge will be considered as allowable investment for obtaining

tax rebate. In addition, capital gains from investments are entirely tax-exempted.

Daily portfolio statements will be provided through e-mail.

Facilities of order submission through phone, e-mail, sms and fax.

Department Overview

PMD (Portfolio Management Department)

PMD of BRACEPL is being lead by the mostly experienced person from the investment

market Mr. Mesbah Uddin Khan. The PMD is further broken down to the following

subdivisions such as Accounting, Sales & Trading, Technical Analysis and last but not

the least customer services deptartment. Customer service department is the only

department that faces the customer directly and they are representing the organization’s

effectiveness as well as reputation. As an intern I was assigned to work as a Customer

Service Department (CSD) in the Portfolio Management Department. The Portfolio

Management Department is the most promising department of BRAC EPL. The graph

below shows the progress it made in the fist three months.

In the

first three months of operation the total Asset under management crossed over

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1200000000 (120 Corer). The growth is tremendous and in

the recent months it did not slow down.

And day by day the transaction volume for BRAC EPL Investments incrased

dramatically. Each day we were breaking our old recod. The daily trade volume crossed

from few lakhs to 40 corer by the end of three months. And now the daily average trade

volume exists between 30-40 corer. The graph below shows the trade volume of the first

three months.

-50,000,000

100,000,000 150,000,000 200,000,000 250,000,000 300,000,000 350,000,000 400,000,000

17 Feb

2010

22 Feb

2010

24 Feb

2010

28 Feb

2010

2 Mar

2010

4 Mar

2010

8 Mar

2010

10 Mar

2010

14 Mar

2010

16 Mar

2010

21 Mar

2010

23 Mar

2010

25 Mar

2010

29 Mar

2010

31 Mar

2010

4 April 2010

6 April 2010

8 April 2010

12 April 2010

15 April 2010

19 April 2010

21 April 2010

25 April 2010

27 April 2010

29 April 2010

3 May

2010

4 May

2010

9 May

2010

11 May

2010

Transaction Volume

As the Asset Under Management increased and so did the Daily Transaction volume it all

eventually lead to the increase of Daily Income. The graph below shows how the profit

increased from a few thousand per day to over 5-10 lacs per day.

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

Daily Income

The treasury department helped out the Portfolio Management team more then any other

departments. All the loans that were disbursed to the clients of the PMD, the loan was

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managed and collected by the treasury department. The

figure below shows about the funds that were disbursed to

the clients and the funds that were still available to be given as loan to the clients.

Details Apr 2010 May 2010 Total

Total funded

Facilities2,300,000,000

Total funds

disbursed60,000,000 200,000,000 260,000,000

Total available

facility2,100,000,000

As we can see from the figures above, that even after our rapid growth, BRAC EPL has

still enough funds to last for few more years and to support the clients with loan facilities

over the period of time. Even after the remaining funds, the Treasury Departments is

already on the move to collect additional funds to keep the company safe if at any time it

requires additional loan for its clients.

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6

31

Male Female

Human Resources

The Human Resource Department has adequately prepared to support the business in due

time. They were efficient enough to hire the right amount of people at the right time. The

table below shows the current situation of BRAC EPL Investments Ltd.

Department wise Existing

Headcount

Budgeted

Headcount (2010)

Difference

CEO’s Office 2 2 -

Portfolio Management 15 26 11

Capital Market 7 9 2

Investment Banking 4 6 2

Finance 3 4 1

Compliance 1 1 -

Admin/Corporate Affairs 2 2 -

Human Resources 2 2 -

IT 1 1 -

Total 37 53 16

The business is running smoothly with the current amount of employees working, and if

any further assistance is required the budgeted head count is prepared to hire additional

support at any time. The figure below shows the distribution of work fore and the

distribution of male employees from female employees.

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9

28

Business Team Support Team

Current Products

Currently BRACEPL has only one product which is CAP Edge a “Non discretionary

portfolio account”. It has been found that it is a tremendous product. Any Bangladeshi

can open that account by depositing only taka one lac. Other market leader like IDLC and

other merchant bank is charging more than Five lac. So compared to the competitors’

product it is a tremendous product to attract general investors. Our dedicated team is also

working for the future product like discretionary portfolio account. But the main thing is

that all the general people think that this CAP Edge is a product of BRAC Bank for the

loan purposes due to the lack of marketing. So it is confirm that this can really bring a

revolutionary change in Bangladeshi investment culture if we take some corrective

decisions very quickly than our prime competitors.

Current Situation of this product

Earlier we said that we are working on only one product. Within this short time we are

getting a good response from the clients. So far we have opened 1000 plus accounts.

Some other potential accounts are in the pipe line. But it has been found that if we can

take necessary steps regarding marketing aspect then the response will be much better.

BRAC has a existing brand image on the clients mind. There is no doubt regarding the

service quality & efficiencies of BRAC but what is lacking is marketing. We have to

inform people that we are in the market for the betterment of the clients as well as the

nation. Our product features can be the ultimate weapon in this regard. It is mentionable

that previously our speed of opening accounts was in a good pace but recently we are

little beat slow in this matter. We found some problems which has been disclosed later.

February March April May June120 230 126 157 455

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Market operation

BRACEPL head office is located in Motijheel and now they have opened branches in

Gulshan and another branch in Motijheel DSE ANNEX to cope up with the increasing

demand of the clients in the Motijheel area. More branches within Dhaka will be

operation very shortly. Future branches are most likely to be open in Uttara, Dhanmondi

and Mirpur area.

It is sure that to win the whole market with our product we have to establish new

branches in some other parts of the Bangladesh. If we can do that then we will get the

first mover advantages. Though we are operating in Motijheel and Gulshan, but we are

getting some supports from the Noakhali and Comilla office regarding account opening.

