The role of market conditions in
Capital Structure Decisions
A Study on Confidence Cement Limited
The role of market conditions in Capital Structure Decisions
A Study on Confidence Cement Limited
Course Title: Corporate Finance
Course Code: FIN 3105
Submitted To:
SK. Alamgir Hossain
Assistant professor
Department of Finance
Jagannath University
Submitted By:
Md. Mohan Iqbal Bappy
On behalf of group no. 15
Department of Finance
Jagannath University
Date of Submission: 15th May, 2025
Group List
Serial no.
Name
Student ID
01
Akhi Rani Dey
B210203019
02
Mohan Iqbal ]Bappy
B210203037
03
Md. Tanvir Hassan
B210203044
04
Shohag Gazi
B210203063
05
Abdur Rahman
B210203083
Letter of Transmission
May 15, 2025
SK. Alamgir Hossain
Assistant Professor
Department of Finance
Jagannath University.
Subject: Term paper the role of market conditions in Capital Structure Decisions a Study on
Confidence Cement Limited.
Sir,
With due respect and honor, we would like to inform you that we, the students of Group – 15 of
your course “Corporate Finance” (Fin-3105), have completed a term paper the role of market
conditions in Capital Structure Decisions a Study on Confidence Cement Limited.We are
extremely grateful for the opportunity that you gave us to express our innovative ability and we
earnestly hope that you will like the work that we have done.
We sincerely hope that this term paper will help you to evaluate us. We will be obliged to clarify
any matter or to provide any further information in this report.
Sincerely yours,
Md.Mohan Iqbal Bappy
On behalf of the students of Group – 15
Department of Finance,
Jagannath University
Acknowledgement
At first, we want to pay our gratitude to all mighty Allah for preparing the term paper on the role
of market conditions in Capital Structure Decisions a Study on Confidence Cement Limited
successfully. Successful completion of any type of project requires help from a number of
people. We have also taken help from different people for the preparation of the term paper.
Now, there is a little effort to show our deep gratitude to that helpful person.
We are extremely grateful to our honorable course teacher SK. Alamgir Hossain, Department of
Finance, Jagannath University for his guidance, suggestions and all type of support &
supervision to prepare this term paper. Without his untiring efforts completion of this term paper
would have been impossible. Above all this term paper is a combined effort of the sincerely
efficiency and determination of all.
Executive Summary
Table of Contents
1. INTRODUCTION .............................................................................................. 8
1.1 BACKGROUND OF THE TOPIC.................................................................8
1.2 IMPORTANCE OF CAPITAL STRUCTURE IN CORPORATE FINANCE
...............................................................................................................................8
a) Objective of the Study .......................................................................................9
b) Structure of the Report .....................................................................................9
c) Limitation of the Study ............................. Ошибка! Закладка не определена.
2. INTRODUCTION OF GRAMEENPHONE LTDОшибка! Закладка не
определена.
3. METHODOLOGY ........................................................................................... 11
3.1 RESEARCH DESIGN ........................... Ошибка! Закладка не определена.
3.2 SOURCES OF DATA ............................ Ошибка! Закладка не определена.
3.3 TOOLS AND TECHNIQUES OF ANALYSISОшибка!
Закладка
не
определена.
a) Ratio Analysis ........................................... Ошибка! Закладка не определена.
b) Comparative Analysis (with Robi Axiata) .................... Ошибка! Закладка не
определена.
c) Trend Interpretation ................................. Ошибка! Закладка не определена.
3.4 TIME PERIOD OF THE STUDY ........ Ошибка! Закладка не определена.
4. DATA ANALYSIS AND FINDINGS ....... Ошибка! Закладка не определена.
4.1 RATIO ANALYSIS ................................ Ошибка! Закладка не определена.
a) Debt-to-Equity Ratio (D/E): ..................... Ошибка! Закладка не определена.
b) Foreign Debt to Total Debt Ratio: .......... Ошибка! Закладка не определена.
c) Interest Coverage Ratio (ICR): ............... Ошибка! Закладка не определена.
d) Cost of Borrowing (Average Interest Rate): ............... Ошибка! Закладка не
определена.
e) Debt Composition .................................... Ошибка! Закладка не определена.
4.2 COMPARATIVE ANALYSIS (WITH ROBI AXIATA):Ошибка! Закладка
не определена.
4.3 TREND INTERPRETATION ............... Ошибка! Закладка не определена.
5. FINDINGS AND RECOMMENDATIONSОшибка!
Закладка
не
определена.
5.1 SUMMARY OF DATA ANALYSIS ...... Ошибка! Закладка не определена.
5.2 IDENTIFIED PROBLEMS .................. Ошибка! Закладка не определена.
5.3 RECOMMENDATIONS ....................... Ошибка! Закладка не определена.
5.4 SUMMARY OF FINDINGS AND RECOMMENDATIONS ........ Ошибка!
Закладка не определена.
CONCLUSION ............................................... Ошибка! Закладка не определена.
