pel final report

Pak Elektron LimitedINTERNSHIP REPORT

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INTERNSHIP REPORT

INSTITUTE OF MANAGEMENT SCIENCES, B.Z.U. MULTAN


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Institute of Management SciencesBahuddin Zakriya University Multan

Submitted To:

Madam Amina Naqvi

Submitted By:

Faheem Zeeshan

MBC-09-02

PAK ELEKTRON LTD

14 Kilometers Ferozpur Road,

LAHOR



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DEDCATION

DEDICATED DEDICATED TTO O M M YY

MOTHERMOTHER

W W HO ALWAYS HO ALWAYS C C ARE ARE M M EE



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PREFACE

As per requirement to complete MBA (Finance) at IMS (Institute of Management

Sciences) I completed my Internship Program at “Pak Elektron Limited (PEL). This

was 6 weeks internship program which prepared me to better understand the

practicality of different tools of finance and accounts.

At the end of training program, it is required to submit an Internship report in

university. The Internship report has been completed, which is a result of one’s time

taking efforts. I prepared this report as what I observed and what so ever I learnt here

in PEL. I also got the help of company’s published material. For instance,

introductory part of this report is mostly taken from “Company Profile”, all raw

financial figures from “Annual Report” of PEL and knowledge of finance from

Finance department.

Major portion of this report has been devoted to Company’s introduction and

particularly to its management system. Efforts were to explore their hierarchies and to

identify the channels of workflow here in PEL. Financial analysis is conducted to

oversee company’s financial position. Finally, I drew conclusions and suggestions for

the betterment of company’s performance. At the end of report I added appendixes to

cover those areas, which were required for further details.



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ACKNOWLEDGEMENT

By the grace of Allah Almighty I have been able to complete my work. I would like

to thank PAK ELEKTRON LIMITED (PEL) for giving me the opportunity and

providing me with a platform to prove my mettle.

I would particularly like to thank to Sir S. M. Aamir for those efforts I get the

internship in PEL. I am also thankful to Muhammad Arshad (Manager Accounts),

Nadeem u din (Manager Finance) Mr. Muhammad Hamayun Atta, Muhammad Afzal,

Muhammad Umer Waqas, Mr. Naveed, Ghulam Dastgeer and Mr. Zahid (Accounts

Officers) who guide me and whose suggestions and cooperation enables me to

compose my efforts and learning and who have patiently guided me in completing

this hard task. Their collateral assistance helped me realize and achieve what I

initially aimed at.

Finally, I would specially like to thank my internship advisor, Miss Amina Naqvi who

was always there when I needed her. This report would not have been possible

without her.

Faheem Zeeshan



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TABLE OF CONTENTS

PREFACE.................................................................................................................................. IV

ACKNOWLEDGEMENT..............................................................................................................V

EXECUTIVE SUMMARY..............................................................................................................1

INTRODUCTION........................................................................................................................2

VISION STATEMENT..................................................................................................................3

MISSION STATEMENT...............................................................................................................3

OBJECTIVES...............................................................................................................................4

HISTORY....................................................................................................................................5

LOCATION AND FACILITIES....................................................................................................7

BUSINESS VOLUME...................................................................................................................7

UNIQUE FEATURES OF THE COMPANY:....................................................................................9

ISO 9001..............................................................................................................................10

NATURE OF THE ORGANIZATION............................................................................................11

BUSINESS DIVISIONS...............................................................................................................11

PRODUCT HIERARCHY:............................................................................................................12

APPLIANCES DIVISION.........................................................................................................13

POWER DIVISION................................................................................................................13

MAJOR COMPETITORS........................................................................................................14

ORGANIZATIONAL STRUCTURE...............................................................................................15

MANAGEMENT PROFILE.........................................................................................................16

ORGANIZATION HIERARCHY CHART........................................................................................18

INTRODUCTION OF DEPARTMENTS........................................................................................19

FINANCE DEPARTMENT..........................................................................................................19

BUDGETING SECTION..........................................................................................................21

GUARANTEES SECTION.......................................................................................................21

MATERIAL PLANNING SECTION...........................................................................................21

LEASING SECTION...............................................................................................................21

ACCOUNTS DEPARTMENT.......................................................................................................28

IMPORT SECTION/FP DEPARTMENT.......................................................................................31

PRE-SHIPMENT ACTIVITIES.................................................................................................33



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POST-SHIPMENT ACTIVITIES...............................................................................................34

PROCUREMENT.......................................................................................................................35

LOCAL PROCURMENT.........................................................................................................35

FOREIGN PROCUREMENT...................................................................................................35

APPLICATION OF THE CLASS ROOM LEARNING......................................................................36

MARKETING STRATEGY.......................................................................................................36

PRODUCT:...........................................................................................................................36

PRICE:.................................................................................................................................36

PLACE:.................................................................................................................................36

PROMOTION.......................................................................................................................36

COMPETITIVE STRATEGY.....................................................................................................37

INDUSTRIAL ANALYSIS............................................................................................................37

MY LEARNINGS IN PAK ELEKTRON..........................................................................................43

SWOT ANALYSIS......................................................................................................................60

STRENGTHS.........................................................................................................................60

WEAKNESSES......................................................................................................................61

OPPORTUNITIES..................................................................................................................61

THREATS.............................................................................................................................62

SUGGESTION……………………………………………………………………………………………………………………….63

CONCLUSION..........................................................................................................................65

APPENDIX...............................................................................................................................66



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EXECUTIVE SUMMARY

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

products manufactured by PEL have always been of high standard and the name 'PEL'

is synonymous with QUALITY all over Pakistan. Since its inception, the company

has been working for the advancement and development of engineering know-how in

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

technicians through its apprenticeship schemes & training programs.

The company comprises of two divisions; 1st is Appliances Division: This

Division of PEL consists of home appliances manufacturing particularly

Refrigerators. 2nd is Power Division: PEL Power Division is one of the major

electrical equipment suppliers to WAPDA & KESC. The company manufactures

transformers, energy meters, switchgears, compact stations.

I worked in the Accounts, Finance and Import department of the Pak elektron ltd. In

the Accounts department I work in inventory, accounts payable, import, book

keeping, and costing section.

In the finance department i spend major time in the treasury and pledge section

In the import department the basic thing is how to find the supplier, how to negotiate

with them and how to open the letter of credit.

In the procurement or commercial department where the local purchases are made I

learned the whole system of purchasing, recording and how the goods reaches to the

store.

While working with PAK ELEKTRON LTD, I got very broader visions about

company financial and marketing activities more than those that I had learned during

my MBA program.

Finally I have provided recommendations to the company regarding their

management functions and other business plans.



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Introduction

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

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

technical collaboration of M/s AEG Germany with object of initially producing

transformers, switchgears and electric motors. AEG experts and PEL personnel

carried out the designing and production of these equipments jointly. It is the oldest

composite electrical equipment-manufacturing unit of Pakistan producing power and

consumer products.

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

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

Energy Meters, Small Generators, Shunt Capacitor, Banks and Recloser etc.

In the year 1980 the company expanded into consumer products with the introduction

of Window Type Air Conditioners and today also manufactures Split Air

Conditioners, Refrigerators, Microwave ovens, Deep Freezers and Compressors etc.

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

PEL is synonymous with QUALITY all over Pakistan. Since its inception, the

company has been acting as an institution working for the advancement and

development of engineering know how in Pakistan. The company has produced

hundreds of engineers, skilled workers and technicians through its apprenticeship

schemes and training programs.

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

of the leading industrial groups in PAKISTAN, having diversified business activities.



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VISION AND MISSION OF PEL

VISION STATEMENT

“To excel in providing engineering goods and services through continuous

improvement”

MISSION STATEMENT

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

and maximize returns for all stakeholders through optimal use of resources

To focus on personal development of our employees to meet future challenges

To promote good governance, corporate values and a safe working environment

with a strong sense of social responsibility



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OBJECTIVES

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

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

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

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

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

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

modifications.

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

maintaining designing and dealing in all kinds of electrical equipment.

To carryon any business whether manufacturing or otherwise which maybe found

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

mentioned above.

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

above objectives or any of them.

To produce high quality and standard products.

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

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

To produce skilled workers and technicians through its apprenticeship schemes and

training programmed for engineers and technicians.



