Final Report of Pel

PAK ELEKTRON LIMITED

DEDICATION

I dedicate this report to my most valuable,

honorable &beloved “parents” and our teacher

“Mr. Muhammad Muneer”. By virtue of who’s

Prayers, I have been able to reach at this position

and whose hands always rose for prayers and

wellbeing. I feel proud by having guidelines from

our Sir Muhammad Munir, I cannot forget their

cooperation.

Thanks

NadeemSabir

MBSE-10-08


ACKNOWLEDGMENT

All praises for almighty Allah. The Creator Whose uniqueness

oneness is unchallengeable countless thanks to the lords of lords

who blessed me with the courage and power to complete this

report and all respects and regards to Holy Prophet Hazrat

Muhammad (S.A.W.W) for giving me the faith paving me on the

right path with the essence of faith in ALLAH.

I truly express my gratitude towards my respected teacher, Mr.

MuhammadMunir who persuaded me to carry out this internship. I

would also like to thank my near and dear ones and many other

bosom friends of mine, who suffered uncomplainingly and plucked

my courage during my long working hours. Thus with great love

and appreciation, I dedicate this report to all the above-mentioned

people and to all the readers of this report.

NadeemSabir

MBA (Evening)

MBSE-10-08


PREFACE

BahauddinZakariya University is a leading institute which provides a lot of

knowledge, skills and research to its students and professors. The institute

provides legible and valuable candidates to almost all fields of study and

research who provide their services in local as well in the national markets.

The intention of the internship is to give expound to our knowledge towards

practical work in the organizations how they maintain their routine works

and uncertain events.

To achieve the purpose I choose the Pak Elektron Limited 18-KM Ferozpur

Road Lahore, which is one of the largest organizations of Pakistan. This

report describes almost all details that I got related to the company. This

report provides enough knowledge about the PEL organization and it is

beneficial to users.


TABLE OF CONTENTS

Executive Summary.........................................................................................................................1

Introduction to Electronics Industry................................................................................................3

History of Pakelektron Limited.......................................................................................................5

Introduction of Pak Electron Limited..............................................................................................7

Introduction to Saigol Group...........................................................................................................8

Company Profile..........................................................................................................................8

Organizational Hierarchy...............................................................................................................10

Vision Statement............................................................................................................................11

Mission Statement.........................................................................................................................11

Objectives......................................................................................................................................12

Corporate Social Responsibility and Ethics..................................................................................13

Departmental Chart of PEL...........................................................................................................14

Business Divisions.........................................................................................................................15

Company’s Major Products...........................................................................................................18

Marketing Department...................................................................................................................19

Production Department..................................................................................................................22

Research& Development Department...........................................................................................23

Information Technology................................................................................................................23

Finance Department.......................................................................................................................24

Functions of Finance Department..............................................................................................25

Corporate Section.......................................................................................................................25

Leasing Section..........................................................................................................................26

Functions of Treasury Section...................................................................................................26

Budgeting Section......................................................................................................................27

Pledge Release Section..............................................................................................................27

Accounts Department....................................................................................................................28

Payable Section..........................................................................................................................28

Costing Section..........................................................................................................................30


Inventory Control Section..........................................................................................................31

Bookkeeping..............................................................................................................................33

Fixed Assets Management.........................................................................................................34

Letter of Credit Section..............................................................................................................34

Payroll Section...........................................................................................................................35

Human Resource Department........................................................................................................37

Procurement Department...............................................................................................................37

Administration...............................................................................................................................37

SWOT Analysis.............................................................................................................................38

Strengths.....................................................................................................................................39

Weaknesses................................................................................................................................39

Opportunities..............................................................................................................................41

Threats........................................................................................................................................41

PEST Analysis...............................................................................................................................43

Political Factors..........................................................................................................................43

Economic Factors.......................................................................................................................43

Social Factors.............................................................................................................................44

Technological Factors................................................................................................................44

Financial Analysis.........................................................................................................................46

Horizontal Analysis....................................................................................................................47

Vertical Analysis........................................................................................................................50

Financial Ratios..........................................................................................................................53

What I Have Learned in the Organization.....................................................................................58

Suggestions and Recommendations..............................................................................................59

References......................................................................................................................................60

Annexure........................................................................................................................................61


EXECUTIVE SUMMARY

Pak Elektron Limited (PEL) is the flag bearer of Saigol Group of Companies. The products

manufactured by PEL have always been of high standards and the name “PEL” is synonymous

with Quality all over Pakistan. Since its inception, the company has been working for the

advancement and development of engineering know how in Pakistan. The company has been

produced hundreds of engineers, skilled workers and technicians through its schemes and

training programs.

Appliances Division of PEL consists of home appliances manufacturing particularly

Refrigerators and Air Conditions.

Power Division of PEL is one the major electrical equipment suppliers to WAPDA &

KESC. The company manufactures transformers, energy meters, and switch gears.

Pak Elektron Limited has launched the range of Home Appliances in Pakistan. Pak Elektron

Limited has been a leading local company in electrical appliances for over five decades, they, to

gather with LG Electronics, which is a global leader in consumer electronics, will bring a new

range of technologically advanced & health care conscious products for the Pakistani consumers.

The summary of PEL’s market share (Product wise)

Refrigerator 32%

Split A/C 13%

Microwave Oven 12%

Water dispenser 8%

In 1956, the Saigol Group of Companies purchased the major shares of PEL. At this junction, the

company was only manufacturing transformers & switch gears, with the Saigols

managementPEL expanded into refrigerators and air conditioner manufacturing and now it has

become a Giant in the world of Home Appliances.

1


PEL is serving the power utilities, industries, individual consumers, houses and commercial

projects by providing reliable, customized and cost effective solutions backed by the innovation

genius of Saigols group. PEL is now technology forerunner and market leader is providing new

products and services to meet ever changing and technology intensive needs of its customers.

PEL is creating new knowledge and adapting to global developments in technological changes

and product design by the continuous R & D. Ever increasing local market share, growing

exports orders, numerous successful power projects and greater than ever base of satisfied

customers are the evidence to these aspiration.

While working in PEL I got very broader vision about the Financial & Tax activities more than

those I had learned during my MBA program. I hope that this practice experience will create

glorious opportunities in future.

A committed team of highly qualified, experienced professionals, financially sound and reputed

sponsors manages the Company. Through sheer dedication, diligence and the Almighty’s

Beneficence the management team at Pak Elektron Limited have earned reputation for

excellence in manufacturing of electrical as well as home appliances and their marketing.

2


INTRODUCTION TO ELECTRONICS INDUSTRY

Electronics is considered one of the world’s fastest growing industries with global revenue worth

trillions of dollars per annum. The sector basically focuses on consumer electronics, with

activities confined to assembly of conventional TV sets, radios, cassette recorders and other

allied consumer electronic products from imported Complete Knock Down (CKD) or Semi

Knocked Down (SKD) kits imported from mostly China.

Actually, electronics have won our hearts. We wake up with the ring of electronic clock, drink

coffee from an electronic coffee machine, work with computers, learn by using video

conferences, and listen to the music from a sound system and go to sleep while adjusting our

electronic watch for tomorrow morning. It is hard even to think that only a hundred years ago our

world seemed different at all from this point of view. But how did the electronics revolution

begin? Which research and discovery was the basis for this modification? Why was it so fast,

relatively to other developments in history?

The first and the second World Wars gave a considerable boost to the way the electronics science

has advanced. Governments of rival countries invested a lot of money in the technology of

military industry. On other hand, they wanted quick solution and were looking for long-range

developments. The first half of the 20th century was the era of the vacuum tubes in electronics.

Using the tube permitted the development of radio, long-distance telephone, television and even

the first computers. Therefore, the varieties of vacuumed electron tubes were the central device

in the electronics system of that time.

Recently we have witnessed the biggest event in the history of electronics – the invention of the

semiconductor devices. It made a real revolution in the world of electronics.Since1960,

transistors have quickly supplanted vacuum tubes. Electronic system became more complex and

smart. This fact, together with the need for compact, lightweight electronic missile guidance

systems, led to the invention of the integrated circuit (IC).

This invention was the result of Early ICs contained about 10 individual semiconductor elements

but their number rapidly increased during next ten years. In 1970, the number was 1,000 in a

chip and the result of hard work of physicists, electronics and mechanical engineers was

3


developing and producing of first microprocessor with memory interface in 1971. This event was

the beginning of computerization and smart digital electronics.

A few companies are involved in somewhat higher level of production/assembly of items like

payphones, energy meters, security systems and telecommunication equipment for defense

through reverse engineering but using imported components or sub-assemblies.

Unfortunately in Pakistan the electronics sector is still in infancy and never became a major

revenue generating industry. Despite the huge growth potential, Pakistan has lagged behind in

the development of its electronics industry. It is, thus, imperative that a coherent strategy is put

in place to develop this sector with a view to increasing the country’s growth potential as well as

achieving self-sufficiency by reducing dependence on foreign sources of products, materials,

components and equipment.

Government of Pakistan has included the electronics sector in its Medium Term Development

Framework (MTDF). The government has planned to help develop an international quality

indigenous supply chain and to raise the share of electronics in the output of the manufacturing

sector from under 3% at present to 10% in 2009 & to 20% in 2020.

