Project Report

ON

Nishat Textile Mills Limited

Presented To:

Mr. Abid Ghouri

Presented By:

Muhammad Waheed M-13083

MBA (Finance)
Session 2007 - 2009

University of South Asia.

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 Dedication

This Report is dedicated to

my parents who have
encouraged and support me in
the field of study.

May they live long!

(Aamin)

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 The tradition of quality, in products and business
practice, runs unbroken through the history of
Nishat group since its inception in 1950.

INTRODUCTION:

When Pakistan came into being there was 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. The export revenue of textile
industry contributes a large share to the GDP of Pakistan.

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.

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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.

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.
Composite project at Nishat mills limited Faisalabad covering 98 acre of land is
providing all 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. His is a 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.

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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.

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COMPANY INFORMATION
BOARD OF DIRECTORS: Mian Hassan Mansha
Mr. Fayaz Ahmad Longi (NIT)
Mr. Muhammad Bilal Sheikh (PICIC)
Mr. Aftab Ahmed Khan
Mr. Khalid Qadeer Qureshi
Mr. Muhammad Azam
Rana Muhammad Mushtaq
Mr. Muhammad Ali Zeb

CHIEF EXECUTIVE: Mrs. Naz Mansha

CORPORATE DEPARTMENT: Mr. Muhammad Azam Company Secretary

Mr. Khalid Mahmood Chohan Senior Manager corporate

AUDITORS: Riaz Ahmad and Company

Chartered Accountants

LEGAL ADVISOR: Mr. M. Aurangzeb Khan, Advocate,

Chamber No. 6, District Court, Faisalabad.

BANKERS TO THE COMPANY: ABN AMRO Bank

Allied Bank of Pakistan Limited
American Express Bank
Askari Commercial Bank Limited
Credit Agricole Indosuez
Citibank N.A.
Deutsche Bank
Emirates Bank International P.J.S.C
Faysal Bank Limited
Habib Bank Limited
Habib Bank A.G. Zurich
Mashreq Bank P.S.C.

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 National Bank of Pakistan
Standard Chartered Grind lays
Societe General – The French
And International Bank
The Hong Kong & Shangai
Banking Corporation Limited
Union Bank Limited
United Bank Limited

MILLS: Niashatabad, Faisalabad

(Spinning, Weaving, 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)

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REGISTERED OFFICE &

SHARES DEPARTMENT Nishat House,

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

LIAISON OFFICE: 1st Floor, Karachi Chamber

Hasrat Monani Road, Karachi.
Tel: 021-6367812-16
Fax: 021-2412936

HEAD OFFICE: 3rd and 4th Floor E.F.U. House,

6-D, Main Gulberg, Jail Road, Lahore.
Tel: 042-5715646-52
Fax: 042-5715644-5

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NUMBER OF EMPLOYEES

Year 1998 1999 2000 2001

No. Of employees 9445 10331 10090 13146

NISHAT GROUP OF COMPANIES

 NISHAT MILLS LTD, FAISALABAD

 NISHAT DYEING AND FINISHING, LAHORE
 NISHAT FABRICS, BHIKHI
 NISHAT SPINNING, FEROZE WATTOAN
 NISHAT SEWING, LAHORE

PRODUCT LINE
Products 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

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 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
 Table cloth and napkins
 Aprons
 Kitchen gloves
 Pot holders
 Chair pads with circle tacks
 Couch cove

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HISTORY AND PRESENT STATUS OF NISHAT

The history of Nishat dates back to 1951, when Mian Mohammad Yahya founded Nishat
Mills. After almost half a century of undaunted success, Nishat Group 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 has its roots firmly planted into four-core business
namely

1. Textiles
2. Power generation
3. Banking
4. Cement

The textile business is further subdivided into 2 textile divisions;

 Nishat Faisalabad
 Nishat Chunian
I did my internship in the head office of Nishat Faisalabad.

TEXTILE CAPACITY
Production 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.

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

D.G khan Cement Company limited

In 1992, Nishat group acquired D.G Khan Cement Company LIMITED from the
government of Pakistan. DGKCC is the second largest project of the group and is ideally
located in the heart of the Pakistan. DGKCC Unit No I has a capacity of 2,200 tons per
day, a new unit having the capacity of 3,300 ton was established in 1997, international
Finance Corporation and Common Wealth Development Corporation have finance this
unit. With addition of unit NO 2, DGKCC has become the largest manufacture cement of
Pakistan.

Muslim commercial bank

In 1991, Nishat Group ventured into the financial sector through the acquisition of
Muslim Commercial Bank. MCB has the grown ever since and is now the largest in the
private sector. MCB has a network of over 1500 branches employing over 12,000 people.

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Management of Nishat Mills Limited

Nishat Mills Limited employees are highly qualified professionals and have a young,
energetic and dedicated team of 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 desired 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:

1. It must provide a product (good or service) that suits best to the company’s
capabilities and for which there is a sufficient market.

2. It must provide the product with consistent quality at a level that appeals to
intended customers and satisfy their needs.

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

reasonable sale price.

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INTERNATIONAL STANDARD OF ORGANIZATION (ISO)

Nishat mills limited have achieved ISO 9001 and ISO 9002 certificate in 1997. In order
to achieve this certificate following requirements should be fulfilled,

(1) MANAGEMENT RESPONSIBILITIES

Management responsibilities includes the following,

i. 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.

ii. 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.

iii. 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.

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iv. 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.

v. 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.

(2) QUALITY SYSTEM

I. System Procedure
ISO 9001 requires that there should be proper system for each work. Standardization of
work is necessary for achieving effective certification.

II. 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.

III. 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.

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 IV. Work Instructions
Instruction should be provided for better handling of job, and it is exactly in its true spirit
followed at Nishat mills limited.

(3) CONTRACT REVIEW

i. Reviews
Sometimes contracts are reviewed, that reviewing must be in proper manner. Contract
should be given keeping in view of interest of the company.

ii. Amendments
If the amendments are made in the contract, they should be made with authorized person.
And management should be fully informed with that.

iii. 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.

(4) DESIGN CONTROL

1. 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.

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 2. 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.

3. Verify Validity Of Design

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

(5) Customer Data Control

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.

(6) Control of Customer Supply Product

There should be proper control over customer’s products.

(6) Product Identification and Tracebility

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.

(7) Inspection

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There should be proper inspection of stores so that every thing functions according to
manners prescribed by certificates.

(8) 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.

(9) 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.

(10) Training Programs

Training programs should be there to upgrade the skills of employees. On the job training
programs should be provided so that workers get knowledge about work.

(11) Statistical Techniques

Various statistical tools are required to better controls the affairs of organization. They
should be available to achieve quality awards. Uses of information technology,
automation of factory, Internet and computer technology are prominent features in
achieving ISO 9001 and ISO 9002.

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 MEMORANDUM OF
ASSOCIATION

NISHAT MILLS LIMITED

I. The name of the company is NISHAT MILLS LIMITED.

II. The Registered office of the company shall be situated in the Province of Punjab,
Pakistan.
III. The objectives for which the company is established are as follows:

“OBJECTS”

. To acquire and take over as a going concern the business rights, liabilities and
undertaking of the NISHAT MILLS, LYALLPUR a firm belonging to:

o Mohammad Yakub
o Mohammad Shafi
o Abdul Hamid
o Mohammad Fafiq
o Mohammad Yaha
o Mohammad Ayoob
o Mohammad Farooq
o Haji Maula Baksh

1. 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

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 agreement referred to Clause 3 of the Company’s Articles of Association and to carry
the same into effect with or without modification.

2. 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.

3. To purchase or take on lease or otherwise acquire and work and spinning mills,
weaving mills, ginning factories or presses for pressing merchandise into bales or
any other similar concern an the property, business and goodwill appertaining
thereto.

4. 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.

5. To carry on the business of spinners, weavers manufacturers balers and pressers

ofall jute, cutting, jute rejections, hemp, cotton, wool, hair and other fibrous
material, and to transact all manufacturing, curing, preparing, dying, coloring or
bleaching processed and mercantile business that may be necessary or expedient,
and to vend the raw material, and manufactured articles.

6. 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.

7. 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.

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 8. To weave and otherwise manufacture, buy, sell, import, export and otherwise deal
in all kinds of cloth and other goods and fabrics including textile, filted, netted
and looped goods.

9. 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.

10. To carry on all or any of the business of silk mercers, silk weavers furriers,
haberdashers, hosiers, manufacturers, importers, and wholesale and retail dealers
of and in textiles and gold and silver thread fabrics of all kinds, milliners,
dressmakers, tailors, hatters, clothiers, outfitters, glovers, lace manufacturers and
feather dressers and allied products of every description.

11. To make arrangements for the supply of cotton, wool, flax,, hemp, silk, jute and
other fibrous and similar products for use in the mills run by the company or
otherwise, either directly or in cooperation with any other person and for this
purpose to set up farms, estates and other establishments.

12. To purchase, or take on lease for any term of year or otherwise acquire land with
or without buildings thereon at such price or rent and under and subject to such
terms and conditions as to title or otherwise as may be thought fit and to erect,
build and construct thereon such factories (ginning or otherwise), mills
warehouses, tanks, chawls, and other buildings, and to purchase take on lease or
otherwise acquire such machinery, engines and apparatus and other property and
erect them and such other therein as may be necessary for the purposed of the
company.

13. To manufacture, refine, improve, purchase, sell, export, import, stock, store or
otherwise deal in woolen, cotton, silk, or mercerized articles, goods, yarn or raw

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 material or nay other quality of the same and to dye it or to manufacture there
from articles of hosiery such as socks, stocking, underwear, outwear, banyans,
jersey, mufflers, bands or any other articles of knitting line or embroidery of
every description, beads, tapes, laces or any other goods of similar nature.

14. To erect, manufacture, contract, install, purchase or hire machinery, mills and
factories for the manufacture of starch and other allied products.

15. 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.

16. To carry on all or any of the business of oil from cotton seeds, rape seeds and all
other varieties of seeds and other sorts of oil and any products thereof and the
manufacturers and dealers of vegetable ghee.

17. To carry on the business of dealing and importing rubber in its raw or
manufactured state and to treat, prepare, render marketable and manufacture all
articles or rubber including Motor and Cycle tyres.

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

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

exporters, factors and warehousemen except managing agents.

20. To transact or carry on all kinds of agency commissio0n and contract business in
Pakistan or abroad and in particular in relation to industrial, manufacturing and
financial transactions and to act as agents of any person, firm, company,
Government or local authorities except managing agents.

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

22. To adopt such means of making known the products and business of the company
as may seem expedient and in particular by advertisement and publicity in the
press or otherwise, exhibitions, publication of books and periodicals and by
granting prizes, rewards and donations.

23. To purchase or by any other means acquire and protect, prolong and renew,
whether in Pakistan or elsewhere any patent rights, brevent, invention, licenses,
protection, concessions, and the like, which may appear likely to be advantageous
or useful to the company, and use and turn to account and to manufacture under or
grant licenses or privileged, in respect of the same and to spend money in
experimenting upon and testing or in improving or seeding to improve any
patents, inventions or rights which the company may acquire or propose to
acquire.

24. 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.

25. To carry on the business of electrical engineers, electricians, engineers,

contractors, manufacturers, constructors, suppliers, of and dealers in electrical and
other appliances, cables, wire-lines, dry cells, accumulate, lamps and works and to
generate, accumulate, distribute and supply electricity for the purpose of light,
heat, motive power and for all other purposes for which electrical energy can be
employed and to manufacture and deal in all apparatus and things required for or
capable of being used in connection with the generation, distribution, supply,
accumulation and employment of electricity, including in the term electricity all
powers that may be directly or indirectly derived there from or may be
incidentally hereafter discovered in dealing with electricity.

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 26. To underwrite, subscribe, acquire, invest, hold, sell, exchange or transfer shares,
debentures stocks, bonds, modaraba certificates, participation term certificates,
term finance certificate or other securities issued or guaranteed by any company,
constituted in Pakistan or abroad or issued or guaranteed by any Government,
State, sovereign, rulers, commissioners, public body or authority, supreme, local
or others and to exercise and enforce all rights and power conferred by or
incidental to the ownership thereof.

27. To borrow raise or secure the payment of money by the issue of debentures,
debentures-stock, bonds, obligations and securities of all kinds, or on personal
security or without security, and to frame, constitute, and secure same as may
seem expedient, with full power to make the transferable by delivery, or by
instruments of transfer or otherwise and either perpetual or terminable, and either
redeemable or otherwise on the undertaking of the company or upon and specific
property and rights, present and future of the company.

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

29. To pay for any property or rights acquired by the company, either in cash fully
paid shares or by the issue of securities, or partly in one mode and partly in
another and generally on such terms as may be determined.

30. 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.

31. To establish and support, or aid in the establishment and support of association,
institutions, funds, trusts and conveniences calculated to benefit employees and
ex-employees of the company, or its predecessors in business or the dependents or
connections of such persons and to grant pensions and allowances, and to make

MBA, UNIVERSITY OF SOUTH ASIA 24

 payments towards insurance, and to subscribe or guarantee money for charitable
or benevolent objects, or for any exhibition or for any public, general or useful
object.

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

33. To acquire and carry on all or any part of the business or property and to
undertake any liabilities of any person, firm. Association or company carrying on
any business which the company is authorized to carry on or possessed of
property or rights suitable for any of the purposes of this company and as the
consideration for the same to pay cash or to issue any shares stocks or obligation
of this company.

34. To promote and form and to be interested in and to take, hold and dispose of
shares and securities in any other company having objects altogether or in part
similar tot those of this company, or carrying on any business capable of being
conducted so as directly or indirectly to benefit this company and to transfer to
any such company all or any of the property, rights and liabilities of this company
and to subsidies or otherwise assist any such company.

35. To appoint such person and/ or firm as may be deemed expedient to be

secretaries, managers, branch managers, or district representatives of the company
upon such terms as the company may determine.

36. To undertake and execute any trust the undertaking whereof may seem desirable
and either gratuitously or otherwise.

37. To procure the company to be registered or recognized in any foreign country or

any place.

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 38. To enter into partnership or arrangement in the nature of a partnership,
cooperation or union of interests, with any person or persons company or
cooperation engaged or interested or about to become engaged or interested in the
carrying on or conduct any business or enterprise which the company is
authorized to carry on or conduct or from which the company would or might
derive any benefit whether direct or indirect.

39. To sell or dispose of the undertaking of the company or any part thereof in such
manner and for such considerations as the company may think fit and in particular
for shares, debentures stock or securities or any other company whether promoted
by this company for the purpose or not, and to improve, manage, develop,
exchange, lease, dispose off turn to account, or otherwise deal with all or any part
of the property and rights of the company.

40. 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.

41. To distribute any of the company’s property among the members in specie or in
any manner thereof.

42. To take part in the formation, management, subsidizing, supervision or control of

the business or operations, of any company or undertaking and for the purpose to
act as directors, trustees, administrators, managers, secretaries or in any other
capacity and to appoint and remunerate any directors, administrators, managers or
accountants or other experts.

43. To advance and lend money on the security of assets of all kinds or without
security upon such terms as may be arranged.

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 44. To give any guarantee in relation to the payment of any loan, debentures-stock,
bonds, obligation, securities and to guarantee the payment of interest thereon or of
dividends on any stock or shares of the company.

45. To constitute any trust with a view to the issue of stocks or securities based on or
representing any shares, stocks, or other assets specially appropriated for the
purpose of any such trust and to settle and regulate, and if thought fir, to
undertake and execute any such trusts and to issue, dispose or hold any preferred,
deferred or other special stocks or securities.

46. To cause the company to be registered or recognized in Pakistan or any other

country.

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

premium or at a discount.

48. To remunerate any person or company for services rendered or to be rendered, in

placing or assisting to place or guaranteeing, the placing of or under-writing of
any of the shares in the company’s capital or any debentures, debentures-stock to
other securities of the company, or in or about the formation and promotion of the
company or the conduct of its business.

49. To enter into any arrangement with any Government or authority, supreme,
municipal, local or otherwise that may seem conductive to the company’s objects
or any of them, and to obtain any such Government or authority, all right,
concessions and privileges which the company may think it desirable to obtain,
and to carryout, exercise and comply with any such arrangements, rights,
privileges and concessions.

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 50. To carry on various other businesses which in the opinion of the company it is
desirable or convenient to carry on in conjunction with or in lieu of any other
business which the company is authorized to carry on.

51. To do all or any of the above things in any part of the world, and either at
principals, agents, trustees, or otherwise and either alone or in conjunction with
others and, by through agents, subcontractors, trustees or otherwise.

52. To do all such other things as are incidental or the company may think conducive
to the attainment of the above objects or any of them. It is hereby declared that in
the interpretation of this clause the power conferred upon the company by any
paragraph, shall not be restricted by reference to any other paragraph, or by the
juxtaposition of two or more objects and that in the event of the any ambiguity in
this clause every paragraph thereof shall be constructed in such a way as to widen
not to restrict the power of the company.

53. To carry on all or any kind of the cement business of manufacturers, sellers,
dealers, and conveniences of all kinds.

o The liability of members is limited.

o The authorized share capital of the company shall be RS. 1500000000
(one billion five hundred million) divided into 150000000 (one hundred
fifty million) ordinary shares of Rupees of 10 each. The company shall
have the power to increase, reduce or reorganize the said capital and
divide shares in the capital for the time being in several classes in
accordance with provisions of Companies ordinance, 1984.

MBA, UNIVERSITY OF SOUTH ASIA 28

 ARTICLES OF ASSOCIATION
OF
NISHAT MILLS LIMITED
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.

1. PRELIMINARY

1. 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.

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

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

altered in accordance with law.
b) Board means a meeting of directors duly called and constituted or as the
case may be the directors assembled at a board.
c) Company means NISHAT MILLS LIMITED.
d) Director’s means the directors for the time being of the company or as the
case may be, the directors assembled at a board.
e) Month means calendar month according to the English calendar.
f) 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.
g) Register means, unless the context otherwise requires, the register of
members to be kept pursuant to Section 147 of the ordinance.

