Resham Textile Industries Limited...3) Mrs. Salma Aziz 4) Ms. Kiran A. Chaudhry 5) Mr. Kamran Ilyas...

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Annual Report ___________________________________________________________

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C O N T E N T S

COMPANY INFORMATION ………………………………….. 3

MISSION ……………………………………………………….. 4

NOTICE OF ANNUAL GENERAL MEETING ………………. 5-6

DIRECTORS’ REPORT ………………………………………. 7-8

FINANCIAL INFORMATION………………………………….. 9

STATEMENT OF ETHICS AND BUSINESS PRACTICES... 10

AUDITORS’ REPORT TO THE MEMBERS ………………… 11-13

STATEMENT OF FINANCIAL POSITION ………………….. 14-15

STATEMENT OF PROFIT OR LOSS……………………….. 16

STATEMENT OF COMPREHENSIVE INCOME …………. 17

STATEMENT OF CHANGES IN EQUITY …………………. 18

CASH FLOW STATEMENT ………………………………… 19

NOTES TO THE FINANCIAL STATEMENTS ……………… 20-49

PATTERN OF SHAREHOLDING …………………………………. 50

FORM OF PROXY ……………………………………………. 51

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COMPANY INFORMATION

CHIEF EXECUTIVE OFFICER : Mr. Muhammad Arshad Saeed

BOARD OF DIRECTORS : Ch. Rahman Bakhsh Mr. Muhammad Musharaf Khan Mrs. Salma Aziz Ms. Kiran A. Chaudhry Mr. Kamran Ilyas Mr. Muhammad Ali Chaudhry

COMPANY SECRETARY : Mr. Muhammad Javed

AUDITORS : M/s EY Ford Rhodes Chartered Accountants Lahore

BANKERS : National Bank of Pakistan Bank Alfalah Limited Askari Bank LImited Al Baraka Bank (Pakistan) Ltd. Faysal Bank Limited

SHARE REGISTRAR : Resham Textile Industries Limited

LEGAL ADVISORS : Mr. Shaukat Haroon (Advocate) Barrister Salman Rahim (Advocate High Court) Yousaf Islam Associates

REGISTERED OFFICE : 36-A, Lawrence Road, Lahore

UAN : (042) 111-767-676

WEBSITE : www.reshamtextile.com

MILLS : 1.5 Kilometer Habibabad, Chunian Road, Tehsil Chunian, District Kasur.

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MISSION

The management is committed to excellence in operations with the aim of achieving highest standards in product

quality, customer satisfaction, Company growth, employees welfare and social responsibilities and is constantly striving

to meet these objectives.

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NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given that the Thirty First (31st) Annual General Meeting of the Shareholders of Resham Textile Industries Limited will be held on 28th October, 2020 at 10:00 a.m. at the Registered Office of the Company i.e. 36-A, Lawrence Road, Lahore to transact the following business.

1. To confirm the minutes of the last meeting.

2. To receive, consider and adopt the Audited Financial Statements of the Company for the year ended June 30,

2020 together with the Directors’ and Auditors’ report thereon.

3. To appoint auditors and fix their remuneration for the year ending June 30, 2021.

4. To elect seven (7) Directors of the company as fixed by the Board in accordance with the provision of Section

159(1) of the Companies Act, 2017, for a term of three (3) years commencing from the date of holding AGM i.e.

28th October, 2020. The names of retiring directors of the Company, also eligible to offer themselves for re-election,

are as follows:

1) Mr. Muhammad Arshad Saeed2) Ch. Rahman Bakhsh3) Mrs. Salma Aziz4) Ms. Kiran A. Chaudhry5) Mr. Kamran Ilyas6) Mr. Muhammad Ali Chaudhry7) Mr. Muhammad Musharaf Khan

5. To transact any other business with the permission of the Chair.

By Order of the Board

Muhammad Javed Lahore: 03 October 2020.

Company Secretary

NOTES:

1. The Share Transfer Books of the Company will remain closed from 22 October 2020 to 28 October 2020 (bothdays inclusive).

2. Notice to Members who have not Provided CNIC SECP vide Notification S.R.O. 19(1)/2014 dated 10th January2014 read with Notification S.R.O 831(1)/2012 dated 5th July 2012 require that the dividend warrant(s) shouldbear CNIC number of the registered member or the authorized person, except in case of minor(s) and corporatemembers. Accordingly, in case of non-receipt of the copy of a valid CNIC, the Company would be unable to complywith the directives of SECP and therefore will be constrained under SECP order dated July 13, 2015 to withholdthe dispatch of dividend warrants of such shareholders. The shareholders while sending CNIC must quote theirrespective folio number and name of the Company.

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In case of non-availability of a valid copy of the Shareholders' CNIC in the records of the Company, the company shall be constrained to withhold the Dividend Warrants, which will be released by the Share Registrar only upon submission of a valid copy of the CNIC in compliance with the aforesaid SECP directives. As per the provisions of section 244 of the Companies Act, 2017, any shares issued or dividend declared by the company which have been remained unclaimed / unpaid for a period of three years from the date on which it was due and payable, are required to be deposited with Securities and Exchange Commission of Pakistan for the credit of Federal Government after issuance of notices to the shareholders to file their claim. Shareholders are requested to ensure that their claims for unclaimed dividend and shares are lodged promptly. In case, no claim is lodged, the company shall proceed to deposit the unclaimed / unpaid amount and shares with the Federal Government pursuant to the provision of section 244(2) of the companies Act, 2017, as prescribed.

3. Pursuant to the provisions of the Finance Act, 2019 effective from July, 01 2019, the rates of deduction of incometax from dividend payments under the Income Tax Ordinance have been revised as follows:

i. Rate of Withholding Income Tax deduction for the persons whose names are appearing on ATL. 15%.ii. Rate of Withholding Income Tax deduction for the persons whose names are not appearing on ATL. 30%

Further, according to clarification received from Federal Board of Revenue (FBR), withholding tax will be determined separately on “Filer/ Non-Filer” status of principal shareholder as well as joint-holders (s) based on their shareholding proportions, in case of joint accounts. In this regard all shareholders who hold shares jointly are requested to provide shareholding proportions of principal shareholder and joint holder(s) in respect of shares held by them to us, in writing, within 10 days of this notice, otherwise it will be assumed that the shares are equally held by principal shareholder and joint-holder(s).

4. Any person who seeks to contest election for the office of Director shall, whether he is a retiring director orotherwise, file following documents / information with the Company not later than fourteen (14) days beforethe date of meeting:

a) Notice of his/her intention to offer himself /herself for election of directors in terms of Section 159(3) of theCompanies Act, 2017.

b) Consent to act as director in Form-28 under section 167 of the Companies Act, 2017.c) A detailed profile along with his/her office address for placement onto the Company's website as required

under SECP's SRO 1196(I) / 2019 dated October 03, 2019.d) An attested copy of Computerized National Identity Card (CNIC).

5. A member entitled to attend and vote at the meeting may appoint another member of the Company as a proxy toattend and vote instead of him. A proxy form duly signed and stamped must be deposited at the Registered Officeof the Company not less than 48 hours before the time fixed for holding the meeting. A form of proxy is attachedhere with in the Annual report.

6. The account holders of CDC are requested to bring their original CNIC/ Passport for the purpose of identificationat the meeting, and Members are also requested to promptly notify the Company of any changes in their registeredaddress.

7. The company’s annual financial statements for the year ended 30 June, 2020 are also being circulated to theshareholders in compliance of section 223(6) of the companies Act. 2017.The annual financial statements has also been uploaded on the company’s website and is readily accessible tothe shareholders http://www.reshamtextile.com

http://www.reshamtextile.com/

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DIRECTORS’ REPORT

It is my pleasure to present the Directors’ Report and the audited accounts for the year ended June 30, 2020.