Companies in Electronics Goods Sector in Pakistan

Pak Electron Limited

Waves

Orient

Siemens Pak

Singer Pak

In conclusion, I can say that the science of electronics is one of most important science today.

We all witness the influence of electronics on our life in good and bad side as well. The process

of development was relatively quick and interesting.

4


HISTORY OF PAKELEKTRON LIMITED

Pak Elektron Limited was set up in 1956 as a joint venture with one of the largest and renowned

manufacturers of electrical equipment Messrs. AEG of West Germany for manufacturing

Transformers, Switchgears and Electric Motors etc. The entire job of machinery requirements

and layout of the factory building was planned and implemented by AEG who produced very

well balanced facility for the design and manufacture of the above equipment and the

commercial production was commenced on 22 November 1956.

Up to 1962, when AEG finally phased out, the designing and manufacturing of all equipment

was carried out jointly by AEG experts and PEL personnel. PEL staff, in the meantime, had

received specialized training in USA and West Germany which enabled PEL to establish itself as

the leading manufacturers of electrical equipment in the country with an excellent reputation for

high quality and thus PEL came to be known as "The Quality Conscious Company".After

conclusion of agreement with AEG, total shareholding of AEG was purchased by the then

sponsors Malik Brothers.

The production continued with AEG designs with much greater emphasis on the quality and

reliability of the products which earned unique distinction of supplying electrical equipment to

projects of paramount national importance like Mangla Dam and Tarbela Dam Projects. PEL

equipment was approved by consultants of international repute including PreeceCardew& Rider

(England), Binnie& Partners (England), Harza Engineering International (USA) and Miner &

Miner International Inc. (USA).

The majority shares were acquired from Malik Brothers by Saigol Group on 11 October 1978

and immediately on takeover the new management chalked out both long term and short term

plans to put the company back on the path of progress. As a part of first phase of its BMR

Programmer the new management injected the additional working capital of Rupees 8.98 million

and Bridge Loan of Rupees 7.50 million (against the public issue of its shares) was provided by

the ICP-led Consortium. As a part of long term plans, the manufacturing of window type Air

conditioners was taken up in 1981 and was immediately established for quality.

5


The company launched the second phase of its BMR and expansion of the existing product line

in the year 1987 and imported machinery for the manufacture of Refrigerators and Deep-freezers

for a total value of Rupees 22.11 million. For the project National Bank of Pakistan - the leading

bank of the company provided the financing. Like Air conditioners these products have also been

well received by the local market which speaks highly of the confidence the consumer has

developed in the quality products manufactured by the company.

During the year 1990 the company had signed an agreement with Messrs HITACHI of Japan for

the manufacture of Vacuum Circuit Breakers.The company has entered into an agreement with

Pakistan Industrial Credit and Investment Corporation (PICIC) for a foreign currency as well as

local currency loan of Rupees 25 million for the expansion, balancing, modernization and

replacement of the existing plant. The machinery has come into operation in October 1991 and

with the balancing, modernization and replacement of machinery, the production capacity of

Refrigerator Section will reach a level of 252,450 cubic feet.

The management of the Company decided to further expand its operation by establishing a plant

for the manufacture of compressors for refrigerators and deep freezers. The technical know-how

agreement has been signed with M/S NECCHI Compressors, Italy for the assembly and

progressive manufacturing of compressors for refrigerators and deep freezers.

6


INTRODUCTION OF PAK ELECTRON LIMITED

Pak Electron Limited (PEL) is the well renowned company in home appliances sector. It is the

journey of years to reach this position. PEL was established in 1956 with the technical

collaboration of M/s AEG Germany with object of initially producing transformers, switchgears

and electric motors. AEG experts and PEL personnel carried out the designing and production of

these equipment jointly. It is the oldest composite electrical equipment-manufacturing unit of

Pakistan producing power and consumer products.

The present range of power products includes Transformers up to 33KV 5MVA capacity,

Switchgears up to 33KV, Cage Induction Motors up to 40HP, Single Phase Energy Motors,

Small Generators, Shunt Capacitor, Banks and Reclosed etc. In the year 1980 the company

expanded into consumer products with the introduction of Window Type Air Conditioners and

today also manufactures Split Air Conditioners, Refrigerators, Microwave ovens, Deep Freezers

and Compressors etc.

PEL products right from the beginning have been of a high standard and the name PEL is

synonymous with quality all over Pakistan. Since its inception, the company has been acting as

an institution working for the advancement and development of engineering know how in

Pakistan. The company has produced hundreds of engineers, skilled workers and technicians

through its apprenticeship schemes and training programs.

In October 1978, the company was taken over by the SAIGOL GROUP, which is one of the

leading industrial groups in PAKISTAN, having diversified business activities.

Pak Electrons Limited is known for its continuous research and development and transfer of

technology from abroad. The Company commissioned its plant for the manufacture of

Electricity Meters in Pakistan in June 1994 with the technical collaboration and under license

from M/S Asea Brown Boveri United State of America (A.B.B. USA). The plant consists of

most modern and latest numerically controlled electronic machines with robotics technology and

is capable to produce 960,000 single phase electricity meters per annum in accordance with the

international standards and specifications using the latest and most modern techniques available

in the world.

7


INTRODUCTION TO SAIGOL GROUP

The Saigol Group is one of the leading industrial groups in Pakistan. The Saigol Group belongs

to the Saigol Family, which is an old business family and has contributed a lot towards

Pakistan’s industrial development. Saigol Group remains a leading and forward-looking group

and believes in continuous development and growth. The result is a global business activity

monitored through various offices worldwide. They are serving nation in diversified business

activities in the fields of:

List of Associated Companies / Undertakings

1. Pak Elektron Limited (PEL) 2. Guarantee Life Employment Limited

3. Saigols Brothers Limited 4. Saritow (Pakistan) Limited

5. PEL Marketing Private Limited 6. Kohinoor Tractors (Private) Limited

7. Kohinoor Energy Limited 8. Kohinoor Autos (Private) Limited

9. Kohinoor Power Company Limited 10. Con-force (Private) Limited

11. Kohinoor Industries Limited 12. Progressive Industries (Private) Limited

13. Azam Textile Mills Limited 14. Art Centre (Private) Limited

15. Saritow Spinning Mills Limited 16. Kohinoor Airwaves (Private) Limited

Company Profile

Board of Directors

Mr. M. NaseemSaigol Chairman / Chief Executive Officer

Mr. M. AzamSaigol

Mr. M. MuradSaigol

Mr. Muhammad ZeidYousafSaigol

Mr. Muhammad Abdullah HaroonSaigol

Mr. Haroon Ahmad Khan Managing Director

Mr. Syed Zubair Ahmad Shah NIT Nominee

Mr. Akbar Hassan Khan NBP Nominee U/S 182 of the Ordinance

8


Ms. TahiraRaza NBP Nominee U/S 182 of the Ordinancerdinance

Mr. Khalid SiddiqTirmizi BOP Nominee U/S 182 of the Ordinance

Mr. M.Khurram Khawaja NBP Nominee U/S 182 of the Ordinance

Registered Head Office

17-Aziz Avenue, Canal Bank,

Gulberg-V, Lahore.

Tel: 042-35718274-5, 35717364-5

Fax: 042-35715105

E-mail:[email protected]

9


ORGANIZATIONAL HIERARCHY

10

Chairman/CEOManaging DirectorGMFinanceGM Manufactring Power Division


VISION STATEMENT

To Excel in providing engineering goods and

services through continuous improvement

MISSION STATEMENT

To provide quality products and services to the complete satisfaction of our customers and

maximize returns for all stake holders through optimal use of resources.

To promote good governance, corporate values, and safe working environment with strong sense

of social responsibility

11


OBJECTIVES

The Objectives and Missions for which the company is established are as following:

The purchase and acquire from Messrs. Malik Brother Limited on Ferozepur Road

(Near Walton) in the district of Lahore under the name of Pak Elektron and all plant,

machinery, goodwill and all the subsisting contracts in respect thereof with right,

privileges and obligations relating to the sold properties and with a view there of to

enter into the agreement and to carry the same into effect with or without

modifications.

To carry on the business or business of manufacturing, selling, installing, maintaining

designing and dealing in all kinds of electrical equipment.

To carryon any business whether manufacturing or otherwise which may be found

convenient to undertake in connection with or in addition to any of these objectives

mentioned above.

To do all such things that are incidental or conductive for the attainment of the above

objectives or any of them.

To produce high quality and standard products.

To produce equipment to be used in numerous projects of national importance.

To secure a high share / quota of WAPDA’s demand for power products.

To produce skilled workers and technicians through its apprenticeship schemes and

training programmed for engineers and technicians.

12


CORPORATE SOCIAL RESPONSIBILITY AND ETHICS

At PEL, we’re making life a little brighter as we share the hopes of local communities around the

world. We’re building a better tomorrow as we grow and prosper together with our partners.

We’re making the world a little greener as we practice the principles of sustainability. Pak

Elektron Limited (PEL) has been awarded for the second time with ‘4th CSR National

Excellence Award 2009’ for best efforts within the multi-dimensional scope of CSR and a

special award for ‘Best Information Material on CSR. Our social contribution initiatives focus on

following areas.