REFERENCES ............................................... Ошибка! Закладка не определена.
1. Introduction
1.1 Background of the Topic
Confidence Cement Limited (CCL) is one of the first private sector cement manufacturing
companies in Bangladesh. It was incorporated in 1991 and began commercial production in
1994. CCL is a concern of the Confidence Group, a major conglomerate in Bangladesh involved
in infrastructure, power, and construction-related sectors. The company operates mainly from
Chittagong, where it has its manufacturing facilities strategically located near the Bay of Bengal,
allowing efficient import of raw materials and export of finished goods.
CCL is listed on the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). CCL
Ltd. in Bangladesh, This study explores whether such access to international financial resources
has influenced its capital structure decisions, particularly in terms of borrowing mix and
associated costs. often benefit from more diversified financing sources, including debt and
equity.
1.2 Importance of the study of Confidence Cement Limited
Studying Confidence Cement Limited (CCL) is important due to its significant role in the
Bangladeshi economy and the broader cement industry. As a leading blue chip company,
CCL's performance reflects the health of the sector and contributes to infrastructure
development. Understanding CCL's operations, strategies, and financial health provides
insights into the cement industry's dynamics, challenges, and growth opportunities in
Bangladesh.
Here's a more detailed look at the importance of studying CCL:
Economic Impact:CCL is a major player in the cement industry, a sector crucial for
Bangladesh's infrastructure and construction projects. Its performance impacts employment,
production, and investment in the country.
Market Leader:As a leading blue chip company, CCL's financial performance and market
position are closely watched by investors and analysts. Studying CCL provides insights into
the market dynamics and competitive landscape of the Bangladeshi cement industry.
Industry Insights:CCL's operational strategies, production capacity, and quality control
practices offer valuable lessons for other cement manufacturers in Bangladesh and beyond.
Investment Analysis:CCL's financial performance, growth trajectory, and risk factors are
important for potential investors and stakeholders interested in the cement industry.
Corporate Governance:CCL's corporate governance practices, including its board structure,
shareholder relations, and ethical conduct, are relevant for understanding the broader
corporate governance landscape in Bangladesh.
Sustainable Development:CCL's commitment to sustainable practices, such as
environmental protection and social responsibility, can be a case study for other companies
seeking to integrate sustainability into their operations.
a) Objective of the Study
The primary objective of this study is to:
The objective of the study of Confidence Cement Limited (or any similar company) generally
revolves around analyzing the company's performance, operations, and strategic positioning
within the cement industry. Here’s a clear and concise version of typical study objectives.
Objective of the Study of Confidence Cement Limited
1. To analyze the financial performance of Confidence Cement Limited over a defined
period.
2. To assess the company's market position within the cement industry of Bangladesh (or
relevant region).
3. To evaluate the production capacity and operational efficiency of the company.
4. To identify strengths, weaknesses, opportunities, and threats (SWOT analysis)
related to its business strategy.
5. To understand the company's corporate governance and management practices.
6. To examine the impact of external factors (e.g., economic, environmental, regulatory)
on its performance.
7. To explore customer satisfaction and brand perception if applicable to the study.
8. To provide recommendations for improving operational efficiency and profitability.
b) Structure of the Report
This report is systematically organized into major sections to address the objectives
comprehensively:
•
•
•
•
•
•
•
Introduction: Provides the background, rationale, objectives, and scope of the study,
including a brief outline of the report structure and its limitations.
Methodology: Details the sources of data, such as annual reports and company websites,
and outlines the analytical tools and techniques—such as ratio analysis, trend analysis,
and comparative analysis—used over a five-year period (2019–2023).
Data Analysis and Findings: Examines capital structure indicators like debt-equity
ratio, foreign debt ratio, interest coverage, and cost of borrowing. It includes graphical
and tabular comparisons between Grameenphone and Robi Axiata, followed by trend
interpretations and key insights.
Discussion: Interprets the analytical findings in light of industry norms and benchmarks,
evaluates managerial decisions, and assesses the advantages and drawbacks of the
current capital structures.
Conclusion and Recommendations: Summarizes the key findings of the study,
provides a student’s perspective on optimal capital structure for GP, and offers practical
recommendations for future financing strategies.