Performance Review

The year under review started very well and significant profits were made upto the month of February 2020, after which

significant COVID-19 effects were visible, particularly due to lockdowns and closures. From March to June 2020

demands for yarn nosedived, exports came to a halt due to lockdown, transport and other means of communication

were also in disarray and to sum up this period and even the period following June 2020 remains a firefighting period.

Most companies declared losses, however by the grace of Allah, s.w.t. your company reported a net profit of

Rs.30,365,000, which is a tribute to the executives and employees of the company and support of shareholders.

However, as elsewhere in the world, it can be safely stated that overall effect of COVID-19 was grossly negative and

the company would have made a significant profit during the period, if COVID-19 had not affected the operations in the

country and elsewhere.

The financial results in tabulated form are given below and details may be perused in other sections of this report:-

2020 2019

Rupees (‘000)

Sales-net 3,384,984 3,815,898

Cost of sales (3,191,509) (3,556,405)

Gross profit 193,475 259,493

Selling and distribution expenses (12,294) (14,287)

Administrative expenses (60,307) (71,393)

Other operating expenses (5,064) (9,170)

(77,665) (94,850)

Operating Profit 115,810 164,643

Other income 9,410 5,791

Finance Costs (75,672) (73,053)

Profit before taxation 49,548 97,381

Taxation (19,183) (29,979)

Profit for the year 30,365 67,402

Future Prospects:

As I write this report on 3rd October 2020, there is complete uncertainty not only in Pakistan but also everywhere in the

world. Even the superpowers like America, China and other major countries in the world are facing crisis mainly due to

Annual Report ___________________________________________________________

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COVID-19 and attendant factors, which have given rise to tensions, disrupting international trade and even political

relationships. However, the company is quietly pursuing its objectives of serving the shareholders by optimizing efforts

aimed at micromanagement. Alhamdulillah, till the writing of this report, the Financial results have been positive but

there are no guarantees about the future prospects since there is very acute shortage of good cotton in the country

and demand of products of textile sector inspite of depreciation of Rupee, locally and abroad. APTMA and other trade

bodies have been active to seek maximum promotion of their business and efforts at reducing cost of business

continue.

It must be mentioned that this year cotton crop was not only sown in lesser area but both the quality and quantity have

been seriously affected by locust, pest attacks and as if this was not enough, by major floods. It is our information from

the field in both Punjab and Sindh, which are major cotton growing areas, that the largest number of growers are likely

to switch over to other crops and both the quality and crop volume will force the industry to go for imports and switching

over to other fibers, which will affect the viability of small units.

The present value of the Dollar and imposition of duties and taxes make the imported cotton very difficult, if not

impossible and the margins squeeze. However, the company has always adopted an optimistic approach and is

Alhamdulillah well prepared to face challenges such as above for which alternatives have been worked out and

preparation made.

Therefore, there is no apprehension, God forbid, that the company operations will be jeopardized in any major way

except by will of Allah, s.w.t.

Acknowledgements

The Directors take this opportunity to thank the Company’s Bankers, particularly National Bank of Pakistan, Bank Alfalah Limited, Askari Islamic Bank, Al Baraka Bank (Pakistan), Faysal Bank Limited, and other financial Institutions for their confidence in the Company and strong financial support. The Directors would also like to particularly mention the dedication and devotion displayed by the employees in performing their duties. In addition, thanks are also due to all Honorable Shareholders for their continuing support.

For and on behalf of the Board

Lahore: October 03,2020. Muhammad Arshad Saeed (Chief Executive Officer)

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FINANCIAL INFORMATION

BALANCE SHEET 2020 2019 2018 2017 2016 2015

(Rupees in thousand)

Paid up Share Capital 360,000 360,000 360,000 360,000 360,000 360,000

Unappropriated Profit 663,686 672,260 721,476 613,596 535,330 539,159

Revaluation surplus on fixed assets 379,953 403,294 429,200 202,102 218,156 236,394

Total Equity 1,403,639 1,435,554 1,510,676 1,175,698 1,113,486 1,135,553

Deferred Liabilities 224,109 272,502 289,316 249,590 280,672 296,914

Long Term Advances - - - - - 131

Current Liabilities 734,013 736,157 353,006 233,363 208,050 326,909

2,361,761 2,444,213 2,152,998 1,658,651 1,602,208 1,759,507

Represented by:

Fixed Assets 1,196,494 1,253,543 1,324,747 1,097,230 1,156,630 1,218,378

Capital work in progress - - - - 2,526 5,746

Long term deposits 3,708 3,702 3,699 3,703 3,698 3,698

Current Assets 1,161,559 1,186,968 824,554 557,718 439,354 531,685

2,361,761 2,444,213 2,153,000 1,658,651 1,602,208 1,759,507

PROFIT OR LOSS

Revenue from contracts with customers 3,384,984 3,815,898 4,140,428 3,464,594 3,132,476 3,395,806

Cost of revenue 3,191,509 3,556,405 3,823,518 3,307,392 3,019,780 3,148,835

Gross Profit 193,475 259,493 316,910 157,202 112,696 246,971

Operating Profit 115,809 164,642 209,876 50,340 40,200 166,721

Profit / (Loss) Before Taxation 49,548 97,381 166,497 52,240 17,395 138,316

Profit / (Loss) After Taxation 30,365 67,402 126,663 95,329 3,354 103,246

EPS 0.84 1.87 3.52 2.65 0.09 2.87

Dividend % 20 20 30 10 - 12

PERCENTAGE TO SALES

Gross Profit % age 5.72 6.80 7.65 4.54 3.60 7.27

Profit Before Taxation % age 1.46 2.55 4.02 1.51 0.56 4.07

Profit After Taxation % age 0.90 1.77 3.06 2.75 0.11 3.04

Admin & Selling Expenses % age 2.14 2.25 2.30 2.14 2.41 2.00

Annual Report ___________________________________________________________

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STATEMENT OF ETHICS AND BUSINESS PRACTICES

This Statement of Ethics and Business Practices is intended to document the principles of conduct and ethics to be followed by Resham Textile Industries Limited (the "Company") and its employees, officers and directors. Its purpose is to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest.

CONFLICTS OF INTEREST - Directors, officers and employees of the Company shall act at all times honestly and ethically, and shall avoid situations where their personal or outside business interests could conflict with the interests of the Company and its shareholders.

DEALING WITH BUSINESS PARTNERS - All purchases of goods and services by the Company will be made exclusively on the basis of price, quality, service and suitability to the Company's needs and in the interest of the Company alone. Directors, officers and employees are prohibited from accepting gifts from sellers or buyers in any form whatsoever.

DISCLOSURE - Each senior executive officer must provide full, fair, accurate and understandable information whenever communicating with the Company's stockholders or the general public.

COMPLIANCE WITH LAWS, RULES AND REGULATIONS - All directors, officers and employees must conduct Company business in compliance with all applicable laws, rules and regulations.

HEALTH, SAFETY, AND ENVIRONMENTAL PROTECTION - It is the Company's policy to ensure the safety of its employees, be extra careful in protecting Company property from fire and other hazards, and to maintain the state of environment.

REPORTING OF VIOLATIONS - It is each employee's responsibility to notify promptly his or her supervisor regarding any actual or potential violation of this Code and any applicable laws, rules and regulations by anyone in the Company.

FAIR DEALING - It is our policy that each director, officer and employee will endeavor to deal fairly with the Company's customers, suppliers, competitors and employees.

