PAK ELEKTRON LIMITED PEL internship report 2006-7

INTRODUCTION OF REPORT OBJECTIVITY Purpose of the Internship Experience

Internships provide an opportunity for students to link theory with practice and further serve as a temporary labor pool for those agencies that have committed to  participate in the internship program. The internship he lp fulfill its mission of preparing students for significant professional and managerial positions in the public sector. Interns are expected to exhibit professionalism p rofessionalism at all times during the experience. This  professionalism should be evident in their interactions with clients, co-workers, and supervisors. Interns are expected to apply their knowledge, skills, and abilities in the  performance of all duties, to behave ethically, and to follow all rules and policies of the site. It is a requirement for graduation. Internship at PAK ELEKTRON LTD

1. Provided me with a practical real world experience in the public or  nonprofit sector.

2. Enabled me to develop important public administration skills which cannot be taught in the classroom. These experiences vary from working on special projects for the interning agency to learning about the human motivation process in a complex organization . 3. Enabled me to compare theoretical ideas learned in the classroom within the world of work regarding public administration experiences.

4. Provided me with experience in an actual public or nonprofit agency before entering the job market. Such experience not only increases my job prospects, but also teaches what is expected in terms of 

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 professional behavior.

5. Permitted me, a student to apply the technical skills learned in the classroom to real world public administrative problems. LEARNING OBJECTIVES

Finance Department Operations Awareness of working environment its pros and cons Conduct SWOT analysis Significance of human resource policies and their implementation implementation

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INTRODUCTION OF COMPANY

Pak Elektron Limited (PEL) was in corporated in Pakistan on march 03,1956 as a public limited company under the companies Act, 1913 (replaced by companies ordinance 1984). Registered office of the company is situated at 17 Aziz Avenue, canal bank  Gulberg_ V Lahore. The company is currently listed on all three stock exchange of  Pakistan. The principal activity of the company is manufacturing and sales of electrical capital goods and domestic appliances. These activities are organized under following divisions. Power division: manufacture of switchgear, energy meter, and transformers. Appliances division: manufacture and assembling of refrigerators, air conditioner, microwave oven, television and washing machine.

BRIEF HISTORY

PAK ELEKTRON LIMITED was set up in 1956 as a joint venture with one of the largest and renowned manufacturers of electrical equipment e quipment Messrs. AEG of West Germany for  manufacturing Transformers, Switchgears and Electric Motors etc. The entire job of  machinery requirements and layout of the factory building was p lanned and implemented  by AEG who produced very well balanced facility for the design and manufacture of the above equipment and the commercial production was commenced on 22 November 1956. Up to 1962, when AEG finally phased out, the designing and manufacturing of all equipment was carried out jointly by AEG experts expe rts and PEL personnel. PEL staff, in the meantime, had received specialized training in USA and West Germany which enabled PEL to establish itself as the leading manufacturers of electrical equipment in the country with an excellent reputation for high quality and thus PEL came to be known as "THE QUALITY CONSCIOUS COMPANY".

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After conclusion of agreement with AEG, total share holding of AEG was purchased by the then sponsors - Malik Brothers. The production produ ction continued with AEG designs with much greater emphasis on the quality and reliability of the products which earned unique distinction of supplying electrical equipment to projects of paramount national importance like Mangla Dam and Tarbela Dam Projects. PEL equipment was approved  by consultants of international repute including Preece Cardew & Rider (England), Binnie & Partners (England), Harza Engineering International (USA) and Miner & Miner  International Inc. (USA). The majority shares were acquired from Malik Brothers by Saigol Group on 11 October  1978 and immediately on takeover the new management chalked out both long term and short term plans to put the company back on the path of progress. As a part of first phase of its BMR Programmer the new management injected the additional working capital of  Rupees 8.98 million and Bridge Loan of Rupees 7.50 million (against the public issue of  its shares) was provided by the ICP-led Consortium. As a part of long term plans, the manufacturing of window type Air conditioners was taken up in 1981 and was immediately established for quality. The company launched the second phase of its BMR and expansion of the existing  product line in the year 1987 and imported machinery for the manufacture of  Refrigerators and Deep-freezers for a total value of Rupees 22.11 million. For the project  National Bank of Pakistan - the leading bank of the company provided the financing. Like Airconditioners these products have also been bee n well received by the local market, which speaks highly of the confidence, the consumer has developed in the quality  products manufactured by the company? During the year 1990 the company has signed an agreement with Messrs HITACHI of  Japan for the manufacture of Vacuum Circuit Breakers. The company has entered into an agreement with Pakistan Industrial Credit and Investment Corporation (PICIC) for a foreign currency as well as local cu rrency loan of  Rupees 25 million for the expansion, balancing, modernization and replacement of the

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existing plant. The machinery has come into operation in October 1991 and with the  balancing, modernization and replacement of machinery, the production capacity of  Refrigerator Section will reach a level of 252,450 2 52,450 cubic feet. The management of the Company decided to further expand its operation by establishing a plant for the manufacture of compressors for refrigerators refrigerators and deep freezers. The technical know-how agreement has been signed with M/S NECCHI Compressori, Italy for the assembly and progressive manufacturing of compressors for refrigerators and deep freezers. Group Profile

In 1948, the Saigols migrated from Calcutta and initiated their business in Lyallpur (later  named to as Faisalabad), the textile city of Pakistan, under the banner of Kohinoor  Industries Limited. Kohinoor Textile Mills

The Saigols set up the first major textile unit - The Kohinoor Textile Mills under the umbrella of Kohinoor Industries Limited. The Kohinoor Textile Mill has state-of-the-art quality control from raw material to finished product manufacturing. Its laboratory is top rated amongst the best laboratories in Pakistan for testing of textile raw materials, other  inputs and yarn. •

Initial Capacity:25,000 spindles

•

Current Capacity: 71,648 spindles

Pak Elektron Limited (PEL)

In 1978, the Saigol Group of Companies purchased major shares of Pak Elektron Limited. At that juncture, the company was only manufacturing transformers and switchgears. With the Saigols in management, PEL started expanding its product range  by entering into Air Conditioner manufacturing.

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Saritow Spinning Mills & Azam Textile Mills

In 1987, the Saritow Spinning Mills Mills and Azam Textile Mills were established under the  banner of Saigol Group of Companies. Saritow Spinning Mills is a spinning unit with 25,440 spindles capacity. Facilitated with the most modern and efficient Japanese and European machinery, its knitted yarn is renowned in the Far East and Europe for its fine quality. Azam Textile Mills is reputed for its carded and combed yarn, which is quite  popular for premier knitting and weaving. Kohinoor Power Company Limited

In 1991, the first power unit commissioned in Pakistan, in the Private sector, was Kohinoor Power Company Limited. Its present production capacity cap acity is 15 MW.

Kohinoor Energy Limited

1995, another power unit, Kohinoor Energy Limited, was established. Kohinoor Power  Limited is a 120 MW power plant located on the outskirts of the city of Lahore. Lah ore. This  project has an annual turnover of $80 million.

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VISION STATEMENT

To excel in providing engineering goods and services through continuous improvement.

