CHAPTER NO.

1. INTRODUCTION
1

Looking at the world as a whole a new and dramatic global order had emerged since the end of the cold war, and is continuing to develop into the new century. Europe and North America, and N.A.F.T.A. respectively illustrate the growing trend to create regional economies. It is Asia however that is attracting global attention as the most dynamic growth region in the world today and is likely to drive the world economic development as we further move through the time. Despite of the tendency towards re-location, most developed countries have nevertheless succeeded in maintaining a local textile industry, which is both viable and competitive at international level. This is mainly due to their unprecedented efforts at modernizing and restructuring the production process. The textile industry in developing countries has increasingly placed emphasis on quality, the rapid response to growing demand and innovation in the areas of fibers (micro fibers) and high value-added textiles (industrial textiles). The Textile Industry all over the world is trying to consolidate through re-adjustment strategy. The markets have become very competitive. There is a fierce competition amongst the low cost producers mostly in Asia to take up the share being lost by high cost European Manufacturers. Pakistan has to compete with countries, which are similar in factor conditions and comparative advantages. The close competitors are India, China, Turkey and Indonesia, now a days Bangladesh is emerging a close competitor in this sector. Due to cotton price edge the Indian Textile Industry had been able to compete us in our traditional yarn and cloth markets. These market changes are developing pressure on our Textile Industry and the industry is in the process of transition for a structural change to rebuild its competitiveness. Such structural changes are always painful. The industry in general is not in a comfortable position. Further the declining profitability has aggravated the credit access problems and ability to finance new investment, which is so important for improving quality and productivity. Excepting few cases no attention has been given to skill development both in manufacturing and marketing. Lack of product diversification and passive selling has kept industry to low market segments with earnings depressed.

1.2

History of Textile Industry of Pakistan

2

Increase in the cotton production and expansion of textile industry has been impressive in Pakistan since 1947. Cotton bales increase from 1.1 million bales in 1947 to ten million bales by 2000. Number of mills increased from 3 to 600 and spindles from about 177,000 to 805 million similarly looms and finishing units increased but not in the same proportion. It employs 50% of industrial labor force and earns 65% foreign exchange of total exports. Pakistans textile industry experts feel that Pakistan has fairly large size textile industry and 60-70% of machines need replacement for the economic and quality production of products for a highly competitive market. But unfortunately it does not have any facility for manufacturing of textile machinery of balancing modernization and replacement (BMR) in the textile mills which need to think about joint ventures for the production of complete spinning units with china, Italy and production of shuttle less looms (Projectile) with Korea, Taiwan and Italy. Cotton textile industry has been premier industry in Pakistan and a major source of export earning and employment. It also helps in value addition to the manufacturing sector of the economy. During the six years between 1993 and 1998, production of yarn (in quantity terms) registered a steady annual growth rate of 302% in Bangladesh and 405% in India. On the contrary, Pakistan registered a growth rate of 101% per annum in yarn production although it ranked third after China and India in the global yarn production during the same six years. In exports, while Taiwan, India and the republic of Korea registered an annual increase of 18.1%, 27.7% and 5.4% respectively during 1993-1998, Pakistan registered a negative growth of 4.8% one important development was that till 1997, Pakistan was the worlds largest exporter yarn followed by India. However, in 1998, India gained the NO 1 position, leaving Pakistan at NO 2 In the case of cotton cloth production, a number of Asian countries have been emerging in the international market to compete with Pakistan. These countries are Bangladesh, India, Taiwan, Indonesia, Thailand, Turkey, Sri Lanka and Iran. The above-mentioned presentation in the context of international scenario highlights the adverse position of Pakistans textile industry when is likely to continue further following the full implementation of WTO agreement from 2005 onwards when an era of free trade will 3

start globally. Notwithstanding the above fact, current stagnation in the local textile industry can be overcome through efforts, consistent with charges occurring in the international market. It must be appreciated that all successive governments since the birth of cotton textile industry in Pakistan have been encouraging the textile exporters to penetrate into new market and also to broaden the base of exportable commodities by including value added textile goods so that reliance on exports of cotton, cotton yarn and coarse fabrics gradually become minimal. Reflecting on the state of affairs, Abid Chinoy, Pakistan cloth merchants Association (PCMA) Chairman, Appreciated governments efforts to encourage new exports and finding new markets, which need aggressive export marketing. The steps taken on the monetary front, such as the frequent devaluation of Pak rupee in terms of dollar could not improve the cost competitiveness of exportable products due to increase in prices of the local and imported inputs of the local textile industry, and also due to inelastic demand for the Pakistans exports. It has been rightly mentioned in the latest stage bank of Pakistans annual report (FY01) that, Over the years Pakistans exports receipts have been vulnerable on account of the narrow base of exportable items, concentrated markets and low value addition this indicated that the growth in the countrys overall exports, including textile products which contributed more then 60% of total export receipts each year, could to be related some cosmetic and ad hoc measure like devaluation of Pak rupee and concession export credits. The first textile commission, which was constituted by the first material law government in 1960 had, inter-alia, recommended that an economic size textile unit should preferably have 25,000 spindles and 500 looms. No new mill with only 12,500 spindles and without looms should be sanctioned. However, no need was paid to the advice by the sanctioning authorities with the result that an excess capacity had tented to build up in the spinning sector. During the period 1973 to December 1992, some 71 spinning units with 1,136, 835 spindles, 6,600 rotors ands 7,329 looms were closed down. In 1992, a foreign consultant 4

form was hired by the government to look into the stagnating conditions in the local textile industry. One of the observations of the foreign consultant was Pakistan has failed to make real progress in the international market and is being over taken by many of the neighboring competitor countries. The spinning sector, traditionally the core of the industry, is already in the crisis with many spindles lying idle and mills being forced to close. Worse still, this sector will be hit by the projected decline of its major markets in Japan and Hong Kong in the coming years. Another important strategic recommendation given by the foreign consultant very much relevant to the current conditions: It is vital that companies play very positive role in the markets, which each one having its own marketing activity, whose job is to understand the need of the customers and the ever changing competitive dynamics of the markets. In order to improve exports, Pakistans Readymade Garments Manufacturers and Exporters Association (PRGMEA) has urged the commerce minister Abdul Razzak Dawood to set up an Apparel Board for the promotion of export of woven and kit garments which fetch US$ 2.5 billion foreign exchange for the country. The industry experts are of the opinion that in the order to have a strong industrial base, Pakistan economy need investment upswing. Pakistans economic growth performance during recent years has been dismal: as against the average growth rate of 6.1% in the 1980s, the half and 4.0% in the 2nd half of the 1990s. The major micro-economic instability factors like high inflation rate, budgetary deficit, continuous depreciation of rupee, economic sanctions, etc. could not help the investment process. Such an environment cannot be conducive to investment and growth. Exporters of textile products have found the target of US$ 10.4 billion set by the government for the year 2002-2003, as achievable and termed it a realistic approach. The textile sector which constituted 69% of total export during 2001-2002, believes that enhanced quota by the European Union and Turkey would make this possible to fetch another US$1 billion this year. The rise in export of value-added products from Pakistan was another point of encouragement for the textile sector. The export of value-added products rose to 57.4% 5

from 53.9% last year-a clear sign that we are moving in the right direction, said the Chairman of all Pakistan textile mills association. The trade policy is considered an acceptable paper, but in the industry does not fine anything that could lead to a high level exports achievement and remove trade imbalance. Pakistans textile sector earned US$5.77 billion during the outgoing year, compared with US$5.577 BILLION OF 2000-2001 indicating a growth of 0.69%. Textile vision 2005 has identified the present status and opportunities to make in roads in conventional and hew markets and has developed sect oral recommendations, hence the sect oral committees set up by the federal textile Board (FTB) would play an important role be ensuring the availability of quality raw materials on competitive prices and improvement in designing, and would adopt quality standards and increase productivity levels. It would attract foreign brands and promote Pakistani brands with world-class standers.

1.3Vision of Textile Industry of Pakistan

An open market driven, innovative & dynamic Textile Sector, which is: I. Internationally Integrated II. Globally Competitive III. Fully equipped to exploit the opportunities created by the MFA Phase out and this enables Pakistan to be amongst the Top Five Textile Exporting Countries in Asia. While going through the draft summary report on Textile Vision 2005, the first and immediate response is that after a long time a sincere effort has been made to revamp textile industry in Pakistan. The enabling backdrop was termed a vital pre-requisite to the viability of the strategy. Some of these factors are not controllable and there is still very heavy reliance on the GOP support/incentives. Unless the industry is able to stand on its own feet firmly, without the crutches of incentives/protection, it will be very difficult to compete in the global markets. The draft of Textile Vision 2005 was circulated after the stakeholders of the textile sector attended the presentation of the strategy on April 14, 2000. This formed the basis of the final deliberation. However, the document, in no way, represents the final policy proposals to the GOP by the Textile Sub-committee chaired by Tariq Sayeed Saigol. Three different scenarios have been suggested for the strategy 6

1.4
1.4.1

Three scenarios of Textile Industry

Low road

I. Exports will maintain the historic growth rates II. There will be no change in the product or the market mix
1.4.2

Do-able Exports growth rate will match each importing country's growth rate of

I. II. III. IV. V. VI. 1.4.3

unit imports Unit exports of garments to Middle East market will grow at 3 per cent annually Pakistan will capture 0.5 per cent share in the Japan and Hong Kong markets Unit price of cotton yarn will grow at 3 per cent and that of fabrics will grow at 4 per cent annually Share of 100 per cent synthetic garments in the garments exports will 13 million bales of cotton will be consumed High road increase from current 3 per cent to 30 per cent, in line with the world trend

I. Value added products (garments and made-ups) will be the engine of export growth (20% annually) II. Export product mix will be balanced by giving extra push in the women and woven garments III. Fabrics exported will contain 55 per cent processed fabrics IV. Total cotton production will be 16 million bales of which 13 million will be consumed Three different scenarios via, Low Road-Do-able, High Road scenarios have been proposed for the strategic development of the Textile Industry to give a quantum jump in the export of textile products. An investment of approximately 5.00 Billion Dollars has 7

been proposed for the next four years time to achieve a minimum growth rate of 12% on present export base.