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History

PAK ELEKTRON LIMITED was set up in 1956 as a joint venture with one of the

largest and renowned manufacturers of electrical equipment Messrs. AEG of West

Germany for manufacturing Transformers, Switchgears and Electric Motors etc. The

entire job of machinery requirements and layout of the factory building was planned

and implemented by AEG who produced very well balanced facility for the design

and manufacture of the above equipment and the commercial production was

commenced on 22 November 1956.

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

equipment was carried out jointly by AEG experts and PEL personnel. PEL staff, in

the meantime, had received specialized training in USA and West Germany which

enabled PEL to establish itself as the leading manufacturers of electrical equipment in

the country with an excellent reputation for high quality and thus PEL came to be

known as "THE QUALITY CONSCIOUS COMPANY".

After conclusion of agreement with AEG, total share holding of AEG was purchased

by the then sponsors - Malik Brothers. The production continued with AEG designs

with much greater emphasis on the quality and reliability of the products which

earned unique distinction of supplying electrical equipment to projects of paramount

national importance like Mangla Dam and Tarbela Dam Projects. PEL equipment was

approved by consultants of international repute including Preece Cardew & Rider

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

Miner & Miner International Inc. (USA).

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

October 1978 and immediately on takeover the new management chalked out both

long term and short term plans to put the company back on the path of progress. As a

part of first phase of its BMR Programmer the new management injected the

additional working capital of Rupees 8.98 million and Bridge Loan of Rupees 7.50

million (against the public issue of its shares) was provided by the ICP-led



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

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

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

product line in the year 1987 and imported machinery for the manufacture of

Refrigerators and Deep-freezers for a total value of Rupees 22.11 million. For the

project National Bank of Pakistan - the leading bank of the company provided the

financing. Like Air conditioners these products have also been well received by the

local market which speaks highly of the confidence the consumer has developed in

the quality products manufactured by the company.

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

of Japan for the manufacture of Vacuum Circuit Breakers.

The company has entered into an agreement with Pakistan Industrial Credit and

Investment Corporation (PICIC) for a foreign currency as well as local currency loan

of Rupees 25 million for the expansion, balancing, modernization and replacement of

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

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

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

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

establishing a plant for the manufacture of compressors for refrigerators and deep

freezers. The technical know-how agreement has been signed with M/S NECCHI

Compressors, Italy for the assembly and progressive manufacturing of compressors

for refrigerators and deep freezers.

Pak Electron Limited is known for its continuous research and development and

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

manufacture of Electricity Meters in Pakistan in June 1994 with the technical

collaboration and under license from M/S Asea Brown Boveri United State of

America (A.B.B. USA). The plant consists of most modern and latest numerically

controlled electronic machines with robotics technology and is capable to produce

960,000 single phase electricity meters per annum in accordance with the

international standards and specifications using the latest and most modern techniques

available in the world.



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LOCATION AND FACILITIESThe head office is in Gulberg Lahore and the production unit is situated at 14-k.m.

Ferozepur Road, Lahore, and is spread over an area of 242 kanals and 15 Marlas of

leasehold land in industrial area of Kot Lakhpat, Lahore, and presently the total

covered area comes to 232,883 square feet. Factory is located on the main road where

public transport is available round the clock helping in easy access to the labor and

customers.

Business volume

The “SAIGOL GROUP” is one of the leading industrial groups in Pakistan. The

Saigol Group belongs to the Saigol Family, which is an old business family and has

contributed a lot towards Pakistan’s industrial development. Saigol Group remains a

leading and forward-looking group and believes in continuous development and

growth. The result is a global business activity monitored through various offices

worldwide. They are serving nation in diversified business activities in the fields of:

Textiles.

Engineering.

Banking and Finance.

Fuel and Energy.

Trading.

Automobiles.



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SAIGOL GROUP OF COMPANIES

Textile

Azam Textile Mills Ltd. 06-Egerton Road, Lahore

Saritow Spinning Mills Ltd. 06-Egerton Road, Lahore

Fuel & Energy

Kohinoor Power Co. Ltd. Kohinoor Nagar, Faisalabad

Kohinoor Energy Ltd. 06-Egerton Road, Lahore

Engineering

Pak Elektron Ltd.1 14km, Ferozepur Road, Lahore

PEL 2 21 km, ferozepur road Qasoor

Banking & Finance

Union Bank Ltd. 06-Egerton Road, Lahore

Union Leasing Ltd. 07-Egerton Road, Lahore

Trading

Saritow Pakistan Ltd. 06-Egerton Road, Lahore

Saigol Computer Ltd. 162-Shadman Colony, Lahore

Automobiles

Kohinoor Motor Works Ltd. 07-Egerton Road, Lahore



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Unique Features of the Company

Low Price product Reliable Modern Environment Friendly High Quality Product Consistent Quality ISO 9001 Certified

PEL power division has the following features

Lower Losses Low Partial Discharge Low Noise Level Higher overloading Capacity Higher Reliability Maintenance- Free Warranty



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ISO 9001

PEL was 16th Company in Pakistan, which got ISO 9001 Certification in 1997, since, and then PEL Management is applying this International Standard Practices for Effectively Managing Quality of Products and Services that Company Offers. The International Standard Practices in PEL have been upgraded as per the Revised ISO 9001 Standards and its Scope of Application is expanding ever since and Top Management is committed to make PEL a Total Quality Management (TQM) Company.

In PEL Quality is the Subject of Management at all Levels. IT focus on continuous improvement in its Systems thus establishing Good Management Practices that ensure Product and Services Standards, it is committed to and making continuous efforts in developing and strengthening its internal and external customers and suppliers, employees training and development and their participation are the KEY forces which are Increasing the Organization's Capabilities thus making it more competitive and fast growing Company. Top management is not only tremendously improving the Working Environment but also investing in improving internal Communication Network for better Teamwork.

Continuous Up-gradation in production facility equipment thus going for State-of-the-art production facility reflects management Vision and commitment for Quality. Having around Fifty years of manufacturing experience with cooperative and dedicated employees and now coupled with efficiency monitoring processes and Data Analysis enable management to take Preventive Actions before things really go wrong.

Elimination of wasteful activities, practices, processes, norms and behavior are the top management's priorities that need to be managed so that the philosophy of ZERO DEFECT can be taken on board. Benchmarking with National and International repute Organizations will be in our road to manufacturing excellence to prove PEL as a World Class Manufacturer.

Nature of the organization



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PEL is an engineering nature of company which has two business divisions.

BUSINESS DIVISIONSPEL is organized in two business divisions:

Product Hierarchy:



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APPLIANCES DIVISION



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PEL’s Appliances Division is the flag carrier of the Saigol Group. This Division of

PEL consists of home appliances manufacturing. In 1981, PEL window type air

conditioners were introduced in technical collaboration with Fujitsu General

Corporation of Japan.

In 1986-87, the company started manufacturing of refrigerators in technical

collaboration with M/s IAR-SILTAL of Italy. In 1987, PEL deep freezers were also

introduced in technical collaboration with M/s Ariston of Italy. In 2006, the Company

has started manufacturing of split type air conditioners of various capacities as the

customer choice has shifted from window type to split type. The product has been

well received in the market. This encourages the company to multiply its production

in the coming year.

POWER DIVISION

PEL Power Division manufactures Transformers, Switchgear, Electric Motors,

Energy Meters, Kiosks, Compact Stations, Shunt Capacitor Banks, etc. of highest

quality and of latest international standards. PEL is one of the major electrical

equipment suppliers to Water and Power development Authority (WAPDA) and

Karachi Electrical Supply Corporation (KESC), which are the largest Power

Companies in Pakistan.

PEL equipment has been used in numerous power projects of Nation importance

within Pakistan over the years and PEL has had the privilege of getting its equipment

approved and certified from well-reputed international consultants.

Major Competitors

Appliances Division Power Division



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Dawlance

Waves

Haier

Mitsubishi

Orient

Singer

Panasonic

Seimens

Climax

Transfab

J&P

AB Ampere

Ahmad & companies

Feco

Areva

Fico

Pempam

Tariq Electric

Syed Bhais

Microtech

Escort

SB Electronic

Creative Electric

Organizational structure

The structure of the Pak Elektron Limited is Hybrid. Because the organization

combines the characteristics of functional and divisional structure in its organizational

structure. As the organization has grown large and have several products and markets

so it is organized into self contained divisions of some type. Functions that are

important to each product and market are decentralized to the self contained units.