Academics and Education

Sports

Children’s Villages of Pakistan

Statement of Ethics

We are serving the nation through electrical goods, home appliances manufacturing, sales and

committed to represent the ethical responsibilities of company operations .In recognition of this,

our commitment reflects the value statements.

Commitment to Principles, Laws & Contracts

As directors, and employees, we all are passionate to our contents and strive to be model of the

principles. It is an organization of people who are united to achieve the common goal. We are

accountable for all our actions both individually and as a company. We act with absolute

honesty, integrity and fairness in the way we conduct our business and in the way we live and

act.

Safety the Utmost Priority

We realize the importance of the human life and company’s all other resources. We are

committed, all the time, to the safe and reliable operations of our power complex, and to the

incident-free workplace. We ensure that this commitment shall remain one of our utmost

priorities.

13


DEPARTMENTAL CHART OF PEL

14

Appliances Division

Marketing

After Sale Production AD

Consumer

Power Division

Marketing Power

Production SG

Production TR Production EM

Internal Audit

Accounts

HR & Admin.

Finance Material Planning

Packaging

Trading

R & D


BUSINESS DIVISIONS

The Company comprises of two divisions; each offering a wide range of products as follows:

Power Division Appliances Division

Power Transformers Refrigerators

EPC Air Conditioners

Distribution Transformers Deep Freezers

Energy Meters Microwave Ovens

Switchgears Trading

Power division

The second but the most powerful revenue generating business division of PAK Elektron,

produces Transformers, Switchgears and Energy Meters for the public sector such as KESC

Karachi Electric Supply Corporation, LESCO Lahore Electric Supply Corporation, IESCO

Islamabad Electric Supply Corporation, PESCO Peshawar Electric Supply Corporation, etc and

for public sector as well.

This division is comprised for four departments.

Marketing Power Division

Production Transformers

Production Switchgears

Production Energy Meters

Marketing Power Division

Marketing department of power division consists of most professional engineers who market all

the power products, seeks new customers and supervise all these three departments to ensure best

quality and reliable products every time.

Production Power Division

The General manager Production (Power division), who is working under command of the

Chairman, supervises three Production managers. These production managers are responsible for

separate power products. The products are Transformers, Switchgear, and Energy meters.

15


Another department that consists of purely technically professional staffs, called “Design

department”, is also working under GM Production. The job of this department is to draw

specified product’s structure, calculate material requirements for production of such product.

Production Transformers

PEL has vast experience in design and manufacturing of standard and special purpose

transformers up to 33kV and up to 6000kVA ratings. This department make oil immersed

transformers with natural cooling are suitable for both indoor and outdoor installations. These are

manufactured according to BSS-171, IEC-76 or VDE-0532 and tropicalized to meet adverse

environmental conditions. All transformers are offered with tabular tank, having a conservator

and breather. This department manufactures following types of transformers.

Distribution transformers (pole mounted or pad mounted design)

Auto transformers

Furnace transformers

Welding transformers

Chokes for furnace transformers

Any other special requirement

Production Energy Meters

Another successful and most powerful department of power division is its energy meter

production department that manufactures Electro-mechanical Energy Meters under license from

ABB-USA. The quality of PEL meters has been certified by KEMA Laboratories (Holland) and

conforms to IEC 521, SGS Yarsley, and U.K, has certified PEL Energy Meter plant for ISO

9002.

This department also manufactures MC8 type a direct connection single-phase meter, which is

commonly used for each home. Its design and constructional features include overload

compensation and temperature compensation, thus providing maintenance-free operation over a

long period and accurate measurement of electrical energy. The frame is sturdy in construction

and the covers are available in unbreakable polycarbonate plastic material.

16


Production Switchgears

MV & LV Switchgear being one of the major power products of PEL is produced for indoor

installations company with the latest international standards by this department, i.e. IEC, BSS or

VDE PEL's Switchboards are steel sheet fabricated, totally enclosed, floor mounting and vermin

& dust proof. These are supplied with factory fitted relevant components and copper bus bars,

internal wiring, terminal blocks etc.

Appliances Division

The Appliances Division was established in 1980–81 when company introduced its first

consumer product i.e. Window room Air conditioner in Pakistan. Refrigerators and Deep

Freezers followed this in the year 1986-87, Fractional Horse Power Compressors in 1993 and

carrier window and split air conditioners in 1997 and Samsung window and split air conditioners

in 2001.

Refrigerators

Deep Freezer

Microwave Ovens

Split And Window Air Conditioners

Washing Machine

Water Dispenser

17


COMPANY’S MAJOR PRODUCTS

18


MARKETING DEPARTMENT

Marketing and sales manager (M&S manager) is head of marketing department, appliance

division. M&S manager has a span of management of four people. Those are performing

different group of activities. The organizational chart of marketing department (appliance

division) is under:

Marketing & Sales Manager

Conventionally, M&S manager involves in all those activities that could fall under marketing

territory of a company. M&S manager formulates marketing strategies and enhances the

probabilities for their implementation. M&S manager sets targets for his team. He diffused his

sales force into different regions. He visits them periodically for their motivations and assists

them for the betterment of their performance.

Financial matters, such as budgeting for marketing department including planning for future

promotional and incentive schemes are handled with the conspiracy of M&S manager. M&S

manager plays an important role in hiring and terminating of company’s executives and other

personnel of concerned department.

His entrepreneurial charge is also creditable. He arranges foreign business tours for

the“Internationalization” of company’s image.

Sales Support Manager

Primarily, “Sales Support Manager” involves in sales concerned activities, such as sales

budgeting and planning, coordination and monitoring sales forces’ performance through out the

country are those matters for which Sales support manager takes responsibilities. He is also

responsible for institutional sales of the company. On the next page, chart shows countrywide

hierarchy.

Product Manager

He manages promotional schemes. Coordination with advertising agencies is another

responsibility. He also plans for advertising and gives budgeted figure for advertising Product

19


Manager plays an important role in launching a new product. He scans competitors’ activities.

Their price trends, promotional activities including advertisements, their outdoor promotions and

incentive schemes are the examples of those activities.

Manager Customer Services

Company is looking for creating an image of “Service Oriented Firm”. That’s why “Manager

Customer Services” plays an important role in this marketing organization. Basically, he is

responsible for all the activities concerning after sales services.

Credit & Distribution Manager

Credit and distribution team performs two types of activities one is to set and monitoring credit

limits for credit sales in order to maintain required level of cash flow for the company. He is

responsible to assess sales performance in regions and their recoveries. Sales force performance

in terms of sale figures are evaluated against budgeted sales. Dealership matters are also falls

under his responsibility. Secondly, dispatching and delivering goods to different sales regions.

Consumer Marketing Department (CMD)

This department is basically under the marketing department. At the start this department did not

exist in the hierarchy but with the passage of time and with the success of easy installment

scheme, this department came into being. The reason is that in the start this department’s target

market was Lahore and its workforce had only 8 persons and now after 2 years of its

establishment it has covers major cities of Pakistan and it has workforce of 45 and they are

recruiting more to cover these areas fully.

There are many regional offices in major cities for example in Multan, Sahiwal, Karachi,

Hyderabad, Faisalabad, Gujranwala, Hattar, Rawalpindi, Sialkot, Bahawalpur, Sukker, Sargodha

and AJK (Azad Jammu Kashmir) and the head-office is in the factory that is Consumer

Marketing Department.This scheme is well received so its now on expansion. This scheme is

only in big cities. The target market of this scheme is Government employees or the employees

of those companies, which have signed Memorandum of Understanding (MOU) with the bank

who is financing. Why so?

20


It is because those Govt. offices make sure to the bank that their employee’s salary will go to

their hands after the deduction of installment of the bank and MOU also make sure that

employees who got financing will get salary after deduction of bank’s installment. Askari Bank

Limited is financing the PEL employees and Soneri Bank and Bank of Punjab to the others

employees of Govt. or company which has been signed MOU with the bank.

Dealers

There are about 1500 dealers dealing in PEL appliance. The Company has to look many different

aspects of a dealer before deciding to give him the dealer ship. The different criteria, which a

dealer has to fulfill, are:

The dealer must have a good reputation in the market in which he is operating.

Those dealers are preferred who do business on cash basis with the company. Even if

they take credit they must be financially strong enough to make the payment within one

month.

The dealer who gives a prominent shelf space to PEL appliance without much persuasion

or does not demand a high price for shelf place is preferred.

Location of dealer's shops is another important factor. The place should be reachable by

customers and easily accessible by them such as Abid Market Lahore.

The dealers must promote PEL appliances through point of purchase promotional

material provided by PEL at their shops. These materials should be displayed at

prominent places.

21

General Manager Production

(Appliances Division)

Material & Planning

Department

Buying Department R & D

DepartmentB& D Manager


PRODUCTION DEPARTMENT

General Manager is a man who handles all sorts of hazards regarding production operation in

Appliances division of PEL. Together with PEL’s Appliances division, General Manager

Production also gives directions to “PEL Appliances Limited” (PAL) which is a subsidiary

company of PEL. PAL is situated at Gadoon, NWFP. His responsibility spread over the

supervision of all those departments and personnel, which facilitates in product.PEL engages in

production of Refrigerators and Air conditioner motors and Washing machine, while Deep

freezers and Air conditioners are manufactured in PAL.

