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kohinoor textile mills

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All praises for Almighty Allah, whose uniqueness, oneness and wholeness is
unchallengeable, guided us in difficult and congeal circumstances. All respects for His
Holy Prophet Hazrat Muhammad (Peace be upon him), who enlightened our minds to
recognize our creator.

The author is thankful to his teachers (Prof.&Dir.) Dr. Ihsan malik , Prof.Mushtaq-ur-
Rahim and Prof. Mrs. Sajida Nisar (Incharge Training Programme) for their kind
guidance, encouragement and keen interest during internship and completion of this

I must acknowledge my gratitude to Mr. ------------------------ (Manager Marketing) and
Mr. ------------------- (Finance Manager), Marketing, Finance and Personnel Department
Kohinoor Industries Limited for their tiring efforts and meticulous supervision during my

I also thank all employees of Kohinoor Industries Limited who cooperated with me
during my internship at K.I.L.

                                        ♣ Preface

Being a student of IBA, University of the Punjab, I am very pleased to disclose the report
on my industrial training at Khinoor Industries Limited Faisalabad dated from 01-05-01
to 30-06-01.

In bid to becoming a successful business administrator, theory and practice of managerial
elements are indispensable. Industrial training fills the gap of theory what we learn in the
college and the practice what we scrutinize in the company. Hence, industrial training is
the only way out for the students of management to learn all these aspects of the ideal
thoughts of management and its application in the industry or business.

The contents of the report include production, financial, personnel and marketing details
of the company.
Muhammad Qaiser

Roll# 2000-85

Institute of Business Administration

                                 University of the Punjab,



Kohinoor Industries Limited - Faisalbad, the largest in the country, was established in
1950 with only 25,000 spindles. Throuhg a rapid process of consolidation and expansicn,
colossus of 147,000 spindles. The mills have the bwest-equipped laboratory in the
country for complete testing of raw materials, other inputs and yarn. It runs a
sophisticated system of quality control for its products covering in-process surveillance
and riagid finished product testing. It has technical collaboration with world renowned
Japanese Taxtile Group KANEBO.

Since the very beginning, Kohinoor has been a trendsetter, setting the pace and direction
for Pakistan’s textile industry. It has always been a leader in yarn products and its
“Telephone” brand yarn is always leading the yarn market.

Kohinoor Industries Limited – Faisalbad is not only a gaint of an industrial unit, it is an
institution in itself recognized as an ideal in the textile industry. Its management systems,
technical and professional training systems, employees welfare set-up, shopping and
schooling centers, make it a complete the Industry. The Sponsors of the company belong
to a renowned Group called “SAIGOL GROUP”. They have grown with the country.
They have grown to fill the vacuum that existed setting up one Industry after another.

Group Profile

Saigols started business activities in Pakistan in 1948 by setting up the country’s first
textile mill- Kohinoor Industries Limited in Lyallpur. With the passage of time and
continuing efforts of Saigols, Naseem Saigol Group becomes one of the major industrial
groups in Pakistan comprising the following:

• Kohinoor Industries Limited

• Azam Textile Mills Limited

• Saritow Spinning Mills Limited

• Pak Electron Limited

• PEL sppliances Limited

• PEL Daewoo Electronics Limited

• Kohinoor Power Company Limited

• Kohinoor Energy Limited

• Saritow Pakistan Limited

• Saigols Computers (Pvt) Limited


1948 – The First raindrop!

This is 1948, Pakistan, just a few months old, has yet to see a cultivator of its parched
industrial scene. Saigols having inherited the business trtadition from their forefathers an
erstwhile family of trades in Calcutta, have chosen Lyallpur (Later named Faisalabad) as
their base. Taking the initiative, they are setting up under the umbrella of Kohinoor
Industries Limited, the country’ first major textile mill – Kohinoor Textile Mills in

Let’s come to 1950, KTM, with a unique edge of location in the heart of cotton growing
area of Paistan, has started its production with a humble capacity of 25,000 spindles. But
through a rapid process of consolidation and expansion extending over a few years it
grew into a prestigious gaint of 147,000 spindles and 2,300 Auto power Looms, with
Latest facility for bleaching, mercerizing, continuous dyeing, and rooler printing,
finishine including Evaset and a large make up department to handle its production.

It was a very strong group and enjoyed leadership uptill 1965 and after it began to
become financially weak. In 1971 nationalization started by Bhuto and this industry took
a lot of

loan from the government and ran only on loans, this was the reason government did not
nationalization it.

In 1984, the top management decided to produce only yarn in order to meet expenses.
However during 80s it was given many loans and once again it becomes profitable for
owners, but in 90s owners took no interests.

Due to shift of resources from textile sector to electronics, processing and weaving units
were closed in 1987, and 1982 respectively.

From the very beginning, Kohinoor has been a trendsetter, setting the pace and direction
for Pakistan’s textile Industry; it has always been a leader in yarn and some of their
brands like TREVIRA, FABRON, BOSKI, have been fully recognized in the country.

They have also been first to introduce blended fabrics in Pakistan.


At present Kohinoor industries limited is running with 93,000 spindles. Now at this time
Kohinoor Industries Ltd. (KIL) is producing only yarn. It has three units now out of
which Units No.3,are completely on expert and other produce yarn for local market. The
mill have best equipped laboratory in the country for complete testing of raw materials
and finished products.


Kohinoor Power Company is a captive power-generating unit of KIL and is a subsidiary
of KIL.

The Kohinoor power company limited, formed in 1991 is the first captive unit to
commission in Pakistan. KPC started its production with two nigatta engine was added in
1993. Now successfully operating 15 MW power plants at 80% capacity, the plant is
meeting entire power requirements of Kohinoor Industries limited.



Mr. M. Naseem Saigol, Chairman.

Mr. M. Azam Saigol, Chief Executive.

Mrs. Sehyr Saigol.

Mrs. Razia Begum.

Mr. Shahid Sethi.

Mr. Imran Iqbal.

Mr. Shahid Nasim.


Sheikh Muhammad Shakeel.


M/s Manzoor Hassain Mir & Co. Chartered Accountants.


Allied Bank of Pakistan Limited.

Askari Commercial Bank Limited.

Emirites Bank International Limited.

Faisal Bank of Pakistan.

Habib Bank Limited.

National Bank of Pakistan.

Union Bank Limited.

Standered Chartered Bank.

United Bank Limited.


06-Egerton Road, Lahore.



Main raw materials are cotton, viscose and polyester and different types of yarn are
produced e.g. PV, 100% CPC.


100% Karded Cotton Ring Spun        3/1 - 24/1
100% Karded Cotton Open End          5/1 - 34/1
100% Karded Cotton slub Ring Spun     5/1 - 10/1
100% Karded Cotton slub Open End      6/1 - 30/1

Polyester / Cotton Blends

40% Polyester/ 60% Karded Cotton               12/ - 26/1
50% Polyester / 50% Karded Cotton Open End 14/1 - 26/1
50% Dacron 40A / 50% Karded Cotton MJS       14/1 - 40/1
50% Polyester / 50% Karded Cotton MJS     14/1 - 40/1
65% Polyester / 35% Karded Cotton MJS      14/1 - 40/1

Acrylic / Cotton Blends

50% Acrilan / 50% Karded Cotton Open End           5.5/1 - 14/1

99% Karded Cotton / 1% Black Poly Open End          6/1 - 30/1
95% Karded Cotton / 5% Black Poly Open End          6/1 - 30/1
90% Karded Cotton / 10% Black Poly Open End         6/1 - 30/1
85% Karded Cotton / 15% Black Poly Open End         6/1 - 30/1
80% Karded Cotton / 20% Black Poly Open End         6/1 - 30/1

Product line

AT Present KIL is engaged in producing variety of yarn (combed, carded)

                                 COMBED YARN

                                     20/1 CMD

                                     72/1 CMD
                                        52/1 CMD

                                        80/1 CMD

                                    CARDED YARN

                                         20/1 CD

                                         32/1 CD

                                        24PC CD

                                        30PC CD

                                        40PC CD

Countries to which yarn is exported.

KIL, s yarn is exported to Japan, USA & EEC countries.


KIL, s yarn is sent to its agents in Faisalabad, Karachi, Multan and Qassur.

Potential market

By aggressive marketing efforts they can cover the markets of Germany, Vietnam, and
rest of the Europe.



In local market every yarn producer is the competitive of the Kohinoor Industries Ltd.


    Bangla Daish



                                  Competitor Analysis

Kohinoor Industries Limited operates in the Yarn spinning mills sector. This analysis
compares Kohinoor Industries Limited with three other companies in this sector in
Pakistan: Dewan Textile Mills Limited (2001 sales of 2.60 billion Pakistan Rupees

[US$44.43 million] of which 105% was Division 1), Bhanero Textile Mills Limited (1.44
billion Pakistan Rupees [US$24.55 million] of which 100% was Cotton yarn), and Apollo
Textile Mills Limited (1.10 billion Pakistan Rupees [US$18.73 million] ).

Sales Analysis

Kohinoor Industries Limited reported sales of 1.94 billion Pakistan Rupees (US$33.04
million) for the fiscal year ending September of 2001. This represents a very small
increase of 1.1% versus 2000, when the company's sales were 1.92 billion Pakistan
Rupees. Despite this increase, sales are still well below the level achieved in 1999, when
Kohinoor Industries Limited reported sales of 2.38 billion Pakistan Rupees.

Sales of Kohinoor Industries Limited

                          3.31 3.15 3.01 2.38 1.92 1.94
                          1996 1997 1998 1999 2000 2001

(Figures in Billions of Pakistan Rupees)

Although sales at this company increased, they increased at a slower rate than the three
comparable companies in 2001. The sales increase of 1.1% was less than those at Dewan
Textile Mills Limited (up 14.3%), Bhanero Textile Mills Limited (10.0%), and Apollo
Textile Mills Limited (13.3%).

Sales Comparisons (Fiscal Year ending 2001)
                            Sales       Sales       Sales/
Company                     (blns)      Growth      Emp (US$)     Largest Region
Kohinoor Industries Limited 1.937       1.1%        N/A           N/A
Dewan Textile Mills
                            2.604       14.3%       18,031        N/A
Bhanero Textile Mills
                            1.439       10.0%       18,239        N/A
Apollo Textile Mills
                            1.098       13.3%       18,729        N/A

Stock Performance

In recent years, this stock has performed terribly. In fiscal year 1996, the stock traded as
high as 15.75 Pakistan Rupees, versus 1.80 Pakistan Rupees on 11/15/02. (In 1996, the
stock retreated significantly from its high, and by the end of the year was at 3.75 Pakistan

The current (11/15/02) price of this stock is 1.80 Pakistan Rupees. During the past 13
weeks, the stock has fallen 9.1%.

During the 12 months ending 12/31/01, the company has experienced losses totalling
3.84 Pakistan Rupees per share. These 12-month earnings are lower than the earnings per
share achieved during the last fiscal year of the company, which ended in September of
2001, when the company reported earnings of -3.20 per share. Note that the earnings
number Includes 1.93 pre-tax charge in fiscal year 2001.

This company is currently trading at 0.03 times sales. This is at a lower ratio than all
three comparable companies, which are trading between 0.04 and 0.20 times their annual
sales. This company has negative book value (and thus a price to book value would not
make any sense).

                           Summary of company valuations

                                                 Price/   Price/   Pr
            Company           Date        P/E    Book     Sales    Chg
            Industries        11/15/02    N/A N/A         0.03     N/A
            Dewan Textile
                              9/10/02     23.8 0.75       0.20     N/A
            Mills Limited
            Bhanero Textile
                              10/30/02    4.7    0.57     0.15     N/A
            Mills Limited
            Apollo Textile
                              10/21/02    14.3 0.19       0.04     N/A
            Mills Limited

The market capitalization of this company is 57.72 million Pakistan Rupees (US$984.69

Dividend Analysis

This company has paid no dividends during the last 12 months. The company also
reported losses during the previous 12 months. Kohinoor Industries Limited last paid a
dividend during fiscal year 2000, when it paid dividends of 0.60 per share.

Profitability Analysis

In 2001, earnings before extraordinary items at Kohinoor Industries Limited were -92.27
million Pakistan Rupees, or -4.8% of sales. This profit margin is lower than the level the
company achieved in 2000, when the profit margin was 10.6% of sales.

The company's return on equity in 2001 was -5.5%. This was significantly worse than the
13.6% return the company achieved in 2000. (Extraordinary items have been excluded).

Financial Position

At the end of 2001, Kohinoor Industries Limited had negative working capital, as current
liabilities were 2.36 billion Pakistan Rupees while total current assets were only 874.65
million Pakistan Rupees. The fact that the company has negative working capital could
indicate that the company will have problems in expanding. However, negative working
capital in and of itself is not necessarily bad, and could indicate that the company is very
efficient at turning over inventory, or that the company has large financial subsidiaries.

At the end of 2001, the company had negative common shareholder's equity of -705.66
million Pakistan Rupees. This means that at the present time, the common shareholders
have essentially no equity in the company. Although the common equity is negative,
Kohinoor Industries Limited does have a net positive equity position (as its preferred
stock, minority interest, etc. are positive).

As of September 2001, the company's long term debt was 381.54 million Pakistan
Rupees and total liabilities (i.e., all monies owed) were 2.81 billion Pakistan Rupees. The
long-term debt to equity ratio of the company is 0.25.

As of September 2001, the accounts receivable for the company were 359.72 million
Pakistan Rupees, which is equivalent to 68 days of sales. This is an improvement over the
end of 2000, when Kohinoor Industries Limited had 108 days of sales in accounts

                                    Financial Positions

                                                 LT Debt/ Days
                    Company                 Year Equity   AR
                    Kohinoor Industries
                                            2001    0.25       68
                    Dewan Textile Mills
                                            2001    0.47       62
                    Bhanero Textile Mills
                                            2001    0.19       47
                    Apollo Textile Mills
                                            2001    0.80       72


The mill is located at a distance of 2.5 km South of the Faisalabad Railway Station on
Jaranwalla Road, Kohinoor Nagar, Faisalabad. Due to its location along the road it has no
transportation problem as well as it is near a big commercial area. Availability of labour
is easy.

It has an area of about 120 acres and has residence for employees and other facilities for
them within the mills.


Main objective of any business firm or company is to earn profit. While the
memorandum of association of Kohinoor Textile Mills is composed of 31 objectives.
However, the most important objectives are given as under:
1. To carry on the business of jute, flax and hemp spinners, cotton
spinners, and doublers, linen and cloth manufacturers, jute, flax,
hemp, cotton and wool merchants, wool combers, worsted
spinners, woolen spinners, yarn merchants, worsted stuff
merchants, bleachers, dyers and manufacturers of bleaching and
dyeing materials in Pakistan and all over the world.

2. To purchase, comb, prepare, spin, dye and deal in cotton, jute,
flax, hemp, wool, silk and any fibrous substances within and
outside Pakistan.

3. Throughout Pakistan and throughout the world, to weave and
otherwise manufacture, buy and sell and deal in all kinds of cloth
and other goods and fabrics, whether textile netted or looped.

4. To carry on the business of manufacturers of and dealers in
waterproof materials and fabrics, paulines, American cloth, floor
cloth and all kinds of imitation leathers and rubbers.

