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SUMMER INTERNSHIP REPORT
ON
NISHAT MILLS LTD.
SUBMITTED BY: M.IRFAN (BBS-09-05)
SEMESTER: 7th
SESSION: 2009-13
DEPARTMENT OF BUSINESS ADMINISTRATION
BAHAUDDIN ZAKARIYA UNIVERSITY
SUB CAMPUS SAHIWAL
PREFACE
This internship report covers my in-depth findings of Nishat Mills Limited. The purpose to do
internship report and making the report was to make able to realize that what is happening in the
organizations in reality and to observe the practicality of the courses that we are studying.
The duration of my internship was two months. During my internship I spend most of my time in
Accounts department, where Mr. Fayaz; The Accounts Manager helped me a lot to learn.
This report covers the history of textile sector and information about Nishat Mills Ltd. The next
portion is of ratio analysis. The interesting part for me was, writing the PESTEL analysis after
observing the situation of our country.
I pay gratitude to my instructor who provided me the opportunity to perform the task of
internship that helped me a lot growing my thinking capabilities and learning capacities.
ACKNOWLEDGEMENT
“All praises for Almighty Allah, who guides us in darkness and helps us in difficulties and due
respect for Holy Prophet (Peace be upon him) who enables us to recognize our creator.”
First, I would like to thanks Almighty Allah who gave me strength to complete challenging tasks
& His blessings that He provided me confidence, guidance & strength to complete this report.
The journey has not finished yet and I pray to Him to show me the straight path & help me more
in future as I am nothing without His blessings.
Writing an internship report appeared to be a great experience for me. It added a lot to my
knowledge. Completion of internship report is not an easy task. It requires continuous hard work.
Completion of this report would have not been possible without the support of all staff of
Finance department to whom I interacted. I would like to thanks especially Teachers to their
practical guidance and personal interest by which I become able to complete this task.
Very special thank to all my dear teachers that build my personality and enable me to do some
creative work be a successful person in practical life.
Mission Statement
To provide quality products to customers and explore new markets to
promote/expand sales of the Company through good governance and foster a sound
and dynamic team, so as to achieve optimum prices of products of the Company
for sustainable and equitable growth and prosperity of the Company.
VISION STATEMENT
To transform the Company into a modern and dynamic yarn, cloth and processed
cloth and finished product manufacturing Company that is 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
that is fully equipped to play a meaningful role on sustainable basis in the economy
of Pakistan.
Organizational Chart
Board of Directors
Chief Executive Officer
Human Resource & Remuneration
Committee
Audit Committee
Board Committees
Corporate Secretariat
Supply Chain Management
Finance & MIS
Internal Audit
Human Resource Management Spinning Division
Weaving Division
Apparel Division
Power Division
Processing & Home Textile
Divisions
Processing & Stitching Dyeing & Finishing
Table of Contents
CHAPTER # 01 ....................................................................................................................................... 1
1.1 EXECUTIVE SUMMARY..................................................................................................................... 2
1.2 INTRODUCTION ............................................................................................................................ 3
1.2.1 The Textile Industry: ........................................................................................................................ 3
1.2.2 Textiles Exports from Pakistan: ....................................................................................................... 3
1.3 NISHAT MILLS LIMITED................................................................................................................ 4
1.3.1 The Founder: .................................................................................................................................... 4
1.3.2 The Chairman: ................................................................................................................................. 5
1.4 COMPANY INFORMATION ................................................................................................................ 6
NISHAT GROUP OF COMPANIES: ...................................................................................................... 7
1.5 NISHAT BUSINESS & PRODUCTS .................................................................................................... 8
1.5.1 Spinning: ................................................................................................................................... 9
1.5.2 Weaving: ................................................................................................................................. 10
1.5.3 Processing: .............................................................................................................................. 11
1.5.4 Home Textile: ......................................................................................................................... 12
1.5.5 Garments: ................................................................................................................................ 13
1.5.6 Power Generation Facilities: ................................................................................................... 14
1.5.7 Nishat Linen: ........................................................................................................................... 15
1.7.8 Nishat Hospitality (Private) Limited: ...................................................................................... 16
1.6 ORGANIZATIONAL STRUCTURE ................................................................................................... 17
1.7 FUNCTIONS OF VARIOUS DEPARTMENTS ................................................................................. 19
1.7.1 ACCOUNTS DEPARTMENT: ..................................................................................................... 19
1.7.2 BANKING AND FINANCE DEPARTMENT: ........................................................................................ 23
1.8 WORKING PROCESS FLOW AT NDF (Nishat Dying & Finishing Unit) ........................................ 24
1.8.1 FABRIC PROCUREMENT: ......................................................................................................... 24
1.8.2 FABRIC RECEIVING: ........................................................................................................... 25
1.8.3 FABRIC QUALITY INSPECTION: ...................................................................................... 25
1.8.4 FABRIC STACKING: ............................................................................................................ 26
1.8.5 FABRIC DISPATCH TO BLEACHING: .............................................................................. 26
CHAPTER # 02 ..................................................................................................................................... 27
RATIO ANALYSIS ............................................................................................................................... 27
2.1 EXPENSE CONTROLS AND MEASURE ......................................................................................... 28
2.2 OPERATING EFFICIENCY MEASURE ............................................................................................ 33
2.3 PROFITABILITY RATIOS ................................................................................................................. 37
2.4 COVERAGE MEASURE ..................................................................................................................... 40
2.5 LIQUIDITY MEASURES .................................................................................................................... 41
2.6 PROFITABILITY MEASURES........................................................................................................... 45
2.7 LIQUIDITY OR CAPITAL STRUCTURE MEASURES ................................................................... 49
CHAPTER # 03 .............................................................................................................................................. 53
3.1 PESTEL ANALYSIS ............................................................................................................................ 54
3.1.1 POLITICAL FACTORS: ........................................................................................................ 54
3.1.2 ECONOMICAL FACTORS: .................................................................................................. 55
3.1.3 SOCIAL FACTORS: .............................................................................................................. 56
3.1.4 TECHNOLOGICAL FATORS: ............................................................................................. 57
3.1.5 ENVIRONMENTAL FACTORS: .......................................................................................... 58
3.1.6 LEGAL FACTORS: ............................................................................................................... 59
3.2 SWOT ANALYSIS .............................................................................................................................. 61
SWOT ANALYSIS DETAILS ................................................................................................................... 62
3.2.1 STRENGTHS: ........................................................................................................................ 62
3.2.2 WEAKNESSES: ..................................................................................................................... 64
3.2.3 OPPORTUNITIES: ................................................................................................................. 65
3.2.4 THREATS: ............................................................................................................................. 65
CHAPTER # 04 ..................................................................................................................................... 67
LEARNING AS AN INERNEE ................................................................................................................. 68
SUGGESTIONS ............................................................................................................................................. 69
IF I WERE THE MANAGER ............................................................................................................................ 71
CHAPTER # 05 ..................................................................................................................................... 72
REFERENCES ........................................................................................................................................... 73
ANNEXTURES ...................................................................................................................................... 74
1
CHAPTER # 01
EXECUTIVE SUMMARY
TEXTILE SECTOR INTRODUCTION
NISHAT MILLS LTD INTRODUCTION
NISHAT BUSINESS & PRODUCTS
ORGANIZATIONAL STRUCTURE
FUNCTION OF VARIOUS DEPARTMENTS
WORKING PROCESS FLOW
2
1.1 EXECUTIVE SUMMARY
Nishat has grown from a cotton export house into the premier business group of Pakistan
concentrating on 4 core businesses; 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.
The company is free from the energy crisis because it has set up its own power generation units
that are not even fulfilling the energy requirement of Nishat mills but they are also selling this to
Government. The company is holding the position with the spinning, weaving and dying units
with the extraordinary production capacity.
Nishat is running different business with different famous products like Nishat Linen that has
opened its outlets in major cities of Pakistan.
Different departments are working well to achieve the strategic aims of the company. They are
adopting the latest Management information system to access data that results in producing
timely results for different departments
The financial ratio analysis shows that the company is enjoying good profits and is consistently
running its operations even in the conditions when the country is passing through critical
conditions.
The PESTEL analysis shows that company has lived away from any kind of complications that
may have affect the company’s goodwill by fulfilling the legal, environmental requirements and
using international financial rules in the production of financial statements.
The SWOT analysis depicts that strengths are greater in number as compared to weaknesses and
threats that shows the company does well know its position and keep the system up to date. Still
there are some lacks that company should overcome to get ultimate results.