MBA, UNIVERSITY OF SOUTH ASIA 29

 h) Seal means the common seal of the company.
i) Section means section of the ordinance.
j) Special resolution means the special resolution of the companies defined
in section 2(1) (36) of the ordinance.
k) Words importing masculine gender include the feminine gender.
l) Words importing singular number include the plural number and vice
versa.
m) 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.
n) Words importing person shall include bodies corporate.
o) The head notes are inserted for convenience and shall not affect the
construction of these articles.
p) Unless the context otherwise requires words or expressions contained in
these articles shall bear the same meaning as in the ordinance.

I1. BUSINESS

3. 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.

MBA, UNIVERSITY OF SOUTH ASIA 30

 111. SHARES
4. 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.

5. The directors shall, as regards any allotment of shares, duly comply with such of
the provision of section 68 to 73 as may be applicable to the company.

6. Every person whose name is entered, as a member in the register shall, without
payment, be entitled to receive within three months after allotment or within
forty-five days of the applications for registration of transfer, a certificate under
the seal specifying the share of shares held by him and the amount paid upon
thereon. Provided that, in respect of a share or share held jointly by several
persons, the company shall not be bound to issue more than one certificate, and
delivery of a certificate for a share to one of several jointly holders shall be
sufficient delivery.

7. If a share certificate is defaced, lost or destroyed, it may be renewed on payment

of such fee, if any, not exceeding one rupee, and on such terms if any, ads to
evidence and indemnity and payment of expenses incurred by the company in
investigating titles as the directors think it.

8. Except to the extent and in the manner allowed by section95, no part of the funds
of the company shall be employed in the purchase of, or in loans upon the
security, the company’s shares.

MBA, UNIVERSITY OF SOUTH ASIA 31

 iv. TRANSFER OF SHARES
9. 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.

10. The directors shall not refuse the transfer any time unless the transfer is defective
or invalid. The directors may also suspend the registration of transfers prior to
the determination of entitlement or rights of the shareholders by giving seven
days previous notice in the manner provided in the ordinance. The directors may
decline to recognize any instrument unless the certificate of the shares to which it
relates, and such other evidence as the directors may reasonably require showing
the right of the transferor to make the transfer accompanies the duly stamped
instrument of transfer.

If the directors refuse to register a transfer of shares, they shall within thirty days
after the date on which the transfer was made lodged with the company send to the
transferee and the transferee notice of the refusal indicating the defect or invalidity to
the transferee, who shall, after removal of such defect or invalidity be entitled to re-
lodge the transfer deed with the company.

v. TRANSMISSION OF SHARES
11. The executors, administrators, heirs of nominees, as the case may be, of a
deceased sole holder of a share shall be he only persons recognized by the
company as having any title to the share. In the case of share registered in the
name of two or more holders, the survivor or survivors shall be the only person
recognized by the company as having any title to the share.

12. Any person becoming entitled to a share in consequence of the death or

insolvency of a member shall, upon such evidence being produced as may from

MBA, UNIVERSITY OF SOUTH ASIA 32

 time to time be required by directors, have the right, either to be registered as a
member in respect of the share or, instead of being registered himself, to make
such transfer of the share as the deceased or insolvent person could have made.
But the directors shall, in either case have the same right to decline or suspend
registration as they, would have had in the case of a transfer of the share by the
deceased or insolvent person before the death or insolvency.

13. A person becoming entitled to a share by reason of the death or insolvency of the
holder shall be entitled to same dividends and other advantages to which he
would be entitled if he were registered holder of the share, except that he shall
not, before being registered as a member in respect of the share, be entitled in
respect of it to exercise any right conferred by membership in relation to
meetings of the company.

VI. ALTERNATION OF SHARE CAPITAL

14. 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.

15. Subject to the provisions of the ordinance, all new shares shall, before issue, be
offered to such persons as at the date of the offer or entitled to receive notices
from the company of general meetings in proportion, as nearly as the
circumstances admit, to the amount of the existing shares to which they are
entitled. The offer shall be made by notice specifying the number of shares
offered, and limiting a time within which the offer, if not accepted, will be
deemed to be declined, and after the expiration of that time, or on the receipt of
an intimation from the person to whom the offer is made that he declines to
accept the shares offered, the directors may dispose off the same in such manner
as they think most beneficial to the company. The directors may likewise so

MBA, UNIVERSITY OF SOUTH ASIA 33

 dispose off any new shares which (by reason of the ratio which the new shares
bear to shares held by person entitled to an offer of new shares) cannot, in the
opinion of the directors, conveniently offered under this regulations.
16. The new shares shall be subject to the same provisions with reference to transfer,
transmission and otherwise as the shares in the original share capital.

17. The company may by ordinary resolution:

a) Consolidate and divide its share capital into shares of larger amount than
its existing shares.
b) Sub-divide its existing shares or any of them into shares of smaller
amount than is fixed by the company’s memorandum of association,
subject, nevertheless, to the provisos, to clause (d) of sub –section of (1)
of section 92.

18. The company may, by special resolution, reduce its share capital in any manner
and with, and subject to, any incident authorized and consent required by law.

19. Subject to the provisions of the ordinance, the directors may accept from any
member the surrender of all or any of his shares on such terms as shall be agreed.

VII. GENERAL MEETING

20. The statutory general meeting of the company shall be held within the period
required by section 157.
21. A general meeting to be called annual general meeting shall be held in
accordance with the provisions of section158, within eighteen months from the
date of incorporation of the company and thereafter once at least in every year
within in a period of six month following the close of its financial year and not
more than fifteen months after the holding of its last preceding annual general
meeting as may be determined by the directors.

MBA, UNIVERSITY OF SOUTH ASIA 34

 22. All general meetings of the company other than the statutory meeting or an
annual general meeting shall be called extraordinary general meetings.

23. The directors may whenever they think fit, call an extraordinary general meeting,
and extraordinary general meetings shall also be called on such requisition or in
default, may be called by such requisition, as is provided by section 159. If at
any time there are not within Pakistan sufficient directors capable of action to
form a quorum, any director of the company may call an extraordinary general
meeting in the same manner as nearly as possible as that in which meetings may
be called by the directors.

VIII. NOTES AND PROCEEDING OF GENERAL MEETING

24. 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.

25. All business shall be deemed special that is transacted at an extraordinary general
meeting, and also all that it is transacted at an annual general meeting with the
exception of declaring a dividend, the consideration of accounts, balance sheet
and the reports of the directors and auditors, the election of directors, the
appointment of, and the fixing of the remuneration of, the auditors.

MBA, UNIVERSITY OF SOUTH ASIA 35

 26. No business shall be transacted at any general meeting unless a quorum of
members is present at that time when the meeting proceeds to business. Three
members present personally who represent not less than twenty-five percent of
the total voting power either on their own account or a proxies shall be a quorum

27. If within half an hour from the time appointed for the meeting a quorum is not
present the meeting, if called upon the requisition of members, shall be
dissolved, in any other case, it shall stand adjourned to the same day in the next
week at the same time and place, and, if at the adjourned meetings a quorum is
not present within half an hour from the time appointed for the meeting, the
members present, being not less than two, shall be a quorum.

28. The chairman of the board of directors, if any, shall preside as chairman of every
general meeting of the company, but if there is no such chairman, or if at any
meeting he is not present within fifteen minutes after the time appointed for the
meeting, or he is unwilling to act as chairman, any one of the directors present
may be elected to be chairman, and if none of the directors is present, or willing
to act as chairman, the members present shall choose on of the their member to
be chairman.

29. The chairman may, with the consent of any meeting at which a quorum is present
(and shall if so directed by the meeting) adjourn the meeting from time to time
but no business shall be transacted at any adjourned meeting other than in the
business left unfinished at the meeting.

30. At any general meeting a resolution put to the vote of the meeting shall be
decided on a show of hands unless a poll is (before or on the declara5ion of the
result of the show of the hands) demanded. Unless a poll is so demanded, a
declaration by the chairman that a resolution has, on a show of hands, been
carried or carried unanimously, or by a particular majority or last, and an entry to
that effect in the book of the proceedings so the company shall be conclusive

MBA, UNIVERSITY OF SOUTH ASIA 36

 evidence of the face without proof of the number or proportion of the votes
recorded in favor of or agent that resolution.

31. A poll may be demanded only in accordance with the provisions of section 167.

32. If a poll is fully demanded, it shall be taken in accordance with the manner lay
down in section 168 and result of the pool shall be deemed to be the resolution of
the meeting at which the pool was demanded.

33. A poll demanded on the election of chairman or on a question of adjournment

shall be taken at once.

34. In the case of an equality of votes, whether on a show of hands or on a poll, the
chairman of the meeting at which the show of hands takes place, or at which the
poll is demanded, shall have an exercise a second or casting of vote.

IX. 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.

35. 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.

36. 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

MBA, UNIVERSITY OF SOUTH ASIA 37

 on a pool, by his committee or other legal guardian, and any such committee or
guardian may, on the pool, vote by proxy.

37. 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.

38. The instrument appointing a proxy shall be in writing under the hand of the
appointer of his attorney duly authorized in writing. A proxy must be member of
the company.

39. The instrument appointing a proxy and the power of attorney or other authority
(if any) under which it is signed, or a materially certified copy of that power or
authority, shall be deposited at the office not less than forty-eight hours before
the time for holding the meeting at which the person named in the instrument
proposes to vote and in default the instrument of proxy shall not be treated as
valid.

40. An instrument appointing a proxy may be in form.

41. A note given in accordance with the terms of any instrument of proxy shall be
valid notwithstanding the previous death or insanity of the principal or
revocation of the proxy or of the authority under which the proxy was executive,
or the transfer of the share in respect of which this proxy is given. Provided that
no intimation in writing of such death, insanity revocation or transfer as
aforesaid shall have been received by the adjourned meeting at which the proxy
is used.

MBA, UNIVERSITY OF SOUTH ASIA 38

 X. DIRECTORS

42. 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.

43. Save as provided in section 187, no person shall be appointed as a director unless
he is a member of the company and holds shares of the minimum value of
Rs.25000 in his own name, relax able in the case of directors representing
interest of other concerns. A director who is required to hold qualification shares
may act as a director before acquiring his qualification shares but shall, in any
case, acquire the same within in two month of appointment.

44. The remuneration of a director for performing extra services, including holding
of the office of chairman and the remuneration to be paid to any director for
attending the meetings of the directors or a committee of directors shall from
time to time be determined by the board of the directors in accordance with law.

XI. POWERS AND DUTIES OF DIRECTORS

45. The business of the company shall be managed by the directors, who may pay all
expenses incurred in promoting and registering the company, and may exercise
all such powers of the company, and may exercise all such powers of the
company as are not by the ordinance or by there regulations, required to be
exercised by the company in general meeting, subject nevertheless to the
provisions of the ordinance or to any of these regulations, and such regulation
being no inconsistent with the aforesaid provisions as may be prescribed by the
company in general meeting but no regulation made by the company in general

MBA, UNIVERSITY OF SOUTH ASIA 39

 meeting shall invalidate any prior act of the directors which would have been
valid if that regulation had not been made.

46. The directors may from time to time, by power of attorney under the company’s
seal appoint any person or person to be the attorneys of the company for such
purposes and with such powers, authorities, and discretion (not exceeding those
vested in or exercisable by the directors under these presents) and for such period
and subject to such conditions as the directors may from time to time think fit.
Any such attorney (s) may, if authorized by the directors delegate all or nay of
the powers vested in him/ them.

47. The directors shall duly comply with the provisions of the ordinance and in
particular with the provisions in regard to the registration of the particulars of
mortgages and charges affecting the property of the company or created by it, to
the keeping of a register of the directors and to the sending to the registrar of an
annual list of members and summary of particulars relating thereto and notice of
nay consolidation or increase of share capital, or sub-division of shares, copies of
special resolution and copy of the register of directors and notifications of any
changes therein.

48. The directors shall cause minutes to be made in books provided for the purpose
of,

a) All appointments of officers made by the directors.

b) The name of the directors present at each meeting of the directors and of
nay committee of the directors.
c) All resolution and proceedings at all meeting of the company and of the
directors and of committee of directs.

And every director present at any meeting of directors or committee of

directors shall sign his name in a book to be kept for that purpose.

MBA, UNIVERSITY OF SOUTH ASIA 40

 49. The directors shall appoint a chief executive in accordance with the provisions of
section 198 and 199. The board shall determine the terms and conditions of
appointments of the chief executive.

XII. DISQUALIFICATION OF DIRECTORS

50. 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.

XIII. PROCEEDING OF DIRECTORS

51. The company may meet together for the dispatch of the business, adjourned and
otherwise regulate their meetings, and they think fit. The quorum for a meeting
of directors shall not be less than one-third of their number of four, whichever is
greater, questions arising at any meeting shall be decided by a majority of vote.
In case of an equality of vote, the chairman shall have and exercise a second or
casting vote. A director may, and the secretary on the requisition of a director
shall, at any time, summon a meeting of directors to, it shall not be necessary to
give notice of a meeting of directors to any director for the time being absent
from Pakistan.

MBA, UNIVERSITY OF SOUTH ASIA 41

 52. The director may elect a chairman of their meetings and determine the period for
which he is to hold office, but, if no such chairman is elected or if at any meeting
the chairman is not present within ten minutes after the time appointed for
holding the same or is unwilling to act as chairman, the directors present may
choose one of their number to be chairman of the meeting.

53. The directors may delegate any of their powers not required to be exercised in
their meeting to committees consisting of such member or members of their body
as they think fit. Any committee so formed shall, in the exercise of the powers so
delegated, confirm to any restrictions that may be imposed on it by the directors.

54. A committee may elect a chairman of its meetings, but, if no such chairman is
elected, or if at any meeting the chairman is not present within ten minutes after
the time appointed for holding the same or is unwilling toast as chairman, the
members present may choose one of their members to be chairman of the
meeting.

55. A committee may meet and adjourn as it thinks proper, question arising at any
meeting shall be determined by a majority of votes of the members present. In
case of any equality of votes, the chairman shall have and exercise a second or
casting vote.

56. All acts by any meeting of the directors or of a committee of directors, or by any
person acting as a director, shall not withstanding that it be after wards
discovered that there was some defect in the appointment of such directors or
persons acting as aforesaid, or that they or any of them were disqualified, be as
valid as if every such person had been duly appointed and was qualified to be a
director.

57. A resolution in writing signed by the directors (not being less than one-third of
their number or four whichever is greater) or affirmed by them through telex or

MBA, UNIVERSITY OF SOUTH ASIA 42

 telegram shall be as valid and effectual as if it had been passed at the meeting of
the directors duly convened and held.]

XIV. ELECTION AND REMOVAL OF DIRECTORS

58. 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.

59. A retiring director shall be eligible for re-election.

60. The number of directors determined by the board shall be elected to office by the
members in general meting in the following manner;

a) 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.

b) 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.

c) The candidate who gets the highest number of votes shall be declared
elected as directors and then the candidate who gets the next highest
number of votes shall be so declared and so on until the total number of
directors to be elected has been so elected.

61. Subject to the provision of the ordinance, the company may from time to time in
annual general meeting increase or decrease the number of directors.

MBA, UNIVERSITY OF SOUTH ASIA 43

 62. Any casual vacancy occurring on the board of directors may be filled up by the
directors, but the persons so chosen shall be subject to retirement at the same
time as if he had become a director on the day on which the director in whose
place he is chosen was last elected as director.

63. The company may remove a director but only in accordance with the provisions
of the ordinance.

XV. THE SEAL

64. 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.

65. The directors may provide for the use in any territory, district or place not
situated in Pakistan, of an official seal which shall be a facsimile of the common
seal of the company, which the addition on its face of the name of every
territory, district or place where it is to be used. The provisions of section 213
shall apply to the use of the official seal.

XVI. DIVIDENDS AND RESERVE

66. The company in general meeting may declare dividends but no dividend shall
exceed the amount recommended by the directors.

67. 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.

MBA, UNIVERSITY OF SOUTH ASIA 44

 68. No dividends shall be paid otherwise than out of profits of the year or any other
undistributed profits.

69. Subject to the rights of the persons entitled to shares with special rights as to
dividends, all dividends, shall be declared and paid according to the amounts
paid on the shares, but if and so long as nothing is paid upon any of the share in
the company, dividends may be declared and paid according to the amounts of
the shares. No amount paid on a share in advance of calls shall be treated for the
purposed of this regulation as paid on the share.

70. Any general meeting declaring a dividend may resolve that such divided be paid
wholly or in part by the distribution of the specific assets and in particular, of
paid up shares, debentures, or debentures in stock of the company or other
company or in one or more of such ways.

71. The directors may, before recommending any dividend, set aside out of the
profits of the company such sums as they think proper as a reserve or reserves
which shall, at the discretion of the directors, be applicable for meeting
contingencies, or for equalizing dividends or for any other purpose to which the
profits of the company may be properly applied, and pending such application
may, at the like discretion either be employed in the business of the company or
be invested in such investments (other than shares of the company) as the
directors may, subject to the provisions of the ordinance, from time to time think
fit.

72. The directors may carry forward any profits, which they may think prudent not to
distribute, without setting them aside as a reserve.

73. Any general meeting may resolve that any money investments, or other assets
forming part of the undivided profits of the company standing to the credit of any
reserve or other fund or in the hands of the company and available for divided

MBA, UNIVERSITY OF SOUTH ASIA 45

 74. (or representing premiums received on the issue of the shares and standing to the
credit of the share premium account) be capitalized and distributed amongst such
of the share holders as would be entitled to receive the same if distributed by
way of dividend and in the same proportions on the footing that they become
entitled thereto as capital and that all or any part of such capitalized fund be
applied on behalf of such share holders in paying up in full any unmissed shares,
debentures or debenture-stock of the company which shall be distributed
accordingly and that such distribution or payment shall be accepted by such
share holders in full satisfaction of their interest in the said capitalized sum.

75. A transfer of shares shall not pass the right to any dividend declared thereon
before the registration of the transfer.

76. 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.

77. Notice of any dividend that may have been declared shall be given in the manner
hereinafter mentioned to the persons entitled to share therein.

78. The dividend shall be paid within the period laid down in section 251.

79. All dividends unclaimed for six year after having been declared shall be kept in
trust by the company but may invested or otherwise made use of by the directors
for the benefit of the company until claimed.

MBA, UNIVERSITY OF SOUTH ASIA 46

 XVII. ACCOUNTS

80. The directors shall cause to be kept proper books of account as required under
section 230.

81. 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.

