1. Profile of SQUARE PHARMACEUTICALS LTD.

SQUARE today symbolizes a name – a state of mind. But its journey to the growth and
prosperity has been no bed of roses. From the inception in 1958, it has today burgeoned
into one of the top line conglomerates in Bangladesh. Square Pharmaceuticals Ltd., the
flagship company, is holding the strong leadership position in the pharmaceutical
industry of Bangladesh since 1985 and is now on its way to becoming a high
performance global player.

Square Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh

and it has been continuously in the 1st position among all national and multinational
companies since 1985. It was established in 1958 and converted into a public limited
company in 1991. The sales turnover of SPL was more than Taka 7.5 Billion (US$
107.91 million) with about 16.92% market share (April 2006– March 2007) having a
growth rate of about 23.17%.

Square Pharmaceuticals Limited has extended her range of services towards the highway
of global market. She pioneered exports of medicines from Bangladesh in 1987 and has
been exporting antibiotics and other pharmaceutical products. This extension in business
and services has manifested the credibility of Square Pharmaceuticals Limited.

Square strive, above all, for top quality health care products at the least cost reaching the
lowest rungs of the economic class of people in the country. We value our social
obligations. They owe to our shareholders and strive for protection of their capital as well
as ensure highest return and growth of their assets. They strive for best compensation to
all the employees who constitute the back-bone of the management and operational
strength of the Company through a pay-package composing salary/wages, allowances,
bonus, profit participation, leave salary and superannuation & retirement benefits. They
strive for best co-operation of the creditors & debtors the banks & financial institutions
who provide financial support when we need them, the suppliers of raw materials &
suppliers who offer them at the best prices, the providers of utilities-power, gas & water
etc. and the customers who buy our products & services by redeeming their claim in time
by making prompt payment and by distributing proper product on due dates.
They strive for fulfillment of our responsibility to the Government through payment of
entire range of due taxes, duties, and claim to various public agencies. They strive, as
responsibilities citizen, for a social order devoid of malpractices, anti-environmental
behaviors, unethical and corruptive dealings. They strive for practicing good governance
in every sphere of activities covering inter alias not being limited to, disclosure &
reporting to shareholders holding AGM in time, distribution of dividends and other
benefits to shareholders, reporting/dissemination of price sensitive information,
acquisition of share by insiders, recruitment & promotion of staff, procurement &
supplies, sale of assets etc. all that directly and indirectly affect the interest of concerned
groups – the shareholders, the creditors, suppliers, employees, government and the public
in general.

Chronology since Inception

• 1958: Debut of Square Pharma as a Partnership Firm.

• 1964: Converted into a Private Limited Company.
• 1974: Technical Collaboration with Janssen Pharmaceutica, Belgium, a subsidiary
of Johnson and Johnson International, USA.
• 1982: Licensing Agreement signed with F. Hoffmann-La Roche Ltd.,
Switzerland.
• 1985: Achieved first position in the Pharmaceutical Market of Bangladesh among
all national and multinational companies.
• 1987: Pioneer in pharmaceutical export from Bangladesh.
• 1991: Converted in to a Public Limited Company.
• 1994: Initial Public Offering of Square Pharmaceutical Shares.
• 1995: Chemical Division of Square Pharmaceuticals Ltd. starts production of
pharmaceutical bulk products (API).
• 1997: Won the National Export trophy for exporting pharmaceuticals.
• 1998: Agro-chemicals & Veterinary Products Division of Square Pharma starts its
operation.
• 2001: US FDA/UK MCA standard new Pharmaceutical factory goes into
operation built under the supervision of Bovis Lend Lease, UK.
• 2004: Signing of agreement with ROVIPHARM, Vietnam to manufacture and
market Square products under license in Vietnam.
• 2004: Secured the top position for the best published accounts and report for 2003
in the manufacturing category for transparency and excellence in corporate
reporting.
• 2005: New State-of- the-Art Square Cephlosporins Ltd. goes into operation; built
under the supervision of TELSTAR S.A. of Spain as per US FDA/ UK MHRA
requirements.
• 2007: Square Pharmaceuticals Ltd., Dhaka Unit gets the UK MHRA approval.
• 2008: New SVPO (Small Volume Parenteral and Ophthalmics) plant starts
operation in Dhaka Unit.
 2. Present Situation:
Square Pharmaceuticals Limited is the largest pharmaceutical company in Bangladesh
and it has been continuously in the 1st position among all national and multinational
companies since 1985. They are doing their management in different places like as

Formulation Unit

Dhaka Unit
The UKMHRA (United Kingdom Medicines and Healthcare Products Regulatory
Agency) approved facility is about 50 km away in the north of the capital city.

