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INTERNSHIP REPORT
SUBMITTED BY:
SAIF ULLAH RANA
STUDENT OF : B.COM
FROM : OUAID-E- AZAM COLLEGE OF COMMERC
Lahore
SUBMITTED TO: MR.
1
PREFACE
There is a large difference between knowledge and practical
work. Books are the source of Knowledge, but there is the practical
work is something different. After B Com of Commerce an internship
for six weeks is a good step for students to acquire some practical
knowledge about the course. Here he applies his knowledge practically
what ever he has learnt in the class. This program also improves the
confidence in student when he works with some professionals.
In class student gain different concepts of accounting, Finance,
Banking, Insurance, Management, computer and about other related
fields. Internship program provide him the chance to see all the things
from near and strengthened his concepts.
Office environment is entirely different than class, so the student
faces various problems in practical work, business field and office
environment. But with the laps of time they adopt themselves with the
office environment and learn the management behaviors, attitudes
and nature of work.
This training provides me a lot of practical knowledge and confidence,
which I feel will help me in my practical life. In PEL Industry, I learn
some and the person with whom I worked tried best to deliver some
knowledge. In this report there is a complete profile of the Saigol
Group, Who is the owner of the PEL Industries. There are also all the
information about the policies, structure and all the financial
information about Pak Elektron Limited.
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DEDICATED
TO
My Sweet Parents, Nice Teachers, sisters and brothers
Who instilled in me the importance of Education and hard work?
Who sacrifice their sweet wishes to fulfill my wants? And whose prayers helped me in every field.
My Friends Who encouraged me in the course of life?
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CONTENTS
Sr. # Page # 1. Vision & Mission statement. 6
2. Company Information 7---9
3. Range of Products 10--12
4. Management Profile 13
5. Associated Companies & Bankers of Company
14
6. Balance Sheet, P/L Account & Capital Structure
15--18
7. Borrowing & Financial Summary 19
8. Management Hierarchy 20
9. Divisions 20--21
10. Finance Department 21--23
4
11. Budgeting 24--25
12. Products Hierarchy 26--27
13. Industry Analysis 28—33
14. Market Analysis 33—36
COMPANY INFORMATION
BRIEF 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
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Engineering International (USA) and Miner & Miner International Inc. (USA).The majority shares were acquired from Malik Brothers by Saigol Group on 11 October 1978 and immediately on takeover the new management chalked out both long term and short term plans to put the company back on the path of progress. As a part of first phase of its BMR Programmer the new management injected the additional working capital of Rupees 8.98 million and Bridge Loan of Rupees 7.50 million (against the public issue of its shares) was provided by the ICP-led Consortium. As a part of long term plans, the manufacturing of window type Air conditioners was taken up in 1981 and was immediately established for quality.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 Airconditioners 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 has 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 Compressori, Italy for the assembly and progressive manufacturing of compressors for refrigerators and deep freezers. Pak Electrons Limited is known for its continuous research and development and transfer of technology from abroad. The Company commissioned its plant for the manufacture of Electricity Meters in Pakistan in June 1994 with the technical collaboration and under licence 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
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accordance with the international standards and specifications using the latest and most modern techniques available in the world.
LOCATION AND FACILITIES:LOCATION AND FACILITIES:
The project 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.
TECHNICAL KNOW-HOW & FOREIGN COLLABORATION:TECHNICAL KNOW-HOW & FOREIGN COLLABORATION:
The company had obtained technical know-how from General Corporation (now Fuji General Limited) of Japan for the manufacture of its Airconditioners and thus was able to produce a unit which is now preferred by the consumers over all the other imported as well as locally manufactured units. The know-how contract was for five years ending in the year 1988.For the manufacture of Refrigerators, the know-how was obtained from SILTAL CASA SPA of Italy, who are one of the major manufacturers of "white-goods" in Italy and has assisted in the establishment of similar plants in many other countries.
The technical know-how for Deep-freezers was obtained from ARISTON of Italy who is the largest manufacturers of "white-goods" in Italy. They have also helped lot of other countries in setting up similar projects for making "white goods".The company has obtained technical know-how from HITACHI for the manufacture of Vacuum Circuit Breakers.
RANGE OF PRODUCTS
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A strict quality control at PEL has ensured that all its products are produced to the international standards. The company is presently producing the following very high quality goods:-
I. TRANSFORMERS:
Outdoor and indoor distribution transformers of 11/0.415 KV and 33/11 KV up to 5000 KVA.
