8/11/2019 NML NCBA (1)

1/19

MASTER OF BUSINESS ADMINISTRATION

(Executive)

Subject Name: MANAGEMENT

Teacher Name: MR: COR SOHAIL

Projects carry out depth study of an organization

Nishat mills

Name: FAIZAN AKBAR

Roll No.1123

Mobile No # 0332-4590251

Session 1-4-2014

(SECTION# 2 SEMESTERS # 01)

8/11/2019 NML NCBA (1)

2/19

Performance of Nishat Textile

Introduction

In this section, introduction, brief profile, vision of Nishat Textile Mills Industries Limited

(hereafter referred as NTML or NML) will be given.

Profile of NTML:

Nishat Mills Limited (NML) commenced business in 1951 when Mian Muhammad Yahya

founder of NML start it operation as a partnership concern, which was converted into privatelimited company in 1959. In 1961, the company went public and was listed on the Karachi stock

exchange, the only stock exchange in the country at that time.

NML started out as a weaving unit with 500 semi-automatic looms; later 10000spindles were

added, laying the foundation on nations biggest textiles composite project. Composite project at

Nishat mills limited Faisalabad covering 98 acre of Landis providing all production process

under one roof i.e. spinning, weaving, processing, stitching and power generation.

Vision:The vision of NTML is:

To transform the Company into a modern and dynamic yarn, cloth and processed cloth and

finished product manufacturing Company that is fully equipped to play a meaningful role on

sustainable basis in the economy of Pakistan.

To transform the Company into a modern and dynamic power generating Company that is fully

equipped to play a meaningful role on sustainable basis in the economy of Pakistan.

Mission:

To provide quality products to customers and explore new markets to promote/expand sales of

the Company through good governance and foster a sound and dynamic team, so as to achieve

8/11/2019 NML NCBA (1)

3/19

optimum prices of products of the Company for sustainable and equitable growth and prosperity

of the Company.

History and Current State:

Nishat mills was established in 1951 by Mr.Yahya. It developed by leaps and bound and in mid

70s it start export to Africa and others countries. In 80s export printing material to Europe and

grows rapidly. Today Mian Mohammad Mansha, the chairman of Nishat Group, like his father,

continues the spirit of entrepreneurship and has led the group to become a multidimensional

corporation.

Nishat has grown from a cotton export house to big 5 listed companies, concentrating on 4 core

business, Textiles, Cement, Banking , and Power Generation. Today, Nishat is considered to be

at par with multinationals operating locally in terms of its quality products and management

skills.

Textiles

Production process consists of spinning, weaving, processing, and finishing. The processing

includes dyeing, engraving. An addition of 20000 new spindles, 100 new air jets looms and new

dyeing plant has increased the existing capacity of 24000 spindles, 740 looms and dyeing and

finishing capacity of 5 million meters which is highest in the country. Its annual turnover for the

year is over Rs.17 billion. The group is the largest exporter of textile products from Pakistan for

more than a decade.

Industry overview

Pakistan ranked forth largest producer of cotton in world according to tax index. Textile sector

contributes 7 billion investments in textile sector along with 50% export of Pakistan. In 2009

textile sector contributes 9.48 $ billon in export of Pakistan.

The good quality fabric of Pakistan recognized worldwide and shows great demand of our textile

products. The demand of textile rises round about 3% that shows greater opportunity.

Government has also provided the benefits to textile sector in order to boost the textile

economy.

8/11/2019 NML NCBA (1)

4/19

The 7 textile exhibition in 2010 have enhance the textile sector. More than 300 international and

local exhibitors are participating in Textile Asia an increase of more than 70%from last

year. This participant includes our own textile firms that have increased the demand and repute

of our products in international market. Collectively the signs are encouraging for the textile

industry of Pakistan. It is important that wise decisions are made in view of the changing global

scenario in order to meet the demands of the future adequately and successfully.

According to president of all Pakistan Textile Mills government should reduce the tax rate

interest on import of textile products and provide privilege to the exporter to boost this industry.

Project objectives and overall project approach

Reason for Choosing Particular Topic andOrganization

Reason for Choosing Topic:

In my study here in University I have done many projects but never get a chance to do ratio or

performance analysis of any firm. So, when Sir Khurram Fani provides us opportunity to select

any topic we prefer this one.