1.5

Structure of Textile Industry

According to IGATEX Pakistan which took place in Karachi, Pakistans largest city, and is slated to return in 2008 that the republics textile and apparel industry is consisted of ginning, spinning, man-made fiber, weaving, finishing, apparel, terry towel, tarpaulin and canvas, and knitwear machinery sectors? The textile and apparel industry as a whole employed approximately 40 percent of total industrial workers and accounted for 46 percent of total manufacturing. There were 1,221 ginning units, featuring an installed capacity of 20 million bales of cotton. The spinning sector comprised 408 spinning units, with an installed capacity of 157,143 rotors; and 50 composite units, with an installed capacity of 10.1 million spindles. The countrys 10 man-made fiber units had an installed capacity of 660,000 tons. While the shows organizers did not detail the number of weaving units in their report, the Pakistani governments Board of Investment reported 124 large and 425 small weaving units, with a total production capacity of 4.4 billion square meters of fabric. The show report also did not include the installed capacity for the 106 finishing units in the organized sector and 625 finishing units in the small-scale sector. However, the investment board noted a total finishing capacity of 4 billion square meters. With regard to finished textile goods, the countrys 5,000 apparel units featured an installed capacity of 450,000 sewing machines, show organizers reported. The installed capacity for Pakistani knitwear manufacturers numbered 12,000 machines. Tarpaulin and canvas production capacity totaled 100 million square meters, while installed capacity of terry towels totaled 7,500 looms. In contrast to IGATEX Pakistans post-show report, the International Textile Manufacturers Federation (ITMF), Switzerland, in its 2005 International Textile.

1.6

Government Initiatives

In 2005, the Pakistani government created a special textile sub-committee in order to formulate a new textile strategies and policy in the hopes of revamping the textile 8

industry. The sub-committee submitted a report entitled "Textiles Vision 2005" which included a number of recommendations including improved product quality, equipment upgrade, developing human resources, aggressive targeting of new markets and development of high-powered leadership for the textile sector.

1.7

Exports

Cotton and yarn are Pakistan's primary textile exports. The textile industry accounts for over 60 percent of Pakistan's total exports. The All Pakistan Textile Mills Association is the organization that regulates the industry, which is currently facing a number of challenges, including the need to improve quality.

1.8

Competition

Pakistan must compete with other producers similar in conditions and comparative advantage. The Pakistani Textile industry's biggest competitors are China, India, Indonesia and Turkey. The cost of power in Pakistan is comparatively high.

CHAPTER NO.2 INTRODUCTION OF GOHAR TEXTILE

2.1

History of Gohar Textile

10

Gohar Textile Mills was incorporated in 1993 in the most renowned textile city of Pakistan i.e. Faisalabad. Ever since its formation it is exporting its total production to the International Markets. Gohar Textile Mills (Pvt) Ltd is a group that is expanding from a modest base on a very consistent & practically enviable growth rate. We are a supply partner for businesses who value the quality and like to enjoy it on a consistent basis.

2.2

Organization Profile

Company information Name :- Gohar Textile Mills (Pvt) Ltd Chairman and chief executive officer Ch. Maqbool Ch. Liqat Ali Director Operation Aftab Gohar Chief finance officer Sh. Asif Bankers Habib bank Corporate Alflah Bank Allied Bank Head office 208- Chak Road, Zia Town, Faisalabad. Mills 3-Km Chak Jhumra Road, Khurrianwala, Faisalabad.

2.2.1 Organizational hierarchy chart

CHAIRMAN CUM-MANGING DIRECTOR 11

CORPORATE GENERAL MANAGERS

Vice President
MANAGERS (M1-M4)

EXECUTIVES (E1-E2)

[rosodmemtPresident
OFFICERS (O020002O2)020002)O2)Managerxec

utive Vice President

STAFF (S1-S4) Management hierarchy

12

2.3

MISSION STATEMENT

GOHAR aims to be a world class textile organization producing diverse range of products for the global textile market. GOHAR seeks to achieve customer delight through excellence in manufacturing & customer service based on creative combination of state of the art technology & human resources. GOHAR is committed to be responsible corporate citizen.

2.4 Products
Gohar Textile Mills produced different high quality export oriented products to the international market. These are as under.

Quilts(Comforters) Bed linen Kitchen linen Processed fabrics Grieg Fabrics

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We are the manufacturers of synthetic hollow fiber filled duvets, pillows and mattress protectors. Our fibers are processed according to modern-world health & safety standards. The Variety of patterns that can be quilted is countless. Automatic size and measurement control feature are built into the machine. 100% product inspection for quality is how we ensure our claim of consistency on high standards. At Gohar we supply an exotic collection of exquisitely designed bed linen to turn your bedroom into a paradise of luxurious comfort. In-line inspection while the product is still on the machine reduces rework cost and time. Various types of button attachment are available through the specially designed machines. Here again the 100% of the product is inspected for even the most minute faults or deviation from the specifications. At the packing stage the affixing of stickers and their positions are specially observed.

2.5

R&D Department:

In order to achieve and maintain market leadership, we have invested significantly in extensive research and development facilities to stay abreast of latest trends in print and fabric confection we get consultation from European designers and even our representatives visit various top-of-the-line stores in foreign markets regularly. That market data is then converted into our own registered designs through our R&D department and is offered to our customers.

2.5.1 Quality Policy

To develop and maintain a consistent quality standard for our customers through reducing the tolerances to the minimums that are practically possible. We fight and win the quality war and not the price war.

2.5.2 Quality Assurance/Lab:

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The equipments are calibrated after a specific time period to maintain the stringent testing conditions. Periodic maintenance of individual machines is defined and is carried out accordingly on time and are monitored through the ISO systemization. Traceability of the produced article with the machinist and the machine numbers is another feature to have the quality assured. Customer standards and procedures are carefully documented and administered through the merchandizing team. We have been approved over the years in quality audits by our customers like IKEA, M&S and others.

2.6

Shipment Efficiency

Critical paths are made and monitored by the PPC department to ensure timely handlings of the orders. Critical paths of each order / Job are prepared and are sent to customer so that both the sides abide by these to achieve timely shipments

2.6.1 Sales Figure

Gohar Textile Mills last years annual turnover was US $ 24 Million. This has seen a consistent double figure growth in the last three years respectively.

2.6.2 Strength
No outside financing so we can under take big orders for longer periods without having to think about any financial constraints. High Cumulative Customer retention rate since the start of operations Sustained growth rate of annual sales turnover. Consistent Quality ; Timely shipments

2.7

Major Customer

The industry leaders who are our top four volume customers are,

IKEA Europe. 15

Metro Group Europe. Marimac Canada. PID Designs Canada

16

CHAPTER NO.3

3. FIELDS OF ACTIVITIES
In any textile following are the elements of a business operation: Spinning Weaving Grey Room Processing Singeing Desizing 17

Scouring Bleaching Printing Dyeing Finishing Folding

III.1 Spinning Department:

Gohar Textile Mills (Pvt) Ltd has two spinning units situated in Faisalabad. These units are equipped with the latest machines in all of their departments. In the spinning units the fiber is converted into yarn, and as this the quality of yarn is very important in the textile sector so spinning units have a lot of importance. Generally the spinning mills mechanism is very similar. It starts from the mixing department where the bales of cotton are mixed and at that section the most visible impurities are taken out. This mixed cotton is then taken to the blow room by a machine. After going through a process it is taken to the card room for the next process. After the card room the route is taken by keeping in view that whether carded yarn is the end product or the combed yarn. The combed yarn is of better quality and its process is a bit bigger than the other one. For the carded portion the drawing breakers & drawing finishers are used to prepare the fiber to a certain level so that the process on the simplex machine can be carried out. On the other hand, in the combed portion, after the drawing breaker the cotton goes through the lab former, & after that it goes through the combing machine, where the comber nail and comber sliver are separated. The comber sliver, after passing through the PC drawing & Drawing finisher goes to the simplex machine. The product that comes from the simplex machine is then taken to the Ring section where the yarn is to be made. Finally after passing through the auto cone the yarn comes in the packing department. In Gohar the process of Ultra Violet Checking is also practiced to ensure the quality of the yarn. 18

As this process is very important so there are some common parameters on which the quality of yarn is judged. These parameters have been listed as below:

III.1.1
Length

Important Parameters of Fiber:

Strength Micronaire value Color grade Neps / gram Trash percentage

III.1.2

Important Parameters of Yarn:

Yarn count Strength LCSP U percentage Thin Places Thick Places Neps IPI (Imperfection)