CONFIDENTIALITY - All directors, officers and employees are prohibited from revealing confidential information of the Company acquired by virtue of their association with the Company or in any other manner, disclosure of which may hurt the interests of the Company. This does not apply to disclosures required by laws, rules and regulations.

PROPER USE OF COMPANY ASSETS - All Directors, officers and employees should protect the Company's assets and ensure their efficient use. Employees must not participate in, or arrange, any activity that is not commensurate with Company interests.

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AUDITOR’S REPORT TO THE MEMBERS

Opinion

We have audited the annexed financial statements of Resham Textile Industries Limited (the Company), which comprise the statement of financial position as at 30 June 2020, the statement of profit or loss, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of the audit.

In our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, the statement of profit or loss, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows together with the notes forming part thereof conform with the accounting and reporting standards as applicable in Pakistan and give the information required by the Companies Act, 2017 (XIX of 2017), in the manner so required and respectively give a true and fair view of the state of the Company's affairs as at 30 June 2020 and of the profit, the comprehensive income, the changes in equity and its cash flows for the year then ended.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Pakistan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants as adopted by the Institute of Chartered Accountants of Pakistan (the Code) and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Information Other than the Financial Statements and Auditor’s Report Thereon

Management is responsible for the other information. The other information comprises of the Directors’ report, but does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of other information, we are required to report the fact. We have nothing to report in this regard.

Annual Report ___________________________________________________________

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Responsibilities of Management and Board of Directors for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting and reporting standards as applicable in Pakistan and the requirements of Companies Act, 2017(XIX of 2017) and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Board of directors are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs as applicable in Pakistan will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs as applicable in Pakistan, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

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We communicate with the board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the board with the statement that we have complied with relevant ethical requirements including independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. Report on Other Legal and Regulatory Requirements

Based on our audit, we further report that in our opinion:

a) proper books of account have been kept by the Company as required by the Companies Act, 2017 (XIX of2017);

b) the statement of financial position, the statement of profit or loss, the statement of comprehensive income,the statement of changes in equity and the statement of cash flows together with the notes thereon have beendrawn up in conformity with the Companies Act, 2017 (XIX of 2017) and are in agreement with the books ofaccount and returns;

c) investments made, expenditure incurred and guarantees extended during the year were for the purpose ofthe Company’s business; and

d) no Zakat was deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980).

The engagement partner on the audit resulting in this independent auditors’ report is Sajjad Hussain Gill.

_____________________ EY Ford Rhodes Chartered Accountants Lahore October 06,2020

Annual Report _________________________________________

2020 2019

Note Rupees Rupees

EQUITY AND LIABILITIES

Share capital and reserves

Share capital

Authorized, issued, subscribed and paid up capital 5 360,000,000 360,000,000

Capital reserve:

Revaluation surplus on property, plant and

equipment - net of tax 6 379,953,135 403,293,740

Revenue reserve:

Unappropriated profit 663,685,974 672,260,480

1,403,639,109 1,435,554,220

Non-current liabilities

Deferred liabilities 7 224,109,357 272,502,487

Current liabilities

Trade and other payables 8 150,484,564 164,954,383

Contract liabilities 9 4,482,530 22,241,421

Unclaimed dividend 542,184 495,707

Accrued markup 8,588,022 11,453,115

Short term borrowings 10 499,935,612 489,600,641

Sales tax payable - net 18,917,283 -

Provision for income tax 51,062,393 47,411,895

734,012,588 736,157,162

2,361,761,054 2,444,213,869

CONTINGENCIES AND COMMITMENTS 11

The annexed notes, from 1 to 34 form an integral part of these financial statements.

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Chief Executive Officer

STATEMENT OF FINANCIAL

14

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2020 2019

Note Rupees Rupees

ASSETS

Non-current assets

Property, plant and equipment 12 1,196,494,193 1,253,543,398

Long term deposits 3,708,160 3,702,160

1,200,202,353 1,257,245,558

Current assets

Stores and spare parts 13 58,397,033 64,233,224

Stock in trade 14 895,582,038 911,217,209

Trade debts 15 138,529,744 97,689,278

Loans and advances 16 11,047,123 1,639,280

Trade deposits and short term

prepayments 17 2,958,270 3,124,241

Balance with statutory authorities 18 47,613,420 72,269,864

Cash and bank balances 19 7,431,073 36,795,215

1,161,558,701 1,186,968,311

2,361,761,054 2,444,213,869

Director

_____________________

POSITION AS AT JUNE 30, 2020

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Annual Report ____________________________________________________

2020 2019

Note Rupees Rupees

Revenue from contracts with customers - net 20 3,384,984,122 3,815,897,638

Cost of revenue 21 (3,191,509,080) (3,556,404,783)

Gross profit 193,475,042 259,492,855

Selling and distribution expenses 22 (12,294,440) (14,287,409)

Administrative expenses 23 (60,307,366) (71,393,464)

Other operating expenses 24 (5,064,110) (9,169,915)

(77,665,916) (94,850,788)

Operating profit 115,809,126 164,642,067

Other income 25 9,410,482 5,791,536

Finance costs 26 (75,671,529) (73,053,077)

Profit before taxation 49,548,079 97,380,526

Taxation 27 (19,183,079) (29,978,664)

Profit for the year 30,365,000 67,401,862


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________________

Director

STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED JUNE 30, 2020

16

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2020 2019

Note Rupees Rupees

Profit for the year 30,365,000 67,401,863

Other comprehensive income:

Items may be reclassified to profit or loss in subsequent periods - -

Items not to be reclassified to profit or loss in subsequent periods - -

Measurement adjustments relating to deferred liability - gratuity - net of tax 7.2.1 9,719,889 1,476,183

Other comprehensive income 9,719,889 1,476,183

Total comprehensive income for the year 40,084,889 68,878,046


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Director

STATEMENT OF COMPREHENSIVE INCOME


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Annual Report ____________________________________________________

Balance as at 01 July 2018 360,000,000 429,200,214 721,475,961 1,510,676,175

Profit for the year - - 67,401,862 67,401,862

Other comprehensive income - - 1,476,183 1,476,183

Total comprehensive income - - 68,878,045 68,878,045

360,000,000 429,200,214 790,354,006 1,579,554,220

Transfer from revaluation surplus on account

of incremental depreciation - net - (25,906,474) 25,906,474 -

Final dividend paid for the year ended

30 June 2018 @ Rs. 2.0/- per share - - (72,000,000) (72,000,000)

Interim dividend paid for the year ended

30 June 2019 @ Rs. 2.0/- per share - - (72,000,000) (72,000,000)

- (25,906,474) (118,093,526) (144,000,000)

Balance as at 30 June 2019 360,000,000 403,293,740 672,260,480 1,435,554,220

Profit for the year - - 30,365,000 30,365,000

Other comprehensive income - - 9,719,889 9,719,889

Total comprehensive income - - 40,084,889 40,084,889

360,000,000 403,293,740 712,345,369 1,475,639,109

Transfer from revaluation surplus on account

of incremental depreciation - net - (23,340,605) 23,340,605 -

1st Interim dividend paid during the year ended

30 June 2020 @ Rs. 1.0/- per share - - (36,000,000) (36,000,000)

2nd Interim dividend paid during the year ended

30 June 2020 @ Rs. 1.0/- per share - - (36,000,000) (36,000,000)

- (23,340,605) (48,659,395) (72,000,000)

Balance as at 30 June 2020 360,000,000 379,953,135 663,685,974 1,403,639,109


STATEMENT OF CHANGES IN EQUITY


________________________


_____________________

Director

Total

Issued,

subscribed

and paid

up capital

Revenue

Reserve -

Unappropriated

profit

Capital

Reserve -

Revaluation

surplus

……………………………… Rupees ……………………………...