Material & Planning Department

This department was established under an idea of “Just in Time”. This department keeps check

on inventory level, including raw material and finished goods. In other duties, estimating

ordering level (the level, since company will have to place an order), and determining the lead-

time for order processing. This department plays a key role for production department.

Buying Department

Buying department arranges goods from local markets. Duties for this department start from

negotiation with suppliers to receipts right goods at right time. He is also responsible for

clearance for the supplier’s cheques.

22


RESEARCH & DEVELOPMENT DEPARTMENT

This department is also working under GM Production. R&D department plays an innovative

role for the company. R&D staff put their effort to improve their current product line and

introduce new models in following the company policy of “Giving multiple choice to their

customers”.

Business and Development Manager

B&D manager seeks opportunities for PEL, which exist in surroundings. On the bases of critical

analysis, he makes profile for each project and gives proposal to higher authorities. Entitled

person is designated in recent days.

INFORMATION TECHNOLOGY

IT department’s key responsibilities are as follows:

Troubleshooting and problems facing in computers.

Installing and deletion of software’s.

Right protection and issuance.

Developed and maintain internal network.

Developed and maintain domain of each person.

Create and enhance internal software’s running currently.

Hardware and all software issues.

23


FINANCE DEPARTMENT

Finance manager and Accounts manager work under General Manager Finance and he reports to

CFO. Finance manager span of management contains five assistant finance officers who repot

their about their sections on daily basis. Major function of this department, obviously, is to

arrange funds for company and also allocate funds. These officers perform significant role at

their stead.

General Manager Finance

His duty is to take major financial decisions and report to CFO. GM Finance takes the reports

from his subordinates and controls both accounts and finance sections. Check on working capital

of the company is another task that falls in his job description. What are the receipts and due

payments for a day is also a matter of concern. Moreover, he also coordinates with other

departments.

Manager Finance

Rate negotiations

Handling cash in & out

24

Chief Finance OfficerGeneral Manager (Finance)Accounts ManagerFinance Manager


Bank relations

Handling short term and long term funds requirements

Assistant Manager Finance

Reports to manager finance

Arranging funds for production

Preparation of Budget

Sections in Finance Department

Corporate Section

Leasing section

Treasury Section

Budgeting Section

Pledge Release Section

Account Receivable Section

Functions of Finance Department

Perform as a workstation and as an integrated circuit amongst all department of the

company.

Arrange monetary resources / funds at favorable prices and at proper time.

Allocate resources / funds throughout the organization.

Deal with banks, investment firms, government departments of Appliance and power

division calculate and keep employees’ salaries record.

Carry out final auditing of financial records prepared by Accounts department of

Appliances and power division.

Corporate Section

I met with Mr. Asad who is the section incharge of corporate finance. He told me about this

section that corporate section mainly deals and coordinates with banks, opening new accounts of

PEL and borrowings from different banks. They also maintain the interest or markup on loans

25


and fulfill the material requirement for production area. As per company policy most material is

imported then they open the letter of credit and it is also a type of short term loan.

Leasing Section

This section of finance deals when company needed funds for the purpose of purchasing

vehicles, then this section contacts with leasing companies. PEL acquires the leasing vehicles

against securities, personal guarantee, assets or shares. First of all PEL sends the demand letter to

leasing company, against it leasing company sends the offer letter to PEL and after negotiation

the company get the vehicles.

Documents for the approval of leasing

1. Basic borrowing fact sheet (BBFS)

2. Annual return of company having share capital Form-A

3. Particulars of directors, CEO, managing director, chief accountant and legal advisor or of

any change their in

Markup in Lease Payments

=KIBOR + 600 Basic Points

Here 600 Basic points means 6%, it was an example. Determination of markup depends upon the

nature of contract with leasing company. Normally after six months markup is revised as per

deal.

Functions of Treasury Section

Collection from marketing and selling department and then deposit those funds into

different bank accounts of PEL based on priority

It allocates the funds to each section and department of the company

It manages the cash outflow and inflow of company

Made the payments to vendors / suppliers

Make the bank reconciliation statement

26


Report to GM Finance as “Daily Fund Position Report” and it includes payments and

receipts of company

Budgeting Section

Starting with budgeting section that forecasts the annual sales, expenditures and cost for the

company after getting production estimates and sales plan from the marketing and then tell the

amount to be arranged for production in order to finance either for power division’s production

or appliances division’s production.

Pledge Release Section

Company acquires finance against the pledged stock; Pledging stock includes imported raw

material, components of air conditioner and refrigerator, transformers, energy meters,

refrigerators etc. These stocks will be pledged in bond housed that situated in company’s

premises, which is under-control of ban authorities.

Bank opens an account in the name of company, said as “Cash Finance Account”. But as per

requirement stock will have to be released for production purpose or sales purpose. Bank sets

limits in this regard, so each replacement requires bank permission. The difference between

borrowed money and pledged stock would have to adjust either by pledging more stock or by

making payments equivalent to the value of released stock.

27


ACCOUNTS DEPARTMENT

All matters, starting from “Book keeping” to formulation of financial statements which are

supervised by “Head of Department (HOD), Mr. Masood”. He directly reports to General finance

manager. He has divided his staff into seven sections.

i. Payable

ii. Costing

iii. Inventory

iv. Book keeping

v. Fixed assets

vi. Letter of credit

vii. Payroll

On the basis of these bookkeeping activities financial statements and relevant statements are

prepared, which necessitate in decision making at corporate level.

Payable Section

Procedure of Purchase Module

1. Material indent receive from workshop Inventory

2. Store check the balance of material & provide the code Inventory

3. Approving authority approves the purchase indent Inventory

4. If regular item purchase order is prepared Purchase/Buying

5. If non regular item, quotation called & negotiation made Purchase Manager

6. Preparation of purchase order Purchase Manager

7. On receiving of material purchase challan is prepared Inventory

8. Inspection & quality control department check the material Inventory

9. On the basis of purchase challan, GRN is prepared Inventory

10. On receipt of bill in accounts department, invoice recorded in payable Payable Manager

11. After booking of invoice payment is made Payable Manager

28


Following Transaction is Made in Accounts Department:

On Receipt of Material in the Store

Raw material & component A/C Debit

Party provision A/C Credit

On Receipt of Bill in Accounts Department

Party provision A/C Debit

Advances sales tax A/C Debit

Federal excise duty A/C Debit

Party provision A/C Credit

On Payment of Bill

Party provision A/C Debit

Bank A/C Credit

Withholding taxA/C Credit

On Payment of Withholding Tax

Withholding taxA/C Debit

Bank A/C Credit

Payments to Suppliers

How does Accounts Department make payments to the company’s suppliers?Supplier sends

“Commercial Invoice” to buying department for the purpose of recovery. Buying department put

it forward to Accounts department. Purchase section officer checks Commercial Invoice against

29


the computer report (store) to see what material have been received that either supplier has valid

right of title or not. After confirmation, cheque is drawn in favor of supplier. Bank payment

voucher is used for the internal records against the drawn Cheques.

Input and Output Sales Tax

Input tax means which is refundable from FBR, because the company has already paid on its

payments to suppliers in the account name of general sales tax (GST). Whereas the output tam

means the tax amount which company has to pay to Federal Board of Revenue Pakistan. After

the calculation of input and output sales tax, company pays or claims the tax from tax authority.

Withholding Tax

It is deducted on all payments and submitted to tax authority (FBR). Withholding tax percentage

varies on the account nature. Such like 3.5% on goods or products, 6% on services, and 2% on

transport expenses payments.

Costing Section

Cost section deals in production-concerned matters. This section maintains records of production

element i.e. material, labor and factory overhead. These things facilitate in fixing of price and

also in control of cost of production.

Documentation for Costing

As far as costing is concerned, three types of documents are used in Accounts department:

Material Analysis Card.

Cost Card.

Expense Sheet.

Material Analysis Card (MAC)

MAC is used for of direct material and indirect material. Usually, a finished product is made-up

of two or more raw materials. MAC is useful to exhibit all sort of material together with their

30


quantity and their costs in Rupees. Each card is furnished against each job order/fabrication

number.

Cost Card (CC)

CC is used for specific job. Final figure of each production element are abstracted from various

sources and compiled here. For instance, material cost is taken from MAC, wages from

production sheet (PC) and factory overhead expenses from Bookkeeping records.

Expense Sheet

Up till now, recording was concerned with only one job. Expense sheet exhibits present status of

various jobs.

Direct Labor Cost

The process in charge will prepare a daily labor hour sheet and will enter in the system. Costing

department will approve daily hour’s sheet and post it. For the labor there is different costing

numbers and calculated separately for each department and estimated labor per hour rate for the

year of 2011 was Rs. 52.16.

Factory Overheads

Estimated FOH was 300% of labor cost for the year of 2011.

Applied Factory Overheads

Actual Factory Overheads

Estimated Factory Overheads

Inventory Control Section

Here inventory means all raw materials which is used for production purpose. There are two

divisions of production at PEL, Power Division & Appliances Division. So for every division

there is a separate store, even for each product there is a separate store which is handled by

concerned store keeper.