References: Lists all sources of data and literature used in the study, formatted in APA
or Harvard style.
Appendix (if applicable): Includes supporting materials such as raw data tables and
additional charts used in the analysis.
Limitations of the study
Here are some common limitations of the study of Confidence Cement Limited, which you
can tailor based on the scope and methodology of your research:
Limitations of the Study of Confidence Cement Limited
1. Limited Access to Internal Data: The study may rely on publicly available financial
and operational information, which might not fully reflect internal challenges or
strategies.
2. Time Constraints: A short research period may limit the depth of analysis, especially
regarding long-term trends or strategic developments.
3. Geographic Limitation: If the study focuses on operations within a specific region
(e.g., Bangladesh), it may not reflect the company’s activities or influence in other areas.
4. Dependence on Secondary Data: The accuracy of the study depends on the reliability
of annual reports, websites, journals, and other secondary sources, which may contain
outdated or biased information.
5. Market Volatility: Sudden changes in market conditions (e.g., raw material prices,
inflation, political instability) during the study period may distort the analysis.
6. Lack of Primary Data: If the study does not include surveys, interviews, or direct
observation, it may miss qualitative insights about employee or customer perspectives.
7. Subjectivity in Analysis: Personal interpretations during SWOT or financial analysis
may introduce bias, especially in the absence of standardized benchmarks.
8. Confidential Information: Certain strategic or proprietary details might be withheld by
the company, limiting the completeness of the assessment.
2.Introduction of Confidence Cement Ltd.
Confidence Cement Limited (CCL) is one of the pioneering cement manufacturing companies
in Bangladesh, established in 1991. As part of the larger Confidence Group, CCL has played a
significant role in the development of the country's construction and infrastructure sectors.
Headquartered in Chattogram, the company was the first private sector cement manufacturer in
Bangladesh and has since built a strong reputation for quality, consistency, and innovation.
Over the years, Confidence Cement has expanded its production capacity and adopted modern
technologies to meet the growing demand for cement in both domestic and international
markets. The company primarily produces Portland cement, which is widely used in residential,
commercial, and industrial construction projects.
Confidence Cement Limited is listed on both the Dhaka Stock Exchange (DSE) and the
Chittagong Stock Exchange (CSE), reflecting its strong corporate governance and transparency.
Its commitment to sustainable business practices, environmental responsibility, and customer
satisfaction has contributed to its position as a trusted brand in the cement industry.
This study aims to analyze various aspects of Confidence Cement Limited, including its
financial performance, operational efficiency, market position, and future prospects.
3. Methodology
This section outlines the methods used to collect, analyze, and interpret data for the study of
Confidence Cement Limited. The objective is to evaluate the company’s performance,
strategies, and overall position in the cement industry.
1. Research Design
A descriptive research design was adopted to understand the current operations and strategic
position of Confidence Cement Limited. Both qualitative and quantitative data were utilized to
provide a comprehensive analysis.
2. Data Collection Methods
a. Primary Data:
Structured interviews with selected employees, management, and dealers of Confidence Cement
Limited.
Surveys conducted among customers and construction professionals to gather perceptions about
the brand.
b. Secondary Data:
Annual reports of Confidence Cement Limited.
Financial statements and company publications.
Industry reports and articles from credible sources.
Data from the Bangladesh Cement Manufacturers Association (BCMA) and other relevant
organizations.
3. Sampling Method
Purposive sampling was used to select key informants (managers, employees, distributors) who
have relevant insights into the company’s operations. For customer feedback, random sampling
was applied within the target geographic areas.
4. Data Analysis Techniques
Quantitative data were analyzed using tools such as Microsoft Excel and SPSS for descriptive
statistics (mean, percentage, growth trends).
Qualitative insights from interviews were analyzed thematically to identify recurring patterns
and strategic highlights.
Tools and Techniques of Capital Structure Analysis
1. Financial Ratio Analysis
These ratios help assess the mix of debt and equity in the company’s capital structure:
•
Debt-to-Equity Ratio (D/E):
Measures the proportion of total debt to shareholders’ equity. It reflects the company’s
leverage level and financial risk. A rising D/E ratio may indicate increased reliance on
debt, including foreign sources.
This indicates the proportion of company financing that comes from debt versus
shareholders' equity.

