Ahmed Zeeshan Khan, comsats

INTERNSHIP REPORT

Nishat Textile Mills Limited

7, main. Gulberg 3, Jail Road Lahore

Presented by:Ahmed Zeeshan Khan

CIIT/FA09-MBA-005/LHRSubmission date:

30-08-2010Presented to:

Mr. Waseem AnwarAssistant Professor

COMSATS INSTITUTE OF INFORMATION AND TECHNOLOGY

Department of Management Sciences.

Jinnah campus Defense road, off rewind road Lahore

Ph No. 35321090, 39203101 Ext. 215

Comsats Institute of Information and Technology, Lahore 1

PART ONE



Executive summary:

NISHAT has grown from a cotton export house into the premier and prestigious business group of Pakistan with five listed companies, focusing at four basic

businesses; includes Textiles, Cement, Banking and Power Generation. Today, Nishat is being considered to be at par, competing at its best with multinationals

performing locally in terms of its quality products and skilled full management

NISHAT Mills Limited is a Pakistan based co. indulged in the business of textile manufacturing and of spinning, combing, weaving, bleaching, dyeing, printing, stitching/apparel, buying, selling and otherwise dealing in yarn, linen, cloth and other goods related to. And fabrics made from raw cotton, synthetic fiber and

cloth. The NISHAT GROUP is also engaged in power generation and its accumulating, distributing and supplying.

I recently have been through my internship in Nishat Mills Limited, in which I got training from sales tax department. The internship basically revolved around the rebate or refund of sales tax. The system, the style of working & the commitment

of the employees in NML is really exemplary.

The distance between success & failure is dependent upon performance, performance up to the mark, or a bit below average, & NML has always tried for

the best. & this is the only reason. It is known to be one of the prosperous business giant in Pakistan. Well despite all these optimist points of Nishat Mills Limited, I felt some roam where the improvement and hard work can immensely

boast up the efficiency of NML.

In the report I have tried to cover a very brief review about all I have been through. I tried to touch every point as per the instructions made by my instructor. It includes bunch of assorted words related to the Textile industry in Pakistan and vision of its industry, detailed SWOT analysis. Afterwards I put all in it that I have

learned in the whole six week training, which is all about the Textile Terminologies or industrial jargons. And process of taxation. I have made it

possible to transfer each and every thing that I have learnt there.


I have all my practical efforts in the form of this manuscript that’s the asset for my future career.

PART TWO


Dedication

This Report is dedicated to my parents who have

encouraged and supported me in the field of study.

May ALLAH bless them!(Aamin)

ALLAH, who made me able to what alone I could not think

of.


PREFACE

Comsats is one of the leading universities in Pakistan. Management

department is the heart of this University. This institute is rendering

invaluable services to the Pakistan nation by producing outstanding

students who have aims to change the world. I myself feel proud as being

a part of that superb and prestigious institute and feel proud of my

mentors, because of their versatile teaching style and enormous

knowledge, as well as their scholastic approach.

Preparing students to face the world confidently and courageously,

Comsatsarranges an internship Programs during summer. The objective

of this program is to give practical exposure about our studies. It is also

helpful for understanding the organizational environment that how to deal

with professionals. For this purpose, I joined Nishat Textile mills Limited,

which is one of the largest Organizations in Pakistan. During my internship

span of 6 weeks, I got chance to work in sales tax Department and got

information about the working and documentation. I tried my level best to


include every thing, which I learned and observed there. This report

contains the details about the functions of Departments, of NISHAT Mills

Limited. This report is prepared in such a way that reader gets full

overview of NISHAT Mills Limited.

ACKNOWLEDGEMENT

.All praises and thanks for almighty Allah who is entire source of knowledge and wisdom to mankind. And whose uniqueness, oneness and wholeness, gave me enough courage, knowledge and ability to accomplish this project.Thanks are also due to last Prophet Hazrat Muhammad (peace be upon him), through whom almighty Allah communicated knowledge to mankind and who is forever a torch of guidance and knowledge for whole humanity.I am thankful to my honorable professor, Waseem Anwar.Who provide me a chance to enhance my knowledge by sending me to Nishat Mills Limited, Lahore.I really praise to the great efforts of my instructors (sales tax officers.Mr. Rizwan,Mr. usman,Mr. sidique,Mr. Salman. Mr. Azam Janjua (GM f & A) and his P.A Mr. Illiyas.

Their constant encouragement made the successful accomplishment of this Project. He guides me in each and every step in this project.And also Staff of COMSATS institute, I again extended my deep gratitude and heartiest thanks to all of them whose creativity, experience, wisdom, skill,


constructive criticism, scholastic approach and valuable suggestions guided me throughout the preparation of this report.

PART THREE


INTRODUCTION

When Pakistan came into being there were just sixteen textile mills, out of which only 12 were operating. Then ALLAH almighty helped to grow the count upto 70 in 1957 as the result of industrial revolution, development took place. Now at present there are 596-textile mills out of which 442 are in operation. The export revenue of textile industry puts in a huge share to the GDP of Pakistan. Since long, Pakistan is known to be the single crop economy i.e. cotton and textile that claims the elephant share in terms of the contribution in the national economy of Pakistan.Despite efforts to bring in diversification in country's overall economic get-up the textile sector continues to be the most important segment of the national economy. Its share in the economy, in terms of GDP, exports, employment, foreign exchange earnings, investment and revenue generation being altogether pushed the textile industry to the heights by being the only single largest lifeline of economic growth of country.Ignoring harsh and hard above borders economic conditions, Pakistan's textile industry has proved to be the knights by coming out of the international crisis in a optimist manner.


Textile Imports of Pakistan

Import related to textile machinery and equipment has boasted up since 1997-98 when a bumper cotton crop was cashed out and the Textile Industry booked humongous profits due to lower input cost. In the last five years more than Rs9 billion have been put into the industry as local investment for the import of spinning related machinery.

NISHAT is one of the major buddy while discussing in terms of importing Textile Machinery. from almost all developed countries. It is predicted that an additional Rs10 billion would be required for Balancing, Modernization and Replacement (BMR) in the spinning sector during the next three years for producing superior quality yarn besides several units are in various stages of installation in Karachi also. These facilities would improve value-addition in fabrics, besides increasing the volume of fabrics and quality garments exports from the country. Textile is the only sector where investment has been substantial and regular during past three years. The most encouraging factor of this investment is diversity. The entrepreneurs, who earlier concentrated on Spinning and Weaving, have now established compact units adding state-of-the-art finishing units and knitting machines to add value to their products. The latest addition to this is the setting up of denim cloth producing units.At present, the export competitiveness of the textile industry can be improved by aggressive marketing techniques and quality improvements which have to be taken care of micro-level that is each textile unit should make its own independent efforts to sell its products in different international markets.

All the individual textile units should implement the ISO 9001 program for quality standard and ISO 14000 for environmental standards to counter the threat of globalization.

Textiles Exports from Pakistan

Textiles constitute a major exporting sector for Pakistan, which accounts for about 60% of the country’s total foreign exchange earnings. The major export items are yarn, gray Cloth, finished cloth, towels and bed sheets and their major customers are the USA, EU, Japan and Hong Kong. Many textile exports take place under quota arrangements With the EU and the United States. Gray cloth constitutes roughly 16-18% of total cloth Exports from Pakistan.

Nishat gray cloth exports account for roughly 20 % of Pakistani gray cloth exports. The Firm has been exporting to the USA for many years, and has only recently started to export to EU countries.


In Pakistan, the cotton crop season runs approximately from August to March. Prices are generally high at the start of the season in August/September, and fall later on as supply increases. Following income tax law, the fiscal year runs from October to September for textiles sector.

As a result global scenario has changed. Government and the corporate textile sector adjusted their policies to achieve maximum benefits of free trade. So, local structure of the corporate culture, investment pattern and fiscal and monetary policies were significantly changed.

CHALLENGE:

To get maximum outcome from quota free regime, all out maxima efforts are needed to boost textile exports and heap up access to the international markets. In the context of boosting the exports, the State Bank of Pakistan has introduced three facilities based schemes for the benefits of exporters which are, Foreign Currency Export Financing Scheme (FCEFS),Political Risk Guarantee Scheme (PRGS)Export Guarantee Scheme (EGS).The bank would provide 210 days credit facility to exporters for South America as compared to 120 days credit facility to other markets

COMPANY INFORMATION

BOARD OF DIRECTORS:Mrs Naz Mansha (CEO)Mian Raza ManshaMian Hassan ManshanMr. Muhammad Nawaz Tishna (NIT)Mr. Faisal Ehsan EilahiMr. Khalid Qadeer Qureshi (Chief Financial officer)Mr. Rana Muhammad Mushtaq Mr. Muhammad AzamRana Muhammad MushtaqMr. Muhammad Ali Zeb

CORPORATE DEPARTMENT:Mr. Khalid Mahmood ChohanCompany Secretary

AUDITORS:


Riaz Ahmad and CompanyChartered Accountants

LEGAL ADVISOR:Mr. M. Aurangzeb Khan, Advocate,Chamber No. 6, District Court, Faisalabad.

BANKERS TO THE COMPANY:ABN AMRO BankAlbaraka Islamic Bank B.S.C (E.C)Allied Bank of Pakistan LimitedAskari Commercial Bank LTDAmerican Express BankCiti bank N.A.Crecent commercial Bank.Faysal Ban LTD.HBLHabib Bank A.G.ZURICUnited bank LTDUnion BankThe hong kong & shangai Banking corporationStandard Chartered BankPICIC commercial Bank LTDNIB bank LTDNational Bank LTDKASB Bank LTDMeezan Bank LTD

MILLS:Niashatabad, Faisalabad(Spinning, Processing, Stitching units &Power Plant)

12 K.M. Faisalabad Road, Shiekhupura(Weaving units & Power Plant)21 K.M Ferozepur Road, Lahore.(Stitching unit)

5 K.M. Nishat Avenue off 22 K.M Ferozepur Road, Lahore

(Dyeing & Finishing Unit and Power Plant)

20 K.M. Shiekhupura Faisalabad Road, Froze Watwan(Spinning Unit)

REGISTERED OFFICE &SHARES DEPARTMENT


Nishat House,53, A, Lawrence Road, Lahore.Tel: 042-6367812-16Fax: 042-6367414

LIAISON OFFICE:1st Floor, Karachi ChamberHasrat Monani Road, Karachi.Tel: 021-6367812-16Fax: 021-2412936

HEAD OFFICE:7, main Gulberg, Lahore.Tel: 042-5716351-9Email: [email protected]: www.nishatmills.com

QUICK INTRODUCTION:

A short intro for NISHAT group can be that the owners, which includesMIAN MASHA who has three sons named as MIAN RAZA MANSHAMIAN UMER MANSHAMIAN HASAN MANSHA

Their businesses areMCB BankDGK cementADAM JEE insuranceNISHAT powerNISHAT hotelPAKISTAN aviatorNISHAT millsAKD developersKLASS textiles (owned by MANSHA’s daughter in law)


http://www.nishatmills.com/

mailto:[email protected]

I worked in NISHAT mills LTD, which had textile being core business, it has the following departmentsH.RMarketingExportsFinanceAccountsPlanningProductionStorePurchasesSales tax, Rebate, Income tax

I remained under training in the above BOLD letters, sales tax & rebate department.Now, onwards I’ll present in words, something regarding NISHAT textiles, as per my raw knowledge.