3
1.2 INTRODUCTION
1.2.1 The Textile Industry:
When Pakistan came into being there were only 16 textile mills out of which only 12 were in
operation. It grew to 70 in 1957 as industrial development takes place. Now a day there are 596
textile mills out of which 442 are in operation. Over the years, Pakistan is said to be the single
crop economy i.e. cotton and textile that claims the lion's 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 altogether placed the textile industry as the single largest determinant of the economic
growth of the country. Despite harsh and hard international economic conditions, Pakistan's
textile industry has weathered the storm by coming out of the international crisis in a very
positive manner.
1.2.2 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, Europe, Japan and Hong
Kong. Many textile exports take place under quota arrangements With the Europe and the United
States. Gray cloth constitutes roughly 16-18% of total cloth.
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.
4
1.3 NISHAT MILLS LIMITED
NISHAT MILLS LIMITED (NML) commenced business in 1951 as a partnership concern,
which was converted into private limited company in 1959. In 1961, the company went public
and was listed on the Karachi stock exchange, the only stock exchange in the country at that
time. In 1989 the Company was listed on Lahore Stock Exchange and in 1992 The Company was
listed on Islamabad Stock Exchange.
It is one of the most modern, largest vertically integrated textile companies in Pakistan. NML
started out as a weaving unit with 500 semi-automatic looms; later 10000 spindles were added,
laying the foundation on nation’s biggest textiles composite project. The Company also has the
most modern textile dyeing and processing units, 2 stitching units and Power Generation
facilities with a capacity of 89 MW.
The Company’s total export for the year 2011 was Rs. 35.610 billion (US$ 416 million). Due to
the application of cautious management policies, consolidation of operations, a strong balance
sheet and an effective marketing strategy, the growth trend is expected to continue in the years to
come. The Company's production facilities comprise of spinning, weaving, processing, stitching
and power generation. Its sales are 48,565,144,000 Rs.
1.3.1 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. His is a
story of success through absolute hard work and a fearless 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.
5
1.3.2 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’ its corporate culture is based on
decentralization, handing over of authority, encouraging the acceptance of responsibility and
inculcating quality consciousness.
It is the conviction that every successful organization is a reflection on the commitment,
dedication, and team spirit of its employees, and Nishat is no exception. People of Nishat are all
instilled with the spirit, a fact evident in their 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.
Nishat group of companies is a premier business house of Pakistan. The group has presence in all
major sectors including Textiles, Cement, Banking, Insurance, Power Generation,
Hotel Business, Agriculture, Dairy and Paper Products. Today, Nishat Group is considered to be
at par with multinationals operating locally in terms of its quality products and management
skills.
6
1.4 COMPANY INFORMATION
BOARD OF DIRECTORS:
Mian Umer Mansha Chairman/Chief Executive
Mian Hassan Mansha
Mr. Muhammad Nawaz Tishna (NIT)
Mr. Khalid Qadeer Qureshi
Mr. Muhammad Azam
Rana Muhammad Mushtaq
Ms. Nabiha Shahnawaz Cheema
AUDIT COMMITTEE:
Mr. Khalid Qadeer Qureshi Chairman/Member
Mr. Muhammad Azam Member
Ms. Nabiha Shahnawaz Cheema Member
CHIEF FINANCIAL OFFICER:
Mr. Badar-ul-Hassan
COMPANY SECRETARY:
Mr. Khalid Mahmood Chohan
AUDITORS:
Riaz Ahmad & Company Chartered Accountants
LEGAL ADVISOR:
Mr. M. Aurangzeb Khan, Advocate,
Chamber No. 6, District Court, Faisalabad.
MILLS:
Nishatabad, Faisalabad (Spinning units and Power Plant)
12 K.M. Faisalabad Road, (Weaving units & Power Plant)
Sheikhupura. 21 K.M. Ferozepur Road, Lahore. (Stitching unit)
5 K.M. Nishat Avenue (Weaving, Dyeing & Finishing unit,
Off 22 K.M. Ferozepur Road, Lahore. Processing unit, Stitching unit and Power Plant)
20 K.M. Sheikhupura Faisalabad (Spinning unit) Road, Feroze Watwan
7
SHARES DEPARTMENT
53 - A, Lawrence Road, Lahore.
Tel: 042-6367812-16, 042-111 113 333
Fax: 042-6367414
HEAD OFFICE:
7, Main Gulberg, Lahore.
Tel: 042-5716351-9, 042-111 332 200
Fax: 042-5716349-50
E-mail: [email protected]
Website: www.nishatmillsltd.com
LIAISON OFFICE:
Ist Floor, Karachi Chambers,
Hasrat Mohani Road, Karachi.
Tel: 021-2414721-23
Fax: 021-2412936
NISHAT GROUP OF COMPANIES:
1. NISHAT MILLS LTD, FAISALABAD
2. NISHAT DYEING AND FINISHING, LAHORE
3. NISHAT FABRICS, BHIKHI
4. NISHAT SPINNING, FEROZE WATTOAN
5. NISHAT SEWING, LAHORE
8
1.5 NISHAT BUSINESS & PRODUCTS
Spinning
Weaving
Processing
Home Textile
Garments
Power Generation
Nishat Linen
Nishat Hospitality (Private) Limited
9
1.5.1 Spinning:
Nishat Mills Spinning Division has over 198,120 spindles, which are operationally organized
into 8 spinning units. The entire machinery is from world-renowned manufactures. All yarns
made at Nishat are Ring Spun suitable for both knitting and weaving. Besides the best Pakistani
cotton, long stapled American, Egyptian and US Pima cotton is also used for fine counts. For
strong belief in product development and innovation Nishat has their own in house state of the
art cotton and yarn testing laboratories. Nishat spinning is one of the most trusted brands in the
market due to its efficient production and quality. Spinning production capacity for both Cotton
and Blended Yarns is 185 tons/day.
10
1.5.2 Weaving:
Nishat Mills Weaving division has 670 modern Air Jet and projectile looms which produce
approximate 9.0 million meters of fabric per month and makes it the largest weaving facility of
Pakistan catering to home textile and apparel fabrics.
At NML Lahore total looms are 193 and capacity is approximate 3.2 Million Meters per Month.
NML Sheikhupura total Looms are 462 and capacity is 5.8 Million Meters per Month. Product
Range: 100 % Cotton and Poly Cotton fabrics, in Plain weaves, Twills, Drills Satins (regular /
broken & striped), Bedford Cords, Herringbones, Pique and Rib Cords. At
Yarn Dyeing:
Nishat Yarn Dyeing is one of the latest exhaust dyeing units in Pakistan having installed
production capacity of 5.0 tons per day. Nishat is processing yarn and sewing thread in package.
Also, it has set up facility for Beam Dyeing which is first of its kind in Pakistan.
11
1.5.3 Processing:
Nishat fabric processing facility is one of the largest and most modern factories of Pakistan. With
an array of custom-made machinery, it has the capacity to produce 90 million meters of fabric
per annum. It is specially designed to handle heavy weight fabrics like twills, drills, canvases /
poplins, fabrics with minimum tension such as stretch fabrics and all high density weaves. The
advantage achieved by the customized design of its machines is the result of an extensive
research work with the help of world renowned machine makers. To ensure that our customers
get the very best we use more than 75% dyes and chemicals of European origin.
The standards are higher than ever, dedicated by fashion, efficient productivity and further
automation is engineered in the plant. To maintain quality and international standards, an on-line
Quality Control (QC) Department has been setup. The QC department is augmented by a fully
equipped Laboratory, which scrutinizes the fabric process flow at all levels. Our extra ordinary
Research & Development work and highly trained marketing personal are pivotal to sustain long
term business relationships
12
1.5.4 Home Textile:
With an array of 938 modern new generation sewing machines, The Home Textile Division
consists of 2 stitching facilities. The two facilities combined have an average production capacity
of approximately 24 million meters per annum. The product line is customized to manufacture
products of various styles and sizes according to the requirements of our customers, wholesalers,
retailers and contract textile business.
Product Range:
Quilt Covers
Quilted Throw-over
Flat Sheet
Fitted Sheet
Pillow Cases
Cushions
Valances
Curtains
Baby Sets
Table Linen
Embroidery
13
1.5.5 Garments:
Nishat Mills Limited has state of art garment manufacturing facility both for men and women.
The Apparel division has deployed 1627 high end sewing machines such as Vibe Mac, Juki,
Mitsubishi and Brother. The Division has the capacity to produce 7.20 million garments per
annum.
The Garment wet process utilizes the modern techniques of Rinse, Enzyme Stone, Enzyme
Wash, Super Bleach, Reducer Wash, Tint Wash and Raisin Wash. In order to obtain best results,
Nishat facility is geared with Tonello Washing machines, Maino dryers, Wrinkle Curing Hangers
and Barrel washing machines and Dryers for sampling. Qualified team members utilize the
equipment to obtain optimal results and cater to the specific needs of the client.