18

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Note 2020 2019

CASH FLOWS FROM OPERATING ACTIVITIES Rupees Rupees

Profit before taxation 49,548,079 97,380,526

Adjustments for:-

Depreciation on property, plant and equipment 12 67,504,517 78,151,717

Gain on disposal of operating fixed assets 25 (588,086) (77,966)

Provision for gratuity 7.2 21,421,951 17,937,187

Provision for Workers' Profit Participation Fund 24 2,877,032 5,383,919

Provision for Workers' Welfare Fund 24 2,187,078 3,691,141

Interest income 25 (4,361,634) (3,470,065)

Finance costs 26 75,671,529 73,053,077

164,712,387 174,669,010

Profit before changes in working capital 214,260,466 272,049,536

Effect on cash flows due to working capital changes

(Increase) / decrease in current assets:

Stores and spare parts 5,836,191 (8,907,660)

Stock in trade 15,635,171 (333,029,790)

Trade debts (40,840,466) (4,679,713)

Loans and advances (9,407,843) 1,606,439

Trade deposits and short term prepayments 165,971 (325,293)

Increase / (decrease) in current liabilities:

Trade and other payables (22,462,375) 14,504,893

Sales tax payable 51,274,651 (10,345,001)

Contract liabilities (17,758,890) 3,977,568

Increase in long term deposits (6,000) (3,600)

(17,563,590) (337,202,157)

Net cash generated from / (used in) operations 196,696,876 (65,152,621)

Finance costs paid (75,608,176) (66,078,380)

Gratuity paid 7.2 (28,185,962) (17,036,886)

Income tax paid (55,142,736) (43,820,803)

Interest received 4,361,634 3,470,065

(154,575,240) (123,466,004)

Net cash flows from / (used in) operating activities 42,121,636 (188,618,625)

CASH FLOWS FROM INVESTING ACTIVITIES

Capital expenditure incurred (11,767,226) (11,378,744)

Sale proceeds from disposal of operating fixed assets 1,900,000 4,508,160

Net cash flows used in investing activities (9,867,226) (6,870,584)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from short term borrowings 10,334,971 358,007,199

Dividend paid (71,953,523) (143,941,043)

Net cash flows (used in) / from financing activities (61,618,552) 214,066,156

Net (decrease) / increase in cash and cash equivalents (29,364,142) 18,576,947

Cash and cash equivalents at the beginning of the year 36,795,215 18,218,268

Cash and cash equivalents at the end of the year 7,431,073 36,795,215


___________________


_____________________

Director

CASH FLOW STATEMENT


19

Annual Report ____________________________________________________

1 CORPORATE AND GENERAL INFORMATION

1.1 Legal status and nature of business

-

- Factory: The Company's factory address is 1.5 km Habibabad in the Kasur district, Punjab.

1.2

2. BASIS OF PREPARATION

2.1 Statement of compliance

-

- provisions of and directives issued under the Act.

2.2 Basis of measurement

The World Health Organization declared COVID-19 a global pandemic on March 11, 2020. Accordingly, on March 20,

2020, the Government of Pakistan announced temporary lock down as a measure to reduce the spread of COVID-

19. The outbreak of COVID-19 has had a distressing impact on overall demand in the global economy with notable

downgrade in growth forecasts.

The Company’s management is fully cognizant of the business challenges posed by the COVID-19 outbreak and

closely monitoring the possible impacts on the Company’s operations and liquidity positions and believes that its

current policies for managing credit, liquidity and market risk are adequate in response to current situation.

Further, subsequent to year end, the situation has been improved with the easing of lock down and re-opening of the

businesses. The management has assessed the impact of the COVID-19 on the financial statements and concluded

that there is no material financial impact of COVID-19 on the carrying amounts of assets, liabilities, income or

expenses which required specific disclosures.

Resham Textile Industries Limited (the Company) is a public unlisted company, incorporated in Pakistan on 06 June,

1990 under the Companies Act, 2017. The Company is engaged in manufacturing and sale of yarn.

The geographical locations and addresses of the Company’s business units, including Mill's plant are as under:

These financial statements have been prepared in accordance with the accounting and reporting standards as

applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:

Head Office: The Company's registered office address is 36 A - Lawrence Road, Lahore.

International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board

(IASB) as notified under the Companies Act, 2017 (the Act); and

Where provision of and directives issued under the Act differ from the IFRSs, the provisions of and directives issued

under the Act have been followed.

These financial statements have been prepared under the historical cost convention except for certain financial

instruments which are carried at fair value, certain items of property, plant and equipment which are measured at

revalued amounts less depreciation and employees retirement benefits which are carried at present value.

Impact of COVID-19 on the financial statements

NOTES TO THE FINANCIAL STATEMENTS


20

____________________________________________________

2.3 Functional and presentation currency

2.4

2.4.1

IAS 28 - Long-term Interests in Associates and Joint Ventures – (Amendments)

IFRIC 23 - Uncertainty over Income Tax Treatments

IFRS 3 - Business Combinations - Previously held Interests in joint operation - (Amendments)

IFRS 11 - Joint Arrangements - Previously held interests in a joint operation - (AIP)

IAS 23 - Borrowing Costs - Borrowing costs eligible for capitalization

IFRS 9 - Prepayment Features with Negative Compensation - (Amendments)

IAS 12 - Income Taxes - Income tax consequences of payments on financial instruments classified as equity

IFRS - 14 - Regulatory Deferral Accounts

2.4.2

Standard or Interpretation

IFRS 16 -Leases

IAS 19 – Plan Amendment, Curtailment or Settlement (Amendments)

Standard or Interpretation

Standards not yet effective

The adoption of the above amendments and improvements to accounting standards did not have any material effect

on the financial statements.

These financial statements are presented in Pakistani Rupees which is also the Company's functional currency.

The following amendments to the approved accounting and reporting standards, applicable in Pakistan, would be

effective from the dates mentioned below against the respective standards and interpretation have not been adopted

early by the Company:

The accounting policies set out below have been applied consistently to all periods presented in these financial

statements, except as stated in Note 2.4.1 below.

The accounting policies adopted in the preparation of these financial statements are consistent with those of the

previous financial year except that the Company has adopted the following accounting standards and amendments

which became effective for the current period:

New and amended standards, interpretations and improvements

Standards, interpretations and amendments to published approved accounting standards effective during

the year

21

Annual Report ____________________________________________________

Effective date

01 January 2023

01 January 2020

01 January 2020

01 January 2023

01 January 2022

01 January 2022

01 June 2020

01 January 2022

01 January 2023

IASB Effective date

Standard

IFRS 1 – First-time Adoption of International Financial Reporting Standards January 01, 2009

IFRS 17 – Insurance Contracts January 01, 2023

IFRS 10 - Consolidated Financial Statements and IAS 28 Investment in Associates and

Joint Ventures - Sale or Contribution of Assets between an Investor and its Associate or

Joint Venture (Amendment)

Annual Improvements to IFRS Standards 2018–2020

IFRS - 4 Extension of the Temporary Exemption from Applying IFRS 9

Amendments to IFRS 3 - Business Combinations - Update a reference in IFRS 3 to the

Conceptual Framework for Financial Reporting without changing the accounting

requirements for business combinations.

Further, the following new standards have been issued by IASB which are yet to be notified by the Securities and

Exchange Commission of Pakistan (SECP) for the purpose of applicability in Pakistan.