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However, some functions that are relatively stable and required economies of scale

and in depth specialization are centralized at the management level. The functions of

Accounting, Finance, Human resources, Industry relations, R&D and Information

technology are same for the both divisions but each division has its own separate

functions of sales, production and marketing.

MANAGEMENT PROFILEA committed team of highly qualified, experienced professionals, financially sound

and reputed sponsors manages the Company. Through sheer dedication, diligence and

the Almighty’s Beneficence the management team at Pak Elektron Limited have



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earned reputation for excellence in manufacturing of electrical as well as home

appliances and their marketing.

CHIEF EXECUTIVE

Mr. Mian Naseem Saigol

BOARD OF DIRECTORS

Mr. M. Azam Saigol

Mr. Shahid Sethi

Mr. Haroon Ahmad Khan (Managing Director)

Mr. M. Murad Saigol

Mr. Homaeer Waheed

Mr. Gull Nawaz (NIT Nominee)

Mr. Masood Karim Sheikh (NBP Nominee U/S 182 of Ordinance)

Mr. Tajammal H. Bukharee (NBP Nominee U/S 182 of Ordinance)

Mr. Wajahat A. Baqi (NBP Nominee U/S 182of Ordinance)

CHIEF FINANCIAL OFFICER

Sayad Manzar Hassan

COMPANY SECRETARY

Sheikh Muhammad Shakeel, FCA

AUDIT COMMITTEE

Mr. Azam Saigol (Chairman/Member)

Mr. Haroon A. Khan (Member)

Mr. Tajammal H. Bukharee (Member)

REGISTERED HEAD OFFICE

17-Aziz Avenue, Canal Bank, Gulberg-V, Lahore



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Office -14 Km, Ferozepur Road. Lahore-54760

GP.D. Box No. 1614, Lahore - Pakistan.

Tel: (+92 42) 5811951-59 (9 Lines

Facsimile: (+92 42) 5810156, 5822682

E-mail: [email protected]

Website Address: www.pel.com.pk

BANKERS

National Bank of Pakistan

The Bank of Punjab

Faysal Bank Limited

Meezan Bank Limited

NIB Bank Limited

My Bank Limited

Soneri Bank Limited

SILK Bank Limited

Bank Alfalah Limited

KASB Bank Limited

Deutche Bank Limited

Royal Bank of Scotland

Bank of Khyber

Dawood Islamic Bank


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

mailto:[email protected]


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Organization Hierarchy chart

Introduction of Departments



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Finance DepartmentFinance manager works under General Manager Finance. His span of management

contains three finance officers. Major function of this department, obviously, is to

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

role at their stead.

General Manager Finance

His duty is to take major financial decisions.

Manager Finance

Rate negotiations

Handling cash in & out

Bank relations

Handling short term and long term funds requirements

Assistant Manager Finance

Reports to manager finance



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Arranging funds for production

Preparation of Budget

Senior Finance Officer (General)

Fund arrangement is a major responsibility of this officer, including leasing,

mudaraba, and secured and unsecured loan arrangements. He keeps check on

inventory in Bond houses against which company finances. He is responsible to

release raw material from bond houses for production and sales purpose.

Check on working capital of the company is another task that falls in his job

description. What are the receipts and due payments for a day is also a matter of

concern. Moreover, he also coordinates with other departments.

Generally, most senior person is entitled for this job. Three assistant accountants work

under his supervision while the “senior finance officer” (General) himself reports to

Manager Finance

Finance officer (Leasing & budgeting)

It is job title assigns a group of activities concerning leasing, mudaraba and other

finance arrangements. His job is to formulate and conduct analysis on present status

of company financing, particularly, repayments and restructuring of installments.

Certainly, budgeting is also a part of his responsibilities.

Finance Officer (Treasury Finances)

National Bank of Pakistan (NBP) facilitates the company in Bond financing,

discounting bills, opening L.C’s. Bank also acts as guarantor in particular cases.

Financial officer (Treasury finances) deals with all corresponding processing in this

regard .Nation Bank of Pakistan (NBP) is the bank by whom the company deals with.

Bank is performing duties regarding secured financing, discounting bills and opening

L.C’s. Bank developed a chain in such and manner that all financial activities

interrelate with each other’s.

Company acquires finance against the pledged stock; Pledging stock includes

imported raw material, components of air conditioner and refrigerator, transformers,

energy meters, refrigerators etc. These stocks will be pledged in bond housed that



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situated in company’s premises, which is under-control of ban authorities. Bank opens

an account in the name of company, said as “Cash finance account”. But as per

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

Bank sets limits in this regard, so each replacement requires bank permission. The

difference between borrowed money and pledged stock would have to adjust either by

pledging more stock or by making payments equivalent to the value of released stock.

In PEL Finance department is working under the supervision of four managers and

one General Manager. This department is comprised of four sections, namely

Budgeting Section

Guarantees Section

Material Planning Section

Leasing Section

Budgeting Section

Starting with Budgeting Department that forecasts Annual Sales, Expenditures and

Costs for the company after getting production estimates and Sales plans from the

marketing and than tell the amount to be arranged for production in order to finance

either power division’s production or Appliances division’s production.

Guarantees Section

Secret behind PEL’s success and increasing market share is its guarantees section that

actively works to get every order either for appliances or for power of the company by

speedily participating for the contract with the help of Tender Bonds of Guarantees.

Leasing Section

This section works in order to fulfill the corporate production, personnel and

operational needs such as Machineries, Auto Mobiles and office equipments. It enters



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into the Buying Contracts always with the one who offers best terms and conditions as

well as the best Internal Rate of Return to the Company.

OBJECTIVE OF FINANCE DEPARTMENT

Finance people concentrate on following points for accomplishment of their tasks

Try to raise maximum funds

Make arrangement for allocation of funds appropriately

Doing above mentioned activities by controlling cost

FINANCE SECTION

There are different modes of financing are used.

CASH FINANCE FACIALITY

Loans can be taken from any commercial bank.

WORKING CAPITAL

Use to meet day-to-day routine finance

RUNNING FINANCE

A fix limit is assigned by bank and Co. can use within that limit

HOW THEY MAKE PLANS

Planning is an important aspect for achieving objectives ahead. So while making

plans manager foresee the situations in advance and take decisions. It is true in case of

finance department. Finance department have to do advance Planning for different

tasks about production and utilization of loans appropriately In advance

HOW THEY TAKE DECISIONS

The only thing that is considered at the time of taking decisions regarding fund raising

is lower markup rates down because this is what makes loans feasible or otherwise.



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PROCEDURAL ASPECTS

WORKING CAPITAL FINANCE

This type of loan is secured against;

Pledge

PLEDGE

It may be constructive or actual. Constructive pledge is that in which goods are not

taken by bank rather keep them in company's good own under its own security.

In case of actual pledge, bank holds the possession of goods.

HOW PLEDGE IS CREATED?

Only pledge latter is required to make it effective.

HOW IR IS DISCHARGED?

Only by paying the amount of loan and issuing o D/O delivery order to discharge that

amount of goods under possession.

PROCEDURE FOR SHORT TERM LOAN

In PEL Industries following procedure is applied for short-term loans.

OFFERING LETTERS

Each bank issues an offering letter that mentions the following things



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Amount sanctioned

Markup rate

Charge over assets (pledge)

Period

Other conditions

ACCEPTANCE

If PEL agrees on the conditions given by the bank it sends the following Documents.

In case the conditions are not acceptable then negotiations are made to bring the

conditions to point where there are acceptable to both the parties.

Board of directors to open the account

List of directors

Form 29 (details of Original limit documents

Copy of resolution Directors)

Signature cards of Directors to open the current account

Memorandum and Articles of association

CREATION OF CHARGE

To create charge, following documents are sent:

Form 10

Affidavit

Letter of pledge

LETTER OF CONTINUITY

When PEL wants a renewal to the existing line after expiry date, it submits a letter of

continuity.



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PROMISSORY NOTE

It is promise of company to pay to the bank the amount of loan plus markup.