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Pad mounted transformers, Kiosks, Dry Type Transformers.
Special Furnace Transformers and Silicon Oil Transformers, etc.
II. SWITCHGEARS:
High Tension indoor and outdoor type switchgears up to 33 KV voltage and short circuit level of 750 MVA.
Low Tension indoor and outdoor type switchgears up to 4000 Amps. And 100 KA short circuits withstand level.
Distribution Boards.
Motor Control Centers.
Automatic Power Factor Improvement Plants.
Relay and Control Panels AC/DC Auxiliary Service Panels.
III. ELECTRICITY METERS:
Electronic digital and Mechanical Single Phase/Three Phase electricity meters are produced in accordance with the International specifications.
IV. REFRIGERATORS:
Full range of single door and double door refrigerators. Presently being manufactured in suitable sizes ranging from 8 cubic feet to 17 cubic feet wide body, slim line, and Jumbo size freezers.
V. DEEP-FREEZERS:
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Full range of deep-freezers will resume production shortly.
VI. SPLIT AIRCONDITIONERS.
VII. WINDOW TYPE AIRCONDITIONERS.
VIII. MICROWAVE OVENS.
IX. TELEVISION SETS. Presently we are importing these products under completely built units (CBUs). We also manufactured earlier Window Type Air conditioners and Split Air conditioners.
Management Profile
A committed team of highly qualified, experienced professionals, financially sound and reputed sponsors manages the Company. Through sheer dedication, diligence and the Almighty’s Beneficence
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the management team at Pak Elektron Limited have earned reputation for excellence in manufacturing of electrical as well as home appliances and their marketing.
Chairman/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, FCA
SYED MANZAR HASAN
COMPANY SECRETARY:
Sheikh Muhammad Shakeel, FCA
AUDIT COMMITTEE
Mr. Azam Saigol (Chairman/Member) Mr. Haroon A. Khan (Member) Mr. Tajammal H. Bukharee
(Member) AUDIRTORS
Yousuf Adil Saleem & Company Charted Accountants
Company Legal Advisor
M/S Hassan & Hassan Advocates
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Associated Companies
The following are the associated companies of the Company as per section 2(2) of the Companies Ordinance 1984.
Kohinoor Industries Limited Kohinoor Power Company Limited Kohinoor Energy Limited Azam Textile Mills Limited Saritow Spinning Mills Limited Saritow Pakistan Limited Saigol Brothers Limited Guarantee Life Employment Limited Progressive industries (Lahore) (Private) Limited Art Center (Private) Limited Saigols (Private) Limited Conforce (Private) Limited Kohinoor Autos (Private) Limited Kohinoor Tractors (Private) Innovative Technologies (Private) Limited Raytex (Private) Limited Standard Grinding Wheel Industries Limited
Registered /Head Office: 17-Aziz Avenue, Canal Bank, Gulberg-V, Lahore
Tel: (042) 5718274-5 or 5717364-5 Fax: (042) 5715105
E-mail: [email protected]
Website Address: www.pel.com.pk
Bankers of the Company:
The Bank of Punjab
Bank Alfalah Limited
Faysal Bank Limited
Meezan Bank Limited
My Bank Limited National Bank of Pakistan
PICIC Commercial Bank Limited
Saudi Pak Commercial Bank Limited
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BALANCE SHEET:
ASSETS (Rupees in Thousand)
SHARE CAPITAL & RESERVESJune 30
2006June 30
2005
June 30
2004
Share Capital 1,215,873 1,136,194800547
Reserves 1,467,619 1,167,070 1,576,346
2,683,492 2,303,264 2376893
SURPLUS ON REVALUATION OF PROPERTY, PLANT
AND EQUIPMENT464,171 488,601
NON CURRENT LIABILITIES
Long-term financing 250,365 393,924 703910
Liabilities against assets to finance lease 182,487 123,092 74646
Deferred Liabilities
Taxation 409,093 345,996 258980
Employee benefits 62 0 0
Deferred Income - grant-in-aid 69,814 73,488 77356
911,821 936,500 1114892
CURRENT LIABILITIES
Trade and other payables 1,599,580 836,697 930063