(annual periods

beginning on or after)

Not yet finalized

01 January 2022

IAS 37 - Onerous Contracts — Cost of Fulfilling a Contract

Covid-19 - Related Rent Concessions (Amendment to IFRS 16)

IAS 1 & IAS 8 - Definition of Material

IFRS 7 & 9 - Financial instruments - Amendments regarding pre-replacement issues in the

context of the interest rate benchmark reform (IBOR) 01 January 2020

IFRS 17 - Insurance Contracts and related amendments

IFRS 3 - Definition of a Business (Amendments)

IAS 1 & IAS 8 - Presentation of Financial Statements Classification of liabilities

(amendments)

The above new amendments to standards and interpretations are not expected to have any material impact on the

Company's financial statements in the period of initial application.

In addition to the above new standards and amendments to standard and interpretations, The IASB has also issued

the revised Conceptual Framework for Financial Reporting (the Conceptual Framework) in March 2018 which is

effective for annual periods beginning on or after January 01, 2020 for preparers of financial statements who develop

accounting policies based on the Conceptual Framework. The revised Conceptual Framework is not a standard, and

none of the concepts override those in any standard or any requirements in a standard. The purpose of the

Conceptual Framework is to assist IASB in developing standards, to help preparers develop consistent accounting

policies if there is no applicable standard in place and to assist all parties to understand and interpret the standards.

(annual periods

beginning on or after)

In addition to the above new standards and amendments to standard and interpretations, improvements to various

accounting standards have also been issued by the IASB in May 2020. Such improvements are generally effective

for accounting periods beginning on or after January 01, 2020. The Company expects that such improvements to the

standards will not have any material impact on the Company's financial statements in the period of initial application.

IAS 16 - Property, Plant and Equipment — Proceeds before Intended Use (amendments)

22

____________________________________________________

3 SIGNIFICANT ACCOUNTING JUDGMENTS AND CRITICAL ACCOUNTING ESTIMATES / ASSUMPTIONS

a)

b)

4

4.1

4.1.1

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognized in the period in which the estimate is revised and in any future periods affected. Judgments made by

management in the application of approved accounting standards that have significant effect on the financial

statements and estimates with a risk of material adjustment in subsequent years are as follows:

The Company reviews the appropriateness of the rates of depreciation, useful lives and residual values used in

the calculation of depreciation on items of property, plant and equipment on a regular basis. Further, where

applicable, an estimate of the recoverable amount of assets is made for possible impairment on an annual basis.

In making these estimates, the Company uses the technical resources available inside / outside the Company,

as appropriate. Any change in these estimates in the future might affect the carrying amounts of items of

property, plant and equipment, with a corresponding effect on the depreciation charge and impairment.

The accounting policies set out below have been applied consistently to all periods presented in these financial

statements, except as stated in Note 2.4.1.

The Company measures certain items of property, plant and equipment (as disclosed in Note 12) at revalued

amounts, resulting in change in fair value of items and presented as a separate component of equity.

Useful lives, residual values and depreciation method

Staff retirement benefits

The Company operates an unfunded gratuity scheme to fulfil labour laws requirements for all of its employees

who are eligible under the scheme. Provision is made annually on the basis of actuarial valuation. Actuarial

valuation was carried as on 30 June 2020 using the projected unit credit actuarial cost method. Actuarial gains

and losses for defined benefit plans are recognized in the statement of comprehensive income when they occur.

Amounts recorded in the statement of profit or loss are limited to current and past service costs, gains or losses

on settlements and net interest income / (expense). All other charges in the net defined benefit asset / (liability)

are recognized in the statement of comprehensive income with no subsequent recycling to statement of profit or

loss.

Taxation

Current tax

Provision for current tax is based on taxable income for the period determined in accordance with the prevailing law

for taxation of income. The charge for current tax is calculated using prevailing current tax rates or tax rates after

taking into account rebates and tax credits, if any, expected to apply to the profit for the period, if enacted or

minimum tax calculated at prescribed rate of the turnover or alternate corporate tax, whichever is higher. However,

for income covered under final tax regime, taxation is based on applicable tax rates under such regime.

The calculation of the benefit requires assumptions to be made of future outcomes, the principle ones being in

respect of increase in remuneration and the discount rate used to convert future cash flows to current values.

The assumptions used for the plan are determined by an independent actuary on annual basis.

SIGNIFICANT ACCOUNTING POLICIES

The preparation of financial statements in conformity with approved accounting standards requires management to

make judgments, estimates and assumptions that affect the application of accounting policies and the reported

amounts of assets, liabilities, income and expenses. The estimates and associated assumptions and judgments are

based on historical experience and various other factors that are believed to be reasonable under the circumstances,

the result of which forms the basis of making judgments about carrying values of assets and liabilities that are not

readily apparent from other sources. Actual results may differ from these estimates.

23

Annual Report ____________________________________________________

4.1.2

4.2

a) Measurement

b) Depreciation

c) Surplus on revaluation of property, plant and equipment

Property, plant and equipment

An annual transfer from the asset revaluation surplus to retained earnings is made for the difference between

depreciation based on the revalued carrying amount of the asset and the depreciation based on asset's original

cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying

amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any

revaluation surplus relating to the particular asset being sold is transferred to unappropriated profit.

Residual values and the useful lives of assets are reviewed at each financial year end and if expectations differ

from previous estimates, the change is accounted for as change in accounting estimate in accordance with IAS 8

- Accounting Policies, Changes in Accounting Estimates and Errors.

Normal repairs and maintenance costs are charged to statement of profit or loss as and when incurred. Major

renewals and improvements are capitalized. Gains and losses on disposal of property, plant and equipment are

taken to statement of profit or loss.

Initial measurement

Deferred tax

Deferred tax is provided on all temporary differences at the statement of financial position date between the tax base

of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are

generally recognized for all taxable temporary differences and deferred tax assets are recognized for all deductible

temporary differences, unused tax losses and tax credits to the extent that it is probable that taxable profits will be

available against which these can be utilized. The carrying amount of deferred tax assets is reviewed at each

reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit or taxable temporary

differences will be available to allow all or part of the deferred income tax asset to be utilized. Deferred tax assets

and liabilities are measured at the tax rates that are expected to apply to the periods when the asset is realized, or

the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the

reporting date.

Depreciation commences from the month in which the asset is available for use and is ceased at the end of

month, preceding the month in which asset is disposed off or de-recognized.

Depreciation on fixed assets is charged to the statement of profit or loss on reducing balance method so as to

write off the depreciable amount of an asset over its estimated remaining useful life at the rates given in Note 12.

A revaluation surplus is recorded in OCI and credited to the asset revaluation surplus in equity. However, the

increase is recorded in the statement of profit or loss to the extent it reverses a revaluation deficit of the same

asset previously. A decrease as a result of revaluation is recognised in the statement of profit or loss however, a

decrease is recorded in statement of comprehensive income to the extent of any credit balance entry in

revaluation surplus in respect of same assets. The revaluation reserve is not available for distribution to the

Company’s shareholders.

Property, plant and equipment (except freehold land, buildings on freehold land, plant and machinery and electric

installations) are initially recorded at cost. Cost includes purchase price and all incidental expenses incurred up

to the date of operation.

Subsequent measurement

Subsequently, the items of property, plant and equipment are stated at cost less accumulated depreciation and

impairment losses, if any. Freehold land, buildings on freehold land, plant and machinery and electric

installations are stated at revalued amounts less accumulated depreciation and impairment losses, if any.

24

____________________________________________________

d)

e)

4.3

4.4

Raw material - First in first out (FIFO)

Raw material in transit - Invoice value plus other charges paid thereon

Work in process - Average manufacturing cost

Finished goods - Average manufacturing cost

Waste - Net realizable value

4.5

4.6

These are stated at cost less identified impairment in value, if any, and consist of expenditure incurred in respect

of tangible fixed assets in the course of their construction and installation. These are transferred to relevant

category of operating fixed assets when asset is available for use. Capital work in progress is stated at cost less

identified impairment losses, if any.