NISHAT MILLS LIMITED

NISHAT MILLS LIMITED whose short symbol. Used in stock market is (NML) commenced business in 1951 at partnership basis, which afterwards was converted into private limited co. in 1959. then In 1961, the company went public and emerged as listed co, on the Karachi stock exchange’s board,

NML initially started with weaving. NML as a weaving unit with 500 semi-automatic looms; which then in later days, climbed to 10000 spindles,As it was the very first step to by laying the foundation on nation’s largest textiles composite projectComposite project at Nishat mills limited Faisalabad covering 98 acre of land deemed to provide all business related production process under one roof i.e. spinning, weaving, processing, stitching and power generation.

The Founder

A man of vision, courage and integrity, Mian Mohammad Yahya was born in 1918 in Chiniot. In 1947 when he was running a leather business in Calcutta, he witnessed the momentous that swept the indo-pak sub-continent and resulted in


the emergence of Pakistan. Like many of his contemporaries, he also migrated to the new country to help establish its industrial base. Here is a brief story of success through sheer hard work and an undaunted spirit of enterprise. Beginning with a cotton export house, he soon branched out into ginning, cotton and jute textiles, chemicals and insurance. He was elected Chairman of All Pakistan textile Mills Association (APTMA), the prime textile body in the country. He died in 1969, at the age of 51 having achieved so much success in so short period.

The Chairman

Today Mian Mohammad Mansha, the chairman of Nishat Group, like his father, continues the spirit of entrepreneurship and has led the group to become a multi dimensional corporation, with wide ranging interests.

Nishat has grown from a cotton export house into the premier business group of the country with 5 listed companies, concentrating on 4 core business, Textiles, Cement, Banking, and Power Generation. Today, Nishat is considered to be at par with multinationals operating locally in terms of its quality products and management skills.

Firmly believing in ‘Growth through Professional Management’ our corporate culture is based on decentralization, delegation of authority, encouraging the acceptance of responsibility and inculcating quality consciousness.

It is our conviction that every successful organization is a reflection on the commitment, dedication, and team spirit of its employees, and Nishat is no exception. Our people are all imbued with the spirit, a fact manifested in our rapid growth and low turnover

Nishat continue to strive to be a better group today than what they were yesterday, for their customers, for their shareholders, for their investors, for the environment, for the community and for their employees, for it is with them that Nishat has achieved so much success in last fifty years.


MISSION STATMENT

To provide quality products to customer and explore new Markets to promote/expand sales of the company through good Governance and faster a sound and dynamic team, so as to achieve Optimum price of products of the company for sustainable and equitable Growth and prosperity of the company

VISON STATMENT

To transform the company into a modern and dynamic yarn,Cloth and processed cloth and finished product manufacturing Company with

highly professionals and fully equipped To play a meaningful role on sustainable basis in the economy of Pakistan To transform the company into a modern and

dynamic power generating Company with highly professionals and fully equipped to play a Meaningful role on sustainable basis in the economy of Pakistan.


Quality Policy

We work together as a team for implementation and continual improvement of total quality system in order to achieve satisfaction of our internal and external

customers.

Textile Vision 2010

An open market driven, innovative & dynamic Textile Sector which is:-

Internationally Integrated.

Globally Competitive

Fully equipped to exploit the opportunities created by the MFA Phase out and this enables Pakistan to be amongst the Top Five Textile Exporting Countries not only in Asia all over the world with the tremendous Textile companies

Down the hill Scenario

Represented a situation where only the historic export growth rates in textile sub-sectors were maintained. The overall average export growth for the textile sector after analysis was finalized at 6% per annum.

Par Scenario

Envisaged increase in unit price realization of yarn, fabric, textile made-ups and garments with an attempt to maintain the market share in each individual market. It also suggested penetration in the non-quota markets along with increased share of synthetic and blended yarns, fabrics and garments. The overall export growth in this scenario was estimated at 12% per annum.

Up the hill Scenario


the most ambitious of the scenarios that not only adopted the apparel sector as the engine of textile export growth but also recommended diversification in products that hold greatest potential but unfortunately have been neglected e.g. woven garments, sports wear, specialized industrial garments, and women wear. Besides broadening of export product portfolio with extra push in synthetic and man-made fibers, fabrics and garments

PART FOUR


NISHAT GROUP OF COMPANIES

*The Nishat Group* Mian Muhammad Mansha Yaha is the captain of this marvelous ship having around 30 companies on board. Mansha, owner of Muslim Commercial Bank as well, is now setting up a billion rupee ($ 17 m) paper sack project too. He is one of the richest Pakistanis around. Nishat Group was country's 15th richest family in 1970, 6th in 1990 and Number 1 in 1997. Mansha is on the board of nearly 50 companies. originally they are Chinioti by clan, Mansha is married to Yousaf Saigol's daughter.

The history of NISHAT Group travels back to 1951, when Mian Muhammad Yahya gave the foundation stone to NISHAT Mills Limited.

This man of vision, courageous and full of integrity, Mian Mohammad Yahya was born in 1918 in Chiniot. In 1947 when he was running leather business in Calcutta, he witnessed by the mountainous changes that swept away the Indo-Pak subcontinent.

This is story of success started from scratches and reached the heights through sheer hard work and an undaunted and provoked spirit of proactive enterprise. By sticking to his cotton export house, he in no time branched out in to ginning,

Cotton and jute textiles,

Chemicals and insurance.

As he became a famous personal, He was elected Chairman of all Pakistan Textile Mills Association. He died in 1969, at the age of 51 having achieved so much in so short span of time.


After almost five decades of flawless success, NISHAT group of companies is among the leading business houses of the country and ranks among the top 5 groups in terms of assets and sales revenue. The group is composed of it four main planted and well routed pillars four core business namelyTextiles

Power Generation

Banking

Cement

TEXTILES

The textile business is further subdivided into 2-textile division:

Nishat Faislabad

Nishat Chunian

The textile capacity of the group is the largest in the country. An addition of 20,000 new spindles, 100 new air jet looms and new dyeing plants has increased the existing capacity of 242,000 spindles, 740 looms and dyeing and finishing capacity of 5 million meters. The largest exporters of textile products from Pakistan, for more then decade!

POWER GENERATION

Nishat group has also been a pioneer in power generation in the private sector of the country. Nishat setup the first power generation unit in the private sector in 1995.

CEMENT

In 1992, Nishat Group acquired D.G Khan Cement Company Limited (DGKCC) from the second largest project of the group and is ideally located in the heart of the country, with easy access to transportation all over Pakistan. DGKCC unit No. 1 has a capacity of 2,200 tons per day. A new unit heaving the capacity of 3,300 tons was setup in 1997. International Finance Corporation and common Wealth Development Corporation have financed this unit. With the addition of unit No.2, DGKCC has become the largest manufacturer of cement in Pakistan.

BANK


In 1991, Nishat Group ventured into the financial sector through the acquisition of Muslim commercial Bank. MCB has grown ever since and is now the largest bank in the private sector. MCB has a network of over 1200 branches employing over 12,000 people.

Nishat Mills.

NISHAT MILLS LTD, FAISALABAD

NISHAT DYEING AND FINISHING, LAHORE

NISHAT FABRICS, BHIKHI

NISHAT SPINNING, FEROZE WATTOAN

NISHAT SEWING, LAHORE

PRODUCT LINEProducts line of Nishat mills limited consists of following items,

BEDDING Sheet sets Quilt cover sets Bed spreads Comforters Bed skirts Oxford pillow cases Blanket covers Sleeping bags

CURTAINS & ACCESSORIES Embroidered curtains Pencil pleat tape curtains Pinch pleat lined & unlined curtains Tab top & rod pocket curtains Assorted pelmets and window dressings Oxford cushion covers Frilled and piped cushion covers Frilled, piped and pleated tie backs


TABLE, FURNITURE & KITCHEN ACCESSORIES Tea cozy Table mats and Table cloth and napkins Aprons Kitchen gloves Pot holders Chair pads with circle tacks Couch cove

TEXTILE CAPACITYProduction process consists of spinning, weaving, processing, and finishing. The processing includes dyeing, engraving. The textile capacity of the group is the largest in the country. An addition of 20000 new spindles, 100 new air jets looms and new dyeing plant has increased the existing capacity of 24000 spindles, 740 looms and dyeing and finishing capacity of 5 million meters. The group is the largest exporter of textile products from Pakistan for more than a decade.

Export Oriented Organization Nishat mills limited are an export oriented organization. Nishat mills limited exports more than 90% of its products which includes top of the list, the Far East, Europe and United States

Major competitors

NISHAT’s competitors are

Crescent

Chenab

Arzoo

Alkarms

Sitara

Kohinoor

Amtex


But main competitors of Nishat Mill are

“Crescent Textile Mills”

“Chenab Textile”

Management of Nishat Mills Limited

Nishat Mills Limited employees are highly qualified professionals and have a

young, energetic and dedicated and focused team of highly skilled professionals

who have a lot of knowledge to their credit

Managers are responsible for the task assigned to them in their departments and

also have to match whether their respective department is achieving the

projected efficiency level or not.

There are at least three basic requirements for a successful company and the

managers of Nishat Mill Limited are made to think on these lines:

It must provide a product (good or service) that suits best to the

company’s capabilities and for which there is a sufficient market.

It must provide the product with consistent quality at a level that appeals to

intended customers and satisfy their needs.

It must provide a product at a cost that always an adequate profit and a

reasonable sale price.

INTERNATIONAL STANDARD OF ORGANIZATION (ISO)


NISHAT mills limited have achieved the goal, ISO 9001 and ISO 9002 certificate

in 1997. In order to achieve there are requirements, which should cater the

following,

MANAGEMENT RESPONSIBILITIES

Management responsibilities includes the following,

Quality policy

According to the ISO 9001 and ISO 9002, it is utmost responsibility of

management to devise policies that provide quality products to customers. Nishat

is working hard to ensure that they produce quality products.

Customer expectation

It is essential that customer expectation should be fulfilled. It is the responsibility

of management to do so. Since Nishat is an export-oriented organization so

utmost attention is paid to meet customers’ need and requirements.

Resource management

Utilization of resources play crucial role in the success or failure of organization.

If resources are effectively utilized, they become cause of success for

organization. Nishat is effectively using its resources and thus has achieved ISO

9001 and ISO 9002. In the financial year of 1999-00, it declared dividend of 26%,

which is highest so far. This performance shows that Nishat mills limited have

sky-high goals. Human resource management also exists. They have ensured

that, right man is placed at right job and also at the right time. Various training

programs are offered for upgrading the skills of staff.


Responsibility and authority

Nishat is fairly decentralized organization. Middle level management makes most

of decisions and matters are decided in a friendly environment. Nishat cares a lot

for its staff. Orders are not dictated but they are made with effective participation

from staff.

Management representatives

Nishat governing body is highly talented. Board of directors include professional

of great repute. They are committed toward achieving a good name for Nishat

mills limited.

QUALITY SYSTEM

System Procedure

ISO 9001 requires that there should be proper system for each work.

Standardization of work is necessary for achieving effective certification.

Standard Operations

Nishat mills limited have established a quality control lab, which ensures quality

products to their customers. Objective at Nishat is to provide only quality

products to their customers. That’s why they achieved quality certification like

ISO 9001.

Quality Planning

Effective planning is required for the success of organization. If plans are well

planned, they bring success to firms. For this production and planning

department has been established.

Work Instructions

Instruction should be provided for better handling of job, and it is exactly in its

true spirit followed at Nishat mills limited.