III.2 Weaving Department:

The weaving units are really very well equipped with the latest machinery to make the best possible product for the customer to gain the customer satisfaction. Most of the machines in the weaving unit are of new technology & mill has a very good check on the quality of fabric produced by its Quality Control department. 19

The end product of the spinning unit is the starting point of the weaving unit. When the cones of the yarn are brought to weaving unit, it is then taken to the warping zone in which the beams are prepared. These beams are then taken to the sizing section where the different chemicals are applied to the yarn so that the weaving of the fabric can be done with the minimum breakage of yarn. After sizing the process of drawing inn is applied so that the yarn could be converted into fabric. After the drawing inn the beams of the yarn is then taken to the Sulzer Looms so that the yarn is converted into the weave product. When the greige is made, then it is taken to the inspection department, where a lot of quality check is done. At the first step the fabric is classified into two types, i.e. A grade & D grade. The D grade fabric is either used in the B grade sale or in gathering of the fresh pieces. While the process of A grade fabric is a bit longer. The A grade fabric after mending, goes to the checking machines, from where it is taken to the rechecking machines. After rechecking either the greige is rolled or folded & packed according to requirements of the buyer. During all the above process, quality is the main purpose of the people. The weaving units check the product quality as under:

III.3 Quality Control Department:

First of all the people of Gohar checks the quality of yarn before taking it into the process. Following are the yarn characteristics that are checked before taking it into the process: Count Testing Strength Testing TPI 20

Hairiness Testing Thick & Thin bases

At the warping section the following characteristic is checked: Breakage Report When the sizing process is applied, the following two tests are applied: Abrasion Test Strength Test

After completion of the greige the gsm test is applied so that to have the best customized product. Finally in the folding section checks are applied at every step of the folding process. A few of the main testing equipments that we have available at our lab are: 1. 2. 3. 4. 5. 6. Data Color 650 Series Model 2006 HT Dyeing Machine Lab Dyeing Padder Crock Meter Nu Martindale Pilling tester Fume Cabinet

Three lot samples from minimum every 3000M is taken and is tested for construction, composition, count, GSM, Tegwa, Absorbency, pH, Pilling, Whiteness, Wet and Dry washing and rubbing results. All these results and then logged for order history and for improvement in future handlings Capacities: Confectioned (Non Filled) Sheet Sets. Curtains. Pillow Shells. Sofa Cover. 21 200,000 sets a month 100,000 pairs a month

Other Products whose production levels vary are Kitchen Linen. (Complete Range)

Confectioned (Filled) Quilting. Pillows. Chair Pads. 120,000 pieces a month 50,000 pieces a month 30,000 pieces a month

III.4 Processing Department:

Processing Unit of every textile mill has a paramount importance because it actually provide the finish fabric product which is either sent to customer either as a piece good or as made up after converting the fabric into the required stitched product. The processing unit of Gohar comprises of the following department: Bleaching Department Finishing Department Printing Department Dyeing Department Folding Department Quality Control Lab Digital Design Studio & Engraving Department Sample Room Production & Planning Department

III.5 Bleaching Department:

The bleaching department of Gohar is equipped with the latest machinery to compete with the market. Bleaching department has the following machines: Singeing & De-sizing: Water Mangle:

22

The above are the machines & a very brief overview of the machines. The bleaching department is like a back bone of the processing unit. After weaving mill, the fabric is brought to the bleaching department where it is prepared on the above machines so as to be prepared for the Printing or Dyeing.

Current capacity:
Current capacity of bleaching is 70,000M per day and another 60,000M per day capacity have been added since December 2006. All our bleaching method is Hydrogen Peroxide based. The Quality Control people ensure the Quality of work in the Bleaching to fulfill the collective goal.

III.6 Printing Department:

The Printing department of Gohar is well established. It has one latest rotary. It is a Reggiani 2005 Model Machine. It has 15 color options. Working width is 3.2 Meters and the capacity is 40,000M per day. We are able to do the three standard design repeats (namely 640mm, 819mm, and 914mm). The mesh categories that we can do are 80, 125 and 165. The Printing department of Gohar is working at its best & producing really good stuff. After the printing from the rotaries, the route of the fabric depends on the dye class. If the reactive dyes have been used, then the fabric will be taken to first of all Ager Machine & then Goller Soaper Washing, then to Stenter finish & finally to the calendar. On the other hand the fabric treated with pigment dye is taken to the curing machine & from there it is taken to the calendar after the required stenter finish. Now in the following line, well see the specifications of the Curing & Ager Machines: Curing Machine: Ager & Curing Machine: 23

III.7 Finishing Department:

Finishing department of any textile mill has a very significant importance because it acts like a hub in the Processing. Almost every fabric which goes through processing unit, it has to be passed through the finishing department. The finishing department of Gohar Processing unit is famous for its quality work. It comprises of many latest machines which includes Stenters, Cylinders, Raising Machines & Sanforizing Machine. Types of Finishes: There are two major types of finishes: Chemical Finishes Mechanical Finishes

The finishes in which no chemical is used is called the mechanical finish, a very good example of mechanical finish is Calender Finish. On the other hand the finishes through stenter are known to be the chemical finish. The finishes are of the following types: Normal Soft Super Soft Chintz Anti Pilling Anti Wrinkle Water Proof 24

 Easy Care Soil Repellent Sanforizing Machine: The Sanforizing machine is used for relaxing the shrinkage of warp. The machine possessed by Gohar has a workable width of 114. It is basically used either on customer demand or in case of Garments. The standard is 5%. Gohar has one Sanforizing machine in its processing unit.

III.8 Calendaring Department:

Rameisch Guraneri 2005 Model machine customized for High Temperature and High Pressure which is very suitable for maximum Chintz finish. Heat source for this machine is Thermo-oil.

III.9 Folding Department:

The folding department of the Gohar has a daily production of 1,00,000m. The folding department is the last department of the Processing Unit. After the folding unit the fabric is transferred to GSC. The folding department has two kinds of machines; the kind is rolling machine while the other kind is of folding machines. It depends on the requirement that which kind of machine would be used. In the folding department of Gohar latest 4 score method is used for the inspection purposes. Quality checks are made at every step of processing unit.

III.10

Engraving:

The Engraving Department of Gohar Textile Mills (Pvt) Ltd is equipped with the latest machinery along with the manual machinery for the process of exposing. In the Engraving Department of Gohar, the screens are generally prepared which are then used in the printing process. 25

Sizes of the Screens: Following are the three repeats of screens which are used in the Engraving Department: 640mm 820mm Similarly the widths of the screens are of the following five kinds: 2650mm 1850mm 1620mm The selection of the screens depends on the design requirement of the print. The most important thing which should be kept in mind is that only one screen should be used for one color that means the number of screens will be equal to the number of colors which will be used during the printing process.

III.10.1

Coating Stage:

The first step which is taken in the formation of the screens is to coat the screen with SCR 100. This coating is done for the purpose of blocking the meshes of the screen so that the required king of design can be made through the screen. The coating of the screen takes almost 8-9 minutes.

III.10.2

Heating Stage: These screens are then heated in the ovens so that to carry out the process in the best possible manner. When the screens are heated in the proper way then they are taken to the exposing machines. The heat is provided to the screens so that to fix the SCR 100 so that the exposing stage should be started.

III.10.3

Exposing Stage:

26

Gohar Textile Mills (Pvt) Ltd has two exposing machines, one of them is manual and the other is fully automatic. The automatic machine is the Wax Jet. The process of exposing stage is different for both the machines. In the process of Manual Machine, it is quite a time taking process. In this machine, the presence of machine operator is very important; otherwise the time for each screen will be higher than the original one. Earlier most of the work was done through this machine but now the major load has been shifted to Wax Jet. Irrespective of these facts the importance of this machine is still there. All sizes and widths of the screens can be prepared through this machine. Basically the manual machine is used for the word of design studio. The Wax Jet machine is fully automatic. The work done through the digital design studio is done through this automatic machine. The speed of exposing through this machine is relatively higher than the manual machine because there is not such need of operator at every stage of the exposing. The process at this machine does not effect because of the presence of the operator. The exposing is being done through the wax on this machine that is why it has such a name. The mechanism of this machine is that the machine is linked with the digital design studio, so the operator can access any of the prepared design in the studio. Then the wax is applied on the screen in such a way that the wax is applied on that place from where the operator want to open the meshes. Then the lighting process is done i.e. the screen goes through high power light. The result of this process is that the place where only coating is there and there is no wax, at these places the coating got fixed in such a way that the meshes are blocked in a better way. After this Exposing stage the screen is taken to the next stage.

27

Gohar has ordered for ink jet machine which will enhance the production capability of the engraving department.

III.10.4

Washing Stage:

The screens are then taken from the exposing machines to the washing area. This is the area where the screens are washed so that the black portion can be washed from the screens. This is also called the Developing Stage. The screens are then kept on the light stand to see that whether the results are satisfactory or not. When the staff feels that the design is satisfactory then they send this screen to the heating machine for curing.

III.10.5

Curing Stage:

The curing is being done through an oven. The screens are kept about 20-25 minutes in the oven. This heat fixes the design on the screen so that after the final touch the screen can be sent to the next department.

III.10.6

Enduring Stage:

During this stage the ring type iron is fixed on both the sides of the screens so that the screens could be taken to the printing department for printing.