5. To carry on the business of drappers and furnishers in all it’s
branches throughout Pakistan and anywhere else in the world.

6. To carry on all or any of the businesses of silk mercers, silk
weavers, cotton spinners, cotton ginners, cloth manufacturers,
furriers, haberdashers, hosiers, manufacturers, importers and
wholesale and retail dealers of and in textile fabrics of all kinds.

7. To carry on the business of mechanical engineers and
manufacturers of machinery and implements of all kinds and to
buy sell, repair, convert, alter, let on hire and deal in machinery,
implements, and hardware of all kinds.

8. To lease, let out on hire, mortgage, sell or otherwise dispose of
the whole of any part of the undertaking of the Company, - or any
lands, business, property rights or interest therein.

9. To make known or give publicity to the business and
productions of the company by means of advertisements.

10. To pay all or any costs, charges, brokerage, commission and
expenses preliminary and incidental to the promotion, formation,
establishment and registration of the company.

11. To take or otherwise acquire and hold shares in any other
company having objects altogether.
                      12. To draw, make, accept, endorse, discount, execute, and issue
                      cheques, promissory notes, hundies, bills of exchange and other
                      negotiable or transferable instruments.

                      13. To appoint agents and managers and constitute agencies of the
                      company all over the world and to discontinue the same as per

                      14. To grant pensions, allowances, gratuities and bonuses, to
                      extend benefits of provident fund or any other contributory
                      schemes on behalf of company, for employees.

                      15. To get the articles of trade in which the company is authorized
                      to deal, manufacture, or packed form other firms.

                      16. To procure the incorporation, registration or any other
                      recognition of the company in any country, state, or place outside

                      17. To open and close accounts with banks or bankers, and to
                      deposit therein, and withdraw from, the funds of the company.

                      18. To issue any share or security and indemnity to nay person
                      whom the Directors have agreed, or are bound to indemnify, or in
                      satisfaction of any liability.

                      19. To do all or any of the above things in any part of the world,
                      and either as principals, agents, contractors, trustees or otherwise
                      or either alone, or in conjunction with others.

                      20. To do all such other things as are incidental or as the company
                      may think conducive to the attainment of the above objects or any
                      of them.


Kohinoor Industries has always adhered to high ethical standards and strived to be the
industry’s preeminent manufacturer. The company’s Mission Statement encompasses
four parts: Vision, Mission, Values, and Principles.


To be achieved through our Mission, Kohinoor Industries’ Vision is "to be a world-class
company as defined by the customers we serve."


"We will exceed our customers’ expectations in quality, service, and value; continually
increase shareholder value; and provide growth opportunities for our people."

The Mission is supported by our Values and Principles


"Honesty, integrity, and hard work."

The company’s success, as well as the success of individual employees, can be traced to
embracing and practicing these values. Flowing from the values of honesty, integrity, and
hard work are a set of principles that we believe in and use to govern our behavior as
Kohinoor Industries employees.


"People, relationships, customer, citizenship, innovation, and results."


Kohinoor’s philosophy is to attract, develop, and retain the best people. We focus on
growing and developing these people through continued education, training, and work
experience. The safety and well-being of our employees are primary corporate objectives.


We strive to establish and maintain honest relationships with all stakeholders in the
company. This is to include employees, shareholders, customers, suppliers, and the
communities in which we live. These relationships are to be founded on mutual trust,
mutual respect, and mutual benefit.

Customer - We recognize that our customers and our ability to exceed their expectations
are critical to our total success. We will listen to and seek to understand our customers’
needs. We will interactively respond to those needs for the mutual benefit of the

In the communities in which we live and the industry in which we work, we will actively
strive to contribute to a better environment for everyone.


In an ever-changing marketplace, new products, services, and technologies are the
lifeblood of our business. We recognize our responsibility to be a leader in product,
technology, and in the marketplace. We will provide a culture that encourages, nurtures,
and recognizes innovation.


We value the trust our shareholders have placed in us, and we recognize our
responsibility to maximize the return on their investment. We will be every customer’s
supplier of choice for all markets in which we operate

                         ORGANIZATIONAL STRUCTURE

The organizational structure of Kohinoor Industries Ltd. is flat and the flow of authority
has a proper channel as shown in the organizational chart. The chart is divided into a
systematic manner into different boxes while each box denotes a department or section
headed by an incharge who supervises plans and controls the operations and affairs of the

This organizational chart shows the flow of authority and responsibility from top
management to lower management. But according to any observations and personal
judgment, there is a diagonal and formal relationship between management while the
flow of authority in the chart as formal, which encourages bureaucratic trends.

CHARACTERISTICS             STATUS         Remarks

1) Formalization            High           No implementation according to document.

2) Standardization          Low            Work is not defined so standardization is low.

                                           Company has no specialization neither
3) Specialization           No             functional nor social. But product department
                                           is function specialized.

4) Centralization           Moderate       MD holds the most of the authority.

                                           Span of control is narrow. But it complex due
5) Hierarchy of authority   Tall
                                           to no clear authority.

                                           There are seven departments and 10 vertical
6) Complexity               High
                                           levels, which make it more complex.

                                           Top management has not right orientation.
7) Professionalism          Low            The line staff has average qualification of

8)Control                   Mechanist      Company needs organic control for stability.



                                       Mgr. Quality

                                   Chief Executive
Chief Operating Offr

                          H.R & Admin

                           Group Mgr


                           G.M. Tech

                           G.M. Mkt

Ch. Eng.Civil

                          Mgr. Cotton

G.M. F&Acct

                            Sr. MM

                            U # 3b


                            U # 3A



                            Dy. GM


                           Mgr. KPC

                            Dy. Mgr


                            Dy. Mgr


Assistan Mgr.

Assistan Mgr.


                                       Mgr. Finance

                                      Dy. Mgr System

Dy.Mgr.Bkg & Shp

Dy. Mgr & SSI

Asst. Mgr.Admn



We can subdivide the mill's management into the following three main levels.


Consisting of Chairman, HR & Admin Manager, Senior Manager Finance & Accounts,
Senior Marketing Manager and General Manager. The Top management formulates
policies and makes decisions about the company activities for achieving the objectives.
General Manager implements these policies and decisions in the mills. While General
Manager's authority consisting of the following.

* Makes decisions within the scope of his own authority.

* Assigns tasks to subordinates in their areas.

* Expects and requires satisfactory performance form subordinates.


This level of management consisting of Assistant Manager, Spinning Master, Labour
Officer, Security Officer and Time Officer. This type of management receives orders
from General Manager and implements them through the co-operation of lower
While the main responsibility of middle management is to control and direct the
operations with the consent of General Manager to get work done. It involves in
standardized production, supplies, good working conditions, and definition of standard
performance and reporting of flow of work.


This department is headed by Assistant Manager who is also the incharge of accounts
section. Assistant Manager controls all the activities of the mills according to the rules
and regulations receive from General Manager. While he performs the following main

* To maintain good relations with outside public.

a. Good relations between Govt. and mills.

b. Good relations with general public.

* Administration of the resident area of the mills.

* Administration of the employees who are working outside the production department in
the mills.

* Dispatching of goods according to the orders of the Head Office and pay excise duty on
those goods.

* Receiving of raw materials for production department and pay custom duty on the

* Receiving orders from Head Office and implement those orders under the supervision
of General Manager.

* Giving information daily about the production and other activities to the Head Office.


When a person is recruited, a letter is sent by the HR & Admin Manager to labour officer
to convey the terms and conditions of the appointment. While the clerk fills up a personal
detailed file which contains the following information.

1. A serial number is assigned to each employee, which is called file number.

2. Name of employee, his father's name, full address of the employee and the department
in which he works.
3. The grade, which has been granted to the employee.

4. Date of birth given because employee is retired when he attains the prescribed age

5. Designation of the employee is also given in his personal file.

6. The file also contains different allowances rate i.e. house rent, medical allowance and
traveling allowance etc.


This is being regarded as the most important card, which is maintained for each
employee. Every employee has a card on which total days of month are recorded. Time
keeper attendances these cards for every shift, while at the end of the month these cards
are sent to the Labour Officer who, on the basis of these cards and other time office
record makes the pay sheet. Attendance card is very complicated in it's structure
containing multiple columns on both sides. The front side of the card contains name of
employee, his father's name, designation, department and then number allotted. First
column of the front side is the date column starting from 1st to 31st. After this date
column, many columns specified to record incoming and outgoing time of the work,
signature of incharge, leaves, privilege leaves etc. are recorded in their respective
columns. Ordinary hours and overtime hours are recorded in hour’s column, which is also
verified by the supervisors. While total of each column is computed in the bottom.

The backside of the card contains name on the employee, father's name, designation and
the month at the top. Summary section contains the summary of ordinary hours (8 hours).
On this side, amount of wages, allowances, bonuses and increments are computed and
called gross wages. Then fines, canteen charges, insurance expenses and loans
installments (if granted to any worker) are deducted from this gross wages and net wages
are given to the employees.


There are three registered unions in the mills:

2. Kohinoor Labour Union

3. Kohinoor Workers Union

Secret ballot to determine the collective bargaining agent is held after every two years,
under supervision of the Registrar Trade Union Faisalabad Region. Last referendum was
held on 31.8.2001 and the Pakistan workers Union was declared the collective bargaining
agent for two years. Mr. Irshad is General Secretary and Mr. Jabbar is President of the
union. Every year the union presents a memo of demands to the management and
agreement is arrived at amicably. Office bearers of the union are very sensible and work
hard both for better production and labour welfare. They are not affiliated with any
political party.


Kohinoor Industry has a very bitter experience of strained labour management relations.
In 1971, registered union in the mills was reported to have been sponsored politically. It
became awkward and aggressive. There was no discipline and production kept on
declining till 1984. More then 55000 employees were on roll. On the investigation of the
union their performance was very poor. The management remained helpless and could
not enforce discipline. Strike and go-slow were regular features. As a result, company
incurred huge losses. The workers also suffered. No bonus or profit paid to them.
Political stability in the government emerged in 1984. The mills management found a
favorable working environment. Re-organization of the management took place.
Superfluous strength was reduced. Awkward Trade Union leaders were thrown out and
discipline restored.

Today relations between the labour and the management are very cardinal. Sense of
mutual understanding and harmony prevails. Consistent with it's socio-economic
objective, the company is very responsive to welfare of the employees. Union is also
playing fair positive role. Consequently, profitability and growth rate is commendable,
which is benefiting both the parties.

Business Intelligence Unit

Business Intelligence Unit functions as the market research and intelligence cell of KIL.
Though its principal responsibility is to collect and analyze the data about yarn Industry,
its key players including its users, namely yarn producers, it also carries out specialized
market studies in other fields namely, textiles and financial analyses.

kIL Executive Development Center

Kohinoor Industries Development Centre was established in June 1997. It was formally
inaugurated on July 28, 1997 by Mr. M. Naseem Saigol and was followed by a seminar
on the Seven Habits of Highly Effective People, based on Steven Covey's bestseller.


The group is determined to establish a platform where it can provide the knowledge and
skills to its employees so that they will be the torchbearers of the organization tomorrow.
KEDC is an in-house management development organization for excellence in training. It
has been established with the explicit purpose of ensuring organizational growth and
development and to serve the need for wisdom in corporate decision-making, thus
playing an important role in the long-term success of Kohinoor Industries Limited.

Training and Development

KIL training and development programme is an in-house programme that is designed to
change the way we work and think. Our faculty is a blend of individuals from diverse
backgrounds comprising of scholars and educationists of the corporate world


KIL are committed to surpass competition by unleashing the constructive creative
abilities and energies of our group's employees.

Seminars / Training Courses Conducted

• The Seven Habits of Highly Effective People

• Star Office Training

• Communication Concepts and Skills, Level-I

• Communication Concepts and Skills, Level-II

• Seminar on Business Ethics

• Finance for Non-Finance Executives
• Presentation Skills

• Office Etiquettes and Mannerism

• 5S-Housekeeping

Future Programmes

• Teamwork

• Time Management

• Effective Meetings Basic Supervision Yarn Industry.

• Safety, Firefighting & First Aid

• Motivation & Leadership

• Knowledge Management

                                 JOB DESCRIPTIONS


Job Title : Manager Cotton

Report to : Chief Operating Officer

Responsibilities :

Responsible for procurement of Pakistani cotton for Kohinoor Industries Limited.
Negotiate with the cotton brokers / suppliers in connection with rate and quality.

Follow up of pending contracts till maturity.

Negotiate with General Manager Finance and Accounts in connection with release of
payment to the cotton suppliers.

Job Title : Assistant System Officer

Report to : Manager Cotton


1- In the absence of Manager Cotton all responsibilities of Cotton is performed by
Assistant System Officer.

2- Any other duty signed by Chief Operating Officer.

Job Title : Assistant Accountant

Report to : Manager Cotton

Responsibilities :

To prepare cotton payment voucher and to follow up cotton parties payment.

Responsible for opening of local L/Cs (cotton) with co-ordination of Finance Deptt.

To responsible for preparation of L/Cs Cotton limits Position reports.

To prepare the debit note of short weight / trash / moisture, deduction of Cotton Suppliers
and timely sent to the brokers.
To follow up cotton parties regarding getting of Sales Tax invoices from the Ginners.

Responsible for preparation and deposit of Income Tax liability relating to cotton parties.

Supervision of cotton Samples required to be tested from Lab. Department.

Any duty signed by the Manager cotton.

Job Title : Cotton Selector

Report to : Manager Cotton


1- Responsible for the loading and dispatch of cotton from the Ginning Factory.

2- To check and ensure the quality of cotton i.e. Moisture/Trash and weight shortage if
any before dispatch.

3- Responsible for timely submission of all related documents i.e. Sales Tax invoices and
bill along with weight notes from Ginning Factory to Mill.

Job Title : Cotton Clerk

Report to : Manager Cotton


1- To maintain the proper record of cotton arrived i.e. parties’ bill, Gate passes, weight
notes and lab results etc.
2- Responsible for timely dispatch of cotton demand drafts and letters to the concerned

3- To Fax contracts and other reports to Multan & Lahore office.

Any other assigned by the cotton Manager.

Job Title : Peon

Report To : Manager Cotton


1- Distribution of documents to other departments.

2- To serve the guests.

3- Any other job assigned by the Manager Cotton

Following duties were assigned to the employees of shipping and banking cell by the
order of Mr. Muhammad Shafique Asstt.Manager Shipping and Banking.

Name: Amir Nazir

Designation: Accounts Executive

              1. Undertaking from Harvester

              2. ACB FAFB arrangement

              3. All export payments (Shipping, Clearing, and Forwarding Etc.)

              4. Rebate cases preparation

              5. Business record

Name: Tahir Mahmood

Designation: Export Officer

              1. Preparation/ Completion/ Scruitning of all shipping documents rcvd
              from H.O.

              2. Negotiation through Askari Commercial Bank

              3. Despatch of docts through HBL, NBP and ACB

              4. Preparation of Bills of Lading.

              5. Correspondence and co-ordination with LHR office regarding dispatch
              and acceptance of documents.

              6. L/c’s Status

              7. Arrangement of Foreign Commission D.D’s

Name: Muhammad Nadeem

Designation: Asstt. Export Officer
               1. Maintaining export records

               2. All sorts of filing

               3. Outdoor runner

               4. Any other duty assigned by seniors

Name: Javed Iqbal Ch.

