INTERNSHIP REPORT

SUBMITTED BY: SAIF ULLAH RANA

STUDENT OF : FROM : COMMERC

B.COM OUAID-E- AZAM COLLEGE OF

Lahore

SUBMITTED TO: MR.

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.

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?

CONTENTS Sr. # Page #

1. 6 2. 7---9 3. 10--12 4. 13 5. 14 6. 15--18 7. 19 8. 20 9. 20--21 10. 21--23 11. 24--25 Vision & Mission statement. Company Information Range of Products Management Profile Associated Companies & Bankers of Company Balance Sheet, P/L Account & Capital Structure Borrowing & Financial Summary Management Hierarchy Divisions Finance Department Budgeting

12. 26--27 13. 2833 14. 3336

Products Hierarchy Industry Analysis Market Analysis

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 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 5

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 accordance with the international standards and specifications using the latest and most modern techniques available in the world. 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 6

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: 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

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. 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. 8

 Distribution Boards. Motor Control Centers. Automatic Power Factor Improvement Plants. III. Relay and Control Panels AC/DC Auxiliary Service Panels. 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: Full range of deep-freezers will resume production shortly. SPLIT AIRCONDITIONERS. WINDOW TYPE AIRCONDITIONERS. MICROWAVE OVENS.

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 Almightys Beneficence 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 10

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

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 11

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 Gulberg-V, Lahore 5717364-5 Fax: (042) 5715105 E-mail: Website Address: shares@saigols.com www.pel.com.pk The Bank of Punjab Bank Alfalah Limited Faysal Bank Limited Meezan Bank Limited My Bank Limited National Bank of Pakistan PICIC Commercial Bank Limited Limited Saudi Pak Commercial Bank

Registered /Head Office: 17-Aziz Avenue, Canal Bank,

Tel: (042) 5718274-5 or

Bankers of the Company:

BALANCE SHEET: ASSETS

SHARE CAPITAL & RESERVES (Rupees in Thousand)

June 30 2006
1,215,873 1,467,619 2,683,492

June 30 2005
1,136,194 1,167,070 2,303,264

June 30 2004
800547

Share Capital Reserves

1,576,346 2376893

12

SURPLUS ON REVALUATION OF PROPERTY, PLANT AND EQUIPMENT

464,171

488,601

NON CURRENT LIABILITIES Long-term financing Liabilities against assets to finance lease 250,365 182,487 393,924 123,092 703910 74646

Deferred Liabilities Taxation Employee benefits 409,093 62 345,996 0 258980 0

Deferred Income - grant-in-aid

69,814 911,821

73,488 936,500

77356 1114892

CURRENT LIABILITIES Trade and other payables Interest / mark-up accrued on loans and other payables Short-term borrowings Proposed Dividend Current portion of long-term liabilities Long-term financing Liabilities against assets subject to finance lease Provision for taxation 321,496 105,132 6,048,257 362,825 62,287 8,685 4,290,531 3256102 404774 1,599,580 226,709 3,795,340 836,697 140,210 2,879,827 930063 0 1897577 23688

TOTAL LIABILITIES

10,107,741

8,018,896

6747887

(Rupees in Thousands) June 30 2004

June 302006

June 302005

NON CURRENT ASSETS Property, plant and equipment Intangible assets 3,144,904 602,465 3,747,369 2,716,401 249,880 2,966,281 3594164 4641 3598805

Long term investments

11,227

60,711

96701

13

Long-term deposits

38,811

25,541

13073

CURRENT ASSETS Stores, spares and loose tools Stock-in-trade Trade debts Loans and advances Trade deposits and short-term prepayments Other receivables Other financial assets Cash and bank balances 58,543 2,576,026 2,614,396 225,113 287,034 9,266 91,022 448,934 6,310,334 52,713 1,963,765 1,853,889 218,179 236,489 270,471 35,596 335,261 4,966,363 49157 1309131 980491 565083 17530 0 0 117916 3039308

TOTAL CURRENT ASSETS

10,107,741

8,018,896

6747887

PROFIT & LOSS ACCOUNT

14

(Rupees in thousands) June 30 2007 June 30 2006 June 30 2005

Sales Less: Sales-Tax and Discount Sales - net Cost of goods sold Gross Profit Other Operating Income

13,077,670 1,264,183 11,813,487 9,283,623 2,529,864 100,458

11,042,160 1,634,142 9,408,018 7,360,351 2,047,667 112,553 2,160,220

8,075,382 1,287,500 6,787,882 5,298,489 1,489,393 60,014 1,549,407 402,348 285,676 23,625 450,888 5,995 380,875 95,701 285,174 Rupees -

Distribution cost Administrative expenses Other operating expenses Finance cost Share of loss of associate Profit before tax Provision for taxation
Profit after tax