82. The directors shall from time to time determine whether and to what extent and
at what time and places and under what conditions or regulations the accounts
and books or papers of the company or any of them shall be open to the
inspection of members not being directors and no member (not being a director)
shall have any right of inspecting any account and book or papers of the
company except as conferred by law or authorized by the directors or by the
company in general meeting.

83. The directors shall as required by section 233 and 236 cause to be prepared and
to be laid before the company in general meeting such profit and loss account
and balance sheets duly audited and reports as are referred to in those sections.

84. A balance sheet, profit and loss account, and other reports referred to in the
preceding articles shall be made out in every year and laid before the company in
the annual general meeting made up to the date not more than six month before
such meeting. The balance sheet and profit and loss account shall be
accompanied by a report of the auditors of the company and the report of
directors.

MBA, UNIVERSITY OF SOUTH ASIA 47

 85. A copy of the balance sheet and profit and loss account and reports of directors
and auditors shall, at least twenty-one days preceding the meeting be sent to the
persons entitled to receive notices of general meeting in the manner in which
notices are to be given as hereinafter provided.

86. Every account of the directors when audited and approved by a general meeting
shall be conclusive except as regards any errors discovered therein within three
months next after the approval thereof. Whenever any such error is discovered
within that period the account shall forthwith be corrected and thenceforth shall
be conclusive.

87. The directors shall in all respect comply with the provisions of section 230 to
236.

88. Auditors shall be appointed and their duties regulated in accordance with section
252 to 255.

XVIII. NOTICES

89. The company shall give notice to members and auditors of the company and
other persons entitled to receive notice in accordance with section 50.

XIX. SECRECY

90. 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

MBA, UNIVERSITY OF SOUTH ASIA 48

 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.

91. No member or other person (not being a director) shall be entitled to enter upon
the property of the company or examine the company’s premises or properties
without the permission of a director subject to articles 82, to require discovery of
or any information respecting any detail of the company’s trading or any matter
which is or may be in the nature of a trade secret, mystery of trade, or secret
process or of any matter whatsoever which may relate to the conduct of the
business of the company and which in the opinion of the directors will be in
expedient, in the interest of the members of the company, to communicate.

XX. RECONSTRUCTION

92. 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

MBA, UNIVERSITY OF SOUTH ASIA 49

 company is proposed to be or is in the course of being wound up, incapable of
being varied or excluded by these presents.

XXI. WINDING UP

93. 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.

XXII. INDEMNITY
94. 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.

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 XXIII. ARBITRATION

95. 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.

MBA, UNIVERSITY OF SOUTH ASIA 51

 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED

Board of Directors
Company Secretary

Chief Executive

Director Director Director Director

Marketing Finance Processing Purchase

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MBA, UNIVERSITY OF SOUTH ASIA 53
 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED

Chief Executive

G.M. G.M. G.M. G.M. Legal G.M. Chief G.M. Director Director
Finance Weave Stitching HRM Advisor Purchase Engineer Export spinning process
ing

MBA, UNIVERSITY OF SOUTH ASIA 54

 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED

GM MARKETING

Incharge fair Deputy Deputy Manager Assistant

Manager Waste Manager
price shop Quality

AM quality Assistant manager Assistant

Assistant waste
manager control manager sales

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 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED

Director
processing

Manager
Manager folding
processing

Dy. Manager processing Dy. Manager processing

Dy. Manager folding
printing dying

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 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED

G.M LOCAL MARKETING

Sr. assistant manager

In charge fair price Dy. Manager Quality Assistant manager
waste

Assistant manager fair

Assistant manager waste Assistant manager waist Assistant manager sales
price

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 ORGANIZATIONAL STRUCTURE
NISHAT MILLS LIMITED

G.M SALES

Sr. Assistant manager Asst. manager sales Asst. Manager sales

Sales officer Sales officer Sales officer

Asst. sales officer Asst. sales officer Computer programmer

Computer programmer

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Part 2

GROUP PERFORMANCE

Playing a crucial role in the private sector, Nishat Group rank among the top five
business houses in Pakistan, in terms of sales and assets. There open and decentralized
management structure helps us in making decision, vital to remain competitive in their
businesses. Their team is proud of their achievement and work together to maintain high
standard of quality and service. As a responsible corporate citizen, they continually strive
for the beneficial partnerships with the communities in which the CARING FOR THE
ENVIRONMENT is undertaken.

Nishat Group is playing a leadership role in setting the pace for environmental protection
in the country. To control pollution and provide safe working and living conditions in and
around Nishat Mills Limited, a sophisticated Water Treatment and Disposal System has
been installed which removes hazardous materials from effluents. This system was the
first of its kind in the Pakistan.

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Different Management Styles at Nishat Mills Limited
1. Personal Development And Training

Junior-level courses are frequently held in-house for personal training. Various courses
organized in the past include the following,

2. Japanese-style Production Management

This course was formulated for supervisors and officers to enhance their management
capabilities in interaction with the lower staff and associates and also to improve the
production efficiencies.

3. Executive Development Course

This course was specially designed for middle management to enhance their principle-
centered leadership qualities so that they could meet the emerging challenges of the
global world. Neuro-linguistic programming was part of the course to help the employee
in day-to-day activities to improve proficiency and effectiveness in their attitude and
work style.

4. Basic English Language Course

This course was for those staff that is not proficient in written and verbal English
language. An external instructor whose services were especially hired for this purpose
conducted the course.

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 5. Basic Labor laws of Pakistan

Professionals from Labor Department organized this course. The main purpose was to
give acquaintances to the staff of their rights. Wage rates, vacations, working hours, child
& bonded labor etc, were the main topics covered.

6. In-Housing Training School

Nishat mills limited has also established an in-house Training School for unskilled labor
so that they may be trained on stitching machines, and qualify for work in the stitching
floors. Unskilled manpower is hired from the market for training. And during this period
they are paid as per the prevailing wage rules.

The Working Environment and Accountability

With the world fast becoming a Global Village and the Internet Information Technology
Revolution, the issues of HUMAN RIGHTS and Working Condition are becoming
significant important with each passing day.

Nishat can pride itself in having one of the most congenial and professional working
environments of any company operating in Pakistan. Nishat is an equal opportunity
employer and there is no discrimination on the basis of sex, caste or creed. All hiring and
promotion decisions are taken on merit. All local laws are adhered to regarding different
matters.

MBA, UNIVERSITY OF SOUTH ASIA 61

Extreme emphasis is placed on worker safety and health. All stitching machines are being
equipped with belt and needle guards. Employees using cloth cutters are required to wear
steel mesh safety gloves.

 Selection & Career ladder

First of all, human resource department selects appropriate people to do the job. These
people are expected to work with full devotion, loyalty etc. management of Nishat
believes in healthy competition among the employees so that workers are promoted on
the basis of performance. Management cares a lot of their employees. Normally young
people with great enthusiasm are preferred. Mostly clerical and middle level management
are young people. Average age would be 25 to 30 years.

 Promotion of Persons at Nishat

On the basis of experience and performance, they are promoted to higher managerial
level; at higher level I have seen various MBA, CA, ICMA and also people who have
spend years at Nishat mills limited. In order to provide incentives to employees at Nishat
mills limited, cash rewards are also granted. The head of the department, on job basis
gives bonuses. Normally 10% of salary is bonus in each year.

 Job Assessment

At Nishat mills limited Performance Appraisal is prepared to check the performance of

workers. It is like ACR (annual confidential report) in the government sector.

The basic Objectives of job assessment are

 Check the overall performance of employees
 Whether the job assigned is fully done or not

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  Integrity, honesty
 Loyalty
 Devotion and commitment of the part of employee to achieve organizational
objectives

 Measures To Check Overall Performance

Higher manager to check the performance of employees adopts following measures,

 Standards are established first
 Measure the individual as well as collectively performance
 Compare actual performance with planned
 Taking corrective action
 Reviews of job are made.
 Superior management assesses accuracy of work.
On the basis of performance appraisal awards and rewards or punishments are given.

 Accountability

Employees have to face inquiries or suspensions, if they are involved in activities which
are not according to the goal of Nishat mills limited. They are often terminated from their
jobs, if they are not performing well. They can be demoted from their ranks. In Nishat
mills limited, promotion is granted on performance basis so they are also accountable if
they are performing poorly.

If the employees are not obedient to their superior or involved in unethical activities, they
have to face the circumstances. Severe punishment like demotion, firing and suspensions
are given to non-performing or low-performing employees.

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  Satisfaction Of Employee

Employees have a high morale. Top management is maintaining very cordial

relationships with union leaders. Actually employees feel a part in the organization and
its achievements.

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 Plant location
Plant location is one of the main long-term strategic decisions normally taken by top
management. Nishat mills limited is ideally located in,

Niashatabad Faisalabad.

12- K.M Faisalabad road Shiekhupura.

21- K.M ferozepur road Lahore.

5 - K.M Nishat avenue Lahore.

Off 22.K.M ferozepur road Lahore.

20-K.M Shiekhupura Faisalabad (ferozewatan)

Main factory is located at Niashatabad. It is a composite unit.

Composite unit means all the process i.e. from spinning to stitching takes place under
one roof. Product process includes spinning, weaving, processing, finishing and stitching
units.

While at Shiekhupura, weaving process is being carried out. At 21. K.M ferozepur road,
Lahore a stitching unit has been established to meet the customer’s requirements. Finally

MBA, UNIVERSITY OF SOUTH ASIA 65

20.K.M Shiekhupura Faisalabad road is a spinning unit is working. This unit involves
converting cotton into yarn.

Plant location is critical success factor. It involve huge investment and irreversible. It is
either a life long asset or life long liability because building and other structure once
made cannot be moved.

Now we see the appropriateness of Nishat plant location,

NISHATABAD FAISALABAD

The history of Nishat mills limited date back to 1951. When Mian Muhammad Yahya
founded Nishat mills limited at NISHATABAD FAISALABAD. This plant is ideally
located in the heart of industrial area. Plant was established keeping in view of following
considerations,

 Availability of cotton
 Technical people
 Housing and other facilities
 Infrastructure
 Cost of transportation of labor
 Land
 Proximity to market
 Stitching and its worker

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  Availability Of Cotton
Since Faisalabad and its surroundings are known for fines kind of cotton so it is easy to
acquire to raw material. Cotton is procured at the start of season to avoid any variation,
which may occur in the crop from time to time, enabling the mills to produce consistent
quality all the year. For this purpose a fully equipped cotton laboratory is established and
it is working day and night during cotton seasons to select the best quality crop to be
purchased.

 Technical People
Faisalabad is an industry-boosting city. People have technical skills. In order to promote
their skills, government has established various training schools, like TEXTILE
COLLEGE FAISALABAD. This college is providing skilled persons to NISHAT
MILLS LIMITED.

 Housing And Other Facilities

Satisfaction of employees both manager and worker is necessary and inevitable to
achieve organization goals. To fully exploit the skills of worker Nishat is providing them
various facilities. A housing scheme was introduced. It was named at NISHATABAD
COLONY. This colony provides residential facilities to workers.
Other facilities include in-house training school to upgrade the skills. Seminars/lectures
are arranged to acquire satisfactory results. Its plant location enables it to invite
celebrities from Faisalabad chamber of commerce to share their personal experiences.

MBA, UNIVERSITY OF SOUTH ASIA 67

  Infrastructure
It includes availability of water, gas, electricity, roads (roads from factory to market),
disposal of wastage etc. all the facilities are available there. Road conditions are
absolutely perfect for the transportation of products. Goods can be transported either by
road or by railway. There is also a dry port at Faisalabad, so delivery of finished products
becomes very easy. There are certain objective factors, which include

 Cost Of Transportation Of Labor

Plant is not far enough from city, infact with increase in population; it has become heart
of industrial area. Cost of transportation of labor/material is low as compared to its
competitors.

 Land At Reasonable Price

Nishat mills limited started out as a weaving unit with 500 semi-automatic looms. Later
on 10000 spindles were added, laying the foundation of nation’s biggest textile composite
project. Nishat mills Faisalabad covers 98 acre. It has quality with adequate provisions
for future expansion.

 Proximity To Market
Nishat mills limited are export-oriented organizations. The major products are exported
to Japan, Far East, South America, Europe and use. Logistics are available to carry
goods. Dry Port., railway and roads all are in perfect conditions.

 Stitching Unit And Its Worker

MBA, UNIVERSITY OF SOUTH ASIA 68

Stitching unit is not far from city so female workers are not reluctant to work in stitching
department. This is another advantage of plant location.

There are certain subjective factors like emotional sentiment of people. I want to serve
my people and I want to serve my homeland. Frankly speaking capitalist do not believe.
They invest money to get return. Nishat mills limited do not have any subjective factors,
which are considered, before location of plant.

PRODUCT LINE
Products 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

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 Table, Furniture & Kitchen Accessories
 Tea cozy
 Table mats
 Table cloth and napkins
 Aprons
 Kitchen gloves
 Pot holders
 Chair pads with circle tacks
 Couch cove

PRODUCTION UNITS OF
NISHAT MILLS LIMITED
The Company’s production facilities comprises of:

 Spinning
 Weaving
 Processing
 Design studio
 Engraving
 Rotary screen printing section
 Finishing section
 Dyeing section
 Inspection and rolling section
 Quality control section

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  Production planning section
 Stitching units
 Power generation

Plant Capacity

UNITS Scale 1998 1999 2000 2001

SPINNING Kgs 54969 51989 48362 52467
WEAVING Sq. Mt. 118008 140229 142304 152619
POWER PLANT KWH 264902 264902 264902 315418

Actual Production

UNITS Scale 1998 1999 2000 2001

SPINNING Kgs 53968 50529 46729 50907
WEAVING Sq. Mt. 107661 128130 130444 140046
POWER PLANT KWH 182090 189273 174829 179882

Reason for Low Production

Under utilization of available capacity is due to normal maintenance. The
generation capacity of power plant was increased due to installation of gas
turbines in last quarter during the year under reference.

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Production Machines

No. Of Spindles 176452 178324 166792 153192 172992

No. Of sulzer looms 338 338 388 284 284

No. Of Air jet looms 120 120 180 244 244

No. Of Thermo sole dyeing 1 1 2 1 3
No of Rotary printing machine 2 2 3 3 3

SPINNING
Nishat Mills Limited initially started business with 10,000 spindles, which later on with
the gradual increase reached 165,800. The entire machinery is from world-renowned
manufacturers from Japan. A China and Europe. For reaching high quality standards,
research and development is imperative for which Nishat Mills has state of the art yarn
and cotton laboratories with world class scaling standards. Cotton is procured at the start
of the season to avoid any variation, which, can occur in the crop from time to time
enabling the mills to produce a consistent quality all the year round. For this purpose a
fully equipped cotton laboratory with HVI-900/I and ASIF-N is working day and night
during the cotton season to select the best quality crop to be purchased.

NML spinning is operationally organized into seven spinning units, each with a
distinctive product range and capacity to keep a check on the quality standards, every
cone undergoes inspection before packing to ensure that the buyer gets only the best out
of the lot.

MBA, UNIVERSITY OF SOUTH ASIA 72

NML spinning is thus renowned for being one of the most trusted brand names in the
market enjoying the trust and confidence of the consumer’s world over.

The major production from the spinning is exported to Japan, Far East, South America,
Europe and the USA. In addition the spinning also provides the same high quality yarn to
their own weaving mills going into fabric production.

A Brief Range of Machinery and Production Range is Given Below

A) Machinery Details

Nishat Mills Limited (Faisalabad only) has seven spinning units with a total of 165,880
spindles. Spinning production capacity for both cotton and Blended yarn is 120 Tons/Day.
Here under are summarized details of spinning machinery:

1) BLOW ROOM

Toyofa-Ohara-Heregeth (Japanese origin with German technology know

how)

2) CARD

Trytzschler (German Origin)

Crosrol (U.Korigin)
Toyoda (Japanese Origin)
Howa (Japanese)

3) DRAWING

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 Toyoda& Howa (Japanese Origin)
Rieter (swiss Origin)

4) COMBER

Toyoda& Howa (Japanese Origin )

Rieter (Swiss Origin)

5) SIMPLEX

Toyda&Howa (Japanese Origine)

6) RINGFRAMES

Toyoda& Howa (Japanese Origine)

FA-507 (Chinese Origin with Germen Drafting)

7) AUTO CORNER

Murata (Japanese Origin)

8) DOUBLE INCH& TWISTING EQUIPMENT

Murata (Japanese Origin)

COUNT RANGE

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 100% Cotton Carded
From New 12 /1 to Ne32/1
From New 12/1 to New 32/1
All double Yarn in 100% Knotless/ auto-spliced

100%Cotton Combed
From New 12/1 to New 32/1
From New 12/1to New 32/1
All double Yarn in 100% Knotless/auto –spliced

We are also producing finer counts i.e., 42/1 combed and

Above with the bending of imported cotton of longer staple length.

BLENDED YARN
Poly cotton

Poly 52%: cotton 48% carded New 10/1 to Ne30/1

Poly 52%: cotton 48% carded New 10/1 to Ne40/1
Poly 65%: cotton 35% carded New 10/1 to Ne30/1
Poly 65%: cotton 35% carded New 10/1 to Ne45/1

Cotton Rich (CVC)

Poly 45%: cotton 48% carded New 10/1 to New 30/1

Poly 45%: cotton 48% combed New 10/1 to Ne 40/1
Poly 40%: cotton 48% carded Ne 10/1 to Ne 30/1
Poly 40%: cotton 48% cambed Ne 10/1 to Ne 40/1

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All yarn made at Nishat Mills Limited is ring spun, for both knitting (waxed or UN
waxed) and weaving.
Standard packing 24 cones per carton
Carton Wt. 100 lbs.
Quantity per FCL 39000 lbs. (40ft High cube container)

WEAVING
NML weaving enjoys the reputation for being the market leader in the loom state fabric
business in Pakistan. Their fabrics are not only rated as the top quality but also enjoy a
premium for their superior quality all over the world. Supported by their own in house
spinning units, the weaving sector of Nishat mills limited produces fabric range form light
to heavy percales to satin and traditional to twill dobby items.

Their fabric is well established all over the world with their exports going to the America
the Far East, Africa, Australia Europe and Japan. Besides export they are also supplying
grey fabric to their dyeing and printing units.