These are valued at the lower of weighted average cost, which is carried at moving average, and net realizable value

less provision for slow moving and obsolete items except for items in transit, which are valued at cost comprising

invoice value, plus other charges paid thereon. Provision is made for slow moving and obsolete items.

The Company frequently reviews the stores, spares and loose tools for possible impairment. Any change in the

estimates in future years might affect the carrying amounts of the respective items of stores, spares and loose tools

and stock-in-trade with a corresponding effect on the provision.

Spare parts of capital nature which can be used only in connection with an item of property, plant and equipment are

classified as operating fixed assets under "plant and machinery" category and are depreciated over a time period not

exceeding the useful life of the related assets.

Average manufacturing cost in relation to work in process and finished goods comprise of cost of material plus

related direct overheads.

An annual transfer from the asset revaluation surplus to retained earnings is made for the difference between

depreciation based on the revalued carrying amount of the asset and the depreciation based on asset's original

cost. Additionally, accumulated depreciation as at the revaluation date is eliminated against the gross carrying

amount of the asset and the net amount is restated to the revalued amount of the asset. Upon disposal, any

revaluation surplus relating to the particular asset being sold is transferred to unappropriated profit.

Borrowings are recorded initially at the proceeds received. In subsequent periods, borrowings are stated at amortized

cost using the effective yield method. Finance costs are included in accrued interest to the extent of the amount

remaining unpaid.

Valuations are performed with sufficient frequency to ensure that the carrying amount of a revalued asset does

not differ materially from its fair value.

Stock in trade

Trade and other liabilities

Stores, spares and loose tools

Disposal

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are

expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the

difference between the net disposal proceeds and carrying amount of the asset) is included in the statement of

profit or loss in the year in which the asset is derecognized.

These are valued at the lower of cost and net realizable value except waste, which is valued at net realizable value

determined on the basis of contract price. Cost is determined as under:

Capital work-in-progress

Net realizable value signifies the estimated selling price in the ordinary course of business less estimated costs of

completion and selling expenses.

Liabilities for trade and other amounts payable are carried at cost which is the fair value of the consideration to be

paid in the future for goods and services received.

Borrowings

25

Annual Report ____________________________________________________

4.7

Step-2

Step-3

Step-4

Step-5

a)

b)

c)

a. Sale of goods

b. Interest income

Interest income is recognized using effective interest rate method.

The Company recognises revenue from contracts with customers based on a five step model as set out in IFRS 15:

Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties

that creates enforceable rights and obligations and sets out the criteria for every contract that must be

met.

Identify performance obligations in the contract: A performance obligation is a promise in a contract with a

customer to transfer a good or service to the customer.

Determine the transaction price: The transaction price is the amount of consideration to which the

Company expects to be entitled in exchange for transferring promised goods or services to a customer,

excluding amounts collected on behalf of third parties.

Revenue recognition

Recognise revenue when (or as) the Company satisfies a performance obligation

Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually

defined terms of payment and excluding taxes and duties. The Company assesses its revenue arrangements against

specific criteria to determine if it is acting as principal or agent.

Allocate the transaction price to the performance obligations in the contract: For a contract that has more

than one performance obligation, the Company allocates the transaction price to each performance

obligation in an amount that depicts the amount of consideration to which the Company expects to be

entitled in exchange for satisfying each performance obligation.

The Company’s performance creates or enhances an asset that the customer controls as the asset is created or

enhanced.

IFRS 15 Revenue from contract with customers

Step-1

The customer simultaneously receives and consumes the benefits provided by the Company’s performance as

the Company performs.

For performance obligations where one of the above conditions are not met, revenue is recognized at the point in

time at which the performance obligation is satisfied.

When the Company satisfies a performance obligation by delivering the promised goods or services it creates a

contract based asset on the amount of consideration earned by the performance. Where the amount of consideration

received from a customer exceeds the amount of revenue recognized this gives rise to a contract liability.

The Company's contracts with customers for the sale of goods generally include one performance obligation and

recognized at a point of time. Revenue is recognized when goods are dispatched to customers. It is the time when

control (significant risk and rewards) relating to ownership of goods and control over these goods have been

transferred to the buyer.

Payment generally becomes due within 30 to 45 days from the date of delivery.

The Company satisfies a performance obligation and recognizes revenue over time, if one of the following criteria is

met:

The Company’s performance does not create an asset with an alternate use to the Company and the Company

has as an enforceable right to payment for performance completed to date.

26

____________________________________________________

4.8

4.8.1 Financial instruments: assets

i)

a) Financial assets at amortised cost

-

-

b) Financial assets at FVTOCI

-

-

Classification and measurement of financial instruments

Financial instruments - Initial recognition and subsequent measurement

The Company does not have any financial asset under this category.

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding.

IFRS 9 includes three principal classification categories for financial assets: measured at amortised cost, fair

value through other comprehensive income (FVTOCI) and fair value through profit or loss (FVTPL). The

Company determines the classification at initial recognition.

The Company has long term deposits, trade debts, loans to employees and bank guarantee margin classified as

financial assets at amortised cost.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated

as at FVTPL:

The asset is held within a business model whose objective is to hold assets to collect contractual cash

flows; and

IFRS 9 states that classification is based on two aspects; the business model within which the asset is held (the

business model test) and the contractual cash flows of the asset which meet the solely payments of principal and

interest (‘SPPI’) test.

On initial recognition of an equity investment that is not held for trading, the Company may irrevocably elect to

present subsequent changes in fair value in other comprehensive income. This election is made on an

investment by investment basis.

Financial instruments are initially recognized when an entity becomes a party to the contractual provisions of the

instrument, and are classified into various categories depending upon the type of instrument, which then

determines the subsequent measurement of the instrument.

The asset is held within a business model whose objective is achieved by both collecting contractual cash

flows and selling financial assets; and

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely

payments of principal and interest on the principal amount outstanding.

A debt instrument is measured at FVTOCI only if it meets both of the following conditions and is not designated

as at FVTPL:

In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets

the requirements to be measured at amortised cost or at FVTOCI as at FVTPL if doing so eliminates or

significantly reduces an accounting mismatch that would otherwise arise.

27

Annual Report ____________________________________________________

c) Financial assets at fair value through profit or loss

ii) Initial recognition

iii)

iv) Derecognition

v) Impairment of financial assets

-

-

Gains and losses arising from changes in the fair value of debt instruments classified as fair value through other

comprehensive income are recognised as other comprehensive income until the financial asset is derecognised

or impaired, at which time the cumulative gain or loss previously recognised in statement of comprehensive

income is recognised in the statement of profit or loss. Any premium or discount paid on the purchase of

securities held at amortised cost is amortised through the statement of profit or loss using the effective interest

rate method.

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial

assets expire or when it transfers the financial assets and substantially all the associated risks and rewards of

ownership to another entity. On derecognition of a financial asset measured at amortized cost, the difference

between the asset’s carrying value and the sum of the consideration received and receivable is recognized in

statement of profit or loss. In addition, on derecognition of an investment in a debt instrument classified as

FVTOCI, the cumulative gain or loss previously accumulated in the investment's revaluation reserve is

reclassified to statement of profit or loss. In contrast, on derecognition of an investment in equity instrument

which the Company has elected on initial recognition to measure at FVTOCI, the cumulative gain or loss

previously accumulated in the investments revaluation reserve is reclassified to equity.

At initial recognition, the Company recognizes a financial asset at its fair value plus, in the case of a financial

asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the

financial asset.