LONG TERM LOANS

PEL acquired a long-term loan to finance the import of machinery. Recently PEL has

purchased some machinery from China for Digital Energy Meters.

The process for long-term loan is explained in following.

PREPARATION OF FISIBILITY REPORT

Following points are considered while preparing the feasibility report.

FINANCIAL STATEMENTS

Cost of the project. This includes operating assets (land, building, Vehicles,

furniture, capital expenditure and means of finance)

Project profit and loss account

Projected statement of changes in financial position. It gives sources of

Finance and the application

Projected balance sheet

ASSUMPTIONS

Production schedule

Dues and chemical assumption

SCHEDULES

Sales forecast statement

Total production cost.



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Working capital

Loan repayment schedule

BANK FISIBILITY REPORT

Bank studies the feasibility report and prepare report and prepare its own feasibility

report to see where it would be feasible to sanctioned loan to company or not.

OFFERING THE LETTER

The bank, if it is satisfied with the feasibility report then send offering letter. It has,

Amount sanctioned

Mark up rate

Charge over fixed assets

Tenor

Installment period

Interest payment period

Acceptance

If company accepts the terms, it must respond with this period.

NEGOTIATION

Negotiation between bank and company takes place to change certain conditions of

offer letter and it acceptable for both parties. A second draft of the offer letter is

prepared with changes and signs of bank and CEO OF PAK ELEKTRON LIMITED.

CREATION OF CHARGES

A charge is created in favor of the bank to secure its loan with following documents

affidavit. It is an undertaking by the company that will follow all conditions.

Form 10. It contains the particulars of assets against which charge is created.



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Memorandum of constructive deposit of little deeds. It tells about the conditions

that the company will follow along with the details of property under charge.

All the above documents are submitted with registrar against whom a Certificate of

Registration of Mortgage is issued.

LOAN PREPAYMENT SCHEDULE

This schedule is prepared to show the mark up principal and total installment value

for whole tenure.



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ACCOUNTS DEPARTMENT

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

supervised by “Account manager”. Accounts manager directly reports to General

finance manager. He has divided his staff into five-section I). Cost section, ii). Import

section, iii). Inventory section, iv). Salary section and v). Accounts Payable section.

On the basis of these bookkeeping activities financial statements and relevant

statements are prepared, which necessitate in decision making at corporate level.

Functions

This particular department has the responsibility to prepare and keep an up to date

record of following:

Financial keep of daily, including the income statement and balance sheet.

Book keeping of daily monetary transactions.

Production maintenance reports

Cost data on labor, materials and overheads.

Remittances and loans

Expense reimbursement



29

Tax statement

Financial deals with the banks, leasing companies, mudaraba companies, and

other government agencies through Finance Center.

The finance department maintains record of all its expenses through vouchers.

Generally the following types of vouchers are used for this purpose.

Cash payment vouchers for cash transactions recording.

Purchase vouchers

Bank payment vouchers

Journal vouchers for general expenses.

PAYMENTS TO SUPPLIERS

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

Supplier sends “Commercial Invoice” to buying department for the purpose of

recovery. Buying department put it forward to Accounts department. Purchase section

officer checks Commercial Invoice against the computer report (store) to see what

material have been received that either supplier has valid right of title or not. After

confirmation, cheque is drawn in favor of supplier. Bank payment voucher is used for

the internal records against the drawn cheques.

COMMERCIAL DEPARTMENT

Commercial Department deals with sales tax custom, and excise matters. This

department has been divided further on the basis of these above-mentioned activities.

Commercial department is headed by “Commercial manager”, who supervises

commercial staff.



30

SALES TAX

Basically, it deals with sales tax matters of the company. Sales tax section annexes

the area of input-sales tax and output- sales tax as well. Input-sales tax, which is

levied on purchasing items, while output sales tax, which is levied on selling items,

are kept in record here in this section.

On monthly bases, sales tax section submits “Return file” to CBR, wherein it gives

net balance, output- sales tax minus input- sales tax. Finally, company claims

refunding amount or makes payment, of balancing figure, to CBR *.

SALES TAX STAFF

Total staff of sales tax section is consisted of four people. Normally, two commercial

assistant officers do job concerning with output-sales tax, one commercial officer

engages in input-sales tax matters, and senior commercial officer supervise all of

them.

SALES TAX AND EXCISE TAX

“Sales tax is levied on all retail. The variations in sales tax have not the directional

effects.”

“Excise tax is livable on goods, includes goods manufactured or produced in non-

tariff area and brought for consumption to tariff area.” Ministry of finance announces

sales tax and excise tax’s rates in its annual budget. For the time being, 16% sales tax

is imposed on registered buyer and unregistered buyers are liable to pay. PEL pay 1%

S.E.D (special excise duty) on transformers.

Recording of Input sale tax & Output sales tax

Input sales tax is levied on raw material. Payments regarding input sales taxes are

recorded in “Purchase register”. At the end of each month total paid amount is

calculated.

Output sales tax is levied on selling item, which buyer pays. Company makes

commercial invoice, wherein selling amount is mentioned along with imposed sales



31

tax. Concerning data is kept in “Supply Register”. Finally, total receiving sales tax

amount is sum up on monthly bases.

Submission of Return File to CBR

Monthly, section is responsible to submit its return file. Wherein total output sales

taxes are subtracted by total input sales tax. If output sales tax exceeds company

makes payment for balancing, otherwise, government charges 5% per month. On the

other hand, when input sales tax greater than output sales tax then company has two

options, either company refunds the additional amount or carried it forward to the

next month.



32

IMPORT SECTION/FP DEPARTMENTPEL is an engineering concerns company introducing Deep freezer, Air-conditioner,

Refrigerator, Energy meters, Transformer and Switchgears. Not even any one product

is entirely manufactured in PEL by locally available raw material. But practice is that,

company imports a large portion of raw material from foreign suppliers.

Import section plays an integral role in achieving cooperate goals, as it is responsible

for all imports concerned matters. Usually, this department imports:

Raw-material

Parts

Equipment

Machinery

Import activities are started from marketing- plan, in general. This plan is forwarded

in systematic way and finally import plan is formulated. On the bases of import plan,

import section allocates their activities.

IMPORT PLAN WORKFLOW

Marketing Plan

Marketing department estimates future demands for company’s products on yearly

bases and monthly bases as well. “Sales planning” process reflects not only previous

sales figure but environmental conditions, too. That‘s why sales plan is also

maintained on rolling bases.

Production Plan

Production department takes it critically against the crucial maters of plant capacity,

manpower and time constrains. With mutual consent of sales department, Finance

department and by the approval of higher authority, Production department formulates

“production plan” with month-wise breakup.



33

Import Plan

After deciding “how much units have to be produced” and confirm that “what

material would required” material planning department would carry forward this

process by checking inventory level and by deciding that what, when, and how much

quantity of material would be ordered to foreign supplier. That final requirement of

material for import is forward in documentary form of “Import plan” to commercial

department. Import section staff performs two types of activities and these activities

are needed to correlate with each other. It is a big task to deal with. Under the heads

of “Pre-shipment activities” and “Post-shipment activities”, the import activities are

grouped.

PRE-SHIPMENT ACTIVITIES

Pre-qualification of supplier(s)

Before submitting “request for quotation” import officer assess supplier(s) either they

fulfill criteria for pre-qualification or not. Supplier should be certified by ISO 9000 or

should have consistent performance regarding,

Competitive price.

Adherence to agreed shipment schedule.

Documentation without discrepancies.

Backup for technical assistance (if required.)

Request for quotation

After list out the pre-qualified suppliers, commercial manager asks for their

quotation.

Bid Analysis

Each bidder is analyzed and selected lowest bidder, but quality matter is also taken

into account. After selection, Commercial manager negotiates with the acceptable

bidder to finalize all terms and conditions.



34

Import purchase order

After selection of most appropriate supplier, order is placed. Incharge import receives

a Performa invoice/ sales contract from supplier.

Opening letter of credit

On the month of basis schedule for L.C. is prepared with reference to annual material

plan. Company mostly engages with National Bank of Pakistan in respect of opening

L.C. When bank opens L.C, commercial department faxes or mails it to supplier.

Follow up the shipment schedule

In case of delayed shipment, L.C is required to extend further. Import officer is also

responsible for that.