CONTRACT REVIEW

Reviews

Sometimes contracts are reviewed, that reviewing must be in proper manner.

Contract should be given keeping in view of interest of the company.

Amendments

If the amendments are made in the contract, they should be made with

authorized person. And management should be fully informed with that.

Quality record

For the storage of record, there should be proper arrangements. Each item in

accounts should be properly coded and placed. Cash should be paid by

cheques.

DESIGN CONTROL

Design and Development Planning

For designing of products, there should be specific arrangements. Department of

design planning should be established, if the enterprise want to achieve quality

certificate like ISO 9001 and ISO 9002.

Design review

Design should be reviewed once made by the firms. This design should have

some characteristics that should be in accordance with the business practices.

Verify Validity of Design

Once design is complete, the competent authority should verify it.

CUSTOMER DATA CONTROLE


It is the perquisite for ISO 9001 that proper customer data should be there. This

is to provide customers list if required by the top management.

CONTROLE OF COUSTOMER SUPPY PRODUCT

There should be proper control over customer’s products.

PRODUCT IDENTIFICATION AND TRACABILITY

Product should be clearly identified and traceable. It should have some

characteristics that distinguish it from others. It should not be similar with other

products in terms of its name, logo etc.

INSPECTION

There should be proper inspection of stores so that every thing functions

according to manners prescribed by certificates.

CORRECTIVE AND PREVENTING MEASURES

There should be check and balances. If the mistakes are made, there should be

proper systems so that they are identified and corrected. Preventing methods

should be there.

INTERNAL AUDIT

There should be strong internal audit. So all discrepancies should be disclosed.

In order to get ISO 9001 there should be separate internal audit department.

TRAINING PROGRAMES

OTI, on job Training programs should must be introduced to upscale the skills of

vibrant employees. On the job training programs should be provided so that

workers get knowledge about work.


STATISTICAL TECHNIQUES

Several combinations of statistical tools are required for the betterment of

controlling the affairs of organization. They should must be available to achieve

quality awards. Introduction of information technology, automation of factory,

Internet and computer technology are shining features in achieving ISO 9001 and

ISO 9002.

PART FIVE


SOME IMPORTANT POINTS OUT OF

MEMORENDUM OF ASSOSIATION.

MEMORANDUM OF ASSOCIATION


The name of the company is NISHAT MILLS LIMITED.

The Registered office of the company shall be situated in the Province of

Punjab, Pakistan.

The objectives for which the company is established are as follows:

“Goals”


. To acquire and take over as a going concern the business rights, liabilities

and undertaking of the NISHAT MILLS, a firm belonging to:

Mohammad Yakub

Mohammad Shafi

Abdul Hamid

Mohammad Fafiq

Mohammad Yaha

Mohammad Ayoob

Mohammad Farooq

Haji Maula Baksh

And to carry on the same business in whole or in part, or in extended form

and pay for the same in cash, shares or otherwise and with a view thereto, to

enter into the agreement referred to Clause 3 of the Company’s Articles of

Association and to carry the same into effect with or without modification.

To carry on the business of textile manufacturers and of dyeing, bleaching

printing, combing, preparing, spinning, weaving, manufacturing, selling,

buying and otherwise dealing in yarn. Linen, cloth and other goods and

fabrics made from raw cotton, silk, flax, jute and materials.

To purchase, sell, exchange and deal in cloth, yarn, cotton in process, raw

cotton, jute, wool, silk, hemp, and other fibrous. Also drugs chemicals, dyes,

metal, stores and other articles and things.

To purchase, import, export, sell, comb, prepare, spin, weave, dye and

otherwise deal in cotton, flax, jute hemp, wool, silk, and all or any fibrous and

other allied products.


To import, export, buy, sell or otherwise deal in all kinds of textile machinery

and equipment, their spare parts and accessories and to manufacture and

deal in articles of all kinds required for the manufacturers of yarn, silk, wool,

linen and cloth and other allied products.

To carry on the business of manufacturers, importers, exporter, buyers,

sellers and dealers in waterproof material and fabrics, Pauline, American

Clothe, floor cloth and imitation leather, rubbers and allied goods.

To promote and establish working of woolen, cotton or spinning and weaving

mills, khaddies or otherwise, carding, raising, machining and finishing of all

cotton, silken and woolen goods, articles and yarns.

To carry on business of dealers and importers of chemicals of all sorts.

To carry on business as general merchants, contractors, agents, importers,

exporters, factors and warehousemen except managing agents.

To carry on all kinds of contracts of Government, locals bodies and other

authorities.

To employ experts to investigate and examine the condition, prospects, value,

character, and circumstances of any business, concerns and undertakings

and generally of any assets, property or rights.

To receive fixed and other deposits, accepts the business of a banking

company.


To draw, make, accept, endorse, discount, execute and issue promissory

notes, bills of exchanges, bills of lading, warrants, debentures, and other

negotiable or transferable instruments.

To invest and deal with any money of the company in such form as may be

though expedient.

To pay all the preliminary expenses of any kind and incidental to the

formation and incorporation of the company out of the funds of the company.

To distribute any of the company’s property among the members in specie or

in any manner thereof.

To issue any shares of the company at par or at a premium or debentures at

premium or at a discount.

ARTICLES OF ASSOCIATION

OF


Actually the main purpose of including memorandum and articles of

association is to get knowledge about company internal management and

affairs, various matter like appointment of directors, their remunerations,

disqualifications, company seal, winding up of company, accounts of

company are frequently discussed. It also sets the boundary wall for the

company.

PRELIMINARY

The regulations in Table “A” in the first schedule of the company’s ordinance,

1984 shall not apply to the company except as reproduced herein.


In these articles, unless the context or the subject matter otherwise requires:

Articles mean these articles as originally framed or as from time to time

altered in accordance with law.

Board means a meeting of directors duly called and constituted or as

the case may be the directors assembled at a board.

Company means NISHAT MILLS LIMITED.

Director’s means the directors for the time being of the company or as

the case may be, the directors assembled at a board.

Month means calendar month according to the English calendar.

Office means the registered office for the time being of the company.

Ordinance means the company’s ordinance, 1984 or any modification

or re-enactment thereof for the time being enforce.

Register means, unless the context otherwise requires, the register of

members to be kept pursuant to Section 147 of the ordinance.

Seal means the common seal of the company.

Section means section of the ordinance.

Special resolution means the special resolution of the companies

defined in section 2(1) (36) of the ordinance.

Words importing masculine gender include the feminine gender.

Words importing singular number include the plural number and vice

versa.

Expression referring to writing shall, unless the contrary intention

appears, be construed as including references to printing, lithography,

photography and other method of representing or reproducing words in

a visible form.

Words importing person shall include bodies corporate.

The head notes are inserted for convenience and shall not affect the

construction of these articles.


Unless the context otherwise requires words or expressions contained

in these articles shall bear the same meaning as in the ordinance.

1. BUSINESS

The directors shall have regard to the restriction on the commencement of

business imposed by section 146, if and so far as, those restrictions are

binding upon the company.

111. SHARES

No shares shall be offered to the public for subscription except upon the term

that the amount payable on application shall be the full amount of the nominal

amount of the shares.

TRANSFER OF SHARES

The instrument of transfer of any share in the company shall be executed

both by the transferor and transferee, and the transferor shall be deemed to

remain holder of the share until the name of the transferee is entered in the

register in respect thereof. No transfer shall be made to an infant or person of

unsound mind.

ALTERNATION OF SHARE CAPITAL

The company may, from time to time, by ordinary resolution increase the

share capital by such sum, to be divided into shares of such amount, as the

resolution shall prescribe.

GENERAL MEETING


The statutory general meeting of the company shall be held within the period

required by section 157.

NOTES AND PROCEEDING OF GENERAL MEETING

Twenty one days at the least (exclusive of the day on which the notice is

served or deemed to be served but inclusive of the day for which notice is

given) specifying the place, the day and the hour of meeting and, in case of

special business, the general nature of that business, shall be given in the

manner provided by the ordinance for the general meeting, to such persons

as are, under the ordinance or the regulations of the company, entitled of

receive such notices from the company, but the accidentally omission to give

notice to or the non- receipt of notice by , any member shall not invalidate the

proceedings at any general meetings.

VOTES OF MEMBERS

Subject to any rights or restriction n for the time being attached to any class

or classes of shares, on a show of hands every member present in person

shall have one vote except for election of directors in which case the

provisions of section 178 shall apply. On a poll every member shall have

voting rights as laid down in section 160.

In case of joint holders, the vote of the senior who tenders as a vote, whether

in person or by proxy, shall be accepted to the exclusion of the votes of the

other joint holders, and for this purpose seniority shall be determined by the

order in which the names stand in the register.

A member of unsound mind, or in respect of whom an order has been made

by any court having jurisdiction, in lunacy, may vote, whether on show of


hands or on a pool, by his committee or other legal guardian, and any such

committee or guardian may, on the pool, vote by proxy.

On a poll votes may be given either personally or by proxy. Provided that

nobody corporate shall vote by proxy as long as a resolution of its directors in

accordance with the provision of section 162 is enforce.

DIRECTORS

The numbers of the directors and the names of the first directors shall be

determined in writing by a majority of the subscribers of the memorandum of

association, so, however, that such number shall not in any case be less than

seven.

DISQUALIFICATION OF DIRECTORS

No person shall become a director of the company if he suffers from any of

the disabilities or disqualification mentioned in section 187 and, if already a

director, shall cease to hold such offers from the date he so becomes

disqualified or disabled. Provided however that no director shall vacate his

office by reason only of his being a member of any company which has

entered into contracts with, or done, any work for, the company but such

director shall not vote in respect of any such contract or work, and if he does

so vote, his vote shall not be counted.

ELECTION AND REMOVAL OF DIRECTORS


At the first annual general meeting of the company all the directors shall stand

retired from office, and directors shall be elected in their place in accordance

with section 178 for a term of three years.

A retiring director shall be eligible for re-election.

The number of directors determined by the board shall be elected to office by

the members in general meting in the following manner;

A number shall have such number of votes as it equal to the product of

the number of voting shares held by him and the number of directors to

be elected.

A member may give all his votes to a single candidate or divide them

between more than one of the candidates in such manner as he may

choose.

THE SEAL

The directors shall provide a common seal of the company which shall not be

affixed to any instrument except by the authority of a resolution of the board

or by a committee of directors authorized in that behalf by the directors, and

two directors or one director and the secretary of the company shall sigh

every instrument to which the common seal is affixed.

DIVIDENDS AND RESERVE

The company in general meeting may declare dividends but no dividend shall

exceed the amount recommended by the directors.


The directors may from time to time pay to the members such interim

dividends as appear to the directors to be justified by the profits of the

company.

No dividends shall be paid otherwise than out of profits of the year or any

other undistributed profits.

The directors may carry forward any profits, which they may think prudent not

to distribute, without setting them aside as a reserve.

A transfer of shares shall not pass the right to any dividend declared thereon

before the registration of the transfer.

If several persons are registered as joint-holders of any share, any one of

them may give effectual receipt for any dividend payable on the share.

Notice of any dividend that may have been declared shall be given in the

manner hereinafter mentioned to the persons entitled to share therein.

ACCOUNTS

The directors shall cause to be kept proper books of account as required

under section 230.

The directors shall keep the books of account at the office on at such other

place as the directors shall think fit and shall be open to inspection during

business hours.

NOTICES

The company shall give notice to members and auditors of the company and

other persons entitled to receive notice in accordance with section 50.