Designation: Accounts Asstt.

               1. Outdoor runner

               2. Maintaining bank statements

               3. Any orher duty assigned by seniors

                          MAIN STRATEGY ABOUT DEBTS


The grave economic recession in Pakistan during the last five years has taken its toll to
the textile industry as well. Like much of Pakistan industrials sector. Kohinoor Industries
too has fallen victim to the circumstances facing the entire nation on the economic front.
In addition to above KIL also have some other inherent problems in old units, which
rendered it unviable. The following are the main inherent problems:

                   Outdated spindles, which were installed in early 50,s.

                   Lower production due to slow speed spindles.

                   Lower yarn yield due to outdated back process and spindles.

                   Minor value added products
                    Higher wage cost per spindle due to manual winders

                   Higher power & fuel cost due to manual winders and slow speed back

As a result KIL suffered huge losses in the last five years which eventually raised its debt
financing to a level of two billion plus which became unsustainable by its operations.

In 1998, Kohinoor Industries total sale was Rs.3060 million, whereas its total debt (long
term & short term) as at April 30, 1999 was Rs.3037 million. The company’s sale
revenues are not enough to service the financial burden of the huge unsustainable debt.


The company was set up in 1948 in the vicinity of Lyallpur (later named Faisalabad).
Fifty years later, with the urbanization of rural areas and civic developments KIL has
become the center point of the Faisalabad City. It has been surrounded by some of the
most populated and lucrative commercialized areas like peoples colony and madina town.

Keeping in view the availability of basic commercial amenities the value of Kills land has
increased manifold. The sponsors of KIL have decided to reduce its debt burden through
transfer/ sale of land owned by KIL valuing two billion approximately.

Some time back in 1998, Saigols approached institutions and gave them a proposal to
take over the land and requested to adjust it against principal liability of unsustainable
debt of the company. After some discussions, bank/ financial institutions showed their
inability to take over the land against settlements of their debts. Then the sponsors
suggested that they might be given an option to sell the land on behalf of the creditors
subject to the following:

                    Three years time be allowed for the repayment of unsustainable debt,
               (minimum time period required for the sale of land) because it involves lot
               of exercises i.e. permissions to be obtained from local administration,
               town planning, development and plotting of land and devising marketing
               strategies etc.

                    Freezing the levy of mark up by the financial institutions during these
               three years, which would be required for land development and sale.
                   Sale proceeds of land are distributed among all the creditors on
               prorata basis as re their exposure.

Their proposal also includes scrapping of outdated spindles (116,000 approximately),
which are not viable due to the reason stated above. While inquiring the status of
remaining two units No.4 & 5, they gave complete financial projections of these two
units along with cash flow. From these projections, it transpires that remaining two units
would be viable if reasonable relief in mark up rates be allowed.

                               TYPES OF CREDITORS

The company has three types of creditors/ lenders/ financial institutions having different
types of charges on company’s assets, which are as follow:

               1. Financial institutions, which are secured by fixed assets of the company
               having 1st charges on it.

               2. Financial institution, which are secured by having charge on specific
               assets of the company such as Leasing companies and Modarabas.

               3. Financial institutions, which have 2nd charge on fixed assets of the
               company or are secured by hypothecation over assets of the company.


Kohinoor Industries also requested that KPC liability payable to different financial
institutions of Rs. 335 million be considered as KIL liability. KIL has an unsecured
liability of Rs. 290 million payable to Kohinoor Power against electricity supplied in last
five years. Due to this huge receivable, KPC could not service its debt in the past.
Reduction in KIL s operations will affect KPC profitability and in future KPC will not be
in a position to repay its debt from its operations. The creditors of KPC are conveying
their intentions to liquidate the project. If it is happened, it will close down the operations
of KIL because KIL does not have any other source of power to run the mills. Keeping in
view the above factors, it is imperative to address the creditors of KPC. KPC liability of
Rs. 250 million should be included in the total liability payable by KIL to financial
institutions and its repayment should be made as of other NFCH creditors. Another
option is to allocate a reasonable amount out of land sale towards KPC liability and pay
that amount to its creditors to reschedule its loans.

As against Kills proposal for repayment of unsustainable debt through sale of land,
Banks/Financial Institutions have another option and that is liquidation of the company
through court. This option is usually adopted where borrowers willingness to pay the debt
is doubtful. In this particular case, borrower is not only willing to pay but also has
insisted the financial institutions to accept the land sale proposal (definite source of
repayment of debt) with certain parameters stated above. Further liquidation process
involves huge cost, unlimited time frame and many other legal complications, which may
not benefit the financial institutions. Legal proceedings would also damage the smooth
business relationship with the client, especially when all other group companies are in
operation ad working reasonably good in the present economic crises and servicing debt
obligations towards financial institutions with reasonable level of satisfaction.

The management of the company also approached SBP coordination committee for the
revival of KIL and implementation of their land sale proposal. In the beginning of 1999,
they gave land sale presentation to the major lenders and SBP committee at Habib Bank
Plaza, Karachi. The committee recommended their case for revival to the Presidents
committee. The Presidents committee discussed KILs land sale proposal in their meeting
held on June 05, 1999 at HBL Plaza and in principal they agreed to accept and implement
land sale proposal cum revival plan of proposal in detail and come up with
recommendations and specific implementation plan in the next meeting.

Since any arrangement of disposal of land and reduction of debt has to be done by and
large to the satisfaction of all the creditors especially 1st charge holders. National Bank
convened 1st charge holders meeting at NBPs board room on July 1st to discuss and
formulate the strategy for the implementation of the KIL s land sale proposal. The
participants discussed the proposal in detail and of the view that. This proposal should be
accepted as KIL does not have the capabilities to repay its debts from operations. Land is
the only definite source of generating debt repayment. While discussing the proposal one
controversial point arose and that was the formulation of the division of sale proceeds
among the creditors. It was argued either the first charge holder be paid first as per their
exposure or it would be distributed proportionately among all the creditors. As it was
feared that to deprive the non first charge holder from the sale proceeds or a plan devised
to pay them at a later stage would provoke them to initiate legal proceedings against the
company that would jeopardize the whole payback plan.
Another significant point was discussed that KIL should put all efforts to initiate,
promote and complete land sale process within two years time. The reason being that
longer the completion period be allowed, would benefit KIL and adversely effect the
financial institutions due to freezing of levy of mark up during that period.

A periodic comprehensive plan of repayment of loans is being attached from which it
transpires that major portion all the creditors exposure will be satisfied from land sale
valuing 1.92 billion.


After addressing above issues and other minor issues, NBP proposes the following
recommendations for the implementation of Kohinoor Industries revival proposal:

                    The whole process of land development and sale should be completed
               in three years time. All land sale proceeds should be materialized within
               two years time.

                    Levy of mark up on all loans to be frozen for the period of three years
               starting from September 1st, 1999.

                   September 1st, 1999 would be the effective date for calculating three
               years time required for land development and sale.

                    An ‘Escrow Account’ be opened and all land sale proceeds will go
               into that account.

                  Sale of building malba and outdated machinery will be done through
               competitive open bidding all sale proceeds will go into the Escrow

                    70% share of total land sale proceeds is distributed among 1st charge
               holders including leasing companies and modarabas on prorata basis till
               the satisfaction of total exposure in the company.

                    30% share of total land sale proceed be distributed among other non-
               1st charge holders as per their exposure in the company till the satisfaction
               of 1st charge holders exposure. Thereafter 100% land sale proceeds will
               be distributed among NFCH as per their exposure.

                   Lenders will appoint one person as ‘Financial Controller’ who will
               have full access over land sale transactions and will monitor its cash flow.
               Financial controller would wet all agreements that will be executed among
               KIL and developers, marketers, consultants and contractors for the
               development and sale of land.

                    Distribution of land sale proceeds will be made as per agreed pan
               stated above and financial controller will monitor it.

                  If land sale is not completed within three years time, then the lender
               may have option to charge mark up with retrospective effect.

                    The company will pay mark up @12% on debts left after land sale

                   The company will pay mark up on all working capital lines to be
               required for running the remaining two units.

                    Any extra sale proceeds other than the projected figure of Rs. 1.92
               billion would be utilized in repaying the remaining outstanding debt of the

These are the broad parameters and if the committee agrees, then pros and cons of the
proposal would be analyzed and discussed with all the creditors. An inter creditors/
borrowers agreement would be drawn between the creditors and KIL.


Pace of life has gone to dangerously accelerated level, rate of obsolescence is very high,
values and social preferences are altering and new trends are emerging. Those who do not
anticipate such change stand against these odds and do not plan or formulate just in time
policies, are thrown out of the system. Today, organizations are endeavoring for
continuous improvement in their production and service system. Policy is a board
framework which tells us what to do, when to do, and who to do it. It also points out the
facts that where we are and where we want to be. It bridges the gap between present and
future. Business policies are blend of past, present and future and are formulated keeping
in view past performance, having a vigilant eye upon present and upon the activities of
futures. Each organization has its own managerial policies, which depend upon its nature.
In the absence of these policies, there will be a great amount of uncertainty, suspicion and
sense of grievances in the environment of an organization. So it is not wrong to say that
effective managerial policies are very necessary for the survival and success of an
organization because these are the steps taken by the managers for effectively operating
the system of an organization.

In first stage all critical areas to business are determined and then long term policies,
plans and strategies are developed. For any manufacturing concern, there are certain
guidelines, which provide a base for setting up its managerial policies. KIL made the
following guidelines for policies after screening the company internal and external

               1. To produce quality standard products.

               2. To improve quality through best use of new technology and trained

               3. Laying the groundwork through both corporate and business strategic

               4. To up hold internal control through incentives and reward systems.

               5. Analyzing the marketing environment through marketing research and
               marketing system.

               6. Analyzing consumer and business markets and buyer behavior.

               7. Analyzing competitors.

               8. Measuring and forecasting market demand.

               9. Managing sales force.

               10. Setting up the system for procurement of raw material at the lowest
               possible cost.

               11. Developing an effective system for anticipation acquisition and
               allocation of financial resources.

               12. “Division of labor” and “Specialization” are main issues of managerial
               policies in production sector.
These are the broad guidelines upon which KIL made as base for managerial policies, in
order t survive in this competing environment and to make profit.

I found following managerial policies developed and followed by Kohinoor Textile

              1. Personnel Policies.

              2. Procurement Policies.

              3. Management Development Policies.

              4. Research and development Policies.

              5. Production Policies.

              6. Marketing and sale Policy.

              7. Financial Policy.

              8. Environment protection Policy.


       Management refers to the universal process of effectively and efficiently getting
       activities completed with and through other people. It is a process by which basic
       functions that is planning; organizing, leading, and controlling are performed to
       achieve the desired objectives of the organization. There are different types of
       leadership styles:

                      1. Benevolent Autocrats: These are more concerned with task
                      achievements and much with the relationship with the workers.

                      2. Democratic Style: This style of leadership is more with both the
                      task and the relationship.

                      3. Developers: These are mainly concerned with the relationship of
                      workers and not with tasks achievement.

       All above mentioned leadership styles are effective in their own ways. The
       leadership style in KIL at top level of management is Democratic but at middle
       and lower level it is Autocratic.

       (Management is more concern with performance but not with relationship)

                         ADMINISTRATION DEPARTMENT

Administration department consists of the following main sections;

1= Accounts offices

Assistant Manager is the head of this section while all types of payments are made by this
office i.e. wages, salaries, store expenses, gratuity and allowances, freight charges, excise
and custom, traveling expenses allowances.

Records of all payments are kept in this office in daily cash-book. If there is shortage of
cash-in-hand, then the cashier brings the required cash from the "Bank" through cheques.
all collections and payments take place by means of cheques.

2. Labour And Welfare Office:

Labour Officer is the incharge of this office who deals with labor affairs such as
maintaining labor records, recruitment and selection of employees, records of the
attendance of employees and records of benefits and services provided to the employees

3. Excise Office:

Deputy Superintendent of excise and custom is the incharge of this office who is
employee of excise and custom department of government. He checks the quantity and
quality of the raw-materials and then this custom duty is being deposited in the bank.
After paying his custom duty, raw-materials can be used in the process of production.

Now when finished-goods are produced and are being despatched to the sales agents,
then excise duty is being paid on the despatched goods. After paying of this excise duty,
deputy superintendent of excise and custom signs "Excise Pass" which is the evidence
that excise duty has been paid.

4. Security Office:

Incharge of this office is named as Security Officer who is responsible to protect the
organization from outside danger. While the staff consisting of the head watchman and
eighty watchmen. Twenty five watchmen are always present in every shift in the mills.
The duties of watchmen are as under:

a. To maintain peace in the mills.

b. To check the employees while coming in and going out from the mills.

c. To check the employees at night in the production department as to whether they are
working or sleeping.

5. Time Office:

Head time keeper is the incharge of this office while the duty of the time office is to
prepare attendance report daily and then give to the labour welfare officer. As already
mentioned that there are three shifts working in the production department, thus every
shift having a separate time keeper. While it is the duty of this office to see that what is
the total strength of workers in the production department. How many workers are absent
and how many are present. How many are on weekly rest, leave and on overtime.

This office prepares daily attendance report and at the end of the month attendance of
every worker is recorded on the pay-sheet. This office also provides coloured cards to
their workers on which attendance, weekly rest and leave of each worker is given and this
is due to satisfy the workers and also maintaining records of the workers.

6. Store Office:

The function of Store Office is to receive and issue the items needed by various
departments. Store Office maintain two registers called "daily register" and "Daily
Receipt Register". In this regard, various departments give their demands of various
items through requisition slip on which the signature of the head of the department is
necessary. On the basis of this requisition slip, store keeper issues the items after
recording it in the daily issue register. In this register, Indent No., Name of Article,
Quality, Amount and the department is given.

                             STORES ADMINISTRATION



In Kohinoor Industries Ltd. the store administration is controlled by Assistant Manager.
The function of store is to receive and issue the items needed by various departments. So,
we can subdivide these stores into following three main categories.


a. Procedure Of Receiving General Store Goods From Head Office:

In this regard, production department sends demands of various items to General
Manager and he the, checks the demands that whether it is required by the production
department or not. After this he signs on these demands. Then these demands are written
on a duplicate book. One copy of these demands is being kept in his record and one copy
is being sent to the store incharge. If demanded items are present in the store, then the
store keeper issues the same.

If the demanded items are not held in the store, then the store Incharge writes required
items on a slip called "Indent Slip" and then this slip is presented to the General Manager,
who signs the slip and send to the head office. Specimen of this indent card is given as


No. ---------- Kohinoor Industries Ltd. Date:-------

Kohinoor Nagar FSD.

S.No. Description of Department Quality Demand


Then head office purchases samples of demanded items and sends to the mills. At the
mills, store incharge informs the production department that the required or samples of
demanded items have come from head office. The section who requires these items
checks these samples as to whether these are according to their requirements or not.
Then, the order is given by the General Manager.