Cephalosporins Unit
Dedicated and state-of-the-art Cephalosporins Manufacturing Facility is built as per the
requirement of International GMP standard like EMEA, UK MHRA and US FDA..

Pabna Unit
Pabna Unit is the first manufacturing facility of Square Pharmaceuticals Ltd. and started
operation in 1958. It is a modern plant that fully complies with WHO – cGMP
requirements.
API Unit
The plant was established in 1992 and started commercial production in 1995. Until 1996
it was involved only for the internal consumption of Square Pharmaceuticals Ltd.

Future Perspective

SQUARE Pharmaceuticals Limited has Vision, Misson, Objective for future plan.
They want to become a leding Pharmaceuticals Industry in the ASIA.

VISION
Their view business as a means to the material and social wellbeing of the investors,
employees and the society at large, leading to accretion of wealth through financial and
moral gains as a part of the process of the human civilization.

MISSION
Their Mission is to produce and provide quality & innovative healthcare relief for people,
maintain stringently ethical standard in business operation also ensuring benefit to the
shareholders, stakeholders and the society at large.

OBJECTIVE
Their objectives are to conduct transparent business operation based on market
mechanism within the legal & social frame work with aims to attain the mission reflected
by our vision.
 3. Principal Sources of Cash:

(Figure in Thousand)
1. Share Capital 496,800,000
This is made-up as follows:
Authorized:
10,000,000 Ordinary Shares of Tk.100/- each
1,000,000,000
Issued, subscribed and paid-up:
a) By Cash:
1,009,230 Ordinary Shares of Tk.100/- each 100,923,000
b) Other than Cash:
4,002 Ordinary Shares of Tk.100/- each 400,200
c) By issue of Bonus Share:
3,954,768 Ordinary Shares of Tk.100/- each 395,476,800

2. LONG TERM LOANS (Secured ): 602,349,621

This represents long term loans from financial institutions are as follows:
(a) Standard Chartered Bank, Dhaka 212,612,33

(b) Dhaka Bank Ltd., Dhaka 132,075,470

(c) Commercial Bank of Ceylon Ltd., Dhaka 22,378,336

(d) Minimum Lease Payments 367,358,951

(e) Eastern Bank Ltd., Dhaka 65,461,036

3. Short Term Loan

1,897,124,652
This consists of the following:
(a) Square Spinning’s Ltd. 99,185,023
(b) Square Knit Fabrics Ltd. 721,496,099
(c) Square Fashions Ltd. 375,282,626
(d) Square Hospitals Ltd. 446,517,554

(e) Beg Rubber Industries Ltd. 110,000

(f ) Square InformatiX Ltd. 34,894,811

(g) Square Cephalosporin’s Ltd.

219,638,539
 Uses of Cash

1. Investment – Long Term 1,915,833,364

This consists of the following:
(a) 10,725,000 Ordinary Shares of Tk. 10/- each including
Bonus Shares in Square Textiles Ltd. 88,636,364
(b) 980,000 Ordinary Shares of Tk. 100/- each
in Square Spinnings Ltd. 98,000,000
(c) 120,000 Ordinary Shares of Tk.100/- each
in United Hospital Ltd. 12,000,000
(d) 200,000 Ordinary Shares of Tk.100/- each
in National Housing Finance and Investment Ltd. 20,000,000
(e) 10 Ordinary Shares of Tk.1,000,000/- each
in Central Depository Bangladesh Ltd. 10,000,000
(f ) Square Hospitals Ltd.: 209,250,000
2,000 Ordinary Shares of Tk. 1,000/- each with premium
of Tk. 5,500/- each 196,250 Ordinary Shares of Tk. 1,000/- each -----------
(g) Advance against Share Money with Square Hospitals Ltd.
for 500,000 Shares of Tk.1,000/- each
500,000,000
(h) 1,260,000 Ordinary Shares of Tk. 100/- each
in Square Knit Fabrics Ltd.
126,000,000
(i) Advance against Share Money with Square Knit
Fabrics Ltd. for 4,000,000 Shares of Tk.100/- each ----------
(j) 252,000 Ordinary Shares of Tk. 100/- each
in Square Fashions Ltd.
25,200,000 (k) Advance against Share Money with Square Fashions Ltd.
for 2,200,000 Shares of Tk.100/- each ----------
(l) Advance against Share Money with Square Informatix Ltd.
for 2,000,000 Shares of Tk.100/- each
200,000,000
(m) 2,596 Ordinary Shares of Tk. 100/- each
in Beg Rubber Industries Ltd.
131,747,000
(n) 950,000 Ordinary Shares of Tk. 100/- each
 in Square Cephalosporin’s Ltd.
95,000,000
(o) Advance against Share Money with Square Cephalosporin’s
Ltd. for 4,000,000 Shares of Tk. 100/-each
400,000,000

2. Purchase Inventories 1,342,364,478

Ratio

1. Gross Margin Percentage: It means The percentage of every dollar earned that
can be used to pay general and administrative expenses.