14
1.5.6 Power Generation Facilities:
Nishat Mills has established state of the art, modern, highly reliable and extremely efficient
captive co-generation power plants to cater in house energy requirements at all its spinning,
weaving, processing, stitching and apparel units. These facilities are using Wartsila, Caterpillar,
Cummins, Daihatsu, Jenbacher & Mak engines for power generation. Gas, Furnace Oil, Diesel
and Steam is being used as fuel for power generation.
Nishat Mills Limited has lived up to its promise to be a vanguard in use of alternative fuels for
energy requirements in the absence of fossil fuels. They have put up a new Combined Heat and
Power plant at our site in Lahore which will produce 6 M.W. of electricity and 65 tons/hour of
steam. Coal will be the primary fuel but special aspect of this plant is its flexibility to use
alternative input mix up-to 70% of bio-mass with 30% of coal. The plant is expected to be
commissioned by May/June 2012. Two high performance, high efficiency, low pressure steam
generating boilers are already in operation using rice husk, wood chips and corn cobs etc as main
source of locally available agri-waste fuels at two sites of our company.
The Company is now planning to establish similar projects for our spinning division at
Faisalabad and our weaving division at Sheikhupura. These plants will have the production
capacity to cater for entire power and energy requirements of these divisions.
Synthetic Natural Gas Plant: Installation of Synthetic Natural Gas (SNG) Plant is nearing its
completion phase. This plant will use LPG as raw material to produce synthetic gas. This
synthetic gas will be used to run processing machines which are solely dependent on natural gas
Location Generation
Capacity
(MW)
Diesel/Furnace
Oil Engines Gas
Engines
Gas/Steam
Turbines
Faisalabad 37.37 2 6 -
Bhikki 14.71 3 4 1
Lahore 27.04 9 9 3
Ferozewatwan 9.70 4 4 -
15
for their running and are non operational during gas load shedding days. A sizeable storage of
LPG has also been established in the Company.
1.5.7 Nishat Linen:
Nishat Linen is a concern of Nishat Mills, the textile and home fashion retail chain that has
redefined the industry with acute attention paid to quality, design and affordability. Nishat Linen
prides itself on being the brand of preference for discerning customers who are in search of
things, unique and chic without compromising on aesthetics or price. Unsurpassed customer
service, including tailor-made orders, ensures our clientele remains loyal to the Nishat family.
From bed linen to kitchen coordinates, upholstery to apparel, Nishat Linen has become a
household name as a creator of stunning, high-quality designs at reasonable prices; a feat
achieved by few.
16
1.7.8 Nishat Hospitality (Private) Limited:
Nishat Hospitality (Private) Limited is incorporated on July 1 2011 as a wholly own subsidiary
of Nishat Mills Limited with the object of running hotel business in Pakistan. The subsidiary has
been constructed and is treated as four star hotel in Lahore on international standards under the
name of “Nishat Boutique Hotel”.
17
1.6 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED
There are different departments working in Nishat Mills Limited (NML) under the heads:
Marketing department
Accounts department
Finance and banking department
Import export and miscellaneous department
Human resource department
I spent most of my time in the Accounts department. The hierarchy given under is of accounts
department.
ACCOUNTS DEPARTMENT
HIERARCHY
C.F.O/DIRECTOR
(Chief Financial Officer)
SENIOR GENERAL MANAGER
GENERAL MANAGER
D.G.M
(DEPUTY GENERAL MANAGER)
18
MANAGER
SENIOR DEPUTY MANAGER
DEPUTY MANAGER
ASSISTANT MANAGER
SENIOR OFFICER
OFFICER
ASSISTANT OFFICER
SENIOR ASSISTANT MANAGER
19
1.7 FUNCTIONS OF VARIOUS DEPARTMENTS
1.7.1 ACCOUNTS DEPARTMENT:
In account department, I managed to understand about the flow of transaction, preparation of
vouchers and ledger posting.
Preparation of vouchers:
In account department under the supervision of concerned officers, I came to know different type
of vouchers being prepared and their process of preparation. Vouchers are written evidence of
any business transaction. The different types of vouchers being prepared by the account
department of Nishat Mills are as under,
Cash payment vouchers
Cash receipts vouchers
Bank payment vouchers
Bank receipt vouchers
Journal voucher or adjustment vouchers
Petty cash vouchers
These vouchers are now discussed below in detail:
Cash Payment Vouchers:
Being a public limited company cash payment vouchers are used for recording the expense of
less than five thousand. These types of vouchers are prepared when cash payments are made
against small expenses i.e. repair, entertainment etc. In order to record the expenses following
entry is passed:
Account code name of expense (debit) Amount
Cash account (credit) Amount
Evidence of expense is attached with the cash payment vouchers.
20
Cash Receipt Vouchers:
These types of vouchers are prepared when the cashier on behalf of the Nishat mills limited is
receiving cash. However, these types of vouchers are small in quantity because majority of
transactions are done by bank. On receipt of cash, cashier prepared the cash received slip.
Account officer prepares voucher on the basis of cash receipt prepared by the cashier. In order to
book the transaction the following entry is passed in the books.
Account code cash account (debit) Amount
Income A/C or receivable A/C (credit) Amount
Bank Payment Vouchers:
Being a public limited company the majority of payment transactions of the Nishat mill limited
are carried out through banks. Bills and invoices being approved by the competent authority
reach at the table of accounts officer for payment. Account officer checks the approval and
mathematical accuracy of the bill and prepares the bank payment voucher. Accounts officer first
confirms the nature of expense i.e. capital or revenue and deduction of tax if applicable then pass
the following entry;
Account code Asset name or expense (debit) amount
Bank account (credit) amount
Deduction of tax at source (credit) amount
Evidence of expense/asset is attached with the cash payment voucher.
Bank Receipt Vouchers:
Account code cheques clearing A/C (debit) amount
Account receivable A/C (credit) amount
Advance against sale A/C (credit) amount
21
Copy of cheques is attached with voucher.
On clearing of above referred cheques following entry passed in the books of account officers.
Account code Bank A/C (debit) Amount
Cheques clearing A/C (credit) Amount
Adjustment Voucher or Journal Vouchers:
These types of vouchers are generally prepared in the following circumstances;
Purchase on credit
Sales on credit
Writing off assets i.e. depreciation store consumption etc.
Rectification of mistakes or omissions
These are discussed below in detail,
Purchase on credit:
Generally raw material, stores and spares are purchased on credit. In order to account them for
the journal voucher are prepared by the concerned account officer
Account code Purchase A/C (debit) Amount
Account payable A/C (credit) Amount
Copy of the invoices is attached with vouchers.
Sales on credit:
Like purchases, sales (local and export) are made on credit and at the time of delivery of goods
following journal are prepared by the account officer:
22
Account code Account receivable A/C (debit) Amount
Credit sales A/C Amount
Copy of invoices is attached with voucher.
Writing off assets:
These journal vouchers are prepared in order to change the assets to expense for the preparation
of monthly accounts.
To account for depreciation of fixed assets:
Account code Depreciation A/C (debit) Amount
Accumulated depreciation A/C (credit) Amount
To account for the raw material consumption:
Account code raw material concerned A/C (debit) amount
Raw material store A/C (credit) amount
To account for store consumption:
Account code store concerned A/C (debit) amount
Store and spares A/C (credit) amount
To account for accrued expenses:
Account code expense A/C (debit) amount
Account payable A/C (credit) amount
In additional to above referred kinds journal voucher is also passed to rectify the mistakes made
in voucher preparation or posting.
23
Ledger Posting:
Computer operator puts log number and makes posting in computer. Accounts of NISHAT
MILLS are computerized and ledgers are prepared in computer. After the preparation and coding
of voucher it is sent to computer operator for posting. A daily print out of all entries is checked to
check the accuracy. After checking the accuracy the master file is updated and posting is made to
respective account ledger by the computer. These record files are also send to record room that
they can be recalled as ever needed.
1.7.2 BANKING AND FINANCE DEPARTMENT:
The main purpose of the department is ensuring the availability of the funds for operation, best
utilization of available fund and to deal with banks. Finance manger prepares daily cash flows
statement in order to determine needs and utilization of funds.
A weekly projected cash flows statement is also prepared in order to determine the need of the
coming week. An account officer prepares bank reconciliation statement of all the banks and list
out the outstanding entries. He then traces the reason for these entries and put bank reconciliation
on the table of finance manager. On receipt of bank statement the manager prepares cash flow
statement and presents it to the finance director for future actions.