POST-SHIPMENT ACTIVITIES

Movement of consignment from Karachi

After opening L.C supplier sends four types document to company through fax or

mail such as:

Commercial Invoice.

Packing list.

Bill of lading.

Certificate of origin.

These documents are treated as non-negotiable documents. Company receives original

shipping documents through Bank.

Custom clearance

Custom clearing agent of the company submits “Bill of entry” to custom authority,

and clears the consignment.

Receipt of consignment at receipt store of the company



35

After custom clearance the consignment is free. Now consignment is received at

receipt store of the company. Receipt store officers assure quantity and quality of the

consignment. Otherwise company claims for damage.

PROCUREMENT

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

and raw material not only from Pakistan but also from Asia, America, Europe, and

Africa.

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

Local Procurement

Foreign Procurement

LOCAL PROCURMENTLocal Procurement department is responsible for all the raw materials that are

required for making various products in the factory. It includes from nails to large

metal sheets. At the start of each financial year they receive a major plan from the

management, which highlights all the raw material required for each product. Dates

and maximum time limit for raw material requirement is also mention in this major

plan.

FOREIGN PROCUREMENTResponsibilities and duties are same as Local procurement but they vary in the

dimension that, they have to arrange the raw material from abroad. They also receive

same plan as local procurement for the whole financial year and develop milestones to

carry out the plan execution properly.

The skill of this department is to purchase the raw material in the optimum cost that

best satisfy the need of production department and also to finance department in

quality as well as in monetary terms respectively.



36

Application of the Class Room Learning

Marketing StrategyMarketing strategy of PEL is that it focuses mostly on middle class people. The other

competitors like LG, Samsung, and Dawlance etc have higher process of their

products. PEL products have comparatively lower prices.

Now we will discuss the 4 Ps of PEL

Product:PEL has a wide range of products catering to different needs of the society. Like it has

appliances division and power division. The PEL products are of high quality. They

have innovative designs. The product detail is discussed above.

Price:The prices of the PEL products are affordable and less as comparative to its

competitors. It keeps its prices low especially for the appliances division, because it

focuses on the middle class people.

Place:PEL has a strong dealer’s network. PEL products are easily available throughout

Pakistan. PEL products are also available in the newly opened mega stores like

mackro, hyper star etc.

DISTRIBUTION CHANNELS

Producer Agent Wholesaler Retailer Customer

PromotionPEL mostly advertise its products through electronic media like for example through

TV channels. No doubt the TV advertisements of PEL are less frequent as compared

to its competitors. But still it has great brand awareness among people. PEL also uses

print media for its advertisements.



37

Competitive Strategy The competitive strategy of PEL is that it has a wide range of products and at

low prices.

PEL focuses on cost leadership strategy in its power division appliances. i.e.

the prices of its power division appliances are high but they are of very high

quality. PEL has a competitive advantage of its brand name.

PEL has high quality products both in appliances and power division because most of the raw materials are imported from different countries and these raw materials are of very high quality.

INDUSTRIAL ANALYSIS

Transformers

PEL has vast experience in design and manufacturing of standard and special purpose transformers. New technical designs for improved efficiency and quality against special orders of non-standard transformers are continuously being explored. These transformers are available for various applications.

- Distribution Transformers

- Auto Transformers

- Furnace Transformers

- Welding Transformers

PEL transformers have been successfully type tested for impulse voltage and short circuit tests by KEMA Laboratories of Holland. Customized transformers, in accordance with domestic and international client’s specifications have also been manufactured for use within and outside Pakistan. Transformers are normally supplied in a period of 3 – 4 months after the receipt of orders from respective distribution companies of WAPDA and varied supply time for private customers. The Company provides one year after sales service warranty to WAPDA, KESC and private sector customers.



38

Major Customers,

- WAPDA & KESC

- Accounts for over 90% of the total transformer sales

Major Suppliers,

- ThyssenKrupp Electrical Steel GmbH of Germany which supplies Silicon Steel Sheet

- International Industries Limited – Pakistan

Energy Meters

PEL manufactures three types of energy meters; Single Phase and Poly Phase. The electro-mechanical energy meters are manufactured under license from ABB of USA. The quality of PEL meters has been certified by KEMA Laboratories of Holland. PEL meters are superior than others due to their ability to lower revenue losses through accurate & precise operation and reduction of maintenance expenses.

Single Phase energy meters provide maintenance-free operations over a long period and accurate measurement of electrical energy.

Poly Phase energy meters improve load performance and precision accuracy. The meters require minimum maintenance and can withstand abuse from surges and magnetic tampering.

Three phase digital electronic meter with dual tariff capability recently launched and supplies to WAPDA has begun this year.



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Energy meter orders from WAPDA are received annually and their supply period is 9 -10 months. Energy meters to KESC are supplied in a period of 3 - 4 months. The Company provides one year after sales service warranty to WAPDA, KESC and

Others.

Major Customers,

- WAPDA & KESC

- Accounts for almost 100% of the total energy meter sales

Major Suppliers,

- Zhejiang Holley Imp. & Exp.Co. Ltd of China and ABB INC

Electricity Metering of USA supplies energy meter parts for

Single phase meters

- Mitsubishi Corporation of Singapore provides poly

Carbonate resins



40

Switchgears

Switchgears are one of the highly technical and specialized power products of PEL. They are produced for indoor and outdoor installations complying with international installation standards. A major customer for this product is WAPDA. The Company provides one year after sales service warranty to WAPDA, KESC and other customers.

Major Customers,

- WAPDA

- Accounts for over 63% of the total Switchgears sales

Major Suppliers,

- Hyundai Heavy Industries, South Korea

- Pelka Elektrik Malzemeleri of Turkey



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Refrigerators

PEL Refrigerators were introduced in 1987 with features such as VCM (Vinyl Coated Metal) coating; stylish finishing and auto drain systems. PEL refrigerators carry compressor made by Danfoss of Germany.

The low noise compressor is extremely silent and keeps the refrigerator running smoothly. Furthermore, the compressor is resilient to fluctuations in voltage level, thereby proving to be a more durable product.

The refrigerators market has experienced growth in previous years due to availability of refrigerators at lower prices, economic growth and the upward trend of consumers, financing at lower interest rates. PEL is actively involved in the manufacturing and trading of refrigerators, which is a major source of consistent growth. The refrigerators business contributes to 48% of the Company’s sales and this trend is expected continue in the coming years.

Major Suppliers,

- Danfoss Compressors GmbH of Germany provides Compressors

- Team Spezialgerate-vertriebs GmbH of Germany provides Polystyrene

- Danfoss A/S of Denmark provides Thermostat

- BASF Aktiengesellschaft of Singapore provides Plastic

Moulding Compound



42

Air Conditioners

PEL is a market leader in the domestic air conditioning market. PEL started manufacturing window air conditioners for the first time in Pakistan in technical collaboration with General of Japan. The air conditioners were specifically designed to meet the extreme climatic conditions of Pakistan. PEL’s air conditioners have excellent cooling capabilities at high temperatures, varying levels of humidity, high air dust and uneven voltage power supply conditions.

The air conditioners market in Pakistan comprises of window air conditioners and split air conditioners. Although the air conditioners market has been growing over the years, however, the growth seems to have come primarily through increase in the split air conditioners market with the window air conditioner market shrinking dramatically.

The split air conditioners market demonstrated a growth of 90% in 2009 as compared to the previous year and keeping in view this trend PEL starts

Major Suppliers,

- Mitsubishi, Japan and Thailand provides rotary type compressors

- Copeland, USA provides reciprocating compressors

\



43

MY LEARNINGS IN PAK ELEKTRON

While working with PAK ELEKTRON LTD, I got very broader visions about company financial and marketing activities more than those that I had learned during my MBA program. What were those experiences? I would like to share them in this report.

I worked in finance and accounts department for about 6 weeks and the detail of my activities performed there were as follows

I verified all the purchase invoices regarding the three main sectors applied appliances, powers and electric.

All the invoices were verified in terms of the net amount after the tax, before tax, sales tax value, vendor verification and debit invoice. Debit invoice is a mode to settle the amount differences of the invoices.

After my due verification then I have to report to my supervisor the Accounts payable head and after this the entries are recorded in the PEL electronic software.