NML FAISALABAD:

Machinery: 188 sulzer- Ruti looms

Capacity: Approximately 2.1 million meters per month
Product range 100% cotton and poly cotton fabrics, in plain weaves. Twills,
Drills,
Satins (regular /broken &stripped, Bedford cordsm herring bones pique and Rib cords.)
This unit has been producing top qualities fabric for export as well as for consumption of
their own processing unit. Recently awarded the ISO9002 certification, the facility is
highly regarded for the production standard and quality control. This unit is comprised of
188 SULZER- RUTI P7100 Looms and state of the, back up process, with equally
efficient quality control and packing department.

MBA, UNIVERSITY OF SOUTH ASIA 76

 NML SHEIKHUPURA
MACHINERY 96 SULZER-ruti- looms (unit -1)

120 Tsudakoma air jets (unit-2)

60 Tsudakoma air jets (unit-3)

64 Tsudakoma air jets (unit-4)

CAPACITY: 4.5 Million meters per month

PRODUCT RANGE
The products in this unit range are not only the traditional 100% cotton polyester cotton
fabrics, but also in Dobby items, customized to the buyer need.

Established initially by the name of Nishat fabric limited 1992. Subsequently merged into
Nishat Mills Ltd, NML Shiekhupura is one of the most advance unit In the country
equipped with the state of art machinery and back processes, the highly sophisticated
labotary also insured total quality control in yarn purchase and fabric production, and
other64 tsudakoma air yet looms have added (unit 4) recently along with the back process.
Future programs for the unit include the purchase of some new air yet looms, which will
be give a boost to the production capacity and the product the range the unit will also
expand subsequently.

PROCESSING
Nishat processing plant with monthly capacity of 3 million meters is one of the largest
processing facilities of Pakistan. With and array of month modern machines, it is the
geared to meet the ever increasing the demand of there client. The processing division

MBA, UNIVERSITY OF SOUTH ASIA 77

has been divided in to different section to facilitate uninterrupted process flow and to
insured quality control at all stages almost 75% chemical and dyestuff being used is of
European origin and independent quality control department with a strong backing of
fully equipped laboratory insured quality standard at all level. The processing plant has
recently been awarded ISO –9001 Certification. Yet another achievement in this regard
by Nishat mills limited.

Bleaching
Sometime cloth is bleached according to customer requirements. Bleaching helps to
remove impurity from the cloth. For this purpose singeing machines are used where cloth
is bleached in three steps.

1. Brushing

It helps to remove thread.

2. Singeing

It removes pills by temperature.

3. Chemicals tanks

It is used to remove oily and stain spots on cloth.

At the end cloth is raped on a batch. Polies then bags are used to prevent air penetration.
At the end, batch number, quantity, meters of cloth are written on paper and stocked with
batcher.

Desizing
Sometimes cloth is desized according to customers’ requirements. It is used to remove
the grey fabric stiffness of the cloth that helps in bleaching for easy washing.

Scovring
It is done in bleaching machine, it helps to remove artificial spot like oil, grease etc.

MBA, UNIVERSITY OF SOUTH ASIA 78

PRE-TREATMENT SECTION

Fabric preparation is crucially important, as the successful out come of all subsequently
operations is dependent on it.
At, Nishat, to reduce the natural impurity of cotton and to impart good hydrophilic
properties, this section employees too singing machine and two modern open with width
bleaching plants, to give more luster and strength one chain less mercerizing machine is
also in operation. Besides preparing fabrics for dyeing printing, this section also bleach
bacteria killer fabric for Japanese hospital linen and fire retardant low pill fabric for
contract textiles.

MACHINERY
Singeing/Designing vollen weides 118”
Singeing/Designing Kyoto 108
Bleaching plant benninger 95
Bleaching plant Kyoto 95
Mercerising C. Less goller 95

DESIGN Studio
The state of the art design studio, known for producing transparencies of the highest
quality, accommodates a STORK STK image 3000,a CST Ramste lll silicon graphic 02
and STORK Drum scanner plotter, along with these a team of convention manual color
separation artist is also maintained.

Design studio is a sub department of processing. Here cloth design is made. Tracers are
there to trace out different pattern and design of cloth. For each type of color different
films are made. Different trace papers that are sued at Nishat are of Kodak and AGFA.

MBA, UNIVERSITY OF SOUTH ASIA 79

For each color separation, there are positive and negative films. Positive film is sent for
processing. Ink is used to fill scratches and unwanted graphics.
Tracing table is used to examine designs and it helping tracing of design. Germany
waterproof ink is sued to avoid the ink expansion. Digital design studio is also
complementary department of design studio. Where design are made on computer
program and using information technology.

ENGRAVING
Technology advancement in the field of rotary printing necessitates upgrading the pre-
print line-up. NML is reputed for the most efficient use of the STORK engraving systems
for manual exposing. They are known for halftone work in single step designing.

Living up to this reputation, they have recently added to their line lf production the
“ROTARY WAX JET’ With exposing resolution at 1019dpi and a screen circumference
of 640,820 and 9144mm. Engraving at this high resolution with digital technology
enhances the print quality to a great extent and reduces the existing human error margins
to the minimum.

ROTAARY SCREEN PRINTING SECTION

In another step to upgrade the existing machine mix. Anew 3.2m (126”) Regina printing
machine, with a facility to print 16 colors has been installed. This machine with UNICA
system successfully combines production and quality performance at the highest possible
level in rotary screen-printing.

NML has a well-trained work force to print extremely intricate and complex toe-on –tone
designs. Monthly printing capacity of the section is about 203 million meters. Besides
conventional printing in pigment and reactive dyes, printing in puff effects, resist and
discharge dyestuff is also done.

MACHINERY:

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Printing machine Reggiani 126” 16 colors
Printing machine john zimmer 110” 12colours
Printing machine stork 72” 16 colors

Following files are maintained in printing department of Nishat mills limited,

 Process sheet
 Job description specification
 Audit report
 ISO 9001
 Assessment file
 Purchase order
 Work instruction
 Staff document
 Worker document
 Reactive color document
 Standard operating procedure
 Customer letters and fax
 Organizational chart
 Technical literature
 Daily production report

FINISHING SECTION
Offering optimal final fabric quality and handle very recently this section has been
equipped with a new generation/ Babco-starter. This machine combines tried and tested
drying technology with innovative electronic control system. Ensuring absolute
reproducibility of fabric qualities and full documentation on the quality control checks.

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Besides offering normal finished, this section also full fills the demands for scotch guard
protection for soil release and resist finish, peach skin affect finish (emerizing), Fire
Retardant finish, water proofing, anti crease and easy care finish,

MACHINARY:

Stenter Babcock 130”

Stenter Monforts 110”
Stenter Monforts 95”
Stenter Monforts 73”
Stenter Krantz 95”
Stenter Krantz 73”
Sanforizing M/c monforts 73”
Raising for Flannel sucker &muller118”
Emerizing M/c sucker &muller 71”
Calenders Ramish 110”

DYEING SECTION
Nishat provides quality piece died fabrics in heavy twills to some of the world leading
brand names like Gap, Old Navy, Banana Republic, DKNY, Tommy Hilfiger, CHAPS,
and sears, this has been made possible by using high quality grieve from the mills own
weaving units and by using expensive dyestuffs, Highly trained Chinese technicians keep
a close check on all stages of production. Depending upon specifications, dyeing in
reactive, disperse, pigment. Vat and sulphur is possible.

To further enhance their existing dyeing capacity of 1,000,000 meters per month, a
designated Apparel Fabric Dyeing Unit is being set up near Lahore. The machinery and
land have been purchased for this project, which is planned to be operational by the end of

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year 2000. This unit, which will have a monthly capacity of 2.5 million mergers, has been
designed to give the optimal results due to the custom built machinery purchased after
careful and lengthy consideration of the technical and

Marketing teams
This would certainly give them an edge over their competitors and would be welcome
addition in the ever-changing apparel fabric market. It will help Nishat mills limited to
improve its market access and consequently profitability.

Following files are maintained in dyeing section,

 Training files
 Dyeing files
 Washing file
 Lab to bulk
 Sample received file
 Singeing file
 OK for curing
 Sample status
 Sample letter
 Shortfall file
 Daily stock file
 After curing file
 Folding return file
 Daily attendance register
 Water fall card

MACHINERY
Pad steam Goller 95”

Pad thermosal monforts 95”

Washing range Goller 95”

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INSPECTION AND ROLLING SECTION

To roll and pack 100,000 meters per day, this section has 8 rolling Machines; all equipped
with photo censors and inspection frames. Apart from rolling and folding, the primary
responsibility of rolling section is to prevent faulty fabric reaching the customer; the
fabric undergoes a100%inspecion system. To assist in shade checking a data color
computer system is also used.

QUALITY CONTROL SECTION

And independent on line quality control section monitors all production operation to the
required levels. The quality control lab is fully equipped to conduct all relevant tests. The
staff not only keeps control of the bulk production, but also is also actively involved in
standardization of process routes and operating procedure.

Quality control lab

Nishat mills limited has not only build an international standard quality control lab to
meet customer’s satisfaction but also to improve their own product quality. Various type
of test is conducted at this quality control lab to improve the quality of products and to
meet customer requirements.
Two Types of Cloth Are Required By Customer
1. When Customer Needs Specific Cloth
When customers need specific type of cloth, he sends his own sample whose composition
is tested is laboratory and production is made according to sample.

2. When Marketing Deppt Offers Design

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When marketing department officers approaches customers, they show their product
quality sample books to customer. Customers can select any leaf of them and can place
order for this type of cloth. That cloth is already available with Nishat whose production
is carried on according to the instruction of customers.
Quality Control Policy

Nishat mills limited are committed to move things in direction of TQM. Their prime
Objective is comically produce products for the satisfaction of buyers. For this they plan
thing ahead, fresh ideas are developed, make more effective use of time, put the right man
in the right place, and keep on updating the skills of the employee by training.
In the factory, in order to motivate employee and workers toward quality management,
many billboards are they’re containing various statements like,

“Quality has no finish line”

“Quality is degree of excellence”
According to juran “Quality is fitness for use”
“Quality ensures our future”

Tests to Ensure Quality

Following test are conducted in quality control lab,
Counter tests
1) To count warp and weft
2) Count Glass
3) To count ends and picks
4) Weight
5) To measure weight of cloth
6) Cock meter test
It examines dry rub and wet rub
7) Pilling test

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It is used to test pilling of cloth
8) Durra test
It is used to examine fastness of cloth
9) Auto wash
It is used to examine change in shade
10) Vasctor
It is used to examine shrinking of cloth
11) Tumble dryer
This test is used to examine dryness of cloth
12) Padder
It is used to examine matching and finishing of cloth.
13) Curring
It is used to examine shade of cloth
14) Light box test
It is used to examine fastness of light on cloth.
15) Presser
It is used to determine pressing of cloth.
16) Visco meter
It is used to measure viscoty of cloth.
17) Inspection table
Here warp and weft and other type of faulth are examined.
18) Chemical analysis
It is used to examine acidity.
19) Spectro photo meter
It is used to examine shading.
20)Perma meter test
It is used to measure passage of air from the cloth.
These types of tests are conducted keeping in view market requirements, weather
requirements and customer demands.

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  Production Planning Section
To control all production priorities and to load machine on day-to-day basis, a full fledge
production planning cell is in operation. This production planning system is designed to
be fine tuned with the clients needs and thereby ensures responsive handling of all
accounts by fore-casting demands from each client in terms of greige quality and quantity,
space on print/ dye machines and space on stitching machines. Coupled with forecast
from their buyers, it makes their system work efficiently. Advantages of this system
include shorter lead times, on time deliveries and less quality hassles.

It is an intermediate party between marketing department and processing department. It

issues daily production program to each processing unit. Daily production reports are
received in this department. New product development letter is also received in this
department. Then work is planned accordingly. Nishat group is pioneer for making
production and planning department. Instructions are first given to production and

planning department and then distributed to other processing units. Here various type of

analysis are conducted like,

1) Bleaching production analysis
2) Printing production analysis
3) Dyeing production analysis
4) Finishing
5) Folding
6) Damage trend analysis
7) Monthly maintenance breaks down analysis

Data flex program is used to save the date at production and planning department. First
export manager creates orders from the customer and record specification of that order on
a paper. This program is sent to the production and planning department.

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The cloth required is issued against the grey demand letter. First copy is remained in
production and planning department. And second goes to grey stock room. On this letter
grey issued is returned. It is generally more than demanded cloth because some cloth
expected to be damage. For this job number is issued to work. When grey material is
issued, lot number is given than production and planning department issues program
according to specification of each processing unit.

STITCHING UNITS
Apart of Nishat plan to have a totally integrated textile sector the stitching unit was set up
in 1989.the unit has a string work force of 400 skilled and semi-skilled workers mainly in
cutting, stitching, quality control, folding and packing department. With an array of 250
modern new generation machines, the stitching, department has an average capacity to
process up to 10,000 bed sets and 2000 curtain pair per day, approximately 40000 meters
of fabric, the assembly line consists of combination of manual and automated operation
designed to provide the required flexibility in its system to allow processing of a wide
product range and versions of its existing product line the units current product line
includes bed sheet, quilt covers, fitted sheet ,cushion cover, valances, datable linen, baby
sets, quilted throwovers and curtains in various specifications and model customized to
the requirements of individual market . In addition, a range of embellished products with
piping, bias binding, bulk over lock, decorative trimming and bourdon stitching is also
being offered to customers, facility to handle small volumes of decorative embroidery is
also on line.

Procedure of Conducting Quality Control

Quality control procedures are carried out at every stage during production. From
purchasing of material to cutting and stitching right till folding and packing of the final
product, each aspect is scrutinized and controlled to the international quality standards.

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Power Generation
The power generation unit formerly known as Nishat Tek Limited, was the first ever
power generation company in the private sector in Pakistan.
Commercial production sanded in 1992 with three KRUPP-Macungie’s with generating
capacity of 5.5 Mw each, Capacity at Faisalabad has since eon increased to 27MW.
Supplying power exclusively to NML.Nishata Tek also establishes a power-generating
unit of 6Mw at Shiekhupura to supply power to sulzer unit lll and Tsudakoma unit ill. It
started commercial operation in September 1995.

MARKETING STRATEGY & FUTURE PROSTECTS:

Future prospectus of Nishat mills limited are given as under

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 Shiekhupura.

Grey Fabric Market

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. We have constantly updated our machinery, replacing old machines with

MBA, UNIVERSITY OF SOUTH ASIA 89

new ones upgrading the existing set-up, leading to better efficiencies and quality
products.
Quality control
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.

Value Addition Strategy

Keeping in view demand of the World market, Nishat Mills Ltd pursued its strategy of
value addition that in command reducing the dependency on Grey Fabrics and Grey
Yarn. Having the foresight to assessing 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 Market

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

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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.

Social Responsibility
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.

Opportunities
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.

Future Prospectus in Non-Quota Countries

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.

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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 Countries

Middle East market is composed of South Africa and the new emerging markets like the
UAE, Egypt, Saudi Arabia, 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.

Position With Regard To Competitors

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.

Market leader in textile sector why?

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

 Best Working Environment

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

 Professional Commitment
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
team’s co-ordinance at all times and it focus remains on maintaining its position as the
market leader in the textile sector of Pakistan.

During my internship I also worked in Sales & Marketing department.

 MARKETING & SALES DEPARTMENT

In marketing department I learned how the orders are executed from the old buyers and
how the new markets and buyers are discovered than orders are executed. Normally what
happen is that the buyers contacts the marketing department and ask for the sample, if
buyer accepts he gives order, Marketing department than issue a sales contract to the
buyer.

Marketing strategies
Marketing strategies includes,

i. Meeting with buyers

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 ii. Company profile
iii. Buyer visits
iv. Free sample
v. Contact with agents
vi. R& D for marketing
a. Through Internet
b. Yellow pages
c. APTMA buyer dictionary
d. Intranet

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

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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 Samples
This 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 Marketing

Research 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

MBA, UNIVERSITY OF SOUTH ASIA 95

a. Through Internet
Nishat 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 dictionary

All 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. Intranet
Through computers, products are introduced and customers are accessed.

Malaysia Market
Nishat mills limited also export goods to Malaysia and earn lot of foreign exchange.

MBA, UNIVERSITY OF SOUTH ASIA 96

During the last six month, shipment to MALAYSIA remains stable. In the month of
December, sales decreases due to intense competition in the market. Overall performance
remains satisfactorily.

United States of America

One of the largest markets of the world, this diagram depicts the export to USA.

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In USA market there is ups and down because after nine September, scenario is totally
different and policies of American government are not fully supporting Pakistan
exporters.

Korea Market
Total sales/exports to Korea are depicted by this graph over the last six month ranging
from July to December.

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In the month of July shipment was made to Korea, in remaining month there was no
turnover. This is because Nishat mills found no buyer in that period.

Singapore Market
Following chart depict the total export made to Singapore market.

MBA, UNIVERSITY OF SOUTH ASIA 99

Marketing department performance remains goods during last six month. Marketing
department successfully cope with opportunities available in Singapore market.

Japan Market
Nishat mills are one of largest exporter in cloth to Japan.

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The performance remained good and excellent.

Hong Kong
Hong Kong is another attractive market for Nishat mills limited.

MBA, UNIVERSITY OF SOUTH ASIA 101

Nishat has very stable customers who believe that they are getting only quality products
and they are assured of quality goods.

SHIPMENT IN SEPTEMBER 2002

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SHIPMENT IN NOVEMBER 2002

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SHIPMENT IN DECEMBER 2002

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SHIPMENT IN SEPTEMBER 2002

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SHIPMENT IN NOVENBER 2002

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Following graph depict quantity shipped to various markets like Japan, Hong Kong,
Malaysia, USA, Korea, and Middle East.

SHIPMENT IN DECEBER 2002

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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

MBA, UNIVERSITY OF SOUTH ASIA 108

the competition to a greater extent. In spite of the above facts Nishat mills ltd, had been
successful in maintaining its market position and growth.

 Diversification Strategy
Market 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 Development

They 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 Conscious

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With 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.