Secondly this topic is quite much useful and realistic in our professional life and last reason ofselecting this is it will provide us the knowledge to ascertain what financial situation of different

firms in market is and which firm is better to invest or consider for job purpose or for business.

2.1.2: Reason for Choosing Organization:

Textile sector is the most growing industry in Pakistan so I want to select a textile firm. I have

selected the Nisha mills because it is member of one the famous and renewed Nishat group of

Pakistan. Whose success is famous in south Asia and the personality of Mr. Mansha also

influence me to choose this firm.

Lastly I have interest in exporting apparels cloths and garment in future. It will help me learning

the quality of product required for export, market information, demand and experience before

conducting my own business.

8/11/2019 NML NCBA (1)

5/19

Research Aim, Objectives and Questions

It is necessary for attaining success in any field that we are clear about questions planning

objects techniques and purposes of our research. That is:

Research Aim:

The aim of this project is to analyze the business and financial performance of Nishat Textile

Mills Limited from July 1, 2008 to June 30, 2010. As well as to attain information regarding the

factors necessary to attain success in textile sector and what is the thing that makes you

indifferent from other firms in same industry.

Research Objectives:The objective of our project is to critically analyze the business and financial performance of the

selected company from every possible aspect like profitability, efficiency, solvency position of

Nishat Textile Mills Limited by using different models presented by different authors.

Overall Research Approach:

The overall project approach includes background nature of firm and industry. We are using

different research techniques that include ratio analysis, Porters five forces model (1979),PEST analysis for business and for measurement of performance, horizontal and vertical

analysis of Nishat Textile mills limited.

The project aim, objectives served as a framework in which work was carried out. The findings

section of this report will give an account on achievement of research aim and objectives. This

will be followed by conclusion and recommendations.

Information Gathering

Sources of Information:

The conduct of this project required data collection from various sources that includes primary

and secondary sources. Primary sources include internet friends and all tools that students used

8/11/2019 NML NCBA (1)

6/19

to get data. Secondary sources include the persons that directly or indirectly relates to Nishat.

We have also gather data from other individuals who have good information of market.

Limitations of information gathering:

Data is collected from the representatives of company, reports, magazines, library and other

sources which may or may be more accurate as there may be factor of biasness or material

irregularity. The time line available for collection of data is very short that create hurdle

regarding reliability of data. Resources available to us regarding collection of data are not

sufficient so, accurate information may not be attained. The persons selected for collection of

information may not true representative of the company.

Ethical issues:One of the most issue arose was it may move to the negative publicity of the company that can

be arouse. It is our responsibility to hide the information of personnel from whom we have

collected the data.

Final report of the project should be present to management for removal of any material mistake

and save repute of the company.

Business Analysis Techniques

SWOT Analysis

SWOT analysis is deal with analysis of business with its external environment. SWOT stands for

Strength Weaknesses Threats and Opportunities. Weihrich suggested in 1982 that S&W

represents the internal environment whereas OT comes from the external environment. Kotler in

1998 suggest that organization should carefully use the SWOT analysis as it represent that

which opportunity should business avail and which should not be avail. Organization should

conduct SWOT analysis for evaluation of organization resources & culture and to make

strategies to fit amongst the benefits of external environment. Thus entire analysis of SWOT

represents the Strength Weaknesses Threats and Opportunities that a business face in the

environment. The only limitation in SWOT was presented in 2006 by Lin & Newkrik that

environmental uncertainty restricts organizations ability to forecast future and reduce the

8/11/2019 NML NCBA (1)

7/19

effectiveness of SWOT analysis. Similarly Li and Lin also showed their concerns about the

quality of information in an uncertain environment thus restricting the use of SWOT analysis.

Pest analysis

Pest refers to political, economic, social, technological means the external environments in

which exist. We analysis a business that how it is or it should respond to all these four factors.

The PEST analysis is a useful strategic tool in order to understand market growth or decline,

business position, potential and direction toward operations. PEST provides a framework for

reviewing a situation, which can be applied by companies to review strategic directions,

including marketing proposition. PEST also helps business to evaluate that whether thecompanys performance is positively aligned with the powerful forces of change that are

affecting business environment.