Dealing with bank is normally by receiving bank reconciliation statements. When banking
department receives such statement it tallies transaction with its own ledgers. Certifies that
whether items debited or credited is true in all respect. If any discrepancy is found it is told to
bank. Since Nishat mills limited is a large organization so daily bank reconciliation are received
from the bank.
Process:
All the cheques, which are presented for payments, any interest or commission charged by the
bank, cheques, received by the banks and credited in the account of Nishat mills limited, any
24
interest received on account of Nishat mills limited by bank are recorded and then tallied. A
person designated as Assistant Manager Heads banking department.
Mark Up Sheets:
Second major function of the banking department of Nishat mills limited is preparation of mark
up sheet. Normally finance is obtained from banks against securities. The securities are (a)
pledge cotton (b) mortgaging machinery etc.
This loan is taken sometimes for short period and sometimes for longer period. So in these loans
interest is paid. This interest rate varies. This interest is calculated on daily basis. When interest
and loan amount is paid to bank, it is this department, which calculates the interest amount due
on Nishat mills limited. Although interest sheet is sent by bank but it is reconciled by the
department.
1.8 WORKING PROCESS FLOW AT NDF (Nishat Dying & Finishing Unit)
1.8.1 FABRIC PROCUREMENT:
First of all marketing department will raise an inquiry about the price and delivery for some
particular quality verbally on telephone or a paper from the customer. Their information must
include construction, width, weave, fiber type and quality required. Then Assistant Manager
Greige (cloth type: not fully processed) will then contact the supplier for the quality and ask for
the price quotations from them with expected delivery time. This information will be notified to
marketing department, accordingly. If deal is confirmed, marketing department will raise a fabric
procurement demand to the Greige department with all the terms and requirements written on it.
Procurement department will negotiate the rate and delivery with the suppliers and make an
agreement with one and reconfirm with the marketing department. Then a purchase order will be
sent to the supplier. It will have all the terms and conditions laid on it. This P.O (purchase order)
will have the signatures of A.M Greige and head of marketing department.
25
Supplier will send its sales contract for confirmation which will be signed and returned (copy) by
the A.M Greige. Copy of this contract will be given to the marketing department, production and
planning department for their record.
1.8.2 FABRIC RECEIVING:
As soon as the production is started on looms, the supplier will send at least 50 meters sample for
initial quality checking. The Greige supervisor may also visit the production site of the supplier
with their knowledge for initial quality checking.
The supplier will also inform at the same time, about the yarn source (warp and weft) along with
the uster results of the yarn to be used. The supplier will mend, check and grade the fabric as per
4 point grading system. At the time of dispatch from their mill, supplier will send a proper
packing list along with their OGP (outward gate pass) and copies of their own final checking
report. Packing of fabric must be in rolls whether they have the facility or not. Bale packing will
not be accepted at all. In case of large orders, fabric may/will be received in small lots; each lot
will be given a separate number at the time of receiving.
Once the vehicle is at the gate of the godown, Greige supervisor will receive the supplier’s OGP,
inspection report’s copy, packing list, bilty of goods and the IGP(inward gate pass) of Nishat
mills and note the all required information. Then Greige supervisor will check the fabric
construction at random; say 5 pieces, before unloading. In case of two or more lots received on
the same day, unloading will be turn-wise.
1.8.3 FABRIC QUALITY INSPECTION:
After unloading, the fabric will be stacked aside and 3 to 5 samples will be sent to the Quality
Check (QC) lab for testing. These results will be verified by the Incharge of QC department.
After lab testing the fabric will finally be checked at random. Selection of sampling will be as
under;
for lot size below 10,000 sampling will be 15%
for lot size 10,000 to 30,000 sampling will be 12 %
for lot size 30,000 to 50,000 sampling will be 10%
for lot size 50,000 to 75,000 sampling will be 08%
for lot size 75,000 to100,000 sampling will be 07%
26
for lot size above 100,000 sampling will be 05%
This checking will be carried out turn wise and may take 4 to 5 days before completion and final
decisions.
During this checking, weight and length of each roll to be checked will also be verified. After
final checking, fate will of the lot will be decided. If the checked lot is rejected, the supplier will
be notified through a copy of GRN (goods rejection note) and they will have to lift the fabric on
their own expense within one week. Copies of GRN will also be sent to Marketing department,
Production & Planning department, and the Project Director’s office. If accepted, accounts
department will be notified through a receiving form and they will carry out the payment
afterwards, as per terms finalized on P.O (purchase order).
1.8.4 FABRIC STACKING:
After approval, each lot will be issued a lot number and will be taken into the record. At this
stage all details (constructions, container number, supplier, buyer etc.) will be entered in the
computer data for record and future references by the Greige supervisor, who will also keep the
inspection record of each lot. Once the fabric is stacked on the racks, Greige supervisor will
update the current rack status and change the bin cards accordingly. During this stacking it will
be tried to place the lots contract wise if allowed by the space and availability of empty racks.
It will be the responsibility of the supervisor to regularly check the racks and fabric rolls for
proper stacking to avoid unexpected hazards such as fungus, cuts, too much dirt and also the
corrections of in cards.
As all the information will daily be updated, current stock status, contract wise balance report,
daily issued and received fabric reports and other such reports will be available on network to
every concerned person.
1.8.5 FABRIC DISPATCH TO BLEACHING:
Every day Purchase and planning department will issue the fabric demand for bleaching, with all
details such as corresponding contract no. shade to be dyed, quality and quantity etc. They will
issue the job card for the bleaching department.
27
The fabric will be issued on a gate pass having the signature of Greige dept. Incharge/ Greige
supervisor. Each time the fabric will be issued to bleaching, a new lot no. will also be issued
which will be mentioned on the job card issued by PP department.
CHAPTER # 02
RATIO ANALYSIS
28
2.1 EXPENSE CONTROLS AND MEASURE
2.1.1 COST OF GOODS SOLD/NET SALES
2.1.2 SELLING AND ADMIN/NET SALES
2.1.3 DEPRECIATION EXP/NET SALES
2.1.4 INTEREST EXPENSE ON BORROWED FUNDS
2.1.5 TAXES/NETS SALES
29
2.1.1 COST OF GOODS SOLD/NET SALES:
Definition: Percentage of sales used to pay for expenses which vary directly with sales.
YEAR 2011 2010 2009 2008 2007
C.G.S/NET
SALES 84% 81% 82% 85% 83%
Explanation:
The average of the ratios is 83% that is lower from the highest ratio of 85%. This is because of
the ratio from 2010 affected the average. As in 2010 the difference between CGS and Net Sales
was lower. Sales were not increased with the proportion as CGS is increased. The higher the
denominator or the lower the answer the more will be beneficial for the company.
Graph Representation:
79%
80%
81%
82%
83%
84%
85%
86%
2011 2010 2009 2008 2007
Pe
rce
nta
ge
C.G.S/ NET SALES
C.G.S/ NET SALES
30
2.1.2 SELLING AND ADMINISTRATION EXPENSE:
YEAR 2011 2010 2009 2008 2007
SELLING AND
ADMIN.
EXPENSES/NET
SALES
5.86% 7.17% 7.33% 7.06%
7.27%
Explanation:
This ratio shows the Percentage that the sales covered for the selling and administrative
expenses. The average ratio is 6.94%. The company has minimum percentage in 2011 that is
5.86%. Selling and Admin expenses were not increased with the proportion as Sales are
increased. Sales are highest in 2011 compared to previous years.
2.1.3 DEPRICIATION EXPENSE:
YEAR 2011 2010 2009 2008 2007
DEPRICIATION
EXPENSE/NET
SALES 2.27% 3.41% 4.43% 4.90% 5.47%
Explanation:
This ratio shows the percentage of depreciation expenses covered by the sales. That is quite low
portion of sales. As depreciation counts for the long run period. Usually the plants average life is
longer so the depreciation is divided to the bigger denominator of life years. The average ratio is
4.10%. With the increase of the sales in 2011 the percentage is low. This might show that
company’s sales are increased with old machinery while there is no resultant increase in
depreciation by purchasing new machinery.
31
2.1.4 INTEREST EXPENSE ON BORROWED FUNDS/NET SALES:
YEAR 2011 2010 2009 2008 2007
INTERST EXP.
ON BORROWED
FUNDS/NET
SALES 2% 0.74% 0.85% 1.05% 0.77%
Explanation:
This ratio shows the portion of the interest expense covered by sales. The average ratio is 1.08%.
The average ratio is lower as it depict that company’s markups are controlled. But that was
higher in 2011. This shows company has borrowed more funds to increase production, ultimately
increasing sales.