MISSION STATEMENT

o

To provide quality products & services to the complete c omplete satisfaction of our  customers and maximize returns for all stakeholders through optimal use of  resources.

o

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

o

To promote good governance, corporate values and a safe working environment with a strong sense of social responsibility.

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MANAGEMENT PROFILE

A committed team of highly qualified, experienced professionals, financially sound and reputed sponsors manages the Company. Through sheer dedication, diligence and the Almighty’s Beneficence the management team at Pak Elektron Limited have earned reputation for excellence in manufacturing of electrical as well as home appliances and their marketing. COMPANY HIERACHY

C h a irm a n

M a n a g in g D ire c t o r  

G M M a n u f a c tu t u r in i nGgM M a r k e tit i n g G M F i n a n c e G M M a n u f a c tu t u r in i nGgM M a r k e tit i n g (Appliances (Appliances (P o w e r D )i v isi s o n (P o w e r D )i v is is o n D i v i s )ioio n D i v i s )ioio n

S .r M a n a g e r   S .r M a n a g e r   (Foreign Finance P r o c u r e) m e n t

S .r M a n a g e. r M k t (P o w e r D )i v is i s io io n

S .r M a n a g e. r M k t (Appliances D i v s i )io io n

S .r M a n a g e. r Q C S .r M a n a g e r   S .r M a n a g e ( A p p l i a n&c e s H R&A H IA P o w) e r  

Manager  Commercial

CENTRALIZATION

In PEL decision making or centralization c entralization of power is kept at the top level. The important decision like establishing goals, hiring employees, choosing contracts are made at the top level, therefore in PEL Centralization is “High”.

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Corporate Information BOARD OF DIRECTORS

Mr. M. Naseem Saigol Chairman / Chief Executive Officer   Mr. M. Azam Saigol Mr. M. Murad Saigol Mr. Muhammad Zeid Yousaf Saigol Mr. Haroon Ahmad Khan Managing Director   Mr. Muhammad Rafi Khan Ms. Neelofer Hameed NIT Nominee Mr. Syed Hasan Irtaza NBP Nominee U/S 182 of the Ordinance Mr. Wajahat A. Baqai NBP Nominee U/S 182 of the Ordinance Mr. Rizwan Hameed NBP Nominee U/S 182 of the Ordinance AUDIT COMMITTEE

Mr. Azam Saigol Mr. Wajahat A. Baqai Mr. Rizwan Hameed Mr. Haroon Ahmad Khan

Chairman/Member   Member   Member   Member  

COMPANY SECRETARY

Mr. M. Omar Farooq CHIEF FINANCIAL OFFICER 

Syed Manzar Hasan

F CA

AUDITORS

M/s M/s You Yousa saff Adi Adill Sal Salee eem m & Co. Chartered Accountants

(A memb member er firm firm of Delo Deloit itte te To Touc uche he To Tohm hmat atsu su))

LEGAL ADVISORS'

M/s Hassan & Hassan Advocates REGISTERED OFFICE

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

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Tel: 042-35718274-5, 35717364-5 Fax: 042-35715105 E-mail: [email protected] SHARES REGISTRAR 

ISLAMABAD

Corplink (Pvt) Limited

Room # 1404, 14th Floor 

Wings Arcade, 1-K Commercial

Green Trust Tower, Blue Area, Islamabad

Model Town, Lahore

Tel: 051-2824543, 2828941

Tel: 042-35839182, 35887262, 35916719

Fax: 051-2273858

Fax: 042-35869037 KARACHI

CHINA

Kohinoor Building

910, No. 1007, Zhong Shan Naun Er Road

25-West Wharf Road, Karachi

Shanghai, china

Tel: 021-32200951-4

Tel: 86-21-64567533

Fax: 021-32310330

Fax: 86-21-54109971

WORKS

UNIT II

14Km, Ferozepur Road,

34Km, Ferozepur Road,

Lahore

Keath Village

Tel: 042-35811951-7 (7 Lines)

Tel: 042-35935151-2

Website: www.pel.com.pk 

Website: www.pel.com.pk 

BANKERS

Bank Alfalah Limited Bank of Khyber  Bank of Punjab Deutsche Bank  Faysal Bank Limited KASB Bank Limited Meezan Bank Limited My Bank Limited  National Bank of Pakistan  NIB Bank Limited

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Royal Bank of Scotland Limited Saudi Pak Commercial Bank  Soneri Bank Limited Standard Chartered Bank 

FIELDS OF ACTIVITIES MAJOR DEPARTMENTS IN PEL

In PEL Industries Following Major Departments are,



Production Department



Accounts Departments



Finance Department



Admin. & H.R Department



Marketing Department



Sales Department



Quality Control Department

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Quality Assurance Department



Maintenance Department



Stores

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PRODUCTION DEPARTMENT

PEL has divided the production department into two further departments.

1- Powe Powerr Divi Divisi sion on 2- Appl Applia ianc ncee Div Divis isio ion n

MAJOR DEPARTMENTS AT PEL

PRODUCT HIERACHY

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Divisions of PEL

Appliances division

Power division

POWER DIVISION

PEL’s Power Division manufactures transformers, switchgear, energy meters, kiosks, compact stations, shunt capacitor banks etc. All the power equipment is assembled under  strict quality control and in accordance with international standards. PEL is a major power equipment supplier to Water and Power Development Authority (WAPDA) and Karachi Electrical Supply Corporation (KESC).

Over the years, PEL’s power equipment has been used in numerous power projects of  national importance. Most of these are tailor made to buyer’s specifications. Due to strict quality standards, PEL has been able to prevent Chinese manufacturers from gaining any market share. However, new entrants represent represent a threat threat and the Company Company is responding responding  by introducing innovations to its existing products. One such innovation is digitization of  its electrical meters which is in the development stage.

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In-s In-spi pite te stif stifff compe competi titi tion on from from emer emergi ging ng loca locall and and mult multin inat atio ional nal bran brands ds,, PEL’ PEL’ss appliances and power equipments have consistently gained marked share due to constant innovation and high quality standards. Strategic partnerships with Copeland, Danfoss, Samsung and others have enabled the Company to incorporate new technologies into existing product ranges, thus introducing new product features.

During During the year year 2006, 2006, PEL retain retained ed its market market leader leadershi ship p in the Power Power Equipme Equipment nt market, increasing its market share from 33% in 2005 to 36% in 2006 in the switchgear  market and also maintained share of 35% in 2006 as well in the energy meters market. PEL’s leadership in the Power Equipment market is largely due to its strong Research and Development knowledge and high product quality.