The head office sends these demanded items along with their bills and then these items
are recorded by store incharge on Store Receipts Note. It is also recorded on store
received ledger. From store received ledger these items are also recorded on the Bin-
Card, while these Bin-Cards are attached with every type of item. Due to this Bin-Card it
is very easy to check each item. The specimen is given as under:

Ledger Folio:-----------

A.C. Units


Date Received Issue Balance Initials

b. Local Purchase For General Store:

The demanded items which are available in the local market are purchased by the
Assistant Manager. While Store Incharge checks all these items and then records on Store
Receipt Register.

c. Procedure For Issue Of Goods:

There is a book of requisition slip in every section of the production department which
contains requisition slip in triplicate. If any section of production department requires
anything, they have to fill requisition slip on which the signature of the head of the
department is essential. Then the store keeper issues the items required after recording it
in Daily Issue Register.

d. Reports Of General Stores:

The following two reports are prepared by the Store Incharge.

i. Daily Store Issue Report:

This report is maintained daily and kept in a file. In this report issuance of demanded
items to every department and balance of items are given. This report is presented daily
to Assistant Manager and General Manager.

ii. Purchase Report:

This report is prepared monthly. In this report the value of all items in the store is
recorded at the end of every month. After preparation, report is presented to Assistant
Manager who checks it and then sends to the head office.


Raw materials stores can be classified into following two main stores.
a. Bounded Warehouse Store:

A large portion of the raw material used in production department in Kohinoor Industries
Limited is imported from the foreign countries, mostly form Japan. Thus when goods are
imported from outside the country, then a custom duty is being paid to the government
with seven days in the appropriate account. If the mills is not in a position to pay custom
duty within seven days then the mills pledges it's bond to the government which is a
security to the government. While this bond having greater value than the amount of this
custom duty. This bon d is the promise by the mills to government that it will pay it's
custom duty on the goods imported. In case of not payment of custom duty within
appropriate period then this raw material is placed in bonded warehouse, which is under
the control of government.

b. Duty Pay Store:

When duty has been paid to the government then the materials of bonded warehouse
comes in duty pay store which means that custom duty has been paid on this material to
the government.

Pledging Of Raw Material For Financing Purposes:

For financing purposes, mills management sometimes pledges raw materials to the bank
while bank gives loan in which raw materials are being pledged and in this case, the
value of inventory is greater than the amount received as loan from the bank. Usually
bank gives loan @ 75% of value of inventory which is called pledging of raw materials
for financing purposes. When the management pays principal amount of loan along with
interest, then mills can use this raw material in the process of production.


All exciseable goods placed in these stores are of two types:

a. E.B.-4 Stores:

Finished products are placed in this store while this store is under the control of excise
office. After paying excise duty on finished goods, they can be brought outside the mills.
Thus, when finished goods are despatched to the sales agents, mills pay excise duty on
these finished goods. Deputy Superintendent of excise and custom signs on the excise
challan which is an evidence that excise duty on the goods despatched is paid. In this
challan, all description of goods, their types, quantities and amount of excise paid to the
government are recorded. While this excise duty is deposited in National Bank of
Pakistan in excise duty account. In this regard, three copies of challan are prepared, one
copy is given to each driver, other is sent to the head office of the mills and the third copy
is kept in the office of the mills.
b. R.G.I. Store:

All finished goods which are pledged to the bank are placed in this store.

Pledging Of Finished Goods For Financing Purpose:

When market conditions are not suitable for mills and mills are in need of capital, then
mills pledges it's inventory as security to the bank and takes loan. While terms and
conditions of the loan set between head office and the bank which is usually 75% of the
inventory value.

                        FINANCE AND ACCOUNTS DEPTT.

* Finance Department

* Accounts Department

* Accounts Office of K.I.L.

* Books of Accounts

* Accounting Policies


It is very important for the smooth and steady operation of the business, whether it is
small scale or large scale. It is so because in t he present days large amount of capital is
needed and one can't provide a huge amount. So, financial management refers to those
activities which are essential for searching out the large among of capital needed for the
smooth operation of business.

Finance is being considered as the life blood of modern business and plays a key role in
business organizations because without finance, there is nothing to plan and organize,
direct, activate and control.

"Financial management is a set of activities which are concerned with the acquisition of
funds and finding out the best uses for these funds."

Thus, finance is a study of revenues and expenditures of an individual or organization.
This means that finance deals with raising of funds for current requirements. So, we can
say that all the departments, sections and even a single task can't be completed effectively
without finance. Therefore, all the departments depend upon finance department.

Kohinoor has it's own Finance Department in its premises. While this department is
headed by Finance Manager of the mills. While Finance Manager is involved in the
financial planning, future forecasting of financial needs and raising funds.


following are the main functions of the finance department.

a) Financial Planning

b) Procurement of funds

c) Finding out different sources for obtaining funds

d) Future of forecasting of financial needs

e) Carrying upon negotiations with creditors

f) Effective utilization of funds

                              ACCOUNTS DEPARTMENT

The financial information of a business organization are communicated through this
section of finance department.

"Accounting is an art of keeping records of transactions and financial affairs" Financial
information are maintained in the form of statements by accounting section. This section
is headed by assistant accounts manager under the management of senior finance
manager. This department keeps records of all accounting transactions, prepares budgets
and financial statements for the mills. While the account office of the mills is directly
concerned with this department.

In this regard, account office of the mills sends cash-book, petty cash-book, vouchers,
record book and this department keeps these books in it's record and then prepares annual
financial statements on the basis of these books. Double entry system is followed and the
financial year start from First October and ends on 30th September. While these financial
statements are prepared mostly for two parties i.e. inside party and outside party.

Management is being considered as the inside party which takes necessary steps for
planning and controlling the future activities on the basis of these statements. While the
outside parties include owners, stockholders, bankers and creditors. Thus, we can say that
accounting information provides a base for decision making and for a future operation.


1. To keep record of cash receipts and payments of the company.

2. To keep ledger accounts and the preparation of Trial balance and annual reports for
these ledgers.

3. To maintain records of fixed assets and their depreciation.

4. To keep records of wages and salaries of employees.

5. To prepare various budgets such as production budgets, sales budgets, labour budgets,
stores budgets and inventory budgets etc.


Accounts office is headed by an Accountant while staff of accounts office consists of an
accountant, cashier and clerks. This office keeps records of all accounting transactions of
the mills, such as daily production, receiving raw materials, despatching of goods, excise
and custom, store expenses, maintenance & repairs and labour salaries and wages etc.


1. To maintain the records of all cash payments and cash received from the head office.

2. To prepare Journal, Ledger, Voucher Book and Cash Book.

3. To send these books to the head office of the company.

4. To pay wages and salaries, store expenses, excise and custom duties, freight charges
and repair and maintenance.


Following are the main books which are used by the accounts office of K.I.L.

a) Journal:

This is the book of original entry prepared by the accounts office, while this book is used
for recording, opening, closing and adjusting entries.

b) Ledger:

Ledger is the book which classify the accounts which brought from ledger. This ledger is
divided vertically into two equal parts. The left hand half is known as Debit (Dr.) while
the right hand half is known as credit (Cr.).

c) Cash-Book:

This is the book of original entry in which all those transactions are recorded which are
related to cash receipts and payments. All cash receipts are recorded on debit side while
all cash payments are recorded on credit side.

d) Petty Cash-Book:

This is also prepared by account office for recording all small sum of money with cashier
to meet all expenses such as postage, telegrams, stationery and office sundries.

e) Voucher Record Book:

This is a register prepared by the accounts office for the purpose of recording vouchers.


Financial statement

The policies adopted by the company, which are consistent with those of the previous
year (except those stated otherwise) are as follows:


These accounts have been prepared on the basis of historical cost convention except land
building and machinery which are stated at revalued amount.


The company operates a contributory provident fund for all its permanent employees and
contributions, based on salaries and wages, are made monthly to cover the obligations.
Gratuity is accounted for as and when paid.


The charge is based on taxable income, if any, as adjusted for tax purposes and after
taking into account all tax credits, rebates and available tax losses. Tax deducted from
export sales u/s 80-CC is considered final discharge. No provision has been made for
deferred taxation as the major timing differences are not expected to reverse for a
considerable period. CURR


Foreign liabilities (except those for which foreign exchange rates have been booked, and
are translated at the fixed rates) are converted into local currency at the rate prevailing at
the balance sheet date.

These are accounted for as and when these become due.


All fixed assets are shown at their purchase cost, except land, building and machinery
which are stated at revalued amount, together with any incidental expenses of acquisition,
including foreign exchange rate variance and interest accrued upto the date when the
assets commence commercial production.

Depreciation is calculated so as to write off the cost of fixed assets, except freehold land,
on a reducing balance basis using the normal rates currently applicable for tax purpose.
However, this year the useful life of the machinery has been reviewed and depreciation is
charged @ 5% instead of 10% in earlier years. A full year's depreciation is charged in the
year of acquisition except major additions to machinery which are depreciated on prorate
basis for the working period. No depreciation is charged in the year of disposal.
Maintenance and normal repairs are charged to income as and when incurred while major
renewals and improvements are capitalized.


These are stated at lower of present value of minimum lease payments under the lease
agreements or the fair value of such assets. The aggregate amount of obligations relating
to these assets are accounted for at net present value of liabilities. Depreciation on these
assets is charged in line with normal depreciation policy adopted for assets owned by the


Investments are stated at cost and no provision is made for diminution in its value.


These are valued as follows:

Stores and spares - at average cost except stores in transit which valued at actual cost.

Raw materials - lower of average cost or market value.

work in process - at average cost.

Finished goods:

- Mill made - at moving average production cost.

Local purchases - at average purchase price.


Sales are recorded on dispatch of goods to customers.

                         PERSONNEL ADMINISTRATION







The incharge of the personnel administration department is the labour and welfare
officer, while this department deals with the labour affairs, such as maintenance of labour
record, recruitment and selection of employees, wages and salaries of employees and
promotion and discharge of employees.


Following are given the main objectives of personnel administration:

1. To help other Managers in solving their personnel problems.

2. To select right man for the right job.

3. To motivate the workforce.

4. To pay fair wages to the employees.

5. To provide better working conditions to employees.

6. To keep the record of employees.

7. To receive orders and policies from the head office and act upon them.


Following are given the main functions which are performed by the personnel
administration in the organization.

1. Recruitment and selection
2. Promotion and Lay off

3. Wages and salary administration

4. Discipline and discharge

5. Training and development

6. Benefits and services

Following are the main policies, which are performed by the personnel administration in
the organization.

1. Recruitment and selection

2. Promotion and Lay off

3. Wages and salary administration

4. Discipline and discharge

5. Training and development

6. Benefits and services

1. Recruitment and Selection:

Recruitment of employees is made from time to time when it is considered necessary to
promote the efficiency of the mills. Now, if any department of the mills requires an
employee, then it is it's responsibility to determine the contents of the job to be performed
and necessary qualifications for performing this particular job satisfactory. While this
recruits and selects the best one employee with the consultation of HR & Admin

This personnel administration department follows a rigid employees selection system,
which involves, interviews, selection test, medical examination and reference checks,
while applications are given by the applicant on printed form, which is supplied by the
mills management. Then labour officer screens out the applications and applicants are
then called for an interview. Here it is important to note that the final authority of
selection of employees is the employers of the mills.

2. Promotion And Lay-Off:
Promotion is being considered necessary to motivate employees to the work, while in this
mill; promotions are not based upon seniority or on merits. Since this is not a seasonal
mill, thus there is no lay-off of the workers.

3. Wages and Salary Administration:

The decision to adopt a particular pay structure with pay grades is the responsibility of
the top management. While the main responsibility of personnel administration is to pay
fair wages to the employees according to their pay grades. There are following pay
grades of the employees.

a) Special grade:

HR & Admin Manager, senior Manager Accounts and General Manager falls in special
grade of top management

b) Administration Staff Grades:

i) Grade A Spinning master, Deputy spinning master

ii) Grade B Junior officers, Accountant, Assistant Manager and labour officer.

iii) Grade C Supervisory staff, Assistant accountant, store incharge, security incharge,
and cashier.

iv) Grade D Senior clerical staff, Accounts assistant, Dispenser and Typist.

v) Grade E Junior clerical staff, purchaser, Time keeper, Wrapping clerk and Cotton
clerk etc.

vi) Grade F Driver, Watchman, Stock collies etc.

c) Technical Staff:

i) Grade I Foremen in all departments

ii) Grade II Senior Officer, Assistant Spinning master Production incharge.

iii) Grade III Supervisory staff, Mixing supervisor, Shift superintendent.

iv) Grade IV Head Fitter, Head electricians.
v) Grade V Fitters, electricians, Motor winders, welders and Blacksmith etc.

vi) Grade VI Ringer and other lower staff.

4. Discipline and Discharge:

Workers are treated according to the rules and regulations of the organization under the
factories Act 1934. If some one violates the orders then he is given full opportunity to
explain and justify himself. Then if the performance or conduct of the employee is
founded unsatisfactory or he remains absent from the work for 10 days, then he is
discharged from his job by the manager HR & Admin.

5. Training and Development:

There is no separate training institution for the employees. while employees are trained
by the method of the on-the-job training. In this case, senior workers perform this duty of

6. Benefits and Services:

Kohinoor Industries Ltd. provides following benefits and services to it's employees:

a) Bonus:

Profit Bonus is paid to all employees every year depending on profitability of the

b) Recreation Allowance:

Recreation allowance equal to one month basic pay is allowed to an employee who has
completed yearly service without having absence or leave without pay to his credit during
the year.

c) Attendance Allowance:

All employees whose basic wages + coat living allowance do no exceeds Rs.1000/-P.M
are paid Rs.40?- P.M. as Attendance Allowance if they have no absence or leave without
pay during the month.

d) House Rent Allowance:
All employees who are not entitled accommodation by the company are paid house rent
allowance at the rate of 10% of the basic pay per month.

e) Insurance:

All employees of the mills are insured under State Life insurance. In case of any accident
or death of employees, the insurance company pays insurance money to nominee.

f) Leave:

Three types of leaves are given to the employees:

1. Privilege Leave (Annual Leaves)

2. Medical Leaves

3. Casual Leaves

i) For staff, 8 casual, 10 medical and 15 annual

ii) For officers 10 casual, 10 medical 15 annual.

g) Gratuity:

Gratuity is granted by the mills on resignation from services or termination from services
for any reason other than misconduct. While 20 years of services prescribed for the
payment of gratuity by the company. The rate of payment of gratuity is 20 days wage for
every completion year of services. The company follows the following formula for the
payment of gratuity.