With this responsibility I was assigned to take and handle all the calls of vendors and from whole the company departments.

After the entries are made then final cheques were made by the authorized individuals and handled over to the concerned department.

Reconciliation of the vouchers with different organizations relating to it.

Reconciliation of the Raaziq international accounts with the account ledgers of finance department.

Check how to code the finish goods inventory.

The two major costing methods used by the Pak elektron limited are the job order costing and process costing. But the major use is job order costing.

Check what types of insurance risks are handled there.



44

Employees form NG to Manager Level is given some facilities e.g. medical, traveling and mobile postpaid etc. the recording of such expenditure.

Manage the records of the company.

I have learned about the inland letter of credit. The more preferable mode of finance. In which the company request the party against the order.

I have also learned that in order to get an order, a company has to follow a participation procedure and this procedure starts from TENDER BONDS or Guarantees given through banks to the buying party in order to assure that certain company has a legal entity, has an ability to fulfill the desired order within specified date and incase if the company dissolves bank will stand liable for the fulfillment of the order.

Similarly another important thing which I had learned over there was the Buying procedure through leasing agreements like writing a purchase order, asking for quotations, making comparisons of the offered features and Internal Rate of Return and lastly the best institutional selection in order to avail leasing facility.



45



46

\

EQUITY AND LIABILITIES (Rupees in Thousand)SHARE CAPITAL & RESERVES 2009 2008 2007 2006 2005Share Capital 1496677 1496677 1368591 1215873 1136194Reserves 131931 131931 1872683 1467619 301515un appropriated Profits 2378750 2074013 849356Total Equity 4007358 3702621 3241274 2683492 2287065SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT

2788311 1940365 823341 464171 497601

NON CURRENT LIABILITIES Long-term financing 3493417 2480238 1314219 250365 389172Liabilities against assets to finance lease

103367 90206 187027 182487 123092

Deferred Liabilities 2013543 1438405 736309 409155 345996Deferred Income - grant-in-aid 110207 82996 66323 69814 73488Total Non Current Liabilities 5720534 4091845 2303878 911821 931748CURRENT LIABILITIES Trade and other payables 1506702 2084351 1572732 1599580 836697Interest / mark-up accrued on loans and other payables

337322 220104 213298 226709 140210

Short-term borrowings 3946515 3868988 3043650 3795340 2879827Current portion of long-term liabilities

Long-term financing 677349 331701 245501 321496 367577 Liabilities against assets subject to finance lease

85944 53228 103105 105132 62287

Provision for taxation - - 8685Total Current Liabilities 6553832 6558372 5178286 6048257 4295283Total Liabilities + O.E 19070035 16293203 11546779 10107741 8018896



47

(Rupees in Thousands) 2009 2008 2007 2006 2005NON CURRENT ASSETS Property, plant and equipment 9720022 6231129 4046378 3144904 2716401Intangible assets 583512 573617 581705 602465 249880Long term investments 21771 52945 12474 11227 60711Long-term deposits 31026 34218 35332 38811 25541Total NON CURRENT ASSETS 10356331 6891909 4675889 3797407 3052533CURRENT ASSETS Stores, spares and loose tools 76854 81990 64376 58543 52713Stock-in-trade 3258607 3571168 2507679 2576026 1956566Trade debts 3807776 4207741 2947646 2614396 1853889Loans and advances 686044 542663 315641 225113 218179Trade deposits and short-term prepayments

229415 321574 306775 287034 236489

Other receivables 12671 32437 29374 9266 270471Other financial assets 26107 72295 162825 91022 35596Sale Tax Refundable 131593 49620 Income tax Refundable 291579 87322 Cash and bank balances 193058 434484 536574 448934 335261TOTAL CURRENT ASSETS 8713704 9401294 6870890 6310334 4959164TOTAL ASSETS 19070035 16293203 11546779 10107741 8018896



48

EQUITY AND LIABILITIES (Rupees in Thousand)

SHARE CAPITAL & RESERVES 2009 2008 2007Share Capital 1496677 1496677 1368591Reserves 131931 131931 1872683un appropriated Profits 2378750 2074013Total Equity 4007358 3702621 3241274

SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT 2788311 1940365 823341NON CURRENT LIABILITIESLong-term financing 3493417 2480238 1314219Liabilities against assets to finance lease 103367 90206 187027Deferred Liabilities 2013543 1438405 736309Deferred Income - grant-in-aid 110207 82996 66323Total Non Current Liabilities 5720534 4091845 2303878CURRENT LIABILITIESTrade and other payables 1506702 2084351 1572732Interest / mark-up accrued on loans and other payables 337322 220104 213298Short-term borrowings 3946515 3868988 3043650Current portion of long-term liabilities Long-term financing 677349 331701 245501 Liabilities against assets subject to finance lease 85944 53228 103105Provision for taxation -Total Current Liabilities 6553832 6558372 5178286Total Liabilities + O.E 19070035 16293203 11546779

(Rupees in thousands) 2009 2008 2007 2006 2005Sales

16,117,524 13,926,572

13,077,670

11,042,160

8,075,382

Less: Sales-Tax and Discount 1,495,912

1,274,579

1,264,183

1,634,142

1,287,500

Sales - net 14,621,612

12,651,993

11,813,487

9,408,018

6,787,882

Cost of goods sold 11,283,796

9,801,897

9,283,623

7,360,351

5,298,489

Gross Profit 3,337,816

2,850,096

2,529,846

2,047,667

1,489,393

Other Operating Income 37,088

108,777

100,458

112,553

60,014

3,374,904

1,958,873

2,630,322

2,160,220

1,549,407

Distribution cost



49

892,068 676,452 588,981 590,412 402,348 Administrative expenses

609,004 543,636

356,556

262,482

230,149

Other operating expenses 116,807

137,227

52,429

25,108

23,625

Finance cost 1,372,676

972,618

937,109

742,130

450,888

Share of Profit/ loss of associate

9,248

5,585

12,162

(23,337)

Profit before tax 393,597

634,525

707,409

516,751

442,397

Provision for taxation 133,051

177,970

125,165

74,609

95,701

Profit after tax 260,546

456,555

582,244

442,142

346,696

Balance Sheet

EQUITY AND LIABILITIES (Rupees in Thousand)SHARE CAPITAL & RESERVES 2009 2008 2007 2006 2005Share Capital 31.73% 31.73% 20.45% 7.01% 100.00%Reserves -56.24% -56.24% 521.09% 386.75% 100.00%un appropriated Profits 180.07% 144.19% -

100.00%-

100.00%100.00%

Total Equity 75.22% 61.89% 41.72% 17.33% 100.00%SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT

460.35% 289.94% 65.46% -6.72% 100.00%

NON CURRENT LIABILITIES Long-term financing 797.65% 537.31% 237.70% -35.67% 100.00%Liabilities against assets to finance lease

-16.02% -26.72% 51.94% 48.25% 100.00%

Deferred Liabilities 481.96% 315.73% 112.81% 18.25% 100.00%Deferred Income - grant-in-aid 49.97% 12.94% -9.75% -5.00% 100.00%



50

Total Non Current Liabilities 513.96% 339.16% 147.26% -2.14% 100.00%CURRENT LIABILITIES Trade and other payables 80.08% 149.12% 87.97% 91.18% 100.00%Interest / mark-up accrued on loans and other payables

140.58% 56.98% 52.13% 61.69% 100.00%

Short-term borrowings 37.04% 34.35% 5.69% 31.79% 100.00%Current portion of long-term liabilities Long-term financing 84.27% -9.76% -33.21% -12.54% 100.00% Liabilities against assets subject to finance lease

37.98% -14.54% 65.53% 68.79% 100.00%

Provision for taxation 100.00%Total Current Liabilities 52.58% 52.69% 20.56% 40.81% 100.00%Total Liabilities + O.E 137.81% 103.19% 43.99% 26.05% 100.00%

In the horizontal analysis of the balance sheet it shows that the company share capital

increase in 2005 and 2006 but after this it is constant to the 31.73%. If I see the non

current liabilities of the company which is increase with the passage of time and goes

to 500%. The company current liabilities also increase but with the slow rate. The

overall effect on the liabilities and owner equity side has constant increase up to

137.81%.