SECRECY

Every directors, manager, advisor, auditors, trustee, member of a committee,

officer, servant, agent, accountant, or other person employed in the business

of the company shall, if so, required by the directors before entering upon his

duties sign a declaration pledging himself to observe a strict secrecy

respecting all transactions of the company with its customers and the state of

accounts with individuals and in matters relating thereto, and shall be such

declaration pledge himself not to reveal any of the matters which may come

to his knowledge in the discharge of his duties except when required to do so

by the directors or by any general meeting or by any a court of law and except

so far as may be necessary in order top comply with any of the provisions in

these presents.

RECONSTRUCTION

On any sale of the undertakings of the company the directors or the

liquidators on a winding up may, if authorized by a special resolution, accept

fully paid shares, debentures or securities or any other company, either then

existing or to be formed for the purchase in whole or in part of the property of

the company, and the directors (if the profits of the company permit) or the

liquidation (in a winding up) may distribute such shares or securities, or any

other properties of the company amongst the members without realization, or

vest the same in trustees for them, and any special resolution may pro-vide

for the distribution or appropriation of the cash, shares or other securities,

benefits or property, otherwise than in accordance with the strict legal rights

of the members or valuation of any such securities or property at such price


and in such manner as the meeting may approve, and all holders of shares

shall be bound to accept and shall be bound by any valuation or distribution

so authorized, and wave all rights in relation thereto save only such statutory

rights (if any) as are, in case the company is proposed to be or is in the

course of being wound up, incapable of being varied or excluded by these

presents.

WINDING UP

If the company is wound up, the liquidator may, with the sanction of a special

resolution of the company and any other sanction required by law, divide

amongst the members in specie or kind the whole or any part of the assets of

the company (whether they shall consist of property of same kind or not) and

may, for such purpose, set such value as he deems fair upon any property to

be divided as aforesaid and may determine how such divisions shall be

carried out as between the members or different clauses of members. The

liquidator may, with the like sanctions, vest the whole or any part of such

assets in trustees upon such trust for the benefit or the contributories, as the

liquidator with the like sanction, shall think fit but so that no member shall be

compelled to accept any shares or other securities whereon there is any

liability.

INDEMNITY

Every officer or agent for the time being of the company may be indemnified

out of the assets of the company against any liability incurred by him in

defending any proceedings, whether civil or criminal, arising out of his

dealings in relation to the affairs of the company, accept those brought by the

company against him in which judgment is given in his favor or in which he is

acquitted, or in connection with any application under section 488 in which

relief is granted to him by the court.


ARBITRATION

Whenever any difference arises between the company on the one hand and

any of the members, their executors administrators or assigns on the other

hand, touching the true intent or construction or the incident or consequences

of these articles or of the statutes, or touching anything there or thereafter

done, executed, omitted or suffered in pursuance of these articles or of the

statutes or touching any breach or alleged breach of these articles, or to

these articles or to any statue affecting the company or to any of the affairs of

the company, every such difference shall, as a condition precedent to any

other action at law be referred in conformity with the arbitration act, 1940, or

any statutory modification thereof and any rules made there under, to the

decisions of an arbitrator to be appointed by the parties in difference or if they

cannot agree upon a single arbitrator to the decision of two arbitrators of

whom one shall be appointed by each of the parties in difference, or in the

event of the two arbitrators not agreeing, then of an umpire to be appointed

by the two arbitrators, in writing, before proceeding on the reference and such

decision shall be final and binding on the parties.


PART SIX


ORGANIZATIONAL STRUCTURENISHAT MILLS LIMITED


Board of Directors

Chief Executive

Director Finance

Company Secretary

Director Marketing

Director Purchase

Director Processing


G.M. Finance

&accounts

G.M. Weave

G.M. Purchase

G.M. Export

Chief Engineer

G.M. Stitching

G.M. HRM

Legal Advisor

Director process

ing

Director spinning

Chief Executive

GM MARKETING

Incharge fair

price shop

Deputy Manager Quality

Assistant Manager

Deputy Manager Waste

Assistant manager

AM quality control

Assistant

manager sales

Assistant manager waste

DIRECTOR PROCESSING

.


Manager processing Manager folding

Dy. Manager processing printing

Dy. Manager processing dying

Dy. Manager folding

GM, SALES

Sr. Asst. manager

Asst. manager sales

Asst. manager sales

Sales officer Sales officer Sales officer

Sr. computer programmer

Asst. sales officer

Asst. sales officer

Computer programmer

PART SEVEN


Sr. GM (F & A)

REBATE DEP SALES TAX DEP

INCOME TAX DEP

Assistant manager rebate

AM sales tax Assistant manager tax

4 Tax officers3 sales tax officers

2 Rebate officers

Brief Description of Different DepartmentsIn company’s office there are followings types of departments.

Purchase Department

Export Department

Accounts& finance Department

M.I.S (Management Information System)

Before starting the discussion regarding the departments, some important documents, used in sales finance (sales tax, rebate) department.

Exporters Document:L.C: letter of credit (contract between buyer and seller) given by bank

Banker Document:Form E: for bank related to the amount inwards. ( foreign currency is converted into PKR)

Customs Document:Shipping bills. Actually are for the clearing agents. Who takes care for the IN or OUT of exported or imported stuff. And work for the company to get the payments released from National taxation department.

Shipping line:Bill of lending. This document is essential. its mandatory to be presented before releasing the containers from the ports


NOTE:exporter document is generated after getting L.C ( marketer gets order and gives to the exporter) exporter can get benefits by the government’s sales tax department.

1- sales tax return as refund2- rebate (duty drawback)3- R & D ( duty drawback of last year)

Purchase Department.

PurposeThe actual purpose of purchase department is to maintain the desirable level of stocks required at all the production units, main offices etc, so that working finance or ideal funds do not get freeze and stuck up in the form of undue huge purchases or a situation where shortage of stock or required raw material, stationary etc may arise, which may cause or hurt to disastrous. Mill should not stop due to non-availability of raw material or store and spares. The additional responsibilities of this department are to keep a check at following.Checking quantity of purchased goods.Checking rates of purchased goods.Checking quality of purchased goods.

ProcedureIn the first phase, requirement are collected as per need from all the departments. The demands then go to higher authorities to ensure the authenticity. They scrutinize that the goods, which are demanded, actually required.once approved. Department asks for different quotation from the selected suppliers. After making an analytical decision in this regard, purchase order is placed. Purchase order actually declares the terms and conditions of order and eventually deal between the parties. The supplier will send the goods followed with the delivery order.

When goods received the goods the purchase department will make a goods receipt note holding the name of goods and it quantity. The supplier will send the commercial invoice or sales tax invoice according to the product and finally purchase department will make a store purchase voucher, which provides the evidence of transaction.


Accounts Department

There are four sections, discussed in details,

Costing sectionPayroll sectionReceivable section Payable section

Account payable sectionMainly it deals with supplier, contractors, creditors, to whom payment is to b given by NISHAT mills limited.For this work A person assigned as assistant manager heads account payable section. Accounts officer and assistant account officer work under him. Before the payment is given to supplier or contractors, the followings are mandatory

Sales tax invoiceInward gate pass Good inspection noteDelivery challan

1. Sales tax invoice.Invoice is presented, which is usually composed of the amount of sales tax deducted etc. this invoice usually contain the following column.

Sr no quantity particulars amount rate of sales tax amount total

2. Inward gate pass


its an integral supporting part. When purchases are done, from outsiders, entry is recorded at their entry. Pass is issued by the concerned authorities. Account payable department requires a copy of inward gate pass. Most important thing to

NOTE:remember, that it deals only with the quantity. It has no concerned with quality. Inward gate pass no is checked by

1) Gate clerk2) Security officer3) Store auditor

3. Goods inspection note this department inspects the goods to know whether they are according to the asked specification. Then a document of good inspection note is prepared. Goods inspection note should be received within a day, a copy of purchase order is given to payable department, when goods are received the concerned department (issuing purchase order)

4. Preparation of checksOnce the invoices are received and checking their accuracy finally account payable department fills up the cheques. Chief controller of NISHAT mills limited signs the cheques. NISHAT mills limited have a flawless computerized system so items are identified and coded. Every party is allotted certain codes and entry is been made in, on spot when they take place.

Entries in books of accountsParty hands over the bill, when once its approved. Out of that, Two vouchers are prepared,

J.V (journal voucher) Expense account (debit) Amount Party account (credit) Amount

Expense debited due to incurrence of certain expense. Party is credited because payment is going to be made.

B.P.V (bank payment voucher)

Party account (debited) Amount Bank (credited) Amount Tax Amount


Tax is deducted. At source under the section 50 of the income tax ordinance 1979.

FUNCTIONS Basically the function of account department is to book a proper record of transaction and to maintain the accounts.

ProcedureAt first step account department records transaction by different type of vouchers as per nature of transaction. Vouchers are provided as evidences of transaction.

As I mentioned before, the books of NISHAT MILLS are computerized and ledgers are also prepared in computer, so vouchers are sent to computer operator for posting.Here a daily print out of all entries is being checked in order to check the accuracy and then posting made to respective ledger.


FINANCE DEPARTMENT

Purpose The basic purpose of finance department is to ensure the readiness of funds availability for production like major operations and specially better allocation of these funds.

Functions The most important duty or function as being the finance manager. That is to arrange different types of loan as per company’s requirement, for example:

Long-term loan Leasing Short-term loan

One of the important duties performed by this department of finance is to prepare loan proposals.

LOAN PROPOSAL

Nishat mills limited produce working capital or funds out from inner and outer parties.Inside parties are shareholders, where as outsiders are banks and various loan providing agencies.

Points to rememberSome points kept in mind before making a loan application are a must, and are given below


Loan amountDate of expiry Rate of interest (important consideration)Securities

Nishat mills limited in following forms offer the securities,

Pledge of cotton

Mostly or frequently offered security is cotton. Usually loan is obtained from bank after pledge of cotton. Bulk of cotton is purchased in the season so to avail the benefit of huge quantity.

Mortgage of factory premises

Factory premises are also mortgaged with bank. Sometimes buildings and factory machinery are mortgaged with bank.

Registered mortgage

In this type of mortgage, deed is registered in the register of ownership and further sale is not allowed. Court fee is paid in this type of mortgage, this is opted when client is new and his track record has not been established.

Personal guarantee of directors and chief executive

Personal guarantee of company chief executive Mrs. Naz Mansha is also offered. Bank before sanctioning loan to Nishat mills limited ask for certain type of guarantee by it directors. So directors give personal guarantee to the bank that its loan will be secured enough, they take the responsibility.

Management Information System

Management information system makes the financial analysis regarding the operation of business. By the calculation of different ratios and other procedures of analysis, they indicated the reasons if the company is not showing progress and also recommend the method by which the weakness of company can be


removed. They also make the forecast about the future and then suggest that how the company can make improvements in future.

If the company wants to start a new project it is MIS, which prepare its feasibility report.

EXPORT DEPARTMENT

Functions & ProcedureThis department is mainly responsible for the export of Yarn, grey cloth and processed fiber like apparel. Stitched clothes, and ready made items, discussed in part 1

This department is bound to maintain and to do the needful work for the preparation of all the legal requirements and essential documents involved in the export of yarn, grey cloth and processed fiber.

This department starts working from getting purchase order to deliver the shipment to the buyer. The export department performs 3 major functions,

SHIPMENT OF YARN, GREY CLOTH & PROCESSED FIBER.