But this whole operation is very tiny comparing to the market. So we need to enhance our

operation as early as possible by opening some new branches in the prime & remote

location. As BRAC EPL is a subsidy of BRAC Bank, the one of the main goal is to reach

all prospective clients in Bangladesh. The Chittagong branch is almost at its final stage

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and will be operation very shortly, other branches like

Bogura, Khulna and Sylhet are to be opened within the

next year.

Customer Services Department

As i have mentioned earlier that customer service is the portion of the PMD, Customer

Services wing generates revenue by opening account and attracting investors to come

towards us. Currently in our CSD (Customer Services Dept) we have some dedicated and

experienced persons to serve the customers. As I was a part of the Customer Service

Department, I had the opportunity to observe how a department was established from

scratch. I had the honor to open the 1st account of BRAC Invesment Ltd and now it was

reached over 1000 clients and it is increasing dramatically. Our customer service dept. is

doing well and they are really dedicated to serve the best to the clients.

Problems faced by the customer service department

Since trading began in BracEpl on 17th Feb 2010, the customer service has opened

over 1000 accounts in less than 4 months. However the growth of new accounts

has shown a siginificant decrease in the last few weeks. Our product and it’s

features are unrivaled in the market as the growth is tremendouse more assistance

is needed to meet the increasing demand. Another problem we are facing is the

issue of compliance. The Noakhali and Comilla offices are not sending duly

completed application forms. This could become a major problem in the future

when the volume of accounts reach a significant size. The causes of the problems

mentioned could be the following factors-

Lack of dispersion of branches

Lack of internal commutation

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Lack of support from our brokerage

Lack of skilled personnel in Noakhali and

Comilla office

Lack of Dedicated Broker

Lack of marketing

Lack of dispersion branches-

Before we were operating only a single office which is situated in the motijheel

area of Dhaka city. Though it is the hub of the share market it Dhaka city, we have

faced many customers who demanded that there we have offices in areas such as

Gulshan, Dhanmondi, Uttara and Mirpur. Branches could help improve the

customer mix and also to raise the awareness of our brand and products. The

primary target should be the gulshan location, which is scheduled to be opened

this month. It will help to bring in the super rich investors and raise our product

awareness among the upper middle class and upper class section of the population.

A portion of this problem was solved due to the opening of the Gulshan and

Motojheel DES ANNEX branch, but more branches will be required shortly as the

company expands.

Lack of Internal Communication-

Another issue we are facing is our internal lack of communication among

departments and offices. A particular issue is the securities list that is prepared by

the research team. There are occasions when we receive 3 updates of the list in a a

particular day. This becomes a problem for the investors. For e.g- One client took

a securities list in the morning and purchased a particular share that was mentioned

to be ‘marginable’ in the list. But the same share was mentioned ‘non marginable’

in the latter part of the day. However, there was no way for the client to know that

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and the individual had already purchased the share

perceiving it to be ‘marginable’. The investor faced

tremendous problem regarding this issue and finally our Head of Portfolio had to

resolve the issue personally.

Lack of support from our brokerage-

We expect our brokerage to help us with our marketing and sales. Since most

people come for the BO Account and because our brokerage has been in operation

longer, they verbally try to communicate our message and raise awareness of our

product to their existing and new investors. So far we have had modest support

from them but we expect it to increase.

Lack of skilled personnel in Noakhali and Comilla office-

Lack of skill of employees in these branches causes a lot of communication

problem. Most of them have very little computer knowledge and does not have

proper corporate etiquette. There were incidents, where we had to fax 30 portfolios

just because they cannot operate their email or use MS office. They also are callas

about the compliance issues and are regularly sending incompleted forms. If this

continues, the list of incompleted accounts might get out of control and may

become a big problem for our compliance department.

Lack of Dedicated Brokers-

Most clients complain about the fact that we have only one dedicated broker. So

our management should think about this and try to come up with a solution for our

client satisfaction.

Lack of Marketing-

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Since we are a service oriented entity, our main focus

should revolve around marketing. Raising product

awareness is a key element in this industry. We should breach the shackles of the

traditional belief of merchant bank marketing and set a milestone which other

banks would follow. Instead of using the pull strategy (Bringing the customers to

us), we should use the push strategy (Taking the product to the customer). This

could be achieved by appointing a sales team which will be solely responsible for

marketing and raising awareness. By doing this, we would be introducing the

concept of direct marketing in the investment industry. We should also increase

the frequency of advertisement to let the investor know about our product.

Recommended Solution

After analyzing all the factors, we have come to the conclusion that marketing

should be our first priority. Sales team should be appointed immediately which

will be directly under the supervision of CSD (Customer Service Department).

We could initially start with 5 sales executives who will be appointed to the head

office and the two other branches that are about to open shortly. Each office will

have 1 or 2 executives depending on the volume of customers and importance of

location.

These executives will be hired as contractual employee with a fixed salary and

commission based on performance and sales. A tentative salary structure for such

executives could be BDT 8000/= per month in addition to the commission on sales

which will be up to the management’s discretion.

We should also think about going for BTL (Below the line) ads to increase

awareness about the product in a cost effective way. We could insert leaflets in the

newspaper instead of giving printed news paper ads. By this we could cover many

major portions of the city in a very cost effective way. Our target is to bring all the

small investors into the capital market and the BTL ads are a very cost effective

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way to achieve it. This will help when we start our

branches in Chittagong and the other division, we

could then go for ATL (Above the line) Ads choosing the media that will assure

highest exposure.

Financial Highlights

BRAC EPL has started its operation for a very short amount of time, but even after that

its growth sky rocketed at a very impressive speed. No one in the market expected this

kind of growth from a new organization and the PMD team met their annual budget by

the end of the first quarter. The whole team worked cohesively to reach their goal. The

table below shows the success of the BRAC EPL Investments in the first few months of

its operation.