Equity Ratio
The equity ratio is a financial metric that shows the proportion of a company’s total assets that
are financed by shareholders’ equity. It reflects how financially stable and less leveraged a
company is.
Formula:
Equity Ratio=Total Equity\ Total Assets
Measures the percentage of assets financed by shareholders' equity.

Debt Ratio
The debt ratio measures the proportion of a company's total assets that are financed through
debt. It indicates the level of financial leverage and risk the company carries.
Debt Ratio=Total Assets \ Total Debt
Shows how much of the company's assets are financed through debt.
Trend Analysis
Analyzing how capital structure ratios have changed over time (e.g., 5-year trend) to
evaluate financial stability and leverage trends.
DuPont Analysis (Extended)
Although primarily used for return analysis, this technique can provide insights into how
leverage (financial structure) affects return on equity (ROE).
Graphical Presentation
Bar charts, pie charts, and line graphs to visually represent the proportion and trend of debt and
equity components.
4. Data analysis
Here is the short data of its capital structure:
Component
Value (BDT
million)
% of Capital
Debt
6,140
46.9%
Equity
6,940
53.1%
Total
13,080
100%
Here is the debt composition:
Debt Component
Amount
Total Debt
BDT 6.1 billion
Long-Term Liabilities
BDT 784.9 million
Short-Term Liabilities
BDT 7.2 billion
📊 Capital Structure-Focused Ratio Analysis (FY 2024)
1. Leverage Ratios
These ratios assess the degree to which Confidence Cement utilizes debt to finance its
operations.
a. Debt-to-Equity Ratio
.  Formula: Total Liabilities / Total Equity
 Calculation: 7,849.03 million BDT / 6,448.75 million BDT ≈ 1.22