Gross Margin Percentage= Gross Margin / Sales

= 7,085,553 / 6,089,905
=1.16 %

2. Earnings per ratio: Market price per share / Eanings per share

P/E ratio : Price per share / earnings per share

Market/ Book ratio: The ratio of book value to market value of stocks.

Year 2005-06

Eanings per share 9.70 times

Market price per share 1.77 times

Earnings per ratio 5.48 times

3. Price/ Earnings ratio: The Price/ Earnings ratio (price-to-earnings ratio) of a stock is
a measure of the price paid for a share relative to the income or profit earned by the firm
per share.

Earnings per Ratio= (Net income – preferred Dividends) / Average No. of common
shares outstanding

Year 2005-06

P/E Ratio 9.70 times

4. Return on Total Assets: Return of total asset measures the amount of Net Income
earned by utilizing each dollar of Total Assets. The equation is:
Return on total assets= [Net income + {Interest expense * (1- Tax rate)}] / Average total
assets

Year 2005-06

ROA 12.54%

5. Working capital: This ratio indicates the extent to which current liabilities are
covered by those assets expected to be converted to cash in the near future.

Working capital = Current Assets - Current Liabilities

= 4,031,684,955 - 2,260,755,481
= 1,770,929,474

6. Current ratio: This ratio indicates the extent to which current liabilities are covered
by those assets expected to be converted to cash in the near future. Current assets
normally include cash, marketable securities, accounts receivables, and inventories.
Current liabilities consist of accounts payable, short-term notes payable, current
maturities of long-term debt, accrued taxes, and other accrued expenses (principally
wages).

Current ratio = Current Assets / Current Liabilities

= 4,031,684,955 / 2,260,755,481
=1.78 times
 Year 2005-06

Current ratio 1.78 times

7. Acid Test ratio: This ratio indicates the firm’s liquidity position as well. It actually
refers to the extent to which current liabilities are covered by those assets except
inventories.

Acid-test Ratio= (Cash + Marketable securities + current receivables) / Current Liabilities

= (316,720,982 + 20,250,000 + 2,353,328,040) / 2,260,755,481
= 2,690,299,022 / 2,260,755,481
= 1.19 times

Year 2005-06

Quick ratio 1.19 times

8. Accounts receivable period = Sales on Account /Average accounts receivable balance

= 5480915782 / 5335164655
= 1.02 days

9. Average payment period: The accounts payable turnover ratio includes all
outstanding obligations that a company owes its creditors.

Average Payment Period (APP) = Payables / (Cost of goods sold/365)

Year 2005-06

APP 234.07 days

10. Inventory turnover ratio: The ratio is regarded as a test of efficiency and indicates
the rapidity with which the company is able to move its merchandise.

Inventory turnover ratio = Gross Turnover / Inventories

Year 2005-06

Inventory Turnover Ratio 5.27 times

11. Times-Interest-Earned (TIE) ratio: This ratio measures the extent to which
operating income can decline before the firm is unable to meet its annual interest cost.

Times interest earned= Earnings before interest expenses and income taxes / interest
expenses

Year 2005-06

TIE ratio 11.30 times

12. Debt ratio: The ratio of total debt to total assets, generally called the debt ratio,
measures the percentage of funds provided by the creditors,
Debt-to-equity Ratio= Total Liabilities / Stockholder’s equity

Year 2005-06

Debt ratio 31%

Cash collection & Cash payment rates of selected Year 2006:

Cash collection rate of 2006:
Total cash collection = 6086229602(taka)
Total collectable amount = 1051158486
Cash collection rate =total cash collection/Total collectable amount
=6086229602 / 1051158486
=5.80%

Cash payment rate:

Total cash payment = 4897074387
Total payable amount =245882822
Cash collection rate =Total cash payment/total pay able amount
=4897074387 / 245882822
=19.92%

Comment: The ability to repay current liabilities using only current assets is satisfied.
So, the company can able to pay liabilities any time.

Cash collection & Cash payment rates of selected Year 2005:

Cash collection rate of 2005:
Total cash collection = 7042821923(taka)
Total collectable amount=1587593180
Cash collection rate =total cash collection/Total collectable amount
=7042821923/1587593180
=4.43%

Cash payment rate of 2005:

Total cash payment = 5187396892
Total payable amount =2895152631
Cash collection rate =Total cash payment/total pay able amount
=5187396892/289515263
=17.91%

Comment: The ability to repay current liabilities using only current assets is satisfied.
So, the company can able to pay liabilities any time.