Power Division accounted for 47% of the Net Sales of the Company as of June 30th 2006. The sales and profit participation by the Division is high due to high quality standards and future growth opportunities. The Power Division comprises of three departments;

1- Manufa Manufactu cturin ring g and Quali Quality ty Contr Control ol 2- Desi Design gn and and Deve Develo lopm pmen entt 3- Marketing

PRODUCTS POWER DIVISION

1. ENER ENERGY GY ME MET TERS ERS 2. TRAN TRANSF SFOR ORME MERS RS 3. SWITCH GEAR  4. GENERATORS TRANSFORMERS

PEL has vast experience in design and manufacturing of standard and special purpose transformers. New technical designs for improved efficiency and quality against special

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orders of non-standard transformers are continuously being explored. These transformers are available for various applications.

i)

Distribution Transformers

ii)

Auto Transformers

iii)

Furnace Transformers

iv)

Welding Tr Transformers

PEL transformers have been successfully type tested for impulse voltage and short circuit tests by KEMA Laboratories of Holland. Customized transformers, in accordance with domestic and international client’s specifications have also been manufactured for use within and outside Pakistan. Transformers are normally supplied in a period of 3 – 4 months after the receipt of orders from respective distribution companies of WAPDA and varied supply time for private customers. The Company provides one year after sales service warranty to WAPDA, KESC and private sector customers. Main Competitors are Siemens, Transfopower, Elmetec and Climax, Climax, while PEL having a market share of 38 %.

ENERGY METERS

following types of meters are manufactured: Electro mechanical •

Single phase

•

Three phase_ Direct connected

•

Three phase _CT operated

Static/Digital •

Single Phase

•

Three Phase Directed connected

•

Three Phase_CT operated

•

Three Phase_TOU

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

Single Phase energy meters provide maintenance-free operations over a long period and accurate measurement of electrical energy. Poly Phase energy meters improve load  performance and precision accuracy. The meters require minimum maintenance and can withstand abuse from surges and magnetic tampering. Three phase digital electronic meter with dual tariff capability recently launched and supplies to WAPDA has begun this year.

Energy meter orders from WAPDA are received annually annua lly and their supply period is 9 -10 months. Energy meters to KESC are supplied in a period of 3 - 4 months. The Company  provides one year after sales service warranty to WAPDA, KESC and other customers. In the supply of Energy Meters PEL share accounts for 35 % of the total supplies while the rest is shared by Syed Bhais, Escort and Telephone Industries.

SWITCHGEARS

Switchgears are one of the highly technical and specialized power products of PEL. They are produced for indoor and a nd outdoor installations complying with international installation standards. A major customer for this product is WAPDA. The Company  provides one year after sales service warranty to WAPDA, KESC and other customers. In Switchgear, PEL enjoys market share of 33 % while competitors are Alstom, Siemens and Fico.

POWER TRANSFORMERS

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owing to massive growth in power sector, demand for power transformers is also growing  proportionately for all ratings from 66KV to500 KV. PEL has ha s stepped into this activity  by starting the manufacturing of 132 KV transformers, being the most demanded rating, and for this purposes has formed a strategies partnership by signing the two agreement. Based on the demand forecast of Power Transformers for WAPDA, KESC and other   projects, PEL’s market share is initially targeted to be 20%, growing in five years.

APPLIANCES DIVISION

The Applian Appliances ces Divisi Division on of PEL is the pionee pioneerr manufa manufactu cturer rer of electr electrica icall goods goods in Pakistan. The Division’s product portfolio comprises of air-conditioners, refrigerators, televisions, microwave ovens, and split air-conditions. PEL is one of the three leading  players in the home appliances market.

The Company is engaged in the manufacturing and/or marketing of the following home appliances. The Company’s Appliances Division contributed significantly to its sales in 2005-06. The main reasons for this growth are increase in market sizes along with PEL’s strong brand image accompanied with its extensive dealership network spread nationwide with with over over one thous thousan and d outle outlets ts and and an afte afterr sale saless serv servic icee netw networ ork k with with over over 100 workshops.

Another major reason for the increasing growth in the home appliances market is the easy availability of consumer financing at lower interest rates. PEL itself is involved in selling its products through a marketing wing for sales against ag ainst consumer financing.

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Availability of Chinese products at very competitive prices has not proven to be that big a threat to the local industry. This is because of the improved quality of the local products and cost efficiencies due to economies in product and raw material purchases hence making the local products competitive with the Chinese imports.

In 2005-06, the Appliances Division contributed around 53%to the Company’s sales whereas the Power Division made up the remaining 47%. Refrigerators and Split air  conditi conditioner onerss were were the main main source source of revenu revenuee in the Applia Appliance ncess Divisi Division, on, wherea whereass transformers and energy meters are the main revenue drivers in the Power Division. The Appliance Division accounted for 53% of the Net Sales as of June 30th 2006. The Appliances division comprises of four departments;

1. Manufac Manufactur turing ing and Qualit Quality y Contr Control ol 2. Rese Resear arch ch and and Dev Devel elopm opment ent 3. Marketing 4. Cons Consum umer er Fina Financ ncee

PRODUCTS APPLAINCES DIVISION

1) REFR REFRIG IGER ERAT ATOR ORS S 2) DEEP DEEP-F -FRE REEZ EZER ERS S SPLIT AIR CONDITIONERS. WINDOW TYPE AIR CONDITIONERS. MICROWAVE OVENS. 3) TELE TELEVI VISI SION ON SETS SETS..

PEL Air Conditioners

PEL window-type air conditioners were introduced in 1981 1 981 in technical collaboration

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with General Corporation of Japan. Ever since their launch, PEL air conditioners have a leading position in the market. PEL air conditioners cooling performance has been tested and approved by Copeland Cop eland and ITS USA. With the shift of users preference from window type to split type air conditioners, PEL has started manufacturing split type air  conditioners. PEL Refrigerators

The manufacturing of refrigerators started in 1986-87 in technical collaboration with M/s IAR-SILTAL of Italy. Like the air conditioner, PEL's refrigerators are also in great demand. Today, PEL Crystal has 30% market share. Its cooling performance is tested and approved by Danfoss, Germany and its manufacturing facility is ISO 9002 certified by SGS Switzerland.

PEL Deep Freezers

PEL deep freezers were introduced in 1987 in technical collaboration c ollaboration with M/s Ariston of  Italy. Because of durability and high quality, PEL deep freezers are the preferred choice of companies like Unilever. Competitor of PEL Appliances Air Conditioners: 1. General 2. Daiken, 3. Waves , 4. National, 5. Dawlence, 6.

Sharp ,

7. LG Refrigerator:

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1. Dawlence, 2. Phillips, ps, 3. Sharp, 4. Samsung, 5. LG

Deep Freezer  1. Waves, 2. Candy, 3. Dawlance

Television: 1. Sony, 2. Phillips, 3. Panasonic Compressors: 1. Dawlance, 2. Tecusah, 3. Embraco, 4. National

LG PRODUCTS LG has entered in a strategic partnership with PEL. According to this agreement P EL has  become the official distributor of LG products in PAKISTAN P AKISTAN from June 2009. LG products in Pakistan are: •

Refrigerator 

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•

Split air conditioner 

•

Washing machine

•

Microwave oven

ISO 9001 Certification

PEL was 16th Company in Pakistan which got ISO 9002 Certification in 1997, since since then then PEL Managem Management ent is applyin applying g this this International International Standard Practices for  Effect Effective ively ly Managi Managing ng Qualit Quality y of Produc Products ts and Servic Services es that that Compan Company y Offers Offers.. The International Standard Practices in PEL have been Upgraded Upgraded as per the Revised Revised ISO 9001 900 1 Stand Standar ards ds and and its its Scop Scopee of Appl Applic icat atio ion n is expand expandin ing g ever ever sinc sincee and Top Manag Managem emen entt is Comm Commit itte ted d to make make PEL PEL a Total Total Quality Quality Managem Management ent (TQM) Company.