III.10.7

Touching Stage:

During the touching stage the final work is done. In this stage if there is any extra patch on the screen, then they are blocked with SCR52 so that the correct effect can be drawn on the fabric. This is the final stage of Engraving Department. After this step, the screens are then taken to printing department.

III.11

Design Studio:

The design studio is a very important department of Processing Unit. The importance of design studio is because of the reason that without its right work nothing correct can be

28

done. The presence of good design studio is very important for any good textile export organization. The buyer sends the desired design in the following forms: Through Sketches Through Fabric Sample Through CD swages Now after having the concept of design, it is then the responsibility of design department to make the screen design, to select the sizes of the screen, to select the repeats of the screens and most importantly to make the films and designs so that to have the same designs during the printing process as required by the buyer. In the digital design studio the work is being done through the latest machineries and software and dedicated and educated persons are there for the purpose carrying out the process. All of the work in this studio is done on the latest machines and the work can be accessed through the Wax Jet machine. In the other design studio, the work is being done through the experienced persons. In that studio the guideline is the first thing which is made at the start. After this step, there comes a chain in the design studio such as to separate the colors up to making the and preparing the films which can be used in the engraving department.

Cutting department: The cutting department is the first department of GSC, which takes the fabric. The fabric, which is to be stitched, is brought from the folding department to the cutting department. In this department the fabric is cut according to the specifications & need. From the cutting department the fabric is transferred to the store from where the fabric is issued on the required floor according to the freezing plan. The cutting department objectives 29

III.12

o Quality control o Cutting o Minimize Wastage So cutting department was performing these responsibilities. Mr. Arif the Cutting supervisor who shared the rules of cutting that is the foundation of the complete stitching department. Those are One: LENTH FOR LENGTH (L*L) Two: WIDTH FOR LENGTH (W*L) The Process flow of cutting department is as below SAMPLE PROGRAMME CUTTING Stitching Department (GSC) Gohar has two stitching units. 1: One is situated in Kharurrianwala 2: The other is situated in Saeed Colony. 75 helpers are daily wages working as quality checker in the whole stitching department. 200 stitching machines in the whole stitching unit. Every machine operator has a unique no to find out the any type of the fault. The objectives of the stitching department are o The cost minimization and o To minimize wastage o Best utilization of time o Quality control by line checker Types of stitching 30

o LOCK STITCH, o CHAIN STITCH, o TWIN NEEDLE, o WORK STATION o Blind stitch o Over lock o Flat lock

III.13

Dispatch Department:

Dispatch department is performing two functions WARE HOUSE, MAID-UP DISPATCH

Dispatch department is responsible to dispatch all types of Export after packing. It depends on the marketing department when it should be dispatched. It is not necessary to dispatch daily. Dispatch department is to pack and dispatch report preparation the prime responsibility is to make maid-ups dispatch Report. Dispatch Department has a continual liaison with Marketing Department and to fix stickers according to the customer demand on the cartoons. The dispatch report also send to the head office and as well as customer. Work force is use for loading or shipping in container. Container Type: Twenty fitter lengths Forty STD 8.5 feet length Forty STD = 9.5 height.

31

From cutting to dispatch process is as below Cutting stitching Packing dispatch

III.14

Commercial Department:

Along with the cutting section, there is another important depart named as commercial department. The working of commercial department starts from receiving the stitching programs. First of all, they see whether it is a new order or a repeat order. Then they issue a demand order through their Purchase Department. It is the duty of the commercial department to arrange all the equipment needed in the stitching unit for every bulk order. The products which are the responsibility of the commercial department includes label, fusing, polyester rope, stiffener, insert card, poly bag, stickers, size stickers, identification sticker, barcodes, security codes etc. Quality is most important consideration while production in Gohar. This is why the quality checks in stitching department are of very good level. This shows that the Quality checks in Gohar Sewing Units are of international standards. As the stitching department is the last department before the dispatch of goods so a lot of responsibility comes on its shoulders. There are sample rooms in the stitching units so as to fulfill the sample stitching requirement for different markets to ensure customer satisfaction.

III.15

Export Marketing Department:

The export department of Gohar Textile Mills (Pvt) Ltd is known to be the best marketing department in the whole textile industry because of the commitment and dedication of employees, the determination of work & the best management system. Gohar Marketing has a very strong liaison with their customers around the world. Thats why Gohar has different segments on the basis of different regions like North America, Australia and Europe.

32

Every region has a different Export Manager and its whole staff. The marketing responsibility is not only to just sales and marketing it has also to find out new horizons and new ways. Thats why Managers visit to new Markets around the world.

33

CHAPTER NO.4

IV.1 LETTER OF CREDIT

The English name letter of credit derives from the French word accreditif, a power to do something, which in turn is derivative of the Latin word accreditivus, meaning trust. A letter of credit is basically a document issued by a bank guaranteeing a client's ability to pay for goods or services. A bank or finance company issues a letter of credit on behalf of a buyer, authorizing the seller to obtain payment within a specified timeframe once the terms and conditions outlined in the letter of credit are met. The letter of credit acts like an insurance contract for both the buyer and seller and practically eliminates the credit 34

risk for both parties, while at the same time reducing payment delays. A letter of credit provides the seller with the greatest degree of safety when extending credit. It is useful when the buyer is not well known and when exchange restrictions exist or are possible. The LC can also be the source of payment for a transaction, meaning that a will get paid by redeeming the letter of credit. Letters of credit are used primarily in international trade transactions of significant value, for deals between a supplier in one country and a customer in another. The parties to a letter of credit are usually a beneficiary who is to receive the money, the issuing bank of whom the applicant is a client, and the advising bank of whom the beneficiary is a client. Almost all letters of credit are irrevocable, i.e., cannot be amended or canceled without prior agreement of the beneficiary, the issuing bank and the confirming bank, if any. In executing a transaction, letters of credit incorporate functions common Traveler's cheques.

Conclusion
A letter of credit is a document issued mostly by financial institutions which usually provides an irrevocable payment undertaking to a beneficiary against complying documents as stated in the credit. Once the beneficiary or a presenting bank acting on his behalf, makes a presentation to the issuing bank or confirming bank, if any, within the expiry date of L/C, comprising documents complying with the terms and conditions of the L/C, the applicable UCP. And international standard banking practices. The issuing bank or confirming bank, if any, is obliged to honor irrespective of any instructions from the applicants to the contrary.

Seller Bank

Buyer Bank

Buyer

35

Carrier After a contract s concluded between buyer and seller, buyer bank supplies a letter of credit to the seller. Seller consigns goods to a carrier in exchange for a bill of lading.

Buyer Bank

Seller

Buyer

Carrier

Seller provide bill of lading to a bank in exchange for payment. Sellers bank exchanges bill of lading for payment from a buyers bank. Buyers bank exchange bill of lading for payment from buyer.

Seller Bank

Buyer Bank

Buyer

Carrier 36

Buyer provides bill of lading to a carrier and takes delivery of goods Seller Bank Buyer Bank

Buyer

Carrier

IV.2 Elements of a Letter of Credit

o o o o o o o

A payment undertaking given by a bank (issuing bank). On behalf of a buyer (applicant). To pay a seller (beneficiary) for a given amount of money. On presentation of specified documents representing the supply of goods. Within specified time limits. Documents must conform to terms and conditions set out in the letter of credit. Documents to be presented at a specified place.

IV.3 PARTIES TO AND ASSOCIATED WITH THE LETTER OF CREDIT

IV.3.1 Applicant The applicant is the party who requests and instructs the issuing bank to open a letter of credit in favor of the beneficiary. The applicant usually is the importer or the buyer of goods and/or services. The applicant can also be another party acting on behalf of the importer, such as a confirming house. The confirming house is equivalent to a buying office, it acts as an intermediary between buyer and seller, and it can be located in a third country or in the sellers country. IV.3.2

Beneficiary

The beneficiary is entitled to payment as long as he can provide the documentary 37

evidence required by the letter of credit. The letter of credit is a distinct and separate transaction from the contract on which it is based. All parties deal in documents and not in goods. The issuing bank is not liable for performance of the underlying contract between the customer and beneficiary. The issuing bank's obligation to the buyer, is to examine all documents to insure that they meet all the terms and conditions of the credit. Upon requesting demand for payment the beneficiary warrants that all conditions of the agreement have been complied with. If the beneficiary (seller) conforms to the letter of credit, the seller must be paid by the bank. IV.3.3 Issuing Bank The issuing bank's liability to pay and to be reimbursed from its customer becomes absolute upon the completion of the terms and conditions of the letter of credit. Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is given a reasonable amount of time after receipt of the documents to honor the draft. The issuing banks' role is to provide a guarantee to the seller that if compliant documents are presented, the bank will pay the seller the amount due and to examine the documents, and only pay if these documents comply with the terms and conditions set out in the letter of credit. Typically the documents requested will include a commercial invoice, a transport document such as a bill of lading or airway bill and an insurance document; but there are many others. Letters of credit deal in documents, not goods. IV.3.4Advising Bank An advising bank, usually a foreign correspondent bank of the issuing bank will advise the beneficiary. Generally, the beneficiary would want to use a local bank to insure that the letter of credit is valid. In addition, the advising bank would be responsible for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. If the issuing bank does not pay the beneficiary, the advising bank is not obligated to pay. IV.3.5Confirming Bank The correspondent bank may confirm the letter of credit for the beneficiary. At the request of the issuing bank, the correspondent obligates itself to insure payment under the letter of credit. The confirming bank would not confirm the credit until it evaluated

38

the country and bank where the letter of credit originates. The confirming bank is usually the advising bank.

