INTERNSHIP REPORT

AT

PAK ELEKTRON LIMITED

(14 km, Ferozepur Rd, Lahore)

IRFAN AMOS
ROLL NO 0 2 5 1 BH BAF 2 0 1 4

SESSION (2014-2018)

START DATE: 02, July 2018 END DATE: 10, August 2018

DEPARTMENT OF ECONOMICS
GC UNIVERSITY LAHORE
 INTERNSHIP PREPORT

AT

PAK ELEKTRON LIMITED

(14 km, Ferozepur Rd, Lahore)

IRFAN AMOS

ROLL NO 0 2 5 1 BH BAF 2 0 1 4

SESSION (2014-2018)

START DATE: 02, July 201 END DATE: 10, August 2018
 DECLARATION

I, IRFAN AMOS, Roll No. 0251-BH-BAF-2014, student of BS (Hons.) in Business Accounting

& Finance, Session 2014-2018 hereby declare that the matter contained in this internship report

titled, “Internship at Pak Elektron Limited. (14 km, Ferozepur Rd, Lahore)” is my own work

and has not been printed, published and submitted as a report/research work, thesis or publication

in any form in any University, Research institution etc. within or outside of Pakistan.

Date: _______________ ____________________

Signature of Deponent

IRFAN AMOS
0251-BH-BAF-14

i
INTERNSHIP COMPLETION CERTIFICATE

ii
 INTERNSHIP COMPLETION CERTIFICATE

It is to certify that the internship work contained in this internship report titled, “Internship at

Pak Elektron Limited. (14 km, Ferozepur Rd, Lahore)” is carried out and completed by Mr.

IRFAN AMOS, Roll No.0251-BH-BAF-2014, under my supervision during his Bachelor (Hons.)

studies in the subject of Business Accounting & Finance.

Dated: ___________________
Signatures

Submitted through

_______________________
Ms. Nosheen Rasool
Lecturer
_______________________ Department of Economics
Saima Sarwar GC University, Lahore
In-charge
Department of Economics
GC University, Lahore

______________________
Controller Examination
Government College University, Lahore

iii
 ORGANIZATION INFORMATION

Organization Pak Elektron Limited

Head Office 14km Ferozepur Rd, Lahore.

Legal Status A Public Limited Company

Authorized Capital Rs. 600,000,000

Paid Up Capital Rs. 5,426,392

Ordinary Shares Rs. 497,681,485

Subsidiary PEL Marketing Pvt. Limited

Company’s Website www.pel.com.pk

iv
 ACKNOWLEDGMENT

I would like to thank GOD Almighty for giving me strength and determination to this work. I am

also thankful to my supervisor Ms. Nosheel Rasool for her support and guidance. I would also

like to thank the people who helped me throughout the process of completing my degree program

v
 DEDICATION

To
The People of Pakistan
For staying strong inspite of terrorism.

vi
Executive Summary:
Pak Elektron Limited (PEL) is one of the much-known organizations in Pakistan. This report is a
summary of my month and a half as an internee at the finance department of PEL. PEL has a
central importance in corporate sector. PEL is genuinely promoting the learning culture which
assures high level of efficiency and performance from its interns by providing apprenticeship to
university students. PEL value the psychological safety, diversity and openness to ideas. My
aspiration as an internee was to learn from my experiences and use this knowledge to solve real-
life problems. In this report I have examined past of the PEL as well as a present position in terms
of finances, corporate environment and relation of the company with investors. Moreover, I have
made recommendations for betterment in some spheres such as employee safety. I have learnt a
considerable measure about the universe of corporate and finance amid my brief internship. I am
better able to differentiate between scholarly learning and real corporate world, this has broadened
my vision. My experience as an intern has taught me values and skills that will guide me in my
future career.