Salary x 20 days

Formula for Gratuity: --------------------------

30 days

h) Economic and other Incentives:

Company also provides credit facilities to its workers without any interest. While this
scheme is known as advance payment scheme and small amount is deducted from the
employee’s wages to recover the credit granted by the company.

i) Dearness Allowance:

Like government employees this mills also pays dearness allowance to its workers.
j) Traveling Allowance:

Traveling allowances are paid to those workers who travel for the mills work.

k) Uniforms:

The company issues uniforms to foremen, peons, watchmen and security staff at free of

l) Accommodation:

Accommodation is provided to about 80% of the employees. Electric, gas, water supply
and flush system facilities are made available by the company.

m) School:

High school for boys and girls, and primary school for both are functioning in the mills
colony. The company provided beautiful buildings for schools. Till 1971, the Company
was running these schools at it's own cost. After that the same were nationalized.

n) Welfare Centre:

In the Welfare centre workers club building is provided. Shopping complex to provide
essential goods also exists.

o) Canteen:

Company is running the mills canteen round the clock for workers welfare. Meals and tea
are sold at subsidized rates. Company is contributing monthly subsidy Rs.24,000/- P.M.
on this account.

p) Medical Centre:

In addition to the Social Security Hospital the company has it's own Medical Centre for
those employees and their families who are not covered under the Social Security
Scheme. Medical Officer and Para-medical staff is employed in the centre.

q) Mosque:

For the convenience of its employees the company has provided a very beautiful and
commodious Mosque in the mills premises. The company bears all expenses of the
Mosque including pay of the staff employed therein.

Managing Director (MD)

The MD is responsible for the overall operation of the company except some aspects of
the Financial Management, which are looked by the MD (D.GI). The MD is the final
responsibility for all aspects of the quality system.

Marketing Representative (MR)

The MR works on the behalf of the MD to ensure that SIL, quality management system
operates as described in this document and is responsible for operating or program of
quality audits and to present its results to the management review meeting.

(The MR is the works manager of the SIL, factory).

Works Manager

Works manager is responsible for all activities carried out the factory and reports to MD.
He assisted by in charges and supervisors of various departments in his work. Production
function is headed by the production supervisors who looks after the whole process and
repots to works manager.

The maintenance function is managed by the maintenance in charge who reports to works

Senior Procurement Manager

The SPM is responsible for all the functions pertaining to local and offshore
procurements. He also contacts suppliers for ultimate approval and evaluation of
suppliers/ venders.
G.M. Sales

GM sales is responsible for all marketing activities carried out by the company and
reports to the MD. He is responsible for the sale of company’s products in the local as
well as the export market and for monitoring market trends and forecasting future
demands. He also monitors the quality of the company’s products and recommends
improvements whenever required. He is also responsible for the handling of customer

Marketing Service Manager

He is responsible for carrying out marketing research, handling export inquires,
advertising and promotional activities.

Production Supervisor

Production department is managed by production supervisor who reports the works

Quality Control Incharge

The Q.C. incharge reports the works manager. He is responsible for maintaining
standards of products. He is responsible for the inspection of the incoming material that
affects quality. He ensures that final inspection is carried out as per documented
procedures. He is responsible for the maintaining of the documented records of inspected

                            PRODUCTION DEPARTMENT:

Kohinoor Industries Ltd. is basically a manufacturing concern which produces industrial
goods (thread) that is used as a raw material in textile mills and is sold through it's sales
agent in the markets. Production department is being considered as the origin of all
activities in a manufacturing concern. The head of this department is called spinning
master who looks after the quantity and quality of the production, while he is also
responsible for the maintenance of machines. If there is any sort of technical fault, then
he directs mechanical foreman and fitters.

Product line

AT Present KIL is engaged in producing variety of yarn (combed, carded)

                                     COMBED YARN

                                         20/1 CMD

                                         72/1 CMD

                                         52/1 CMD

                                         80/1 CMD

                                     CARDED YARN

                                          20/1 CD

                                          32/1 CD

                                          24PC CD
                                         30PC CD

                                         40PC CD


The main function of production department are given as under:

1. To manufacture thread of different counts.

2. To utilize the available plant capacity in proper way

3. To control the finished products, work in process and material inventories.

4. To pack thread cones into the bags.

5. To provide information about production to the account office daily and accounts
office then sends them to head office.


Main sections of production department are given as under:

1. Blow Room Section:

The functions of blow room are as under:

a) Opening raw materials

b) Mixing of raw materials

In this section, polyester, viscose and cotton are used as raw materials. First of all raw
materials comes in the form of bales and is opened by workers. After this, material is put
into a bale breaker which automatically weights this material and mixes it in the ratio of
65% polyester and 35% viscose. In this section, 30 bale breakers are installed, 15 for
polyester and 15 for viscose. Cotton is opened by hands.

2. Carding Section:

In this section, material is regularly mixed and silver is made from this material. There
are 10 big pipes installed which bring the sliver from blow room to carding section.

3. Drawing Section:

When sliver comes from carding section, it is not straight while this becomes straight to
some extent in this section. In this section 35 drawing machines are working and
production is measured in pounds. While every machine produces 200 pounds per hour.

4. Simplex Section:

40 simplex machines are working in this section while every simplex having 116
spindles. In this section, silver is converted into roving which is slightly twisted. While
silver is brought from drawing section. After this, roving is brought to the ring section.

5. Ring Section:

Roving from simplex is converted into thread in this section. In this section 78 ring
machines are installed while each machine having "600" spindles, thus total number of
46800 spindles are working in this section. The production per spindle is 4.5 ounces per
shift, while the total production of this section is 13163 pounds per shift. In this section
three types of threads can be produced which are called 20 thread, 34 thread and 44

6. Cone Winding Section:

From ring section, thread is brought to cone winding section. In this section, thread is
wound on paper cones and is then packed in the bags. In each bag 40 cones of thread are
packed having a weight of 100 pounds.

7. Quality Control Laboratory:

Quality control laboratory is being regarded as the essential section in which the best
quality of product is observed. While this laboratory having modern equipments which
analysis the production of the mills. While these analyses are presented to General
Manager who also having specialization in textile fields.
General Manager checks these analyses which is in the form of a report and then removes
the defects of production for achieving the best quality of thread. The staff of laboratory
consists of laboratory incharge, laboratory assistant, wrapping clerks and wrapping boys.

Quality Policy

The management of Kohinoor Industries Ltd. defines the quality as:

A) Consistently provide the products that meet the quality expectations of our customers.

B) Actively pursue in ever improving the quality by focusing on our processes and

Kohinoor Industries Ltd. ISO 9002 Certified

ISO 9002 certificate is given to only those industries which do not design but only
produce products.

This certificate has been awarded to KIL in recognition of the organization's quality
system which complies with ISO 9002: 1994.

Certificate is awarded by united register of systems ltd for the manufacturing of yarn

Certificate No: 1674

Date of Issue: 12 October 1998

Expiry Date October 2003

                            MARKETING DEPARTMENT

A well organized marketing department is necessary for every modern organization
because a business can compete only if it's marketing performance is adequate. While we
can define marketing as under:

"Marketing is the process of adjusting the resources of the business firm to meet the
needs of the market".

While these resources of the business firm are as under which are also called the
"Marketing Mix".

- Product

- Promotion

- Channel of Distribution

- Price

These above four variables are those which a business firm can change or control and to
keep their customers satisfied. We can say that marketing department in any organization
plays an important role in the success of a business. Kohinoor having a well organized
marketing department, while this department is controlled by it's marketing manager.
There are two assistant managers one for local and other for export marketing.


Marketing department of Kohinoor Industries Ltd. performs following main functions:

1. To dispose off the products at predetermined prices.

2. To convey information about market demand to it's top management.
3. To send information about sales and inventory to the top management and the
accounting department.

4. To convey information about latest prices and competition to the top management.

5. To raise the sales through visits to the markets as well as to bring suggestions about


Kohinoor Industries Limited reported sales of 1.94 billion Pakistan Rupees (US$33.04
million) for the fiscal year ending September of 2001. This represents a very small
increase of 1.1% versus 2000, when the company's sales were 1.92 billion Pakistan
Rupees. Despite this increase, sales are still well below the level achieved in 1999, when
Kohinoor Industries Limited reported sales of 2.38 billion Pakistan Rupees.

                          Sales of Kohinoor Industries Limited

                          3.31 3.15 3.01 2.38 1.92 1.94
                          1996 1997 1998 1999 2000 2001

(Figures in Billions of Pakistan Rupees)


Success of any organization depends upon its sales volume. Main objectives of its
organization is to increase sales and capture new markets. Sales policies may change
from time to time for the betterment of company. The company policies are channel of
distribution, maximum output in the market with marginal profit, responsible pricing
policies and market arrangements regarding the advertisement and sales promotion


The mills promotes its sales through its market observers and sales agent by their
personal visit and to convince the customers and to make them sure good services and
quick delivery.


Kohinoor Industries Ltd. making two types of sales i.e. local and foreign sales.


The Kohinoor Industries Ltd. making local sales in three ways, as direct selling by the
mills, sales through agent and sales by distributors.

i) Direct sales:

The direct sales are made by the mills to the customers on payments. Mostly the direct
sales are made on cash basis.

ii) Sales Through Agents:

The procedure of agent system sales is that goods are dispatched to sales agent and the
sales agent distributes it to various branches. Agents are advised to sell the goods at the
best possible rates prevailing in the environment. After making sales the commission is
deducted by the agents and the remaining proceeds is send to the mills. The agent submit
daily sales amount and reports, describing the goods sold by them, received by them and
the inventory unsold. In the daily performance report they mentioned the selling price,
discounts and shipment procedures made to the buyers. Mostly the goods are sold
through agent in Pakistan and exported to foreign countries.


For making export sales, Kohinoor Industries Ltd. has established a marketing division at
Lahore, the main purpose of this division is to attract the foreign buyers and to increase
the demands for Kohinoor Industries Ltd's products in international market.
On the other hand when a foreign party is interested in the product of Kohinoor, they
approach the marketing division at Lahore then inform the marketing division about the
foreign interested party at head office. After a satisfactory discussion and correspondence
a contract is made reflecting the different aspects of sales when the foreign buyers are
agreed upon the quantity, quality selling price and delivery schedule he is asked to
establish a letter of credit.



                    LETTER OF CREDIT

                    COMMERCIAL INVOICE

                    PACKING LIST


                    CERTIFICATE OF ORIGON

                    EXPORT FORM


                    US CUSTOME INVOICE


                    TRUST RECIEPT

                    LETTER OF GUARANTEE


                                         20 CD

                                        20 CMD

                                         32 CD


                                       21/1 CMD

                                       72/1 CMD

                                       52/1 CMD

                                       80/1 CMD


It is a formal acknowledgment and type of advance payment by the buyer to the supplier.
The supplier can not receive the money until and unless delivery has been made to the
buyer. Under this arrangement the importers made an advance payment to his bank to the
importers bank, in Pakistan. In broad speaking letter of credit (L/C) is a discussion
between two banks on export and import of goods. The established L/C includes the line
of delivery goods and other requirements of importers. The marketing director informs
the mills at Faisalabad produce such and such type of goods upto specific period at time
as mentioned in L/C. They ship the written goods with in the stipulated period of L/C to
the foreign buyer. The necessary documents are delivered to the bank and payment is
received in the form of Pakistan rupee by converting the foreign currency into Pakistani
rupees according to the foreign exchange rules. KIL always opens an irrevocable L.C.

Documents Used By Sales Department:

1. Sales Order:

This printed form is filed when the purchase order is placed by a buyer. The sales order
form is prepared along with delivery order. At a time three copies are prepared one for
cashier, one for sales department and the original one is sent to the buyer. After payment,
gate pass is prepared and the goods are transferred to the buyer.

2. Gate Pass:

This is the pass, allow a person to carry goods through gate of Kohinoor. Gate pass is
signed by authorized person and counter-signed by custom officer. Three copes are
prepared for gate pass, one is for truck driver, other for central excise and the original one
is retained by the gate clerk. Which is finally transferred to the sale department.

3. Sale Invoice:

This printed form is filled by authorized person, when goods are delivered. The sale
invoice having different columns telling about selling price, quantity and quality etc. Two
copies are prepared. One is sent to the purchaser and the other one is retained by the sales

4. Daily Stock and Sale Report (D.S.S.R):

The agents of Kohinoor are working through out the Pakistan, when they made a local
sale after sale a daily stack and sale report is prepared by each agent. D.S.S.R gives
information about sales position, stock position and account position.;

All the waste is being handed over the marketing department of the mills. Waste is also
categorized according to quality. Every year tenders are invited from outside parties and
the highest bid is awarded the contract. After receiving the sales order, the invoices are
made from which gate pass is prepared, while this gate pass is the signal to take waste
goods out of the factory gate.

                                  MARKETING MIX

1. Product

2. Price

3. Place

4. Promotion


The product of Kohinoor Industries is yarn. KIL produces different counts of yearn with
different blending ratios.

count; If one pond raw material gives 840 yards of fiber (yarn) then its count would be

840 yards = 1 hank = single count, 840x2 yards = 2hank = Double count.

Blending Ratio

It is the ratio in which different kinds of raw material (cotton, viscouse) are blended. The
products of Kohinoor Industries Ltd. are made from three types of raw material i.e cotton,
viscouse & polyester. With different counts and blending ratios, different types of yarn
are produced. For example 100% cotton, PV (which is polyester and viscouse), PC which
is made by blending kdyester with cotton.
In PC ratio is 75:25 and in PV ratio is 85:15, usually yarn of 23, 26, 38, 44 count is made.

KIL's main competitors are Nishat Group, Sapphire Group, Sitara Group etc. customers
are length conscious i.e. they like the yarn for which per count length is more.


There are four basic factors which can effect the price of yarn.

i) Seasonal impact

ii) Supply & demand

iii) Quality of the product

iv) Quality of competitor's products

There are some other factors also for example whether the customers are price conscious
or quality conscious. This factor affects a little because most of local customer are price
conscious and foreign customers are both price as well as quality conscious.

Seasons impacts the demand and so the producer has to keep seasonal changes in mind
when pricing the yarn. If in a season there is much demand then automatically prices will
rise and case will be reverse for surplus supply by the industry.

Quality of yarn is an other major factor which affects the price, if quality is better than
competitors, definitely the price would be higher and for lower quality price will be

If the product is once spread and established in the market KIL keeps on gradually
increasing the price and at the same time observing the responses of customers.


KIL's distribution network is very simple but effective. The industry has a very big
market of Faisalabad with many competitors. KIL has five distributors in Faisalabad and
they are bound to buy particular amount of yarn from KIL. They have submitted their
securities with KIL.

KIL also has agencies to which yarn is given and these agencies distribute yarn all over
the Pakistan. Multan, Karachi and Lahore are the cities where agencies send yarn to
distributors and other customers.

KIL has not a very powerful system of promotion. It has no means of advertising. It only
uses its relations in the market and promotes its products.

KIL replaces any types of yarn if its quality do not meet the requirement of customers,
but in order to do this KIL sends its staff members to check the yarn. If the yarn is found
defective it is replaced otherwise not.

KIL does not give any discount on the products found to be defective only replacement is


The tools used by both internal and external analysts are the same. But the purpose for
carrying out the analysis is different. The tools used by the analysts are as follows.

                    Ratio Analysis

                    Trend Analysis

                    Common Size Analysis

                                 ♠RATIO ANALYSIS♠

                                                                 I) LIQUIDITY RATIOS


SIGNIFICANCE: A measure of short –term debt-paying ability.

FORMULA: (Current Assets - Current Liabilities)


2001 = 874,650 - 2,356,576 = ( 1,481,926 )

2000 = 969,756 – 2,321,818 = ( 1,352,062 )


This reveals there is no margin by which firm’s current assets cover its short-term
obligations (C. L) And firm is not able to pay its bills as they come due. Negative Net
Working Capital means, the risk of the firm is very high but is does not mean that the
firm is insolvent.