31


Material Arrival at PEL

Material received at receiving store from suppliers or company’s own sources. Here inspection

and quality is checked by I& QC department. If the material is according to standard, check the

physically of material and as per purchase order then they approve it.

When the inspection process is completed then store keeper makes good receipt note (GRN) and

allot the good receipt number. Such like R0348, here ‘R’ representing a part of refrigerator. After

it material is sent to relevant department, and relevant store keeper maintain Bin Card for issuing

of material to production.

Bin Card Performa

Date Issue voucher

number

Order

number

Receipt Issue Balances Total

PEL NBP BOP

--- --- --- --- --- --- --- --- ---

After GRN, invoice is sent to accounts department. Accounts department also make a bin card so

that inventory balances can be maintain on daily basis. Here bin card also includes rates of

material as per unit and total. The quantity balances must matches with store keeper bin card.

Systems used by the inventory section are Material Issue Control System (MICS) and Material

Receipt Control System (MRCS). PEL is using the First in First out (FIFO) method for issuing of

material from store to production departments.

Inventory control department check the inventories all levels i.e opening and ending and in

process so inventory decrease under their required level than they make order for purchase

department for maintain the inventory level as set by the top management. The purchase

department for purchase of raw material uses all these methods.

Vendor purchase

Supplier direct purchase

Cash purchase

32


Credit purchase

Bookkeeping

The record of internal expenses related to the employees is maintained in the book keeping

section. The incharge of the section first approve expense by checking the evidence. The expense

incurred is paid in the factory-by-factory accountant.Different types of voucher are prepared in

this section.

Cash payment Voucher

Bank payment Voucher

Cash Receipt Voucher

Bank Receipt Voucher

Journal Voucher

Expenses for which PEL has to pay are categorized as follows. Expenses, which are incurred,

recorded under the book keeping section. So the brief detail of the expenses explained under.

Admin Expenses

PEL records Accounts Department Expenses, Finance Department Expenses, HR Department

Expenses and Gate Reception Expenses as Admin Expenses.

Selling Expenses

All the expenses incurred by Selling Department, Advertising Department and warranty

expenses are treated as Selling Expenses.

Travelling and Daily Allowances (TA/DA)

PEL is compensating to its employees as three different types of travelling.

Local Travelling

Inland Travelling

Foreign Travelling

33


Daily allowances are also paid in three different ways.

Diem

PGA

Hotel Stay

Diem means imbursement for lunch and dinner, PGA means Paying Guest, and hotel stay. Staff

can claim these all allowances according to the company policies as per grade wise.

Fixed Assets Management

In this section companies all fixed asst maintain. The depreciation recorded periodically and

salvages value of asst all these functions are performed under the heads of fixed asset

management section.This is very helpful in preparation of the financial reports because in these

reports assets are shown as their salvage value and their book value.

Letter of Credit Section (LC)

The company is engaged in importing the material for the production of power and appliances

products. Two employees in accounts department record the transactions, related to import of

material for production. PEL is using two systems as Import Monitoring System and Oracle for

the purpose of letter of credit.

Simply LC means guarantee, because LC is opened by importer to its bank, and bank made the

payment to exporter’s bank on the behalf of importer. There are two different types of LC as

Sight and Usuance. There are two different types of dry ports as Karachi Dry Port and Lahore

Dry Port.

LC includes these documents:

Journal Voucher

It includes all type of expenses on letter of credit from opening to closing date.

34


Goods Receipt Note

Code Description Quantity

Received

Quantity

Rejected

Quantity

Approved

Rate Per

Unit

Value

--- --- --- --- --- --- ---

Landed Cost Sheet

P.O. No. Date LC No. Quantity LC Value in

FC

LC Opening

Ex. Rate

LC value in

Rupees

Supplier

--- --- --- --- --- --- --- ---

Shipment

It includes all items which are related to shipment such like shipment charges, insurance and

other expenses.

Payroll Section

This section handles and maintains the records of salaries and wages of all employees, working

in PEL. Mr. Mirza Imran Khan (Account Officer) who has told me about this section.

Salary means fixed amount paid by the company against employee services. In includes two

heads as allowances and deductions.

Allowances

It includes basic salary, house rent, cost of living allowances (CLA), utility allowances, special

allowances, and special pay.

Deductions

In involves provident fund, employee over age benefit income (EOBI), mess, travelling, medical,

telephone charges.

35


How to Make Salary

Standard Month 30.5 days

Standard Day 08 hours

Gross Salary All allowances – Deductions

Overtime Calculation

It is paid on two bases as Basic salary and CLA, and overtime payment is made only for workers.

suppose an employee works 60hours as overtime then calculation will be as follows:

(Basic+CLA )/30.5 ¿ /8∗60

Shift Day Allowances

If one shift is working against the nature of work time (day time) then shift day allowance is to

be paid by PEL. Suppose night shift is working against the nature of work (day time), because

night is for rest and day is for working. So company pays some incentive for night shift.

Calculation for Shift Day Allowances:

(Basic /2) /30 Days∗Days work

Leave Encashment

1. Casual leave (10 days per annum)

2. Sick leave (08 days per annum)

3. Encashment leave (14 days per annum)

Provident Fund

Company deducts 10% of basic salary from each employee’s salary, and also contributes with

equal amount by employer. And then invest this amount anywhere, after a specified duration

employee can withdraw his provident fund.

36


HUMAN RESOURCE DEPARTMENT

Human resource department of the PEL Company is very much conscious of hiring the

employees for the company. The standards he set for hiring the new people. HRM department of

the company mainly makes the external recruitment .this is usually done through newspaper web

sites extra. HRM department also set salaries, packages and TADA allowances.

PROCUREMENT DEPARTMENT

PEL has state of the art methods of production and they also outsource the products and raw

material not only from Pakistan but also from Asia, America, Europe, and Africa. So for this

purpose PEL has two different departments for procurement, which are:

Local Procurement

Local Procurement department is responsible for all the raw materials that are required for

making various products in the factory. It includes from nails to large metal sheets. At the start of

each financial year they receive a major plan from the management, which highlights all the raw

material required for each product. Dates and maximum time limit for raw material requirement

is also mention in this major plan.

Foreign Procurement

Responsibilities and duties are same as Local procurement but they vary in the dimension that,

they have to arrange the raw material from abroad. They also receive same plan as local

procurement for the whole financial year and develop milestones to carry out the plan execution

properly.

ADMINISTRATION (IR & A)

Key responsibilities of IR & A department are maintenance of attendance, maintenance of stores

check the material in & out from the factory, maintenance of factory, provide assistance to all

departments regarding material.

37

StrengthsBrand Loyalty

After Sales ServicesPower Division

56 Years of Heritage

WeaknessesLess utilization of capacity

Price SettingLack of Product Range

Too much dependence on imported materialLess increment in salaryLack of advertisement

Helpful Harmful

Internal

OpportunitiesExport Opportunity

Trends Toward High QualityIncreasing the Product LineIncrease in Product Range

ThreatsWorld Trade Organization

Strong CompetitionChinese Product

Supplier’s Growing Bargaining Power

External


SWOT ANALYSIS

38


SWOT Analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,

Opportunities, and Threats involved in a project or in a business venture. It involves specifying

the objective of the business venture or project and identifying the internal and external factors

that are favorable and unfavorable to achieving those objectives. The strengths, weaknesses,

opportunities and threats of PEL are discussed below.

Strengths

Brand Loyalty:

PEL has created a strong brand image in the mind of the customers through higher quality and

low prices. The customers of PEL always prefer its home appliances like Window AC, split AC

and refrigerators, during the time ofpurchase. PEL is a popular company inPakistan and

everyone knows about the PEL products and its brand name.

After Sales Services:

PEL provides the after sale service to customers which increases the customers satisfaction. The

biggest strength of services department is that it handles a complaint within 24 hours in any part

of the country, which helps in increasing the satisfaction level of customers

Power Division:

Power division is the unique strength for PEL. Most of electronics companies deal in only home

appliances but PEL is the only company which deals in home appliances and power appliances.

56 Years of Heritage:

As I discussed earlier that PEL was established in 1956 so they have a long time heritage, its

values and principles distinguish it from other organizations.

Weaknesses

Lack of Advertisement:

39

http://en.wikipedia.org/wiki/Business

http://en.wikipedia.org/wiki/Project

http://en.wikipedia.org/wiki/Strategic_planning#Elements


It is a second major weakness of PEL that it is not a vigorous advertiser. Only recently PEL has

invested a considerable amount in advertisement, but when we look at its competitors, PEL still

has to do a lot in this sector.

Less Increment in Salary:

The yearly increment in the salary is very low as compared to the inflation .as compared to their

competitors; PEL increases the salary not so much.

Too Much Dependence on Imported Material:

They are more dependent on the imported material rather than domestic but it causes problem

when there is slow supply or shortage of material from abroad.

Lack of Product Range:

PEL has introduced more products of consumer items but there are more needs to develop new

consumer items.

Price Setting:

Price setting is also a main problem for PEL because it sets its prices on the bases of competition

and this strategy reduces its profit margin.