vii
Glossary:
PD Power Division

AD Appliances Division

EPC Electrification Procurement & Construction

BBFS Borrower’s Basic Fact Sheet

PEL Pak Elektron Limited

viii
Contents
Chapter No. 1 ...............................................................................................................................................1
History and Background of Pak Elektron Limited ..................................................................................1
1.1 About PEL: ........................................................................................................................................1
1.2 Mission Statement .............................................................................................................................2
1.3 Vision Statement ................................................................................................................................2
1.4 Core Values of PEL:..........................................................................................................................2
1.5 Organogram: .....................................................................................................................................3
1.6 Board of Directors: ............................................................................................................................4
1.7 Board Committees of PEL:...............................................................................................................5
1.8 Business Volume: ...............................................................................................................................6
1.9 Product Line: ...................................................................................................................................10
Chapter No. 02 .......................................................................................................................................... 11
Structure Functions of PEL Finance Department................................................................................. 11
2.1 Structure of PEL Finance ...............................................................................................................11
2.2 Divisional Layout of Finance Activities in Finance Department: ...............................................11
2.2.1 Inventory & Budgeting: ...............................................................................................................12
2.2.2 Corporate Finance: ......................................................................................................................12
2.2.3 Treasury: .......................................................................................................................................13
2.2.4 Receivable: ....................................................................................................................................13
2.3 Role of the CFO: ..............................................................................................................................13
Chapter No. 03 .......................................................................................................................................... 14
Financial Decision Making and Use of Electronic Data ........................................................................ 14
3.1 Different Types of Software Being Used by PEL: ........................................................................14
3.2 Reports for PEL Management: ......................................................................................................14
3.3 Sources of funds: .............................................................................................................................15
3.4 Generation of funds:........................................................................................................................15
3.5 Mobilization of funds: .....................................................................................................................16
Chapter # 04 .............................................................................................................................................. 17
Financial Analysis of Pak Elektron Limited .......................................................................................... 17
4.1 Five Year Balance Sheet 2013-2017: ..............................................................................................17
4.2 Five-year Income Statement 2013-17: ...........................................................................................18
4.3 Ratio Analysis of Pak Elektron Limited: ......................................................................................19
4.4 Horizontal Analysis of Balance Sheet 2013-2017: ........................................................................39
4.5 Horizontal Analysis of Income Statement 2013-2017 ...................................................................40
4.6 Vertical Analysis of Balance Sheet 2013-17: .................................................................................41
ix
 4.7 Vertical Analysis of Income Statement: ........................................................................................42
Chapter No. 05 .......................................................................................................................................... 43
SWOT Analysis of Pak Elektron Limited .............................................................................................. 43
5.1 Strength: ...........................................................................................................................................43
5.2 Weaknesses: .....................................................................................................................................43
5.3 Threats: ............................................................................................................................................43
5.4 Opportunities: ..................................................................................................................................43
5.5 Comparison of PEL with its Competitors: ....................................................................................44
Chapter No. 06 .......................................................................................................................................... 45
Learning as Student Intern at Pak Elektron Limited ........................................................................... 45
6.1 Duties: ...............................................................................................................................................45
6.2 Accomplishments: ...........................................................................................................................46
6.3 Problems Encountered:...................................................................................................................46
6.4 Objectives of Internship: ................................................................................................................46
Chapter No. 07 .......................................................................................................................................... 47
Conclusion & Recommendations ............................................................................................................ 47
7.1 Conclusion ........................................................................................................................................47
7.2 Suggestion and Recommendations: ...............................................................................................47
Bibliography............................................................................................................................................ 478