Porter 5 forces model

Michael porter an authority on competitive advantage contends that a corporation is most

concerned with the intensity of competition within its industry. The model is used to understand

the competitive landscape of industry.

The forces which are discussed by porter are;

-Threat of new Entrants

-Rivalry among existing firms

-Bargaining power of suppliers

-Bargaining power of Buyers

-Threat of substitute products

8/11/2019 NML NCBA (1)

8/19

DuPont analysis:

Dupont analysis is a method of performance measurement that was started by the DuPont

Corporation in the 1920s. In order to access the firms financial state /condition DuPont analysis

is used. It merges the income statement and balance sheet into two summary measure of

profitability:

Return on asset (ROA)

Return on equity (ROE)

1st step:

ROA = net profit margin*total asset turnover net profit margin measure the firms profitability on

sale total asset turnover indicates how efficiently the firm has used its asset to generate sales

and the product of these two ratios results in the return on total assets(ROA).

2nd step:

ROE= ROA*FLM

FLM is the financial leverage multiplier which is the ratio of total asset to common stock equity.

FLM is used to convert the ROA into the ROE that reflect the impact of financial leverage on

owners return.

DuPont system allows the firm to break its return on equity into three components, profit on

sales, efficiency of assets used, and a use of financial leverage component. And these

dimensions are used to analyze the total return to owners.

Its a way of tracking the possible problem back to its cause:

Slow collection of accounts receivable Low ROE

High level of receivables high level of total asset

Slowed down

Driving down its ROE Total asset turnover

Ratio analysis

Single most important technique of financial analysis in which quantities are converted into

ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or

8/11/2019 NML NCBA (1)

9/19

different industries. Ratio analysis determines trends and exposes strengths or weaknesses of a

firm.

Findings and Interpretation

Nishat SWOT analysis:

Our findings relating the Nishat SWOT is:

Strength:

The major strength of Nishat is that its ideal location in the heart of Faisalabad. Faisalabad is

famous for textile sector all over the world.

Availability of cheap labor and technical expertise and high quality machinery gives Nishat a

strong position market.

NTML is part of Nishat groups that provides opportunity to produce own raw material provide

financial assistance and good management that results confidence of customers, efficient

working of NTM and cheaper products.

Good quality control system, ISO certified make good reputation of Nishat and provide the big

renowned long term customer to the company.

Weaknesses:

NTML is using centralized management decision making that burden the management and

results inefficiency.

If imported machinery or any part went out of order then takes time to correct it that results

suffer in productivity, time and cost.

High salaries of management and low salaries of workers create ethical issues that results highturnover of workers and reduce motivation.

NML is paying at the normal wage rate for overtime while the overtime rate is always high in all

the organizations. Lack of planned HR structure.

8/11/2019 NML NCBA (1)

10/19

Opportunities

Due to WTO establishment and fulfilling all its requirements brings opportunity of economies of

scale and conduct international business.

ISO 14000 certification improve image of Nishat and brings international market.

Have capacity to expand in terms of products and markets.

Threats:

Globally Economic instability create problem that includes dumping. After 9/11 fore nor never

prefer Pakistan products.

Political insatiability create safety threat for firm

Buyer demands is changing day by day that requires innovation but Nishat does not have that

research.

Nishat pest analysis

Findings/results

Following are the findings of PEST analysis:

Political Instability

Unfortunality the Pakistan is one of those countries which always face the political instability and

this rapid change in trade policies every time while Government changes are a great hurdle on

the path of development. Government should apply sustainable policies for the beneficial of the

exporters as well as the investors.

Economic situation

Now a days the economic condition of Pakistan also affecting the manufacturing process, by

increase in inflation rate the cost of production increases and in results the profit margin of the

investor is also reduces.

8/11/2019 NML NCBA (1)

11/19

Social situation

The change in the lifestyle of the people affects the growing demand of the NTM products. The

change in the lifestyle and needs in different demographics also affect the demand of the

customers. Due to all these changes NTM is performing excellent for the excellence

organization as well as for the customer.