SIGNIFICANCE: A measure of short – term debt paying ability.






2001 = ------------ = 0. 37: 1



2000 = -------------- = 0. 42: 1

NOTE: A current ratio of (2. 0) is occasionally cited as acceptable for a manufacturing


A relatively low current ratio in both years represents that the liquidity position of the
firm is not good and the firm is not able to pay its current liabilities in time without facing
difficulties. Because against the liability of RS. 1 the company has less than 50% of
current sources and in the year 2001 the ratio further decreased by 0.05%. The overall
situation of regarding Current Ratio is very bad.


SIGNIFICANCE: A measure of short – term debt – paying ability without relying upon
the sale of its inventories.




Quick Assets = Cash + Marketable Securities + Receivables



2001 = -------------- = 0. 12: 1



2000 = ------------- = 0. 19: 1

NOTE: A quick ratio of (1. 0) or greater is occasionally recommended.


This reveals a distinct weakness in the company’s liquid position. As 1: 1 is reckoned to
be a ‘Safe’ ratio. The company appears to be in a serious need of liquid funds.


SIGINIFICANCE: A measure of short – term debt – paying ability.




Absolute Quick Assets = Cash + Bank Balance



2001 = ------------- = 0 .04 : 1



2000 = ------------ = 0. 06 : 1

NOTE: A standard (0. 5: 1) Absolute Quick Ratio is considered an acceptable.


This ratio shows that the company has 0. 04-paisa worth of absolute liquid assets for one
rupee worth of current liabilities .The company is needed to improve 0. 46% to cover the
standards of 0. 5 : 1.


The liquidity ratios of the company shows the inability to pay the current liabilities . As
Quick Ratio , Current Ratio and Absolute Quick Ratio are all below the standards.

                                                          II) PROFITABILITY RATIOS



SIGNIFICANCE : A measure of the profitability of the company’s products .



= -------------------------------------------- X 100


= --------------------- X 100




2001 = ------------- X 100 = 15. 71 %



2000 = ----------- X 100 = 16. 87 %


NOTE: For most merchandising companies Gross Profit rates usually lie between 20 %
and 50 % , depending on the types of products thy sell .


The lower gross profit margin shows that the firm has not controlled over the cost of
goods sold and higher the relative cost of merchandise sold.

Significant low rate may provide investors with an early indication of changing consumer
demand for the company’s products.

In other words, the total margin available to cover operating expenses is insufficient and
yields a lower profit.


SIGNIFICANCE: An indicator of management’s ability to control operating costs.


------------------ X 100


(Due to Loss;


--------------- X 100



( 92,272 )

2001 = -------------- X 100 = (4.76)



2000 = ------------- X 100 = 10.73 %


NOTE: A net profit equal to only 2% or 3 % of net sales is considered to be sufficient.


In 2000, Net Profit ratio provides an indication of management’s ability to control
expenses and to retain a reasonable portion of its revenue as profit.

But in 2001, the negative ratio indicates that the management has low efficiency in
controlling operating expenses of the firm.

However, in both years the firm is not able to achieve a satisfactory return on its
investment. This ratio also indicates the firm’s capacity to face adverse economic
conditions such as price competition, low demand etc.


SIGNIFICANCE: Profitability without concern for taxes and interest.



---------------------------- X 100




2001 = ------------- X 100 = 6.76 %



2000 = ------------- X 100 = 7.86 %





2001 = 100%- 93% = 7%

2000 = 100%-92% =8%

NOTE: A higher Operating Profit Margin is preferred.


We know that Operating Profits are” Pure” because they measure only the profits earned
on operations and ignore any financial and government charges (Interest and Taxes).

SO, here operating profit is very low which shows that the firms other expenses are too
much higher excluding interest and taxes.


SIGINIFICANCE: Actual costs of the units sold.



--------------------------------X 100




2001 = -------------- X 100 = 84.29%



2000 = ---------------X 100 =83.13%



Both ratios are relatively high. It shows the selling cost of one unit is above than 80% of
selling price of one unit, so firm has not control over the cost of units sold and it is the
basic reason for lower profit.

SIGNIFICANCE: This ratio shows the operational efficiency of the business.



-----------------------------------------------------------X 100




2001 = --------------X 100 = 93.2%



2000 = ---------------X 100 =92.1%


NOTE: An Operating Ratio ranging between 75% and 80% is generally considered as
standard for manufacturing concern.

Above the standard and higher operating ratios shows the lower operating profit and
operational inefficiency of the business.


SIGNIFICANCE: Financial Expenses Ratio indicates the relationship of Financial
Expenses to Net Sales.


The lower the ratio, the greater is the profitability and higher the ratio, lower is the

Therefore, in 2000, due to lower ratio company gain some profit but in 2001, due to
higher ratio company bears net loss in spite of profit.



SIGNIFICANCE: The rate of return earned on the stockholders equity in the business.



-----------------------------------X 100


(Due to Loss;


--------------------------------X 100




2001 = ------------X 100 = (18.81%)


2000 = ------------X 100 = 41.94%


NOTE: For ROE, 14.04% is considered to be a medium return for an industry.


In 2000, a high return on equity reflects the firm’s acceptance of strong investment
opportunities and effective expense management.

But in 2001, negative figure due to net loss indicates the vice versa situation.


SIGNIFICANCE: Measuring the overall efficiency of a firm.





(Due to Loss;

-----------------------------X 100




2001 = -------------X 100 = (2.14%)



2000 = -------------X 100 = 4.55%


NOTE: Higher the ratio, better are the results.


This ratio has not great importance to the present and prospective shareholders, because
higher the firms return on investment, the better.

SIGNIFICANCE: The earning per share represent the number of rupees earned on behalf
of each outstanding share of common stock.







2001 = --------------X 100 = (8.09%)



2000 = -------------- X 100 = 18.03%



Notice that earnings per share have decreased and become negative in 2001.We knows
that common stockholders consider a decline in earnings per share to be an unfavorable

A decline in earnings per share generally represents a decline in the profitability of the
company and creates doubt as to the company’s prospects for future growth.


The profitability ratios indicate that:

The gross profit and net profit of the company is decreased in year 2001 as compared to
year 2000.It is due to increase in cost of goods sold and operating expenses in year 2001.

Return on equity and return on investment is also decreased due to decrease in net profits
of the company in year 2001.Earning per share has also decreased due to the same

                                          III) SOLVENCY RATIO / LEVERAGE RATIO

SIGNIFICANCE: The ratio indicates the proportionate claims of owners and the
outsiders against the firm’s assets.







2001 = ------------ = 1: 1



2000 = ------------ = 1: 1


NOTE: A ratio of 1: 1 may be usually considered to be a satisfactory ratio.

The ratio in this case is 1: 1 which means that all the shareholders equity will be used up
in paying the debts of the existing creditors and there is no coushin for the potential


SIGNIFICANCE: This measure tells us the relative importance of long-term debt to the
capital structure of the firm.







2001 = ------------ = 0. 73 : 1



2000 = ----------- = 0. 93 : 1



This ratio indicates that for every each Rs. 1, the outsiders have .73-cent claims against
the firm’s equity.
In 2001, the firm declines their Long Term Debts and therefore, claims become 0.93 to
0.73 cent against the firm’s equity.


SIGNIFICANCE: This ratio serves a similar purpose to the debt to equity ratio.







2001 = -------------- = 0.62 : 1



2000 = -------------- = 0.62 : 1



This ratio tells us that 62% of the firm’s assets are financed with debt, while the
remaining 38% of the financing comes from shareholders equity.

This indicates that the company has financed above to half of its assets (Fixed + Current)
with debts.


SIGNIFICANCE: Measure the %age of Fixed Assets financed with Long Term Debts







2001 = ------------- = 0.08 : 1


2000 =------------- = 0 . 10 : 1



Because of the declining rate of the Long Term Debts in 2001, the fixed assets are
financed with only 0.08% of total worth. It reveals that mostly current assets are used for
financing fixed assets which is not a good indication for investment purposes.


The analysis of leverage ratios tells that:

Debt equity ratio, Debt to total equity, Debt to fixed assets and debt to total assets ratios
have decreased in the year 2001 as compared to year 2000. It shows a little better position
of the company regarding to leverage ratios.

                                              IV) MANAGEMENT EFFICIENCY RATIO


SIGINIFICANCE: Indicates how quickly receivables are collected.











2001 = ------------- = 8. 10 Times



2000 =------------- = 6.67 Times


NOTE: A higher receivable turnover ratio shows greater control of management over
their receivables collection.


In 2001, receivable turnover ratio improved by 1: 43 Time than 2000 year. It shows that
for the attainment of better position management improved their efficiency in respect of
receivables and the length of operating cycle becomes shorter.


SIGNIFICANCE: Indicates in days how quickly receivables are collected.







2001 = ----------- = 44 Days


2000 = --------- = 54 Days



We Assume ♣ Total Sales is on credit base.

♣ Number of Days in a year 360.

♣ In 2000, receivables are average.


Our above calculations show that only 44 Days in 2001and 54 Days in 2000 are required
for the collection of Debts.

Now, if the management takes a time less than 44 or 54 Days for the collection of Debts
then the management is efficient and otherwise not efficient.

In 2001, average collection period decreased by 10 Days, it means; management becomes
more efficient for the collection of receivables.


SIGNIFICANCE: Indicates how quickly inventory sells.










2001 = --------------- = 7.14 Times



2000 = -------------- = 8.46 Times


NOTE: A low inventory turnover ratio implies over investment in inventories, dull
business, poor quality of goods and stock accumulation.


It shows that the inventories are sold 8 Times in 2000 and 7 Times in 2001. So, in 2001
ratio tells us over investment in inventories and a dull business.

SIGNIFICANCE: Indicates in Days how quickly inventory sells.







2001 = ------------ = 50 Days



2000 = ------------ = 43 Days



The trend indicated by this analysis is unfavorable, since the length of time required for
Kohinoor Industries to turnover (sell) its inventory is increasing.


Managerial Efficiency Ratios signifies that the management takes special steps for the
collection of Account Receivables and improved their efficiency in this respect. But for
the management of inventory, there is a lack of control.

                                                              V) COVERAGE RATIOS


SIGNIFICANCE: To assess the risk to debt holders in– terms of number of times interest
charges were earned







2001 = ------------- 0.88 Times



2000 = ------------- = 1.93 Times


NOTE: A Ratio of 5.3 Times interest earned would be considered strong in many


The measurement tells us that it is impossible for the company could cover its interest
payments without difficulty.
Because of net loss, it becomes more difficult to meet its obligations in the year 2001.
This ratio therefore allows owners, creditors and managers to assess the firms ability to
handle additional fixed-payment obligations such as debt.



An analysis of percentage financial statements where all balance sheet items are divided
by total assets and all income statement items are divided by net sales or revenues.


An analysis of percentage financial statements where all balance or income statement
figures for a base year equal 100.0 (percent) and subsequent financial statement items are
expressed as percentages of their values in the base year


REGULAR (in thousands) INDEXED(%)

LIABILITIES                  1999         2000         2001       1999     2000      2001

Surplus on revaluation
                           1,485,753    1,602,271    1,509,999    100.0    107.8    101.6
of Fixed Assets
Long Term Loans           609,496     457,791     356,919     100.0   75.12    58.56

Liabilities against
Assets subject to         112,962      57,537      24,619     100.0   50.93    21.79
Finance Lease

Deferred Liability         82,497      75,897      69,297     100.0    92           84


Short Term Loans          1,116,317   1,177,279   1,145,336   100.0   105.46   102.6

Current portion of Long
                          270,612     416,584     548,855     100.0   153.94   202.82
Term Liabilities

Creditors, Provisions
                          1,045,441   719,756     661,774     100.0   68.85    63.30
and Accrued charges

Unclaimed Dividend          611         611         611       100.0    100      100

Proposed Dividend           NO         7,588        NO         --       --          --

TOTAL Current
                          2,432,981   2,321,818   2,356,576   100.0   95.43    96.86

TOTAL LIABILITIES         4,723,689   4,515,314   4,317,410   100.0   95.59     91.4

REGULAR (in thousands) INDEXED (%)

ASSETS                    1999        2000        2001        1999    2000     2001

Land                      1,350,829   1,348,148   1,348,148   100.0   99.8     99.8

Operating Assets          2,232,966   2,156,503   2,080,934   100.0   96.58    93.19

GOVT. Taken over
                          28,921      27,229      NO          100.0   94.15    --

Long Term Deposits        13,678      13,678      13,678      100.0   100      100


Stores, Spares and
                          80,244      38,480      33,458      100.0   47.95    41.7
Loose Tools
Stock in Trade             362,547      188,257      269,179      100.0   51.93     74.25

Trade Debts                280,914      287,066      191,063      100.0   102.19    68.01

Short Term
                           90,000       16,335       7,560        100.0   18.15     8.4

Advances, Deposits,
Payments & other           275,635      306,835      278,185      100.0   111.32    100.93

Cash and Bank
                           7,955        132,783      95,205       100.0   1669.2    1196.8

TOTAL Current Assets       1,097,295    969,756      874,650      100.0   88.38     79.71

TOTALS ASSETS              4,723,689    4,515,314    4,317,410    100.0   95.59     91.4


In 2001, Kohinoor Industries pays both long-term loans and liabilities against assets
subject to finance lease, therefore deferred liabilities decreased by 92% to 84%.

In assets side, we see that there is no improvement in fixed assets and current assets
significantly declined by 88% to 79%.

The above both situations show that company uses the current assets for the payment of
debts. It is the basic reason of declining the rate of short-term investment. We know that
co. made short-term investment only in this case, if current assets increased by safety
margins, but there is no indication of safety margin.

In 2001, cash and cash in hand decreased, because receivables and inventories have
inverse relationship.



REGULAR (in thousands) INDEXED (%)

                          1999         2000         2001         1999     2000      2001

Sales                     2,387,515    1,915,878    1,936,795    100.0    80.25     81.12
Cost of Sales            2,294,157   1,592,708   1,632,600   100.0   69.42     71.16

Gross Profit             93,358      323,170     304,195     100.0   346.2     325.8

Operating Expenses

Administrative           57,603      62,734      60,521      100.0   108.91    105.1

Selling                  101,232     109,916     112,748     100.0   108.6     114.4

Total Op. Exp.           158,835     172,650     173,269     100.0   108.7     109.7

Operating Profit/
                         (65,477)    150,520     130,926     100.0   (230)     (100)

Other Income             132,777     70,150      22,364      100.0   52.83     16.84

E. B.I. T.               67,300      220,670     153,290     100.0   327.9     227.8

Financial Expenses       475,354     114,479     175,153     100.0   24.1      36.8

Workers profit
                         --          (11,288)    --          --      --        --
participation fund

Workers welfare fund     --          (997)       --          --      --        --

                         --          93,906      (21,863)    --      --        --

Unusual items            --          122,547     (55,713)    --      --        --

Profit/ (Loss) Before
                         (408,054)   216,453     (77,756)    100.0   (53.04)   19.0

Provision for Taxation

Current                  11,938      (10,789)    (16,668)    100.0   (90.4)    (139.6)

Prior                    --          --          1,972       --      --        --

Profit/ (Loss) after
                         (419,992)   205,664     (92,272)    100.0   (48.97)   21.97


The income statement of KIL reveals that sales increased by 1% and cost of sales
increased 2% as compared to previous year.