After receiving packing list from shipping department, export departments starts its main functions. The export department prepares the some documents to ensure the timely shipment,The most commonly documents are:

Letter of credit (L\C)Bill of exchangeCommercial invoiceExport declaration form.Certificate of originPacking listCustoms invoice Textile declaration formInspection certificate


Shipping bill/bill of lodging/air way billManufacture’s certificateForm “E”

In some special cases, some other documents as and when required by the buyer are also prepared like;

Certificate of child laborCertificate of forced labor

Letter Of CreditThe import and export of goods throughout the world is now usually arranged by documentary letter of credit. The importer requests his bank to open LC in the favor of exporter. The bank in pursuance of that request issues LC is favor of exporter. The LC is a promise or guarantee by the bank to honor bill of exchange drawn by exporter, provided the conditions of letter of credit are fulfilled.

Definition

“Letter of credit is an undertaking by a bank to meet the drafts drawn by exporter”

“Letter of credit is the conditional undertaking on the request of the importer/buyer”

“A written undertaking by the bank of importer” i.e. issuing bank at the request of buyer or importer to make payments at sight or at

Parties of Letter Of Credit

Four parties are involved in the payment of the goods,

BuyerBuyer bankBeneficiaryAdvising bank.

Form E


E stands for export. When Nishat mills limited exports yarn or processed fiber, form E is taken from the bank. In which bank describes quantity and price of goods exported. Nishat mills limited obtain FORM E from Credit Agricol Indosuez, Citi Bank etc.

Packing list

It explains goods, and their respective quantity which are packaged. This packing list is sent to the shipping company.

Shipping bill/ bill of lading/ airway bill/ railway receipt.

When goods are exported by means of sea, five copies of bill of lading are prepared. and If the goods are sent by air, air way bill is prepared. When the goods are sent through railway, railway receipt is prepared.

Company carrying goods issues bill of lading. It describes nature of goods exported their value.

Date of shipment Date at which ship will reach the destination Shipping bill no M.R nos

It is mate receipt number. When captain of ship receives goods and place it in ship he issues a mate receipts numbers.

Commercial invoiceInvoice can be of following types;1. Cost and freight2. FOB (freight on board)If we deduct freight from cost and freight, we get FOB value. Cost and freight means this cost also covers the freight charges from port to importers godown. FOB value includes charges only up to port.

Shipping DocumentsAfter receiving these documents, the Shipping Documents must be submitted within three working days. .

The following documents are submitted which are the proof of shipment.

1. Invoice2. Bill of Lading3. E Form


4. DE Form “2” & Form ED-I

Invoice

Invoice indicates the particulars of contract, size of commodity, quantity, quality, price and packing.

Bill Of Lading: (B/L)

B/L Indicates the exporter’s name; notify party, quantity, and quality, and destination, port of issue and date of issue of exported items. The shipping company issues it.

E-FORM E- Form is submitted under foreign exchange regulation Act 1947.

DE FORMS 2 & FORM ED-IThis form indicates the bank name, demand loan No., type of commodity, contract L/C Nos. shipment date, amount of shipping goods, sales contract No., issue date, amount, date of obtaining finance and %age of commission.

EXPORT PROCEEDS REALIZATION CERTIFICATEIf amount is paid by own sources then after the amount is received the exporter has to send EPRC to SBP.


PREPARATION OF IMPORT DOCUMENTS

Performa Invoice / Indent /ContractShows applicant’s name, Export country to import country, payment mode by L/C (type) e.g. irrevocable & unrestricted L/C at sight,Shipment time e.g. within 2 months after receipt of L/C, Place of delivery e.g. C&F Karachi by vessel e.g. Validity until August 01, 2001, items, description, quantity, unit price, total amount in words and numbers

Covering LetterThis ensures and shows the detail and price of the imported items.

Application for Opening of Letter of CreditIn which request is made from bank to open L/C for the attached Performa invoices.

Form IApplication for permission under the Foreign Exchange Regulation Act, 1947 is made to purchase foreign exchange for payment of imports.

Appendix-BThis certificate is given to the bank for chemical export

Appendix-GThis certificate is given in addition to appendix-G for import of spare parts & machinery.

Applications and Agreement for Commercial Letter of CreditThis document is given by Bank, which includes;Type of letter of creditBeneficiary & amountApplicant & advising bankTransshipment/carriage doc


To be presented within 15-21 days after the date of issuance of the shipping document(s)

Insurance ArrangementsInsurance of goods are made against the damages. This amount consists of total amount of goods plus 10% cushion.

L/C Opening1) Application 2) Performa Invoice 3) Insurance Cover Note4) Form I5) Appendix-G.

Import Documents / L/C RetirementWhen L/C is reached to the bank then bank demands the amount of L/C from importer. L/C Retirement Doc. and B/LThese documents are given to the clearing agent for clearing the consignments. Then he requires the cheques of the amount of custom and other charges/duties. Then the required amount is to be sent for costing in the Costing Section to check the exemption.

Bill of EntryIn which every concerned party gives its remarks and stamped one copy and is sent to the SBP, one copy is sent to the custom department and the Company itself retains one copy.

L/C’S PARTICULARSL/C type, no. & AmountDate & PlaceFavoring partyApplicantSigned commercial invoices indicate the value not more than L/C’s value.Full set of clean “on Board” marine Bill(s) of ladingInsurance buyer’s care declaration of each and every shipment is to be advised to Insurance Co. A - Copy of insurance declaration to accompany the original documents.Packing list requirements


CLAIM FOR REBATE.

Rebate is actually a “duty draw back”. The duty which an importer pays to government for the product that is re exported after some process, then government pays back some of its part. This pay back of duty is called rebate.

Export Rebate DepartmentThe export rebate department is charged with the responsibility of drawing duty back. Government of Pakistan is providing relaxation/incentives for the export of textiles product, for example different rates are for different categories of export cloth and mentioned. These rates are subject to change and modifications

FunctionsFunction of export rebate department start with exporting cloth or cotton made items to abroad. if these items are included in that list on which duty can be withdrawn under the orders of federal government then export documentations department sends relevant Documents to the export rebate so that claim could be filed properly. Remember no rebate is claimed on cotton export.

Documents used in department In order to claim rebate following documents are sent to customs house,

Bill of lading Packing list Goods dispatch report Commercial invoice Bill of export Form E Bank credit advice OR export proceed realization certificate

Bank issues EPRC when payment is received from the importer bank. In this way LC is retired from. But when LC involves some span of time say it is usance LC


60 days after or 90 days, we may request ANNEXURE B, bank issues it when payment has not been received from the importer on the basis ANNERURE B claim for rebate can be made.Usually bank issues ANNEXURE A when payment is received from the importer bank on this basis claim for rebate could be filed. Since Nishat is large group it has a established track record, so bank feel no hesitation is issuing ANNEXURE B in favors of Nishat mills limited so that claim could be filled.

SR2 NUMBERWhen case is filed custom authorities issue SR2 number. Application for duty draw back is made U/S 21 and 37 of customs act 1969.

Issuance of chequesAfter verification of export transaction custom authorities accept the duty draw back case and according to rules issue cheques. Rates of duty draw back are different for different exported items. Cloth on which more processing is performed greater is the rate of duty drawback.


Some extra knowledge and Working of sales tax, rebate department in squeezed form:

REBATE:Rebate is calculated through two methods.

ManuallyThrough computer

In manual system. Original invoices and documents are required at the moment. Documents are sated up well before.

This includes original shipping bills.Commercial invoicesBill of ladingWhere bill of lading is of two types. One is ticketed or can b said as negotiable.And the other one is non-negotiable.

Commercial invoice is of exporterG.D or good declaration is for the custom departmentBank has a document named Form E.and EPRC (export proceed realization certificate) bill of lading is for the shipment departmentPacking list.

Now if we talk about the computerized way of calculating rebate. We would need a sales tax certificate. And its done by the exporter. This after wards is widrawn from government with the help of clearing agent.Note: when we get EPRC and then send to government after calculation. It get converted to SR2 form.well the system of rebate was manual before 2006. But after that era was


changed to IT stuff. Now when shipment is done. On spot the company has to fill the rebate document. It’s the requirement of government.

SALES TAX:sales tax which is paid. Is calculated through computed systems. And after that computed generated amounts are taken out. Which FBR sends to the company. Of different parties.With the help of all these items. Inventory stock statement is prepared. This can be explained through an equation.That isopening balance (from balance sheet) + purchases ( manufacturing for export and locals) – exports = sales tax payable amount.

Active tax payer Always purchase from the active tas payer because in near future

active tax payer will only be allowed to import and export Sales tax input credit/adjustment allowed only if purchases are made form

the active tax payerexpense for income tax will only be admissible if purchases are made from active tax payer

Only active tax payers will be able to participate with procurement tender Only active taxpayers will be able to operate as clearing agent, shipping

agent etc.

Note:Clearing agents are related to customs.Shipping agents are: couriers, carriers, banksInsurance companies etc


PART EIGHT


SWOT ANALYSIS

Now we shall conduct SWOT analysis for NISHAT mills limited.

Conducting an internal strategic-management audit is to come to some conclusion, that some internal as well external factors are stuck with NISHAT. This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business. And with some deep study, opertunities and threats to such kind of organization are presented below.

Strengths of NISHAT mills limited

Export-oriented organizations Highly skilled labor Talented marketing managers Qualified finance staff Professionalism in the employees Corporate culture Sound policies Strong group Successful history Computer information system Availability of raw material at cheaper rate Products are technologically competitive Innovative products Customer orientation Efficient production system International standards for employee’s welfare

Weakness of NISHAT mills limited

Rely on foreign customers


Dual data organization, more time taking High cost of production ·Centralized decision making ·Weak image in the international market ·Small international market share ·Less promotional activities ·Lack of benefits and rewards for the employees

These are only few weaknesses in NISHAT textiles, over and all it is a successful organization.

Key opportunities available to Nishat mills

In 2005 when all quota barriers were lifted (quota free exports) Increase demand of Pakistan cotton-made products Growth through advertisement To use information technology Expand product lines Capture new market segments around the world Reduce the cost by proper utilization of resources Hire more well-educated and experienced person

Key threats to NISHAT textiles

Intensive competition WTO Child labor propaganda by various NGOs Political instability in Pakistan Mostly operating in overseas market New Entry of competitors Buyer needs demands changes Political instability Changed of government policies Globally Economic instability


PART NINE


MARKETING & COMPETETIVE STRATEGY

Competitive strategy

The past year has been tough for the textile industry as competition is steadily and margin of profits is becoming smaller day-by-day. Our competitors from Asia have come up in a big way with lower prices resulting from lower overhead, cheaper and better raw materials and machinery.

Countries like China, Indonesia, India and Bangladesh played an active role in the fabric market. Improvement in quality and production capability was the main area of concentration.

Market for Yarns and Grey fabrics was diversified to increase the customer base and reduce dependency on the Far East. In this effort business with Malaysia, Korea, Taiwan, UK and South America was initiated in case of Yarns.

A new spinning unit of 21,672 spinning has also commenced, which caters to the weaving units in Sheikhupura.

In case of Grey Fabric market business was initiated in South Africa, North America, Japan, Italy, France, and Sri Lanka etc. Product range was also increased to cater to the differing needs of the buyers. Fancy and special items like Dobby Designs, Bedford Cords, and Cavairy Twills and stretch fabrics were developed which are being sold at premium prices.

NML has constantly updated machinery, replacing old machines with new ones upgrading the existing set-up, leading to better efficiencies and quality products.