2,630,322 588,981 356,556 52,429 937,109 12,162 707,409 125,165 Rupees

590,412 262,482 25,108 742,130 23,337 516,751 74,609 442,142 Rupees 6.30 5.79

Earning per share Basic Diluted

4.53 4.27

Capital Structure Authorized Capital: 15

Ordinary shares of Rs.10 each

(Rupees in Thousands)

June 30 2006

June 30 2005

June 30 2004

June 30 2003 June 30 2002 250,00 0 -

Ordinary Share Capital 1,500,0 (Rs.10/- each) 00 Preference Share Capital 1,000,0 (Rs.10/- Each) 00

1,500,0 00 1,000,0 00

250,00 0 -

250,00 0 -

ISSUED, SUBSCRIBED AND PAIDUP CAPITAL: Issued at Rs.10/- each. (Thousands) June 30 2006 Ordinary share capital: Opening Issued for Cash Bonus Shares Issued against building and machinery Issued against Scheme of amalgamation Closing Preference Shares: Class A Class -- B Closing Total issued share capital 237,49 4 367,92 2 1,375 4,082 610,87 3 605,00 0 605,00 0 1,215,8 73 237,49 4 288,24 3 1,375 4,082 531,19 4 605,00 0 605,00 0 1,136,1 94 83,525 147,89 4 1,375 4,082 236,87 6 236,87 6 83,525 100,51 9 1,375 4,082 189,50 1 189,50 1 83,525 100,51 8 1,375 185,41 8 185,41 8 June 30 2005 June 30 2004 Rupees June 30 2003 June 30 2002

16

*The company is in the process of issuing 302.5 milliom class B, cumulative non-voting Preference Shares.

2.

BORROWINGS Rupees (Thousands) June 30 2006 June 30 2005 185,37 9 756,74 9 2,879, 827 3,821, 955 June 30 2004 104,5 32 1,078, 798 1,897, 577 3,080, 907 June 30 2003 84,00 2 986,0 65 1,132, 927 2,202, 994 June 30 2002 65,47 0 789,0 43 785,3 76 1,639, 889

Lease Finance Long-term Borrowing Short-term Borrowing Total

287,6 19 571,8 61 3,795, 340 4,654, 820

FINANCIAL SUMMARY A snapshot of the Companys performance over the last few years, 2001 to 2006 is as below:
A o n in P Rm mu t K illion s

Ju e 2006 n G ross S ales D iscounts &T axes N S et ales C G O S G ross P rofit A inistrative E dm xpenses S elling E xpenses O perating P rofit F inancial &other C harges P rofit before T axes T axes P rofit after T axes S rce: P L ou E 1 1,042 1,634 9,408 7,360 2,048 262 590 1,282 742 517 75 442

Ju e 2005 n 8,075 1,287 6,788 5,298 1,489 285 402 838 450 442 96 285

Ju e 2004 n 6,077 1,147 4,929 3,859 1,070 169 274 627 396 280 3 277

Ju e 2003 n 3,983 773 3,209 2,382 827 134 166 527 359 184 43 141

Ju e 2002 n 3,163 585 2,578 1,893 685 143 141 402 342 146 16 130

Ju e 2001 n 2,521 392 2,129 1,509 620 98 125 397 373 107 13 94

The Group also holds expertise in trading business which adds to the wide array of business activities already undertaken by the Group.

17

MANAGEMENT HIERARCHY:
C h ai rm an

M a n a gin g D ire c to r

G M F ina n ce

G M M a nu fa ctu r in g (P ow e r D ivison )

G M M a rketing (P o w e r D ivison )

G M M a nu factu rin g (A pp lian ce s D ivisio)n

G M M a rke ting (A p p lian ce s D ivisio)n

S r. M a na g e r (F o re ig n P ro cu re m e nt )

S r. M an a g e r F in an ce

S r. M a na g e r M kt . (P o w e r D ivisio n )

S r. M a n ag e r M kt . (A pp lia nces D ivsiio)n

S r. M a n a ge r Q C . (A p plia nces & P ow er )

S r. M an a ge r H R&A

S r. M a n ag e r H IA

M a na g e r C o m m e r cia l

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: 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. 18

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: 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:

19

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. FINANCE DEPARTMENT The Finance Division manages the financial resources of the Company. It has the overall responsibility of preparing the Companys 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. 20

Information Technology Department The 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 Documents correspondence Dealing with other departments to avail the documents required Reporting to all the manager of finance department OBJECTIVE OF FINANCE DEPARTMENT Finance people concentrate on following points for accomplishment of their tasks Try to raise maximum funds 21

 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 advance HOW THEY TAKE DECISIONS The only thing that is considered at the time of taking decisions regarding fund raising is lower markup rates down because this is what makes loans feasible Or otherwise.

Budgeting:
Budgeting means to make the estimation of next financial years 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 years actual and next years 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
22

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: 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: 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: 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
23

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: In the daily production report the detail about the previous days 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 days 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.