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 RATIO ANALYSIS

OF

NISHAT MILLS LIMITED

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 NISHAT MILLS LIMITED
BALANCE SHEET
AS ON SEPTEMBER 30, -------------

1999 2000 2001

Equity and Liabilities
RS IN (000)
Share capital and reserves
Authorized Capital 1500000 1500000 1500000
Issued and Subscribed and paid up share
capital 1113444 1113444 1113444
Capital reserves 1027622 1027622 1027622
Revenue 201518 2428503 2566448

Surplus on revaluation of operating fixed

assets 12118 12118 12118

Non Current Liabilities

Redeemable capital 252120 919250 2205907
Long Term Loans 325429 228499 155639
Liability against finance lease 107806 103834 235220
Deferred liability for gratuity 1608 1091 843

Current Liabilities
Current portion of long-term liabilities 562747 242729 768264
Short term finance 4479010 4397584 5001841
Creditors accrued and other liabilities 478364 533645 781352
Worker' participation fund 23247 41587 20959
Provision for Taxation 186884 164068 146087
Proposed dividend 194853 283928 167017
Unclaimed Dividend 5480 6955 9683

Total Liabilities and Owner Equity 10782776 11904857 14222444

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 Assets

NON-CURRENT ASSETS 1999 2000 2001

Tangible fixed assets
Operating fixed assets 3555922 3679482 6194523
Assets subject to finance lease 371014 243102 467330
Capital work in process 125014 1465706 154009

Long Term Investment 1590552 1390552 1390552

Long Term loans, deposits, prepayments 57151 76963 100136

Current Assets
Stores, spare parts and loose tools 544536 5071128 541611
Stock in Trade 1824542 1410306 1966667
Short term investment 5938 5938 5938
Trade Debts 1290253 1409926 2027613
Advances, deposits and prepayments 660621 478999 377918
Other Receivables 316832 482438 630440
Cash At Bank 440401 754317 365707
5083123 5049052 5915894

TOTAL ASSETS 10782776 11904857 14222444

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 NISHAT MILLS LIMITED
INCOME STATEMENT
AS ON SEPTEMBER 30, -----------

1999 2000 2001

RS IN
(000)
SALES 9436104 10134014 11662457
COST OF GOODS SOLD 7745353 7991952 9605013
GROSS PROFIT
1690751 2142062 2057444
ADMINISTRATIVE SELLING AND GEN EXPESES 497043 545717 710360
OPERATING PROFIT 1193708 1996345 1357084
ADD; OTHER INCOME
68480 102431 116363
EARNING BEFORE INTEREST AND TAX 1262188 1698776 1463447
LESS: FINANCIAL CHARGES 299208 669014 1049756
WORKERS PARTICIPATION FUND 23247 41887 20960

PROFIT BEFORE TAXATION 439733 788175 392731

LESS: PROVISION FOR TAXATION 59719 87788 77769
PROFITAFTER TAX 380014 700387 314962

PROFITABILITY RATIO

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FINANCIAL HIGHLIGHTS

1997 1198 1999 2000 2001

PROFIT AND LOSS (RUPEES IN THOUSAND)

Net sales 8557876 8919459 9436104 10134014 11662457

Gross profit 1622745 1956420 1690751 2145062 2057444
Profit before tax 379589 412273 439733 788175 392731
Profit after tax 324739 344397 380014 700387 314962

CASH OUTFLOWS
Taxes paid 86522 111489 96326 47762 110060
Financial charges paid 820524 789018 836912 652024 941253
Fixed capital expense 342969 644944 386464 1895627 2416093

BALANCE SHEET
Current assets 3161495 4209470 5083122 5049052 5915894
Current liabilities 3925000 4940337 5930586 6070496 6895203
Operating assets 3295763 3265748 3555922 3679483 6194523
Long term loans 8660045 9940818 10782777 11904857 14222444
Share holders equity 3818405 3967949 4153110 4569569 4717514

RATIOS
Current ratio 0.88:1 0.97:1 0.95:1 0.93:1 0.97:1
Gearing ratio 0.27:1 0.29:1 0.23:1 0.29:1 0.42:1
Gross profit ratio 18.96 18.96 18.96 18.96 18.96
Net profit before tax 4.44 4.44 4.44 4.44 4.44
Earning per share 2.92 2.92 2.92 2.92 2.92
Proposed dividend 15 15 15 15 15

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 PROFITABILITY RATIO

Gross profit ratio

Gross profit
------------- X 100
Net sales

1999
1690751
---------- X 100
9436104

=17.92%

2000
2142062
----------- X 100
10134014
=21.14%

2001
2057444
------------- X 100
11662457
=17.64%

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INTERPRETATION
Gross profit ratio is the ratio of gross profit to net sales expressed as percentage .In 1999
the firm earned a gross profit of 17.92%, in 2000it increased to 21.41%and in 2001 it
decreased to 17.64%. The reason why the gross profit increased in 2000is that sale
volume increased by 1.6% as compared to 1999 but cost of goods sold decreased by
8.05%. It is due to management efficiency and effective policies .In 2001the gross profit
decrease because sales volume does not increase in correspondence to increase in cost of
goods sold because during this period the rate of inflation and dollar fluctuations was
high. The gross profit is sufficient to recover all operating expenses and to build up
reserves after paying all fixed interest charges and dividend

Net profit ratio

Net profit after tax
---------------------- X 100
Net sales
1999
380014
----------- X 100
9436104
=4.02%
2000
700387
--------- X 100
10134014
=6.91%
2001
314962
------------- X 100
11662457

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 =2.70%

GRAPH SHOWING GROSS PROFIT IN THE LAST FIVE YEARS

INTERPRETATION
This is used to show over all profitability and hence it is useful to the proprietors. Higher
the ratio better for the organization it shows the firms ability to turn each rupee of sale
into net profit. In 1999, N.P was 4.02%, in 2000 it increase to 6.19% and in 2001 it
decrease by 4.21% to2.70%. The reason why net profit decreased in 2001 is that
operating expenses has increase by20.38% as compare to 1999. Higher ratio shows firms

MBA, UNIVERSITY OF SOUTH ASIA 118

capacity to withstand adverse economic conditions. It is also advantageous to survive
even in the case of falling prices and sale volume.

Operating Ratio
Cost of good sold + operating expense
------------------------------------------------ X 100
Net sales
1999
7745353+497043
--------------------- X 100
9436104
=87.35%
2000
7991952+545717
---------------------- X 100
10134014
=84.25%
2001
9605013+710360
---------------------- X 100
116622457
=88.45%

Interpretation
This ratio shows the operational efficiency of the business. It is consider to be yard stick
of operating efficiency but it should be used cautiously because it may be effected by a
number of uncontrollable factors like sale promotion expenditure, in efficiency of
marketing department, general rise in selling expenses and introduction of better
substitute by the competitor. In 1999, operating ratio was 87.35%; in 2000-it decrease to
84.25% and it again increase to 88.45%. 2001 shows that 87.45% of sales have been

MBA, UNIVERSITY OF SOUTH ASIA 119

consumed by cost of good sold and operating expenses and 12.55% of sales left to cover
interest, income tax, dividend and firm’s need to retain profit for expansion. This high
percentage is due to above-mentioned factors. In 2000, decrease is due to effective
management policies.

Expenses Ratio
Particular expense
------------------------ X 100
Net sales
What do theses ratios signify?
Expense ratio indicates the relationship of various expenses to the sale. The operating
ratio reveals the average total variations in expense. But some of the expenses may be
increasing while some may be falling. It is use to depict the causes of the variation of the
operating ratio. Lower the ratio better for the organization.

Cost Of Goods Sold Ratio

Cost of goods sold

----------------------- X100

Net sales
1999
7745353
------------ X 100
9436104
=82.08%
2000
7991952
----------- x 100
10134014

MBA, UNIVERSITY OF SOUTH ASIA 120

 =78.6%
2001
9605013
----------- x100
11662457
=82.36%

Interpretation
This ratio shows how much percentage of sales is the cost of goods sold. Lower the ratio,
better for the organization. In1999, the cost of goods sold ratio was 82.08%, in 2000, it
decrease by 3.22% to 78.86%, in 2001, it again rose to 82.36%. In 2000, the cost of
goods sold decrease because of efficient and effective management policies to control the
wastage and loss, overhead etc.

MBA, UNIVERSITY OF SOUTH ASIA 121

 Summary of dividend analysis

Figures in Pakistan Rupees

Quarters are Fiscal Quarters (4th quarter ends in September)

TTM TTM Payout

Quarter EPS Divs EPS Divs Ratio
0.00
1Q1997 n/a n/a 0.000 n/a
0
0.00
2Q1997 n/a n/a 0.000 n/a
0
0.00
3Q1997 n/a n/a 0.000 n/a
0
1.31
4Q1997 n/a 2.558 1.316 51.4%
6
0.00
1Q1998 n/a n/a 1.316 n/a
0
0.00
2Q1998 n/a n/a 1.316 n/a
0
0.00
3Q1998 n/a n/a 1.316 n/a
0
1.53
4Q1998 n/a 2.711 1.535 56.6%
5
0.00
1Q1999 n/a n/a 1.535 n/a
0
0.00
2Q1999 1.340 n/a 1.535 n/a
0
0.00
3Q1999 n/a n/a 1.535 n/a
0
1.53
4Q1999 1.448 2.788 1.535 55.1%
5
0.00
1Q2000 n/a n/a 1.535 n/a
0
0.00
2Q2000 2.628 n/a 1.535 n/a
0
0.00
3Q2000 n/a n/a 1.535 n/a
0
2.55
4Q2000 3.662 6.290 2.550 40.5%
0
0.00
1Q2001 n/a n/a 2.550 n/a
0
0.00
2Q2001 1.960 n/a 2.550 n/a
0
0.00
3Q2001 n/a n/a 2.550 n/a
0
1.50
4Q2001 0.870 2.830 1.500 53.0%
0
0.00
1Q2002 0.170 3.000 1.500 50.0%
0
0.00
2Q2002 0.280 1.320 1.500 113.6%
0
0.00
3Q2002 0.460 1.780 1.500 84.3%
0

MBA, UNIVERSITY OF SOUTH ASIA 122

 TTM: Trailing Twelve Months
EPS: Earnings per share
Divs: Dividends per share

(A): ALL ITEMS ADJUSTED FOR STOCK SPLITS OR DIVIDENDS - 120:100 RIGHTS ISSUE
(14% DIV) IN 2000, 23:20 RIGHTS ISSUE (4.22% DIV) IN 95, 15% IN 94

(B): CALCULATION BASED ON YEAR END OUTSTANDING SHARES

(C): BASED ON AVERAGE SHARES OUTSTANDING

Selling and administration expense ratio

Selling and administration expense
-------------------------------------------- X 100
Net sales
1999
497043
---------- X 100
9436104
=5.27%
2000
545717
---------- X 100
10134014
=5.39%
2001
710360
---------- X 100
11662457
=6.09%

MBA, UNIVERSITY OF SOUTH ASIA 123

Interpretation
This ratio shows how much percentage of the sale is the selling and administration.
Lower the ratio better for the organization. In1999, it was 5.27%, in 2000 it was 5.39 %
and in 2001 it rose to 6.09%. This percentage shows the increasing trend. This trend is
due to expensive advertisement and sales promotion technique and administration staff
salaries. In 2001 the selling and administration expenses increases by 20.38% as compare
to 1999.

OVER ALL PROFITABILITY RATIO

RETURN ON SHAREHOLDER INVESTMENT

Net profit after tax
------------------------ X 100
Shareholders fund

Shareholders fund paid up capital + capital reserves + revenue reserves

+ unappropriated profit + surplus on revaluation of investment
1999
380014
---------- X 100
4165228
=9.12%
2000
700387
---------- X 100
4582672
=15.28%
2001

MBA, UNIVERSITY OF SOUTH ASIA 124

 314962
----------- X 100
4730562
=6.62%

Interpretation
This ratio is one of the most important ratios used for measuring the overall efficiency of
the firm. As the primary objective of the firm is to maximize it’s earning, this ratio
indicates the extent to which this primary objective of the company is being achieved.
This ratio is of great importance to the present and perspective shareholder as well as
management of the company. This ratio shows how well the resources of the company
are being used. Higher the ratio better for the organization.
In 1999, the return on the shareholder fund is 9 paisa per rupee, in 2000 it increase to 15
paisa and in 2001 it reduced to 6 paisa that is in 2000, return on shareholder fund
increased because shareholder fund increase by 10% in 2000 as compare to 1999 and net
profit before interest and tax increased by 84% in 2000 as compare to 1999. In 2001
shareholder fund increased by only 3.22% but net profit after tax decrease by 55%, which
is not in accordance with net profit before tax change. Decrease in profit resulted in 2001
due to increase in selling and administration expenses and financial charges in 2001 as
compare to 2000.

Return on equity capital

Net profit after tax
------------------------ X 100
Equity share capital

1999

MBA, UNIVERSITY OF SOUTH ASIA 125

 380014
---------- X 100
1113444
=3.13%
2000
700387
--------- X 100
1113444
=62.91%
2001
314962
---------- X 100
1113444
=28.28%

Interpretation
This ratio is meaningful to the equity shareholders who are interested to know the profit
earned by the company and those profit which can be made available to pay dividend to
them higher the ratio, better it is. In 1999 it was 34.13%, it increase to 62.90% in 2000
and then again decrease to 28.28% in 2001. The reason for increase in return on equity
capital is the increase in sale and decrease in cost of goods sold that resulted in an
increase in overall profitability and in 2001, the profit decrease because cost of goods
sold and financial charges increased in 2001. In 2001, every 100 rupee of share capital is
earning Rs. 28.28 of net profit that is still quite satisfactory.
Earning per share
Net profit after tax
------------------------ X 100
No of equity shares
1999

MBA, UNIVERSITY OF SOUTH ASIA 126

 380014
--------- X 100
111344
=3.41 per share

2000
700387
---------- X 100
111344
=6.29 per share
2001
314962
---------- X 100
111344
=2.85 per share

MBA, UNIVERSITY OF SOUTH ASIA 127

 PRE-TAX PROFIT
This graph depicts the pre-tax profit during last 5 years. In the 1999-2000, firm earned
huge amount of profit. This is because of improvement in management decisions.

MBA, UNIVERSITY OF SOUTH ASIA 128

Interpretation
Earning per share calculated for a number of years indicate whether or not the earning
power of the company has increased. The earning per share simply show the profitability
of the firm on a per share basis .It does not reflect how much is paid as dividend and how
much is retained in the business. But as a profitability index, it is a valuable and widely
used ratio. In 1999 earning per share was Rs. 3.41, in 2000, it increases to 6.29 and in
2001,and it decreased to Rs.2.83 per share.

LIQUIDITY RATIO
(a) Current ratio
Current asset
----------------
Current liabilities
1999
5083123
----------
5930585
=0.86:1
2000
5049052
-----------
6070496
0.83:1
2001
5915894
-----------
6895203
0.86:1

MBA, UNIVERSITY OF SOUTH ASIA 129

Interpretation
Current ratio is general and quick measure of liquidity of a firm. It represents a margin of
safety or cushion available to the creditors. It is an index of the firm’s financial stability.
It is also an index of technical solvency and an index of the strength of working capital.
In 1999, the current ration is 0.86:1 that is Rs 0.86 is available to pay an obligation of Rs
1. It shows firm’s liquidity position is not strong enough. It cannot pay its short-term
liabilities. The financial position of the firm is not strong. But it has improved its liquidity
from 2000 to 2001.

ANALYSIS SUMMARY SEPTEMBER

Note: All figures are in Pakistan Rupees

Ratios Equity Capital Dividends

Earned Profit Book Earnings Divs

Last Growth Rate Value Per % Per Avg
Year Price P/E P/Bk % % Begin Yr Share Chg Share Yield
1994 65.65 n/c n/c n/c n/c n/a n/a n/c A 0.00 0.0
1995 25.66 n/c n/c n/c n/c n/a n/a n/c A 0.00 0.0
1996 9.21 n/c n/c n/c n/c n/a n/a n/c 0.00 0.0
1997 14.91 5.8 n/c n/c n/c n/a 2.558 n/c 1.32 8.8
1998 9.30 3.4 0.3 3.9 9.0 30.18 2.711 6 1.54 16.5
1999 8.82 3.2 0.3 4.6 9.5 31.36 C 2.788 10 1.54 17.4
2000 28.10 4.5 0.9 11.4 19.2 32.81 B 6.290 110 A 2.55 9.1
2001 10.95 3.9 0.3 3.2 6.9 41.15 C 2.830 -55 1.50 13.7
2002 16.05 n/c 0.4 n/c n/c 42.37 n/a n/c 0.00 0.0
11/15/02 19.00 13.6 0.4 n/a n/a 42.37 1.350 n/c 1.50 7.9

(A): ALL ITEMS ADJUSTED FOR STOCK SPLITS OR DIVIDENDS - 120:100 RIGHTS ISSUE
(14% DIV) IN 2000, 23:20 RIGHTS ISSUE (4.22% DIV) IN 95, 15% IN 94

MBA, UNIVERSITY OF SOUTH ASIA 130

(B): CALCULATION BASED ON YEAR END OUTSTANDING SHARES

(C): BASED ON AVERAGE SHARES OUTSTANDING

Current Ratio

This graph depicts current ratio of last 5 years. Although current ratio of Nishat mills
limited is below the standard but since it enjoys an excellent credit rating in the eyes of
lenders so it does not matter. Its track record is also excellent. Actually management of
Nishat mills limited firmly believes in fair business practices. So while in obtaining loan
not a greater importance is paid to current ratio.

MBA, UNIVERSITY OF SOUTH ASIA 131

(b) QUICK RATIO / ACID TEST RATIO
Liquid assets
----------------
Current ratio
Liquid assets = Current asset – (inventories + prepaid expenses)
1999
2706725
------------ X 100
5930585
0.46:1
2000
3122112
---------- X 100
6070496
=0.49:1
2001
3397960
----------- X 100
6895203
=0.49:1

MBA, UNIVERSITY OF SOUTH ASIA 132

Interpretation
Quick ratio is very useful in measuring the liquidity position of the firm. It measures the
capacity of the firm to pay off current obligation immediately and is a more rigorous test
of liquidity than current ratio.
In 1999, the liquid ratio was 0.46:1, it has shown more liquid and readily cash
convertibles assets of 0.46 to pay off the obligation of Rs 1. It does not represent good
financial position.
In 2000, it rose to 0.51:1 and in 2001 it was 0.49:1. A lower liquid ratio does not mean a
bad liquidity position, as inventories are not absolutely non-liquid. The liquid ratio is
better in 2000 as compared to 1999 and 2001.

