Professional Documents
Culture Documents
By
1
By
Shawgat S. kutubi
Lecturer, Finance
School of Business
Independent University, Bangladesh
2
16th September, 2010
Letter of Transmittal
To
Shawgat S. kutubi
Lecturer, Finance
School of Business
Independent University, Bangladesh
Dear Madam,
Thanking You,
Sincerely Yours,
Md. Shahnawaz Khan
ID# 0510042
3
Acknowledgement
All praises are due to Almighty Allah who enabled me to complete this report. This
report entitled Problems and prospect of brokerage houses in Bangladesh A study on
Stock and Bond Ltd.
4
Contents
Acknowledgement ......................................................................................................... 4
5
4.07 Lack of knowledge among the new investors .................................................. 18
4.08 Overpriced securities ....................................................................................... 19
4.09 Market manipulation ........................................................................................ 19
4.10 Lack of experienced manpower ....................................................................... 19
Chapter 05 Prospects of Stock and Bonds Ltd............................................................. 20
References .................................................................................................................... 26
6
Chapter 01: Background of the Report
1.01 Introduction
Stock market is the reflector of and countries economy system, and a broker house is
a reflector of stock market. Broker house is a licensed buyer and seller of stock and
securities for there clients. As a member of DSE the broker house does this service for
commission on each transaction. That means more transaction more commission for
houses and more wealth for it.
Before 1998 broker houses were not so active because people used to sell and buy
there paper share direct to buyer or seller hand to hand. This hand to hand transaction
was really a slow process and full of hustle. But after establishment of CDBL (Central
Depository of Bangladesh Limited) it was just a matter of click. Since then investor in
share market is increasing day by day, and activity of brokerage house is also
increasing. Its not that this increasing activity only bring wealth for brokerage houses
there is also enormous number of problem. Because houses have to deal with
thousands of people every day and every one have there own needs and wants. In my
whole internship period I have tried to identify problem which faces the brokerage
houses and the future prospect of a brokerage firm on the perspective Stock and bond
Ltd.
7
1.02 Scope of the study
This report is on the overall progress and problem of brokerage houses in Bangladesh.
It is obvious that this report can not discuss all the aspects of brokerage house because
the basis of this report is only one company. But because it is one of the leading
brokerage firms in Bangladesh Member of DSE, anyway it can give us an
understanding of how the brokerage houses are performing in Bangladesh.
1.03 Methodology
There are both primary and secondary information were used in this report. The
primary information were provided by SBL and allowed to show in public and the
secondary information was collected from several book journal and WebPages.
1.04 Limitation
It is observable that almost all studies have some boundaries. During performing my
work, I had to face a number of limitations.
There were some confidential issues like financial issues, for which they were
very strict and careful in revealing those information. Although they have provided
the financial statement but only the methods the numbers in the statement were
changed
Lack of enough materials like books, journals and other papers capture me for
severe brainstorming during working this report.
8
Chapter 02 Background of the company
The Dhaka Stock Exchange (DSE) was established as East Pakistan Stock Exchange
Association Limited on April 28, 1954. Formal trading of the bourse began in 1956.
On June 23, 1962, it was renamed as East Pakistan Stock Exchange Ltd. The name of
the stock exchange was once again changed to Dacca Stock Exchange Ltd on May 13,
1964. The service on the stock exchange continued uninterrupted until 1971. The
trading was suspended during the liberation war and resumed in 1976 with the change
in economic policy of the government.
Since then the bourse did not look back and continued its journey contributing to the
development activities of the nation. On August 10, 1998 the DSE introduced screen-
based state-of-the-art automated online real-time trading through Local Area Network
(LAN) and Wide Area Network (WAN). On January 24, 2004, Later the
DSE upgraded its automated trading system on August 21, 2005. Central Depository
System (CDS) for electronic settlement of share trading made a debut in the DSE on
1st January, 2004. In its 50-years journey the stock exchange has made significant
contribution to the economy of Bangladesh providing the unique platform to raise
funds for investment from the market. The stock exchange is in a relentless process of
modernization and up gradation of its systems and facilities to accommodate latest
technologies available. The SEC approved the Direct Listing Regulations-2006 as
proposed by the DSE which paved the way for direct listing of large and profitable
companies at offloading shares by government companies through the bourse.
9
2.02 Company profile
10
benefit of the country‟s economy. The objectives of Stock and Bond Ltd. are given
below:
Provide a complete, high-quality trading experience in various markets through
robust technology and a well experienced Relationship Management team.