x
List of Tables:
Table 1.1 Audit Committee .....................................................................................................................5
Table 1.2 HR & Remuneration Committee...........................................................................................5
Table 1.3 Revenues ..................................................................................................................................6
Table 1.4 Equity.......................................................................................................................................7
Table 1.5 Advances ..................................................................................................................................8
Table 1.6 Investment ...............................................................................................................................9
Table 3.1 Sources of Funds ...................................................................................................................15
Table 3.2 Generation of Funds .............................................................................................................16
Table 3.3 Mobilization of Funds...........................................................................................................16
Table 4.1 Five Year Balance Sheet .......................................................................................................17
Table 4.2 Five Year Income Statement................................................................................................18
Table 4.3 Gross Profit Ratio .................................................................................................................19
Table 4.4 Net Profit/loss to Sales ..........................................................................................................20
Table 4.5 Return on Equity ..................................................................................................................21
Table 4.6 Operating Leverage ..............................................................................................................22
Table 4.7 Return on Capital Employed ...............................................................................................23
Table 4.8 Current Ratio ........................................................................................................................24
Table 4.9 Quick/Acid Test Ratio ..........................................................................................................25
Table 4.10 Cashflow from Operations of Sales ...................................................................................26
Table 4.11 Inventory Turnover Ratio ..................................................................................................27
Table 4.12 No. of days in Inventory .....................................................................................................28
Table 4.13 No. of days in Receivables ..................................................................................................29
Table 4.14 No. of days in Payable ........................................................................................................30
Table 4.15 Total Assets Turnover ........................................................................................................31
Table 4.16 Operating Cycle ..................................................................................................................32
Table 4.17 Earnings Per Share .............................................................................................................33
Table 4.18 Price Earnings Ratio...........................................................................................................34
Table 4.19 Dividend to Yield Ratio ......................................................................................................35
Table 4.20 Market Value Per Share ....................................................................................................36
Table 4.21 Financial Leverage Ratio ...................................................................................................37
Table 4.22 Interest Cover Ratio ...........................................................................................................38
Table 4.23 Horizontal Analysis of Balance Sheet ...............................................................................39
Table 4.24 Horizontal Analysis of Income Statement ........................................................................40
Table 4.25 Vertical Analysis of Balance Sheet ....................................................................................41
Table 4.26 Vertical Analysis of Income Statement .............................................................................42
xi
List of Figures:
Figure 1.1 Organogram of PEL .............................................................................................................3
Figure 1.2 Board of Director ..................................................................................................................4
Figure 1.3 Revenues ................................................................................................................................6
Figure 1.4 Total Equity ...........................................................................................................................7
Figure 1.5 Total Advances ......................................................................................................................8
Figure 1.6 Total Investment....................................................................................................................9
Figure 2.1 Layout and Activities of PEL Finance Dept. ....................................................................11
Figure 4.1 Gross Profit Ratio ...............................................................................................................19
Figure 4.2 Net Profit/loss to Sales ........................................................................................................20
Figure 4.3 Return on Equity .................................................................................................................21
Figure 4.4 Operating Leverage ............................................................................................................22
Figure 4.5 Return on Capital Employed .............................................................................................23
Figure 4.6 Current Ratio ......................................................................................................................24
Figure 4.7 Quick/Acid Test Ratio.........................................................................................................25
Figure 4.8 Cashflow from Operations of Sales ...................................................................................26
Figure 4.9 Inventory Turnover Ratio ..................................................................................................27
Figure 4.10 No. of days in Inventory....................................................................................................28
Figure 4.11 No. of days in Receivables ................................................................................................29
Figure 4.12 No. of days in Payables .....................................................................................................30
Figure 4.13 Total Assets Turnover.......................................................................................................31
Figure 4.14 Operating Cycle.................................................................................................................32
Figure 4.15 Earnings Per Share ...........................................................................................................33
Figure 4.16 Price Earnings Ratio .........................................................................................................34
Figure 4.17 Dividend to Yield Ratio ....................................................................................................35
Figure 4.18 Market Value Per Share ...................................................................................................36
Figure 4.19 Gross Profit Ratio .............................................................................................................37
Figure 4.20 Interest Cover Ratio ..........................................................................................................38
Figure 5.1 Market Share in terms of Sales ..........................................................................................38