Balance Sheet

(Rupees in Thousands) 2009 2008 2007 2006 2005NON CURRENT ASSETS Property, plant and equipment 257.83% 129.39% 48.96% 15.77% 100.00%Intangible assets 133.52% 129.56% 132.79% 141.10% 100.00%Long term investments -64.14% -12.79% -79.45% -81.51% 100.00%Long-term deposits 21.48% 33.97% 38.33% 51.96% 100.00%Total NON CURRENT ASSETS 239.27% 125.78% 53.18% 24.40% 100.00%CURRENT ASSETS Stores, spares and loose tools 45.80% 55.54% 22.13% 11.06% 100.00%Stock-in-trade 66.55% 82.52% 28.17% 31.66% 100.00%Trade debts 105.39% 126.97% 59.00% 41.02% 100.00%Loans and advances 214.44% 148.72% 44.67% 3.18% 100.00%Trade deposits and short-term prepayments

-2.99% 35.98% 29.72% 21.37% 100.00%



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Other receivables -95.32% -88.01% -89.14% -96.57% 100.00%Other financial assets -26.66% 103.10% 357.42% 155.71% 100.00%Sale Tax Refundable 165.20% 100.00% Income tax Refundable 233.91% 100.00% Cash and bank balances -42.42% 29.60% 60.05% 33.91% 100.00%TOTAL CURRENT ASSETS 75.71% 89.57% 38.55% 27.25% 100.00%TOTAL ASSETS 137.81% 103.19% 43.99% 26.05% 100.00%

In the asset side of the balance sheet shows that he non current asset side investment

is much more than the current side. As the current liabilities of the company are less

the company also meet the fewer amounts of assets. More non current liabilities more

non current assets. The company shows the good position of non current vs. current

asset proportion. The stock in trade up to 2008 increase but in 2009 it decrease. Trade

debtor also decreases in 2009. The total assets of the company increases with the time.

Profit & Loss.

(Rupees in thousands)

2009 2008 2007 2006 2005Sales 99.59% 72.46% 61.94% 36.74% 100.00%Less: Sales-Tax and Discount 16.19% -1.00% -1.81% 26.92% 100.00%Sales - net 115.41% 86.39% 74.04% 38.60% 100.00%Cost of goods sold 112.96% 84.99% 75.21% 38.91% 100.00%Gross Profit 124.11% 91.36% 69.86% 37.48% 100.00%Other Operating Income -38.20% 81.25% 67.39% 87.54% 100.00% 117.82% 26.43% 69.76% 39.42% 100.00%Distribution cost 121.72% 68.13% 46.39% 46.74% 100.00%Administrative expenses 164.61% 136.21% 54.92% 14.05% 100.00%Other operating expenses 394.42% 480.86% 121.92% 6.28% 100.00%



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Finance cost 204.44% 115.71% 107.84% 64.59% 100.00%Share of Profit/ loss of associate

-139.63% -123.93% -152.11% 100.00%

Profit before tax -11.03% 43.43% 59.90% 16.81% 100.00%Provision for taxation 39.03% 85.96% 30.79% -22.04% 100.00%Profit after tax -24.85% 31.69% 67.94% 27.53% 100.00%

In the horizontal analysis of the Pak elektron limited the company sales increase with

the time up to 115.41%. the cost of goods sold also increase. Sales bring the positive

gross profit which is favorable for every company. Company earns profit up to

124.11%. the expense controlled in 2009 and heavy finance cost pay for which

company suffer loss in operating and net loss up to 24.85% with respect to the base

year comparison. the company earns profit up to 2009 but in 2009 due to the electric

crises and budget shortfall the company suffers loss according to base year. Company

also pays the profit on share which is the reason for loss.

Balance Sheet

EQUITY AND LIABILITIES (Rupees in Thousand)

SHARE CAPITAL & RESERVES 2009 2008 2007 2006 2005

Share Capital 7.85% 9.19% 11.85% 12.03% 14.17%

Reserves 0.69% 0.81% 16.22% 14.52% 3.76%

un appropriated Profits 12.47% 12.73% 0.00% 0.00% 10.59%

Total Equity 21.01% 22.72% 28.07% 26.55% 28.52%

SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT

14.62% 11.91% 7.13% 4.59% 6.21%

NON CURRENT LIABILITIES

Long-term financing 18.32% 15.22% 11.38% 2.48% 4.85%

Liabilities against assets to finance lease 0.54% 0.55% 1.62% 1.81% 1.54%

Deferred Liabilities 10.56% 8.83% 6.38% 4.05% 4.31%



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Deferred Income - grant-in-aid 0.58% 0.51% 0.57% 0.69% 0.92%

Total Non Current Liabilities 30.00% 25.11% 19.95% 9.02% 11.62%

CURRENT LIABILITIES

Trade and other payables 7.90% 12.79% 13.62% 15.83% 10.43%

Interest / mark-up accrued on loans and other payables

1.77% 1.35% 1.85% 2.24% 1.75%

Short-term borrowings 20.69% 23.75% 26.36% 37.55% 35.91%

Current portion of long-term liabilities

Long-term financing 3.55% 2.04% 2.13% 3.18% 4.58%

Liabilities against assets subject to finance lease

0.45% 0.33% 0.89% 1.04% 0.78%

Provision for taxation 0.11%

Total Current Liabilities 34.37% 40.25% 44.85% 59.84% 53.56%

Total Liabilities + O.E 100.00% 100.00% 100.00% 100.00% 100.00%

In the vertical analysis of the balance sheet it shows the current liabilities are 34.37%

and non current liabilities are 30%. And the owner’s equity proportion is 34% in

2009. That shows that the company is debt finance. The company has more debt in

the current position. In the previous years the company has a lot of debt in the current

liabilities. But in 2009 the Pak elektron limited control over the current financing and

reduce up to 34.37%.

(Rupees in Thousands) 2009 2008 2007 2006 2005NON CURRENT ASSETS Property, plant and equipment 50.97% 38.24% 35.04% 31.11% 33.87%Intangible assets 3.06% 3.52% 5.04% 5.96% 3.12%Long term investments 0.11% 0.32% 0.11% 0.11% 0.76%Long-term deposits 0.16% 0.21% 0.31% 0.38% 0.32%Total NON CURRENT ASSETS 54.31% 42.30% 40.50% 37.57% 38.07%CURRENT ASSETS Stores, spares and loose tools 0.40% 0.50% 0.56% 0.58% 0.66%Stock-in-trade 17.09% 21.92% 21.72% 25.49% 24.40%Trade debts 19.97% 25.83% 25.53% 25.87% 23.12%Loans and advances 3.60% 3.33% 2.73% 2.23% 2.72%Trade deposits and short-term prepayments

1.20% 1.97% 2.66% 2.84% 2.95%



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Other receivables 0.07% 0.20% 0.25% 0.09% 3.37%Other financial assets 0.14% 0.44% 1.41% 0.90% 0.44%Sale Tax Refundable 0.69% 0.30% 0.00% 0.00% 0.00%Income tax Refundable 1.53% 0.54% 0.00% 0.00% 0.00%Cash and bank balances 1.01% 2.67% 4.65% 4.44% 4.18%TOTAL CURRENT ASSETS 45.69% 57.70% 59.50% 62.43% 61.84%TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%

In the assets side of the balance sheet it shows that from 2005to 2008 the company

has high current assets than non current assets but the petrel of assets distribution in

2009 is change in 2009 the company have more non current assets than that of the

current assets the proportion is 45.69% current and 51.31%non current. This is better

for the financing and loan. At that point the company current ratio is more than 1

which is favorable.