IV.4 TYPES OF LETTER OF CREDIT

IV.4.1 Commercial and stand by L/C: Commercial letters of credit are used primarily to facilitate foreign trade. The commercial letter of credit is the primary payment mechanism for a transaction. It is a contractual agreement between a bank, known as the issuing bank, on behalf of one of its customers, authorizing another bank, known as the advising or confirming bank, to make payment to the beneficiary. The issuing bank, on the request of its customer, opens the letter of credit. The issuing bank makes a commitment to honor drawings made under the credit. The beneficiary is normally the provider of goods and/or services. Essentially, the issuing bank replaces the bank's customer as the payee The standby letter of credit serves a different function. The standby letter of credit serves as a secondary payment mechanism. The bank will issue the credit on behalf of a customer to provide assurances of his ability to perform under the terms of a contract. A bank will issue a standby letter of credit on behalf of a customer to provide assurances of his ability to perform under the terms of a contract between the beneficiary. The parties involved with the transaction do not expect that the letter of credit will ever be drawn upon. The standby letter of credit assures the beneficiary of the performance of the customer's obligation. The beneficiary is able to draw under the credit by presenting a draft, copies of invoices, with evidence that the customer has not performed its obligation. The bank is obligated to make payment if the documents presented comply with the terms of the letter of credit. They are issued by banks to stand behind monetary obligations, to insure the refund of advance payment, to support performance and bid obligations, and to insure the completion of a sales contract. The credit has an expiration date.The standby letter of credit is often used to guarantee performance or to strengthen the credit worthiness of a customer. In the above example, the letter of credit is issued by the bank and held by the supplier. The customer is provided open account terms. If payments are made in accordance with the suppliers' terms, the letter of credit would not be drawn on. The

39

seller pursues the customer for payment directly. If the customer is unable to pay, the seller presents a draft and copies of invoices to the bank for payment. IV.4.2 Revocable or irrevocable letter of credit: Letters of credit may be either revocable or irrevocable. A revocable letter of credit may be revoked or modified for any reason, at any time by the issuing bank without notification. A revocable letter of credit cannot be confirmed. Once the documents have been presented and meet the terms and conditions in the letter of credit, and the draft is honored, the letter of credit cannot be revoked. The revocable letter of credit is not a commonly used instrument. If a letter of credit is revocable it would be referenced on its face. The irrevocable letter of credit may not be revoked or amended without the agreement of the issuing bank, the confirming bank, and the beneficiary. An irrevocable letter of credit from the issuing bank insures the beneficiary that if the required documents are presented and the terms and conditions are complied with, payment will be made. If a letter of credit is irrevocable it is referenced on its face. IV.4.3 Sight letter of credit: All letters of credit require the beneficiary to present a draft and specified documents in order to receive payment. A draft is a written order by which the party creating it, orders another party to pay money to a third party. A draft is also called a bill of exchange. There are two types of drafts: sight and time. A sight draft is payable as soon as it is presented for payment. The bank is allowed a reasonable time to review the documents before making payment. A time draft is not payable until the lapse of a particular time period stated on the draft. The bank is required to accept the draft as soon as the documents comply with credit terms. The issuing bank has a reasonable time to examine those documents. The issuing bank is obligated to accept drafts and pay them at maturity. A Letter of credit is known as a Sight letter of credit if it involves payment to the seller against a Sight Draft. On the other hand, if the payment is made against a Usance Draft, then it is known as Usance letter of credit.

IV.5 Clauses OF LETTER OF CREDIT

40

 FROM :( NAME & ADDRESS OF OPENING BANK ) This clause contains details of bank which has opened the Letter of Credit, and it works on the behalf of the buyer of goods. The opening bank plays the first step in the whole process of letter of credit. TO :( NAME & ADDRESS OF ADVISING BANK ) This clause shows the details of bank which plays the foremost role in the process of letter of credit. The advising bank belongs to the country of seller. It plays the role of middleman between the seller and the opening bank TYPE OF L/C :IRREVOCABLE This clause shows the type of L/C in which it is being made. Various types of L/Cs are Revocable, Irrevocable, Commercial, Negotiable etc. L/C Number : The clause shows a particular number for L/C and every L/C has different number so that difference can be judged between different L/Cs. DATE OF ISSUE : This clause shows that date on which the opening bank has issued the L/C. DT. & PLACE OF EXPIRY : __________________________________IN This shows about the date and the place in india where the lc will get expired, means that financial institution where the L/C is send by the opening bank. NAME & ADDRESS OF THE: APPLICANT It contains detail about the buyer of the goods. It gives complete address of the buyer. NAME & ADDRESS OF THE: BENEFICIARY It shows details of the seller of goods, like sellers name, address, country to which he belongs. 41

 AMOUNT OF CREDIT IN : US DOLLARS /EURO/ANY OTHER FREELY EXCHANGEABLE CURRENCY (IN FIGURES & WORDS) It shows the currency in which the deal is been made, the code for that currency as well as the amount of the goods. PERCENTAGE CREDIT : AS PER CONTRACT AMOUNT TOLERANCE Sometimes the amount in the letter of the credit and the exact amount of the goods does not match. There can be a difference between the both. So a specific percentage of amounts of goods specified in L/C is given as a tolerance and the exact amount of goods can be in between the minimum and maximum tolerated limits. CREDIT AVAILABLE WITH: This part shows the details of that party from where the amount can be reimburses by the seller. This states either a specified bank in India or any bank in India. USANCE OF THE DRAFTS : This clause shows whether the draft is payable at sight or at any date in future. DRAFTS TO BE DRAWN ON: It tells about the party which acts as a drawee. Generally the opening bank acts as a drawee . PARTIAL SHIPMENT : AS PER CONTRACT This clause contains details whether the shipment of goods is allowed through one shipment or the goods can be sending through various shipments. TRANSHIPMENT : AS PER CONTRACT Transshipment means when the goods are send, SHIPMENT FROM : It tells about that place from where goods are send by the seller. 42

 SHIPMENT TO : Its that place where the goods are sending by the seller. And generally its that country where the buyer lives. LATEST SHIPMENT DATE : Its that date till which the goods should reach to the buyer. After that date, its the choice of the buyer whether he accepts the goods or not. DESCRIPTION OF GOODS : Description of Materials Size ( in mm) and Quantity (in MT) Specification Tolerance Quantity Quantity Tolerance Price per MT (in USD/Euro/any other freely exchangeable currency) DOCUMENTS REQUIRED : Beneficiarys Commercial Invoice - one original plus two signed copies covering materials shipped. Invoices will be raised on the basis of (THEORETICAL/ ACTUAL/ DRAFT SURVEY)weihgt.

IV.6 L/C in Gohar

In this system , first corporate centralized market Yarn department advices a branch to make sale of yarn through letter of credit In case of those customers who are either new for a organization whose credit worthiness is not satisfactory according to research report After opening the L/C concerned unit makes the sale to the customers as per agreed terms and conditions stipulated in the L/C. Then concerned unit sent the invoice and other 43 market

papers to the centralized accounting cell for lodging the documents with the bank.. This documents consists of Bill of exchange Original invoice Original G/r copy Packing list Copy of L/C On the Due date mentioned in the L/C, we receive the realization advice from the bank, where we have lodged the document drawn under L/C. after getting the advice from the bank, we credit the customers with the amount we have realized

IV.7 DOCUMENTS NEED FOR L/C

Letter of credit documents are required to be arranged in the following series: By seller (duplicate documents) o Bill of exchange o Bill o Goods lorry receipt o Party acceptance letter o Debit note o Packing list o Original letter of credit By sellers bank (Duplicate documents) o Letter o Bill of exchange o Bill o Goods lorry receipt o Party acceptance letter o Debit note o Packing list 44

o Letter of credit (duplicate) By buyers bank (Original documents) o o o o o o o Bill of exchange Bill Goods lorry receipt Party acceptance letter Debit note Packing list Letter of credit (DUPLICATE)

4.7.1

Negotiation of letter of credit

NEGOTIABLE means the ability to be sold or transfers to another party as a form of payment. Something which is negotiable is transferable by endorsement and delivery. (When documents come back from bank). JOURNAL ENTIRES IN THE BOOKS OF GOHAR AT THE YEAR ENDED JUNE 30 2. PARTICULARS 45 L.F

DEBIT Particular bank a/cDr Interest on inland bill discount a/c.Dr To inland bill discount a/c (BEING Negotiation of id no.on dated. Inland bill discount charges a/c..Dr To bank a/c (BEING INALND BILL DISCOUNTING CHGS DR
BY BANK ON DATED .AGST IBD NO

CREDIT (RS)

(RS) XXXX XXXX

XXXX

XXXX XXXX

How interest is calculated Total bill of exchange amount * rate of interest* number of days in Bill of Exchange. Rate of interest is 11.5% (according to STATE BANK OF PAKISTAN). Number of days is calculated as per the conditions laid down IN L/C AGREEMENT

4.7.2

A Realization of bill of exchange

JOURNAL ENTIRES IN THE BOOKS OF GOHAR AT THE YEAR ENDED MARCH 31ST 2.

