Case Study on M/s. Rana Paper Mills Ltd.

M/S. Rana Paper Mills Ltd.

The main sponsor of the project, Mr. Rana completed Masters in Economics from Dhaka University. He was engaged in import of drugs and medicine and a dealer of Dhaka Stock Exchange (as a member). One of his friends was a chemical engineer and who inspired Mr. Rana to set up a paper mill. Accordingly, Mr. Rana proposed to the bank for extending financial facilities to set up the simplex board manufacturing unit with a production capacity of 10 ton/day. The bank sanctioned a loan of Tk. 1.50 crore in 1982 and opened L/C for import of machinery in 1985. But due to dishonesty of suppliers and sponsors, the machinery could not reach in the project site in time. Rather the machinery was supplied in 1993 but they could not install the machinery till 1994. Besides, it was found that the machinery was old and inoperative. But again the bank sanctioned Tk. 0.50 lac as additional loan to start up the project. The sponsors procured additional machinery for diversification of the product i.e. duplex board instead of simplex board. By this time, the total outstanding loan mounted up to Tk. 15.00 crore which was impossible to be repaid by them. As per sponsor’s proposal, bank waived the total accumulated interest of Tk. 12.50 crore and balance principle amount was kept into interest free block account. The bank also approved working capital loan of Tk. 50.00 lacs. In the meantime the main sponsor died and his son took over the management. The new management had tried to run the project but they have failed to manage it. Presently, the project has become stuck up/sick.

As a senior student of business studies, analyze the case to find the extent of the following reasons for sickness of the enterprise:

1. Management incapability
2. Inexperience in the line of business
3. Dishonesty of the sponsors

Study on Case

Before going to analyze the case, first we should know about case. Case can be defined as the short statement of quantitative and qualitative situation of a bank, institution or an individual for a specific period.

Case study can be consider as analyzing an imaginary situation, which is a replica of real condition, by considering that the analyst himself / herself is responsible and authorized for taking the right decision.

Analysis of a case study has following steps-

1. Analysis of the environment of the situation
2. Identify the main issue of the problem
3. Identify the main actors in connection with the problem
4. Identify the main causes of or determinants of the problem
5. Identify the alternative solutions and locating the advantages and disadvantages of each of the alternative
6. Deciding in favor of the best alternative

Now let’s take a look about our case on Rana Paper Mills.

Environment of the situation[pic 1]

From the case we found following environment-

Economic Environment- The economic environment consists of external factors in a business' market and the broader economy that can influence a business. The economic environment can be dividing into-

1. The microeconomic environment, which affects business decision making - such as individual actions of firms and consumers
2. The macroeconomic environment, which affects an entire economy and all of its participants.

In this case it’s a Macroeconomic environment because Mr. Rana was an Importer of drugs and medicine and also Import machinery for simplex board manufacturing. Here Interest rate, Foreign Exchange rate is the factor of macro economy.