CURRENT ASSET MOVEMENT AND ACTIVITY RATIO

(a) Stock turn over ratio
Cost of goods sold
------------------------
Average stock
1999
7745353
-----------
1931547
=4 times
2000
7991952
-----------
2143256
=3.73 times
2001
9605013

MBA, UNIVERSITY OF SOUTH ASIA 133

 ----------
2212850
=4.34 times

Average stock = (opening stock +closing stock)/2

Interpretation
Inventory turnover ratio measures the velocity of conversion of stock into sales. In other
words, how rapidly inventory is turning into receivables through sales.
In 1999,the turnover was 4 times. In 2000, it decreased to 3.73 times and in 2001 it again
increase to 4.34 times. In 2000 the ratio was low because of over investment in
inventories, stock accumulation. This low ratio represents in efficient inventory
management.

(b) Inventory turnover in days

365
-------------------------
Inventory turnover ratio

1999
365
------
4 times
=91.25 days
2000
365
-------------
3.73 times

MBA, UNIVERSITY OF SOUTH ASIA 134

 =97.85 days

2001
365
-----------
4 times
=91.25 days

Interpretation
It shows in how many days an average, before any inventory is turned into account
receivables through sales. In 1999 and 2000 it was 91 and 98 days respectively and in
2001 it was 84 days. The management should take prompt action to reduce these days

Debtor’s Turnover Ratio

Sales
-------------------
AV. trade debtors
1999
9436104
--------------------------------
1674052+1290253/2
=6.37 times
2000
10134014

MBA, UNIVERSITY OF SOUTH ASIA 135

 ---------------------------------
1290253+1409926/2
=7.51 times

2001
11662457
-----------------------------------
1409926+2027613/2
=6.78 times

Interpretation
It indicates no of times debtors are turned over during the year. The higher the value of
debtors turnover, the more efficient is the management of debtors, or more liquid the
debtors. There is no rule of thumb, which may be used, as normal to interpret the ration.
In 1999 the debtor’s turnover ratio was 6.37 times. It increases to 7.1% in 2000 and
decrease to 6.78%in 2001. It suggests that management is inefficient in management of
debtors
Average Collection Period
NO. Of working days
-----------------------------
Debtor’s turnover

1999
365
-----
6.37
=57 days

MBA, UNIVERSITY OF SOUTH ASIA 136

 2000
365
-----
7.51
= 49 days
2001
2001
365
------
6.78
=54 days

Interpretation
This ratio measures the quality of debtors. A short collection period implies prompt
payment of debtors. It reduces the chances of bad debts.
In 1999 the collection period was 57 days; it reduces to 49 days in 2000 and then increase
to 54 days in 2001. This period is high. Management should take prompt action to control
it. It shows inefficient credit collection performance.

AVERAGE PAYMENT PERIOD

NO of working days
-------------------------
Creditors turnover ratio*

1999
365

MBA, UNIVERSITY OF SOUTH ASIA 137

 -----
17
= 21 days

2000
365
-----
10.56
= 35 days
2001
365
-----
13.42
= 27 days

Creditors Turnover Ratio

Credit purchases
---------------------
Average trade

Interpretation
It represents the no of days taken by the firms to pay its creditors. High creditor’s
turnover ratio and low average payment period represents creditors are being paid
promptly. Thus enhancing the credit worthiness of them.
In 1999 it was 21 days; it rose to 35 days in 2000 and decrease to 27 days in 2001. It
shows that firm is not taking full advantage of credit facilities allowed by the creditors.

MBA, UNIVERSITY OF SOUTH ASIA 138

On other hand, it maintain the goodwill of the company by increasing credit worthiness
on prompt pay back

Nishat Mills Limited

The Company manufactures, spins, combs, weaves, bleaches, dyes, prints,
stitches, buys, sells textiles and otherwise deals in yarn, linen, cloth and other
goods and fabrics made from raw cotton, synthetic fiber and cloth. The Company
also generates, accumulates and distributes electricity.

Stock Chart Officers

Chairman & Chief Executive
Naz Mansha

Secretary
Muhammad Azam

Stock Price (11/15/02): 19.00

Recent stock performance
1 Week 3.5%
4 Weeks 15.9%
13 Weeks 22.2%
52 Weeks 14.5%
Earnings / Dividends (as of 6/30/02)
Earnings Dividends
Most Recent Qtr 0.46 1.50
Last 12 Months 1.35 1.50
Ratio Analysis
Price / Earnings Ratio 14.07 Dividend Yield 7.89%
Price / Sales Ratio 0.18 Payout Ratio 111.11%

MBA, UNIVERSITY OF SOUTH ASIA 139

 Price / Book Ratio 0.43 % Held by Insiders 5.00%

ANALYSIS OF LONG TERM FINANCIAL POSITION AND

SOLVENCY TEST.

Debt-Equity Ratio
OUTSIDERS FUND
-------------------------
SHAREHOLDERS FUND

Outsiders’ fund
Redeemable capital + debentures + long term loans + current portion of long term
liabilities + short term finances

1999
5727113
-----------
4165228
=1.37:1
2000
6291896
-----------
4582672
=1.37:1
2001

MBA, UNIVERSITY OF SOUTH ASIA 140

 8366871
-----------
4730562
=1.7:1

Interpretation
The ratio indicates the proportionate claim of owners and outsiders against the firm asset.
The purpose is to get an idea of the cushion available to outsider on the liquidation of the
firm. The interpretation of the ratio depends upon the financial and business policies.
In 1999, 2000 the ration was 1.37: 1and in 2001 it was 1.76:1, it shows that management
want to do business with maximum outsider funds in order to take lesser of their
investment.
It shows that for every 1.76 rupees worth creditors’ investment, the shareholders have
invested RS 1.
Debt To Total Asset Ratio
TOTAL DEBTS
--------------------
TOTAL ASSTS
1999
5727112
-----------
10782776
=0.53:1
2000
6291896
-----------
11904857
=0.53:1
2001

MBA, UNIVERSITY OF SOUTH ASIA 141

 8366871
------------
14222444
=0.59:1

Interpretation
It shows how much sufficient our assets are in retiring the total debts. We can observe in
our analysis that for every RS 1 of assets we have 0.53, 0.53 and 0.59 debts respectively.
We can also say that how much is that external financing is our total assets. Now, if the
firm liquidates the creditors will owe 0.53, 0.53, and 0.59 in respective years and rest will
go to the shareholders.

 Interest Coverage Ratio

EBIT
----------------
Interest expense

1999
1262188
------------
799063
=1.58:1
2000
1698776
-----------
667188
=2.55:1
2001
1463447

MBA, UNIVERSITY OF SOUTH ASIA 142

 ----------
1048467
=1.40:1

Interpretation
The interest coverage ration is very important from the lender point of view. It indicates
the no of time interest is covered by the profit available to pay interest charges. It is an
index of the financial strength of an enterprise. A high ratio assures the lender a regular
and periodic interest income. But the weakness of the ratio may create some problems to
the financial managers in raising funds from debt sources.
In 1999 the ratio was 15 times and in 2000 it was 25 times. In 2001 it reduced to 14
times. The ratio is quite high and helps financial manager to raise funds from debts
sources. In 2001 the company has RS 14 of profit to pay RS 1 of interest.

 Inventory Turnover in Days

365
---------------------------
Inventory turnover ratio
1999
365
------
4 times
=91.25 days
2000
365
-------
3.73 times
=97.85 day
2001
365

MBA, UNIVERSITY OF SOUTH ASIA 143

 -----
4.34 times
=84.10 days

Interpretation
It shows in how many days an average, before any inventory is turned into account
receivables through sales. In 1999 and 2000 it was 91 and 98 days respectively and in
2001 it was 84 days. The management should take prompt action to reduce these days

 Total Asset Turnover / Capital Turnover Ratio

Net sales
------------
Total asset
1999
9436104
------------
10782776
=. 88 times
2000
10134014
-------------
11904857
=0.85 times
2001
11662457
-------------

MBA, UNIVERSITY OF SOUTH ASIA 144

 14222444
=0.82 times

Interpretation
It shows that firms must manage its total assets efficiently and should generate maximum
sales through their proper utilization. As the ratio, increases there are more revenue
generated per rupee of total investment in asset. The firm ability to produce a large
volume of sales on a small total asset based is an important part of the firms overall
performance in terms of profits. In 1999, 2000 and 2001 the ratio was 0.88, 0.85, 0.82
times respectively. In 2001, the ratio indicates that it is producing RS 0.82 sales per
rupees of investment in total assets.

 Proprietary Ratio
SHAREHOLDERS FUNDS
------------------------------------
TOTAL ASSETS

1999
4165228
----------- X 100
10782776
=38.6%
2000
4582672
------------ X 100
11904857
=38.5%
2001
4730562
----------- X 100

MBA, UNIVERSITY OF SOUTH ASIA 145

 14222444
=33%

Interpretation
This ratio puts light on the general financial strength of the company. It is also regarded
as a test of the soundness of the capital structure. Higher the ratio, better the long term
solvency of the company. Low proprietary ratio will include greater risk to the creditors.
In 1999 and 2000 this ratio was 38.6% and 38.5% respectively. In 2001 it is reduced to
33%. It shows that in 2001 the shareholders contribution was RS 33 for every RS 100
employed in business and creditor’s contribution would be the remaining RS 77.

 OPERATING CYCLE

Operating cycle measures the length of time from the commitment of cash for purchase
until the collection of receivables resulting from the sale of goods or services. Operating
period of an enterprise is the time period between acquisition of raw material till the
realization into cash or any other instrument, which is readily converted into cash.

Operating cycle = Inventory turnover in days + Receivable turnover in days

1999 = 91+57 = 148 days

2000 = 98+49 = 147 days
2001 = 91+54 = 145 days

MBA, UNIVERSITY OF SOUTH ASIA 146

 OPERATING CYCLE

Operating cycle shows how much days are required from the purchase of material to
realization of cash. The length of time from the incurrence of cash for purchase of raw
material until the collection of receivables resulting from the sale of goods or services.

Operating cycle for 1999 is 148 days, in year 2000 it was 147 days and in 2001 it is 145
days. Company trend is going in appositive ways. Nishat is maintaining its operating
cycle. There is no fluctuation. It shows efficiency of the management that is why
inventory is regulating efficiently. A firm with short operating cycle can operate
efficiently with relatively small amount of current assets and relatively low current and
acid test ratio. The firm is liquid in the dynamic sense that it can produce product, sell it
and collect cash for it.

MBA, UNIVERSITY OF SOUTH ASIA 147

  CASH CYCLE

Cash cycle measures the length of time from the actual outlay of cash for purchase until
the collection of receivables resulting from the sale of goods and services.

Cash Cycle = Operating cycle - Payable turnover in days

1999 = 148-21 = 127days

2000 = 147-35 = 112 days
2001 = 145-27 = 118 days

Cash cycle of Nishat Mills is in year 1999 is 127 days, in year 2000 it decreases to 112
days and in 2001 it is 118 days. The lesser the days of completing the cash cycle, higher
be the business activity and company efficiency. It indicates the better circulation of
cash. Long Cash cycle might be the warning of excessive receivables and inventory. It
might lead to more chances of bad debts. Short cycle is sign of good management.
Nishat is maintaining its cycle.

MBA, UNIVERSITY OF SOUTH ASIA 148

 Stock Price Analysis

Figures in Pakistan Rupees

Qtrly 12 mo.
Quarter High Low Close Change Change
Apr - Jun 1994 0.000 0.000 81.643 n/a n/a
Jul - Sep 1994 81.643 57.234 65.651 -19.6% n/a
Oct - Dec 1994 74.068 46.713 46.924 -28.5% n/a
Jan - Mar 1995 47.134 25.250 26.092 -44.4% n/a
Apr - Jun 1995 26.513 22.725 25.219 -3.3% -69.1%
Jul - Sep 1995 40.351 28.070 25.658 1.7% -60.9%
Oct - Dec 1995 30.482 22.368 25.658 0.0% -45.3%
Jan - Mar 1996 31.140 21.491 24.561 -4.3% -5.9%
Apr - Jun 1996 23.904 12.281 12.281 -50.0% -51.3%
Jul - Sep 1996 13.377 8.772 9.211 -25.0% -64.1%
Oct - Dec 1996 16.447 8.553 14.035 52.4% -45.3%
Jan - Mar 1997 25.219 14.167 22.368 59.4% -8.9%
Apr - Jun 1997 23.596 16.754 17.544 -21.6% 42.9%
Jul - Sep 1997 21.930 13.596 13.596 -22.5% 47.6%
Oct - Dec 1997 16.930 11.754 12.807 -5.8% -8.7%
Jan - Mar 1998 12.632 9.035 9.035 -29.5% -59.6%
Apr - Jun 1998 9.167 5.921 7.018 -22.3% -60.0%
Jul - Sep 1998 9.868 5.789 9.298 32.5% -31.6%
Oct - Dec 1998 9.254 6.184 8.509 -8.5% -33.6%
Jan - Mar 1999 11.404 8.114 9.167 7.7% 1.5%
Apr - Jun 1999 9.912 7.763 8.333 -9.1% 18.8%
Jul - Sep 1999 9.825 7.939 8.816 5.8% -5.2%
Oct - Dec 1999 23.509 8.333 23.509 166.7% 176.3%
Jan - Mar 2000 35.800 22.544 35.800 52.3% 290.5%
Apr - Jun 2000 44.250 23.150 23.150 -35.3% 177.8%
Jul - Sep 2000 28.300 19.200 28.100 21.4% 218.7%
Oct - Dec 2000 29.800 19.900 26.150 -6.9% 11.2%
Jan - Mar 2001 27.300 15.750 16.300 -37.7% -54.5%
Apr - Jun 2001 19.000 16.550 17.300 6.1% -25.3%
Jul - Sep 2001 16.750 10.650 10.950 -36.7% -61.0%
Oct - Dec 2001 17.250 10.200 13.850 26.5% -47.0%
Jan - Mar 2002 20.700 14.600 16.450 18.8% 0.9%
Apr - Jun 2002 17.750 11.550 15.600 -5.2% -9.8%
Jul - Sep 2002 17.100 15.150 16.050 2.9% 46.6%
11/15/02 19.000 22.2% 14.5%

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  Return on Investment

Net profit after tax

---------------------------------------- X 100
Total assets

1999
380014
------------------------ X 100
10782776

=3.52 %

2000
700387
-------------------- X 100
11904857

=5.88%

2001
314962
---------------------- X 100
14222444

= 2.21%

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 Sales & Profitability Summary

Figures expressed in billions of Pakistan Rupees

Sales % of Inc. bef % of Sales/

Year Sales Growth EBITDA sales Extra sales Emps Empl
1992 3.688 n/c 0.579 15.7% 0.223 6.0% n/a n/a

1997 8.572 n/c 1.527 17.8% 0.325 3.8% n/a n/a

1998 8.919 4.0% 1.874 21.0% 0.344 3.9% n/a n/a

1999 9.594 7.6% 1.529 15.9% 0.380 4.0% n/a n/a

2000 10.297 7.3% 1.909 18.5% 0.700 6.8% n/a n/a

2001 11.662 13.3% 1.777 15.2% 0.315 2.7% 13,146 887,149

 Return on Investment

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 Net profit after tax sales
--------------------------------- X ------------------- X 100
Sales total assets
1999

380014 9436104
--------------------------- X -------------------
9436104 10782776
= 3.50

2000

700387 10134014
------------------- X ----------------- X 100
10134014 11904857

= 5.87

2001

314962 11662457
---------------- X -------------------- X 100
11662457 14222444

= 2.21

Interpretation
Return on investment is an important ratio in measuring the trend of the organization and
thorough analysis of the company. Neither the net profit margin nor the total assets itself
provide adequate measures for overall effectiveness. Net Profit margin ignores the

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utilization of assets and total assets turnover ratio ignores the profitability on sales. One
variation in Du Pont analysis is to understand the firm’s return on investment. The return
on investment ratio or earning power resolves this shortcoming. An improvement in the
earning power of the firm will result if there is increase in total assets turnover ratio, an
increase in net profit margin ratio or both.

In the year 2001, the return on investment remained low but in 1999 and 2000 there is
positive trend and there is an increase in return on investment because of increase in both,
net profit margin and total asset turnover ratio. This is showing the Total Quality
Management (TQM) and efficiency of management.

NISHAT MILLS LIMITED

INCOME STATEMENT
VERTICAL ANALYSIS

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 1999 2000 2001

SALES 100% 100% 100%

COST OF GOODS SOLD 82.08 78.86 82.36
GROSS PROFIT
17.92 21.14 17.64
ADMINISTRATIVE SELLING AND GEN EXPESES 5.27 5.39 6.09
OPERATING PROFIT 12.65 15.75 11.55
ADD; OTHER INCOME
0.73 1.01 1
EARNING BEFORE INTEREST AND TAX 13.38 16.76 12.55
LESS: FINANCIAL CHARGES 8.47 8.58 9
WORKERS PARTICIPATION FUND 0.25 0.41 0.18

PROFIT BEFORE TAXATION 4.66 7.78 3.37

LESS: PROVISION FOR TAXATION 0.63 0.87 0.67
PROFITAFTER TAX 4.03 6.91 2.7

Interpretation
Percentages of cost of goods sold to sales remain with in range of 78% to 80%. It means
that cost of goods is being strictly controlled at Nishat mills limited. In the year of 2000
administrative expenses were 5.39% but in the year 2001 administrative expenses
increased to 6.09% that depicts the inefficiency of management in curtailing its
administrative costs.
Earning before interest and profit also reduced in the year of 2001 because of increase its
selling and administrative costs. Financial charges also increase in the year of 2001
because firm financed its projects through borrowed financing.
In the year 2001 profit after tax reduced as compared to 2000 because of increase in cost
of goods sold, increase in selling and administrative cost and increase in financial
charges.