Details Jan 2010 Feb 2010 Mar 2010 Apr 2010 YTD Budgeted

Taka Taka Taka Taka Taka Taka

Interest

income- 113,899 1,635,510 3,578,939 5,328,348 11,872,849

Interest

expense- - - 125,000 125,000 -

Net

interest

income

- 113,899 1,635,510 3,453,939 5,203,348 11,872,849

Fee and

commission

income

- 1,291,471 8,517,998 9,296,344 19,105,813 45,827,874

Fee and - 252,035 2,458,967 4,019,353 6,730,355 13,568,890

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commission

expense

Net fee and

commissio

n income

- 1,039,436 6,059,031 5,276,991 12,375,458 32,258,984

Net income

from other

financial

instruments

carried at

fair value

- 33,973 2,469,342 2,395,024 15,198,339 9,007,690

Other

operating

income

4,675,128 2,181,11721,460,50

07,670,205 35,986,950 1,333,333

Total

operating

income

4,675,128 3,668,42531,624,38

328,796,159 68,764,095 54,472,856

Operating

expenses3,081,571 3,901,296 4,398,531 5,841,485 17,222,883 50,538,636

Depreciatio

n and

amortizatio

n

200,000 352,376 798,150 806,123 2,156,649 2,033,981

Total

operating

expenses

3,281,571 4,253,672 5,196,681 6,647,608 19,379,532 52,572,617

Profit

before

income tax

1,393,557 (585,247)26,427,70

222,148,551 49,384,563 1,900,239

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25 | P a g e

Objectives

The report purports to focus on two aspects:

I. The organization and

II. The project

Objectives of the Organization Part

The purpose of the organizational part is to demonstrate the experience of the twelve

week internship program and analyze the activities, performances and also to demonstrate

their strength, weakness, opportunities, threats and other business affairs of BRAC EPL

Investments Ltd.

Objective of the Project Part

This part of the report encompasses a brief rundown on the various functions and

operations of the Merchant Banking Division of BRAC EPL Investmensts Ltd.. I was

allowed to have a practical orientation in every department of the Merchant Banking

Division of BRAC EPL. Thus, all practical information used in this is more or less

collected through the day to day orientation.

26 | P a g e

Specific Objectives

Apart from the organizational and the project parts, the

report will also contains some specific objectives – to know about the historical

background of the merchant banking of our country and the current status of the stock

market of Bangladesh.

Scope

I have been assigned in the Merchant Banking Division of BRAC EPL Investments Ltd. and

thus give me the way to get myself familiarized with the non-banking environment for

the first time indeed. I have had an opportunity to gather experience by working in the

different desks of the branch. The area of concentration of this report is confined in

investigating different aspects of the merchant banking transactions, problems, prospects.

Methodology

The paper has been written on the basis of information collected from primary and

secondary sources. The primary information has been collected from the Institutional and

as well as some general clients of the bank.

The secondary information has been collected from the bank’s records, corporate

newsletter, branches manuals, different websites and various publications in the bank.

Some opinions and ideas have been incorporated in the paper through interactive sessions

and interviews with the top management and mid level executives of the organization.

Limitation

During my orientation I am able to learn a lot of things but still it was not enough. There

are some limitations that I can’t ignore. The main limitations were:

27 | P a g e

First of all the duration of my orientation was not

enough to cover all aspects of non-banking

operations.

Data unavailability was the constraint. Official documents on the detail activities

of the department were not available as the the organization was newly formed

As an Intern, I don’t have access into much confidential information of the

organization.

As the company is newly formed, many of the information were not propel filed

and it was hard to access them.

Guiding Principals

BRAC EPL Investments Ltd. is a multi-product financial institution offering an array of

diverse financial services and solutions to institutional and individual clients to meet their

diverse and unique requirements. Following are the guiding principles that shape the

organizational practice of BRAC EPL.

Customer first: BRAC EPL Investments Ltd. has grown with its customers, who are

believed to be the center of all actions. As the root of BRAC EPL’s corporate philosophy,

customer service gets the highest priority.

Innovation: BRAC EPL Investments Ltd. has continuously introduced new financial

products for meeting the needs of the entrepreneurs in a complex & challenging business

environment. The concept of innovation is in-built into the working culture.

Professional Knowledge: BRAC EPL Investments Ltd. is staffed with qualified

professionals and innovative minds in the country. Years of operational experience, large

industrial database and competent workforce have gives them unparalleled advantages.

Professional ethics: The professional at BRAC EPL Investments Ltd. maintain the

highest degree of financial and business ethics in all transactions with the clients. From

28 | P a g e

the very start BRAC EPL Investments Ltd. tried to put in

its best efforts to meet the expectations of the clients and

investors.

PESTLE Analysis

Political, Environmental, Social, Technological, Legal, and Economical analysis are very

important before measuring any organization’s performance. To evaluate the position of

BRAC EPL in the industry, it is essential to know where and in what situation this

institution is performing its operations. Following factors are discussed to show their

effect on BRAC EPL and on this industry of Bangladesh as a whole.

Political Factors: Political environment was always unstable and it always affects every

aspect of life of this developing country. Due to political turmoil since October 2006 the

share market behaves inconsistently. During this period, DSE general index reached into

record maximum point and also fallen to record minimum point. 26th November, 2007

DSE GEN reached 3071 point increasing 127 in a single day while 3rd December it fallen

to 2873 decreasing 93 points single day lose. This indicates lack of confidence among

investors and uncertainty in the capital market.

Economic Factors: Economic forces are the factors that affect the consumer buying

power and spending patterns. Despite political turmoil Bangladesh saw a record GDP

growth rate of 6.7% in fiscal year 2005-06. At the same time export oriented

manufacturing, the industrial sector rose by 10.47% and the foreign exchange reserves

achieved a new high of US$ 3.9 billion at the end of 2006. However due to massive

seasonal flood and cyclone SIDR attack, the projected growth for the fiscal year 2007-

2008 will be tough to achieve. Beside this high inflationary pressure led by hike in price

of essentials, fuel, oil, power shortage, uncertainty in politics, reduced RMG export will

worsen the situation.