PARTICULARS

L.F DEBIT(RS) CREDIT (RS)

46

I inland and bill discounting a/cDr To party account (BEING REALISATION OF IBD NO, AGST INV
NO.ON DATED.)

XXXX XXXX

Note: At the time of realization of L/C there may be over due days Bank will charge over due interest against late payment according to number of days. 4.7.3 Fully payment but late payment (overdue interest charged by bank)

JOURNAL ENTIRES IN THE BOOKS OF GOHAR AT THE YEAR ENDED MARCH 31ST 2. PARTICULARS Party a/c ..Dr To bank (BEING
AMOUNT OF OVERDUE INTEREST DEBITED TO PARTY ACCOUNT AGST IBD NO. ON DATED ..)

L.F DEBIT(RS) XXXX

CREDIT (RS)

XXXX

47

CHAPTER NO.5 MARKETING STRATEGIES

5.1 MARKETING STRATEGY

The past year has been tough for the textile industry as competition is steadily and margin of profits is becoming smaller day-by-day. Our competitors from Asia have come up in a big way with lower prices resulting from lower overhead, cheaper and better raw materials and machinery. Countries like China, Indonesia, India and Bangladesh played an active role in the fabric market. Improvement in quality and production capability was the main area of concentration. 48

Market for Yarns and Grey fabrics was diversified to increase the customer base and reduce dependency on the Far East. In this effort business with Malaysia, Korea, Taiwan, UK and South America was initiated in case of Yarns. In case of Grey Fabric market business was initiated in South Africa, North America, Japan, Italy, France, and Sri Lanka etc. Product range was also increased to cater to the differing needs of the buyers. Fancy and special items like Dobby Designs, Bedford Cords, and Cavairy Twills and stretch fabrics were developed which are being sold at premium prices. Gohar has constantly updated our machinery, replacing old machines with new ones upgrading the existing set-up, leading to better efficiencies and quality products. Gohar has established its name in new markets be creating specialized fabrics, designs and also by providing our customers with efficient service and excellent quality. Keeping in view demand of the World market, Gohar Textile Mills (Pvt) Ltd pursued its strategy of value addition and reducing the dependency on Grey Fabrics and Grey Yarn. Having the foresight to assess that in coming years value addition will be the thing of the future, Gohar Textile Mills (Pvt) Ltd worked towards the achievement of its goal of future increasing its capability in value addition. It has placed us successfully in the middle to upper end of the market. Our strength in Europe is the curtain division. This included yarn dyed dobbies, engineered confections, different finishes and embellished products. The plan is to continue with this winning strategy and at the same time we are trying to find new clients in the high end.

5.2

Marketing process
Inquiry costing quote to customer Check Greige 49

Processing cost per delivery Approval received Lab dips/strike sample P.O received/Sales Contract sent Greige booking Dying/printing program issue Fabric processed Shipment sample dispatched for approval Shipment sample approved Shipment dispatched

5.3

Target Customers
o Main Markets: North America o South America o Western Europe o Eastern Asia o Southeast Asia o Midle East o Africa o Oceania

50

51

CHAPTER 7 FINANCIAL STATEMENTS OF GOHAR TEXILE MILL

7.1.1 Balance Sheet (Assets) GOHAR TEXTILE MILLS (PVT) LTD.

BALANCE SHEET
AS ON JUNE 30, 2010 ASSETS Non-Current Assets Fixed Assets
Property, Plant and equipment

2010

2009

2008

Capital work in progress

95,106,306 17,167,507 112,273,81 3 17,911,775

859,511,872 29,416,245 888,928,11 7 1,855,100

834,564,661 9,917,561 844,482,22 2 1,851,600

Long Term Deposits and Deferred Cost

52

Due From Association Current Assets Stores, spares and loose tools Stock in trade Trade Debts Loans and advances Deposits & Prepayments Other Receivables Cash & Bank Balances

932,913,058

5,371,789 501,519,693 325,722,287 108,291,134 1,520,559 90,774,664 5,862,001 1,039,062,12 7 2,102,160,77 3

22,059,708 418,396,869 179,273,728 14,551,289 634,052 45,621,999 12,269,150 692,806,795 1,583,590,01 1 1

21,923,660 254,750,341 230,280,445 16,070,374 475,251 48,094,547 25,341,111 596,935,72 9 1,443,269,55

7.1.2 Balance Sheet (Liabilities) GOHAR TEXTILE MILLS (PVT) LTD.

BALANCE SHEET
EQUITY & LIABILITIES Share Capital & Reserves Authorized Capital 1,000,000 ordinary shares of Rs of Rs. 100/= each Issued Subscribed & Paid up Capital Revenue Reserves Surplus on Revaluation of Fixed Assets Non Current Liabilities Long Term Loans 53 108,893,475 AS ON JUNE 30, 2010 2010 2009 2008

100,000,00 0 40,649,500 1,537,898,335 1,578,547,83 5

100,000,00 0 40,649,500 1,040,929,687 1,081,579,18 7 136,785,79 3 108,893,47 5

100,000,00 0 40,649,500 977,358,726 1,018,008,22 6 150,307,32 5 161,993,47 5

Liabilities against Assets Subject to Finance Lease Due to Associate Undertaking Current Liabilities Trade & Other Payable Interest/Markup Payable Current Portion of Long Term Liabilities Short Term Finance Advances from customers Provision for Taxation Contingencies & Commitment

697,617 90,859,194 111,904,367 91,258,28 5 120,000,000 323,162,65 2 2,102,160,77 3

78,746,596 2,938,326 58,665,99 1 105,000,000 264,209 10,716,434 256,331,55 6 1,583,590,01 1

5,544,15 4 50,187,799 1,785,003 42,981,01 2 12,462,557 107,416,37 1 1,443,269,55 1

7.1.3 Income Statement

GOHAR TEXTILE MILLS (PVT) LTD.

INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 2010
2010 RUPEES 2009 RUPEES 2008 RUPEES

Sales Cost of Sales Gross Profit

1,685,690,136 (1,337,574,966) 348,115,170

939,447,389 (772,932,261) 166,515,128

1,106,826,330 (924,243,329) 182,583,001

Selling & Distribution Expenses Administrative Expenses

(136,679,293) (30,820,720) (167,500,013)

(53,845,099) (23,493,925) (77,339,025)

(62,077,899) (26,086,598) (88,164,497)

54

180,615,157 Other Operating Income Other Operating Expenses 113,018,209 (293,887) 293,339,479 (12,529,084) 280,810,395 (15,246,256) 265,564,139

89,176,103 54,304 (3,263,473) 85,966,935 (23,960,952) 62,005,983 (10,716,434) 51,289,549

94,418,504 25,463 94,443,967 (16,077,485) 78,366,482 (12,462,557) 65,903,925

Finance Cost Net Profit for the year before taxation Provision for Taxation Net Profit for the year after taxation

CHAPTER 8 FINANCIAL ANALYSIS

55

RATIO ANALYSIS OF GOHAR TEXILE MILL

2008-2009-2010

8. FINANCIAL ANALYSIS
"Financial statement analysis is the process of identifying of financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit & loss account," and it is done through ratio analysis.

8.1

RATIO ANALYSIS

Ratio means one number expressed in term of another. A ratio is a statistical yardstick by means of which relationship between two or various figures can be compared or measured. Here we are going to explain the ratio analysis of Gohar Textile Mills.

8.2

CATEGORIES OF RATIOS

Financial ratios can be divided into the following four parts. A. Liquidity ratios B. Activity ratios C. Leverage ratios D. Profitability ratios A. Liquidity ratios Current Ratio Quick Ratio 56

B. Activity ratios Receivable Turnover Ratio Receivable in days/ Avg. collection day Accounts payable Turnover Ratio Account payable in day Inventory Turnover Ratio Total Asset Turnover Ratio C. Leverage ratios Debt to Total Asset Ratio Long-term Debt to Shareholder Equity Ratio Time Interest Earned Ratio

D. Profitability ratio Gross Profit Margin Ratio Net Operating Income Ratio Net Profit Ratio Return on equity Return on investment Book value per share

57

8.2.1

LIQUDITY RATIOS

Liquidity ratio is for the firms ability to meet the short term obligations. It shows the firm financial position that the firm has sufficient cash for the short term payments to the creditors. Or the company has the cash equivalent things for the payment of the obligations. Liquid Ratios includes the following: Current Ratio Quick Ratio

58

Current Ratio
Current Assets

=
Current Liabilities

Years Current Assets Current Liabilities Ratio

2010 1,039,062,127 23,162,652 3.22

2009 692,806,795 256,331,556 2.70

2008 596,935,72 107,416,371 5.56

59

INTERPRETATION
.