MBA, UNIVERSITY OF SOUTH ASIA 154

 NISHAT MILLS LIMITED
BALANCE SHEET
VERTICAL ANALYSIS

1999 2000 2001

Equity and Liabilities
Share Capital and Reserves
Authorized Capital
Issued and Subscribed and paid up share capital 10.33 9.35 7.83
Capital reserves 9.53 8.63 7.23
Revenue 18.65 20.4 18.12

Surplus on revaluation of operating fixed assets 0.0046 0.1 0.09

Non Current Liabilities

Redeemable capital 0.11 7.72 15.51
Long Term Loans 2.34 1.92 1.09
Liability against finance lease 3.02 0.87 1.65
Deferred liability for gratuity 1 0.01 0.1

Current Liabilities
Current portion of long-term liabilities 5.22 5.4 5.4
Short term finance 41.54 36.94 35.17
Creditors accrued and other liabilities 4.44 4.48 5.49
Worker' participation fund 0.22 0.35 0.15
Provision for Taxation 1.73 1.38 1.03
Proposed dividend 1.81 2.38 1.17
Unclaimed Dividend 0.05 0.06 0.07

Total Liabilities and Owner Equity 100 100 100

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 ASSETS
Non-Current Assets
Tangible fixed assets
Operating fixed assets 32.98 30.91 43.5
Assets subject to finance lease 3.44 2.04 3.29
Capital work in process 1.16 12.31 1.08

Long Term Investment 14.75 11.68 9.78

Long Term loans, deposits, prepayments 0.53 0.65 0.7

Current Assets
Stores, spare parts and loose tools 5.05 4.26 3.81
13.8
Stock in Trade 16.92 11.85 3
Short term investment 0.06 0.05 0.04
14.2
Trade Debts 11.97 11.84 6
Advances, deposits and prepayments 6.13 4.02 2.66
Other Receivables 2.4 4.05 4.43
Cash At Bank 4.08 6.34 2.57
47.15 42.41 41.6

33333333333333333333333333333333
3333333
TOTAL ASSETS 100 100 100

INTERPRETATION
NISHAT MILLS limited operating assets increased in the year of 2001 as compared to
year 2000. Firm’s redeemable capital also increased as compared to previous years.
Overall performance of Nishat mills limited remains satisfactory.

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 TREND ANALYSIS

“Trend analysis shows the direction upward or downward and involves the
computation of the percentages relationship that each statement item bears to
the same item in the previous year.”

Interpretation of Income Statement

 SALE

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The increase in sales illustrates that it is showing an upward trend due to the
increase in the wholesale price of the commodity in the market. The unit
produced has also been increased and the company also captured more buyers
in 2001 resulting in greater sales volume.
Sales volume in 2000 is greater as compared to the previous year and lesser as
compared to 2001 showing the company’s inability to capture more buyers.

 Cost of Goods Sold

Increasing trend in the cost of goods sold is due to the reason that company also
incurred more variable and fixed costs and other operating cost as well as
compared to 1998 in 2000 and 2001.

 Gross Profit
Gross profit showing an upward trend in the year 2000 as compared to 1999
because sale volume increased in this year and cost of goods sold was 78.86%
of sale in 2000 as compared CGS i.e. 82.08% of sale in 1999. In 2001, it again
decreased because of increasing in cost of goods sold in 2001 i.e. 82.36%.

 Operating Expenses
Operating expenses are showing an upward trend in 2000 and 2001 as
compared to the previous years because sale volume has increased in these
years. The company has a spent a lot of money on selling expense as
advertisement and also on administration, due to these operating expenses are
showing an upward trend.

 Financial Charges
Financial charges are showing an upward trend in the year 2000 and 2001. In
1999, it reduced from the 1998 expense because of the efficiency of the
management to control on such expenses. In 1999 and 2000, it increases due to
inefficiency of management. Management should take steps to avoid such
expenses.

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  Earning Before Interest and Tax
Earning before interest and tax at first reduced in 1999 as compared to 1998
because of increase in operating expenses in 1999. In 2000, it increased
because in this year cost of goods sold decreased due to efficiency of the
management and gross profit are also high.
In 2001, it again decreased because in this year the cost of goods sold increased
as compared to previous year and gross profit ratio was also low. The operating
expense also increased in this year due to inefficiency of management resulting
in low earning before interest and tax.

 Taxes
Taxes are levied by the govt. and it can increase or decrease the amount of
taxes when it likes or feels necessary. In 1999, the taxes decrease as compared
to 1998 because of new govt. policies and enforced tax rates. In 2000, it
increases because have in sale and profit as compared to 1999. In 2001, it again
decreases due to decrease in profit.

 Net Income
The net income has been increased over the year due to following reasons.
In 1999, it increased because of increase in sale volume and unit cost. In 2000, it
again increases because of increase in sale, decrease in cost of goods sold and
increase in earning before interest and expense. In 2001, it again decreases as
compared to 2000 because of increase in cost of good sold, selling,
administration and other taxation expenses.

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FORMULA USED

Current year amount – previous year amount

Chain base = ------------------------------------------------------------------------ X 100
Previous year amount

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 Assets

Fixed assets In 1999, the company fixed assets has been increasing by 0.08% as
compared to previous year and similar fashion is noticed the year 2000 and 2001. We
have noticed that the sale volume over the year has been increased. This is due to
increased volume of fixed assets.

 Long Term Investment

Long-term investment is showing decreasing trend in the year 1999 and 2000 as
compared to previous year. In 2001, it is same that is in 2000 i. e. no increase in
long-term investment. It shows that company is more interested in investing his
current assets.

 Long Term Loans, Deposits, Prepayment and

Deferred Cost
Long-term loans, deposits, prepayment and deferred cost showed a positive sign
in 2000 and 2001. In 1999, it decreased because there were political crises in the
country. The firms do not involved in more investing in other companies because
of risk of loss. The increase in 2000 and 2001 is a healthy sign in the country; in
these years there was political stability, showing that the investment of the
company in other companies has considerably increased.

 Current Assets
Current assets comprising of stores, spare parts and loose tools have shown
increased pattern in the year 1999 and 2000 representing the expansion of the
business. In the year 2001, it reduced as compared to 2000 because these
assets were sufficient to meet next year requirement. Stock in trade showed as
increasing trend in the year 1999 showing inefficiency of the management
because management fails to dispose it of in time. The decline in stock in trade in
the year 2000 shows efficiency of management also the buyers are satisfied by

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the decisions. In the year 2001, it again showed an increasing trend showing
inefficiency of the management.
Trade debtors showing declining trend in the year 1999 as compared to 1998
which is a positive sign but trade debtors which includes account receivables and
debtors have been increased in the year 2000 and 2001 which shows the
following:
Company collection on accounts is slow.

 Company is selling the goods on credit rather than cash basis.

 Management should take remedial measures to lesson the trade debtors
at reasonable level.
 Short term investment cash and bank

Short term investment cash and bank balance have been increase in 1999 and
2000 showing a positive sign to meet the working capital requirement of the firm.
In 2001, the balance reduced because of the inefficiency of the management and
it reduces the ability to meet working capital requirement of the company.

FORMULA USED

Current year amount – previous year amount

----------------------------------------------------------------
Previous year amount

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LIABILITIES AND OWNER EQUITY

 Issued Subscribed and Paid Up Capital

We have observed that the issued subscribed and paid up capital of the
company remained the same throughout the years.

 Share Holder Equity

The shareholder’s equity is showing a positive sign that the share holder’s share
in the business have been increased

 Long Term Liabilities

Long-term liabilities have been decreased in the year 1999,2000 and 2001
respectively, showing the efficiency of the management in retiring its debts.

 Deferred Liabilities
Deferred liabilities show the decreasing the trend that shows the efficiency of
management in retiring them off.

 Liability against Assets Subject To Finance Lease

Liability against assets subject to finance lease shows the decreasing trend in the
year 2000 and 2001 that shows firms took less loans against assets in this year
and shows less expansion in business but in the year 2001 it again rose that
shows expansion of business.

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  Current Liabilities
Current liabilities shows the liquidity position of the company short term
borrowing of the company have been increased in the year 1999 but in 2000 and
2001 it shows the decreasing trend representing its control on borrowing
depicting the efficiency of the management
Creditors, accrued and other liabilities have shown a positive trend in the year
1999 that it decreased. Firm has to pay less amount money to others. It again
increased in the year 2000 and decreased in 2001. The increase depict that
company is postponing payment to creditors. Creditors may find in convenience
in receiving their money back. It will effect their goodwill but in the year 2001 the
management controlled it by their efficiency.

 Proposed Dividend
Proposed dividend and dividend payable shows that the company has
accumulated greater profit which would be distributed after some time.

FORMULA USED

Current year – previous year

-----------------------------------------------------
Previous year

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Training Programme
While at Nishat, I worked in different department. My focus of intention was on finance
department, where I spent most of my time in understanding the procedure of opening of
letter of credit and other export details. This enabled me in understanding the function
performed by bank, in relation to letter of credit. Here I am presenting a brief summary of
department, their functions and what I understood there.

Brief Introduction of Different Departments

In company’s office there are followings types of departments.

 Purchase Department

 Export Department

 Accounts& finance Department

 M.I.S (Management Information System)

Purchase Department.
Purpose
The main purpose of department is to maintain the desirable level of purchase, so that
ideal funds are not stuck up in the shape of heavy purchase or a position not arise that
mill stop due to non-availability of raw material or store and spares.
In addition to this purchase department is also responsible for checking of
following.

 Checking quantity of purchased goods.

 Checking rates of purchased goods.
 Checking quality of purchased goods.

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Procedure
Firstly different departments according to their requirement put their demand. Higher
authorities will check the authenticity of demand. They scrutinize that the goods, which
are demanded, actually required.

When demand is approved. Purchase department gets different quotation for this product
and after making a reasonable decision in this regard, they will issue a purchase order. .
Purchase order declares the terms and conditions of order and finally deal between the
parties are decided. The supplier will send the goods along with the delivery order.

On receiving the goods the purchase department will make a goods receipt note on which
the name of goods and it quantity is shown. 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

Accounts Department

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Accounts Department

There are four sections, which are described below in details,

1) Payroll section
2) Costing section
3) Payable section
4) Receivable section

 Account payable section

It primarily deals with supplier, contractors, creditors, to whom Nishat mills limited
make the payments. A person designated as assistant manager heads account payable
section. Accounts officer and assistant account officer work under his supervision. Before
payment is made to supplier or contractors following supporting documents are required.

 Sales tax invoice

 Inward gate pass
 Good inspection note
 Delivery challan

1. Sales tax invoice

Invoice is prepared which shows 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

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2. Inward gate pass
In the supporting documents inward gate pass is also very essential. When things are
purchased from outside parties they reach factory premise so entry is made. And a pass is
issued by the concerned authorities that allowing the entrance of goods. Account payable
department require a copy of inward gate pass. Most important thing to remember, that it
deals only with the quantity. It has no concerned with quality. Inward gate pass no is
checked by

1) Gate clerk
2) Security officer
3) Store auditor

3. Goods inspection note

When purchase process of goods (commodities is initiated a purchased order is made, a
copy of purchase order is given to payable department, when goods are received the
concerned department (issuing purchase order) inspects the goods to know whether they
are according to their specification mentioned in purchase order. So a copy of good
inspection note is prepared. Goods inspection note should be received within one day
after the storeroom receives goods

4. Preparation of checks
After receiving the invoices and checking their accuracy finally account payable
department prepares cheques. Chief controller of Nishat mills limited signs these. Nishat
mills limited have totally computerized system so items are identified and coded. Every
party is allotted certain codes and entry is made in them as and when they take place.

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Entries in books of accounts
Party sends the bill, once it is approved. Two vouchers are prepared,

J.V (journal voucher)

Expense account (debit) Amount

Party account (credit) Amount

Expense account is debited because company has incurred certain expense. Party is
credited because payment is going to be made to him.

B.P.V (bank payment voucher)

Party account (debited) Amount

Bank (credited) Amount
Tax Amount

Deduction of tax is made at source under the section 50 of the income tax
ordinance 1979.

FUNCTIONS

The main function of account department is to keep proper record transaction and
maintain the accounts.

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Procedure
Firstly the account department makes the recording of transaction by different type of
vouchers according to the nature of transaction. The vouchers provide the evidence of
transaction.

As books of NISHAT MILLS are computerized and ledgers are being 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 main purpose of the department is ensuring the availability of the funds for operation
and also better allocation of these funds.

Functions
The most important function of finance manager is to arrange different types of loan
according to the requirement, like:
 Long-term loan
 Leasing
 Short-term loan

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One of the main important functions performed by finance department is to prepare loan
proposals.

LOAN PROPOSAL
Nishat mills limited generate funds from inside and outside parties. Inside parties include
shareholders, while outsider parties are banks and various loan providing agencies.

Difference between fund based and non-fund based

credit
1. Fund base credit
In fund base credit there is actual disbursement of cash by the bank to Nishat mills
limited.
2. Non fund base credit
In non fund base credit bank only provides guarantee no disbursement of cash is made.
When loan proposal is made various consideration should be kept in mind, first we will
see the matter from the point of Nishat mills limited then apprehensions of bank will be
discussed in detail,

Points to remember
Following points should be kept in mind before making a loan application.

 Loan amount
 Date of expiry
 Rate of interest (important consideration)
 Securities

Nishat mills limited in following forms offer the securities,

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 1) Pledge of cotton
Mostly or frequently offered security is cotton. Usually loan is obtained from bank after
pledge of cotton. In pledge ownership and possession is with the bank. There is important
point to remember that although cotton is stored in the god own of NML but all the keys
are with the banks. The bank releases when payment is made to bank cotton. Generally
cotton purchase is heavily financed by bank. Bulk of cotton is purchased in the season so
to avail the benefit of huge quantity.

2) Mortgage of factory premises

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

Types of mortgage
There are two types of mortgage

 Equitable mortgage
 RTG mortgage

 Equitable mortgage

Under this type mortgage deed is not registered in the court of law. Normally court fee is
paid when mortgage deed is registered. Registration of mortgage deed means that lien of
bank is marked on the premises in the register of ownership so further purchase and sale
of this property is not allowed.
Equitable mortgage is preferred when client is trust worthy, his track record has been
established and he enjoys a favorable repute in the market.

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  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.

3) 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.

 Bankers point of view

Now we see the loan proposal from bankers’ point of view, banker has various
apprehensions before sanctioning loan to borrower. Bank analyses 3 Ps before advancing
loan,

1. Person
2. Purpose
3. Papers

1. Person
First of all person is important. Who is going to be on receiving end? In the past loans
were given to people according to their political status. Now a day’s bank cares a lot
before advancing loan.

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2. Purpose
What is the purpose of loan? Is it short term or long term loan? The motive behind the
loan is of immense important. Question should be asked whether the loan is obtained for
purchase of machinery or for construction of building.

3. Papers
The securities against which loan is granted are of great importance. Whether the
securities offered are good enough to secure the loan amount of bank. Now we come to
the lending policy of bank.

 Lending policy of bank

First of all loan proposal should meet the prudential regulations requirements. That is
maximum exposure to a single party should not exceed 30% of bank unimpaired
capital. The unimpaired capital of bank is equal to paid up capital plus reserves.

Another consideration is that current ratio should not fall below 1:1 although Nishat
mills limited current ratio is not 1:1 but since its track record has been established and it
enjoys a favorable repute in textile sector ,of course one of the leading exporter of textiles
products so banks normally do not pay much attention to this one.
The points which bank takes into account before sanctioning the loan are summarized as
under:
We can use word camel to denote them,

CAMEL
“C” stand for CAPITAL ADEQUACY
“A” stand for ASSET MANAGEMENT
“M” stand for MANAGEMENT SOUNDNESS
“E” stand for EARNING AND PROFIT

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“L” stands for LIQUIDITY
So we can summarize banks consideration into the above mentioned points.

 Credit Policy of Bank

How bank advance credit?
Before advancing the loan, bank do calculate certain ratio analysis,
Financial analysis of Nishat mills limited includes,

 File work
 Loan processing
 Previous record

Along with loan application following documents are attached

 Annual report
 Directors NIC copies
 Signature specimen of directors
 Last 3 years exports and imports details

 This statement verifies the financial position of Nishat mills limited Company

 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.

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EXPORT DEPARTMENT

Functions & Procedure

This department is responsible for the export of yarn, grey cloth and processed fiber. This
department has to fulfill all the legal requirements and prepare important 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,

1. SHIPMENT OF YARN, GREY CLOTH & PROCESSED FIBER.

After receiving packing list from shipping department, export departments starts its main
functions. It usually prepares the following documents to ensure the timely shipmen
The most commonly documents which export department has to prepare and deal
with are:

o Letter of credit (L\C)

o Bill of exchange
o Commercial invoice
o Export declaration form.
o Certificate of origin
o Packing list
o Customs invoice
o Textile declaration form
o Inspection certificate
o Shipping bill/bill of lodging/air way bill
o Manufacture’s certificate

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 o Form “E”

In some special cases, some other documents as and when required by

the buyer are also prepared like;

o Certificate of child labor

o Certificate of forced labor

Contract
First of all, contract between Nishat Mills limited and importer takes place. Nishat mills
limited find its buyer through marketing department. Then negotiation starts and finally
terms and conditions of contract are finalized.

Letter Of Credit
The 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”

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 “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,

I. Buyer
II. Buyer bank
III. Beneficiary
IV. Advising bank.

How L/C is opened

T he i mport department receives the Performa invoice from purchasing
de pa rt ment, after getting the approval from the authorized person (Mi a n
Um e r Sahib in Nishat Mil ls Limited) the concerned person write a n
Appl i cation in the name of his authorized bank requesting him to open a
L e t t e r of Credit in the favor of a particular party in a foreign country.
Insura nce Certificate is obtained from the Insurance Company for the
prot e c tion of damages. H.S Codes are also required for the confirmati on
of duty charged by the Government on different item of goods.
(Ha rm onized System Codes)

T he department according to the requirement makes sometim e s

a m e ndments.

Import documents are retired by paying the all dues to bank. L / C and Bill of Lading are
given to the clearing agent for clearing the consignment.

Finally bill of entry is received which has three copies in which every concerned party
give its remarks with stamp. One copy is sent to the SBP for maintaining records of

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Imports.2nd copy is sent to the custom department and 3 rd is retained by department for
record.

After clearance of the export documents, export department negotiate the paper with bank
and receive payment from the bank. Then our local bank sends documents to the buyer
bank and foreign bank release payment to our bank with the permission of the buyer.

In foreign trade, letter of credit has gained tremendously importance. It has facilitated the
trade, two unknown parties come together and both are benefited.