Social Factors: These are the forces related to society’s basic values, perceptions,

preferences and behavior. People grow up in a particular society that shapes their basic

29 | P a g e

belief and behavior pattern. These forces affect the

survival and success of every industry of the given society.

For the record of share market points, experts claims the investors’ mindset and lack of

knowledge. Thus merchant banking industry heavily influenced by social factors.

Technological Factors: It is a common saying that today’s world is a world of

technology and only those will survive who can be up-to-date with the technology.

Technological forces are those that create new advancement, create innovative products

and market opportunities. To operate in the share market every broker house must be

connected to TESA (The Electronic Securities Architecture), the trading software of

DSE. The principle function of TESA includes Market Information, Order Management,

Order Execution, Trade Reporting, Index calculation, and Market Access. It runs 24 hrs

in a day & 365 days in a year.

Legal Factors: The only regulatory body for monitoring share trading is Bangladesh

Bank (BB) and Security Exchange Commission (SEC). BB has the power to impose

penalties for non-compliance and also to intervene in the management of a bank if serious

problems arise. The major policies and activities of the central bank of Bangladesh can be

covered in to Interest Rate Policy, Capital Adequacy Requirement, Loan Classification

and Provisioning Requirements, Foreign Exchange System Monitoring, and Exchange

Rate Policy. The central bank regulations related to merchant banking are covered under

the following acts:

1. The Foreign Exchange Regulation Act, 1947

2. The Banking Companies Act, 1991

3. Financial Institutions Act, 1993

The Bangladesh Bank also has defined guidelines in addition to these acts, which also

need to be strictly adhered to. The guidelines are covered under the following heads:

a. The Foreign Exchange Policy Guideline

b. Prudential Guidelines for Banking Companies

30 | P a g e

For example in 25th November, 2007 SEC imposed rule

declaring ban on margin loan in all merchant banks.

Environmental Factors: Environmental factors are those that affect the industry due to

environmental, ecological or ethical changes. Since share trading is not highly related to

environmental factors, the merchant banking industry is also not influenced by those

factors. However, some large companies of this industry checks whether its clients is

complying with the Environmental Conservation Act 1995 and Environmental

Conservation Rule 1997 properly in the investment projects.

Industry Life Cycle

Merchant banking is a very new concept in Bangladesh capital market arena. This

industry is growing rapidly basically because of the profit margin from the portfolio

management services. Another reason for the growth is the increasing number of

companies listed on the share market. As a result the demand for issue management and

issue underwriting is also growing. For the last five years the number of companies listed

31 | P a g e

increased very fast. During this time large MNC’s and

financial strong companies were getting involved into this

industry. Only in 2007 around 17 companies listed so far under the supervision of

different merchant banks. So every day new financial institutions are applying for

merchant banking license. Recently Citi Bank NA gets the license of merchant banking.

This indicates how attractive the industry is becoming.

The merchant banking industry just covered its embryonic stage. Now it is in growth

stage. Although the number of rivalry increased a lot, but there is huge potential into this

industry.

Experts are expecting that the industry will continue its growth for the next five year and

then may be it reached to its shakeout stage, considering tis current growth rate. The

problem may arise when unqualified, incapable firms will enter into the market and guide

people in different direction. To prevent such incident SEC and other regulatory bodies

need to be aware from now and give licenses before proper evaluation and judgement.

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Top Merchant Banks Operating In the Market

(Market Survey)

Although about 23 companies currently have obtained merchant banking license from the

Securities and Exchange Commission only a few of them are seen to be actively involved

in the merchant banking operations. Recently a number of banking companies have also

obtained merchant banking license from the SEC and obtained approval from Bangladesh

Bank for merchant banking operations. However, they are yet to be actively involved in

merchant banking. The listed merchant banks can also be categorized by the services they

offer. Currently the SEC allows two types of merchant banking licenses:

1. Full Service Merchant Banks

2. Issue Managers

Although the full service merchant banking license allows for the bank to undertake issue

management transactions not all bank are currently actively involved in issue

management.

IDLC

IDLC Finance Ltd commenced its journey, in 1985, as the first leasing company of the

country with multinational collaboration and the lead sponsorship of the International

Finance Corporation (IFC) of The World Bank Group. Technical assistance was provided

by Korea Development Leasing Corporation (KDLC), the largest leasing company of the

Republic of South Korea.

IDLC, which has now emerged as Bangladesh’s leading multi-product financial

institution, has amongst its external share-holders, international development agencies

such as the Aga Khan Fund for Economic Development (AKFED) and German

Investment and Development Company (DEG) besides the IFC. The other foreign

sponsors include Kookmin Bank of the Republic of Korea in addition to KDLC and, all

33 | P a g e

these institutions together hold 45% of the Company's

shares.

Three Bangladeshi financial institutions - IPDC of Bangladesh Limited, The City Bank

Limited, Sadharan Bima Corporation and the general public hold the remaining 55%

of the shareholding in this public limited company listed with the Dhaka Stock

Exchange. IDLC is on the list of the twenty (20) largest capitalized companies in the

country. 

 The unique institutional shareholding structure comprising mostly of financial

institutions helps the company to constantly develop through sharing of experience and

professional approach at the highest policy making level.

 IDLC, as a multi-product financial institution, offers a diverse array of financial services

and solutions to institutional and individual clients to meet their diverse and unique

requirements. The product offerings include Lease Finance, Term Finance, Real Estate

Finance, Short Term Finance, Corporate Finance, Merchant Banking, Term Deposit

Schemes, Debentures and Corporate Advisory Services. 

IDLC's vision is to be Bangladesh’s best multi-product financial institution. In achieving

this vision and goal, we realize the importance of taking due care of all of

our constituents, particularly the share-holders, customers and workforce. The corporate

philosophy is to perform with proper accountability and achieve highest ethical standards

in all our activities.