The Company recognizes loss allowance for Expected Credit Losses (ECLs) on financial assets measured at

amortized cost at an amount equal to life time ECLs except for the following, which are measured at 12 month

ECLs:

bank balances for which credit risk (the risk of default occurring over the expected life of the financial

instrument) has not increased since inception.

other short term loans and receivables that have not demonstrated any increase in credit risk since

inception.

Gains and losses arising from changes in the fair value of assets classified as fair value through profit or loss are

included in the statement of profit or loss in the period in which they arise.

A financial asset is mandatorily classified in this category if it is acquired principally for the purpose of selling in

the short term, or if it fails the SPPI test. Derivatives are classified as FVTPL as they do not meet the SPPI

criteria.

A financial asset can be classified in this category by choice if so designated by management at inception. This

designation is because the relevant assets and liabilities (including derivatives) are managed together and

internal reporting is evaluated on a fair value basis.

The Company defines fair value as the price, as at the measurement date, that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants.

The Company has no financial asset classified as financial assets at fair value through profit or loss.

Subsequent measurement

28

____________________________________________________

4.8.2 Financial instruments: liabilities

i) Classification of financial liabilities

The Company classifies its financial liabilities in the following categories:

- at fair value through profit and loss (“FVTPL”), or

- at amortized cost.

ii) Initial recognition and measurement

iii) Subsequent measurement

iv) Derecognition

4.9 Off-setting of financial instruments

The Company’s financial liabilities include trade and other payables, short term borrowings, accrued markup, and

unclaimed dividend.

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position

if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a

net basis, to realize the assets and settle the liabilities simultaneously.

All financial liabilities are recognised initially at fair value and, in the case of financial liabilities measured at

amortized cost, net of directly attributable transaction costs.

Where management has opted to recognize a financial liability at FVTPL, any changes associated with the

Company’s own credit risk will be recognized in statement of comprehensive income. Currently, there are no

financial liabilities designated at FVTPL.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms,

or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the

derecognition of the original liability and the recognition of a new liability. The difference in the respective

carrying amounts is recognised in the statement of profit or loss.

Financial liabilities at amortized cost are subsequently measured at amortised cost. Whereas, financial liabilities

carried at FVTPL are initially recorded at fair value and transaction costs are expensed in the statement of profit

or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial liabilities

held at FVTPL are included in the statement of profit or loss in the period in which they arise.

Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as

instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

The gross carrying amount of a financial asset is written off when the Company has no reasonable expectation of

recovering a financial asset in its entirety or a portion thereof.

Loss allowance for trade debts are always measured at an amount equal to life time ECLs. Life time ECLs are

the ECLs that result from all possible default events over the expected life of a financial instrument. 12 month

ECLs are portion of ECLs that result from default events that are possible within 12 months after the reporting

date.

ECLs are a probability weighted estimate of credit losses. Credit losses are measured as the present value of all

cash shortfalls (i.e. the difference between cash flows due to the Company in accordance with the contract and

cash flows that the Company expects to receive).

29

Annual Report ____________________________________________________

4.10 Other receivables

4.11

4.12

4.13

Contingent liability is disclosed when:

-

-

4.14

4.15

4.16

4.17

The advances received from customers against goods which are yet to be delivered are recorded and presented as

contract liabilities within current liabilities.

Provisions

Contingent liabilities

there is a possible obligation that arises from past events and whose existence will be confirmed only by the

occurrence or non occurrence of one or more uncertain future events not wholly within the control of the

Company; or

there is present obligation that arises from past events but it is not probable that an outflow of resources

embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be

measured with sufficient reliability.

Impairment of non-financial assets other than inventories

Assets that have an indefinite useful life, for example freehold land, are not subject to depreciation and are tested

annually for impairment. Assets that are subject to depreciation are reviewed for impairment at each reporting date,

or whenever events or changes in circumstances indicate, that the carrying amount may not be recoverable. An

impairment loss is recognized, equal to the amount by which the asset's carrying amount exceeds its recoverable

amount. An asset's recoverable amount is the higher of its fair value less costs to sell and value-in-use. For the

purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable

cash flows. Non-financial assets that suffered impairment are reviewed for possible reversal of the impairment at

each statement of financial position date. Reversals of the impairment loss are restricted to the depreciated cost of

the asset. An impairment loss, or the reversal of an impairment loss, is recognized in the statement of profit or loss

for the year.

A provision is recognized in the statement of financial position when the Company has a legal or constructive

obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle

the obligation and a reliable estimate can be made of the amount of obligation. The amount recognized as a

provision reflects the best estimate of the expenditure required to settle the present obligation at the end of the

reporting period.

Foreign currency transactions

These are recognized at fair value and subsequently carried at amortized cost less an allowance for any ECL. Bad

debts are written-off when there is no reasonable expectation of recovering the contractual cash flows.

Sales, purchases and other transactions with related parties are carried out on mutually agreed terms.

Contract liabilities

Related party transactions

Transactions in currencies other than Pakistani Rupee are recorded at the rates of exchange prevailing on the dates

of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies

are retranslated at the rates prevailing on the reporting date except where forward exchange contracts have been

entered into for repayment of liabilities, in that case, the rates contracted for are used. Gains and losses arising on

retranslation are included in statement of profit or loss for the period.

Cash and cash equivalents are carried in the statement of financial position at cost. For the purposes of the cash

flow statement, cash and cash equivalents comprise cash in hand, cash at banks on current, saving and deposit

accounts and other short term highly liquid instruments that are readily convertible into known amounts of cash and

which are subject to an insignificant risk of changes in value.

Cash and cash equivalents

30

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Note 2020 2019

5 AUTHORIZED, ISSUED, SUBSCRIBED AND PAID UP CAPITAL Rupees Rupees

Number of shares 36,000,000 36,000,000

360,000,000 360,000,000

6 REVALUATION SURPLUS ON PROPERTY, PLANT

AND EQUIPMENT - Net of tax

Surplus arising on revaluation of property, plant and equipment 6.1 379,953,135 403,293,740

6.1 Surplus on revaluation of property, plant and equipment

Surplus as at 01 July 503,590,784 540,078,776

Revaluation surplus arising during the year - net of tax - -

Transferred to unappropriated profit in respect of:

(23,340,605) (25,906,474)

Related deferred tax liability (9,533,487) (10,581,518)

(32,874,092) (36,487,992)

470,716,692 503,590,784

Less: Related deferred tax liability

Opening deferred tax liability 100,297,044 110,878,562

Deferred tax liability on surplus arising during the year - -

Deferred tax liability of incremental depreciation transferred

to unappropriated profit (9,533,487) (10,581,518)

90,763,557 100,297,044

Surplus on revaluation as at 30 June 379,953,135 403,293,740

7 DEFERRED LIABILITIES

Deferred tax liabilities 7.1 197,554,394 231,648,715

Staff retirements benefits - unfunded gratuity 7.2 26,554,963 40,853,772

224,109,357 272,502,487

Surplus related to incremental depreciation charged during the

year - net of deferred tax

Ordinary share of Rs. 10 each fully paid in cash (Rupees)

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Annual Report ____________________________________________________

7.1 Deferred tax liabilities

2020 2019

Rupees Rupees

7.1.1 Deferred taxation

Opening balance 231,648,715 248,218,551

Recognized in:

Statement of profit or loss (31,909,230) (16,237,981)

Statement of comprehensive income (2,185,091) (331,855)

(34,094,321) (16,569,836)

Closing balance 197,554,394 231,648,715

Note 2020 2019

7.1.2 Components of deferred tax Rupees Rupees

Accelerated tax depreciation and amortization 139,238,259 145,699,808

Surplus on revaluation of property plant and equipment 90,763,557 97,796,501

230,001,816 243,496,309

Staff retirement benefits - unfunded gratuity (9,886,030) (11,847,594)

Minimum tax (22,561,392) -

197,554,394 231,648,715

7.2 STAFF RETIREMENT BENEFITS - UNFUNDED GRATUITY

Staff retirement benefits - unfunded gratuity 7.2.1 26,554,963 40,853,772

7.2.1 Movement in the net liability recognized in the statement of

financial position are as follows:

Opening balance 40,853,772 41,097,799

Remeasurements charged to other comprehensive income (7,534,798) (1,144,328)

Expense recognized during the year 21,421,951 17,937,187

Payment made during the year (28,185,962) (17,036,886)

Closing balance 26,554,963 40,853,772

Deferred tax asset on deductible temporary difference arising in respect of:

The following are the major deferred tax liabilities and assets recognized by the Company and the movements

therein, during the current and prior reporting year.