Interest / mark-up accrued on loans and other payables 226,709 140,210 0
Short-term borrowings 3,795,340 2,879,827 1897577
Proposed Dividend 23688
Current portion of long-term liabilities
Long-term financing 321,496 362,825 404774
Liabilities against assets subject to finance lease 105,132 62,287
Provision for taxation - 8,685
6,048,257 4,290,531 3256102
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TOTAL LIABILITIES 10,107,741 8,018,896 6747887
(Rupees in Thousands)
June 302006
June
302005
June 30
2004
NON CURRENT ASSETS
Property, plant and equipment 3,144,904 2,716,401 3594164
Intangible assets 602,465 249,880 4641
3,747,369 2,966,281 3598805
Long term investments 11,227 60,711 96701
Long-term deposits 38,811 25,541 13073
CURRENT ASSETS
Stores, spares and loose tools 58,543 52,713 49157
Stock-in-trade 2,576,026 1,963,765 1309131
Trade debts 2,614,396 1,853,889 980491
Loans and advances 225,113 218,179 565083
Trade deposits and short-term prepayments 287,034 236,489 17530
Other receivables 9,266 270,471 0
Other financial assets 91,022 35,596 0
Cash and bank balances 448,934 335,261 117916
6,310,334 4,966,363 3039308
TOTAL CURRENT ASSETS 10,107,741 8,018,896 6747887
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PROFIT & LOSS ACCOUNT
(Rupees in thousands)
June 30 2007 June 30 2006 June 30 2005
Sales 13,077,670 11,042,160 8,075,382
Less: Sales-Tax and Discount 1,264,183 1,634,142 1,287,500
Sales - net 11,813,487 9,408,018 6,787,882
Cost of goods sold 9,283,623 7,360,351 5,298,489
Gross Profit 2,529,864 2,047,667 1,489,393
Other Operating Income 100,458 112,553 60,014
2,160,220 1,549,407
Distribution cost 2,630,322 590,412 402,348
Administrative expenses 588,981 262,482 285,676
Other operating expenses 356,556 25,108 23,625
Finance cost 52,429 742,130 450,888
Share of loss of associate 937,109 23,337 5,995
Profit before tax 12,162 516,751 380,875
Provision for taxation 707,409 74,609 95,701
Profit after tax 125,165 442,142 285,174
Rupees Rupees Rupees
Earning per share - - -
Basic6.30 4.53
Diluted 5.79 4.27
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Capital StructureCapital Structure
Authorized Capital:Authorized Capital:Ordinary shares of Rs.10 each (Rupees in Thousands)
June 30
2006
June 30
2005
June 30
2004
June 30
2003
June 30
2002
Ordinary Share Capital (Rs.10/- each)
1,500,000
1,500,000
250,000
250,000
250,000
Preference Share Capital (Rs.10/- Each)
1,000,000
1,000,000
- - -
ISSUED, SUBSCRIBED AND PAIDUP CAPITAL:
Issued at Rs.10/- each. Rupees (Thousands)
June 30
2006
June 30
2005
June 30
2004
June 30
2003
June 30
2002
Ordinary share capital:
Opening
Issued for Cash 237,494
237,494
83,525 83,525 83,525
Bonus Shares 367,922
288,243
147,894
100,519
100,518
Issued against building and machinery
1,375 1,375 1,375 1,375 1,375
Issued against Scheme of amalgamation
4,082 4,082 4,082 4,082 -
Closing 610,873
531,194
236,876
189,501
185,418
Preference Shares:Class – A
605,000
605,000
- - -
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Class -- B - - - - -
Closing 605,000
605,000
- - -
Total issued share capital
1,215,873
1,136,194
236,876
189,501
185,418
*The company is in the process of issuing 302.5 milliom class B, cumulative non-voting Preference Shares.
2. BORROWINGSRupees (Thousands)
June 30
2006
June 30
2005
June 30
2004
June 30
2003
June 30
2002
Lease Finance 287,619
185,379
104,532
84,002
65,470
Long-term Borrowing 571,861
756,749
1,078,798
986,065
789,043
Short-term Borrowing 3,795,340
2,879,827
1,897,577
1,132,927
785,376
Total 4,654,820
3,821,955
3,080,907
2,202,994
1,639,889
FINANCIAL SUMMARY
A snapshot of the Company’s performance over the last few years, 2001 to 2006 is as below:
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The Group also holds expertise in trading business which adds to the wide array of business activities already undertaken by the Group.