NISHAT has established its name in new markets be creating specialized fabrics, designs and also by providing our customers with efficient service and excellent quality.


Leaving behind the traditional way of doing business and in our journey towards excellent it has consistently expanded its buyer base and explored the different markets around the world.

Keeping in view demand of the World market, NISHAT Mills Ltd pursued its strategy of value addition and reducing the dependency on Grey Fabrics and Grey Yarn.

Having the foresight to assess that in coming year’s value addition will be the thing of the future, NISHAT Mills Limited worked towards the achievement of its goal of future increasing its capability in value addition.

The export of processed fabric and made-Ups has shown market improvement as compared to last year. In Europe, NISHAT has made the most growth in the year 1999.

It has placed us successfully in the middle to upper end of the market. Our strength in Europe is the curtain division.

This included yarn dyed dobbies, engineered confections, different finishes and embellished products. The plan is to continue with this winning strategy and at the same time we are trying to find new clients in the high end.

We are also exploring business opportunities in countries like Spain and France where NISHAT has very little business at the moment.

North America is the star market for Nishat; it’s a new market for it after breaking up the exclusive arrangement with our previous sale set-up. The quota is coming down in 2005 and we have started to prepare for it internally as well as for the external environment. Bedding is the bulk of the home textile business.

NISHAT is in the process of updating its machinery to cater the needs of the wider width fabric requirement for USA bedding business. Nishat is also taking up the social accountability issues very seriously, which are so dear to the American consumers. Lot of big brand US companies have visited us and are discussing the possibilities of a joint venture.

The opportunities are limitless, we have to review and analyze them very thoroughly to associates with the right people in the long run. In the short term we are building a small amount of quota, which will give us recognition as a bedding supplier.

NISHAT is very strong in non-quota categories like curtain and table linen. These categories are best served with new product development (NPD). NISHAT will coordinate the effort for NPD by all markets to optimize results. NISHAT has achieved the highest sales in 1999-2002 for North America market.


On top NISHAT has developed more direct and closer relationship with our end customers. Oceanic has been our most lucrative and mature marker. In business terms it is our “cash cow” market.

Primarily due to being a non-quota market it had no real limitations in this market. Despite economic problems in that region, it has maintained our sales figures in the year under review. This market is a good design source for other markets, which is helping us to maintain our print volumes.

Middle East market is composed of South Africa and the new emerging markets like the UAE, Egypt, Saudi Arabia, and Jordan etc. NISHAT has dedicated new staff with fresh energy for the emerging market.

They have successfully broken the ground and we have very strong faith that these markets will give us good volumes in the near future. We are also targeting printed apparel business for the first time. The latest addition is the most ambitious Apparel Dyeing plant setup near Lahore, which has started its production.

The effectiveness and productivity of this plant will be further enhanced, as NISHAT Mills Ltd moves towards becoming a more vertically integrated organization.

Our dyed fabric has already established its name in the market. It is being exported to some of the leading brands of the world.

NISHAT has increasing its profitability by working efficiently, procuring better raw material and most importantly kept a very close association with its costumers.

It visits its business partners frequently and provides them with the best service possible. All of the above mentioned points led to strengthened relationship with its business partners making it very difficult for its competition to penetrate into its market share.

NISHAT has provided its staff with better working environment and facilities, which enhanced efficiency and out put.

At NISHAT, it is prospering due to our professional commitment toward excellence and giving the best results at all times and against all odds. Its marketing and production teams co-ordinance at all times and it focus remains on maintaining its position as the market leader in the textile sector of Pakistan.


Marketing strategies

Marketing strategies includes,

Meeting with buyersCompany profileBuyer visitsFree sampleContact with agentsR& D for marketingThrough InternetYellow pagesAPTMA buyer dictionaryIntranet

1. Meeting with buyers

Marketing manager meets with buyer, introducing Nishat products to prospective buyer. This strategy helps manager to understand the needs and requirements of buyers as well as marketing people are aware of current trends of market. Through negotiation you win the sympathy of buyers and business for the company.

2. Company Profile

Nishat mills limited has also published it profile introducing its key products to customer. This booklet is send to various agencies dealing in purchase of cotton, fabrics and made-ups. This strategy helps to introduce the company in out side world. Various broachers are also published.

3. Buyers Visit

Sometimes buyer’s visits are arranged to familiarize them with products, Nishat is offering for their valuable customers. Theses visits are crucial for the growth of the company because they help in introducing products to others and also win a lot of business for the company. Nishat marketing department frequently invites buyer to show them excellent production process and quality productions.


4. Free SamplesThis strategy is widely used to boost up exports. Free samples are delivered to customers to show how best our products are? Free sample is useful techniques in winning the loyalty of customers. When new product is made, free samples are sent to loyal customer to show firms concern for them. Customer’s satisfaction is a important aspect because customer is a person who gives meaning to company.

5. Contacts with Agents

Nishat mill limited is an export-oriented organization. More that 85% of its sales constitutes exports. So to capitalize foreign market, Nishat has long list of its agents working in foreign market. This strategy is useful when company is not able to communicate with buyers; it can hire services of agents who for commission introduce their products in market. Relationships with distributors or agents are recognized as critical success factors so lot of importance is paid to agents who are valuable asset of firm.

6. R & D for MarketingResearch and development is key to success. Some organizations feel that they cannot survive without R & D. Nishat is one of these organizations. Organizations finances research and development projects using either % age of sales of method or financing as many projects as possible.

Following are some research and development techniques

a. Through InternetNishat has recognized the importance of information technology in business field and very quick to capitalize this opportunity. It has launched its website which tells buyers about Nishat products.

b. APTAMA buyer’s dictionaryAll Pakistan textile mills association publishes a directory, which includes prospective buyers. This dictionary is published regularly. Marketing department carefully analyses it and find buyers for its quality products.

c. IntranetThrough computers, products are introduced and customers are accessed.

4 Ps of Nishat Mills Limited


ProductPromotionPricePlace

1. Product Product includes product line,

Product LineBEDDINGSheet setsQuilt cover setsBed spreadsComfortersBed skirtsOxford pillow casesBlanket coversSleeping bagsCurtains & AccessoriesEmbroidered curtainsPencil pleat tape curtainsPinch pleat lined & unlined curtainsTab top & rod pocket curtainsAssorted pelmets and window dressingsOxford cushion coversFrilled and piped cushion coversFrilled, piped and pleated tie backs

Table, Furniture & Kitchen AccessoriesTea cozyTable matsTable cloth and napkinsApronsKitchen glovesPot holdersChair pads with circle tacksCouch cove

2. PromotionNISHAT mills limited run advertising and promotion campaign on large scale. The promotion of products can be classified into two ways,

Direct MarketingIndirect Marketing


Direct MarketingPromotional activities include presentations, free samples.(a) Presentations These are given to customer in a hotel at Karachi.

(b) Free SamplesFree samples are also provided so that customer may get an idea about the quality and excellence of Nishat mills limited.(c) Agents Direct marketing is done through agents. In each country a display center has been established names as CMD Company (concept marketing design). In Germany, products of Nishat mills limited are displayed in an exhibition (Frankfurt).(d) Territorial Manager ToursTerritorial manager tours are also arranged. These tours are arranged to find new buyers in foreign market.Indirect marketing

(a) Chain stores

Companies in foreign countries make product from Nishat mills limited but sell them on their own name. This is another way to increase fir sales by increasing the number of chain stores.Territorial managers are required to submit their reports at the end of their tours.

3. Pricing

Before setting prices of products various elements are kept into mind.Customer is of utmost important. If customer is old, his track record is good and enjoys a favorable repute so profit margin may be reduced. Prices area determined on cost basis by adding certain percentage of profit. This is highly sensitive area. In 2005 when all quota barriers would be lifted, so pricing would become a crucial factor.

4. PlaceAs mentioned earlier, Nishat mills limited has its agents in each exporting country. Place includes, channels from producers to final consumers.

Placement of OrderSometime buyer asks for sample, when it is accepted the buyer places the order. Marketing department issues sales contract that contains the below mentioned details. After signing the contract the buyer opens L/C in the favor of the seller, after the opening of the L/C the marketing department plans for the production and arranges the shipment.Now we shall discuss contents of sales contract in details,


Specification of goodsQuantityPriceContract amount

QuantityIn the sales contract, the quantity is written in yards. Different kinds of fabrics are produced so quantity is expressed sometimes in yards and sometime in meters.

PriceNow comes very important content of sales contract i.e. price. In case of foreign buyer price is normally written is US dollar. It depends on the negotiation between buyer and seller and if they agree that price will be shown on US dollar, it is US dollar.Unit price is also written. It is very important to mention whether it is FOB value or C&F

Shipment DetailsShipment details address basic questions, whether partial shipment is allowed or not? Transshipment is allowed or not? In how many days, ship will reach buyers country?

Terms & ConditionsThe buyers and sellers decide terms of shipment mutually. Matters regarding insurance, freight, carriage, value of goods exported, packing charges, certificate of origin and any additional conditions are set by importers and exporter.

Coordination between production planning & marketing department

Coordination between production planning & marketing department is essential. Nishat was the pioneer in establishing production-planning department. The production staff carries out all the orders that are obtained by the marketing personnel. In fact there is very close relationship between production planning and marketing department.

In production planning following things are done;

More detailed Marketing Strategies Textiles industry faced many challenges during the year 1998-99 throughout the world. Inflation and decline in purchasing power resulted in decline in demand, which increased the competition to a greater extent. In spite of the above facts


Director process

ing

Director spinning

Nishat mills ltd, had been successful in maintaining its market position and growth.

Diversification StrategyMarket yarn is diversified to increase the customer base. Under this, diversification program, business with Malaysia, Korea, Taiwan and UK have been initiated. Product range is also increased to cater for the different needs of increased number of buyers production volume is also increased by concentrating on coarse counts with a result of increase in volume from 90-95 containers per month to around 115 containers month.

Market Development In order to reduce their dependence on a few markets especially FAR EAST, new markets were developed for tray cloth. This diversification not only reduced their dependence on Hong Kong but also gave those better profit margins at times when Hong Kong market was very depressed. Under this market diversification, they started business with SOUTH AFRICA, AUSTRALAS, TAIWAN, and SRILANKA, ITALY etc.

Contacting Old Customers The business with some of the old buyers in Europe was also revived during this period after intensive efforts. This revival gave both good volumes and better profit margins.

New And Innovative Product DevelopmentThey have developed fancy and special items like Cavalry Twills, Bedford Cords and dobby items, which are being sold at premium prices. They keep on modernizing their equipment in order to maintain the high quality of their products.

More Quality ConsciousWith the increase of competition, they have become more quality conscious. In order to achieve their quality standards, they are maintaining better quality by getting yarn from pre-approved sources, tighter fabrics inspection in folding and providing service to their customers.