Less Utilization of Capacity:

Due to lack of finance a company cannot utilize all its resources on its full capacity. It increases

the cost of products per unit that decreases the profit margin of each consumer item. As the

production capacity and actual production of different products is given below (2008).

Production Capacity Actual Production

Refrigerators 3500000 2924905

Energy meters 1200000 986085

40


Transformers 2000 1356

Air conditioners 36250 6560

Opportunities

Export Opportunity:

PEL have also the opportunity to export their products in other international countries like UAE,

Saudi Arabia, and other Arabic and African Countries.

Trends Toward High Quality:

There is a rapidly change in the technology with the time and every company is adopting new

technology so PEL has the opportunity to utilize the maximum new technology and capture more

and more customers.

Increasing the Product Line:

Company has the opportunity to increase their production line and will also increase the

efficiency of the employees and in this respect the cost of the company reduce. First of all, they

should look the conditions of the market and then they should produce their products.

Increase in Product Range:

PEL can increase its product range that will be more profitable for the company. There are more

needs to develop new consumer items like PEL washing Machines, Vacuum cleaner and other

items.

Threats

World Trade Organization:

World trade organization given the permission in year 2005 to each company of home appliances

to export their products after paying less duties or duty free products. That increases the pressure

41


for the indigenous companies to reduce the prices and increase the quality. But PEL Company

also runs under uncertain conditions.

Strong Competition:

There is very strong competition for the home appliances in the market so every company tries to

come in the no.1 position for achieving the maximum shares in the market.

Chinese Product:

Chinese products are another threat for the Pakistani companies because these products are

cheaper than the Pakistani products. Chinese products stress the indigenous companies to lower

the quality and prices that will not be profitable in the long run.

Supplier’s Growing Bargaining Power:

The supplier growing power is increasing due to more demand of the electronic industry due to

this phenomena the suppliers of raw material are charging high prices and it is reducing average

profit margin of companies.

42


PEST ANALYSIS

Political Factors

Political or legal forces means law and order situation in the country. Country’s policies for the

trading companies, Political and legal situation regarding PEL Company is stated as

The political condition of Pakistan is highly uncertain and unstable but from few years

we have seen some consistency in government policies which encourage the foreign

investors to invest in Pakistan.

There is no check on importers by the Govt. any dealer can import anything and can sell

it with his own label on it. There is no quality check and brand authenticity. An example

is the Fast Home Appliances.

There are very few incentives for the manufactures in Pakistan by the Govt. as compared

to the upcoming giants like China. The cost of the manufacturing is very high because of

the electricity rates and other over heads so most of the type the manufacturers prefer to

outsource.

The said demand is met through imports from China, there is 15% subsidy given to the

importers in China.

Economic Factors

Mean economic condition of the country such as change in dispose bale income, fluctuation in

market, inflation rate etc...Company sets the prices according to the economic situation of

Pakistan

There is great boom in construction sector now days and more houses and other building

are being constructed than ever before so there is a great demand for home appliances

and above all are split units.

At the back of stronger than expected performance of agriculture and manufacturing the

GDP growth is likely to exceed the target and may end up at around 8.4% the highest

growth in last 15 years. Pakistan is number 2 in the race of GDP growth after China.

According to per capita income, Pakistan is included in the middle income group and

high rates of electricity at commercial and residential areas are point of huge concern for

43


people. This is one big reason that people are shifting at a great speed from window type

air conditioners to split units. A window type air conditioners 1.5 Ton consume 11

amperes approximately 3 unit of electricity per hour and the split unit consume 8.5

amperes approximately 2 unit of electricity per hour.

Social Factors

Now day’s people are becoming more and more price conscious. That is why window

type air conditioner is almost absolute because of high cost of electricity bills and splits

are becoming popular because of low electricity bills.

Consumer also prefers split units because they are considered energy savers. But the

traders are fleecing consumer by selling to them low capacity splits as high capacity

units. They are many chances that you get a 0.75 ton split if you go to the market to buy a

one ton unit without your knowing it, so the consumers have to pay the same amount of

power bill at the end of the day and with less cooling.

In countries like Pakistan air conditioning usage of maximum because of an extended

summer season of nearly eight months a year. In Pakistan the air conditions are used by

upper and middle class.

The companies are becoming socially responsible these days as they have introduced

anti-bacterial and anti-dust filter.

Our society has started considering split units as the status symbol and feels this graced if

split units are not installing in every room of their houses. A sizeable number of people

prefers to buy air conditioners on cash bases, there are many who want to procure A/Cs

through banks and leasing companies on consumers financing packages. Besides, many

dealers initiated their own scheme of selling air-conditioners and other domestic

appliances on easy installments.

Technological Factors

With the introduction of split units, this new technology has made A/C more affordable

and easy to install and maintain.

44


Efficiency of an A/C depends on the outer part. If the outer part is bigger than the A/C

will be more efficient in sense of cooling. Window type A/C have smaller outer part as

compared to the split units, therefore they are less efficient as compared to the split units.

Another reason for being less efficient is that window type A/C has the cooling unit and

heat discharging unit at the same place so sometimes hot air tends to cause the cool air

lose its potential to work properly. Splits on the other hand have two separate parts and

the cooling unit is in no contact with the heat discharging unit which tends to improve the

efficiency of split units.

Another technical aspect is that rotary compressors are use in split units which are

soundless and do not heat up in extreme temperatures compare to the window A/Cs.

Because of being more efficient in cooling the compressor of split unit drips at proper

time and the set temperature is achieved at lesser time as compared to window type A/C.

this is one of the reason that split unit consumes approximately 2 units of electricity per

hour and a window A/C consumes approximately 3 units of electricity per hour.

This is due to innovation in technology that now there is need to make a small whole anywhere

you want to install a split as compare to a window type A/C which need as a big hole and a

proper place to be installed.

45


FINANCIAL ANALYSIS

46


Horizontal AnalysisIncome Statement

31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07In Percentage (%)

Revenue – net 96.02 148.33 39.20 107.10 100Cost of sales 111.43 149.78 34.13 106.41 100Gross profit 41.12 143.17 57.26 109.56 100Other operating income 36.97 50.70 40.52 18.16 100

40.96 139.72 56.64 106.15 100Distribution cost 128.08 170.77 50.92 109.28 100Administrative expenses 176.72 194.30 90.40 133.00 100Other operating expenses 9.23 135.85 37.67 89.07 100Financing Cost 150.81 173.26 66.15 106.02 100Total Operating Expenses 145.06 175.58 65.38 111.82 100(Loss)/ Profit before taxation (257.75) 36.81 31.57 89.87 100Share of (loss) / profit of associate (83.56) 43.49 20.05 45.92 100(Loss) / profit before taxation (254.76) 36.92 31.37 89.11 100Provision for taxation (510.28) 57.67 48.45 142.19 100(Loss) / profit for the year (199.82) 32.46 27.69 77.70 100

Interpretation

In common size analysis, horizontal analysis of income statement shows that year 2007 is as base

year. Net revenue over the next years in 2008 to 2011, having fluctuation trend. Cost of sale

showing increase trend except of 2009. Gross profit is showing fluctuation trend, but the total

operating expenses are showing increasing trend, and due to this reason company has faced

tremendous loss in 2011. Provision for taxation is showing imbalanced trend over the total

period of time. So the profit for the after deducting all expenses and taxes is very high in 2008

but in 2011 PEL faced a huge loss due to low sales volume as comparing to its overall

expenditures.

Balance Sheet

47



EQUITY AND LIABILITIESShare Capital & Reserves Issued, subscribed and paid up capital 121.90 121.90 116.45 109.36 100Reserves 237.47 237.47 190.88 190.88 100Un-appropriated profits 98.18 151.57 136.47 113.60 100Surplus on Revaluation of Property, Plant and Equipment

481.21 505.58 531.22 235.67 100

Non-Current Liabilities Long-term financing – secured 346.13 376.98 310.39 188.72 100Liabilities against assets lease 11.68 7.90 63.82 90.87 100Deferred taxation 268.01 373.69 391.63 195.35 100Deferred income 84.54 112.98 152.45 125.14 100Total Non-Current Liabilities 286.48 338.37 311.79 181.07 100Current Liabilities Trade and other payables 94.42 95.15 81.65 132.53 100Interest accrued on loans payables 386.27 178.25 156.48 103.19 100Short-term borrowings 202.88 193.68 154.65 127.12 100Current portion of: 100 - long-term financing 450.66 463.55 319.18 135.11 100 - liabilities against assets finance lease 37.24 93.29 80.46 97.27 100Total Current Liabilities 185.94 173.92 138.87 127.56 100Total Liabilities 216.90 224.55 192.12 144.04 100Total Liabilities and Owner's Equity 206.06 221.10 198.63 141.99 100ASSETSNon-Current Assets Property, plant and equipment 348.19 332.02 332.57 156.50 100Intangible assets 54.13 78.69 87.87 98.61 100Long term investments 35.22 108 183.63 424 100Long-term deposits 154.64 214.19 261.89 97.09 100Current AssetsStores, spares and loose tools 170.22 168.39 140.92 127.36 100Stock-in-trade 169.36 225.39 152.60 142.41 100Trade debts – unsecured 127.11 133.15 109.48 142.75 100Advances 234.01 254.60 308.91 203.00 100Trade deposits and prepayments 74.18 80.60 63.23 104.82 100Other receivables 67.50 179.58 58.54 126.99 100Other financial assets 4.60 16.47 16.90 44.40 100

48


Sales tax refundable - 4,426.76 4,029.60 1,295.22 100Income tax refundable 34.94 723.52 760.29 180.74 100Cash and bank balances 30.17 64.06 22.97 80.97 100Total Current Assets 135.80 168.08 128.83 136.83 100Total Assets 206.06 221.10 198.63 141.99 100

Interpretation

In horizontal analysis trends are computed by taking 2007 as a base year. Company has increased

its share capital but in very minor ratio. Company has more and more reserves because by taking

2007 as base year reserves are almost 90% more in 2008& 2009 than 2007. There is also

handsome increase in long term financing and other non-current liabilities but in 2011 it

decreases. Management should decide to reduce long term financing because it creates negative

effect on the profitability of the company.