xii
xiii
 Chapter No. 1

History and Background of Pak Elektron Limited

1.1 About PEL:

Pak Elektron Limited (PEL) is the forerunner producer of electrical goods in Pakistan. Malik
brothers of Faisalabad established PEL in 1956, in technical alliance with Allgemeine Elektricitats-
Gesellschaft AG(AEG) of Germany to manufacture transformers, switchgear and electric motors.
AEG exited from the venture and sold its share of PEL to the Malik Brothers. On Jan.1, 1972 Govt.
of Zulfiqar Ali Bhutto introduced its economic reform program in order to nationalize the
industries. But PEL was not nationalized because of the its partnership with AEG. Afterward, in
1978 Malik Brothers sold PEL to Saigol group of companies. Management of PEL under Saigol
group started manufacturing deep-freezers in 1987 with the technical assistant of Ariston
Corporation of Italy. They started its appliances division by manufacturing air conditioners in 1981
in collaboration with General Corporation of Japan subsequently refrigerators in 1986-7 in
collaboration with IAR-SILTAL of Italy. PEL further diversified its product range in appliance
division and introduced automatic washing machine, water dispenser and microwave oven. In
2005 PEL Electrification Procurement & Construction(EPC) Division was formally established to
deliver custom made solutions for private clients in grid station, electrification for housing projects
and industrial parks. EPC Division foresees a great potential due to boom in the housing sector.
Now PEL is the sole manufacturer of power products i.e. transformer, switch gears & electric
meters in Pakistan and number two in the domestic appliances market.

1
1.2 Mission Statement

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

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

1.3 Vision Statement

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

1.4 Core Values of PEL:

• Adhering to high standards of morality.

• Continued focus on customer satisfaction.
• Honesty and integrity in conducting business.
• Being socially responsible by giving back to society.

2
1.5 Organogram:

The blow mention organogram shows the structure of Pak Elektron Limited, showing Its
departments, their functional and administrative reporting.

Figure 1.1 Organogram of PEL

3
1.6 Board of Directors:

Figure 1.2 Board of Director

MR. M NASEEM SAIGOL

(Chairman/Non-Executive)

MR. M. MURAD SAIGOL

(Chief Executive Officer)

Directors:

MR. M. ZEID YOUSAF SAIGOL

(Executive Director)

MR. SYED MANZAR HUSSAIN

(Executive Director & CFO)

MR. SHEIKH M. SHAKEEL

(Non-Executive Director)

MR. SYED HAROON RASHID

(Non-Executive Director)

MR. ASAD ULLAH KHAWAJA

(Independent Director)

4
1.7 Board Committees of PEL:

The two major board committees of Pak Elektron Limited are as follows:

Table 1.1 Audit Committee

Audit Committee

Composition Designation
Mr. Asad Ullah Khawaja (Chairman)
Mr. Azam Saigol (Member)
Mr. Usman Shahid (Member)
Sheikh Muhammad Shakeel (Member)

Table 1.2 HR & Remuneration Committee

Human Resource & Remuneration Committee

Composition Designation
Mr. Asad Ullah Khawaja (Chairman)
Mr. Azam Saigol (Member)
Mr. Usman Shahid (Member)
Syed Manzar Hassan (Member)

5
1.8 Business Volume:

Below is the five-year business volume of PEL in term of revenue, equity, advances and
investment.

1.8.1 Revenues:

Five-year revenues of Pak Elektron Limited are as follows

Table 1.3 Revenues

Year 2017 2016 2015 2014 2013

Revenues 42,347 34,124 29,323 24,126 18,856

Figure 1.3 Revenues

Total Revenue
45,000 42,347
40,000
34,124
35,000
29,323
30,000
24,126 18,856
25,000
20,000
15,000
10,000
5,000
-
2017 2016 2015 2014 2013

Interpretation:
The figure 1.3 is showing upward trend/increase in the total revenues. Sales revenues registered a
growth of 109% over the last six years

6
1.8.2 Total Equity:

The equity of Pak Elektron Limited in last five years as follows

Table 1.4 Total Equity

Year 2017 2016 2015 2014 2013

Equity 22,727 20,840 13,616 11,026 6,545

Figure 1.4 Total Equity

25000
22727
20840 Total Equity(Rs. in Million)
20000

15000 13616

11026
10000
6545

5000

0
2017 2016 2015 2014 2013

Interpretation:
The equity of Pak Elektron Limited increased from Rs.6,545 Million to Rs.22,727 Million over
the last five years.

7
1.8.3 Total Advances:

The total advances of Pak Elektron Limited in the last five years are as follows:

Table 1.5 Total Advances

Year 2017 2016 2015 2014 2013

Total Advances (Rs. In 846 955 914 830 453

Million)

Figure 1.5 Total Advances

Total Advances
1,200
955
1,000 846 914
830
800 453

600

400

200

0
2017 2016 2015 2014 2013

Interpretation:
The above figure indicating upward trend in advances. In 2014 advances decline but from 2015
onward the advances of the company are increase to Rs.7,727 Million.