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Company Quality is the Subject of Management at all Levels. The focus is on continuous improvement in Systems thus establishing Good Management Management Practices, Practices, are committed to and making continuous efforts in developing and strengthening internal and extern external al custom customers ers and suppli suppliers ers.. Employ Employees ees traini training ng & develop developmen mentt and their  their    participation are the KEY forces which are increasing increasing Organization's Organization's Capabiliti Capabilities es thus making it more competitive and fast growing Company. Top management is not only tremendously improving Working Environment but also investing in Improving internal Communication Network for better  Teamwork. Continuous Up-gradation in production facility/equipment in the pursuit of State-ofproductio tion n technol technology ogy reflec reflects ts manage managemen mentt Vision Vision and commit the-art produc commitmen mentt for Quality . Over fifty years of manufacturing experience with cooperative and dedicated

employ employees ees couple coupled d with with per perform formanc ancee based based system system and Data Analysi Analysiss enable management to take Preventive Actions before things really go wrong. One of the Mission of organization to promote good governance and corporate values with a strong sense of social responsibility.

EPC Contracting

Power Projects PD is a new addition to PEL with a purpose to establish a national source of catering specialized jobs of execution of turnkey and EPC electrical projects. At an age of just three years, Power P ower Projects PD has recognized its presence in the market by

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undertaking undertaking 132kV substation substationss and industria industriall and residenti residential al societies societies electrifi electrification cationss turnkey turnkey projects projects against against multinati multinational onal companies. companies. Pakistan Pakistan Engineering Engineering Council has granted

it

licence

in

C-1

(No

limit)

category.

PEL, PEL, a stro strong ng base base of manuf manufac actu turi ring ng of power power trans transfo form rmer er,, dist distri ribut butio ion n trans transfo form rmer ers, s, MV/L MV/LV V swit switchg chgea ears rs,, ener energy gy mete meters rs,, cont contro roll and rela relay y pane panels ls give give confidence Power Projects PD to install these equipment for its projects. In addition, it has establ establish ished ed techni technical cal associ associati ation on with with GANZ, GANZ, (Hungr (Hungry) y),, SEL (USA) (USA) and RMS (Australia).

AWARDS IN EXCELLENCE AND RECOGNITION

PEL Awarded 6th Annual Environment Excellence Award-2009

Mr. Yaqub Tabasum (Project Manager Unit-II) Receiving the award from Mr. Hameed Ullah Jan Afridi (Federal Minister for Environment)

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Annual Environment Excellence Awards are instituted jointly by National Forum for  Environment and Health (NFEH), United Nations Environment Program (UNEP), Ministry of Environment, Government of Pakistan and the Federation of Pakistan Chambers of Commerce & Industry (FPCCI). Annual Environment Excellence Awards are designed to recognize and promote the organizations which make an outstanding contribution to sustainable development. They aim to highlight policies, practices,  processes and products from all sectors of business in the country, which help to achieve economic and social development without detriment to the environment and natural resources. Pak Elektron Limited (PEL) was awarded 6th Annual Environment Excellence Award for   best Health, Safety and Environment performance. The Award was presented to Pak  Elektron Limited in a graceful ceremony; held on July 09, 2009 at Hotel Sheraton, Karachi. Mr. Hameed Ullah Jan Afridi, A fridi, Federal Minister for Environment, honored the ceremony by as chief guest whereas Mr. Askri Taqvi, Minister for Environment, Sindh  presided over. Javed jabber (Global Vice President IUCN), Dr. Kaiser Waheed (Chairman NFEH) and Naeem Qureshi (President NFEH) were also present on the occasion. Mr. Yaqub Tabasum (Project Manager Unit-II) received the Environment Excellence Award on behalf of PEL. PEL Awarded 4th CSR National Excellence Award 2009

Mr. Yaqub Tabasum (Project Manager Unit-II) Receiving the ‘CSR Award’ from Mr. Khawaja Izhar Ul Hassan (Advisor to Chi ef Minister Sindh)

These awards are instituted jointly by Help International Welfare Trust and CSR  Association of Pakistan, and means to recognize and appreciate the efforts made by

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corporations within scope of Corporate Social Responsibility. Pak Elektron Limited (PEL) has been awarded for the second time with ‘4th CSR National Excellence Award 2009’ for best efforts within the multi-dimensional scope of CSR an d a special award for  ‘Best Information Material On CSR’. The Award was presented to Pak Elektron Limited in a ceremony; held in Karachi Ka rachi on 21st January, 2010 at Avari Hotel & Towers, Karachi. Mr. Pir Mazhar-ul-Haq (Provincial Minister Education and Literacy), Mr. Sheikh Muhammad Afzal Alias (Provincial Minister for Environment & Alternate Energy Government of Sindh) and Mr. Khawaja Izhar Ul Hassan (Advisor to Chief Minister  Sindh) honored the ceremony as chief guest. Mr. Yaqub Tabasum (Project Manager  Transformer Unit-II) received the CSR National Excellence Award on behalf of PEL.

FINANCE DEPARTMENT DESCRIPTION AND ANALYSIS

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FINANCE

Finance can be defined as

1. The commerci commercial al activit activityy of providing providing funds funds and capital. capital. 2. the branch branch of economics economics that that deals deals with with the management management of money money and other  other  assets. 3. the manageme management nt of money, credit, credit, banking banking and investments. investments.

This department deals with the acquisition and management of finance.

 JOBS ASSIGNMENTS IN FINANCE DEPARTMENT DEPARTMENT

General Manager Finance “A person who takes the major financial decisions”

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Manager Finance 

Rate negotiations



Handling cash inflow & outflow

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Bank relations



Handling short term and long term funds requirements

Asst. Manager Finance 

Reports to manager finance

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Arranging funds for production

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Preparation of Budget

Couriers 

Documents correspondence



Dealing with other departments to avail the documents required



Reporting to all the manager of finance department

OBJECTIVE OF FINANCE DEPARTMENT Finance people concentrate on following points for accomplishment of their tasks •

 Try to raise maximum funds

•

Make arrangement for allocation of funds appropriately

•

Doing above mentioned activities by controlling cost

HOW THEY MAKE PLANS

Planni Planning ng is an impor importan tantt aspect aspect for achiev achieving ing object objective ives s ahead. ahead. So while making plans manager foresee the situations in advance and

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take take deci decisi sion ons. s. It is true true in case case of fina financ nce e depa depart rtme ment nt.. Finan Finance ce depart departmen mentt have have to do advanc advance e Planni Planning ng for differ different ent tasks tasks about about production and utilization of loans appropriately in advance.

HOW THEY TAKE DECISIONS

 The only thing that is considered at the time of taking decisions regarding fund raising is lower markup rates down because this is what makes loans feasible or otherwise.