IDLC’s unique institutional shareholding structure, compromising mostly of financial

institutions, helps the company to constantly develop through sharing of experience and

professional approach at the highest policy making level. The company has authorized

capital of Taka 1,000,000,000 (10,000,000 shares of Taka 100 each) and paid up capital

of Taka 150,000,000 (1,500,000 ordinary shares of Taka 100 each). IDLC has also

established two wholly owned subsidiaries, IDLC Securities Limited and I, Cons Limited

to provide customers with security brokerage solutions and IT solutions, respectively.

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Prime Finance and Investment Limited

Prime Finance and Investment Limited is a Non-Bank Financial Institution engaged in

leasing and merchant banking operations in Bangladesh. It was incorporated on 10 March

1996 as a public limited company under the company’s act 1994 and was licensed on 25

April 1996 by the Bangladesh bank under the Financial Institutions Act 1993. The

company obtained license from the Securities and Exchange Commission on 25 July

1999 to conduct merchant banking. It commenced leasing operations on 15 July 1996 and

merchant banking on 16 October 1999. At the time of establishment, it’s authorized and

paid up capital was Tk 500 million and Tk 50 million respectively divided into ordinary

shares of Tk 100 each.

The leasing unit of the company provides finance for capital machinery including

construction equipment, marine equipment, energy generation equipment, office and

office automation equipment and transport. Through this unit, the company provides

micro finance under hire purchase scheme and working capital finance to the enterprises,

as well as to individuals of different profession through the this unit. The merchant

banking unit is engaged in capital/stock market operations, which includes both fee and

fund based services. Specific capital market oriented activities of the company are issue

management, underwriting of public issue of shares and debentures, direct trading in the

securities market, bridge financing, portfolio management, and venture capital finance,

etc.

Uttara Finance and Investment Limited

Uttara Finance and Investment Limited a joint venture leasing and financing company

registered as non-bank financial institutions under the Financial Institution Act 1993 and

35 | P a g e

the company’s act 1994. It commenced business on 1

November 1995 with an authorized capital of Tk 250

million divided in to shares of Tk 100 each. The paid up capital of the company is Tk 120

million. Of the total share capital, 25% is held by Bangladeshi sponsors, 20.83% by

foreign sponsors (Singaporean), 14.10% by the investment corporation of Bangladesh,

0.09% by its employees and 39.98% by the general public. The company is listed with

both Chittagong and Dhaka Stock Exchanges.

The company provides lease finance for all types of industrial and commercial light and

heavy equipment and consumer durable including vehicles, as well as temporary credit

support to its clients. It provides documentary credit support to import lease assets from

abroad and asset-related term financing. Merchant banking activity of the company

includes underwriting, portfolio management, bridge financing, and facilities through

syndication/consortium, mutual fund and investment in capital market through investors'

account.

Bay Leasing and Investments Limited (BLIL)

BLIL was incorporated in Bangladesh as a public limited company under the company’s

act 1994. It obtained license from the Bangladesh bank as a non-bank financial institution

under the Financial Institutions Act 1993 on 25 May 1996 and commenced leasing and

other types of financing activities at that time. The company was established with an

authorized and a paid up capital of Tk 500 million and Tk 50 million respectively,

divided into shares of Tk 100 each. In June 1998, the Securities and Exchange

Commission granted the company the license to operate as a full-fledged merchant

banker. The company's paid up capital rose to Tk 40 million in 2000 to lever the

accompanied risk of its increased business performance.

The company has a brokerage house named BLI Securities Ltd., which is engaged in

stock market dealings and other merchant banking functions. The company earned a

gross profit of Tk 10 million in 1997 and Tk 11 million in 2000. The management of the

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LIMITATION OF MERCHANT BANKING IN BANGLADESH

company is vested in a 19-member management team

headed by the managing director.

GSP Finance Company (Bangladesh) Limited

GSP Finance Company (Bangladesh) Limited is a non-bank financial institution

incorporated in Bangladesh on 29 October 1995 as a public limited company under the

companies act 1994. The company received its certificate of commencement of business

on 14 January 1996 and its license on 4 March 1996. It went into commercial operations

on 17 April 1996. It also received license from Securities and Exchange Commission on

24 August 1999 for working as a merchant banker. Five foreign sponsors hold 85.28% of

its shares and the rest is held by domestic sponsors. The company was established with an

authorized and a paid up capital of Tk 1,000 million and Tk 150 million respectively. The

paid up capital in December 2000 was Tk 160 million.

The company offers lease finance to all types of plant, machinery, equipment and

vehicles both for industrial and commercial use and for pharmaceutical industries.

Merchant banking activities of the company include transactions in Mutual Funds, issue

management and underwriting of public issue of shares and debentures, and participation

in the trading of shares in the stock exchanges. It also receives term deposits. Other

functions of the company are hire purchase, supply of venture capital, short and medium

term loans to industrial units and individual entrepreneurs, project financing (separately

and by syndication), and investment and other financial counseling.

A list of other merchant banks and their services is listed in the appendix.

Supply of Funds

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Although share capital is prospective source of fund for

merchant banks, many companies have not utilized this

opportunity fully. As most of the merchant banks are incorporated as public limited

companies, it could be a better alternative for them to raise fund through initial public

offerings in order to finance the expanding horizon of activities. It can also be seen that

the dominance of bank loan in the total fund is decreasing while the importance deposit

base is gaining momentum. Financial institutions have to raise capital and reserve of at

least BDT 250 million, a portion of which must be collected through the issuance of IPO.

This arrangement will make their operations more transparent, bring accountability to the

shareholders and reduce dependence on credit lines. Though all merchant banks were

required to raise their minimum capital requirement through IPOs by September 2006

(extended from June 2006), eight (8) companies are yet to float their shares in the market.