Regarding the current liabilities, company’s current liabilities are increasing rapidly from 2008

to 2011. Company’s non-current assets showing increasing trend includes property and deposits

but long term investments and intangible assets decreases slightly after 2008 to 2011. Current

assets of PEL are showing inconsistent over the time after 2008. Company’s overall total assets

are showing growing tendency but in 2011 it decreases slightly.

49


Vertical AnalysisIncome Statement


Revenue Net 100.00 100.00 100.00 100.00 100.00Cost of sales 90.61 78.84 67.98 77.57 78.08Gross profit 9.39 21.16 32.02 22.43 21.92Other operating income 0.33 0.29 0.88 0.14 0.85

9.72 21.45 32.90 22.57 22.77Distribution cost 6.99 6.03 6.81 5.35 5.24Administrative expenses 6.02 4.29 7.55 4.06 3.27Other operating expenses 0.04 0.41 0.43 0.37 0.44Financing Cost 12.46 9.27 13.38 7.85 7.93Total Operating Expenses 25.51 19.99 28.16 17.63 16.89(Loss)/ Profit before taxation (15.80) 1.46 4.74 4.94 5.89Share of (loss) / profit of associate (0.09) 0.03 0.05 0.04 0.10(Loss) / profit before taxation (15.89) 1.49 4.79 4.98 5.99Provision for taxation (5.63) 0.41 1.31 1.41 1.06(Loss) / profit for the year (10.26) 1.08 3.48 3.58 4.93

Interpretation

In the Common Size analysis of the Profit and Loss Account of Pak Elektron Limited, it is

shown that there is a very minor difference in the cost of sales and net revenue for the year of

2011 but in remaining years Company having better difference in cost of sale and net revenue.

Other operating income has a very minor share with respect to net revenue.Total operating

expenses are displaying ups and downs trend,and in this company has faced a huge loss in 2011.

Because operating expenses are very higher than gross profit. So in this way company has set

aside provision for taxation more in 2011 as comparing to all other years. PEL has enjoyed a

good profit as 4.93% of sale in 2007.

Balance Sheet

50



EQUITY AND LIABILITIESShare Capital & Reserves Issued, subscribed and paid up capital 7.01 6.53 6.95 9.13 11.85Reserves 0.69 0.64 0.58 0.80 0.60Un-appropriated profits 7.44 10.71 10.73 12.50 15.62Surplus on Revaluation of Property, Plant and Equipment

16.65 16.30 19.07 11.84 7.13

Non-Current Liabilities Long-term financing – secured 19.12 19.41 17.79 15.13 11.38Liabilities against assets to finance lease 0.09 0.06 0.52 1.04 1.62Deferred taxation 8.29 10.78 12.57 8.77 6.38Deferred income 0.24 0.29 0.44 0.51 0.57Total Non-Current Liabilities 27.74 30.53 31.32 25.44 19.95CURRENT LIABILITIESTrade and other payables 6.24 5.86 5.60 12.71 13.62Interest / mark-up accrued on loans payables

3.46 1.49 1.46 1.34 1.85

Short-term borrowings 25.95 23.09 20.52 23.60 26.36Current portion of: - long-term financing 4.65 4.46 3.42 2.02 2.13 - liabilities against assets to finance lease 0.16 0.38 0.36 0.61 0.89

40.47 35.28 31.35 40.29 44.8568.21 65.81 62.67 65.73 64.80

Total Liabilities and Owner's Equity 100.00 100.00 100.00 100.00 100.00ASSETSNon-Current AssetsProperty, plant and equipment 59.21 52.62 58.67 38.63 35.04Intangible assets 1.32 1.79 2.23 3.50 5.04Long term investments 0.02 0.05 0.10 0.32 0.11Long-term deposits 0.23 0.30 0.40 0.21 0.31Total Non-Current Assets 60.79 54.76 61.40 42.66 40.50CURRENT ASSETS Stores, spares and loose tools 0.46 0.42 0.40 0.50 0.56Stock-in-trade 17.85 22.14 16.69 21.78 21.72Trade debts – unsecured 15.75 15.37 14.07 25.67 25.53Advances 2.63 2.67 3.60 3.31 2.32Trade deposits and short-term 0.96 0.97 0.85 1.96 2.66

51


prepaymentsOther receivables 0.07 0.18 0.07 0.20 0.22Other financial assets 0.03 0.11 0.12 0.44 1.41Sales tax refundable - 0.71 0.60 0.22 0.02Income tax refundable 0.79 1.37 1.60 0.53 0.42Cash and bank balances 0.68 1.35 0.54 2.65 4.65Total Current Assets 39.21 45.24 38.60 57.34 59.50Total Assets 100.00 100.00 100.00 100.00 100.00

Interpretation

In the common size analysis of the Balance Sheet it shows that in 2007 share capital is 11.85%

of total assetsand in upcoming years share capital of total assets ratio decreased but in 2011 it

increased minor. It means that company issued more shares in 2007 but after that firm continues

to buy back its ordinary shares till 2010. Reserves are showing varied tendency and long term

financing shows increasing trend with respect to total assets. Total non-current assets are

showing ups and downs when it compared to total assets of that particular year.Deferred taxation

showing fluctuation but deferred income is showing an increasing behavior after 2007.

Financial Ratios

Liquidity Ratios

52


31-Dec-2011 31-Dec-2010 31-Dec-2009 31-Dec-2008 31-Dec-2007

Current Ratio 0.97 1.28 1.23 1.42 1.33Quick Acid-Test Ratio 0.50 0.63 0.67 0.83 0.78

Interpretation:

The liquidity position of PEL has been satisfactory in the preceding years but in 2011 it declined.

As the above analysis table indicates, in 2008 the liquidity position was 1.48 times which means

that in 2008 the firm has RS. 1.48 to pay a liability of RS. 1 which is quite well but in 2011 it

reduced to 0.97 times. This change in the liquidity position is due to higher increased percentage

of Current liabilities in the balance sheet of year 2011. Current ratio also effects profitability and

credibility of company in the sense of don’t put at large current assets for fulfilling the current

liabilities, because the excess money is useful for investing in short term and long term

securities. But in case of not fulfilling the liabilities on time, company’s credibility disturbs.

Secondly, quick ratio is calculated for the purpose of checking most quickly and liquid table

assets that can be easily and speedily convert into cash. PEL’s quick ratio is showing decreasing

trend after 2008 due to advances and huge inventory stock,which is not very beneficial for the

company

Debt Ratio

53

1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-110.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

Current RatioQuick Acid-Test Ratio


31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07Debt to Equity Ratio 2.74 2.98 2.63 1.77 1.10Debt Ratio 0.68 0.66 0.63 0.66 0.65Interest Coverage Ratio -0.27 1.16 1.35 1.63 1.74

Interpretation

Debt ratio is a financial ratio that indicates the percentage of a company's assets that are provided

via debt. The higher the ratio, the greater risk will be associated with the firm's operation. In

addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn

will lower the firm's financial flexibility.

Interest coverage ratio is a calculation of a company's ability to meet its interest payments on its

outstanding debt. While debt to equity is a measure of a company's financial leverage, Investing

in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest

rates, due to the additional interest that has to be paid out for the debt. In PEL debt to equity ratio

is upward but debt ratio remained very minor variation and interest coverage ratio is showing

declining tendency which means the larger the debt burden on the company.

54

1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-11-0.50

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

Debt to Equity RatioDebt Ratio Interest Coverage Ratio


Activity Ratios

31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07Inventory Turnover 2.42 2.44 0.82 2.75 3.68Total Assets Turnover 0.48 0.69 0.20 0.77 1.02Average Collection Period 118.92 80.63 250.85 119.73 89.83Average Payment Period 52.74 39.54 148.87 77.52 62.24

55


0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

Inventory TurnoverTotal Assets Turnover


Interpretation

Average collection period measure how long a firm's average sales dollar remains in the hands of

its customers. A longer collection period automatically creates a larger investment in assets.

Inventory turnover ratio measures the number of times a company's investment in inventory is

turned over during a given year. The higher the turnover ratio, the better, since a company with a

high turnover requires a smaller investment in inventory than one producing the same level of

sales with a low turnover rate. Company management has to be sure, however, to keep inventory

at a level that is just right in order not to miss sales.The graph is showing fluctuating for

inventory turnover and total asset turn over. Average collection period and payment period

having same in trend as ups and down.