FINANCE DEPARTMENT SECTIONS

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Finance Department

Corporate Finance

Material Management Finance

Arrangement of Loans

Leasing

Budgeting Finance

Treasury Finance

Bank  Guarantee

MATERIAL MANAGEMENT FINANCE/LOGISTICS

The logistics department comprises a part of the finance department. It is headed by Mr.M. Hanif and further consist of a senior accounts accoun ts officer, two junior executives and two accountants. The basic task carried out by the persons working in the logistics section are:

•

daily check on production

•

daily check on stock (materials and finished goods)

•

controlling the production plan for the future

•

control on orders in hand

Materials imported by PEL basically remains in bank custody. The bank makes payments for these materials to the foreign suppliers and releases them to PEL as per payments by them. The bank further higher mucaddam companies/clearing agents to to watch over and monitor these materials. The materials are generally store in PEL premises. Material requirement for appliances and power good manufacturing are different hence their  29

requisition are also different. PEL uses cash financing and various other credit facility  provided by the bank. The basic cycle as follows: Raw materials are imported using the different financing facilities. Materials are then u se to make finished goods. The materials when enter the production cycle aa term as workin-process (WIP). WIP is hypothecated and loans taken ag ainst it. Then a portion of  finished goods produced are further pledged and payments for raw materials is made through it. The whole procedure must be carried out in a timely way with correct information reaching at the right time from factory to material section, so that materials may be requested and obtained at the right time without delay.

The main documents included are: •

sales tax invoice

•

 pledge letter 

•

 bill of export

•

release document

SALES TAX INVOICE

The invoice document consist of particulars of buyer and supplier ie; name, address,  phone number, net tax inclusive value, lastly the person purchasing the materials required to sign and specify his name and designation.

PLEDGE LETTER 

Pledge letter , this document is used u sed to pledge material with the bank. Material when imported deposited at the bank. The pledge letter clarifies that goods are unencumbered  property of the company. Detail of the goods ie; number of packages, type of commodity,  packing, rate and value are specified on this document.

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BILL OF EXPORT

This is a transshipment permit also. The particulars included are consignor and consignee name and address, the additional document attached. Mode of transport and of discharge, number of packages, description of goods, per unit value and a number of other details. The total detail add up to 66 for which separate sections are made on this document.

RELEASE DOCUMENT

This document is basically a formal request to the bank to release goods that have been store by them. It contains the following particulars: materials, quantity, rate and v alue. Release may be of finished goods or raw-materials as per situation.

CORPORATE CORPORATE FINANCE

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Mr Nadeem Asghar 

Mr Asad Ullah

TRUST RECEIPT

CASH FINANCE

BRIDGE FINANCE LIABILITY COMPARISONS

Mr Tahir  Mehmood

Mr Tayyab Sharif 

Mr Umer  Zahid

ASSISTANT MANAGER 

LOAN ACCOUNTS

LEASE ASSET MANAGEMENT

BANK  GUARANTEE

BANK GUARANTEE

PEL has guarantee dealings with a number of banks. Parties to a guarantee are as follows: •

 principal debtor 

•

creditor (employer)

•

bank (guarantor)

the guarantee procedure is basically b asically for big projects under taken by PEL for other  companies. The guarantee is necessitated because the customer ie; other company feel more secure if a schedule bank intervenes in the dealing of these two parties and provides additional surety of contract fulfillment. The period of validity of the gu arantee is until the contract is fulfilled satisfactorily by PEL. It then expires. There is facility of date extension in a guarantee also. The bank may not only extend the date up to which the guarantee is under taken, but also ‘enhancement facility is provided whereby the bank  increases the amount up to which the guarantee is taken. Bank charges commission for  these services which is 0.4% of the contract amount. Federal excise duty (FED) is charge cha rge  by bank which is essentially government income. The margin amount of 5% is refunded to PEL if the guarantee expires without use. Guarantee may be of the following types: •

tender bond

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•

 performance bond

•

advance payment

•

•

 balance of payment retention money

TENDER BOND

Tender bond is taken by the company when it is placing a bid or proposal for a particular   project. During the bidding process the contract is made. If PEL wins the contract c ontract the tender bond automatically becomes performance bond. In case of rejection of proposal the margin is return to PEL.

PERFORMANCE BOND

This bond is created by conversion con version of tender bond. It remains valid until the project is  being work upon by b y the party. When the project is completed by the party, who won the  proposals the may acquire their margin from the bank b ank and the bond automatically expire.

RETENTION MONEY

In this case a percentage of the cost of the total project is retained by the bank as a security for the customer. On completion of work by b y the contractor, the money is returned to him. In case of o f failure to complete work the money is credited to customer  account.

COUNTER GUARANTEE

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Counter guarantee is used in case c ase of dealings with a foreign party. When a local supplier  contracts to supply goods abroad he is required to provide security to a scheduled bank  abroad who is in business with the foreign party. This is done via a local scheduled bank. The local bank on behalf of the supplier provides assurance to the bank abroad that the work shall be completed. Once satisfied, the foreign bank assures the customer or   provides a guarantee on behalf of the local bank. Suppose PEL has a contract with a company in Saudi Arabia. The foreign company wants to get a guarantee of quality performance from PEL. PEL will get a local bank e.g  National Bank to give a counter guarantee to a local scheduled bank of Saudi Arabia which will further give guarantee to the foreign company. In completion of contract, the  procedure is similar to guarantee. The major portion of the payment is returnable to the company ie; PEL. The FED is government income which is forwarded to it. The commission is the bank income. The margin infect is returned to the supplier company.

BUDGETING

Mr Amir Sattar  ASSISTANT FINANCE EXECUTIVE

Mr Amir Khawaja SENIOR EXECUTIVE

Mr Zaigham Ali JUNIOR EXECUTIVE

BUDGET PREPARATION METHOD AND APPROACH:

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In the global global corpor corporate ate vibe vibe the preparati preparation on of foreca forecaste sted d budget budget carrie carriess a unique unique importance. The forecasting of future cash flows, profit margins, sales turnover and   projections for the future assets and liabilities position is a practice exercised by all growing and prospering businesses. Normally businesses works on two methods for   projecting their future outcomes.these are:

•

Percentage of sales Method (Short Term)

•

Trend Forecast (Long Term)

The budgeting procedure for PEL is dependent on calculated assumptions vary and hence a set of statements is produced. These are called as Sensitive Analysis . These future  projections and calculations are primarily based on quantity of sales in the preceding year. As all projections are sales driven therefore they depend upon,

•

Feedback from sales/Marketing Department

•

Power Division Sales (keeping in view the anticipated WAPDA demand)

The formulation of budget is a task that cannot be accomplished by the efforts of the  budgeting department merely but it contains the combined expertise of Sales, Marketing, and production departments of Appliances and Power Division, Accounts & Finance departments accompanied with the cooperation of all the relatives departments for the  preparation of budget.

The foundation of budget for PEL is laid not only by cautious calculation but meetings and discussions are held on regular intervals, these discussions involve the GM Finance, manager budgets, assistant manager budgets. The higher management in the consultation with with the finance finance execut executive ive budgeti budgeting ng personn personnel’ el’ss device devicess plans plans for the calcul calculati ative ve approach approach to the formulatio formulation n of budgets. This customary customary process of caring meeting meeting does

35

not end end with with the the comp comple leti tion on of budge budgett is carr carrie ied d furt further her for for revi review ewss and and for for the the monitoring monitoring of Actual vs. Forecasted Forecasted budget on monthly, monthly, quarterly, quarterly, semi annually annually and at the end of budgeting period.