Four of these have already submitted necessary documents to Securities and Exchange

Commission (SEC) for review while four others are still in the process of doing so.

Cost of Fund

Merchant banks face comparative disadvantage in collecting funds compared to the banks

because they cannot collect short term (less than one year) deposits from individuals due

to the central bank’s restriction, and again deposits in these institutions are perceived to

be less safe to the public. The high cost of fund for these compels them to operate on a

relatively low profit margin.

Asset-Liability disparity

Asset-liability mismatch is another cause of concern for merchant banks. Demand for

funds to meet the increasing lending requirements has increased many times. But the

availability of funds has become inadequate. The average weighted life of the company’s

business portfolio should be less than the average weighted life of its deposits and

borrowing in its operating guidelines for a leasing company. Therefore, the merchant

banks have to explore alternative ways for raising funds.

38 | P a g e

Investment in High Risk Portfolio

It is already mentioned that cost of funds for merchant

banks are higher than that of banks. In order to sustain the high cost of borrowing, these

may be inclined to invest in the high return segments, which can expose them to

commensurately higher risks. Moreover, fierce competition among competitors may also

force many institutions to reduce the margin at the expense of quality of the asset

portfolio. This strategy may eventually create the possibility of an increase in the non-

performing accounts. Unless adequate risk management capabilities are developed, the

growth prospects of merchant banks would not only be hindered but it might also be

misapprehended.

Product Diversification

The merchant banks emerged primarily to fill in the gaps in the supply of financial

services which were not generally provided by the banking sector, and also to

complement the banking sector in meeting the financing requirements of the evolving

economy. The new customer base has not been created and the growth of industrial

entrepreneurship could not be facilitated through merchant banking packages.

Diversifying the product range is a strategic challenge for them in order to become

competitive in the rapidly growing market.

Competition with other Banks

With the advent of new merchant banks, the market share is being spread over the

competing firms and the demand facing each firm is becoming more elastic. Active

participation of commercial banks in the non-bank financing activities has further

increased the level of competition in the industry. For commercial banks, public deposit

is one major source of funds which they can collect with relatively lower cost. Thus the

business environment for merchant banks has become more challenging as they have to

face uneven competition with banks in terms of collecting funds.

Lack of skilled Human Resource

39 | P a g e

Skilled and trained human resource is considered as an

important component for the development of any

institution. Due to the recent growth of merchant banks, availability of experienced

manpower is a challenge for this industry. The supply shortage of efficient resource

personnel has been leading to a significant increase in the compensation package. The

industry experts believe that although there exists enormous growth opportunity, the

market is still quite small and scope of work for skilled personnel is very limited

compared to that of banks. This makes the competent personnel to switch from the

merchant banks to other institutions after a certain period implying low retention rate of

skilled human resource.

Fragile Legal environment

Although the default culture has not yet infected the merchant banks to any major extent,

delays in court procedures create another cause of concern. The situation cannot be

improved only by making the legal system stronger through enactment of new laws rather

ensuring proper implementation existing ones is more of concern.

Merchants Banks: From the view of the Customers.

The growth of BRAC EPL Investments Ltd it self is a living proof of the prospects of

Merchant Banks in Bangladesh. As mentioned before there are already 24 active

merchant banks in Bangladesh and many more renowned banks are already preparing to

open merchant banking division. The secondary data collected and mentioned before

shows the growth, profit and stability of each of the merchant banks that are in operation

today. And only due to the future prospect of merchant banks that some many other

banks are planning to open up merchant banks.

Beside the secondary data, I also took the initiative on collecting some primary data. I

prepared a little questioner and personally interviewed the clients to find the attitude of

the clients about merchant banks and the margin loan facility that they provide.

40 | P a g e

It has been seen that most the clients who come to

merchant banks applying for margin loan know about the

risk factors. I also found out those clients who are in the stock market for more then 6-7

years are more relaxed with the interest rates and charges of the margin loan facility.

They are well aware of that the cumulative interest rates and charges of the merchant

banks are less then the interest of a bank. And big investors are also less worried about

the charges. Because most of them are confident that they will be able to make the profit

required to offset the charges. They realize that they are able to trade with twice the

money they had with them, in simple terms they will be able to make twice as much

profit, so in terms of that the interest rates and other charges don’t bother them that much.

On the other hand it has been that small investors who wants to open and account with

only 1 lac are more concerned about the charges. They make through and detail queries

before making and investment. Only after they are satisfied they will approach a margin

loan facility. But it has been seen, that who have a better understanding about the market,

even if they have a small investment do not hesitate to take the offer of margin loan.

Clients who open margin loan account under merchant banks are deprived of one main

facility. They can not apply for IPO (Initial Public Offering). The margin loan account of

merchant banks are only designed to operate in the secondary market.

The whole trade of merchant bank is done under and Omnibus BO account of the

respected company. Then the desired trade of each of these clients are allocated in their

respective client code. In short, the clients trading under merchant banks have no

individual BO account of their own.

Even after this drawbacks, more and more clients approach everyday to avail a margin

loan facility in a merchant bank.

I had an opportunity to collect some answers via a questioner and some interviews. It was

very hard to get the clients of cooperate. Before the trade they are mostly worried about

what is going to happen, so they were not willing to answer properly. During the trade,

41 | P a g e

they are all busy monitoring the constant price change of

all the products and at that time they don’t like to be

disturbed. And after the trade they are either to happy with their accomplishment or

disappointed and even at that time they are not willing to share any information. But even

after that I was able to get in touch with 30 respondents who were willing to answer my

questions, but I mostly had to ask them the questions and manually fill them out.

After gathering the basic question of name, address and contact number I moved on to the

more serious questions.

My first question was to find out the experience of the clients in the share market.

Therefore the fist question stated “for how long are you involved in the share market?”