PART TEN


Financial Analysis of the Company

NISHAT PVT. LIMITEDBALANCE SHEETFOR THE YEAR ENDED 2009 2009 2008 2007 2006 2005EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Share Capital 1,597,857,0

00 1,597,857,0

00 1,452,597,0

00 1,452,597,0

00 1,597,857

,000

Reserves 23,549,323,0

00 28,566,041,0

00 19,659,812,0

00 11,353,517,0

00 28,566,041,

000

Accumulated profit

-

-

-

-

-

Total Equity 25,147,180,00

0 30,163,898,00

0 21,112,409,00

0 12,806,114,00

0 30,163,898,0

00

SHAREHOLDERS EQUITYNON CURRENT LIABILITIES

Loan term finances 1,047,794,0

00 1,773,820,0

00 2,982,353,0

00 2,796,512,0

00 1,773,820

,000

liabilities against assets subject to finance lease - -

33,031,000

61,643,000

-

1,047,794,000

1,773,820,000

3,015,384,000

2,858,155,000

1,773,820,000

CURRENT LIABILITIESTrade and other payables

1,141,227,000

926,593,000

960,436,000

812,216,000

926,593,000

Interest/ mark up on loans

201,847,000

131,744,000

151,236,000

88,449,000

131,744,000

short term borrowings

9,175,518,000

5,018,664,000

4,315,708,000

4,284,815,000

5,018,664,000

Current portion of long term liabilities

926,025,000

1,341,565,000

1,342,771,000

711,164,000

1,341,565,000

Provision for income tax

276,988,000

230,807,000

281,382,000

356,689,000

230,807,000

11,721,605,000

7,649,373,000

7,051,533,000

6,253,333,000

7,649,373,000

CONTIGENCY - - - - -


AND COMMETMENTS

TOTAL EQUITY AND LIABILITIES

37,916,579,000

39,587,091,000

31,179,326,000

21,917,602,000

39,587,091,000

ASSETS 2009 2008 2007 2006 2005

NON-CURRENT ASSETSProperty, Plant and Equipment

10,647,310,000 10,586,159,0

00 10,611,353,0

00 9,151,096,0

00 2,429,954

,944

Capital Work in progress

13,321,088,000 15,672,980,0

00 10,793,026,0

00 5,003,177,0

00 57,60

8,750

Loan term loans-secured and deposits

8,122,000

9,523,000

6,377,000

4,890,000

Loan term loans-secured and deposits

10,541,000

9,342,000

10,130,000

12,022,000

23,820,007

23,987,061,000

26,278,004,000

21,420,886,000

14,171,185,000

2,511,383,701

CURRENT ASSETSstores, spares parts and loose tools

490,229,000

422,428,000

471,520,000

424,827,000

1,249,572,742

stock in trade 4,103,648,0

00 3,106,436,0

00 3,003,174,0

00 2,897,392,0

00

Trade Debts 1,329,027,0

00 831,653,

000 1,026,884,0

00 877,358,

000 1,150,579

,738

Short term investments

7,129,154,000

8,118,459,000

4,350,146,000

2,173,530,000

109,138,820

loans and advances

403,295,000

411,270,000

418,794,000

424,533,000

245,255,091

Short term deposit and prepayments

30,400,000

26,395,000

30,525,000

39,180,000

13,497,444

others receivables 370,013,

000 322,839,

000 407,147,

000 388,598,

000

-

Cash and bank balances

73,752,000

69,607,000

50,250,000

520,999,000

56,528,131

13,929,518,000

13,309,087,000

9,758,440,000

7,746,417,000

2,824,571,966

TOTAL ASSETS 37,916,57

9,000 39,587,09

1,000 31,179,32

6,000 21,917,60

2,000 5,335,9

55,667


NISHAT PVT. LIMITEDPROFIT & LOSS A/CFOR THE YEAR ENDED 2009

2009 2008 2007 2006 2005SALES

COST OF SALES 19,267,6

33,000 17,180,1

92,000 16,417,35

8,000 11,374,63

0,000 7,461,

055,757 (16,298,85

7,000) (14,335,25

4,000) (13,701,62

6,000) (9,239,73

1,000) 7,091,

114,328 GROSS PROFIT

2,968,776,000

2,844,938,000

2,715,732,000

2,134,899,000

14,552,170,085

DISTRIBUTION COST ADMINISTRATIVE EXPENSES

(961,711,000)

(928,778,000)

(663,671,000)

(510,246,000)

-

OTHER OPERATING

(398,757,000)

(320,202,000)

(264,807,000)

(175,040,000)

54,689,456

OTHER OPERATING INCOME

(110,781,000)

(91,758,000)

(78,689,000)

(70,978,000)

27,986,950

5,806,873,000

671,275,000

277,961,000

621,569,000

111,644,873

4,335,624,000

(669,463,000)

(729,206,000)

(134,695,000)

194,321,279

OPERATING PROFIT

7,304,400,000

2,175,475,000

1,986,526,000

2,000,204,000

14,746,491,364

FINANCE COSTshare of profit in associated companies

(907,432,000)

(819,267,000)

(755,054,000)

(407,696,000)

127,260,241

-

-

527,394,000

440,846,000

13,544,903

(907,432,000)

(819,267,000)

(227,660,000)

33,150,000

140,805,144

PROFIT BEFORE TAXATION 6,396,96

8,000 1,356,20

8,000 1,758,86

6,000 2,033,35

4,000 14,887,2

96,508

TAXATION (258,0

00,000) (145,0

00,000) (126,

000,000) (166,

000,000) 8

5,046,149 PROFIT AFTER TAXATION

6,138,968,000

1,211,208,000

1,632,866,000

1,867,354,000

14,972,342,657


1. RATIO ANALYSIS

2. ADVANTAGES OF RATIO ANALYSIS

3. LIMITATION OF RATIO ANALYSIS

4. TYPES OF RATIO ANALYSIS

I. LIQUIDITY RATIO

II. TURNOVER RATIO

III. PROFITABILITY RATIO

IV. LEVERAGE RATIO

RATIO ANALYSIS

The term "accounting ratios" is used to describe significant relationship

between figures shown on a balance sheet, in a profit and loss account, in a

budgetary control system or in any other part of accounting organization.

Accounting ratios thus shows the relationship between accounting data.

Ratio analysis is very important while measuring the performance of the

business. These ratios are carried out from the Income statement and balance

sheet. Many parties including management, investors and Government are

interested in these ratios. The purpose of analysis is to measure the performance

of the company and financial health of the organization.

Advantages of Ratios Analysis

Ratio analysis is an important and age-old technique of financial analysis. The

following are some of the advantages of ratio analysis:

Simplifies financial statements:


It simplifies the comprehension of financial statements. Ratios tell the whole

story of changes in the financial condition of the business

Facilitates inter-firm comparison:

It provides data for inter-firm comparison. Ratios highlight the factors

associated with successful and unsuccessful firm. They also reveal strong firms

and weak firms, overvalued and undervalued firms.

Helps in planning:

It helps in planning and forecasting. Ratios can assist management, in its

basic functions of forecasting for Planning, co-ordination, control and

communications.

Makes inter-firm comparison possible:

Ratios analysis also makes possible comparison of the performance of

different divisions of the firm. The ratios are helpful in deciding about their

efficiency or otherwise in the past and likely performance in the future.

Help in investment decisions:

It helps in investment decisions in the case of investors and lending decisions

in the case of bankers etc.

Limitations of Ratios Analysis

The ratios analysis is one of the most powerful tools of financial management.

Though ratios are simple to calculate and easy to understand, they suffer from

serious limitations.


Limitations of financial statements: Ratios are based only on the information

which has been recorded in the financial statements. Financial statements

themselves are subject to several limitations. Thus ratios derived, there from, are

also subject to those limitations. For example; non-financial changes though

important for the business are not relevant by the financial statements. Financial

statements are affected to a very great extent by accounting conventions and

concepts. Personal judgment plays a great part in determining the figures for

financial statements.

Comparative study required: Ratios are useful in judging the efficiency of the

business only when they are compared with past results of the business.

However, such a comparison only provide glimpse of the past performance and

forecasts for future may not prove correct since several other factors like market

conditions, management policies, etc. may affect the future operations.

Ratios alone are not adequate. Ratios are only indicators, they cannot be

taken as final regarding good or bad financial position of the business. Other

things have also to be seen.

Problems of price level changes: A change in price level can affect the validity

of ratios are calculated for different time periods. In such a case the ratio analysis

may not clearly indicate the trend in solvency and profitability of the company.

The financial statements, therefore, be adjusted keeping in view the price level

changes if a meaningful comparison is to be made through accounting ratios.

Lack of adequate standard: No fixed standard can be laid down for ideal

ratios. There are no well accepted standards or rule of thumb for all ratios which

can be accepted as norm. It renders interpretation of the ratios difficult.

Limited use of single ratios: A single ratio, usually, does not convey much of a

sense. To make a better interpretation, a number of ratios have to be calculated

which is likely to confuse the analyst than help him in making any good decision.


Personal bias: Ratios are only means of financial analysis and not an end in

itself. Ratios have to interpret and different people may interpret the same ratio in

different way.

Incomparable: Not only industries differ in their nature, but also the firms of

the similar business widely differ in their size and accounting procedures etc. It

makes comparison of ratios difficult and misleading.

Ratio Analysis

Ratio analysis involves the methods of calculating and interpreting financial

ratios to access the firm’s performance and status. The basic inputs to ratio

analysis and firm’s income statement and balance sheet for the periods to be

examined.

TYPES OF RATIO ANALYSIS

Two types of Ratio Analysis are generally carried out,

1. Cross Sectional Approach, in this approach, the effectiveness of business

is compared with the competitors business of the same period.

2. Most companies use the Time Series Analysis in which the performance

of company over a period is measured.


Ratio Analysis categories:

A) Liquidity

B) Turnover

C) Profitability

D) Leverage

LIQUIDITY RATIOS:

Liquidity ratios are the ratios for testing short term solvency or financial position of a business. These are designed to test the ability of the business to meet its short term obligation promptly. A class of financial metrics that is used to determine a company's ability to pay off its short-terms debts obligations. Generally, the higher the value of the ratio, the larger the margin of safety that the company possesses to cover short-term debts

Current Ratio:

Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities.

Limitations of Current Ratio:This ratio is measure of liquidity and should be used very carefully because it

suffers from many limitations. It is, therefore, suggested that it should not be used as the sole index of short term solvency

1. It is crude ratio because it measure only the quantity and not the quality of the current assets.


2. Even if the ratio is favorable, the firm may be in financial trouble, because of more stock and work in process which is not easily convertible into cash, and, therefore firm may have less cash to pay off current liabilities.

3. Valuation of current assets and window dressing is another problem. This ratio can be very easily manipulated by overvaluing the current assets. An equal increase in both current assets and current liabilities would decrease the ratio and similarly equal decrease in current assets and current liabilities would increase current ratio.

current ratio current assets/current liabilitiesyear 2009 2008 2007 2006 2005

Nishat 1.19

1.74

1.38 1.24 0.37

Liquidity or Acid Test or Quick Ratio:

Liquid ratio is also termed as "Liquidity Ratio”,” Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due

quick ratio(current assets-stock)/current liabilities

year 2009 2008 2007 2006 2005

Nishat 0.84 1.33 0.96

0.78

0.37

Turnover/ Activity ratios:

Activity ratios are measures of how well assets are used. Activity ratios -- which are, for the most part, turnover ratios -- can be used to evaluate the benefits produced by specific assets, such as inventory or accounts receivable. Or they can be use to evaluate the benefits produced by all a company's assets collectively.

These measures help us gauge how effectively the company is at putting its investment to work. A company will invest in assets – e.g., inventory or plant and


equipment – and then use these assets to generate revenues. The greater the turnover, the more effectively the company is at producing a benefit from its investment in assets

Inventory days.

The number of day’s inventory is also known as average inventory period and inventory holding period. A high number of days inventory indicates that their is a lack of demand for the product being sold. A low days inventory ratio (inventory holding period) may indicate that the company is not keeping enough stock on hand to meet demands. The number of days inventory and inventory turnover ratios are included in the financial statement ratio analysis spreadsheets highlighted in the left column, which provide formulas, definitions, calculation, charts and explanations of each ratio.