An increase in net sales considered alone, is not necessarily favorable. The increase in
Kohinoor industries net sales was accompanied by a somewhat greater percentage
increase in the cost of goods (merchandise) sold, which indicates a narrowing of the gross
profit margin.

Selling expenses increased markedly and administrative expenses decreased slightly,
making an overall increase in operating expenses of 109.7%, as contrasted with a 325.8%
increase in gross profit.

The financial expenses increased significantly in the year 2001. The amount of these
expenses is greater than the operating income and in the final net income figure becomes
unfavorable, it would be incorrect for management to conclude that its operations were at
maximum efficiency.


REGULAR (in thousands) Common Size%

LIABILITIES                    1999        2000        2001      1999    2000    2001

Surplus on revaluation of
                             1,485,753   1,602,271   1,509,999   31.5    35.5     35
Fixed Assets

Long Term Loans              609,496     457,791     356,919     12.90   10.14   8.27

Liabilities against Assets
                             112,962      57,537      24,619      2.4    1.27    0.57
subject to Finance Lease

Deferred Liability            82,497      75,897      69,297     1.75    1.68    1.61


Short Term Loans             1,116,317   1,177,279   1,145,336    24     26.07   26.53

Current portion of Long
                             270,612     416,584     548,855      6      9.23    12.7
Term Liabilities

Creditors, Provisions and
                             1,045,441   719,756     661,774     22.13    16     15.3
Accrued charges

Unclaimed Dividend             611         611         611       0.013   0.014   0.014

Proposed Dividend              NO         7,588        NO         --     0.17     --

TOTAL Current
                             2,432,981   2,321,818   2,356,576   51.51   51.4    54.6

TOTAL LIABILITIES            4,723,689   4,515,314   4,317,410   100.0   100.0   100.0

REGULAR (in thousands) Common Size%

ASSETS                     1999        2000        2001        1999    2000     2001

Land                       1,350,829   1,348,148   1,348,148   28.6    29.857   31.2

Operating Assets           2,232,966   2,156,503   2,080,934   47.3    47.76    48.2

GOVT. Taken over
                           28,921      27,229      NO          0.612   0.603    --

Long Term Deposits         13,678      13,678      13,678      0.29    0.303    0.317


Stores, Spares and Loose
                           80,244      38,480      33,458      1.7     0.85     0.77

Stock in Trade             362,547     188,257     269,179     7.7     6.2      6.2

Trade Debts                280,914     287,066     191,063     5.9     6.4      4.43

Short Term Investments     90,000      16,335      7,560       1.9     0.362    0.175

Advances, Deposits,
Payments & other           275,635     306,835     278,185     5.8     6.1      6.4

Cash and Bank Balances     7,955       132,783     95,205      0.168   2.9      2.21
TOTAL Current Assets          1,097,295    969,756       874,650      23.2     21.5      20.3

TOTAL ASSETS                  4,723,689    4,515,314     4,317,410    100.0    100.0     100.0


In vertical analyses, we see that over the three-year span, the percentage of long-term
loan continuously decreased and in 2001, the long –term loans are only 8.27% of total
assets. Although, decreasing trend of long-term loans is favorable, which shows the value
of total assets increased, but its good impact becomes less because of the increasing trend
of the current portion of long-term liabilities and short-term loans. It shows that company
delays its payments and further borrows for its liabilities & operations.

On the assets side, operating assets are 48.2% of total assets in 2001, it shows that
operating assets are increased but it is not a fact. The total assets of the company
significantly decreased as compared to 1999, and land, which is non-operating also
increased. Here, the rate of increase mental in operating expenses is low as compared to
declining the rate total assets during the 3 years. It is the basic reason, it seems that there
is an improvement in operating assets. Short-term investment and cash & bank balance,
both are decreasing not only as compared to previous years but here, in comparison of
total assets too.


                           For The Year Ending December 31

REGULAR (in thousands) Common Size%

                           1999        2000        2001        1999     2000    2001

Sales                      2,387,515   1,915,878   1,936,795   100.0    100.0   100.0

Cost of Sales              2,294,157   1,592,708   1,632,600   96.1     83.13   84.3

Gross Profit               93,358      323,170     304,195     3.91     16.87   15.71

Operating Expenses

Administrative             57,603      62,734      60,521      2.413    3.27    3.125

Selling                    101,232     109,916     112,748     4.24     5.74    5.82

Total Op. Exp.             158,835     172,650     173,269     6.65     9.01    8.95

Operating Profit/ (Loss)   (65,477)    150,520     130,926     (2.74)   7.86    6.76

Other Income               132,777     70,150      22,364      5.56     3.66    1.15

E. B.I. T.                 67,300      220,670     153,290     2.82     11.52   7.9

Financial Expenses         475,354     114,479     175,153     19.91    6       9.04
Workers profit
                           --           (11,288)     --           --        (0.6)    --
participation fund

Workers welfare fund       --           (997)        --           --        (0.1)    --

                           --           93,906       (21,863)     --        4.90     (1.13)

Unusual items              --           122,547      (55,713)     --        6.4      (2.88)

Profit/ (Loss) Before
                           (408,054)    216,453      (77,756)     (17.1)    11.3     (4.01)

Provision for Taxation

Current                    11,938       (10,789)     (16,668)     0.50      (0.56)   (0.86)

Prior                      --           --           1,972        --                 0.102

Profit/ (Loss) after
                           (419,992)    205,664      (92,272)     (17.69)   10.73    4.76


In vertical analysis, every item is being compared with relation to sales. The analysis
indicates that sales are increased in 2001, but cost of sales too much increased and
becomes 84% of total sales. Company gain only 15.71% of gross profit, which is less as
compared to previous years.

In the previous year, sales are decreased, but cost of sales decreased in greater margin as
compared to total sales and because of this reason company’s gross profit improved in
2000, as compared to 1999 &2001.
In operating expenses i.e., (selling & admn.) there is no change and therefore, operating
profit decreased by 1% and Earning before interest and taxes decreased by 4% in relation
to total sales.

Overall company bears a net loss at the end of income year because of financial expenses.
In 2001, financial expenses increased by 3% and become 9.04% of total sales.

It is the alarming situation that company should control their expenses and take the
improvement in the their efficiency.







                                                              Qtrly 12 mo.
      Quarter            High         Low        Close       Change Change
Jan - Mar 1993           0.000        0.000      29.565         n/a   n/a
Apr - Jun 1993           0.000        0.000      25.043      -15.3%   n/a
Jul - Sep 1993           0.000        0.000      26.957        7.6%   n/a
Oct - Dec 1993           0.000        0.000      36.522       35.5%   n/a
Jan - Mar   1994     0.000      0.000      53.478    46.4%    80.9%
Apr - Jun   1994     0.000      0.000      39.565   -26.0%    58.0%
Jul - Sep   1994     0.000      0.000      27.391   -30.8%     1.6%
Oct - Dec   1994    19.130     14.565      15.217   -44.4%   -58.3%
Jan - Mar   1995    16.500     11.304      16.500     8.4%   -69.1%
Apr - Jun   1995     0.000      0.000       9.250   -43.9%   -76.6%
Jul - Sep   1995     0.000      0.000      12.000    29.7%   -56.2%
Oct - Dec   1995    15.500     10.000      10.500   -12.5%   -31.0%
Jan - Mar   1996    15.750      7.500       7.750   -26.2%   -53.0%
Apr - Jun   1996    10.000      5.000       5.000   -35.5%   -45.9%
Jul - Sep   1996     5.150      3.000       3.750   -25.0%   -68.8%
Oct - Dec   1996     5.400      3.800       4.000     6.7%   -61.9%
Jan - Mar   1997    10.500      3.750       6.500    62.5%   -16.1%
Apr - Jun   1997     6.750      3.500       4.250   -34.6%   -15.0%
Jul - Sep   1997     5.350      2.500       3.250   -23.5%   -13.3%
Oct - Dec   1997     3.000      1.750       2.050   -36.9%   -48.8%
Jan - Mar   1998     2.300      1.400       1.400   -31.7%   -78.5%
Apr - Jun   1998     1.750      1.350       1.600    14.3%   -62.4%
Jul - Sep   1998     1.500      1.000       1.200   -25.0%   -63.1%
Oct - Dec   1998     1.100      1.000       1.000   -16.7%   -51.2%
Jan - Mar   1999     1.100      0.800       1.100    10.0%   -21.4%
Apr - Jun   1999     1.500      0.800       1.200     9.1%   -25.0%
Jul - Sep   1999     2.900      1.000       1.900    58.3%    58.3%
Oct - Dec   1999     3.300      1.000       3.250    71.1%   225.0%
Jan - Mar   2000     5.700      3.000       4.200    29.2%   281.8%
Apr - Jun   2000     4.750      3.200       3.800    -9.5%   216.7%
Jul - Sep   2000     4.700      3.500       4.700    23.7%   147.4%
Oct - Dec   2000     5.250      4.000       4.950     5.3%    52.3%
Jan - Mar   2001     5.850      3.350       3.350   -32.3%   -20.2%
Apr - Jun   2001     4.000      2.750       2.750   -17.9%   -27.6%
Jul - Sep   2001     3.000      2.050       2.050   -25.5%   -56.4%
Oct - Dec   2001     2.700      1.500       1.500   -26.8%   -69.7%
Jan - Mar   2002     2.750      1.500       2.200    46.7%   -34.3%
Apr - Jun   2002     3.050      1.950       2.200     0.0%   -20.0%
Jul - Sep   2002     2.750      1.750       2.000    -9.1%    -2.4%

                             Stock Price Analysis

Stock Performance

In recent years, this stock has performed terribly. In fiscal year 1996, the stock traded as
high as 15.75 Pakistan Rupees, versus 1.80 Pakistan Rupees on 11/15/02. (In 1996, the
stock retreated significantly from its high, and by the end of the year was at 3.75 Pakistan

The current (11/15/02) price of this stock is 1.80 Pakistan Rupees. During the past 13
weeks, the stock has fallen 9.1%.

During the 12 months ending 12/31/01, the company has experienced losses totalling
3.84 Pakistan Rupees per share. These 12-month earnings are lower than the earnings per
share achieved during the last fiscal year of the company, which ended in September of
2001, when the company reported earnings of -3.20 per share. Note that the earnings
number Includes 1.93 pre-tax charge in fiscal year 2001.

This company is currently trading at 0.03 times sales. This is at a lower ratio than all
three comparable companies, which are trading between 0.04 and 0.20 times their annual
sales. This company has negative book value (and thus a price to book value would not
make any sense).

                           Sales & Profitability Summary

                Figures expressed in billions of Pakistan Rupees

            Sales        % of Inc. bef                      % of           Sales/
Year Sales Growth EBITDA sales Extra                        sales     Emps Empl
1993 1.410         n/c       0.087      6.2%     -0.072     -5.1%      n/a      n/a

1994 2.234       58.5%       0.344     15.4%      0.046      2.1%      n/a      n/a
1995 3.129       40.0%       0.095     3.1%      -0.207     -6.6%      n/a     n/a

1996 3.307        5.7%       0.387     11.7%     -0.095     -2.9%      n/a     n/a

1997 3.146       -4.9%       0.255     8.1%      -0.380    -12.1%      n/a     n/a
1998 3.008       -4.4%       0.205     6.8%      -0.282     -9.4%      n/a     n/a
1999 2.378       -21.0%      0.024     1.0%      -0.420    -17.7%      n/a     n/a

2000 1.916       -19.4%       n/a        n/a     0.203     10.6%       n/a     n/a

2001 1.937        1.1%        n/a        n/a     -0.092     -4.8%      n/a     n/a

Sales Analysis

Kohinoor Industries Limited reported sales of 1.94 billion Pakistan Rupees (US$33.04
million) for the fiscal year ending September of 2001. This represents a very small
increase of 1.1% versus 2000, when the company's sales were 1.92 billion Pakistan
Rupees. Despite this increase, sales are still well below the level achieved in 1999, when
Kohinoor Industries Limited reported sales of 2.38 billion Pakistan Rupees.

                          Sales of Kohinoor Industries Limited

                         3.31 3.15 3.01 2.38 1.92 1.94
                         1996 1997 1998 1999 2000 2001
(Figures in Billions of Pakistan Rupees)

Profitability Analysis

In 2001, earnings before extraordinary items at Kohinoor Industries Limited were -92.27
million Pakistan Rupees, or -4.8% of sales. This profit margin is lower than the level the
company achieved in 2000, when the profit margin was 10.6% of sales.

The company's return on equity in 2001 was -5.5%. This was significantly worse than the
13.6% return the company achieved in 2000. (Extraordinary items have been excluded).

             Earnings and Dividends Summary

                Figures in Pakistan Rupees

Quarters are Fiscal Quarters (4th quarter ends in September)

                                  TTM         TTM      Payout
Quarter       EPS     Divs        EPS         Divs      Ratio
1Q1993        n/a     0.000        n/a         n/a       n/a
2Q1993        n/a     0.000        n/a         n/a       n/a
3Q1993        n/a     0.000        n/a         n/a       n/a
4Q1993        n/a     0.000     D -3.383      0.000      n/m
1Q1994        n/a     0.000        n/a        0.000      n/a
2Q1994        n/a     0.000        n/a        0.000      n/a
      3Q1994        n/a    0.000        n/a      0.000    n/a
      4Q1994        n/a    0.000     D 1.590     0.000   0.0%
      1Q1995        n/a    0.000        n/a      0.000    n/a
      2Q1995        n/a    0.000        n/a      0.000    n/a
      3Q1995        n/a    0.000        n/a      0.000    n/a
     4Q1995 A       n/a    0.000    D -7.167     0.000    n/m
      1Q1996        n/a    0.000        n/a      0.000    n/a
      2Q1996        n/a    0.000        n/a      0.000    n/a
      3Q1996        n/a    0.000        n/a      0.000    n/a
      4Q1996        n/a    0.000    D -3.307     0.000    n/m
      1Q1997        n/a    0.000        n/a      0.000    n/a
      2Q1997        n/a    0.000        n/a      0.000    n/a
      3Q1997        n/a    0.000        n/a      0.000    n/a
      4Q1997        n/a    0.000    D -13.182    0.000    n/m
      1Q1998        n/a    0.000        n/a      0.000    n/a
      2Q1998        n/a    0.000        n/a      0.000    n/a
      3Q1998        n/a    0.000        n/a      0.000    n/a
      4Q1998        n/a    0.000    D -9.762     0.000    n/m
      1Q1999        n/a    0.000        n/a      0.000    n/a
      2Q1999        n/a    0.000        n/a      0.000    n/a
      3Q1999        n/a    0.000        n/a      0.000    n/a
      4Q1999        n/a    0.000    C -14.710    0.000    n/m
      1Q2000        n/a    0.000        n/a      0.000    n/a
      2Q2000       5.040   0.000        n/a      0.000    n/a
      3Q2000        n/a    0.000        n/a      0.000    n/a
      4Q2000       1.980   0.600     C 7.020     0.600   8.5%
      1Q2001        n/a    0.000        n/a      0.600    n/a
      2Q2001      -0.120   0.000        n/a      0.600    n/a
      3Q2001        n/a    0.000        n/a      0.600    n/a
      4Q2001      -3.080   0.000    BC -3.200    0.000    n/m
      1Q2002      -0.700   0.000      -3.900     0.000    n/m

                             Trailing Twelve
                       EPS: Earnings per share
                             Dividends per




Dividend Analysis

This company has paid no dividends during the last 12 months. The company also
reported losses during the previous 12 months. Kohinoor Industries Limited last paid a
dividend during fiscal year 2000, when it paid dividends of 0.60 per share.