Technological factor

To meet the changing requirements of the competent business environment, especially in the

textile sector where there is a lot of technological development. Excellent computerized

machines and devices are installed in the NTM that has made extension in its present setup by

installation of well advanced technology imported from Japan China and France.

Explaining each of the porters model forcein context on Nishat mills

Threat of new Entrants

The threat of entering new firms always remain in market not for only nishat mills but the other

firms also, So to defend themselves from this threat they gain economies of scale and the otherbarriers which Nishat mills create for entrants are Product differentiation, switching cost.

Rivalry among existing firms

Another threat for Nishat mills is the hyper competition in industry. The firms currently in the

industry (Crescent, Kohinoor, other Chunioties) are also create the threat for Nishat mills

because the profitability of the Nishat mills affected by their actions Suppose if one competitor

reduce the prices so Nishat will also have to reduce which in result will affect the profitability of

company.

Bargaining power of suppliers

The bargaining power of supplier also affects Nishat mills profitability in such a way that if

supplier increase their prices of raw material so definitely the cost will go up as well. The

8/11/2019 NML NCBA (1)

12/19

bargaining power of buyers is also a threat for a firm operating in industry. The buyer affects the

profitability in such a way that he wants discounts and other services which might lower the

margin of profit for the company.

Threat of substitute products

The substitute product means any product which satisfies the same needs. So substitute

products in market are also a major threat for Nishat mills.

Ratios Analysis of Nishat

Following are the ratios that we are calculated from the books of Gittman, Sohail Afzal and

Business finance. We have calculated that:

Profitability

Increase in N.P and G.P due to increase in quality and prices of product. Spinning and cotton

prices also played a vital role, due to global shortage of cotton. Weaving segment contributed

notably but still under pressure, due to high cost of yarn and cloth purchased. Timely investment

in garment Segment Company was able to reduce its financial cost by 28.26% due to subsidy

on textile products and Rate by government and more effect funds managements. (March 2009

Rs.1127.4798 million, March 2010 Rs.808.800 millions).

Sales have shown a consistent inclining trend except a decline in 2005 mainly to abolition of

MFA agreement. Sales have increased by 12.15% in FY08 and 23.89% in FY09.

Devaluation in rupee against dollar and ample cotton stock resulted in good results during the

earlier part of year 2009.

Due to change in marketing strategy NML reduce better quality of yarn having good market

demand. This helps NML to get good business orders.

Liquidity

Liquidity decline in order to fulfill the requirements of IAS-39, market condition and current

economic scenario, the company decided to record full impairment of Rs.17.259 million against

8/11/2019 NML NCBA (1)

13/19

available for sale security where fair market value is less than their cost as at 30 June 2009.

Despite improved revenue the firm has low working capital for short term fun cling nets.

Ratios

Activity ratio

The changes are indicator of better inventory management efficient credit policy towards the

debtor.

Solvency ratio

The debt burden the company reduced over the past 8 year. The fall in equity is on the back offshrinking an appropriate profit which was eroded by the impairment cost. Long term debt to

equity increased interest earned ratio has deteriorated showing Strain Company ability to meet

its short term interest charges.

The company acquired 1 million loans from Habib Bank (KIBOR).

Market ratio

The price to earnings ratio shows a positive surge despite the prevalent uncertain marketcondition. The book value of share shown a decline due to increase in no of outstanding share.

Financial Highlights

Bonus

The significant increase in gross profit and net profit is mainly attributable to increase in sale

quantities, good sales mix of products and increase in prices of the products manufactured and

sold by the Company. All business segments of the Company have been able to realize benefitfrom the slightly improved economic scenario during the current year for the textile sector of the

country compared to the corresponding previous year and have contributed towards the

excellent results. In particular spinning and garment businesses of the Company has performed

tremendously well in the current year by generating higher margins. Our spinning business

through effective planning, timely investment in cotton and excellent production facilities has

8/11/2019 NML NCBA (1)

14/19

grasped optimum benefits offered by the sharp rise in demand of cotton yarn and its selling

prices even though later in the year the sales margins were affected by imposition of additional

duties by the Government. Our timely investment in garments segment has started showing

positive results in the current year and it has shown a growth in revenue and gross margin of

107% and 335% respectively.