8
1.8.4 Investments:

The investment of the Pak Elektron Limited over the last five years are as follows:

Table 1.6 Investment

Year 2017 2016 2015 2014 2013

Investments 31 49 95 86 23

Figure 1.6 Total Investment

Investment (Rs. In Million)

100 95
90 86
80
70
60
49
50
40
31
30 23
20
10
-
2017 2016 2015 2014 2013

Interpretation:

The figure 1.6 shows fluctuation in the investment. In 2015 the investment was Rs. 95 million,
which was highest in the last five years. In year 2017 the investment of PEL is Rs. 31 million only.

9
1.9 Product Line:

PEL includes two divisions: each offering an extensive variety of product & services:

Appliance Division

i) Refrigerators
ii) Deep Freezers
iii) Air Conditioners
iv) Water Dispensers
v) Microwave Ovens
vi) Washing Machines

Power Division

i) Switch Gears
ii) Grid Stations
iii) Energy Meters
iv) Power Transformers
v) Distribution Transformers (Pad & Poll mounted)
vi) EPC (Electrification Procurement & Construction)

10
 Chapter No. 02

Structure & Functions of PEL Finance Department

2.1 Structure of PEL Finance

PEL finance department consist of four major section which includes Inventory & Budgeting,
Treasury, Corporate Finance and A/C Receivables. Receivable Section have three major functions
A/C Receivables (collection), Planning (Expense Budgeting) and Working capital (FAPC).
Treasury deal with the cash management, reconciliation of accounts and transfer of funds.
Corporate finance works for arrangement of funds/loans for company’s operations, evaluation of
markup and deal with banks issues. The role of Inventory section is to make sure the availability
of inventory, release of pledge stock, leasing, joint inspection of stock and bank guarantees etc.

2.2 Divisional Layout of Finance Activities in Finance Department:

Figure 2.1 Layout and Activities of PEL Finance Department

11
2.2.1 Inventory & Budgeting:

Inventory is backbone for manufacturing organizations. PEL uses 70% imported material, it takes
almost three months to reach the material at PEL godown that’s why the role of inventory is very
important for PEL operations. Inventory section receive material request from production line and
then request corporate finance section to make sure the availability of L.C (Letter of Credit) or
bank guarantee, on the other side import department makes all the arrangements for import of
inventory such as documentation and contacting importers. The duty and functions of the
Inventory & budget section are as follows:

• Inventory control
• PTR pledge stock
• NBP pledge issues
• Bank joint inception
• Maintenance of stock
• Book keeping of inventories
• Daily prepare material updates
• Keep record of the pledge inventory
• Make sure the availability of material to production lines
• Release of material pledge under FIM (Finance against Imported Material)

2.2.2 Corporate Finance:

Corporate finance performs the following duties:

• Deal with bank issue

• Preparation of Delivery Order
• Import L.C, Advance payments
• Arrangement of loans/Borrowing
• Preparation of BBFS (Borrowers’ basic fact sheet)
• Evaluation of markup, JPP, running charge and charge on current & fixed assets.

12
2.2.3 Treasury:

The major responsibility of treasury is cash management and transfer of funds. Treasury perform
the following functions:

• Funds Transfer
• Cash management
• Assortment of funds
• Reconciliation of Accounts
• Payment of Advances or Facilities.
• RTGS (Real Time Gross Settlement)
• Payment of Government Duties (Sales tax, Customs, Excise Duty etc.)