2.1.5 TAXES/NET SALES:
YEAR 2011 2010 2009 2008 2007
TAXES/NET
SALES
1.17% 1.18% 1.23% 1.34% 0.84%
Explanation:
Th ratio shows the amount of the percentage of the taxes covered by the sales. The average is
1.15%. company paid large amount of tax in 2011 as 1.34%. But this percentage is quite high
from 2011 that is 1.17%. the reason can be that Government provided tax relief to the large
companies to produce more product resulting in increased exports, that will increase foreign
exchange.
32
Graph Representation:
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2011 2010 2009 2008 2007
Pe
rce
nta
ge
EXPENSE CONTROLS AND MEASURE
SELLING AND ADMIN.EXPENSES/NET SALES
DEPRICIATION EXPENSE/NETSALES
INTERST EXP. ONBORROWED FUNDS/NETSALES
TAXES/NET SALES
33
2.2 OPERATING EFFICIENCY MEASURE
2.2.1 ANNUAL COST OF GOODS SOLD/AVERAGE INVENTORY
2.2.2 AVERAGE RECEIVABLES COLLECTION
2.2.3 NET SALES/NET FIXES ASSETS
2.2.4 NET SALES/TOTAL ASSETS
34
2.2.1 ANNUAL COST OF GOODS SOLD/AVERAGE INVENTORY:
YEAR 2011 2010 2009 2008 2007
ANNUAL
C.G.S/AVERAGE
INVENTORY 49.537 42.238 36.336 35.717 32.072
Explanation:
This ratio is also called inventory turnover. This ratio shows that how many times the company
is able to sell out inventory during the reporting period. So the average figure is 39.18. This
means that the company is able to sell inventory 39 times averagely. It is increasing continuously
from 2007 to 2011. So the company has strong position.
2.2.2 AVERAGE RECEIVABLES COLLECTION:
YEAR 2011 2010 2009 2008 2007
DAYS*A.R/CREDIT
SALES= Days 34.52 43.53 73.90 52.07 53.22
Explanation:
The average value for these ratios is 51.45. This shows that company takes 51 days to receive
payments owed, in terms of receivables, from its customers and clients. The ratio is high in 2009.
The company took longer time to collect its receivables in 2009, which is not good for the
company. The reason is that the sales were low in this year. So the company gave longer period
to clients to boost up the sales. This is lower in 2011, as the company keeps its ACP short to
collect money as soon as possible so they can channelize it again in the process.
35
Graph Representation:
2.2.3 NET SALES/NET FIXES ASSETS:
YEAR 2011 2010 2009 2008 2007
NET
SALES/NET
FIXES ASSETS
1.362 0.915 1.028 0.803 0.659
Explanation:
It is also called fixed asset turnover ratio. The average is 0.953. A high ratio indicates that a
company is doing an effective job of generating sales with a relatively small amount of fixed
assets. The ratio was lowest in 2007; it means Company has overinvested in fixed assets or sales
were low.
0
10
20
30
40
50
60
70
80
2011 2010 2009 2008 2007
C.G.S/AVG. INVENTORY
AVG. RECEIVABLESCOLLECTION
36
2.2.4 NET SALES/TOTAL ASSETS:
YEAR 2011 2010 2009 2008 2007
NET
SALES/TOTAL
ASSETS
0.898 0.683 0.757 0.508 0.436
Explanation:
This is also called total asset turnover. It measures the ability of the company to use its assets to
efficiently generate sales. The average is 0.66. This shows that how efficiently the company is
using its assets to generate its sales. It is increasing gradually as compared to past, that is a good
trend. This shows that the company is utilizing resources positively and sales are increasing.
Graph Representation:
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2011 2010 2009 2008 2007
Tim
es
OPERATING EFFICIENCY MEASURE
NET SALES/NET FIXES ASSETS
NET SALES/TOTAL ASSETS
37
2.3 PROFITABILITY RATIOS
2.3.1 GROSS PROFIT MARGIN
2.3.2 NET PROFIT MARGIN
38
2.3.1 GROSS PROFIT MARGIN:
YEAR 2011 2010 2009 2008 2007
GROSS
PROFIT/NET
SALES*100 16% 19% 18% 15% 17%
Explanation:
The average ratio is 17%. It is a measurement of how much from each Rupee of a company's
revenue is available to cover overhead, other expenses and profits. The higher the ratio the better
is for the company. It also shows that the company has control on its production cost. This was
high in 2010. The value is highest in year 2010 that is 19%.
2.3.2 NET PROFIT MARGIN:
YEAR 2011 2010 2009 2008 2007
NET INC./NET
SALES 10% 9% 5% 32% 10%
Explanation:
The average for this ratio is 13.2%. Net profit margin measures how much of each Rupee earned
by the company is translated into profits. Low net profit margin indicates low margin of safety.
Net Profit Margin is high as 32% in 2008 because it includes Gain on Sales of Investments that is
not present in other years. Net profit margin is affected by more factors as production,
administration, selling, financing, pricing or tax factors.
39
Graph Representation:
0%
5%
10%
15%
20%
25%
30%
35%
2011 2010 2009 2008 2007
Pe
rce
nta
ge
Profit Margins
GROSS PROFIT MARGIN
NET PROFIT MARGIN
40
2.4 COVERAGE MEASURE
2.4.1 INTEREST COVERAGE:
YEAR 2011 2010 2009 2008 2007
EBIT/INTEREST
EXPENSE 4.38 3.92 2.08 8.05 2.52
Explanation:
The average for this ratio is 4.19. The high is the ratio; the beneficial is for the company. When
this is below 1, it means that company is no able to meet its interest obligations. So the company
is safe at present conditions. That ratio was high in 2008 because of the factor of the gain on the
sale of investment.
Graph Representation:
0
1
2
3
4
5
6
7
8
9
2011 2010 2009 2008 2007
Tim
es
INTEREST COVERAGE
INTEREST COVERAGE
41
2.5 LIQUIDITY MEASURES
2.5.1 CURRENT RATIO
2.5.2 ACID TEST RATIO
2.5.3 WORKING CAPITAL
2.5.4 NET LIQUID ASSETS
42
2.5.1 CURRENT RATIO:
YEAR 2011 2010 2009 2008 2007
CURRENT
ASSETS/CURRENT
LIABILITIES 1.20 1.11 0.86 1.19 1.74
Explanation:
The average ratio is 1.22 which is fairly satisfied for the company. This ratio measures that if a
company has enough resources to pay its current debts, usually for 12 month period. It is below 1
in 2009. The reason is that company has low figures in Loans and advances and short term
investments. Behind this there can be other factors like firm's managerial inefficiency in
implementing strategies.
2.5.2 QUICK RATIO:
YEAR 2011 2010 2009 2008 2007
QUICK RATIO 1.14 1.05 0.81 1.15 1.68
Explanation:
Average quick ratio is 1.17. This excludes inventory and measures the ability to use its quick
assets (cash and cash equivalents, marketable securities and accounts receivable) to pay its
current liabilities. This is normal as compared to the current ratio which shows that company is
not depending heavily on inventory. Lenders pay attention to this ratio especially.
43
Graph representation:
2.5.3 WORKING CAPITAL:
YEAR 2011 2010 2009 2008 2007
C.A-C.L 3119610.00 1164513.00 -1307427.00 2207913.00 5659714.00
Explanation:
Positive working capital means that the business is able to pay off its short-term liabilities. But it
is negative in 2009 which shows that that the business currently is unable to meet its short-term
liabilities with its current assets. Therefore, an immediate increase in sales or additional capital
into the company is necessary in order to continue its operations. It was highest in 2007.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
2011 2010 2009 2008 2007
TIm
es
LIQUIDITY MEASURES
CURRENT RATIO
QUICK RATIO
44
2.5.4 NET LIQUID ASSETS:
YEAR 2011 2010 2009 2008 2007
CURRENT
ASSETS-
INVENTORY-
CURRENT
LIABILITY 2164474.00 475681.00 -1868678.00 1717684.00 5237286.00
Explanation:
This shows the company’s ability to pay short term liabilities without depending on inventory.
The company has negative liquid assets in 2009 which means company is currently unable to pay
short term liabilities. But the graph shows little variation with minor difference in behavior of
both ratios that means they are not heavily depending on inventory to meat short term
obligations.