The trading business is centralized and the budgeting, sales and pricing is done centrally except generators, and a different team handles the generator business with the same approach as the other team caters the rest of Trading Business e.g. pricing, budgeting and sales.

BUDGET DEVELOPMENT:

The process of budget includes following steps.

•

BUDGET CALL:

The budgeting department requests the other departments to compose their own   projections for the future demand and expenses keeping in view their current monetary position. In turn, the respective departments analyze their growth for  expens expenses es and demand demand for funds. funds. Proper Proper calculati calculation on of each each item item for which expense has been booked is to be mentioned in the projected fund requirement detail. The need for help of supplementary departments operating in the company arises as the budgeting department solely may not be able to identify the monetary requi require reme ment ntss of thes thesee depa depart rtme ment nts. s. Th Thee preci precisi sion on in thes thesee calc calcul ulat atio ions ns is dependent on the exact or near true projection for the allocation of resources for  various functions of each department in the company.

•

DATA COLLECTION :

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The budgeting department then receives the detail of projected expenses from the supple supplemen mentar tary y depart departmen ments ts operati operating ng in the PEL. PEL. As soon soon as the Budget Budgeting ing Section receives the forecasted budget proposal of each department, the process of  data collection is deemed complete hitherto. This data is taken to further course of  action.

•

DATA SUPERVISION:

The data provided by the relative departments is then put forth for scrutinizing. This scrutiny of proposed expenses and requirement of funds is one of the most important steps for the preparation of budget for the imminent financial year. Meeting and discussions are held to identify the areas where the necessity of  funds funds is impe impera rati tive. ve. Th Thes esee meet meetin ings gs incl include ude the the gene genera rall manag manager erss of the the respective departments and heads of treasury and finance. As these areas are identified, concentration of the budget is hence focus to the efficiently effective aspects.

•

AMENDMENTS:

The projection for allocation of resources must be made by vigilantly analyzing the growth growth of fund fund requir requireme ements nts.. The projec projectio tions ns made made by each each depart departmen mentt regarding the allotment of funds are through a careful review of the past year  requirement trends. The requirements trends are under consideration of budgeting depa depart rtme ment nt as bein being g form former erly ly expos exposed ed to the the deve develo lopm pmen entt of budge budget. t. Th Thee   bud budget getin ing g depar departm tment ent revi review ewss the the propo proposa sals ls for for fund fund allo alloca cati tion on by each each depart department ment and takes takes into into notice notice the newly newly added added expense expenses. s. The budgeti budgeting ng department also observes the comparative increase in the fund requirement and then puts forward its own assumptions for the projected expenses. The budget  proposal  proposal is then sent back to the respective respective departments departments for amendments amendments in their  their   proposal.

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As the budget is sent to these relative departments necessary suggestions also sent along with it, for the departments to study and amend their own requirements in accordance to the proposition presented in their service. The departments study the proposals as provided by the Budgeting Section and in the response either  amends their proposal or have to justify their allocation of funds.

•

DATA RECOLLECTION:

The data as sent back to the respective departments is amended and consequently sent back to the budgeting section for further review. The data is then recollected  by the Budgeting Section and is again put under review. The recollection of data is made under only from those departments where the section deems the projected figures non realistic.

•

RECTIFICATION OF ERRORS:

The data when received back from the respective departments is then scrutinized for for erro errors rs.. Th This is insp inspec ecti tion on is nece necess ssar ary y as the the data data sent sent back back may may cont contai ain n miscalculations or misallocation of funds. These may include wrongly projected expe expens nses es or deli delive very ry costs costs.. Th Thee resp respec ecti tive ve depa depart rtme ment ntss that that deve develo lop p the the  projections for the coming year might have not calculated the employee turnover  exactly and according to the latest ratio. The likelihood of projected salaries may  be anticipated lessees and in addition to this the projection of the seasonally hire workers may potentially differ from the actual ones. The expenses may have been wrongly projected, it is also possible that some exceptions from the last year have  been added to the projections and some new cost center might have been omitted.

The errors in the projections are not considered harmful as these leads to careful esti estima mati tion on for for the the deve develo lopm pmen entt of budge budget. t. Th Thes esee erro errors rs are are rect rectif ifie ied d and and

38

consultation with the relevant department for which the budgeting projections are considered non appropriate. The budget to be developed under sound estimations must have to be properly and carefully discussed for the near to actual expenses and fund requirement. it is however not possible for any organization to come up exactly with the same figures as mentioned in the forecasted budget. Deviation from the projections is a common happening happen ing but this should be as low as possible.

•

DATA COMPILATION:

The budgeting department after scrutinizing the forecasted budget then performs the duty of the compilation of the budget received from various departments of  the company. company. This This is a gigant gigantic ic respon responsib sibili ility ty on the part of the budgeting budgeting department. The forecasted budget for PEL is compiled with great care and for  this purpose meetings are held among the budgeting personnel and the senior  management. management. The data received received to be compiled contains contains each and every cost and expense that is expected to take place in the succeeding year.

•

BUDGET REVIEW:

The data compilation is a very time consuming task and due to the carefulness with which it has to be done prolongs the time for the completing of the budget development the budget is then sent to all the departments of the company for its review and to approve their respective budget in the complete budget document for the following fiscal year. Each department of the company reviews its budget and gives its opinion, suggestion and approval for the budget to be launched. This  budget document is also sent to the higher management to review its sections and give their suggestions regarding the development of o f the forecasted budget.

In event event of any any accu accura racy cy in the the compi compila lati tion on of the the budge budgett the the resp respec ecti tive ve depart department ment can inform inform the bud budget geting ing departm department ent for correc correcti tion. on. This This bud budget get revi review ewss help help in the the soun sound d prep prepar arat atio ion n of the the annua annuall bud budge gett as the the rele releva vant nt

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departments have the complete knowledge of the projected budget before its finalization.

•

MONITORING:

The budgeting department keeps a close eye on the comparison between the actual and forecasted budget and at the end of each month the department makes a summary for the Actual vs. Forecasted. This summary gives an idea about the  performan  performance ce of the department department in terms terms of the usage of the available available funds. This comparison is then presented to the higher management along with necessary sugges suggesti tions. ons. These These sugges suggesti tions ons help help the higher higher manage management ment to influe influence nce the  performance of the respective departments in a more effective manner.

The budgeting department not only monitors the usage of allocated funds but also monitors the sales of the products. As there is a possibility that sales are not according to the projections as put forth by the department itself, the budgeting Department in addition reports to the senior management regarding the difference  between the actual and projected sales.

The monthly reports of the Actual vs. Forecasted is also used as a tool to keep a check on the departments, as maximization of output from limited resources helps in greate greaterr produc productiv tivity ity and profit profitabi abilit lity. y. This This respons responsibi ibilit lity y of the bud budget geting ing department is full time job and requires a close look on the monthly output of the department. The significance of the budgeting department can be visualized by the fact that the budgeting department has the maximum number of meetings with the higher management than any of other section of the Finance Department.

SALIENT FEATURE OF MONITORING ARE: o

Comparison of Sales, Materials, pricing, Costing Schedule, Monthly Expenses,

o

Production Capacity, Workers Strength, Borrowings, Financial Charges, etc.