Quick Ratio
Liquid Assets

=
Current Liabilities

Years Liquid Assets Current Liabilities Ratio

2010 537,542,434 323,162,652 1.66

2009 274,409,926 256,331,556 1.07

2008 342,185,388 107,416,371 3.19

60

INTERPRETATION

8.2.2

Activity Ratios

Activity ratios are concerned with measuring the efficiency in assets management. Activity ratio shows that what are the firms activities during the year means that how the firm used the assets in the operation of business. In order for the assets to be used effectively, the business needs a high turnover. An activity ratio includes the following ratios: Receivable Turnover Ratio Receivable in days/ Avg. collection day Accounts payable Turnover Ratio Account payable in day Inventory Turnover Ratio Total Asset Turnover Ratio

61

Receivable Turn over Ratio

Annual Credit Sale

=
Average Account Receivable

Years Annual Credit Sale Average Account Receivable Ratio

2010 1,685,690,136 325,722,287 5.18

2009 939,447,389 179,273,728 5.24

2008 1,106,826,330 230,280,445 4.81

62

INTERPRETATION

Receivable in days / Average Collection Period

Account Receivable

=
Annual Credit Sales Years Account Receivable X 365 Annual Credit Sale Ratio 2010 118,888,634,755 1,685,690,136 70.53 2009

X 365

2008 84,052,362,425 1,106,826,330 75.94

65,434,910,720 939,447,389 69.65

63

Interpreation

Accounts Payable Turn over Ratio

Annual Credit Purchase

=
Account Payable Years
Annual Credit Purchase

2010 1,337,574,966 111,904,367 11.95

2009 772,932,261 78,746,596 9.82

2008 924,243,329 50,187,799 18.42

Account payable Ratio

64

Interpreation
.

Account Payable in days

Account Payable

=
Annual Credit Purchase Years
Account payable

X 365

2010 40,845,093,955 1,337,574,966 30.5

2009

2008

28,742,507,692 18,318,546,635 772,932,261 37.16 924,243,329 19.82

Annual Credit Purchase Ratio

65

Interpreation
collection period

Inventory Turnover Ratio

Cost of Goods Sold

=
Average Inventory

Years
Cost of Goods Sold

2010 1,337,574,966 501,519,693 2.67

2009 772,932,261 418,396,869 1.85

2008 924,243,329 254,750,341 3.63

Average Inventory Ratio

66

Interpreatation

Total Asset Turn Over

Sales

=
Total Assets

Years Sales Total asset Ratio

2010 1,685,690,136 2,102,160,773 0.80

2009 939,447,389 1,583,590,011 0.59

2008 1,106,826,330 1,443,269,551 0.77

67

Interpretation

8.2.3

LEVERAGE/SOLVENCY ANALYSIS

Solvency analysis of a firm indicates the amount of the other peoples money being used to generate profit. In general, these analyses are more concerned with long term debts, because these commit the firm to a stream of payments over the long run. Debt to Total Asset Ratio. Long-term Debt to Shareholder Equity Ratio. Time Interest Earned Ratio.

68

Debt to total Asset Ratio

Total Debt (short & long)

=
Total Assets

Years
Total Debt (short & Long)

2010 432,753,744 2,102,160,773

2009 365,225,031 1,583,590,011

2008 274,954,000 1,443,269,551

Total asset Ratio

0.21

0.23

0.19

69

INTERPRETATION

Long term Debt to Shareholder Equity Ratio

Long Term Debt

=
Shareholder Equity

Years Long term Debt Equity Ratio

2010 109,591,092 1,578,547,835 0.07

2009 108,893,475 1,081,579,187 0.10

2008 167,537,629 1,018,008,226 0.16

70

INTERPRETATION tax advantage with the use of debts.

Time Interest Earned Ratio

EBIT

=
Interest Expenses

Years Earning before interest and tax (EBIT) Interest Charges Ratio

2010 280,810,395 12,529,084 22.41

2009 62,005,983 23,960,952 2.59

2008 78,366,482 16,077,485 4.87

71

Interpreatation Time interest earned ratio indicates how many times the EBIT of a firm can sign.

8.2.4

PROFITABILITY ANALYSIS

The main object of a business concern is to earn profits. Profitability analysis of a firm indicates the overall efficiently of the management. Without profit a company can not attract the outside capital. Profitability is a result of a larger number of policies and decisions. The profitability ratios show the combined effects of liquidity, asset management (activity) and debt management (gearing) on operating results. The overall measure of success of a business is the profitability which results from the effective use of its resources. Profitability analysis includes: Gross Profit Margin Ratio Net Operating Income Ratio Net Profit Ratio Return on equity Return on investment Book value per share 72

Gross Profit Margin Ratio

Gross Profit

=
Sales

x 100

Years Gross Profit Sale Ratio

2010 348,115,170 1,685,690,136 0.21

2009 166,515,128 939,447,389 0.18

2008 182,583,001 1,106,826,330 0.16

73

Interpretation .

Net Operating Margin

Operating Profit

=
Sales

x 100

Years
Operating Income

2010 293,339,479 1,685,690,136 0.17

2009 85,966,935 939,447,389 0.09

2008 94,443,967 1,106,826,330 0.09

Sale Ratio

74

Interpreation a good impression.

Net Profit Margin

Net Profit after tax Net Sales x 100

Years Net Profit Sale Ratio

2010 265,564,139 1,685,690,136 0.16

2009 51,289,549 939,447,389 0.05

2008 65,903,925 1,106,826,330 0.06

75

INTERPRETATION

Return on Equity (ROE)

Net Profit

=
Equity Years Net Profit Equity Ratio 2010 265,564,139 1,578,547,835 0.17 2009

x 100

2008 65,903,925 1,018,008,226 0.06

51,289,549 1,081,579,187 0.05

76

INTERPRETATION

Return on Investment (ROI)

Net Profit

=
Total Assets

Years Net Profit Total Assets Ratio

2010 265,564,139 2,102,160,773 0.13

2009 51,289,549 1,583,590,011 0.03

2008 65,903,925 1,443,269,551 0.05

77

Interpretation

Book Value per Share

Equity

=
Number of Shares Years Total Equity No. of Shares Ratio 2010 1,578,547,835 1,000,000 1578.55 2009 1,081,579,187 1,000,000 1081.579 2008 1,018,008,226 1,000,000 1018.01

78

INTERPRETATION

CHAPTER 9 FINANCIAL ANALYSIS TREND ANALYSIS

79

OF GOHAR TEXILE MILL

2008-2009-2010

9. TREND ANALYSIS
In trend analysis we done two types of analysis, these are

9.1

Horizontal Analysis

It is conducted by setting consecutive balance sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. A comparison of statements over several years reveals direction, speed and extent of a trend(s). The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage.

9.2 Vertical Analysis

Like horizontal analysis this can also done for balance sheet and income statement. Here we assign 100% value to any key item of balance sheet or income statement and then see portion of other items in this percentage.

80

HORIZONTAL ANLYSIS OF
81

GOHAR TEXILE MILL

2008-2009-2010

9.1.1.1

Horizontal Analysis (Assets)

GOHAR TEXTILE MILLS (PVT) LTD.

Horizontal Analysis (Assets)
ASSETS Non-Current Assets Fixed Assets Property, Plant and equipment Capital work in progress 2010-2009 Increase or (Decrease) %age % 2009-2008 %

(764,405,566 ) (12,248,738) (776,654,304 )

-89% -42% -87%

24,947,211 19,498,684 44,445,895 -

3% 197% 5%

82

Long Term Deposits and Deferred Cost Due From Association Current Assets Stores, spares and loose tools Stock in trade Trade Debts Loans and advances Deposits & Prepayments Other Receivables Cash & Bank Balances

16,056,675 932,913,058

866% -

(16,687,919) 83,122,824 146,448,559 93,739,845 886,507 45,152,665 (6,407,149) 346,255,332 518,570,762

-76% 20% 82% 644% 140% 99% -52% 50% 33%

3,500 136,048 163,646,528 (51,006,717) (1,519,085) 158,801 (2,472,548) (13,071,961) 95,871,066 140,320,460

0.19% 1% 64% -22% -9% 33% -5% -52% 16% 10%

9.1.1.2

Horizontal Analysis (Liabilities)

GOHAR TEXTILE MILLS (PVT) LTD.

Horizontal Analysis (Liabilities)

EQUITY & LIABILITIES 2010-2009 Share Capital & Reserves Authorized Capital 1,000,000 ordinary shares of Rs. 100/= each Issued Subscribed & Paid up Capital Revenue Reserves Increase or (Decrease) %age % 2009-2008 %

495,728,528 495,728,528

48% 46%

Surplus on Revaluation of 83

64,811,081 64,811,081 -

7% 6%

Fixed Assets Non Current Liabilities Long Term Loans Liabilities against Assets Subject to Finance Lease Due to Associate Undertaking Current Liabilities Trade & Other Payable Interest/Markup Payable Current Portion of Long Term Liabilities Short Term Finance Advances from customers Provision for Taxation

(136,785,793)

-100%

(13,521,533) (53,100,000)

-9%

-33%

697,617 90,859,194

34,397,890 (2,938,326) 32,592,294 15,000,000 (264,209) (10,716,434) 68,071,215

44% -100% 56% 14% -100% -100% 27%

(5,544,154) 27,318,678 1,153,323 15,684,979 105,000,000 264,209 (1,746,123) 147,675,066 140,320,460

-100%

54% 65% 36%

-14% 137%

Contingencies & Commitment 518,570,762

Horizontal Analysis Balance Sheet
140% 120% 100% 80% 60% 40% 20% 0% Total Assets Total Liabilities

33%

10%

2008 2009-2008 2010-2009

84

9.1.2

Horizontal Analysis (Income Statement) GOHAR TEXTILE MILLS (PVT) LTD. INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 2010 Horizontal Analysis 2010-2009 2009-2008 % Change Change

% Change -15% -16% -9%

Sales Cost of Sales Gross Profit

Selling & Distribution Expenses Administrative Expenses

746,242,747 (564,642,705) 181,600,042 (82,834,194) (7,326,795) (90,160,988) 91,439,054 85

79% 73% 109%

154% 31% 117% 103%

(167,378,941) 151,311,068 (16,067,873) 8,232,800 2,592,673 10,825,472 (5,242,401)

-13% -10% -12% -6%

Other Operating Income Other Operating Expenses 112,963,905 2,969,586 207,372,544 11,431,868 218,804,412 (4,529,822) 214,274,59 Net Profit for the year after taxation 0 418% 6) 208021 % -91% 241% -48%

28,841 (3,263,473) (8,477,032) (7,883,467) (16,360,499) 1,746,123 (14,614,37 -22% 113% 0% -9% 49%

Finance Cost Net Profit for the year before taxation Provision for Taxation

353% 42%

-21% -14%

Horizontal Analysis Income Statement

160% 140% 120% 100% 80% 60% 40% 20% 0% Gross Profit NPAT

2008 2009-2008 2010-2009

86

VERTICAL ANLYSIS OF GOHAR TEXILE MILL

87

2008-2009-2010

9.2.1.1

Vertical Analysis (Assets)

GOHAR TEXTILE MILLS (PVT) LTD.