Graph Representation:
-3000000
-2000000
-1000000
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
2011 2010 2009 2008 2007
Ru
pe
es
LIQUIDITY MEASURES
WORKIG CAPITAL
NET LIQUID ASSETS
45
2.6 PROFITABILITY MEASURES
2.6.1 EBIT/T.A
2.6.2 EBT/T.A
2.6.3 EBIT/ net Worth
2.6.4 EBT/Net Worth
46
2.6.1 EBIT/T.A:
YEAR 2011 2010 2009 2008 2007
EBIT/T.A
12.97% 9.56% 9.55% 19.26% 5.25%
Explanation:
It’s called return on total assets. The average for this ratio is 11.3%. The ratio is considered an
indicator of how effectively a company is using its assets to generate earnings before contractual
obligations must be paid. The greater the ratio, the good is for the company. The figure was high
in 2008. That is because company gained sales on investments.
2.6.2 EBT/T.A:
YEAR 2011 2010 2009 2008 2007
EBT/T.A 10.01% 7.12% 4.96% 16.87% 4.62%
Explanation:
This ratio is a representation of management's ability to utilize the resources available. It
expresses the ratio of pre-tax returns on total assets. This ratio excludes interest. The ratio is
considered an indicator of how effectively a company is using its assets to generate earnings
before tax obligations must be paid. The high the ratio, the good is for the company. The average
is 8.72%. This is higher in 2008 because of the company’s gain on sale of investment factor.
47
2.6.3 EBIT/ NET WORTH:
YEAR 2011 2010 2009 2008 2007
EBIT/ NET
WORTH 19.81% 14.06% 15.56% 29.05% 6.90%
Explanation:
The average figure for the ratio is 17%. The higher the ratio the good is for the company. The
figure was high in 2008 that is 29.05% the same reason is that the numerator is higher because of
the company’s gain on sales of investment. The lower value is in 2007 that is 6.90. The reason is
that the denominator was high as compares to year 2008.
2.6.4 EBT/NET WORTH:
YEAR 2011 2010 2009 2008 2007
EBT/NET
WORTH
15.29% 10.47% 8.08% 25.44% 6.07%
Explanation:
The average ratio is 13.07%. The higher the ratio the good is for the company. It is same as
above ratio but excludes interest.
48
Graphical representation:
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2011 2010 2009 2008 2007
Pe
rce
nta
ge
PROFITABILITY MEASURES
EBIT/T.A
EBT/T.A
EBIT/ NET WORTH
EBT/NET WORTH
49
2.7 LIQUIDITY OR CAPITAL STRUCTURE MEASURES
2.7.1 LEVERAGE RATIO
2.7.2 T.L/NET WORTH
2.7.3 CAPITALIZATION RATIO
2.7.4 DEBT TO SALE RATIO
50
2.7.1 LEVERAGE RATIO:
YEAR 2011 2010 2009 2008 2007
T.L/T.A 34.56% 32.06% 38.66% 33.68% 23.95%
Explanation:
This ratio shows that how much of the company assets have been formed with the debts. The
average ratio is 32.52%. The lower the ratio, the better is for the company. When the ratio is
higher it depicts that company is more leveraged. The figure was highest in 38.66% this shows
that company had low assets in denominator as compared to previous year 2008.
2.7.2 T.L/NET WORTH:
YEAR 2011 2010 2009 2008 2007
T.L/NET
WORTH
52.82% 47.19% 63.02% 50.78% 31.49%
Explanation:
The average for the ratio is 49.06%. This ratio shows that the company has enough resources to
pay its liabilities in terms of its assets. The higher figure is 52.82% whereas the lowest figure is
31.49%. The higher figure is showing that the company is more leveraged. Lower the ratio, the
better is for the company.
51
2.7.3 CAPITALIZATION RATIO:
YEAR 2011 2010 2009 2008 2007
LONG TERM
DEBT /(LONG
TERM
DEBT+NET
WORTH) 8.70% 11.90% 11.77% 4.00% 5.59%
Explanation:
The ratio shows the ability of the company to pay its long term debts while excluding the short
term debts. The average figure is 8.39%. The lower the ratio, the better will be for the company.
The company had lower figure in 2008.
2.7.4 DEBT TO SALE RATIO:
YEAR 2011 2010 2009 2008 2007
T.L / NET
SALES 38.49% 46.95% 51.03% 66.27% 54.90%
Explanation:
This ratio shows that how much the company is able to pay its total liabilities depending on the
net sales. The lower the figure the better will be for the company. The figure is high in 2008
because the company’s gain on sales of investment. The figure is lower in 2011; the reason
might be that to increase the sales the company has to bear more liabilities and the company has
highest sales in 2011 as compared to other years.
52
Graph Representation:
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
2011 2010 2009 2008 2007
Pe
rce
nta
ge
CAPITAL STRUCTURE MEASURES
T.L/T.A
T.L/NET WORTH
CAPITALIZATION RATIO
T.L / NET SALES
53
CHAPTER # 03
PESTEL
&
SWOT ANALYSIS
54
3.1 PESTEL ANALYSIS
First of all it should be known that what PESTEL analysis is what it includes and how it can affect an
organization.
PESTEL stands for:
Political
Economic
Social
Technological
Environmental
Legal
There are many factors in the macro-environment that will affect the decisions of the managers
of any Nishat Mills. Tax changes, new laws, trade barriers, demographic change and government
policy changes are all examples of macro change. In PESTEL analysis we examine all these
important factors and how they might have an effect on Nishat Mills.
3.1.1 POLITICAL FACTORS:
These refer to government policy such as the degree of intervention in the economy. What goods
and services does a government want to provide? To what extent does it believe in subsidizing
firms? What are its priorities in terms of business support? Political decisions can impact on
many vital areas for business such as the education of the workforce, the health of the nation and
the quality of the infrastructure of the economy such as the road and rail system.
If we analyze these factors by putting Textile sector ahead, it can be analyzed that Government
does have strong affect on the textile sector of Pakistan. As this country does not have
established a strong political base since its independence, every new government launches its
own policies that rotate around their own benefits rather that providing benefits to the textile
sector of Pakistan. We face unstable price determination policies that ruin the planning of the
textile sector. The government has no control over suppliers so they provide raw material to
mills on their rate rather than determined by the government. Ultimately this affects the textile
55
sector. I was told that company faced problems in 2009 because of the uncertainty in the price
level. Because of the predictions that the raw material price will increase next year at a sudden,
they stocked a large amount o raw material. But the price declined and they had to face the loss
next year.
Pakistan is the 8th
largest exporter of textile products in Asia. As Nishat Mills also have large
exports to the foreign countries. Therefore when Pakistan is facing political instability and its
relation with other countries go worse, this will ultimately affect the textile industry. Since 9/11
Pakistan exports have been reduced very much. People are very threatened from political
environment of the country, so they are shifting industry to foreign countries.
World trade agreements are very much affected by the corrupted governments. As the industry
has to face many obstacles if they don’t comply with the terms of political persons having high
will. The ongoing war on terror and political instability scares the big investors. Investors,
weather local or foreign are usually not shy of risk. They know high gains follow high risks but
they hate to enter a market that lacks transparency and where mobility of their capital is not
ensured. So the main points that come under the political factors that have direct or indirect
affect on the company are:
Weak political base
Unstable price
Sudden changes in the policies
Threat of country conditions. i.e. war on terrorism
3.1.2 ECONOMICAL FACTORS:
Economical factors include interest rates, taxation changes, economic growth, inflation and
exchange rates. Economic change can have a major impact on a firm's behavior. For example:
Higher interest rates may deter investment because it costs more to borrow
Inflation may provoke higher wage demands from employees and raise costs
Higher national income growth may boost demand for a firm's products
Overseas economic growth
Higher tax rates
56
Domestic Issues:
Pakistan is facing all the problems mentioned above. The government has been unable to provide
the manufacturing sector with what it needs to flourish. Bangladesh government is investing in
their manufacturing industry. They are providing electricity approximately at 35% lower rates
than Pakistan. The supply for the orders is interrupted very much. International buyers are
reluctant to do business in Pakistan as orders placed in Pakistan are often delayed due to
unavoidable circumstances such as electricity shortages, gas shortages, and petroleum levy and
sudden increase in its prices. The high cost of doing business is because of intensive increase in
the rate of interest which has increased the problems of the industry.
Global Recession:
Global recession has badly affected the textile sector of Pakistan. This recession caused a very
high rate of inflation, which, in 2010, had increased to a enormous 25% as compared to a 7.9%
of 2008. Dollar rate has been increased 60 to 95 Rs. in short time. These events ultimately hit the
company in various ways.
Taxation Issues:
The Textile Industry was one of the industries of Pakistan that enjoyed cent percent Zero rating
facility, which means that their products are not subject to any sales tax. The applicability of the
new sales tax system for textile sector has become applicable from April 1, 2011.
Due to all the above contributing factors the cost of doing business in Pakistan has increased
immensely. That affects the Nishat mill’s activities.