2.2.4 Receivable:

A/C Receivable, which is one of very important section in PEL Finance Department. PD
Receivable Section have three major functions:

• PD A/C Receivables (Collection Plans)

• PD Planning (Expense Budgeting)
• Working capital (FAPC)
• Facilitate the WAPDA Marketing
• Prepare markup acquired for PD orders.
• EPC (Electrification Procurement construction)

2.3 Role of the CFO:

A chief financial officer (CFO) is the senior decision maker for managing the cash related exercises
of an organization. PEL incurred loss of Rs.1 billion in year 2011 but in year 2014 it secure profit
of Rs.2.24 billion because of the continue struggle of its CFO Syed Manzar Hassan. While talking
to press reporter, he said “Cut in interest rate with improvement in Pakistan’s economic outlook
also helped clamp down financial charges, “he said. “Rupee remained relatively stable, which
also worked in our favour.” The CFO and other financial managers of PEL had proven the
importance of their role in the company.

13
 Chapter No. 03

Financial Decision Making and Use of Electronic Data

3.1 Different Types of Software Being Used by PEL:

• Oracle E-Business Suite (EBS):

The main features of EBS are as follows:

• Services management
• Financial Management
• Advanced Procurement
• Value Chain Arrangement
• Supply Chain Management
• Value Chain Implementation
• Customer Affiliation Management
• Cheque Management System (CMS):
It has a well-defined mechanism; First enter the cheque details i.e. cheque number in CMS,
which generate the payment voucher & then attach the cheque with payment voucher and
send to bank for further necessary actions.
• Microsoft Office:
Word, Excel & Power Point.

3.2 Reports for PEL Management:

Accounts and Finance departments of PEL prepare following reports for the management:

Budget report:

Budget report is an inside report prepare by Mr. Farhan (Finance Executive of PEL) for
management to assess how close budgeted projection to the actual performance.

Balance sheet:

Balance sheet is an external document, tells the financial position of the business i.e. Assets,
Liabilities and Equity.

14
Production report:

This is a critical report in manufacturing companies. In PEL, production managers prepare

production report by using manufacturing production software and regularly send to the concerned
heads of departments.

Profit & loss Report:

Profit & loss report tells about whether business is generating profit or loss. PEL’s last year Net
Profit was Rs. 3,308 Million.

3.3 Sources of funds:

Below listed are the funding sources of PEL:

• Borrowing
• Share Capital
• Reserves

Table 3.1 Sources of Funds

Year 2017 2016 2015 2014 2013

Borrowings 9,254 6,770 6,646 5,766 5382

Share 5,426 5,426 4,431 4,431 3,131

Capital
Reserves 4,280 4,280 1,294 1,294 530

3.4 Generation of funds:

PEL generate its funds from the following resources:

• Equity
• Short term loans
• Long term loans
• Lease finance
• Cash finance

15
 Table 3.2 Generation of Funds

Year 2017 2016 2015 2014 2013

Equity 22,727 20,840 13,616 11,026 6,545
Short Term 7,727 4,982 4,669 4,243 4,960
Loans
Long Term 4,048 4,604 6,127 7,344 5,728
Loans
Lease 22 46 61 75 31
finance

3.5 Mobilization of funds:

Corporate organizations mobilize their funds in order to expand the profit and accomplish their
fiscal goals. PEL mobilize its funds in the following activities: I) Liquid Funds. II) Fixed
Resources.

Table 3.3 Mobilization of Funds

Year 2017 2016 2015 2014 2013

Cash & bank 484 552 578 340 278
Investments 31 49 95 86 23
Fixed Assets 17,046 16,442 15,510 14,467 14,818
Admin Expense 1,119 884 758 690 643

16
 Chapter No 04

Financial Analysis of Pak Elektron Limited

4.1 Five Year Balance Sheet 2013-2017:

The latest five-year balance sheet of Pak Elektron Limited from year 2013 to 2017 as follows:

Table 4.1 Five Year Balance Sheet

(Rs. In Million)

Particulars 2017 2016 2015 2014 2013

Assets

Property, Plant and Equipment 17,406 16,442 15,510 14,467 14,818

Intangible Assets 316 324 338 344 349

Long term Assets 1,178 1,301 871 257 128

Total Non-Current Assets 18,899 18,068 16,719 15,068 15,295

Cash and cash equivalents 484 552 578 340 278

other Current Assets 24,533 21,707 18,853 17,119 11,570

Total Current Assets 25,017 22,259 19,431 17,459 11,848

Total Assets 43,916 40,327 36,150 32,527 27,143

Equity & Liabilities

Shareholder's Equity 27,001 25,511 19,996 15,579 11,158

Long term debt 4,048 4,604 6,127 7,344 5,728

Deferred Liabilities/Income 2,452 2,367 2,305 2,440 2,474

Current Liabilities 10,415 7,845 7,722 7,148 7,782

Total Equity and Liabilities 43,916 40,327 36,150 32,527 27,143

17
4.2 Five-year Income Statement 2013-17:

The five-year income statement of Pak Elektron Limited from year 2013 to 2017 as follows:

Table 4.2 Five Year Income Statement

(Rs In Million)
Particulars 2017 2016 2015 2014 2013

Revenue 42,347 34,124 29,323 24,126 18,856

Sales Tax and Discount (11,347) (7,290) (4,201) (3,608) (2,387)

Cost of Sales (21,884) (18,550) (17,688) (14,209) (12,414)

Gross Profit 9,116 8,284 7,434 6,309 4,055

Other Income 18 37 36 32 46

Operating Expenses (3,979) (2,706) (2,277) (1,893) (1,486)

Financial Cost (1,547) (1,497) (1,665) (1,893) (1,819)

Shares of Profit/(Loss) of
associate (5) 0 (13) (11) (21)

Profit before taxation 3,603 4,119 3,514 2,545 775

Taxation (295) (450) (634) (304) (169)

Profit After Tax 3,308 3,670 2,880 2,241 607

18
4.3 Ratio Analysis of Pak Elektron Limited:

The purpose of ratio analysis is to measure the operating and financial performance of any firm or
company such as efficiency, liquidity, productivity and soundness. The following ratios of PEL
calculated to evaluate its financial performance:

4.3.1. Gross Profit Ratio:

It’s a profitability ratio, use to measure the operational performance of the business. It shows
relationship between gross profit and net sales revenue

Table 4.3 Gross Profit Ratio

Particulars 2017 2016 2015 2014 2013

Gross profit 29.1% 30.87% 29.59% 30.75% 24.62%
ratio

Figure 4.1 Gross Profit Ratio

Gross Profit Ratio

35.00%

29.10% 30.87% 29.59% 30.75%

30.00%

24.62%
25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2017 2016 2015 2014 2013

Interpretation:

In 2013, gross profit of the company was 24.62%, in 2014 it was 30.75%, in 2015 it was 29.59%,
in 2016 it was 30.87% and in 2017 it was 29.10%. This shows that operational performance of the
company remained constant from year 2014-17.
19
4.3.2. Net Profit/loss to Sales:

This ratio measures the percentage of profit with respect to sales of the business.

Table 4.4 Net Profit/loss to Sales

Particulars 2017 2016 2015 2014 2013

Net 10.67% 13.68% 11.46% 10.92% 3.69%
Profit/loss to
sales

Figure 4.2 Net Profit/loss to Sales

Net Profit/loss to Sales

16.00%
13.68%
14.00%

12.00% 11.46% 10.92%

10.67%
10.00%

8.00%

6.00%
3.69%
4.00%

2.00%

0.00%
2017 2016 2015 2014 2013

Interpretation:

Net profit ratio of the company decreased from 13.68% in 2016 to 10.67% in 2017. This indicates
that profitability of the firm decreased in year 2017. In last five years, the lowest net profit ratio
was in year 2013.

20
4.3.3. Return on Equity:

ROE is a profitability ratio measure the performance of business for its investors/shareholders.

Table 4.5 Return on Equity

Particulars 2017 2016 2015 2014 2013

Return on 14.56% 17.61% 18.96% 20.33% 9.28%
equity

Figure 4.3 Return on Equity

Return on Equity
25.00%

18.96% 20.33% 20.33%

20.00% 17.61%
14.56%
15.00%

10.00%

5.00%

0.00%
2017 2016 2015 2014 2013

Interpretation:

Return on equity decreased from 17.61% in 2016 to 14.56% in 2017. This indicates that company
generated less profit for investor’s investments in year 2017.

21
4.3.4. Operating Leverage:

Operating leverage used to measure the changing in operating income with respect to percentage
change in sales.