Interpretation:
A ratio of 1.22 indicates that for every 1 BDT of equity, the company has 1.22 BDT in
liabilities. This suggests a moderate reliance on debt financing.
b. Debt Ratio

Formula:
 Total Liabilities / Total Assets
 Calculation: 7,849.03 million BDT / 14,297.78 million BDT ≈ 0.55

Interpretation:
Approximately 55% of the company's assets are financed through liabilities, indicating a
balanced capital structure.
c. Equity Ratio

Formula:
 Total Equity / Total Assets
 Calculation: 6,448.75 million BDT / 14,297.78 million BDT ≈ 0.45

Interpretation:
About 45% of the company's assets are financed through shareholders' equity, reflecting a
solid equity base.
2. Coverage Ratios
These ratios evaluate the company's ability to meet its financial obligations.
a. Interest Coverage Ratio

Formula: EBIT / Interest Expense

Calculation: 1.1x
This indicates that Confidence Cement's earnings before interest and taxes (EBIT) can cover its
interest expenses 1.1 times. 1

Interception:
This indicates that Confidence Cement's earnings before interest and taxes (EBIT) can
cover its interest expenses 1.1 times.
3. Profitability Ratios
These ratios provide insight into the company's financial performance relative to its capital
structure.
A Return on Equity (ROE)