                           ANALYSIS SUMMRY

               Note: All figures are in Pakistan Rupees

                Ratios        Equity Capital                        Dividends
                        Earned Profit
                                      Value Earnings      Divs
                        Growth Rate
        Last                          Begin      Per   %   Per Avg
                             %    %
Year   Price   P/E P/Bk                  Yr    Share Chg Share Yield
1993   26.96   n/c   n/c       n/c     n/c     n/a D -3.383   n/c   0.00    0.0
1994   27.39 17.2    0.7       4.2     4.2 37.85    D 1.590   n/c   0.00    0.0
1995   12.00   n/c   0.3     -20.8   -20.8 34.46 D -7.167     n/c           0.0
1996    3.75   n/c   0.1     -12.1   -12.1 27.29 D -3.307     n/c   0.00    0.0
                                                        D -
1997    3.25   n/c   0.1     -35.9   -35.9 36.77              n/c   0.00    0.0
1998    1.20   n/c   0.1     -43.2   -43.2 22.58 D -9.762     n/c   0.00    0.0
                                         -              C -
1999    1.90   n/c   0.2    -121.1         12.15              n/c   0.00    0.0
                                     121.1           14.710
2000    4.70   0.7   0.1     12.5     13.6 51.48    C 7.020   n/c   0.60   12.8
                                                      BC -
2001    2.05   n/c   0.0      -5.5    -5.5 58.07              n/c   0.00    0.0
2002    2.00   n/c   n/c       n/c     n/c      -       n/a   n/c   0.00    0.0
11/15/02   1.80   n/c   n/c    n/a    n/a            -3.840   n/c   0.00   0.0





                               Top of Form

                              Bottom of Form

Financial Position

At the end of 2001, Kohinoor Industries Limited had negative working capital, as current
liabilities were 2.36 billion Pakistan Rupees while total current assets were only 874.65
million Pakistan Rupees. The fact that the company has negative working capital could
indicate that the company will have problems in expanding. However, negative working
capital in and of itself is not necessarily bad, and could indicate that the company is very
efficient at turning over inventory, or that the company has large financial subsidiaries.

At the end of 2001, the company had negative common shareholder's equity of -705.66
million Pakistan Rupees. This means that at the present time, the common shareholders
have essentially no equity in the company. Although the common equity is negative,
Kohinoor Industries Limited does have a net positive equity position (as its preferred
stock, minority interest, etc. are positive).

As of September 2001, the company's long term debt was 381.54 million Pakistan
Rupees and total liabilities (i.e., all monies owed) were 2.81 billion Pakistan Rupees. The
long-term debt to equity ratio of the company is 0.25.

As of September 2001, the accounts receivable for the company were 359.72 million
Pakistan Rupees, which is equivalent to 68 days of sales. This is an improvement over the
end of 2000, when Kohinoor Industries Limited had 108 days of sales in accounts

                                   Financial Positions

                                          LT Debt/        Days
Company                              Year Equity          AR
Kohinoor Industries Limited          2001 0.25            68

                           MY TRAINING PROGRAMME


                       KOHINOOR INDUSTRIES LIMITED

During my internship, I worked in the following departments.

              • Accounts

              • Export documentation

              • Export rebate

              • Banking

              • Finance

              • Purchase

              • Management information system

Therefore, during my internship I concentrate in account and finance department.

                   Banking Department

The major function of banking department is to deal with banks. Dealing with bank is
normally by receiving bank reconciliation statements. When banking department receives
such statement it tallies transaction with its own ledgers. Certifies that whether items
debited or credited is true in all respect. If any discrepancy is found it is told to bank.
Since KIL is a large organization so daily bank reconciliation are received from the bank


All the cheques, which are presented for payments, any interest or commission charged
by the bank, cheques, received by the banks and credited in the account of KIL, any
interest received on account of KIL by bank are recorded and then tallied. A person
designated as Assistant Manager heads banking department.

Mark Up Sheets

Second major function of the banking department of KIL is preparation of mark up sheet.
Normally finance is obtained from banks against securities. The securities are (a) pledge
cotton (b) mortgaging machinery etc

This loan is taken sometimes for short period and sometimes for longer period. So in
these loans interest is paid. This interest rate varies from 9 % to 14%. This interest is
calculated on daily basis.

                    Rules to Calculate Interest

The basic rule which is followed to calculate interest is to include the day at which the
loan is sanctioned and on that date when loan is paid back is not included in the interest
charging days.

Formula to Calculate Interest

Interest= loan amount * days

Days in working year

Work done by banking department
When interest and loan amount is paid to bank, it is the banking department, which
calculates the interest amount due on .Although interest sheet is sent by bank but it is
reconciles by the banking department.

                                             Account department

In account department, I managed to understand the flow of transaction, preparation of
vouchers and ledger posing.

Preparation of vouchers

In account department under the supervision of concerned officers, I came to know
different type of vouchers being prepared and their process of preparation. Vouchers are
written evidence of any business transaction. The different type of vouchers being
prepared by the account department of Kohinoor Industries Limited is as under,

                               • Cash payment vouchers

                               • Cash receipts vouchers

                               • Bank payment vouchers

                               • Bank receipt vouchers

                               • Journal voucher or adjustment vouchers

                               • Petty cash vouchers

Now I discuss these types of vouchers one by one.

                       i. CASH PAYMENT VOUCHERS

Being a public limited company cash payment vouchers are used for recording the
expense of less than five thousand. These types of vouchers are prepared when cash
payments are made against small expenses i.e. repair, entertainment etc. in order to
record the expenses following entry is passed:

Account code name of expense (debit) Amount

Cash account (credit) Amount

Evidence of expense is attached with the cash payment vouchers.
                       ii. Cash Receipt Vouchers

These types of vouchers are prepared when the cashier on behalf of the KIL is receiving
cash. However, these types of vouchers are small in quantity because majority of
transactions are done by bank. On receipt of cash, cashier prepared the cash received slip.
Account officer prepares voucher on the basis of cash receipt prepared by the cashier. In
order to book the transaction the following entry is passed in the books.

Account code cash account (debit) Amount

Income A/C or receivable A/C (credit) Amount

                       iii. Bank Payment Vouchers

Being a public limited company the majority of payment transactions of the KIL are
carried out through banks. Bills and invoices being approved by the competent authority
reach at the table of account officer for payment. Account officer checks the approval and
mathematical accuracy of the bill and prepares the bank payment voucher. Account
officer first confirms the nature of expense i.e. capital or revenue and deduction of tax if
applicable then pass the following entry;

Account code Asset name or expense (debit) amount

Bank account (credit) amount

Deduction of tax at source (credit) amount

Evidence of expense/asset is attached with the cash payment voucher.

                       iv. BANK RECEIPT VOUCHERS

Bank receipt voucher are prepared when mill receives cheques against account receivable
or advance payments.

On receipt of cheques account officer sends the cheques for clearing and passed the
following entry;

Account code cheques clearing A/C (debit) amount

Account receivable A/C (credit) amount

Advance against sale A/C (credit) amount

Copy of cheques is attached with voucher.

                 If the collecting bank the reversal of above entry returns cheques is
              made in the books.

                  On clearing of above referred cheques following entry passed in the
              books of account officers.

Account code Bank A/C (debit) Amount

Cheques clearing A/C (credit) Amount


These types of vouchers are generally prepared in the following circumstances;

                   Purchase on credit

                   Sales on credit

                   Writing off assets i.e. depreciation store consumption etc.

                   Rectification of mistakes or omissions

Now I discuss them one by one

                   Purchase on credit
Generally raw material, stores and spares are purchased on credit. In order to account
them for the journal voucher are prepared by the concerned account officer

Account code Purchase A/C (debit) Amount

Account payable A/C (credit) Amount

Copy of the invoices is attached with vouchers;

                   SALES ON CREDIT

Like purchases, sales (local and export) are made on credit and at the time of delivery of
goods following journal are prepared by the account officer:

Account code Account receivable A/C (debit) Amount

Credit sales A/C Amount

Copy of invoices is attached with voucher.

                   WRITING OFF ASSETS

These journal vouchers are prepared in order to change the assets to expense for the
preparation of monthly accounts.

                   To account for depreciation of fixed assets:

Account code Depreciation A/C (debit) Amount

Accumulated depreciation A/C (credit) Amount

                   To account for the raw material consumption:

Account code raw material concerned A/C (debit) amount

Raw material store A/C (credit) amount

                   To account for store consumption:

Account code store concerned A/C (debit) amount

Store and spares A/C (credit) amount
                   To account for store consumption:

Account code store concerned A/C (debit) amount

Store and spares A/C (debit) amount

                   To account for accrued expenses:

Account code expense A/C (debit) amount

Account payable A/C (credit) amount

In additional to above referred kinds journal voucher is also passed to rectify the mistakes
made in voucher preparation or posting.

During my stay with Kohinoor Industries Limited, I also worked with computer operator
in order to understand posting process.


Computer operator put log no and make posting in computer. Accounts of KIL are
computerized and ledgers are prepared in computer. After the preparation and coding of
voucher it is sent to computer operator for posting A daily print out of all entries is
checked to check the accuracy. After checking the accuracy the master file is update and
posting is made to respective account ledger by the computer.

                                         FINANCE DEPARTMENT

I also spent some time in finance department to understand the cash flow of the
department .the main purpose of the department is ensuring the availability of the funds
for operation and best utilization of available funds.

Finance manger prepares daily cash flows statement in order to determine needs and
utilization of funds.

A weekly projected cash flows statement is also prepared in order to determine the need
of the coming week. An account officer prepares bank reconciliation statement of all the
banks and list out the outstanding entries. He then traces the reason for these entries and
put bank reconciliation on the table of finance manager. On receipt of bank statement the
manager prepares cash flow statement and presents it to the finance director for future
                                       PURCHASE DEPARTMENT.

The main purpose of purchase department is to maintain the desirable level of purchase,
so that ideal funds can stuck up in shape of heavy purchase or a position not arise that
mill stop due to non-availability of raw material or store and spares.

In addition to this purchase department is also responsible for checking of following:

               • Checking quantity of purchased goods.

               • Checking the quality for purchased goods.

               • Checking rates of purchased goods.

                          CONCLUSION & SUGGESTIONS








Main objective of any business concern is to produce more, while this mills is producing
more of it's capacity. But in my humble opinion, certain steps can be taken to increase it's
production which in reverse will increase the profit. Steps which can be taken are as

1. Since further expansion possible, thus managing agents should establish a looming
section also produces cloth for the market.

2. To overcome the heavy cost, management should decrease it's labour force in
production department.

3. While it is necessary for marketing department to capture the international market and
it is possible, because the company has also maintained exports to different countries
many years ago.

4. Mills will have to minimize it's cost of production which in my opinion is very high.

5. Marketing department will have to increase it's efficiency for promoting it's product
both in local and international market.


When we examine the Income Statement of Kohinoor Industries Ltd for 2001 we can see
that administrative expenses were very high. Thus management will have to control these
administrative expenses. By adopting this policy, mills can increase it's profit.


There is no qualified and experienced mechanical and electrical engineer. Thus for
quality production, mills will have to recruit a mechanical and an electrical engineer.
Which in turn increases, the quality production and also satisfies the industrial users.
Management will also have to recruit qualified and experienced staff in it's administrative
section, because a learned administrative staff is able to control the efficiency of the

Main objective of any industry is to provide employment for those who live in the
particular area. I am not in the favour of recruitment policy of this firm. According to
their policy, 8% of employees are from other areas of Pakistan while only 20% are
employed from this local area of Faisalabad. During my internship, I observed that few
persons were employed from this area and which is not a healthy trend. Thus in my
opinion, I suggest that this ratio of local area should increase to 35% which will be
suitable and justified for this local area.


Provision of learning is given to the employees on-the-job training but for a such industry
which having modern machines, a separate training institution is essential, where
unskilled workers learn the operation of modern machines. While a separate learning
tutor must be recruited by the mills management who trains the unskilled workers.


In Kohinoor Industries Ltd. promotion is given on party basis, in other words, we can say
that management shows the picture of "Yes Minister", where promotions are given to
those who justify themselves that they are more loyal or sincere from others.

Thus due to this, those workers are usually promoted who know a little while an efficient,
learned and qualified person goes beyond. Thus in order to compete with other
competitive companies, management has to revise it's promotion criteria and must be
given on seniority and qualification basis.


Most of the managerial staff is laden with duty and different types of tasks, thus they
can't perform their duties smoothly due to not having sufficient authority.

Hence to achieve efficiency and effectiveness, the staff must be given adequate authority
and in this way they can perform their duties smoothly.

                                  SWOT ANALYSIS

 Analysis from viewpoints of strength, weaknesses, opportunities and threats of the
company is as below: -

                 Factors                        Performance
                                 Major      Minor      Minor  Major
                                Strength   Strength Weakness Weakness
           * Company
           * Market Share
           * Customer
           * Customer
           * Product Quality
           * Service Quality
           * Pricing
           * Distribution
           * Promotion
           * Sales Force
           * Innovation
           * Geographical
           * Cost or
           Availability of
           * Cash Flow
           * Financial

           * Facilities
           * Economies of
           * Capacity
           * Able-dedicated
           * Ability to
           Produce on Time
           * Technical

           * Dedicated
           * Entrepreneurial
           * Flexible or

 Apart from strength and weaknesses of the company, some of the landmark opportunities
and threats can be pointed below :

Opportunities :-

              1)   With arrival of the year 2003, the company will get well chance to
              have more export overseas due to exemptions of trade restrictions.
              2) In the current state of slumping textile industry, Kohinoor Industries
              can still heighten as a potent market player with good use of its resources.

              3) Company is consistently investing in Research and Development to
              improve the quality of existing products and entered into new products.

              4) Due to ISO-9000 certificate, there is a lot of potential to increase

       This will help the company in forth coming time to sustain and enhance its market

Threats :-

              1) Textile Industry as a whole is adversely affected by over capacity and
              demand recession and unfortunately the future seems to be grim.
                2) Due to apathetic view towards advertising and publicity, it is feared to
                lose the share of customer’s mind for the product of the company.

                3) 3) The equation – ‘ Bigger cannibalizes smaller’ has been changed. It
                has been twisted to ‘ faster is master’. Hence, KIL has to update its
                structure to be responsive to the volatile market.

                4) Bad image of Pakistani goods.

                5) Political unstability.

References :-

Production and Operations Management – kil

Marketing Management – kil

Personnel Management - kil (NET)

And other documents of the company.kil

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