 Points To Remember In Letter Of Credit

What I did at Nishat mills limited? I came to know lot of things about letter of credit.
Contents of letter of credit are summarized as under,

I. Shipper’s name
ii. Consignee name
Never importer, according to State Bank regulations, consignee of goods can ever be
importer unless mode of payment is advance. State Bank of Pakistan point of view in this
regard is to secure the payment of letter of credit. Goods are received in foreign country
either by bank or some one other. The purpose is that foreign remittance should come
inside PAKISTAN.

iii. Mode of payment

Iv. Kind of letter of credit
V. Port of shipment
Vi. Port of delivery
Vii. Special instruction, if any
viii. Customs Invoice

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After opening letter of credit, invoice is prepared. One of for customs authorities, so
proper shipment takes place. It is sent along with goods shipped to foreign country.

ix. 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.
I want to mention a very interesting point there. Normally in case of small exporter, bank
inspects goods and issues FORM E. but in case of Nishat mills limited, blank FORM E
are issued by the bank, they are filled by the export documentation department. Since
Nishat is a large group and enjoys a favorable repute in the eyes of banks so they do not
care much is issuing blank FORM E. Nishat mills limited have given written undertaking
to bank that in case of unfavorable events. Nishat mills limited will settle the matter with
SBP.

x. Packing list
It describes goods, their quantities which are packaged. This packing list is sent to the
shipping company.

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

When goods are sent by sea, five copies of bill of lading are prepared. 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

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  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.

xii. Commercial invoice

Invoice can be of following types;
1. Cost and freight
2. 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.

Xiii.Certificate of origin
Some importers requires certificate of origin from NML. It is a declaration by NML that
goods are of Pakistani origin. Importers import fabrics because of finest cotton. It is an
assurance that goods are of Pakistani origin. Export Promotion Bureau normally issues
this certificate.

xiv. Beneficiary certificate

Export department also prepares it. In some special cases, some other documents as and
when required by the buyer are also provided, for example
Certificate of no child and forced labor

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HISTORY OF EXPORT FINANCE SCHEMES:

State Bank of Pakistan introduced a scheme in the year 1973 Known as Refinance
Scheme for Non-Traditional and newly emerging Exports with a view to providing
adequate bank credit for exports of non-traditional and newly emerging commodities on
favorable terms. Later in May 1976 it was decided to include all manufactured goods in
the scheme. Subsequently in October 1977 the scope of scheme was further enlarged and
a new scheme was introduced named Export Finance Scheme.

EXPORT FINANCE UNDER PART- I

Under Part –I of the scheme, the commercial banks provide concessionary finance to
exporters for financing the exports of eligible commodities on case-by-case basis against
individual.

Firm Export Order Irrevocable Letter of Credit

The term Firm Export Order shall include contract of sale, confirmation order for sale,
purchase order, Proforma Invoice and similar other documents evidencing purchase of
goods by foreign buyers. The information such as (1) name and address of exporters /
Importers (2) commodity (3) quantity / rate / amount etc. (4) period of shipment (5) terms
of payment.

Signature of exporters / importers should be provided in such documents. The exporter

must verify the signature of the buyer. As for L/C it would be enough that it indicates the
name of commodity and the amount.

The maximum period for which export finance under Part-I of the scheme can be
extended to the exporter is 180 days.

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APPLICATION FOR EXPORT FINANCE SCHEME UNDER
PART I SCHEME:

Exporter are required to submit following documents to their bankers for obtaining export
finance for onward submission to respective office of State Bank of Pakistan.

Pre-Shipment:

i. Demand Promissory Note

ii. Undertaking as per Annexure A on non-judicial stamp paper
iii. Copy of Letter of Credit or Firm Export Order

Demand Promissory Note

On demand the exporter promise to pay bank or order the sum or value received from
this date which includes the amount of profit / rate @ XX rate when converted into
annual % terms.”

Submission of Substituted Documents

As the loan mature after 180 days the documents must be submitted on 179 th day if these
are submitted on 180th day then late substitution fine is paid.

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The application for substitution is submitted with following documents:

1. Covering Letter:
It is a Letter, which informs you that what Type of documents is enclosed herewith.

2. Undertaking by Exporter:
In which the exporter, informs the bank that due to un-expected crisis of the buyer, they
are hesitating / reluctant in establishing letter of credit in respect of contract. They
expressed their inability to accept the shipment at this stage and have accordingly
cancelled the contract.

Therefore exporter requested to allow substitution of the contract and adjust the amount
of Re-Finance against substituted letter of Credit.

3. Original Sales Contract

Indicates the date at which contract is issued. The contents of sales contract are

 Buyer’s name & address

 Product description
 Quality & packing
 Shipment date
 Price
 Payment date etc

4. Particulars of Sales Contract Performa

These particulars include no. And date of contract, date till which that contract is valid,
the amount of the contract, name of buyer of contract, destination of the goods, and
shipment date of the goods in

Case of already exported goods, value of goods yet to be exported, no. Date and amount
of re-finance loan obtained from State Bank of Pakistan and due date of repayment of the
re-finance loan.

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5. Telex
It is sent by the buyer in which he informs the seller that due to some crisis in the
international market he is not in a position to open the L/C against that contract so please
treat the contract as cancelled.

6. Undertaking by the Exporter

Exporter finance has been availed against this sales contract or will be availed of by us
against this new firm order or against a portion of the transferable L / C duly transferred
in the name of above exporter or against the firm export order (s) in relation to which
under noted L / C or a transferred portion of it was received from our bank or from any
other bank under Part-1 of the export Finance Scheme, and the export proceeds realized
against shipment (s) made under the aforesaid documents have not been / will not be
accounted for matching purpose by the aforesaid exporters under part 11 of Export
Finance Scheme.

7. Certificate to Be Given By the Bank in Cases of Substitution of Firm

Export Order / Letter Of Credit under the Export Finance Scheme:

This certificate is issued to certify that they availed of no finance against this contract. It
includes the particulars of the new firm export order(s) and L/C (s) a portion of
transferable L/C, which includes no. And Date of L/C, date till which that L/C is valid,
amount of L/C, name of buyer, Destination, last date of shipment, goods already
exported, Date of shipment of above goods, Value of above goods, Value of goods yet to
be exported, Date of which above goods are to be shipped.

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  Shipping Documents
After 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. Invoice
2. Bill of Lading
3. E Form
4. DE Form “2” & Form ED-I

1. Invoice

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

2. 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.

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

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4. DE FORMS 2 & FORM ED-I
This 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.

 RETENTION OF FUND

The amount of document is paid to SBP then it is usable by the exporter after repaying
the loan the amount is useable by the exporter. For example; if the contract is at sight
then the amount is received within 15 days and it is sent to the State Bank of Pakistan and
not useable by the exporter after repaying the loan the amount is useable by the exporter.
This amount is repayable within 3 working days if it is not paid then the bank has right of
retention of fund.

 LOAN MATURITY
On the maturity date the exporter has to repay the fund if amount is receivable after
maturity date then the exporter has to pay the loan on his own sources.

The loan may be matured at sight 15 days to 120 days if more days are required then
permission is taken from SBP.

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

 Collection And Negotiation Of Documents

Documents sent to banks mostly on collection basis as well as negotiation / discounted.

1. Collection Basis
These are forwarded to any bank without negotiating exchange rates. On payments if the
exchange rate of submission bank is better than the other we will credit the same bank.

2. Negotiations / Discount:
We sell out our export documents depending upon better exchange rates of competitive
banks.

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PREPARATION OF IMPORT DOCUMENTS
1. Proforma Invoice / Indent /Contract

Indicates applicant’s name, to be shipped from 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, amount.

2. Covering Letter
This indicates the detail and price of the imported items.

3. Application for Opening of Letter of Credit

In which request is made from bank to open L/C for the attached Proforma invoices.

4. Form I
Application for permission under the Foreign Exchange Regulation Act, 1947 is made to
purchase foreign exchange for payment of imports. It indicates NIT No, place of issue,
date of issue, authorized bank, currency, beneficiary’s name and address, Indenter’s name
and registration No., description of goods, port of shipment, carrying Co.’s name and
applicant’s name and address.

5. Appendix-B
This certificate is given to the bank for export of chemical.

6. Appendix-G
This certificate is given in addition to appendix-G for import of spare parts & machinery.
It is not necessary to submit this document with L/C opening documents. But is not

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necessary to submit it at the time of retirement because the bank endorses it properly and
it is used for shipment.

 Particulars of Appendix G:

Name and address of importer, location of industrial unit with full address, name of
industry, detail of machinery, products manufacture, date of original established of the
unit, no, date of Government Sanction/Approval whether the unit was originally
established against imported or local machinery, income tax particulars, brief description
of machinery required along with H.S. Code No, purpose for which machinery required
that may be for one of the following: -

a) New Unit

b) Expansion

c) Balancing

d) Modernization

e) Replacement

Particulars of previous imports under expansion, rated capacity of new machinery applied
for, brief description of raw material and estimated annual imports requirements.

7. Applications and Agreement for Commercial Letter of Credit

This prescribed form is given by Bank, which includes;

 Type of letter of credit

 Beneficiary& amount

 Applicant& advising bank

 Transshipment/carriage doc

To be presented within 15-21 days after the date of issuance of the shipping document(s)
but within the validity of the credit, payment period, signed invoices that goods are of
exported, country of origin & B/L.

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

The insurance Co. certificate indicates: (1) Marine Cover Note No. (2) Date (3) Issuing
date.

9. H.S. Codes
These are codes used by custom department for imported commodity.

10. L/C Opening

1) Application

2) Performa Invoice

3) Insurance Cover Note

4) Form I

5) Appendix-G.

11. L/C Scrutiny

When the L/C is prepared by bank, then it is checked by import department with the L/C
documents hold by the Department.

12. L/C Amendment

Sometimes L/C is amended e.g. expiry date, shipment date, amount, indenter is involved
etc.

13. Import Documents / L/C Retirement

When L/C is reached to the bank then bank demands the amount of L/C from importer.
Importer contacts the other bank for buying the foreign currency and advice the bank to

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deposit the amount in the bank in which the importer opened this L/C then the bank
retires the document of importer L/C.

14. L/C Retirement Doc. and B/L

These 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.

15. Bill of Entry

In 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 PARTICULARS
a) L/C type, no. & Amount

b) Date & Place

c) Favoring party

d) Applicant

e) Signed commercial invoices indicate the value not more than L/C’s value.

f) Full set of clean “on Board” marine Bill(s) of lading

g) Insurance 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.

h) Packing list requirements

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Special Instructions
1. Outside bank charges are on beneficiary’s a/c

2. This L/C is available with any bank in Exporter’s country

3. Goods shipment from export country port to import country’s port.

4. Partial shipment allowed / not allowed

5. Transshipment allowed / not allowed

6. Shipment on enemy’s flag vessels and / or parts strictly prohibited

7. Doc. must be presented for negotiation within 15 days after the

date of shipment

8. All shipping docs. Must show H. S. Code

9. Short Form / Blank Back B/L(s) not acceptable

10. Shipping Co.’s name also indicated.

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  All Pakistan Textiles Mills Associations (APTMA)
It is an association of textile industry. It is non government body and acts as a pressure
group.

Functions
Following are the major functions performed by the APTMA.

1. Talks with government

If a certain textile industry is facing problem, or there is any government intervention
MA hold talks with Government to settle the disputes. So it acts as an intermediate party
between government textiles industry.

2. Conduct seminars
It regularly conducts seminars in which renowned persons are invited to share their
experiences in the field of textiles.

3. Arrange lectures
Foreign delegations are also invited for prospective investment in textiles sector.
It is a facilitating unit/body. If textile unit is worried about taxes, it is the APTMA on
which this matter will be frequently discussed.

Nishat mills limited are an active member of APTMA. There is another non government
organization known as ALL PAKISTAN CLOTHS EXPORTERS ASSOCIATION. Its
member through ballot chooses governing body of APTMA.

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  QUOTA SYSTEM
Most of the customers are American and US Government allocate quota to third
world. Infect quote is in quantitative and more than that can be shipped to non quota
countries, like UEA, JAPAN,NEWZELAND and AUSTRIALIA.

Kinds Of Quota

There are four kinds of quota,

I. First come first serve

II. One time quota

III. Auction quota

IV. Regular quota

i. First come first serve quota

This type of quota is granted by Export promotion bureau through APTMA to those
exporters who finds buyer in foreign quota country.

ii. One time quota

This form of quota is granted only once. It is usually granted for export of cloth. This
type of quota is non-transferable. It finishes when exporter export products to foreign
importer.

iii. Regular quota

This type of quota is granted on the basis of past performance and ability of exporter to
find buyers in foreign market.

iv. Auction quota

This type of quota is available through auction. Whosoever bids high gets the quota.
Nishat mills limited not only fulfills it regular quota but also acquire it from auction.

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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 Department

The 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

Functions
Function 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

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  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 NUMBER
When 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 cheques
After 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.

WORK DONE DURING INTERNSHIP

During my internship, I worked in the following departments.
 Accounts
 Export documentation
 Export rebate
 Banking
 Finance
 Purchase

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  Management information system
Therefore, during my internship I concentrate in account and finance
department.

 Banking Department
Functions
The major function of banking department is to deal with banks. 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 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 from 9 % to 14%. This interest is
calculated on daily basis.

MBA, UNIVERSITY OF SOUTH ASIA 198

  Rules to Calculate Interest
The basic rule which is followed to calculate interest is to include the day at which the
loan is sanctioned and on that date when loan is paid back is not included in the interest
charging days.

Formula to Calculate Interest

Interest= loan amount * days

Days in working year

Work done by banking department

When interest and loan amount is paid to bank, it is the banking department, which
calculates the interest amount due on Nishat mills limited. Although interest sheet is sent
by bank but it is reconciles by the banking department.

 Account department

In account department, I managed to understand the flow of transaction,

preparation of vouchers and ledger posing.
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 type of vouchers being
prepared by the account department of NISHAT MILLS is as under,

MBA, UNIVERSITY OF SOUTH ASIA 199

  Cash payment vouchers

 Cash receipts vouchers

 Bank payment vouchers
 Bank receipt vouchers
 Journal voucher or adjustment vouchers
 Petty cash vouchers

Now I discuss these types of vouchers one by one.

i. 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.

ii. 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

MBA, UNIVERSITY OF SOUTH ASIA 200

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

iii. 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 account officer for payment. Account officer
checks the approval and mathematical accuracy of the bill and prepares the bank payment
voucher. Account 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.

iv. BANK RECEIPT VOUCHERS

Bank receipt voucher are prepared when mill receives cheques against account receivable
or advance payments.

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On receipt of cheques account officer sends the cheques for clearing and passed the
following entry;

Account code cheques clearing A/C (debit) amount

Account receivable A/C (credit) amount

Advance against sale A/C (credit) amount

Copy of cheques is attached with voucher.

 If the collecting bank the reversal of above entry returns cheques is made in the
books.

 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

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  Writing off assets i.e. depreciation store consumption etc.

 Rectification of mistakes or omissions

Now I discuss them one by one

 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:

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.

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  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 store consumption:

Account code store concerned A/C (debit) amount

Store and spares A/C (debit) amount

 To account for accrued expenses:

Account code expense A/C (debit) amount

Account payable A/C (credit) amount

MBA, UNIVERSITY OF SOUTH ASIA 204

In additional to above referred kinds journal voucher is also passed to rectify the mistakes
made in voucher preparation or posting.
During my stay with NISHAT MILLS, I also worked with computer operator in order to
understand posting process.

LEDGER POSTING
Computer operator put log no and make 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
update and posting is made to respective account ledger by the computer.

 FINANCE DEPARTMENT
I also spent some time in finance department to understand the cash flow of the
department .the main purpose of the department is ensuring the availability of the funds
for operation and best utilization of available funds.

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.

 PURCHASE DEPARTMENT.
The main purpose of purchase department is to maintain the desirable level of purchase,
so that ideal funds can stuck up in shape of heavy purchase or a position not arise that
mill stop due to non-availability of raw material or store and spares.

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In addition to this purchase department is also responsible for checking of following:

 Checking quantity of purchased goods.

 Checking the quality for purchased goods.
 Checking rates of purchased goods.

Recommendations:

 Improve Short Term Ratios for making company operations more smooth and
easy.

 Make their Cash Collection System more efficient, because their Account
Receivable Turnover is declining from last years.

 Improved Liquidity of Cash in Short Run by financing some portion of debt from
long run.

 Must declare dividends, because of not declaring dividend in 2002 their share
price drastically decline.

 Maintain the price of Share according to value of Share.

 Use the capacities available of producing the products or sell those assets for
gaining revenue i.e. Television

 Need to change the inventory system i.e. LIFO, because with this system they
have maintain LIFO pool which is helpful in their uncertain period where the
prices fluctuates and their cost is out of their control.

MBA, UNIVERSITY OF SOUTH ASIA 206

 Annexure

MBA, UNIVERSITY OF SOUTH ASIA 207

Bibliography:

http://www.nishatmills.com.pk/profile.htm

www.aptma.org.pk/usefull_link.asp

http://www.brecorder.com/index.php?
currExchange=K&currPageType=D&currSector=18&stocks=stocks
%2Fmframe.php&currDate=2009-01-09&scrType=1024%7C768

http://www.brecorder.com/index.php?
currExchange=K&currPageType=D&currSector=6&stocks=stocks
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http://www.pacra.com/pressrel/nishat_P07.pdf

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http://www.apakistannews.com/nepra-approves-increase-in-electricity-tariff-93460

http://www.engineeringpakistan.com/IB/BulletinDec08.pdf

http://www.kpmg.com.pk/download/budget/03.pdf

http://thenews.jang.com.pk/daily_detail.asp?id=147383

http://www.dailytimes.com.pk/default.asp?page=2007%5C05%5C29%5Cstory_29-5-
2007_pg7_2

http://www.sbp.org.pk/Ecodata/kibor/2008/Dec/kibor-31-Dec-08.pdf

http://www.sbp.org.pk/reports/annual/arfy06/Chp-2.pdf

http://www.sbp.org.pk/reports/annual/arfy08/Stats/Chap2.pdf

http://www.finance.gov.pk/admin/images/updates/LSM%20Sep%2008.pdf

http://www.dailytimes.com.pk/default.asp?page=2007%5C08%5C03%5Cstory_3-8-
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MBA, UNIVERSITY OF SOUTH ASIA 208