Inventory Days Inventory Days = Inventory / Cost of Sales*365

Year 2009 2008 2007 2006 2005

Nishat 91.90 79.10 80.00

114.46

-

Debtors Turnover Ratio or Receivables Turnover Ratio:

Debtor’s turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

Debtor's day Trade debtors/Credit sales*365year 2009 2008 2007 2006 2005

Nishat 25.18

17.67

22.83

28.15

56.29

Creditors / Accounts Payable Turnover Ratio

This ratio is similar to the debtor’s turnover ratio. It compares creditors with the total credit purchases. It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. Same as debtor’s turnover ratio, creditor’s turnover ratio can be calculated in two forms, creditors’ turnover ratio and average payment period.


Creditors daysTrade Creditors/Credit Sales*365

year 2009 2008 2007 2006 2005

Nishat 21.62

19.69

21.35

26.06

45.33

Total Assets Turnover Ratio.

The total assets turnover ratio measures the use of all assets in terms of sales, by comparing sales with net total assets. This interactive tutorial walks you through the calculations as well as where on the financial statements to find the numbers.

FormulaSales/ Total Assets

year 2009 2008 2007 2006 2005

Nishat 0.51

0.43

0.53

0.52

1.40

Fixed Assets Turnover Ratio:

Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assetsFormula Cost of sales / Fixed Assetsyear 2009 2008 2007 2006 2005

Nishat 1.53

1.35

1.29

1.01

2.92

Profitability Ratios:

Profitability ratios (also referred to as profit margin ratios) compare components of income with sales. They give us an idea of what makes up a company's income and are usually expressed as a portion of each dollar of sales. The profit margin ratios we discuss here differ only by the numerator. It's in the numerator that we reflect and thus evaluate performance for different aspects of the business: The gross profit margin is the ratio of gross income or profit to


sales. This ratio indicates how much of every dollar of sales is left after costs of goods sold.

Gross Profit (GP) Ratio:

Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales.

Formula Gross profit/Sales*100year 2009 2008 2007 2006 2005

Nishat 15.41

16.56

16.54

18.77

4.96

Operating Profit Ratio:

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. It measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales.

Formula Operating Profit Margin = Operating profit /Sale*100year 2009 2008 2007 2006 2005

Nishat 37.91

12.66

12.10

17.58

7.56

Net Profit/ (Loss) after Tax:

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage

FormulaNet profit before tax/Sales*100

year 2009 2008 2007 2006 2005

Nishat 33.20

7.89

10.71

17.88

9.45


Return on Assets:

Where asset turnover tells an investor the total sales for each $1 of assets, return on assets [or ROA for short] tells an investor how much profit a company generated for each $1 in assets. The return on assets figure is also a sure-fire way to gauge the asset intensity of a business. Companies such as telecommunication providers, car manufacturers, and railroads are very asset-intensive, meaning they require big, expensive machinery or equipment to generate a profit. Advertising agencies and software companies, on the other hand, are generally very asset-light (in the case of a software companies, once a program has been developed, employees simply copy it to a five-cent disk, throw an instruction manual in the box, and mail it out to stores).

FormulaNet Income / Total Assets*100

year 2009 2008 2007 2006 2005

Nishat 16.19

3.06

5.24

8.52

14.81

Return on Capital Employed (ROCE) Ratio:

Capital employed and operating profits are the main items. Capital employed may be defined in a number of ways. However, two widely accepted definitions are "gross capital employed" and "net capital employed". Gross capital employed usually means the total assets, fixed as well as current, used in business, while net capital employed refers to total assets minus liabilities. On the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and loss account balance), debentures and long term loans.

FormulaProfit before interest and taxation / Capital Employed *100

year 2009 2008 2007 2006 2005

Nishat 24.42

4.25

7.29

12.99

(30.48)

Return on Equity Capital (ROE) Ratio:

In real sense, ordinarily shareholders are the real owners of the company. They assume the highest risk in the company. (Preference share holders have a


preference over ordinary shareholders in the payment of dividend as well as capital. Preference share holders get a fixed rate of dividend irrespective of the quantum of profits of the company). The rate of dividends varies with the availability of profits in case of ordinary shares only. Thus ordinary shareholders are more interested in the profitability of a company and the performance of a company should be judged on the basis of return on equity capital of the company. Return on equity capital which is the relationship between profits of a company and its equity, can be calculated as follows.

Equity share capital should be the total called-up value of equity shares. As the profit used for the calculations are the final profits available to equity shareholders as dividend, therefore the preference dividend and taxes are deducted in order to arrive at such profits.

Formula[(Net profit after tax − Preference dividend) / Equity

share capital] × 100year 2009 2008 2007 2006 2005

Nishat 24.41

4.02

7.73

14.58

2.62

LEVERAGES RATIOS:

A company can finance its assets either with equity or debt. Financing through debt involves risk because debt legally obligates the company to pay interest and to repay the principal as promised. Equity financing does not obligate the company to pay anything -- dividends are paid at the discretion of the board of directors. There is always some risk, which we refer to as business risk, inherent in any operating segment of a business. But how a company chooses to finance its operations -- the particular mix of debt and equity -- may add financial risk on top of business risk Financial risk is the extent that debt financing is used relative to equity. Financial leverage ratios are used to assess how much financial risk the company has taken on. There

are two types of financial leverage ratios: component percentages and coverage ratios. Component percentages compare a company's debt with either its total capital (debt plus equity) or its equity capital. Coverage ratios reflect a company's ability to satisfy fixed obligations, such as interest, principal repayment, or lease payments.

Debt to Equity Ratio:

Debt-to-Equity ratio indicates the relationship between the external equities or outsiders funds and the internal equities or shareholders funds. It is also known


as external internal equity ratio. It is determined to ascertain soundness of the long term financial policies of the company.

FormulaTotal Long Term Debts / Shareholders Funds

year 2009 2008 2007 2006 2005

Nishat 0.04

0.06

0.14

0.22

0.06

Debt Service Ratio or Interest Coverage Ratio:

Interest coverage ratio is also known as debt service ratio or debt service coverage ratio. This ratio relates the fixed interest charges to the income earned by the business. It indicates whether the business has earned sufficient profits to pay periodically the interest charges.

FormulaNet Profit Before Interest and Tax / Fixed Interest Charges

year 2009 2008 2007 2006 2005

Nishat 7.05 1.66

2.33

4.99

5.54

.

Investments / Share Holder Ratios:

Relationship of gains from investments (including realized capital gains) resulting from insurance operations to earned premiums.

Earnings Per Share (EPS) Ratio:

Earnings per share ratio (EPS Ratio) are a small variation of return on equity capital ratio and are calculated by dividing the net profit after taxes less preference dividend by the total number of equity shares.Formula Profit after tax/No. of sharesyear 2009 2008 2007 2006 2005

Nishat 38.42 7.58

10.22

12.86

5.17


Earnings Yield.

The earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.

FormulaEarning Per Share / Market Price Per Share * 100

year 2009 2008 2007 2006 2005

Nishat 44.69

5.87

9.75

16.92

9.79

Market Value of Shareyear 2009 2008 2007 2006 2005

Nishat 85.97

129.20 104.80

76.00

52.80

PRICE EARNING RATIO (P/E RATIO):

Price earning ratio (P/E ratio) is the ratio between market price per equity share and earning per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether or not to buy shares in a particular company.

Formula Market price per equity share / Earnings per share

year 2009 2008 2007 2006 2005

Nishat 2.24

17.04

10.25

5.91

10.21


PART ELEVEN

Learning as internee

It was an exemplary experience that I have performed with sincere devotion and commitment. I have an interest in industry that’s because industry especially Textile industry is the back bone of the national economy. But one thing I want to


share that it was not game of finger tips, that it looks like, it was tough and had complications in its process but the overall it was nice and great experience. My earnings and learning I am going to share regarding my internship in sales tax and rebate department.· First I met Mr.Illiyas the P.A of GM A & F he introduced me to the floor, all 5-6 people, afterwards he asked Mr. Rizwan to take me under his training. He is the sales tax officer; he started with some brief introduction about the NISHAT group. And then he came to introduce some

New products in NML.Product lines, Different business.Rules and regulationsTimings

He told me about the actual work of the department, I discussed about the accounts and finance practices going on in the international Textile market. I learnt that every problem is solved with a systematic process like from the root of the problem.I also performed some task in the rebate department like how to calculate the rebate amount, how to follow the parties, whose invoices are missing. What is the procedure of purchasing, how to keep the records of transactions, how to file a return.I tried to learn about the total procedure and required of the documents and dealing coordinating with tax department, record room, all the record is saved.During my internship I learnt about the disciplines to maintain in such an organization, then I was a part of internal audit. Went through cross checking, monitoring, ticking, feeding, rechecking, informing. Reporting of short data. Gathered knowledge about important and necessary document for exports and other operations.I learnt about the minimum pay scale. The ways of training. And what are the procedures of the NISHAT about HR matters. The success ritual, history tellers,

Duties My duties kept on changing. I worked in four phases.1st was to do with the pervious years works. That was related to the internal audit. The payments of sales tax were blocked. 2ndly I was to work with a sales tax officer with whom I was assigned to calculate the sales tax amount through the formulae


3rdly I was the most experienced internee, so I was to ensure what the new comers are doing, and was to work for the preparation of missing invoices, and to prepare a report of the suppliers to whom the company has to peruse.4thly I was to work on computer. That was my final week. And got the experience regarding feedings and all.

New Knowledge Acquired

Had knowledge about the real time work. Came to know that it’s not that easy to sustain and maintain dignity in job. Had knowledge about the practical work of the subject I have studied up till now regarding commerce.

Problems Encountered

Problem were not really so immense cause of my believe in hard work and instant adaptability. And the cooperative attitude of 70 % of the staff.

How Experience Impacts your Career

Top of all, I came to know how to apply for any job, I went through interviews, had experience to cope up with already working people being a fresh candidate. Knowledge about on job Politics, gained confidence to communicate, participate anticipate, how to be proactive. How to over come the management dilemma. How to take good decision at an appropriate time, and all the experiences have made impressive impact at my career, which was not really exposed to the real time world.

Conclusion


NISHAT Mills Limited is one of the leading groups in Pakistan. The system, the management style, the policies & centralized decision making environment is really remarkable. This report is basically an attempt to identify the areas which need to be improved.In this era of technology, the “Information” is the key to success in the business. This means that the successful businessman will be who will have the right information at the right time. This comment leads to the conclusion that the Information Sharing Process should really be improved. The overall analysis is indicating that the company’s progress has mainly attained through dedication of employees. The effectiveness of its management, their willingness to take advantage of opportunities and face challenges of changing economic picture, this all contributes to the very much improved and sound position of company. This is really appreciable for the devotion and hard work of all the employees of the company Recommendations for Improvements are:

· At present facility of bonus is given only to production staff but such incentives should also be given to Head office Staff.· Special incentives should also be given to Head on Eid and on other special days should be given to the workers.· Medical facilities are given in mill but such facilities should also be given to management.· Different training courses should be arranged for the up lifting and improving the quality of work for employees· They provide transportation facility to only female employees I think male should also be provided with conveyance convenience. This will create the easiness for workers and reduce the wastage of time.· There is also a problem of work overload for the employees and it should be control properly so that the employees are motivated. · Employees should be paid extra for the work which they done after working hours.