The significant increase in sales in 2010 by 32.11% over 2009 is in line with the Companys

commitment to year on year growth trend in sale quantities together with the significant increase

in sale prices. It is worth mentioning here that our garment sector has shown more than 100%

increase in sales in 2010 over 2009.

Trend analysis/Common size analysis of NTML:

Common size analysis expresses comparison in percentages. It makes analysis of different

sizes of the firm more meaningful.

Horizontal Analysis

Horizontal analysis compare each year with the base year and thus making comparison of

different items in different years easy and meaningful. We have taken 2008 as base year and

then compared each years figures with respective items in proceeding year.

Interpretation of horizontal analysis

BALANCE SHEET INTERPRETATION

By comparing the ratios we get the results as follows:

In non-current assetsProperty, plant and equipment have been increased by almost 12% in

2010. It means either they have purchased in property or its value is increasing. Long term

Investment, loans, deposits are also showing increasing trend in 2010. It is quite much in betterposition.

Stock in trades and trade debt have been increased by 40 & 54 % in 2010. It means they have

expanded their business requiring more stock in trade to be kept with by taking more debts.

And overall assets have been decreased by 17% as compared with year 2008 that may be due

to political uncertainty and increase in cost.

8/11/2019 NML NCBA (1)

15/19

Share capital has increased by 516 % in 2010 and each item in balance sheet is showing an

increasing treed as compare to base year.

Profit & Loss Account/ Income StatementInterpretation

By comparing the ratios we get the results as follows:

Sale of company has increased by 64% in 2010 as increased in demand and inflation in market.

Similarly profits and other operating incomes are also showing an increasing trend.

All other items in income statement is showing decreasing trend may be due to poor conditions

of country.

Interpretation

Cost of goods sold has also been decreased by almost 4% in 2010 as compared to 2008. It was

highest in 2008 i.e. 84% of sales.

Resulting Gross Profit has been increased from 4% in 2010. It has decreased due to decrease

in cost of goods sold.

Selling, distribution and administration expenses have been decreased from 20% in 2010.

Other operating expenses have been decreased from 1 % in 2010.

Comparison

NTML is showing very good financial position as compare to Nishat as it paid divined of 25 in

2010 and other years where as KTML does not paid any dividend. NTML have Market and

earnings ratios are attractive as compare to KTML.

Z score of NTML shows good position and enhances the confidence of investor where as KTML

is at the bankrupt position.

Efficiency ratios shows good and efficient working of management as KTML is not showing a

healthy position. Overall ratios of NTML and KYML are same as crises of our country in terms of

energy, inflation and security affects each business in our country. Thus both have problems

8/11/2019 NML NCBA (1)

16/19

relating stock and efficiency. In 2010 KTML and NTML are showing more debt as both have

more money to invest and for shareholders.

Conclusion

Nishat mills are one of leading organization of Pakistan. The style of management, working

structure and security conditions is very impressive. Proper information is vital for business

success so Nishat should pay attention on effective information system in order to avail long run

merits. Nishat is facing the threats of competition, law and order situations and the lack of highly

educated persons in Nishat but yet it is trying to avail every single opportunity by using strength

controlling weaknesses and minimizing threats. The ratios of NTML is approximately same and

better as the KTML and this is due to effective and sound capital structure and efficient working

of management. The comparison of KTML and NTML is showing very sound situation of NTML

that is making very good repute of NTML. NTML shows good range of profits that makes it a

good organization to work with it.

Being an investor NTML is highly favorable as last year dividend is mesmerizing. But fluctuation

may show high uncertainty yet it is attracting the investor to invest. Company performance is

satisfactory and overall market repute is good that enhances the interest of investor and proves

a highly favorable firm to invest.

ReferencesPrincipals of managerial finance by Gittman, 12th edition

Advance accounting by sohail Afzal

Porter five force model organizational behavior by seema seghai

Swot analysis principles of marketing Philip Kotler 13th edition.

8/11/2019 NML NCBA (1)

17/19

8/11/2019 NML NCBA (1)

18/19

8/11/2019 NML NCBA (1)

19/19