MANAGEMENT HIERARCHY:
DIVISIONS
POWER DIVISION
Power Division accounted for 47% of the Net Sales of the Company as of June 30th 2006. The sales and profit participation by the Division is high due to high quality standards and future growth opportunities. The Power Division comprises of three departments;
Manufacturing and Quality Control Design and Development Marketing
A brief description of each is as follows:Manufacturing and Quality Control:Manufacturing and Quality Control:
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The Manufacturing Department is responsible for monitoring and execution of production activities for transformers, energy meters and switchgear and also overlooks the vendor development and procurement of local and imported components used in manufacturing of power equipment. The Quality Control department is responsible for maintaining product quality. Transformers and energy meters production is already ISO 9002: 2000 certified while production of switchgear is in process of being certified.
Design and Development:Design and Development:
An independent design and development facility with highly qualified team of engineers has been established. The facility is equipped with state of the art technology and is responsible for developing power distribution products in line with customer Requirements. The facility ensures reliable power distribution to industrial and commercial projects.
Marketing
The Marketing Department is responsible for the marketing and sales of Power Division products. Most of the selling activity involves personal selling. Since the products involved are tailor made to customer requirements, knowing the requirements well and adhering to the quality standards required by the customer is of utmost importance. The Department is responsible for meeting sales target for regular customers and negotiating sales deals.
APPLIANCES DIVISION
The Appliance Division accounted for 53% of the Net Sales as of June 30th 2006. The Appliances division comprises of four departments;
Manufacturing and Quality Control Research and Development Marketing Consumer Finance
A brief description of each is as follows
Manufacturing and Quality Control:
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The Manufacturing Department is responsible for the monitoring and execution of production activities related to the refrigerators and air conditioners and also overlooks vendor development and procurement of local and imported components. Quality maintenance is the prime concern for the success of this segment therefore; a separate Quality Control department is responsible for the pre-sale inspection of products.
Research and Development:
A well equipped Research and Development Centre is responsible for product design and development. The Centre is staffed with more than 30 engineers, designers and technicians. Latest Computer Aided Designing (CAD) and Computer Aided Modeling (CAM) equipment and devices are being used. In addition dies and moulds making shop
is equipped with latest Computerized Numerically Controlled (CNC) machines and uses CAD-CAM and other modern tools.Marketing:
The Marketing Department is responsible for the marketing and sales of home appliances products and also undertakes sales promotion. Sales promotion activities undertaken by this Department involve direct marketing and mass marketing through media. However, the primary focus is on utilizing the dealer network to push sales, through incentive schemes targeted at dealers. The Department comprises 21 area sales offices having over 100 marketing and sales personnel supported by area credit control and ware housing departments.Consumer Finance:
The Consumer Finance Department is responsible for the marketing and sales of Appliance Division products under consumer finance arrangements with banks. The Department was formed in 2003 and focuses on salaried individuals employed in Government organization, private and public sector corporate institutions. The financing plan under consumer finance arrangements is optimized for people with low Salary that otherwise would not be able to afford up-front payments. In this regard; the Company has entered into arrangements with a number of corporate institutions to provide employees with attractive schemes. PEL has already started this scheme with various public sector entities like LESCO, MEPCO, POF Wah Cantt, Pakistan Aeronautical Complex, Kamra, Air Weapons Complex, Hasanabdal, Packages and The Group companies.
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FINANCE DEPARTMENT
The Finance Division manages the financial resources of the Company. It has the overall responsibility of preparing the Company’s operating results, maintenance of financial records, preparation and monitoring of budgets targets, variance analysis, inventory management financing arrangements and dealing with government agencies such as CBR etc. The Division is also responsible for human resources related activities.Information Technology DepartmentThe Information Technology Department is responsible for providing efficient communication infrastructure with an objective of paper less environment and fast and reliable information sharing. The Company has a Local Area Network (LAN) of over 450 computers and Wide Area Network (WAN) linked with the area offices.
JOBS ASSIGNMENTS IN FINANCE DEPARTMENT:
GENERAL MANAGER FINANCE
To take major financial decisions.
MANAGER FINANCE
Rate negotiations. Handling cash INS & OUTS. Bank relations. Handling short term and long term funds requirements
ASST. MANAGER FINANCE
Reports to manager finance Arranging funds for production Preparation of Budget
COURIERS
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Documents correspondence Dealing with other departments to avail the
documents requiredReporting to all the manager of finance departmentOBJECTIVE 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.