Profitability Ratios

31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07Gross Profit Margin 0.09 0.21 0.32 0.22 0.22Operating Profit Margin -0.03 0.11 0.18 0.13 0.14Net Profit Margin -0.10 0.01 0.03 0.04 0.05Return on Assets -0.05 0.01 0.01 0.03 0.05Return on Equity -0.70 0.11 0.10 0.30 0.43Earning Per Share -9.55 1.55 1.01 3.02 4.25

56


50.00

100.00

150.00

200.00

250.00

300.00

Average Collection PeriodAverage Payment Period


Interpretation

Profitability ratios (also referred to as profit margin ratios) compare components of income with

sales. They give us the idea of what makes up a company’s income and are usually expressed as

a portion of each rupee of sale. Gross profit margin indicates how much of every rupee of sale is

left after cost of goods sold. Same as net profit margin shows how of each rupee of sale

isleftover after all expenses. Return on equity is showing tremendous decline in 2011 but all

other profitability ratios changed very few in the last five years.

earning per share is the amount of income earned during a period per share of common stock.

PEL’s EPS is showing almost decreasing trend because the company has issued more shares but

earning didn’t increase as the same ratio, and in 2011 due to huge loss EPS declined up to -9.55

which is very alarming situation for the management.

57

1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-11

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

Gross Profit MarginOperating Profit MarginNet Profit MarginReturn on AssetsReturn on Equity

1-Jan-07 1-Jan-08 1-Jan-09 1-Jan-10 1-Jan-11

-12.00

-10.00

-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

Earning Per Share


WHAT I HAVE LEARNED IN THE ORGANIZATION

During internship I worked in the accounts and finance department of the company. I learnt

about the basic operations, different terminologies and documents used in the department. Some

other basic learning is given below.

How to work individually as well as in groups under relaxed and stressful environment

Patience is very important in dealings, as anger can lose your customer

Working of production plant of PEL products (Air Conditioners, Refrigerators) by

visiting the production site

How does Accounts Department make payments to the company’s suppliers

How does the company calculate its input and output tax

How does cost section deals in production-concerned matters

I learned that record of internal expenses related to the employees is maintained in the

book keeping section

How the different types of vouchers are prepared, such like Cash payment Voucher Bank

payment Voucher, Cash Receipt Voucher, Bank Receipt Voucher, Journal Voucher

58


SUGGESTIONS AND RECOMMENDATIONS

As I found brand name is very important factor in consumer buying behavior, thus it is

advised that PEL should work on the brand image. Although PEL has a strong brand

name, but it has to create much more stronger one, mainly through advertising, to

compete with Dawlance, Waves,and other international brands.

The company should take measures to improve the quality of their products by improving

the process. Thus the company is advised to take steps towards improving the quality of

its products; otherwise it will lose a lot of potential customers to their competitors.

To gain more competitive advantage over their competitors, PEL has to work on their

distribution network.

PEL more focus should be on electronic media to get competitive advantage over the

competitors. They have to increase their advertising expenditures.

The company must give more incentives to the dealers so that they remain loyal to the

company and promote the products.

The product line of PEL is not good as compared to others like Haier, Waves, Super

Asia, so it’s good for the company for more success if they work on it.

Let the employees to know about the cost of parts of machines which assembled after

repairing so that they realize about the value of that parts, and consequently they will use

that in sophisticated manner.

The company should announce two holidays in a week; it will not only help the company

in cost cutting but also increase efficiency of its employees.

Save time by minimizing the official procedures

Develop proper goals and objectives for every member of team and department.

Co-ordination should be developed between departments to departments. This can be

done through setting goals and objectives of the whole company not only for their

different departments.

59


REFERENCES

The sources from where I have gathered data for my report:

www.pel.com.pk

Mr. Muhammad Masood (HOD of Accounts Department)

Mr. Arshad Ali (Accounts Manager)

Mr. Nadeem-Ud-Din Qureshi (Assistant Manger Finance)

Mr. Mirza Imran Khan (Account Officer)

Mr. Muhammad Asad (Corporate Finance Section Incharge)

60

http://www.pel.com.pk/


ANNEXURE

Attached Documents include:

Financial Statements of Pak Elektron Limited

Comprehensive Income Statement

Statement of Financial Position

Internship Program Letter

Internship Completion Letter

61


62


COMPREHENSIVE STATEMENT OF INCOME

For the Year 2007-2011

31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07Rupees in Thousands

Revenue 13,723,169 19,895,448 5,203,152 13,926,572 13077670Sales-tax and discount 2,380,339 2,372,792 571,721 1274579 1264183Revenue – net 11,342,830 17,522,656 4,631,431 12,651,993 11,813,487Cost of sales 10,277,948 13,814,754 3,148,401 9814594 9223623Gross profit 1,064,882 3,707,902 1,483,030 2,837,399 2,589,864Other operating income 37,140 50,936 40,708 18247 100458

1,102,022 3,758,838 1,523,738 2,855,646 2,690,322Distribution cost 792,803 1,057,011 315,170 676,452 618,981Administrative expenses 683,115 751,074 349,450 514,122 386,556Other operating expenses 4,838 71,223 19,751 46,697 52,429Financing Cost 1,413,264 1,623,611 619,911 993,565 937,109Total Operating Expenses 2,894,020 3,502,919 1,304,282 2,230,836 1,995,075(Loss)/ Profit before taxation (1,791,998) 255,919 219,456 624,810 695,247Share of (loss) / profit of associate (10,162) 5,289 2,438 5585 12162(Loss) / profit before taxation (1,802,160) 261,208 221,894 630,395 707,409Provision for taxation (638,698) 72,184 60,643 177970 125165(Loss) / Profit for the year (1,163,462) 189,024 161,251 452,425 582,244


STATEMENT OF FINANCIAL POSITION

For the Year 2007-2011

31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08 31-Dec-07Rupees in Thousands

EQUITY AND LIABILITIES

Share Capital & Reserves

Authorized capital 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000Issued, subscribed and paid up capital 1,668,264 1,668,264 1,593,720 1,496,677 1,368,591Reserves 164,134 164,134 131,931 131,931 69,118Un-appropriated profits 1,770,706 2,733,582 2,461,255 2,048,783 1,803,565

3,603,104 4,565,980 4,186,906 3,677,391 3,241,274Surplus on Revaluation of Property, Plant and Equipment

3,962,040 4,162,626 4,373,769 1,940,365 823,341

Non-Current LiabilitiesLong-term financing – secured 4,548,852 4,954,333 4,079,149 2,480,238 1,314,219Liabilities against assets to finance lease 21,841 14,776 119,368 169,954 187,027Deferred taxation 1,973,350 2,751,515 2,883,631 1,438,405 736,309Deferred income 56,069 74,935 101,108 82,996 66,323Total Non-Current Liabilities 6,600,112 7,795,559 7,183,256 4,171,593 2,303,878Current LiabilitiesTrade and other payables 1,485,002 1,496,489 1,284,080 2,084,351 1,572,732Interest accrued on loans payables 823,896 380,197 333,763 220,104 213,298Short-term borrowings 6,174,860 5,895,077 4,706,890 3,868,988 3,043,650Current portion of: - long-term financing 1,106,375 1,138,026 783,597 331,701 245,501 - liabilities against assets subject to finance lease

38,393 96,185 82,959 100,286 103,105

Total Current Liabilities 9,628,526 9,005,974 7,191,289 6,605,430 5,178,286Total Liabilities

16,228,63816,801,53

3 14,374,54510,777,02

3 7,482,164Total Liabilities and Owner's Equity

23,793,78225,530,13

9 22,935,22016,394,77

9 11,546,779ASSETSNon-Current Assets Property, plant and equipment 14,089,185 13,434,70

9 13,457,138 6,332,705 4,046,378

Intangible assets 314,874 457,744 511,134 573,617 581,70514,404,059 13,892,45

3 3,968,272 6,906,322 4,628,083

Long term investments 4,393 13,447 22906 52,945 12,474 Long-term deposits 54,636 75,515 92,152 34,218 35,332 Current AssetsStores, spares and loose tools 109,582 108,405 90,721 81,990 64,376


Stock-in-trade 4,247,023 5,652,0893,826,744

3,571,168

2,507,679

Trade debts – unsecured 3,746,881 3,924,7723,227,219

4,207,741

2,947,646

Advances 625,559 680,611825,807

542,663

267,327

Trade deposits and short-term prepayments 227,555 247,266193,963

321,574

306,775

Other receivables 17,241 45,869 14,952 32,437 25,543 Other financial assets 7,491 26,810

27,522 72,29

5 162,825

Sales tax refundable - 169,589154,374

49,620

3,831

Income tax refundable 187,496 349,560367,325

87,322

48,314

Cash and bank balances 161,866 343,753123,263

434,484

536,574

Total Current Assets 9,330,694 11,548,724

8,851,8909,401,294 6,870,890

Total Assets23,793,782

25,530,139 22,935,220

16,394,779 11,546,779

Final Report of Pel

Documents

Transcript of Final Report of Pel