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o

Business Plans

o

Meetings with Senior Executives

o

Recommendations

o

Difference of the Actual vs. Forecasted Figures.

BUDGET CONSISTS OF THE FOLLOWING:

Income statement, cash-flow statement, monthly sales quantities, sales value, material cost, sales and material material values, values, conversion conversion costs, debtors/deb debtors/debtt balances, balances, inventories inventories and trade creditors are accounted for in each product. Separate sheets are formed for each and every product and each and every expense.

•

Income statement reveals the profit before tax

•

Cash-flow statements the cash generated each month

•

Sales quantity sheet gives you the total sales per month of the different types of a

 particular product i.e. versions. ‘spill over’ refers to the order of last year that are yet to be fulfilled and ‘expected order’ are those orders which are to be received in the future. •

Sales and materials have private values i.e those sold to other than WAPDA and those of WAPDA. Both of these areas are totaled to get final values.

•

Conversion costs include raw materials, wages and all those costs, which come

under the head of FOH. •

Debtor sheets give details of opening balances of debtors, those received after 1

and 2 months respectively and the closing balances also.

budge t prepared. A cash flow Cash flow statement is a very important part of the budget statement focuses on three main areas namely: •

Financing activities

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•

Operating activities

•

Investing activities

Financing Financing activities activities include all expenditures related to the different types of loans and

credit facilities taken by the concern. It includes three main costs i.e. stocks, trade debts and creditors. Markups paid on the facilities, the return of principal amounts and all other  expenses related to financing activities are accounted for.

Investing activities activities include all money invested by the concern on a venture, the profits

earned by them and their startup expenses.

include all conversion conversion costs required required to change raw materials materials into Operating activities include finished goods. The expenditures and incomes of this activity are evaluated.

Cash inflows typically include sales collections, bank loans, sponsor given money, and company issue of right shares.

Cash outflows include material costs, working capital, payment against stock, payment to creditors, bankers’ taxes, long term debt repayment and capital expenditure. Cash flow  basically monitors the movement of stocks from stores in raw form to the line (i.e. factory) in work-in-process form and to the go-down in the finished-goods form.

BUDGET FEATURES:

The Budgeting Department of PEL is a very efficient department, as not many of the compan companie iess have have a budge budgeti ting ng depar departm tmen entt on such such soun sound d grou grounds nds.. In most most of the the

42

companies the budget is made by accounts and finance department committees which give their budget suggestions in view of the past expenditures, these committees may not as well follow the lines as the Budgeting Department of PEL practices. The budget of the most of the manufacturing sector companies as a common practice is based on the  percentage of the sales method.

The Budgeting department of PEL in consent with the rest of the departments working in the company develops a mutually agreed budget. The preparation of the budget of PEL is task assigned to a team dedicated for the said purpose.

The most most import important ant aspect aspect of the Budget Budgeting ing Depart Departmen mentt is the monit monitori oring ng of the expenses and the summary for the actual vs. projected expenses for every department. The monitoring not only delegates some part of the responsibility for the screening of the department but also helps the management to find ways to curtail surplus expenses causing hindrance in greater profitability.

According to my observations the Budgeting Department of PEL is a providing praise worthy services for the company and performing its operations with due diligence and conscientiousness. TREASURY

The treasury section consists of a total of 5 persons. 1 of them is in the bank ban k on a  permanent basis, the bank being National Bank Of Pakistan (NBP). Each bank is given a code, the code for NBP being 02. Work in the treasury department consists of two fundamental tasks: o

Collections

o

Receipts

The ‘Cheque Management’ portion of PEL’s software software is used for this this purpose. The basic tasks carried out are as follows: •

Bank dealings

•

Funds payment 43

•

Updating banks

•

Foreign payments

•

Export transactions

The collections of Appliances division and Power division are recorded separately month-wise, year-wise and day-wise also. Payments are basically routed from the accounts department. Cheques from separate departments are also tracked in this system. All information is directed to finance department via the accounts department. Recording takes place in Accounts whereas payments take place in Finance. The system is updated everyday. Everyday all the balances of PEL in any account are tracked and sent to the bank account where money is required. Generally all payments are made through NBP so money is required here. Payment of various cheques, chequ es, expenses and cost of financial facilities and service charges of the bank are also paid on a regular basis. Monthly batches are made and are given one serial number. All activities of the day are summarized in a ‘Treasury Report’ that is made on a daily  basis. Apart from the recordings in the software of the receipts and collections in the software, this information is also maintained upon Microsoft Excel. Tentative cash flows for the next ten days are also made and comparisons made, later on, of the actual expenses with those of standard/recorded ones. Bank accounts reconciliation is done on a monthly basis, which is as follows; the documents required are bank statement, statement of General Ledger and the break-up of  (L/C) facility availed from the bank. The entries that have not been added are so added in  pencil and the sheet completed. The bank reconciliation statement consists of balances with the bank. The credits, which wh ich may consist of un-presented cheques are added and the debits are deducted to reach the reconciled balance, which is what is recorded in the company’s own books also. If a cheque is dishonored for any reason, it comes back to the Finance department. Finance makes a voucher and sends it to the Accounts department and the concerned department who had made the sales/transaction to tell both departments that the money was actually received. In addition to the voucher a memo is also sent to the concerned department,

44

which consists of reasons why the cheque was dishonored. A number of reasons are a re  printed upon the memo. The appropriate reason is ticked or if the reason is not included in the list given, it is added in writing on the blank space given below on the memo. Sales tax rebates are also dealt with in this section. A list of documents is attached to the import documents to get sales tax waived off.

ACCOUNTS RECEIVABLE SECTION

The task for the Account Receivable section is to manage the receivable generated through the sales of Power Division, the receivable for the power section. This section keeps the track of the customers for in time receipts. The marketing department for Power Division is related to very large extent to the Accounts Receivable section. The bidding and tendering procedure is the responsibility of the marketing department for the power division. The tasks for the account receivable start where the tender is approved by the tender issuing company. This section makes all necessary arrangements for the correct do cumentation of the contract between PEL and the tender issuing company. It is responsibility of the accounts receivable section to study all the clauses laid down in the letter of intent provided p rovided by the tender issuing company. Tendering Procedure

The sales for power division are not similar to the sales by the Appliances Division. The sales procedure for Appliances Division is rather simple as the finished products are  provided to the dealers and other sources for sales. The tendering procedure and formalities related to Accounts Receivable section and Marketing Department can be given as: •

Tender 

•

Bidding

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•

Acceptance

•

Intimation Letter 

•

Company Correspondence

•

Purchase Order and Conditions

•

Letter of Credit

•

Clearance Certificate

•

Warranty Certificate

•

Offer of Inspection

•

Inspection

•

Inspection Certificate

•

Invoice

•

Delivery order 

•

Dispatch

•

GRN

Tender

The notice of tender is published by the company in newspapers. The tender is then notified to the concerned department dep artment for it. This department then studies the tender  information thoroughly as provided in the newspaper. A copy of detailed tender notice which is in form of a booklet is then obtained by the concerned department. The tender   book is studied comprehensively and following requirements are noted, •