Vertical Analysis (Assets)

ASSETS Non-Current Assets Fixed Assets Property, Plant and equipment Capital work in progress

2010

2009

2008

5% 1% 5%

54% 2% 56%

58% 1% 59%

Long Term Deposits and Deferred Cost Due From Association Current Assets Stores, spares and loose tools 88

1% 44%

0.12% -

0.13% -

0.3%

1%

2%

Stock in trade Trade Debts Loans and advances Deposits & Prepayments Other Receivables Cash & Bank Balances

24% 15% 5% 0.1% 4% 0.3% 49%

26% 11% 1% 0.04% 3% 1% 44%

18% 16% 1% 0.03% 3% 2% 41%

100%

100%

100%

9.2.1.2

Vertical Analysis (Liabilities)

GOHAR TEXTILE MILLS (PVT) LTD.

Vertical Analysis (Liabilities)
EQUITY & LIABILITIES Share Capital & Reserves Authorized Capital 1,000,000 ordinary shares of Rs. 100/= each Issued Subscribed & Paid up Capital Revenue Reserves 2010 2009 2008

5%

6%

7%

2% 73% 75%

3% 66% 68%

3% 68% 71%

Surplus on Revaluation of Fixed Assets Non Current Liabilities 89

9%

10%

Long Term Loans Liabilities against Assets Subject to Finance Lease Due to Associate Undertaking Current Liabilities Trade & Other Payable Interest/Markup Payable Current Portion of Long Term Liabilities Short Term Finance Advances from customers Provision for Taxation

5%

7%

11%

0.03% 4%

0.4% -

5% 4% 6% 15%

5% 0.2% 4% 7% 0.02% 1% 16%

3% 0.1% 3% 1% 7%

Contingencies & Commitment 100% 100% 100%

9.2.2 Vertical Analysis (Income Statement)

GOHAR TEXTILE MILLS (PVT) LTD.

INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 2010

Vertical Analysis
2008 Sales Cost of Sales Gross Profit 100% -79% 21% 2007 100% -82% 18% 2006 100% -84% 16%

Selling & Distribution Expenses Administrative Expenses

-8% -2% -10% 11%

-6% -3% -8% 9% 0%

-6% -2% -8% 9% 0%

Other Operating Income

7% 90

Other Operating Expenses

0% 17% -1%

0% 9% -3%

0% 9% -1%

Finance Cost Net Profit for the year before taxation Provision for Taxation Net Profit for the year after taxation

17% -1%

7% -1%

7% -1%

16%

5%

6%

CHAPTER NO.10 SWOT ANALYSIS

91

10. SWOT Analysis

SWOT Analysis is a popular technique used to analyze some companys present business situation. It provides us with an overview of companys major strengths and its critical weaknesses. The external opportunities and threats that the company faces in the external environment are also highlighted in this approach. Following are the strengths, weaknesses, available opportunities and possible threats to Gohar Textile Mills:

10.1 Strengths:
No outside financing so we can under take big orders for longer periods without having to think about any financial constraints. High Cumulative Customer retention rate since the start of operations Sustained growth rate of annual sales turnover. Consistent Quality ; Timely shipments Vertically integrated. High quality products. Excellent market image in the local and international market. 92

 Highly qualified management. Adequate financial resources. Adopting information technology. Loyal customers. Skilled Labor. Broad and motivational vision.

10.2

Weaknesses:

High employee turnover Centralized management system High cost of production. Low production capacity. De-motivated Staff. Less promotional activities. Non-Corporative culture. Insufficient benefits for the employees. Stereotype machinery for processing. Communicational gap among different departments.

10.3 Opportunities:
Zero sales tax to be charged on 12 textile raw materials Can expand its division such as entering in weaving sector also. Can introduce its own label in domestic as well in international market Can capture new market segment. Full potential of entertaining the local market. Can reduce the cost by proper utilization of resources. End of quota restrictions by the end of year 2004. Can hire well-educated and experienced staff.

93

 Globalization.

10.4 Threats:
Entry of new competitors just likes China & India. Buyer need and demand changes. Political instability. Changing geopolitical situation. Change of government policies. Low price offered by competitors. Globalization

CHAPTER NO.11
94

CONCLUSION AND RECOMMENDATION

11.1 CONCLUSION
Its' period of Globalization, any organization or institute who ignore the element of globalization automatically kick out from the market. Only those can be survive who compete this global market perfectly. So the Gohar Textile Mills (Pvt) Ltd has the opportunity to survive the global market because it has the better goodwill and positive earning per share it can capture all the global market. Gohar Textile Mills (Pvt) Ltd is also faces a tenor in which there is both opportunities and threats for it to be able and survive and growth. But many of the challenges that shall be outside of the control of the mills. However, this does not absolve the government of Pakistan and the local Textile industry from its responsibility to best deal with the climate both locally and internationally and prepare itself for even greater challenges. Now there is need that the Govt. and industry realize that a sincere and positive approach has to make to meet the challenges of the present day competition environment. In this 95

regard adequate finance for capital investment, working capital and development of comprehensive long-term strategies and the stable government. Gohar Textile Mills (Pvt) Ltd is one the best apparel producer in Pakistan. Inside the organization Gohar textile is practically meeting the challenges of Global Village. They have created completely paperless office; every activity of Gohar is online. In/Out time of employees is also computerized. I have observed some negative things also during my internship in Gohar like sometime extra burden is loaded on worker due to late shipment. Even Gohar has great capability to meet the requirements but some times Gohar get the order in such a bulk quantity that its capacity becomes lesser than orders. Financial position of Gohar is better than many other organizations. Gohars decisionmaking is centralized due to which no problem occur in lower level management. The level management of Gohar is also performing well.

11.2

RECOMMENDATIONS

Before joining this organization I know a little about the organization work, its working system and environment, so I learned a lot from this experience. Based on my experience & observation regarding the operations and policies of organization, there are some recommendations which include short term as well as long term issues for the improvement. 11.2.1 Assess the Performance of employees There is no efficient method introduced by organization for his assessment of performance of employees. Promotions are completely relying on higher management like managers est.s there can be some sort of favoritism. So to avoid all this, there should be a proper method to judge the employees. 11.2.2 Search New Markets Organization can enhance profit by finding new market in the world. Gohar Textile Mills (Pvt) Ltd. should continue to expand its business, by increasing its sale through aggressive market penetration strategies. 11.2.3 Improve Information Technology System Gohar Textile Mills (Pvt) Ltd should immediately improve its Information Technology System. The soft wares currently in use should be made error free as it is the need of the hour. 96

11.2.4 Computerized Accounting System As far as accounting is concerned, although the entire system is computerized, but there still involves lots of paperwork. So this should be minimized b acquiring more advanced accounting software. 11.2.5 Job Rotation There is no rotation of employees within departments and cross departments. So the top management should immediately start thinking in terms of rotating the employees in various departments, as this transforms work force into human capital. 11.2.6 Distribute Work Equally Management should distribute work equally among different employees. Some of the employees are overburdened while some sections are overstaffed. 11.2.7 Improve its Website Gohar Textile Mills (Pvt) Ltd needs to improve its website. More information relating to financial performance and sale of the organization should be available on the website.

11.2.8 Evolve Management Policy Gohar Textile Mills (Pvt) Ltd should evolve a very serious management policy to attract multi national corporations as its clients. This action, if actualized, would not only prove to be highly profit generating, but it would also contribute a lot towards Gohar Textile image building. 11.2.9 Advertise One of the most pressing needs of the time is to advertise Gohar Textile Mills (Pvt) Ltd in the electronic media. Gohar Textile Mills (Pvt) Ltd has not, till date, employed advertisement in electronic media as a full fledge marketing tool. I think it is high time that organization does this 11.2.10 Market Survey The management should make the market survey time to time to get more and latest information about the market factors like the price, demand, current consumer trends etc.

97

CHAPTER 12 REFERENCES
98

& SOURCES

99

www.gohartextile.com.pk Gohar Textile Annual Report asif_gohartextile@yahoo.com www.google.com www.Scribd.com www.investopedia.com www.answer.com

100