Provide an investment opportunity for small and large investors through earning
commission.
Provide a fully automated trading system with most modern facilities. To
ensure: quick, easy, accurate transactions and easily accessible to all.
Undertake any business relating to the Stock Exchange, such as a clearing
house, securities depository center or similar activities.
11
2.07 Capital structure Of SBL
62,500,000
12
The compositions of the shareholders are given as under:
Name of Shareholders Nationality Number of share Amount
2010 2010
Mr. Md. Mustafa Bangladeshi 110,313 11,031,300
Mr. Khwaja Arim Ahmed Bangladeshi 110,313 11,031,300
Mr. Kafiluddin Bhuiyan Bangladeshi 75,531 7,353,100
Mr. Mohammad A Hafiz Bangladeshi 73,531 7,353,100
Mr. Sifatuddin Beg Bangladeshi 147,031 14,703,100
Mr. Khawaja Ashed Ahmed Bangladeshi 36,781 3,678,100
Mr. Khwaja Aziz Ahmed Bangladeshi 36,750 3,675,000
Mrs. Farhana Chowdhury Bangladeshi 36,750 3,675,000
31 may 2010 31may 2009
Short term Loan with uttara 8,410,831 8410831
Finance & investment Ltd.
Short term loan from IDLC 1,884,242
13
Chapter 03 Prospect of Brokerage houses in Bangladesh
3.01 Interest among the industries to raise capital
There‟s an intense interest among the industries to raise capital form the capital
market. They are not going for traditional capital raising method like banks or the
borrowers. From every sector industries are enlisting there names in the DSE and CSE
to get money from general investors. It we see in the list of dse there were 236
companies were listed till December 2009 but now there is 254 companies listed. So
in last eight month 18 new company came to the market for raising there capital.
Among them Grameen phone was the largest one it raised approximate Tk. 13503mn
14
3.05 Change in Bank deposit rate
From last decades deposit rate of the banks were quite high, which was actually more
then the actual growth rate of GDP. So it was really a safe investment for general
people just deposit a healthy amount in the banks and have a good amount from
interest. But recently BB has taken initiative to lower the deposit rate to lower the
interest rate of borrowing. So now people are not interested to put there money in the
banks. They are now going for investment by there either starting new business or
going for the capital market investment.
Stability of economy and capital market has attracted the foreign investor in
Bangladesh capital market. And Establishment of CDBL has given a new opportunity
for foreign investors. Now people from outside of country can also invest directly to
DSE or CSE if they want by opening corporate account on any of the member of
them. According to the DSE, in 2007, net foreign or portfolio investment on the
Dhaka Stock Exchange surged 8.3x to $129 million. The banking sector, followed by
the power, pharmaceutical and cement sectors, received the most foreign investment.
In 2010 the number Bo account registered in CDBL is 116,348.
15
3.08 Demand of new brokerage houses
Demand of new brokerage houses are increasing now. There are already 238 member
under Dhaka stock Exchange and 136 member under Chittagong stock exchange but
from the increasing number of investor the capacity of brokerage houses are full now.
Almost all of the firms have several offices in Dhaka city as well as other cities but
still 12000 Bo account average still is a big number.
16
Chapter 04 Problems of Brokerage houses in Bangladesh
4.01 Cost of opening a new brokerage house
The cost of opening a new brokerage is huge. To become a member of DSE now cost
almost Tk. 500 mn excluding the other cost, Deposit to CDBL is 5mn. So despite of
the increasing demand of new brokerage houses it is not possible to investor just start
one. There is another problem that DSE is not willing to give membership license in
near future. Despite of the membership cost it contains a huge portion of money on its
setup. So to start a new brokerage one should have Tk. 600mn-650mn which is not
easy for a person or company.
17
4.05 BO account maintenance
Bo account maintenance is a great responsibility for the brokerage houses. Every
financial years end CDBL will charge the houses for the clients account. And after
that they have to raise the amount from every individual client. It‟s a very slow and
long process. After collecting the money the firms find that not every one has paid for
there account because some clients‟ have no transaction at all and they will not going
to have the renewal amount against that account, Which is ultimately a loss for the
brokerage firms.
18
4.08 Overpriced securities
Over the last couple of year the market size is growing intensively. Everyday new
people are investing in the capital market. But no of securities are not increasing to
mach the growing demand, result over pricing of the current securities. If this growth
of supply increases in this rate can lead to another disaster like 1996, and brokerage
houses will found them bankrupted.