For how long are you involved in the share market?    Frequency Percentagea) Less then a year 4 13.3333333b) 2-4 years 12 40c) 5-10 years 11 36.6666667d) More the 10 years 3 10   Total 30 100  Mean 7.5    Median 7.5

If we look at the above table we can that most of the clients are not new in the share

market, they have more or less some experience about the market and what it represents.

Most of the respondents were attracted by the margin loan facility, with some knowledge

margin loan gave them the opportunity to invest the double amount, and therefore most

of the respondents aim to get double return.

Secondly I targeted to find out, what type of account do the respondents hold?

What type of account do you maintain?    Frequency Percentagea) BO Account 4 13.3333333b) Margin Loan Account 9 30c) Both 17 56.6666667    30 100

42 | P a g e

13%

40%

37%

10%

Less then a year 2-4 years 5-10 years More the 10 years

13%

30%57%

BO Account Margin Loan Account Both

  Mean 10    Median 9  

The table and the graph above shows that more than 50% of the respondents hold both a

BO account and a Margin Loan account, when I personally asked the respondents the

reason for this, they said its simple, they want to get the margin loan facility so that they

can trade double the volume, and on they also hold an BO account, so that they can apply

for IPO, a facility that is not available in the margin loan account. Half of the respondents

who were only using the margin loan facility were new, they had not that much exposure

with the share market. But they tool up the loan as it gave them a chance to double their

investments.

That gave me the opportunity to ask the next question, do the respondents think that the

margin loan facility is very risky.

3. Do you think Margin Load is risky?    Frequency Percentagea) Very risky 7 23.3333333b) Little risky 21 70c) Safe 2 6.66666667d) Very Safe 0 0    30 100  Mean 7.5    Median 4.5  

The table and the graph above tell us about the client’s perceptions about the margin loan

facility. Question number 4 was to get the reason behind answer number 3, where I asked

the respondent the reason behind margin loan’s riskiness. We can see that none of the

respondent are answered that margin loan is very safe, as there is a loan involved they all

thought that there are some risk involved in the margin loan facility. Only 6% of the

respondents thought that it was somewhat safe, but the as these 6% of the respondents

had more then 5 years experience in the share market and they sort of know all the tricks

behind the market, that was the reason they thought that margin loan facility is was safe.

The other 93% of the respondents thought that margin loan was risky even as they were

using it. They said that there are constant interest charges and management fees, and even

43 | P a g e

Very risky23%

Little risky70%

Safe7%

Very Safe0%

Very risky Little risky Safe Very Safe

if they are in a loss they had to pay them. Therefore it put

them into some pressure to always pay up the charges in

the quarter end.

As I asked the next question, I was amused to see that fully that 100% respondents

choose one answer. When I asked them that will it be easier to use the margin loan if they

have more information about the market? And as I said before all the respondents said

yes. It made me curious and I rally wanted to find the reason why every one said yes.

When I asked other people in the trading floor about this question, I was surprised every

single one them said yes. Then I took this issue to one of Traders, he said, any

respondents will say yes if you provide more market information to them. No one wants

to make a loss, so more as they get more information they will be more into it. The graph

below shows how much the respondents wants to get more information.

5. Do you think it would be easier to use Margin Loan Facility if you have more information about the market?    Frequency Percentagea) No 0 0b) Yes 30 100    30 100  Mean 15    Median 15  

The next question that also would have been one sided except if there were no

respondents that had previously used margin loan facility. The question asked if the loan

interest, management fees and the buy and sell brokerage commission that the clients

were paying is high? The respondent answers from the point of view of BRAC EPL

Investments Ltd. The graph below shows their answers.

6. Do you think that interest, fees and brokerage commission is too expensive?     Frequency Percentage

a Yes 16 53.3333333

b No 6 20

c Average 8 26.6666667    30 100  Mean 10  

44 | P a g e

No0%

Yes100%

Yes53%

No20%

Average27%

  Median 8  

More then 50% of the clients said that the charges are too

high, but as I looked further into the topic, I found out that the clients perceive the

charges to be high. The remainder 40% who said that the charges are not high and it

average, they also went to different merchant banks for queries and some contains margin

loan accounts in other banks as well, therefore after market survey they perceive that the

charges in BRAC EPL Investments are not that high compared to its competitors.

The last question was little confidential for the respondents, not all the clients wanted

45 | P a g e

46 | P a g e

Case Studies

1. Relocation from Gulshan Office to Motijheel Head Office.

I had tremendous opportunity to be with an organization from its very start. At the

very beginning there were just three interns working for BRAC EPL Investments

Limited. We were assigned under three department heads. As mentioned before

BRAC EPL Brokerage office was located in Gulshan, but there was not sufficient

space to accommodate all of the Investment team. So, before the new Motijheel office

was ready, all of the Investments was temporary working on the Gulshan Branch. The

Investment Team was located there for four months, and I was first assigned to the

work on the Gulshan Branch. And the day finally came when Head Office was ready

and the Whole Investment team was getting to move. At first the Portfolio

Management Team was assigned to move and as I was an intern of the PMD

(Portfolio Management Team) was I lucky to make the first move as well. Therefore

on the 4th of February, the PMD team started to get ready to move. As the next two

days were weekends it was the perfect time to move. The whole PMD team arrived

on the Head Office on the following Sunday. After setting up the PMD Department,

the PMD team took initiative to prepare the rest of the office for the other

departments so that they could shift easily. In the following days rest of departments,

HR, Treasury, Capital Market and the Research Department shifted to the Head

Office. Everyone were really excited to be in new office, and now they only counting

for the operation to start.

2. Launching of Operation of BRAC EPL Investments Limited.

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February 17th is the most memorable day of BRAC

EPL Investment. On this day BRAC EPL had all the

documents Approved by SEC to start its operation. As the head of settlement walked

in with the approved documents in his hand, within five minutes we from the

customer service departments were fully busy. Before February 17th, we were only

able to collect the accounts of the clients. But as we did not have the permission to be

in operations we were unable to open any of the accounts. So, at that very time we

started to call up all the clients who had deposited their account. The customer service

department activated all the accounts and called up all the respective clients and

informed that they are now ready to trade using the margin loan facility. This was just

the start of the financial journey of BRAC EPL Investments Limited.