Deferred tax liability on taxable temporary difference arising in respect of:

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____________________________________________________

Note 2020 2019

Rupees Rupees

7.2.2 Movement in the present value of defined benefit obligation

Present value of fund obligation as at 01 July 40,853,772 41,097,799

Current service cost 17,608,538 15,412,287

Interest cost on defined benefit obligation 3,813,413 2,524,900

Benefits paid during the year (28,185,962) (17,036,886)

Actuarial (gains) / losses from changes in financial assumptions (518,416) 856,245

Experience adjustments (7,016,382) (2,000,573)

Present value of fund obligation as at 30 June 26,554,963 40,853,772

7.2.3 The amounts recognized in the statement of profit or

loss are as follows:

Current service cost 17,608,538 15,412,287

Interest cost on defined benefit obligation 3,813,413 2,524,900

Expense recognized in statement of profit or loss 21,421,951 17,937,187

The charge for the year has been allocated as follows:

Cost of revenue 21 18,729,384 13,328,177

Distribution cost 22 1,397,666 2,758,398

Administrative expenses 23 1,294,901 1,850,612

21,421,951 17,937,187

7.2.4 Remeasurements recognized in Other Comprehensive Income

Experience adjustments - net of actuarial (gains) / losses (7,534,798) (1,144,328)

7.2.5 Actuarial assumptions: 2020 2019

Discount rate used for interest cost (Percentage) 14.25% 7.75%

Discount rate used for year end obligation (Percentage) 8.50% 14.25%

Expected salary increases:

FY 2021 7.50% 13.25%

FY 2022 7.50% 13.25%

FY 2023 7.50% 13.25%

FY 2024 7.50% 13.25%

FY 2025 7.50% 13.25%

FY 2026 onwards 7.50% 13.25%

Net salary is increased at 01-Jul-20 01-Jul-19

Retirement age Age 60 Age 60

Mortality rates SLIC SLIC

2001 - 2005 2001 - 2005

Setback

1 year

Setback

1 year

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Annual Report ____________________________________________________

7.2.6 Sensitivity analysis

Sensitivity

level Assumption

+100 bps Discount rate 24,925,917

-100 bps Discount rate 28,425,981

+100 bps Expected salary increase 28,504,306

-100 bps Expected salary increase 24,824,366

7.2.7 Estimated expense to be charged to profit or loss in financial year 2021 Rupees

Current service cost 12,614,908

Interest cost on defined benefit obligation 2,005,512

14,620,420

Note 2020 2019

8 TRADE AND OTHER PAYABLES Rupees Rupees

Trade creditors 7,019,073 11,334,320

Accrued liabilities 8.1 95,625,904 113,810,872

Unclaimed Workers' Profit Participation Fund 8,462,348 8,462,348

Workers' Profit Participation Fund 8.2 24,769,033 18,963,555

Workers' Welfare Fund 14,495,068 12,307,990

Other payables 113,138 75,298

150,484,564 164,954,383

8.1

Defined

benefit

obligation

A quantitative sensitivity analysis for significant assumptions as at 30 June 2020 on defined benefit obligation is as

shown below:

This includes Gas Infrastructure Development Cess (GIDC) and tariff payable on gas bills amounting to

Rs.31,155,583 (2019: Rs.20,706,641) and Rs. Nil (2019: Rs.15,733,030) respectively to Sui Northern Gas Pipelines

Limited (SNGPL). The Company has obtained stay order against the recovery of these payables. The Company has

given post-dated cheques to SNGPL which are encashable subject to the final order of the Honorable Supreme Court

of Pakistan. Subsequently, Honorable Lahore High Court, Lahore, has granted stay on recovery of GIDC as the

Company falls in the category of industrial consumers and not in the category of captive power. Moreover, the

Company has filed review petition before the Honorable Supreme Court of Pakistan against the judgment dated

13.08.2020.

The sensitivity analysis as above, have been determined based on a method that extrapolates the impact on defined

benefit obligation as a result of reasonable changes in key assumptions occurring at the year end.

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Note 2020 2019

8.2 Workers' Profit Participation Fund Rupees Rupees

As at the beginning of year 18,963,555 12,158,175

Interest on funds utilized in the Company's business 26 2,928,446 1,421,461

Add: Charge for the year 24 2,877,032 5,383,919

As at the year end 24,769,033 18,963,555

9 Contract liabilities 4,482,530 22,241,421

9.1 This represents advances received from customers against which goods have to be delivered.

Note 2020 2019

Rupees Rupees

10 SHORT TERM BORROWINGS - Secured

Running finance - National Bank of Pakistan 10.1 119,332,639 324,600,641

Running finance - Askari Bank Limited (Islamic) 10.2 373,570,000 165,000,000

Booked overdraft 10.4 7,032,973 -

499,935,612 489,600,641

10.1

10.2

Running finance facility to procure raw material i.e. cotton bales, has been obtained under mark-up arrangement

having aggregate borrowing limit of Rupees 650 million (2019: Rupees 650 million). Markup is payable on quarterly

basis at the rate ranging from 3 Months KIBOR + 1.00% p.a to 3 Months KIBOR + 1.75% (2019: 3 Months KIBOR +

1%). Borrowing limits are to be renewed every year. These have been secured by way of pledge of cotton bales,

polyester, yarn bags of appropriate value, personal guarantees of sponsoring directors (Mr. Muhammad Arshad

Saeed, Mrs. Salma Aziz, Ch. Rahman Bakhsh and Ms. Kiran A. Chaudhry) and exclusive charge over stocks pledged

with NBP of an amount of Rs. 867 million registered with the Securities and Exchange Commission of Pakistan.

Running finance facility for yarn manufacturing and purchase of cotton bales has been obtained under mark-up

arrangement having aggregate facility limit of Rs. 400 million (2019: Rupees 350 million). Markup is payable on

quarterly basis at the rate Matching KIBOR + 1.00% p.a (2019: Matching KIBOR + 1.00%). Borrowing limits are to be

renewed every year. These have been secured by way of effective pledge of locally purchased / imported raw

material in godown under Bank's approved Muccadam as agreed in facility letter and 5th ranking charge for Rs. 200

million over current assets of the Company registered with the Securities and Exchange Commission of Pakistan.

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Annual Report ____________________________________________________

10.3

10.4

11 CONTINGENCIES AND COMMITMENTS

11.1 Contingencies

11.1.1

11.1.2

11.1.3

11.2 Commitments

11.2.1

11.2.2

11.2.3 Commitments, as at year end, in respect of outstanding letters of credit amount to Rs.9.8 million (2019: Rs. Nil).

The Company has total credit facilities of Rs. 1,635 million (2019: Rs. 1,415 million) at the year end. Whereas,

Resham Textile Industries Limited...3) Mrs. Salma Aziz 4) Ms. Kiran A. Chaudhry 5) Mr. Kamran Ilyas...

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