Formula:
 Net Income / Average Shareholders’ Equity
 Calculation: 753.33 million BDT / 6,448.75 million BDT ≈ 11.68%

Interpretation:
An ROE of 11.68% indicates that the company generated a return of approximately
11.68% on shareholders' equity, reflecting efficient utilization of equity capital.
b. Return on Assets (ROA)

Formula:
 Net Income / Total Assets
 Calculation: 753.33 million BDT / 14,297.78 million BDT ≈ 5.27%

Interpretation:
An ROA of 5.27% suggests that the company earned a return of 5.27% on its total assets,
indicating moderate efficiency in asset utilization.
� Additional Insights



Liquidity Ratios:
o Current Ratio: 0.59
o Quick Ratio: 0.17
These ratios indicate potential liquidity concerns, as the company may face
challenges meeting short-term obligations.
Cash Flow:
o Operating Cash Flow: -6.45%
Negative operating cash flow suggests that the company's core operations are not
generating sufficient cash, which could impact its ability to service debt and
finance operations.
Investment Activities:
o The company is investing BDT 8.15 billion to establish a new production facility
in Narsingdi, with 70% financed through loans and the remaining 30% through
equity. This significant investment indicates a strategic move to expand capacity
and market reach.
Here is a graphical representation of the data:
📌 Summary
Confidence Cement PLC exhibits a moderately leveraged capital structure with a debt-to-equity
ratio of 1.22. While profitability ratios like ROE and ROA are healthy, liquidity ratios raise
concerns about short-term financial stability. The company's substantial investment in a new
facility, primarily financed through debt, underscores the importance of monitoring its capital
structure and liquidity position closely.
.
5.Findings and Recommendations
Confidence Limited is a part of the Confidence Group, one of the largest conglomerates in
Bangladesh. While "Confidence Limited" itself might not be a specific, standalone entity with its
own detailed findings and recommendations, understanding the broader Confidence Group and
its various subsidiaries provides valuable insights.
Based on the available information, a detailed analysis of Confidence Cement Limited's annual
reports reveals the following findings and recommendations:
Findings:
* Revenue Fluctuations: The company's revenue has shown inconsistency over the past four
years. It decreased from approximately BDT 4,619 million in 2021 to BDT 4,064 million in
2022, then increased to BDT 4,556 million in 2023, and again decreased to BDT 4,093 million in
2024. This indicates potential volatility in sales performance.
* Gross Profit Volatility: Gross profit also experienced significant volatility. It was positive in
2021 (Tk. 513 million) and 2024 (Tk. 623 million) but negative in 2022 (Tk. -81 million), before
recovering to Tk. 328 million in 2023. The negative gross profit in 2022 is a significant concern,
indicating that the cost of sales exceeded revenue. This needs a thorough examination of
production costs and pricing.
* Operating Profit Improvement: Operating profit showed a positive trend, recovering from a
loss of Tk. -2,728 million in 2022 to a profit of Tk. 5,105 million in 2024. This suggests
improved operational efficiency or better cost management in recent periods.
* Rising Finance Expenses: A concerning trend is the significant increase in finance expenses,
which rose from Tk. 2,225 million in 2021 to Tk. 4,347 million in 2024. This substantial increase
likely impacts the company's profitability and could be due to increased borrowing or higher
interest rates.
* Profitability Trends: Gross profit turned negative in 2022 but recovered significantly in 2023
and 2024. Operating profit also showed a similar trend, with a substantial loss in 2022 followed
by positive figures in 2023 and a strong performance in 2024. Profit before tax and profit for the
period have also shown a positive trajectory after a lower performance in 2022.
* Cost Management: The cost of sales saw a decrease in 2024, which positively impacted the
gross profit. However, finance expenses have been increasing over the observed period, which
could be a concern for overall profitability.
* Share of Profit from Joint Ventures: A significant portion of the company's profit before tax
comes from its share of profit in jointly controlled entities, which has been consistently high over
the past four years, indicating the importance of these ventures to the company's bottom line.
* Dividend History: Confidence Cement has a history of paying dividends, including both cash
and stock dividends in recent years. The cash dividend rate varied, with a 10% cash dividend
declared in 2024.
* Financial Health: Analysis suggests a high debt-to-equity ratio, although it has improved
over the past five years. The interest coverage ratio is low, indicating that the company's earnings
may not comfortably cover its interest expenses. Short-term liabilities exceed short-term assets,
which could pose a liquidity risk.
* Operational Adjustments: Recent reports indicate that the company decided to temporarily
suspend operations of its Ready-Mix Concrete (RMC) plant due to challenges in importing raw
materials amid a foreign currency crisis and a slowdown in domestic infrastructure development,
coupled with new VAT implications.
* Profit After Tax Growth: Despite the fluctuations in revenue and gross profit, the profit after
tax has shown a positive trend in recent years, reaching Tk. 7,534 million in 2024, up from Tk.
1,029 million in 2022 and Tk. 2,716 million in 2023.
* Earnings Per Share (EPS): The EPS has shown a fluctuating but overall positive trend,
reaching BDT 8.73 in 2024, a significant increase from previous years.
* Market Position: Confidence Cement is recognized as one of the largest cement producers in
Bangladesh and a leading blue-chip company in the Dhaka and Chittagong Stock Exchanges.
Capital Structure:
* Debt-to-Equity Ratio: Information from external sources indicates a high debt-to-equity ratio
for CCL. One source suggests a ratio of 88.6%, while another indicates 83.8%. This signifies that
a significant portion of the company's assets is financed by debt, which could increase financial
risk, especially with rising finance expenses.
* Shareholding Pattern: As of January 31, 2022, sponsors/promoters and directors held
30.03% of the paid-up capital, institutions held 37.62%, foreign investors held 0.00%, and the
public held 32.35%. This indicates a significant institutional holding.
* Paid-up Capital: The paid-up capital as of January 31, 2022, was Tk. 782.35 million,
consisting of 78,234,731 ordinary shares of Tk. 10 each.
* Market Capitalization: As of May 8, 2025, the market capitalization was approximately Tk.
4.33 billion, with a share price of around Tk. 50.20. However, another source mentions no
meaningful market capitalization data is currently available. This discrepancy needs clarification
from the most recent official reports.
Recommendations:
* Revenue Growth Strategy: The company should focus on developing a sustainable revenue
growth strategy to reduce the volatility observed in recent years. This could involve market
expansion, product diversification, or strengthening customer relationships.
* Cost Optimization: While the cost of sales decreased in 2024, the increasing finance
expenses warrant attention. The company should explore opportunities to optimize its financing
structure and reduce borrowing costs.
* Working Capital Management: Addressing the mismatch between short-term assets and
liabilities is crucial to improve liquidity. Efficient management of inventory and receivables
could help in this regard.
* Strategic Review of RMC Plant Suspension: The suspension of the RMC plant should be
part of a broader strategic review to assess the long-term viability of this segment given the
import challenges and market conditions. Exploring alternative sourcing or focusing on core
cement production might be necessary.
* Leveraging Joint Venture Performance: Given the significant contribution of joint ventures
to the company's profit, maintaining and strengthening these relationships should be a priority.
Exploring new profitable joint venture opportunities could also be beneficial.
* Debt Management: While the debt-to-equity ratio has improved, continued efforts to reduce
debt and improve the interest coverage ratio are recommended to strengthen the company's
financial stability.
* Continuous Monitoring of Market Dynamics: The company should closely monitor the
macroeconomic environment, including foreign currency fluctuations and infrastructure
development, to proactively respond to potential challenges and opportunities.
* Focus on Core Strengths: Given its strong market position in the cement sector, Confidence
Cement should continue to leverage its reputation for quality and reliability.
It's important to note that these recommendations are general based on the available information.
A more detailed analysis of each subsidiary's specific market conditions, financial performance,
and strategic goals would be necessary to provide more targeted and specific recommendations
for "Confidence Limited" and the broader Confidence Group.