Material Requirement

•

Delivery Requirement

•

Availability of Raw Material

•

Availability of Resources

Biding

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The biding process then takes place where several bidders bid for the same tender. A manufacturing company cannot participate in the bidding process until the following documents are not provided •

Tender Form

•

Bid Guarantee (2% of total Value)

•

Literature for Product

Acceptance

The acceptance of Bid depends on the following things: •

Unit Price

•

Technical Qualification

Letter of Intent

As soon as the letter of Intent is received by the company the task for the Account Receivable section start. This section makes the necessary arrangements in compliance with the conditions provided in the Letter of Intent. As soon as the Letter of o f Intent is received the correspondence between the buyer and the PEL starts. Correspondence:

The correspondence of the buyer and PEL starts effectively with receiving Letter of  Intent. In this correspondence the buyer demands the performance bond from PEL (10% of the amount of contract). Purchase Order & Conditions:

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The purchase order is the document soul of contract. This purchase order maintains the total detail of conditions in the contract. The purchase order has following aspects, •

Distribution of stores

•

Special conditions

•

Specification

•

Terms of delivery

•

Inspection

•

Payment

•

Consignee

•

Sales tax and other Govt. duties

•

Warrantee

•

Failure and termination

•

Inspection & Rejection

•

Packing

•

Acknowledgement Receipt

Letter of Credit

Payment terms are made clear to the buyer, for the payment is to be made through Letter  of Credit. Clearance Certificate

A clearance Certificate from the Excise and Taxation office is provided to the buyer. Warrantee Certificate

A certificate of warrantee is provided to the buyer. This certificate is valid up till 18-24 months from the date of Goods Received Note and in ccase ase of transformers 18 month from the date of installation. Offer for Inspection

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The Accounts Receivable section has to make necessary arrangements for the inspection offer. This inspection is necessary for the goods to be deemed satisfactory by the buyer to use. The offer for inspection is made by the Accounts Receivable Section.

Inspection & Certificate

Subsequent to the offer of inspection the inspection is made by the inspection team of the  buyer (WAPDA). The inspection team inspects the produc t and approves it and issues an Inspection Certificate. Delivery Order

The Inspection Certificate is then taken as a token for the approval for dispatch of goods. The goods are dispatched along with delivery order. Freight charges for delivery are already agreed between the buyer and PEL in the contract. Goods Received Note

The last document is the most important document for the claim for sales revenue. As the goods reach their destination the buyer and seller after satisfaction with the condition of  goods, issue goods receive note in favor of PEL which is received by the Accounts Receivable Section. This is commonly known as GRN. The GRN is the strongest document to claim money from the LC issuing bank. Aging of Receivables

A very important function of the Accounts Receivable Rec eivable section is to record the aging of  receivables. A record of the total receivables generated by sales of Power Division is maintained. This process is similar to summaries maintained by the rest of the sections in the Finance Department. PROVIDENT FUND

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Provident Fund is the 10% amount deducted from the basic salary of the employees. The employees receive double the amount deducted for provident fund. E.g. When an employee leaves the job and his Provident fund is Rs. 100000, he will receive Rs. 200000. This 100000 is contributed by the company. PEL invests this deduction and contribution and earns interest which is also added to the  provident fund account of the employee. Those who do not want to earn interest, their  interest profits are also distributed amongst those who are interested in taking interest. PEL do not earn any profits itself, it goes to the employee provident fund ac count.

TYPES OF PROVIDENT FUND

There are two types of Provident Fund 1. Refundable

In this case the employee can take money as loan from its provident fund account but he is charged interest +1%, which means when the loan is recovered 1 more installment is  paid by the employee. 2. Non-refundable

In this case once the loan is taken by the employee, there is no need to repay it. This amount is deducted from the provident fund account. Zakat

The Government of Pakistan announces each year the amount of earning on which zakat has to be paid. The amount for this year (2008-2009) is Rs. 20000. Zakat of 2.5% is deducted from the provident fund of employee’s basic salary deduction or share not from the contribution by PEL and it is non-refundable. It is upon the employee’s choice

50

whether to get the zakat deducted from it Provident fund or he can pay the zakat himself, do not get it deducted and can receive the full amount. Provident Fund Account

In order to get the account opened these are a few steps through which the employee has to go through but they are different for the executive level employees and managerial level employees: Application form  Provident Fund GM Industrial Relation & administration  Approval 

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TASKS ASSIGNED AND PERFORMED

SWOT ANALYSIS OF PEL The following is an assessment of the strengths, weaknesses, opp ortunities and threats to PEL: Strengths 

ISO Certification



Brand Name



Strong Dealer Network 



Free After Sales Services



Market Leader in WRAC (Window Room Air Conditioner)



Second Most Sold Refrigerator 



Quality Products



Research and Development Department



High Variable Cost



Lack Of Advertisement and Marketing Strategies



Inefficient Use Of Capacity



Exploration Of Market in Pakistan



Foreign Markets



Increase In Product Range

Weaknessses

Opportunities

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

Increase In Production Capacity



Energy Crisis



Price War 



Political Instability



Smuggled Goods Market



Good Performance Of Competitors

Threats

DILEMMA FACED BY ORGANIZATION

o

They have raised very expensive loans so they should retire their expensive loans.

o

They should carefully study their competitors.

o

Their operating cost is very high so they should control their operating expenses.

o

When supervisor provide negative feedback he/she should immediately counterbalance it with positive statement for the purpose of encouragement in that situation.

o

There should be a continuous c ontinuous monitoring of performance. When performance deviates from plans one does not have h ave to wait for the next periodic review to correct it. The supervisor and subordinate should discuss the situation immediately so the corrective actions can be taken at once in order to avoid the major disasters.

o

Whether performance appraisal discussions are held monthly, quarterly, annually appraise should be clear about what he/she is doing right and wrong ,and how he/she can overcome there deficiencies for the future appraisal.

o

Performance appraisal should be conducted in a way that employee should not perceive it as a fatigue or threat for there job but it should take it as an opportunity to add or contribute more value in work of there organization

o

In terms of power division the market is a monopsony - a market in which there are many suppliers and one buyer, in this case the buyer being WAPDA therefore the condition it sets with PEL are binding for it.

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o

Their capital structure is mostly constituted of debt, which decreases the risk but it also decrease profits as they are more liabilities.

o

PEL needs to strengthen its advertising policy as its competitors are mainly focusing on their marketing to attract customers.

o

Company’s liquidity position is dismal. So they need to pay off their short term loans.

SUGGESTIONS AND RECOMMENDATIONS

o

Although they do recruit many internees but they are not able to manage such a large number as the internees do not have many tasks to perform. They are not  provided with PC’s to better understand their system.

o

The managers are very cooperative but b ut the behavior of executives especially towards female employees or internees is discriminatory. The environment is hostile and male oriented.

o

The mess area needs to be more hygienic and the food available is the same everyday. There needs to be more variety on the menu so that employees actually appreciate the food they get.

o

Separate washrooms and prayer room for females are not available.

o

Recruiting and hiring of females for finance and accounts department.

o

They need to work on their marketing strategy as their brand name is gradually deteriorating; their alliance with LG has only increased the sales of LG products as people are more aware of their brand.

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