3.1.3 SOCIAL FACTORS:
Changes in social trends can have impact on demand for a firm's products and the availability,
attitudes to work, income distribution and willingness of individuals to work. In social factors
demographics have a lot of importance. Demographics include age structure of the population;
gender; family size and composition; changing nature of occupations etc.
Some important social factors that affect NML are as:
57
Health consciousness
Population growth rate
Age distribution
Career attitudes
Emphasis on safety
As the lifestyle of people changes their needs change, so NML is there to fulfill their
requirements regarding clothing admirably. Its products are available for different age groups
and gender. The very good example product wise is Nishat Linen project. It provides the latest
and the premium products in Pakistan. It has launched its outlets in more than 20 cities of
Pakistan including Sahiwal.
The contribution of this industry to the total GDP is 8.5%. It provides employment to
about 15 million people, 30% of the country work force of about 49million. Nishat Group is
providing employment to more than 30,000 (2008) people.
Nishat Mills Ltd. is a large organization and according to its claims of social responsibility it
provides its employees with good attitude to work and leisure and a safe work environment. Now
what this organization is doing under corporate social responsibility is also venerable.
Donations: During the financial year 2010-2011 the Company contributed a total of Rupees 7.8
million towards various social welfare projects through donations to different charitable
organizations and trusts.
Equal Opportunity Employer: The Company has been offering employment opportunities to
people from various ethnicities and both the genders without any prejudice or bias. Equal
Opportunity Employer is a label Nishat is proud to claim for itself.
3.1.4 TECHNOLOGICAL FATORS:
New technologies create new products and new processes. Technology can reduce costs,
improve quality and lead to innovation. These developments can benefit consumers as well as
the organizations providing the products. Technological factors can lower barriers to entry,
reduce minimum efficient production levels, and influence outsourcing decisions.
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Some technological factors include:
Research & Development activity
Automation
Technology incentives
Rate of technological change or rate of technological obsolescence
NML is taking care of all these important factors to be successful in today’s severe competition.
Its research and development department is working to use cost and energy efficient machines to
produce best product for its customers. Mostly processes are automated. Modern machines are
taking place of workers and ultimately reducing the organizational costs. It provides the latest
software for the data entry system. Its IT department is working a lot to provide the best to
achieve the benchmarks set by the company. It provides intranet service to its employees to
create ease among work activities. Concerned persons can get access to the relevant data when
needed. So it overcomes its competitors by using latest technology and advanced information
technology system. It is using the latest machines and techniques in Spinning, Weaving, Dying
and stitching departments to produce fine garments.
3.1.5 ENVIRONMENTAL FACTORS:
Environmental factors include the weather and climate change. Changes in temperature can
impact on many industries including farming, tourism and insurance. With major climate
changes occurring due to global warming and with greater environmental awareness this external
factor is becoming a significant issue for firms to consider. The growing desire to protect the
environment is having an impact on many industries and NML is one of them that are conscious
about what is good for the environment.
General moves towards more environmental friendly products and processes are affecting
demand patterns and creating business opportunities.
Pakistan is beautiful country where all four weather seasons emerge. So Nishat has launched
seasonal varieties to fit according to the weather.
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On the other side to save the environment from being polluted it takes precautionary measures
like it has set up a water treatment plant.
Water Treatment Plant: NML has a large water treatment plant because it produces chemically
contaminated water from Dying unit, so to treat this before throwing the water out it makes water
cleans. The capacity of the water treatment plant is 280m3/Hour.
Occupational Safety and Health Standards: Most of the production units of the Company are
ISO-9001 and SA-8000 certified. These standards are being developed and monitored by
“International Organization for Standardization” and “Social Accountability International”,
ensuring quality management systems and excellent working conditions for employees.
3.1.6 LEGAL FACTORS:
Legal factors are related to the legal environment in which firms operate. In Pakistan there have
been made laws by the government that provide protection to both the company and the
consumer like the laws about discrimination and disability discrimination , an increase in the
minimum wage and greater requirements for firms to recycle affects an organization’s actions.
Legal changes can affect a firm's costs (e.g. if new systems and procedures have to be developed)
and demand (e.g. if the law affects the likelihood of customers buying the good or using the
service).
Different categories of law that NML has to consider are;
Consumer laws: These are designed to protect customers against unfair practices such as
misleading descriptions of the product. And NML is strongly abiding by this rule that it declares
the product information and specifications as they are.
Competition laws: These are aimed at protecting small firms against bullying by larger firms
and ensuring customers are not exploited by firms with monopoly power. Instead NML has
strong relations with small firms related to the textile sector because it has to purchase the Grey
Cotton from many small companies to meet its requirements. And yet in Pakistan Textile sector
does not come under monopoly because there are a large number of firms working here, that’s
why there are no chances of customers’ exploitation.
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Employment laws: These cover areas such as joblessness, dismissal, working hours and
minimum wages. They aim to protect employees against the abuse of power by managers. As
NML is working as an organization of equal opportunity employer, so its treatment with the
employees is very much satisfactory. They have a strict policy regarding working hours of
employees and workers and if someone works extra time, he is paid extra. There are laws against
discriminatory treatment. And the organization provides wages according to the government
minimum wage policy.
Health and Safety measures: These laws are aimed at ensuring the workplace is as safe as is
reasonably practical. They cover issues such as training, reporting accidents and the appropriate
provision of safety equipment. These health and safety measures are part of company’s code of
conduct. NML tries to arrange a safe work environment within its premises. The organization has
a large fully equipped medical unit that deals with the emergency and regular fatigue and
sickness situations.
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3.2 SWOT ANALYSIS
Definition:
It is a tool that identifies the Strengths, Weaknesses, Opportunities and Threats of an
organization. Specifically, SWOT is a basic, straightforward model that assesses what an
organization can and cannot do as well as its potential opportunities and threats.
The method of SWOT analysis is to take the information from an environmental analysis and
separate it into internal (strengths and weaknesses) and external issues (opportunities and
threats).
SWOT analysis of Nishat Mills Limited:
Strengths:
ISO 9001-2000:
Advanced Security System
OKTEX 100:
High quality product
Latest mechanized machinery.
Tremendous market positioning
Highly qualified and skilled management
Highly Motivated Workforce
Adequate financial resources
Competitive advantage
Equipped with MIS System
Own power generation plant
Weaknesses:
High cost of production
Centralized decision making
Frail image in the international
market
Small international market share
Less promotional activities
Lack of benefits and rewards for
the employees
Opportunities:
Organization can expand product lines
Organization can reduce the cost by
proper utilization of resources
Organization can hire more well-
educated and experienced person
Threats:
Buyer needs diversity Political
instability
Governmental policies instability
Global Economic recession
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SWOT ANALYSIS DETAILS
3.2.1 STRENGTHS:
ISO 9001-2000:
Nishat is certified under ISO 9001-2000, so it meets the requirement of international standard
and has a value in the mind of concerned people.
Advanced security system:
Nishat has an advanced security system. There are hidden security cameras which capture the all
moments. The entry system of all the workers is much secured. Workers are allowed to enter
after their hand is scanned through a scanning machine.
Oktex 100:
Nishat is also Oktex 100 certified. It means that Nishat does not use any kind of hazardous
materials that may have an effect on the customers or environment.
High quality product:
Nishat is using advance technology like they have modern machinery by which the quality of
product produced is very high and it is made sure that meets international quality standards.
Latest mechanized machinery:
They are using modern looms which they have purchased from Japan and France. And by using
that latest machinery the productivity of the employees is very high.
Tremendous market positioning:
Nishat is one of the pioneer textiles in the Pakistan so it has got the position in the mind of its
customer. And being an old textile company people are loyal to it. Nishat has a better position in
the mind of its customers.
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Highly qualified and skilled management:
The management of Nishat is skilled; they have hired the foreign graduate people in their
management and also experienced people from all over the country.
Highly motivated workforce:
They are compensating to their employees well which motivates the workforce and they seem
together as a unit and work together as a family.
Adequate financial resources:
The owner of the Nishat is one of the richest persons in Pakistan and they have enough to face
the stiff financial situation or when the market is cold and have investments in other industries
like cement, Bank, They have adequate financial resources to meet tough times when there is
market downturn.
Competitive advantage:
It is an old textile business and it has still kept its position in the textile market on all others
competitors nationwide so it has a distinctive edge.
Equipped with MIS System:
They have a management information system by which the departments and employees are
connected with each other and they have a data warehouse by which they can share their
information easily.
Own power generation plant:
Nishat has its own power generation plant. Nishat is the pioneer in the private organizations who
start the power generation. It is also selling its electricity to WAPDA.