3. 1st PMD monthly Meeting

After a few days in operation, the first Portfolio Management Department meeting

was held. They main objectives of this meeting was to ensure that all the sub

departments within the Portfolio Management Department, like Accounts,

Settlements, Customer Service, Branch Operation and Trade are all functioning

properly. The business is new, everyone in the meeting participated and commented

on how to make the operation more smooth and how to cut down other unnecessary

cost that will become a liability in the long run. The meeting was lead by the head of

PMD, Mesbah Uddin Khan. The meeting was very interactive, very informal as

everyone was very relaxed but effective as everyone could participate.

4. Head Office on Fire.

This incident was one of the most crucial and dangerous incidents that the employees

of BRAC EPL had to face. A short circuit from the generator started this fire. Panic

spread through out the building within seconds. As all the employees from all the

offices tried to rush down it became more dangerous. Black smoke filled the

stairways which caused even more chaos within the people. The good thing is that

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everyone took initiatives to help the other person out

and made sure that all the employees made it out safely.

The fire brigade arrived in the scene and took care of the fire. As per their comment

the fire was not the big but could have been dangerous if it would spread before

extinguishing it. Slowly all the employees made it back to the office. But as the fire

was in the electrical power line, all the power in the building was cut off. But the

trade must go on. So all the traders and other employees of the portfolio management

team started communicating with the other branches to execute the trade placed in the

head office. It was long hard day, but through sheer will power and team effort we got

the job done.

5. 2 Days Team Building Session In Rajendropur

As the title says, it was team building session designed so that the employees of

BRAC EPL can work more efficiently. The main reason behind this program was to

familiarize the employees with each other. It has been observed that the employees

from the “BRAC EPL Stock Brokerage” knew a handful people from the “BRAC

EPL Investment” team and like wise. And even more, employees from different

branches only communicated with each other via phone or e-mail. So, the main theme

was to introduce all the employees with each so that the communication and

operation is more effective and efficient. The 2 day team building session included

everything, from indoor games to out door exercise, from team coordination exercise

to video exercise. All in all this was a very effective program, as the communication

and operation is running smoothly between the branches and the between the

brokerage and the investment team.

6. Celebration of Highest Trade volume

After only two months of launching the operation, BRAC EPL reached its record

trade. As the company is new everyday they were setting milestones for themselves.

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On average daily trade volume consist of 3,00,00,000 -

4,00,00,000. But on that certain date, the whole BRAC

EPL Investment crossed over 100,000,000. This was by far one of the biggest

achievements of the BRAC EPL Investment team. Financially this was the best thing

that happened to BRAC EPL.

7. Zero Tolerance for Compliance issues.

The golden rule that was set by the head of the Portfolio Management Department.

There will be on inconsistency in trade, .there will be no incomplete account opening

form. There will not be thing that is not within the legal terms. This sometimes causes

some negative impact. For example, there are other securities houses who are little

relaxed in terms of overbuy (when a client buys shares that exceeds his total purchase

power) or in terms of netting (when a share is sold and the some other share is bought

with the equivalent amount of money). Therefore some clients complain that of others

can be a little relaxed why can’t BRAC EPL do the same. But the logic behind BRAC

EPL Investment Limited is to make profit by staying within the rules. It will not do

anything that will hamper its goodwill.

8. Miss Communication between branches due to technical error.

There was this day, when a little miscommunication occurred between the head office

and the branch in Noakhali. As the fax machine was not working the account opening

confirmation mail could not be sent. As a result the we could not officially deliver the

client code to the branch and the trade of those accounts was on halt. Therefore a

quick action was taken. It was decided that the client code / trading code will be

notified to the branch via phone. During this communication, between all the client

code that was given to the branch office in Noakhali, one of the account number was

misheard and wrongly entered. As a result two different trade was done under the

same account number. As the end of the day, when this error was discovered, all the

trade data was dumped from the software, then the error was corrected and then data

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was loaded again. This was no negative financial

impact on the company but that day, most of the

employees form the Portfolio Management Department had to stay back to solve this

problem. But it was made sure that on the future this same mistake was never done

again. No confirmation about the code or about the purchase power was ever

delivered through the phone again. All the data was delivered via fax or e-mail.

9. Opening of Gulshan Branch and DSE Annex Branch.

BRAC EPL has a plan to open as many branches in Dhaka as possible. The main

purpose of opening branches all around Dhaka is to increase the client base and to

accommodate the increasing amount of clients. The opening of two other branches

was a huge success. Within 1 month Gulshan Branch opened 100+ clients and their

asset under management was over 8 corers. Another branch was opened in Motijheel

in the DSE Annex building so that BRAC EPL can accommodate the huge client base

in Motijheel area. And this approach really pleased the clients as now they have

enough space to sit comfortably and trade. Even as the head office was just around

the block the DSE Annex branch showed huge success. Within three weeks they were

also able to open 50+ accounts. Opening branches had a huge financial impact on

BRAC EPL Investments. It not only increased the Asset Under Management Value,

but it also increased the trade volume and the total trade amount.

10. Investor Awareness program

BRAC EPL plans to host an investor awareness program each month so that they

should share knowledge about the share market to the valued customers. The main

objective of this program is share knowledge with the customers, not all the

customers who trade in the share market are not accustomed to all the rules and

regulations of DSE and not all the customers are accustomed to the terms used in the

share market. DSE officials and even BRAC EPL officials take part in these program

to share knowledge and educate the investors about all the terms and condition. I my

self attended two of these programs and from my experience it is very educational

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and very helpful. In the long run this will be beneficial

for BRAC EPL as this is creating a positive good will.

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