M/S. Sabina Chemical Ltd. Case [ কেস নং-৫৪ ]
M/S. Sabina Chemical Ltd. Case [ কেস নং-৫৪ ]
Mrs Sabina obtained her bachelor’s degree in Chemical Engineering from BUET in 1969 and joined a research Institute as a senior scientific officer. Her husband was also an engineer employed in a govt organization as an executive In 1975, her husband was killed by some derailed army official In 1989, she was invited by the bank to establish a zinc sulfide manufacturing unit based on local raw material”
local technology and locally fabricated machinery to cater to the need of the domestic market with financial assistance from the bank under the special Assistance Fund (SAF). She took this opportunity and submitted a loan proposal having a production capacity of 700-meter ton zinc sulfide (Solid) and the bank sanctioned an amount of Tk 25.00 lac in 1989. In the meantime, she resigned from the service and formed a private Ltd. company along with her family members.
As per the design approved by the bank, the construction was completed by mobilising sponsors own equity. In the apprasal stage, the construction cost was under estimated. They invested in construction works near about double- the estimated cost. On the other hand, the bank delayed disbursement for procurement of machenary. For this, they could not procure all the machinary in time.
The project went into operation partly 1992 and as such they could produce only liquid zice sulphide instand of solid zinc sulphide.
It was a raw-material for preparation of insecticide but due to Govt. embargo, it could not be sold in the market and at present the production is suspended The sponsors of the company again submited a proposal to the bank in 1998 for additional loan of Tk 40.00 lac tor procure the left out machinary alongwith some additional ones to produce zinc sulphide (solid) and at the samitime requested the bank for waiver of accrued interest as the loan could not bring about any benefit to the unit.
The porposed loan is to meet the cost of the machinary and part of working capital to put the unit in commercial operation.
As senior student of business studies) MBA/ M.Com)/ as a bank executive analyse the case and find the reasons for failure of the enterprise including the following:
Hints for Analysis :
1. Dealy in the disbursement of bank loan.
2 Lack of monitoring and supervision in the implementation stage.
3 Faulty apprasal.
4 Government policy
M/S. Prime Fishing Net Manufacturer Case [ কেস নং-৫৫ ]
The main sponsors of the project was Hare krishna a small businessman. His elder son was a banker and others were engaged in trading business with their father The bank sanctioned a loan of Tk 85.00 lac in 1985 to establish a Fishing Net Manufacturing unit with a capacity of 15.00 lac pounds of fishing net/yr.
His elder son (Banker) was not in the management directly but he played an important role to sanction and operate the project They imported machinery by utilizing bank loan and completed the implementation in 1987 but commercial operation was delayed by one year due to non-availability of working capital which as per terms was stipulated to be kept by the sponsors from their equity. After one year the sponsors arranged working capital facilities for import of raw materials from a sponsoring bank against collateral security.
The project went into commercial operation and was paying bank dues more or less regularly. In 1992, on request of the borrower the bank sanctioned additional BMRE loan of Tk 80.00 lac for increasing production capacity to 30.00 lac pound/yr In 1994, the borrower imported machinery and completed the expansion scheme. On the other hand the borrower imported more additional back processing machinery beyond the knowledge of the Bank worth Tk 70.00 lac from their own sources for production but the capacity of back processing unit was high.
They consumed only 40% OF its production and rest 60% was surplus for marketing outside. They needed huge working capital but they could not arrange it and the project became sick. In the meantime, they failed to pay the bank dues and total outstanding dues went up to Tk 460 lac in 1998. The Bank approved the borrowers proposal for waiver of 100% of accumulated interest and keeping the balance amount in Block A/C to be repaid in next 5 years without further interest.
The Bank also issued NOC for taking working capital loan from other banks but they had no fixed assets to offer as collateral security. Consequently, they failed to arrange the working capital from other bank Presently, the project is not in operation. As a senior student of business studies[ MBA M.Com] or as a bank executive, analyze the case to find the extent of the following reasons for sickness of the enter rise
(1) Managerial incapability
(2) Too much capital going into fixed assets
(3) Shortage of W/C (4) Insufficient net worth of the sponsors.