HOW THEY MAKE PLANS
Planning is an important aspect for achieving objectives ahead. So while Making planes 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 advanceHOW 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 feasibleOr otherwise.
BudgetingBudgeting:
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Budgeting means to make the estimation of next financial year’s expenses, sales, capital expenditures, Employees etc.In the budgeting first all the Managers send budgets of their relative departments in which the details of the previous year’s actual and next year’s budgeted expenses and also the actual and budgeted employees by their grades are given to the Assistant Manager M. Arshad Ali. These Budgets are sent by all departments by keeping in mind the cost of the products. Then both Arshad Ali and Senior Accounts Officer prepare the following from these budgets in the summary form so that it can be easily presented to Senior Finance Manager Amir Sattar and who shows these final reports to the owner of this firm who in the end approves the entire budget.
Expense Summary. Capital Expenditures Summary. Product Wise sales summary. Daily Report.
About each of them a brief Detail is given below.
(1) Expense Summary:(1) Expense Summary: In the expense summary the expenses of whole year Month wise are prepared in the summary form by using the software budgeting system and also the estimation of employees are given that how much employees will be needed in the financial year and also which employees are going to be promoted. In the Software the expenses and Employees grades are already given you have to just add the data in it and
we also calculate the variance and some of the expenses in some of the departments are not given and for those the code have to be opened. (2) Capital Expenditures Summary:(2) Capital Expenditures Summary:
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In this the capital Expenditures of the next financial year are given and also the detail of each is given where these expenditures are going to be spend and also shown in which month they will occur by using the excel.
(3) Product Wise Sales Summary:(3) Product Wise Sales Summary: The sales summary of all the products by their sale in the local market and also their sale through export and the sale of the products through the Consumer marketing department means that the products which are sold through the marketing and then totally estimated. We also prepare the previous 2 years summary so that we can estimate that our sales has increased or decreased.
(4) Daily Report: (4) Daily Report: In the daily production report the detail about the previous day’s production/Received Qty means how much production or quantity they have produced or received yesterday, dispatch/sales Qty shows how much quantity have been sold or dispatched, Gross Sales shows the gross sales of all the departments, and physical collection shows that how much they have received cash and how much sales is receivable and this report also shows the previous day’s finished goods production which are in the store available today. This is the secret report and they do not show to the internees. For this Report Mr. Ghulam Asghar sends the collection report and Mr. Nadeem –u-din sends the receivables Report through the mail. The hard copy of this report in the final form is send to the Amir Sattar. This report is prepared by the senior accounts officer Mr. Amer Fayyaz Khawaja and sends to the Sr. Finance Manager.
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PRODUCTS HIRARCHY
1. Appliances Division2. Power Division
APPLIANCES DIVISION:The Appliances Division of PEL is the pioneer manufacturer of electrical goods in Pakistan. The Division’s product portfolio comprises of air-conditioners, refrigerators, televisions, microwave ovens, and split air-conditions. PEL is one of the three leading players in the home appliances market.
The Company is engaged in the manufacturing and/or marketing of the following home appliances.
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PAK ELEKTRON LIMITED
POWER DIVISION
APPLIANCES DIVISION
TRANSFORMER ENERGY METER
SWITCHGEAR
REFRIGERATORAIR
CONDITIONER
MICROWAVE OVEN
TELEVISION
DEEP FREEZER
GENERATOR
WASHING MACHINE
The Company’s Appliances Division contributed significantly to its sales in 2005-06. The main reasons for this growth are increase in market sizes along with PEL’s strong brand image accompanied with its extensive dealership network spread nationwide with over one thousand outlets and an after sales service network with over 100 workshops. Another major reason for the increasing growth in the home appliances market is the easy availability of consumer financing at lower interest rates. PEL itself is involved in selling its products through a marketing wing for sales against consumer financing. Availability of Chinese products at very competitive prices has not proven to be that big a threat to the local industry. This is because of the improved quality of the local products and cost efficiencies due to economies in product and raw material purchases hence making the local products competitive with the Chinese imports. In 2005-06, the Appliances Division contributed around 53%to the Company’s sales whereas the Power Division made up the remaining 47%. Refrigerators and Split air conditioners were the main source of revenue in the Appliances Division, whereas transformers and energy meters are the main revenue drivers in the Power Division.