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3.2.2 WEAKNESSES:
High cost of production:
The production cost is high because of not properly utilization of its resources. They are using
latest machinery but they are not adopting advanced production and marketing techniques. So
improvement is still needed in these areas.
Centralized decision making:
Mostly decisions are made by the upper management which is weakness of the Nishat. They
don’t take into considerations of the issues with other employees or worker in detail. They
should decentralize their decision making power to lower level to take the urgent decisions; that
will ultimately be fruitful for the company.
frail image in the international market:
As they have high cost of labor and production so specialized countries in textile field like
Bangladesh and China take advantage of lower labor and production cost taking more orders
from foreign countries. This is a weak point.
Small international market share:
Although Nishat has very strong image in the market nationwide financially and product wise
but it has small market share in the global textile industry due to the sound competitors likes
china, and Bangladesh etc.
Less promotional activities:
The advertising and promotional cost of the Nishat textile is very low as it does not take an
effective part in advertisement. It can increase its turnover manifolds by using effective
advertisements tactics these days, as people lives are very much affected by electronic media.
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Lack of benefits and rewards for the employees:
Nishat does not take effective steps to improve the stands of living of its employees by not
providing effective bonus programs and performance reward systems. So this is another
weakness.
3.2.3 OPPORTUNITIES:
Organization can expand product lines:
Currently Nishat is not dealing in knitwear; they can expand their product line by producing
knitwear. So still there are other businesses that Nishat can commence because they have their
own energy plants and machinery so extra cost for the production will be covered by expanded
businesses.
Organization can reduce the cost by proper utilization of resources:
If the cost of different matters which is not utilizing properly is controlled by the Nishat
management they can produce more in a few costs. It has to develop a further systematic process
for controlling and managing resources. Like they can adopt new labor management strategies.
Organization can hire more well-educated and experienced personnel:
Still improvements are required in workforce. They can take advantages by hiring more skilled
people and they should hire young, fresh and energetic staff for their betterment.
3.2.4 THREATS:
Buyer needs and wants diversity:
There is much more diversification in consumers’ mind. Their needs continuously change as the
occasions and environment change.
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Political instability:
Political instability affects the Nishat because of the quota system the company can be restricted
by the government to export. Lots of challenges are being faced by the company due to unstable
country conditions. They cannot form long term decisions as the environment is uncertain.
governmental policies instability:
Government policies are changing day to day so it is a threat for the Nishat to survive in such an
unpredictable environment.
Global Economic recession:
As globally a cold economic war is started since the population is increased manifolds in last
decade as compared to scarce resources.
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CHAPTER # 04
SUGGESTIONS &
RECOMMENDATIONS
LEARNING AS AN INTERNEE
IF I WERE THE MANAGER
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LEARNING AS AN INERNEE
It is difficult to write about what I learned at Nishat Mills Ltd. Because when I entered within
such a big organization, I was bombarded with lot of things at the same time that I could not
realize suddenly. But with the passage of time I got realized that my thinking style, my
punctuality, and my routines are just got better. I became a committed person. Some of the skills
that I have internalized at Nishat Mills Ltd are discussed below;
Commitment:
I was kept rotated by my instructor to different persons within the department so that I could get
the maximum exposure to their working tasks, their abilities their commitment to the work. They
also assigned sometimes the task of their own to perform and I took them as my boss is giving
me orders and performed them with commitment. So I learnt the skill that how to be committed
to my seniors and to my work.
Teamwork experience:
When I entered the organization I considered myself as a part of team. Large organizations are
built by the teamwork efforts of the individuals. I learnt thee how to perform tasks within a team,
where lots of other people are also connected to you.
MIS learning:
The company has its own management information system developed in java. There were certain
restrictions about using this network. But at certain occasions, employees let me allowed to
perform some minor tasks. And I also I learned how information flows through different levels
within the departments and how can a relevant person use that information.
Managerial skills exposure:
I got exposure to other different skills that can be helpful in my future that how to manage work,
relations with officers, putting pressure in subtle ways to get work done in time. I observed that
you can’t be too lenient or too harsh to your employees. A manager has to make relations to such
a level that no feels that my manager is too lousy to control his personnel nor too harsh to keep
atmosphere stressful.
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SUGGESTIONS
During my internship I felt some inadequacies that should be paid attention or modified.
Bonus system:
The proper facility of bonuses is provided to the production department, and there is no defined
and proper system to award bonuses to other departments. Compensation and reward system
should be brought at higher level in order to let the employees be motivated and happy. There
should be more fringe benefits for the employees taking into consideration their devotion skill
and experience.
This higher level would make the employees more efficiency & effective. Therefore my
suggestion is that the bonuses should also be awarded to other departments too.
Employees training:
Although there are educated and talented staff working in Nishat Mills limited but it is the need
of the hour that the staff should be given the time-to-time refresher courses for the up to date
knowledge for meeting knew and dynamic challenges in the growing business concern of Nishat
Mills Limited. New training courses will help in uplifting the quality of the work of employees.
Need of a cafeteria:
As NML is consisting of a large area and there is only is a small canteen that is far away from
office area and is located near plants. So from my point of view a couple of canteens should be
available near office area in order to minimize the distance that will help in improving the
working time of the employees, because less time will be consumed to travel from one point to
another.
Training program to recruits:
When I was in the Human Resource department, I observed that fresh boys with no working
experience were also hired by the department. They did not even know how to operate the
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machines where they will work. There was no proper training provided to them. They learn by
direct experience and interaction with the other workers.
These new workers should be provided with the proper training because working with the big
and costly machines can be harmful to the workers and the company may have to bear the loss in
case a costly machine malfunctions.
Compensation for the internees:
The company has no policy to compensate the internees. There should be little compensation for
trainees as well, as they can fulfill their day to day traveling and food expenses. By doing this
trainees will show more interest, more devotion, more potentials and will work with their full
mental and physical efforts.
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IF I WERE THE MANAGER
The things that I observed during my internship in a way that might have been improved to a
certain level were not up to the mark. These points are discussed below;
Social interaction activities:
The personnel were not provided with any kind of social activity where employees from different
departments can make interaction with each other. In this way their working collaboration to
achieve the organizational strategic goals might have been helped a lot. So I as a manager would
be creating such kind of activities like, employees achievement award ceremony, coffee
meetings etc. the core purpose of this activity would be to make employees not to feel that they
are not the working robots rather to provide them recreational activities.
Assigning tasks that will stretch the employees:
When my employees begin to take on more responsibility and demonstrate that they're capable, I
will give them tasks that will expand their skill sets and help them take more ownership of their
work. For example I can give them the role playing of a manager someday that will give them
the opportunity to think out of the box, facing new issues that managers face. So they will learn
to tackle things in a good way.
Let people make mistakes:
In most of the organizations people are ordered strictly to not to do any mistakes, and they are
reminded this message again and again that they feel reluctant to make their own decisions
because they might not do it correctly? That ends up making the employees more dependent on
the manager. This makes them less effective and unnecessarily drains a significant portion of
manager’s time.
In order for people to think for themselves, they need to learn, and in order to learn, sometimes
they need to make mistakes. So I will trust them, and give them a fair margin of error.
Finally I will say that being a good manager doesn't mean being a people pleaser. If an
employee keeps crossing the line or failing to meet expectations, I will use a feedback sandwich
or nonviolent communication to correct the situation. If that fails, I will consider firing them.
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CHAPTER # 05
REFERENCES
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REFERENCES
1. Mr. Saeed Nawaz (General Manager Weaving Department)
Contact: 03334053939
2. Mr. Fayaz Ahmed (Manager Accounts Department )
Contact: 03334287685
3. Javed Iqbal (Accounts Officer)
4. www.nishatmills.com
5. http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm
6. www.dgtrdt.gov.pk/Research/38th_syndicate_reports/6.pdf
7. http://www.pakonomy.com/2012/02/08/alarming-trends-in-textile-industry-of-pakistan/
8. http://www.smallbusinessnotes.com/business-finances/financial-ratios.html
9. http://www.youtube.com/watch?v=R2yEH2lyzW0&feature=related
10. http://www.pakonomy.com/2012/02/08/alarming-trends-in-textile-industry-of-pakistan/
11. http://www.oup.com/uk/orc/bin/9780199296378/01student/additional/page_12.htm
12. http://tutor2u.net/business/strategy/PEST_analysis.htm
13. http://www.quickmba.com/strategy/pest/
14. http://www.investopedia.com/terms/s/swot.asp
15. http://www.wikihow.com/Be-a-Good-Manager
16. http://www.is.wayne.edu/mnissani/SE/PrefaceTopics.htm
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ANNEXTURES