19
Chapter 05 Prospects of Stock and Bonds Ltd.
20
5.06 Most experienced working force
SBL has a reputation to recruit the most experienced personal to do its job done.
Dealing with enormous no of client and also dealing with DSE and CDBL need
dedication and skills. The brokerage houses are closely monitored by the DSE so it is
the employee who has to be strict to maintain rules and regulation if there is one
mistake SBL have to pay the price of that mistake. But SBL is maintaining its
excellence on its work that‟s why it is one o the top 10 brokerage house in
Bangladesh.
21
Chapter 6 Problems for SBL
22
6.05 No individual finance department
SBL does not have an individual finance department. So it is a disadvantage for the
company that they can not monitor there financial activities closely. All the financial
decisions are taken by directors like traditional method.
23
Chapter 08 Lesson learned from SBL
As an intern student of Independent University I worked in Stock & Bond Limited for
three months limited period. In this limited amount of time I have learned many
things and most importantly it was the first introduction to the corporate world and its
belonging. Secondly I came to know about the capital market performance. Till now I
have been reading in textbook and articles about the performance of DSE and CSE
but by working in SBL for three month I have experienced the real capital market and
goatherd a knowledge which can‟t be forgotten in lifetime.
Another thing I learned that account section is the hart of the company. It has to run
24 hr a day. I have seen them working in the account section till evening to fulfill
there responsibility. To take this kind of responsibility one must give the full
dedication toward the company they are company and that is my third lesson.
So I hope that this lesson learned from Stock and bond Ltd in last three month will
help me in my future life.
24
Chapter 09 Conclusion
Bangladesh is a third world country which is still under development. Stock market is
the reflector of and countries economy system, which is also under development. So it
is an obvious that it will have an enormous number of problems. But it is also true
there is a lot more opportunities for stock market in Bangladesh. If we can overcome
these problems it will be a great strength for this nation.
This strength will make another sector bigger which is the brokers of stock and
securities. So if the broker houses can solve there problem and maintain there
operation according to rules and regulation then it can become one of the largest
business sector in Bangladesh.
25
References
www.Dsebd.org
www.thefinancialexpress-bd.com
Financial report of Stock & Bond Ltd.
Monthly review DSE
26
Stock and Bond Limited
Blaance Sheet
As at 31 May 2010
31-May 31-May
2010 2009
Taka Taka
Property and assets
Tangible Fixed assets at cost less
accumulated depreciation 10,061,735 4,763,615
Membership consideration value 8,000,000 8,000,000
Software installation 500,000 ---
Preliminary expenses 26,429 52858
18,588,164 12,816,473
Investments in FDR 15,764,826 16,647,021
Current assets
Accounts Receivable 89,769,995 43,002,436
Receivable from DSE 121,495,818 10,803,151
Receivable from Clients 60,417,524 48,816,657
Advances and deposits 2,392,496 2,633,410
1,499,048,95
Cash in hand and bank balances 6 7,588,954
1,773,124,78 112,844,60
9 8
Less: Current liabilities
Payable to DSE 46,880,867 15,730,648
Payable to clients 618,168,413 43,063,431
1,015,113,98
Payable to others 0 825,729
Short term loan with UFIL 8,410,831 14,421,374
Initial deposit for BO a/c opening 800,410 800,410
Short term loan with IDLC 1,884,242
Provision for Taxation 1,899,141 899,141
Liabilities for Expenses 4,564,863 3,812,853
1,697,722,74
7 79,553,586
Net current assets 75,402,042 33,291,002
Financed By
27
Profit transferred from Profit and loss
account 9,755,032 254,516
1.9,755,032 62,754,516
28
Stock and Bond Limited
As at 31 May 2010
Operating activities
Profit for the period/year 48,000,516 25,356,393
Adjustment for items not involving movement of cash:
Deprecioation 1,569,975 957,430
Amortisation of preliminary Expences 26,429 52,860
Operating activities before changes in working capital 49,596,920 26,366,683
Investing Activities:
Acpuisiton of fixed assets (7,368,095) (4,330,051)
Net cash outflow from investing activities (7,368,095) (4,330,051)
Financing Activities:
Share capital 25,000,000 52,500,000
share money deposit
Net cash inflow from financing activities 25,000,000 52,500,000
29