POWER DIVISION:PEL’s Power Division manufactures transformers, switchgear, energy meters, kiosks, compact stations, shunt capacitor banks etc. All the power equipment is assembled under strict quality control and in accordance with international standards.PEL is a major power equipment supplier to Water and Power Development Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC).Over the years, PEL’s power equipment has been used in numerous power projects of national importance. Most of these are tailor made to buyer’s specifications. Due to strict quality standards, PEL has been able to prevent Chinese manufacturers from gaining any market share. However, new entrants represent a threat and the Company is responding by introducing innovations to its existing products. One such innovation is digitization of its electrical meters which is in the development stage.In-spite stiff competition from emerging local and multinational brands, PEL’s appliances and power equipments have consistently gained marked share due to constant innovation and high quality standards. Strategic partnerships with Copeland, Danfoss, Samsung and others have enabled the Company to
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incorporate new technologies into existing product ranges, thus introducing new product features.During the year 2006, PEL retained its market leadership in the Power Equipment market, increasing its market share from 33% in 2005 to 36% in 2006 in the switchgear market and also maintained share of 35% in 2006 as well in the energy meters market. PEL’s leadership in the Power Equipment market is largely due to its strong Research and Development knowledge and high product quality.
MARKET ANALYSIS
HOME APPLIANCES MARKET:The domestic consumer durables industry suffered over the past decade as a consequence of unabated flow of smuggled goods through the Afghan Trade Transit and other channels.The industry enjoyed a boom period from 1992 to 1995 but it received a blow in 1996 when sales tax was raised to 18% from 15%, besides the levy of excise duty. As a result of these measures, seven companies out of a total of 11 either liquidated or suspended their production due to heavy taxation measures and falling demand of consumer durables resulting from price increase. The industry recovered and from 1999 onwards; following the governments tariffs rationalization on imported components and the increasing domestic demand. Almost the entire domestic demand of refrigerators, deep freezers and air conditioners is currently being met primarily by three active players namely Dawlance, PEL and Waves. Dawlance is the market leader in refrigerators, Waves in deep freezers and PEL in window air conditioners. The quality of locally produced goods, competitive prices, consumer financing and after sales service has increased customer satisfaction and sales have been increasing every year. As the market is growing, new brands are being imported from China. The influx of A Chinese product is a threat to the local industry. However the volume level at which the local manufacturers are operating has resulted in cost efficiencies due to economies in product and raw material purchases thereby making local products competitive with Chinese brands. Furthermore, the threat from Chinese manufacturers is further reduced due to the high level of deletion achieved by the local producers. Market Size:
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The home appliances market in Pakistan has expanded in the past several years and the growth is expected to continue. The total size of home appliances market is Rs31, 537 mn
out of which Rs18, 557 mn comes from sales of white goods, Rs11,720 mn from electronic goods, and Rs1,260 mn from gas appliances.
In white goods, refrigerators account for almost 50.44% in sales. The details of white goods category is as follows:In the chart below sales (Rs.) shall be written as (million thousand)
13.950bn and No frost Refrigerators account for Rs 2.025bn. The market is expanding mainly due to the low prices, availability of consumer financing at low interest rates and changing life styles with a trend towards preserving eatables for a longer period.Market GrowthThe refrigerator market has grown at a CAGR of 20.2% in the last five years. The expected growth for year 2005-06 is 35%. The key reason for upward trend is low prices, economic growth and easy availability of consumer financing at low interest rates. If the Same trend continues, sales for 2005-06 are expected to be one million units representing a growth rate of 21%.Competitive EnvironmentThere were four major players in the refrigerator market in 1999-2000 namely, Dawlance, PEL, Waves, and Philips. Philips exited from the market in 2001-02 and since
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Then, the main competition has been between the three domestic brands. Currently Dawlance is leading in the Refrigerators market followed by Waves and PEL Recently Haier has joined in marketing & sale of Refrigerators.
Major Competitors
PEL has been able to maintain its leadership in all three products market and is expanding its market share backed by strong R&D knowledge in power equipment and high product quality.
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Pak Elektron Limited (PEL)PEL re-launched their refrigerator brand “Crystal” in 1999
and obtained good response from the market. The refrigerator was fitted with imported compressor which improved consumer perception of the product and helped boost sales. The Company has recently introduced refrigerators with water dispensers.