Profit & Loss

(Rupees in thousands) 2009 2008 2007 2006 2005Sales 100.00% 100.00% 100.00% 100.00% 100.00%Less: Sales-Tax and Discount 9.28% 9.15% 9.67% 14.80% 15.94%Sales - net 90.72% 90.85% 90.33% 85.20% 84.06%Cost of goods sold 70.01% 70.38% 70.99% 66.66% 65.61%Gross Profit 20.71% 20.47% 19.34% 18.54% 18.44%Other Operating Income 0.23% 0.78% 0.77% 1.02% 0.74% 20.94% 14.07% 20.11% 19.56% 19.19%Distribution cost 5.53% 4.86% 4.50% 5.35% 4.98%Administrative expenses 3.78% 3.90% 2.73% 2.38% 2.85%Other operating expenses 0.72% 0.99% 0.40% 0.23% 0.29%Finance cost 8.52% 6.98% 7.17% 6.72% 5.58%Share of Profit/ loss of associate

0.06% 0.04% 0.09% -0.21% 0.00%

Profit before tax 2.44% 4.56% 5.41% 4.68% 5.48%



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Provision for taxation 0.83% 1.28% 0.96% 0.68% 1.19%Profit after tax 1.62% 3.28% 4.45% 4.00% 4.29%

In the vertical analysis of the profit and loss account of Pak elektron limited the

company sales increase with the passage of time and company gross profit form 2005

to 2009 increase from 18.44% to 20.71%. the company profit before tax decrease with

time because of increase in the expenses. The profit after tax also decreases because

of high finance cost but company provision of taxation decrease.

2009 2008 2007 2006 2005

Current Ratio 1.32 1.43 1.32 1.04 1.15Debt / Equity Ratio 306.30% 287.64% 230.84% 259.37% 228.55%Asset to Equity Ratio 475.88% 440.05% 356.24% 376.66% 350.62% Debt Ratio 64.36% 65.37% 64.80% 68.86% 65.18%Long Term Assets Versus Long term Debt

30.00% 25.11% 19.95% 9.02% 11.62%

Net Profit Margin 1.78% 3.61% 4.93% 4.70% 5.11%Operating Income Margin 2.69% 5.02% 5.99% 5.49% 6.52%Gross Profit Margin 22.83% 22.53% 21.41% 21.77% 21.94% Return on Total Equity 6.50% 12.33% 17.96% 16.48% 15.16%Return on Total Assets 1.37% 2.80% 5.04% 4.37% 4.32%



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Return on Investment (ROI) 9.82% 17.14% 21.83% 19.26% 19.34% Accounts Receivable Turnover 3.84 3.01 4.01 3.60 3.66Inventory Turnover 3.46 2.74 3.70 2.86 2.71 Total Assets Turnover 0.77 0.78 1.02 0.93 0.85Fixed Assets Turnover 1.41 1.84 2.53 2.48 2.22

The financial ratios of the Pak elektron limited are given above and the interpretation

of the ratios is given with the graphs.

In the graph shows that the current ratio of the PEL is more than 1 in the last five

years which shows the company good performance. Company is highly debt finance



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and with the passage of time the debt is going high. In the asset to equity ratio the

assets are much more than the equity which is 4.75.

In the debt ratio against the total assets is going to decline as shown in the graph. In

2006 it is highest about 69%. Which shows the company good position. Long term

assets are less than the long term liabilities. The long term liabilities increase after the

2006.



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PEL is earning the profits in the last five year but the company operating and net

profit decline in 2009 as compare to the previous years. The company gross profit

remains the same in the previous years. Profit decline due to high finance cost and

share of associate.

The current figure shows that the return on the equity, asset and investment. The

return on investment is high in 2007. And decrease after that year. The return on asset

and equity are high in 2007 but it also decline due to the low sales volume and low

profits.



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The inventory and accounts receivable turnover is calculated by the sales divided by

the inventory or debtors. In the 2007 the accounts receivable turnover is high. It may

have two reason high sales or low debtor. And in the inventory turnover the same case

applied that either the sales are high or inventory is low. In 2008 it decline but in 2009

it again goes up.



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Total assets turnover and fixed assets turnover is calculated by the sales divided by

the total asset or fixed asset. As the total assets are more than the fixed assets so the

denominator is high so total asset turnover amount is low and fixed assets turnover is

high. In 2007 the total and fixed asset turnover is higher due to the high amount of

sales or low assets.

SWOT ANALYSIS

STRENGTHSPEL has the following strengths and is in more competitive position in these areas

than its competitors. Following are the main strong points of PEL:

Strong brand image

Strong dealer network

Strong quality, sale and service

Number 2 in refrigerators in Pakistan

Strong grip in home appliances

Strong Management

Distribution of Authority

Strong research and development department

Free customer service

Public Limited Company



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Although PEL is owned by the SAIGOL GROUP but its shares can be purchased and

sold in stock exchange market. So every one who is interested in purchasing the

shares of PEL he can purchase. It is also called public limited company. So people are

more interested in buying the PEL products.

WEAKNESSES

Like other companies PEL has some weaknesses in operating the business. If PEL

overcome on these weaknesses then it can become a market leader in the home

appliance. PEL loose some competitive edge in the following points:

Lack of advertisement

System variations

Lack of Product range

Less Utilization of capacity

Financial Problems

OPPORTUNITIES

For the PEL there are more opportunities for expansion the business. If PEL realize

that opportunities then it will be more fruitful and profitable for the company. Even if

company does not take advantage of these opportunities then it will loose its



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competitive position and high profit. Its competitors will give PEL tough time to

pursuing the opportunities that are adopted by them. Following are the opportunities

for the PEL.

Exploration of market in Pakistan

Increase in product range

Export opportunity

Increase in production capacity

THREATS

PEL Company in such a competitive era has many threats as well. These threats are

for the present situations and future. Company should make its policies and strategies

according to these threats. So following are the main threats for the PEL

Strong competition

China’s product introduction in the market

Price war

Slow growth rate in Pakistan

Instability of government

Tax department

World Trade Organization

Investors



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Suggestions

Increase Utilization of capacity

One thing that I observed during my internship that PEL could not make the freezer as they target. They have enough capacity to make but the less or lack of utilization of capacity they fail to meet their targets.

Lack of advertisement

Other competitor companies have good marketing and advertising campaigns as I observed that near the PEL there is a great sign board of Waves.

System variations

PEL should have to adopt the one system. As they are changing the system to ERP which is very good but they have to train their employee as well. Training procedure must be change. There should be the presentation to all workers.



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Lack of Product range

They should have to increase their product range as their new competitor SAMSANG in appliances has a lot of product range so they also have to increase their products.

To gain more competitive advantage over their competitors, PEL has

to work on their distribution network

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

remain loyal to the company and promote the products.

PEL should open its internship programs on frequent basis so more and

more students can get the chance to work as an internee in such a huge

institute and get their relevant work experience.

Introduction of seasonal schemes can help to boost sales

Dressing of officers even at executive level is casual so they

have to implement the executive dressing.

Too much favoritism in PEL so there should be control and merit

should be followed.

There is no rotation of job work so one person is limited to his

work.

PEL more focus should be on electronic media to get

competitive advantage over the competitors. They have to

increase their advertising expenditures.



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CONCLUSION

Concluding, I found that the people while purchasing for a certain item take great

interest in the brand name, quality, and features. A very fine example is that of

Dawlance. Most of the people that I had contacted gave a lot of preference to

Dawlance. People have a strong faith in this brand name, partly due to its high quality

and features and partly due to the brand image that it has created during all these

years. All the other factors like price, advertisement, word of mouth, dealers etc. don’t

have that much importance during the buying process. PEL is not targeting through

advertising, by coordinating their marketing efforts, take advantage of synergy among

various communication tools, and develop more efficient and effective marketing

communication programs.

Even a new technologies and formats create new ways for marketers to reach

consumers, they are affecting the more traditional media Television, Radio,

Magazines and Newspapers are becoming more fragmented and reading smaller and

more selective audience.



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PEL is doing some advertising efforts but problem is that there is no creativity in ads.

No doubt PEL is making excellent products, but unfortunately PEL is not realizing

creative advertising is also important part of their Marketing success.

PEL should improve the environment and space of its finance department so that

internees as well as employees feel ease to perform their duties effectively and

efficiently.

Appendix

PEL Pak Elektron Limited

HS code Harmonize System Code

PEL Pak Electron Limited

C&F Cost and Freight

CIF Cost Insurance and Freight

FOB Free on Board

Ex Work Material Pick from Factory

LME London Mattel Exchange

L\C Letter of credit

PAD Payments against documents

WAPDA Water and Power Development Authority

KESC Karachi Electric Supply Company

FDD Foreign Demand Draft

ETA Estimated Time of Arrival



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FOC Free Of Cost

TQM Total Quality Management

ISO International Standard Organization


pel final report

Documents

internship report dedcation

pak elektron limited

end of report

annual report of pel

internship advisor

weeks internship program

management profile

management system