PRODUCTS HIRARCHY 1. 2. Appliances Division Power Division

24

PAK ELEKTRON LIMITED

POWER DIVISION

APPLIANCES DIVISION

TRANSFORMER

ENERGY METER

REFRIGERATOR

AIR CONDITIONER

SWITCHGEAR

GENERATOR

MICROWAVE OVEN

TELEVISION

DEEP FREEZER

WASHING MACHINE

APPLIANCES DIVISION: The Appliances Division of PEL is the pioneer manufacturer of electrical goods in Pakistan. The Divisions product portfolio comprises of airconditioners, refrigerators, televisions, microwave ovens, and split airconditions. 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.
M n fa tu g a u c rin R frig ra rs e e to A C n itio e (S lit) ir o d n rs p De F ee e p re z rs T d g ra in M ro a e O e s ic w v v n A C n itio e (W d w ir o d n rs in o )

The Companys Appliances Division contributed significantly to its sales in 2005-06. The main reasons for this growth are increase in market 25

sizes along with PELs 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 Companys 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: PELs 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, PELs power equipment has been used in numerous power projects of national importance. Most of these are tailor made to buyers 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, PELs 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 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. PELs leadership in the Power Equipment market is largely due to its strong Research and Development knowledge and high product quality. 26

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: 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

27

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.
D e s cription W h ite Goo d s Electro n ic Go o d s Ga s A p p lia n ce s Tota l So urce: PE L Va lue (R s . in m n) 2 9 ,78 5 1 4 ,21 4 1 ,3 5 9 4 5 ,35 8 X 1 .2 0 + 1 5 0 X 1 .2 5 + 1 0 0 Perc enta ge 5 8.8 4 % 3 7.1 6 % 4 .00 % 1 0 0.0 0 %

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)
P d ct ro u R efrig erator (N F t) o ros R efrig erator (D irect C ool) D eep F reeze r A C nd ir o itione (W r indow ) A C nd ir o itione (S r plit) W ing M hin (Lo l) ash ac e ca W ing M hin (Im ash ac e ported) V umC ner acu lea M w ve O icro a ven T tal o S rc P L ou e: E N . o U its o f n 75,0 00 900,0 00 170,0 00 40,0 00 350,0 00 700,0 00 50,0 00 50,0 00 270,0 00 A erag P v e rice 27,0 00 15,5 00 13,0 00 17,0 00 20,0 00 3,0 00 8,1 00 4,0 00 4,5 00 S ales R inth u d s. o san s 2,02 5 13 ,950 2,21 0 68 0 7,00 0 2,10 0 40 5 20 0 1,21 5 29 ,785 % eo S ag f ales 6.84% 4 3.60% 1 0.51% 5.31% 1 6.71% 1 0.10% 1.75% 0.82% 4.36% 10 0.00%

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 Growth The 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 Environment There 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 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.

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Com petitive Market Others 8% Waves 14%

PEL 32%

Daw lance 46%

Major Competitors
Product Category Transformers Major Competitors 1. 2. 3. 4. Switchgear 1. 2. 3. Energy Meter Siemens (Pakistan) Engineering Company Limited, Karachi Climax Limited, Gujranwala Transfopower (Private) Limited, Lahore Elmetec (Private) Limited, Lahore Siemens (Pakistan) Engineering Company Limited, Karachi Alstom Pakistan (Private) Limited, Lahore Fico Engineering Pakistan Limited

1. 2. 3.

Syed Bhais (Private) Limited, Lahore Escorts Pakistan Limited, Lahore Telephone Industries of Pakistan Haripur

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. 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.

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Dawlance Dawlance started operations in early 80s 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 months easy installment plan and 24 months installment plan at an attractive financing cost. The companys 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 80s. They started refrigerators production in mid 90s 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 PELs share of the market is over 38%.
P r o d c u ts T r a n s fo r m e r s S w i tc h g e a r E n e r g y M e te r s To ta l S o urc e : P E L WAPDA 95% 95% 85% KESC 5% 5% 15% M a r k e t S iz e 2 0 0 5 E L S h a r e P 4 ,0 9 4 m n 1 ,4 7 0 m n 2 ,7 6 5 m n 8 ,3 2 0 m n 1 ,4 7 3 m n ( 3 6 % ) 4 5 1 m n (3 4 % ) 9 6 7 m n (3 5 % ) 2 ,8 9 1 m n

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ACCOUNTS PAYABLE

CONTENTS 1. Credit Purchase 2. Supplier Direct Purchase 3. Cash Purchase 4. 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 Supplier Direct Purchase Cash Purchase Vendor Purchase

1. Credit Purchase:
For credit purchase local procurement section raise purchase orders to local
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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 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

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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
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
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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 Cash Payment Voucher 1.Cash Receipt Voucher 2.Bank Payment Voucher 3.Bank Receipt Voucher 4.Journal Voucher

Expense Types: Detail of following expenses is maintained in this section. 34

 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

Admin

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(Verification)

Accounts

Book Keeping section

Voucher preparation

(Approval)

Payment (Through cashier)

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