- DawlanceDawlance started operations in early 80’s and currently holds
market leadership with annual sales expected to be 305,000 units in 2004-05. The product range includes deep freezers, microwave ovens, split air conditioners and certain kitchen appliances.Dawlance is also running its consumer financing operations in all major cities. The company provides interest free 12 month’s easy installment plan and 24 months installment plan at an attractive financing cost. The company’s R&D is very active which resulted in Dawlance been able to introduce new designs after every 2-3 years.- Waves
Cool Industries is primarily a deep freezers manufacturing company which started its operations in late 80’s. They started refrigerators production in mid 90’s under the brand name of “Waves”. This is relatively a new company and continues to make efforts aimed at gaining market share.
POWER EQUIPMENT MARKET:
The demand for power equipment is on the rise in the country due to system revamping and village electrification projects being implemented by the utilities and more investment in electricity transmission and distribution by the private sector. Furthermore, the improved economic outlook of the country is expected to have a positive impact on the power equipment business.
The Power Division market mainly comprises of Transformers, Switchgear and Energy Meters. The total market size is in 2003-04 is Rs 7.031bn while PEL’s share of the market is over 38%.
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ACCOUNTS PAYABLE
CONTENTS
1. Credit Purchase2. Supplier Direct Purchase3. Cash Purchase4. Vendor Purchase
Receipts Procedure (Local)
Departments raise indents to local procurement section for their required items.
Local procurement section arranges to purchase the indented items in form of four types of purchases.
Credit Purchase
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Supplier Direct Purchase
Cash Purchase
Vendor Purchase
1. Credit Purchase:
For credit purchase local procurement section raise purchase orders to local
suppliers/parties. PO bears the quality computer code rate and value drawing and all
specifications of required items. PO also bears the terms and condition of payment and
delivery schedule according to production plan.
2. Supplier Direct Purchase:
In this type of purchase no PO is raised to supplier/parties.
3. Cash Purchase:
Items purchased through cash by Company Purchase are called cash Purchase.
4. Vendor Purchase:
In this type of purchase company to local vendor for Die-casting supplies raw material,
Molding, Chroming, Printing, Powder costing etc.
Vendor claims only processing charges.
When items are purchased through any type of purchase as mentioned above.
Procurement section makes a Purchase Challan against cash memo or delivery Challan of
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supplier and hands over to receiving store. In receiving store, Store Keeper cheeks the
items according to purchase Challan. If he finds any discrepancy he mention on Challan.
After counting or weighing the items he makes a GRN and hands over to QC department
for inspection. QC department inspects the items according to their standard. Sub standard
or defective items are rejected. QC department gives the remarks or reason of rejection (if
any) on GRN.After approving the items QC supervisor sins the GRN and send it backs to
Receiving store. Storekeeper assigns a Serial No and date to GRN in its relevant group
such as R C A T D P X T E N etc. Now receiving store process is OK. After this Store
Keeper sends the items along with GRN to relevant Store. Here related Storekeeper again
checks the material according to GRN then he posts it on his Bin Card. Material is they
stored in raw material and them issued to jobs as required by production department. After
posting the GRN on Bin Card Store keeper sends the GRN to Accounts Department where GRN is posted into stock ledger after its valuation.
ISSUE PROCEDURE
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Production department can receive material through a material request form that includes
items code, quantity FB No. Cost center No. Etc. The relevant department head must
approve this form and all it is done through online system, which is subsequently, receive y
the relevant store for its issuance. Stock is issued (if available) after necessary formalities
such as store allocation etc. If there is any difference between requested Qty and available
stock then storekeeper changes the qty and posts it on Bin Card. After pasting into Bin
Card storekeeper sends the requests to Accounts Dept for its value wise processing.
Accounts department allot serial number aromatically, date and value etc. before the
incorporation into stock ledger.
BOOK KEEPING
CONTENTS
1.Cash Payment Voucher
2.Cash Receipt Voucher
3.Bank Payment Voucher
4.Bank Receipt Voucher
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5.Journal Voucher
Expense Types:
Detail of following expenses is maintained in this section.
Medical Expenses
Traveling Expense
Inland
Local
Foreign
Utilities Bills
Electricity
Mobile
PTCL
Gas
Etc
Stationary Expense
Employee Welfare Expense
Entertainment Expense
Postage & Telegram Expense
Rent rate & Taxes Expense
Fee & Subscription Expense
Cleaning & Sanitation Expense
Procedure for the approval and payment of these Expenses is given as
following.
Section Incharge
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Admin
(Verification)
Accounts
Book Keeping section
Voucher preparation
(Approval)
Payment (Through cashier)
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