Table 4.6 Operating Leverage

Particulars 2017 2016 2015 2014 2013

Operating (0.38) 0.46 0.90 2.54 (2.45)
leverage

Figure 4.4 Operating Leverage

Operating leverage
3.00 2.54
2.45
2.50

2.00

1.50
0.90
1.00
0.38 0.46
0.50

0.00
2017 2016 2015 2014 2013

Interpretation:

Operating leverage decreased from 0.38 times in 2016 to 0.46 times in 2017. It indicates that the
fixed and variable cost reduced in year 2017 and sales of PEL increases.

22
4.3.5. Return on Capital Employed:

It uses to measure for comparison of relative profitability taking into account of capital
employed.

Table 4.7 Return on Capital Employed

Particulars 2017 2016 2015 2014 2013

Return on 8.57% 10.54% 9.37% 8.79% 2.85%
capital
employed

Figure 4.5 Return on Capital Employed

Return on Capital Empoyed

12.00%
10.54%
10.00% 9.37%
8.57% 8.79%
8.00%

6.00%
3.69%
4.00%

2.00%

0.00%
2017 2016 2015 2014 2013

Interpretation:

Return on capital employed was 8.57% in 2017. In 2016, return on capital employed was
10.54%. It indicates that company performed better in year 2017.

23
4.3.6. Current Ratio:

Current ratio is used to measure the liquidity of the company, that how efficiently it fulfilling the
liquid requirement.

Table 4.8 Current Ratio

Particulars 2017 2016 2015 2014 2013

Current ratio 2.41 2.84 2.52 2.44 1.52

Figure 4.6 Current Ratio

Current Ratio
3.00 2.84
2.52
2.41 2.44
2.50

2.00
1.52
1.50

1.00

0.50

0.00
2017 2016 2015 2014 2013

Interpretation:

Current ratio measures the liquidity of the company, that how efficient it fulfilling its liquid
obligation. The current ratio of year 2017 was 2.41 times. It decreased in year 2017 after increasing
for 4 years (2013 to 2016). It indicates that company had enough liquid resources in 2017 to fulfill
its short-term obligations.

24
4.3.7. Quick/Acid Test Ratio:

Quick ratio is a type of liquid ratio use to see how a company can fulfill its current liabilities
with quick assets.
Table 4.9 Quick/Acid Test Ratio

Particulars 2017 2016 2015 2014 2013

Quick acid test 1.56 1.73 1.61 1.49 0.99
ratio (In time)

Figure 4.7 Quick/Acid Test Ratio

Quick/Acid test Ratio

2.00
1.73
1.80 1.56 1.61 1.49
1.60
1.40
1.20 0.99
1.00
0.80
0.60
0.40
0.20
0.00
2017 2016 2015 2014 2013

Interpretation:

Quick acid test ratio was 1.56 times in 2017, it decreased fm 1.73 times in 2016. Although quick
acid test ratio decreased but company had enough liquid assets to meet its immediate liabilities in
2017.

25
4.3.8. Cashflow from Operation to Sales:

This ratio measures the ability of the company to turn its sales into cash.

Table 4.10 Cashflow from Operations of Sales

Particulars 2017 2016 2015 2014 2013

Cash flow 0.05 0.07 0.07 0.05 0.04
from
operations to
sales

Figure 4.8 Cashflow from Operations of Sales

Cash Flow from operations to sales

0.08
0.07
0.07 0.07

0.06
0.05
0.05
0.05
0.04 0.04
0.03
0.02
0.01
0.00
2017 2016 2015 2014 2013

Interpretation:

Cashflows from operations to sales decreased in year 2017 to 0.05 times from 0.07 times in 2016.
The cash flows from operations to sales shows upward trend/growth from 0.02 times to 0.06 times
during the past 6 years.

26
4.3.9. Inventory Turnover Ratio:

Its an efficiency ratio used to see how efficiently a company managing its inventory

Table 4.11 Inventory Turnover Ratio

PARTICULARS 2017 2016 2015 2014 2013

Inventory 2.74 2.64 2.83 2.79 3.24
turnover ratio

Figure 4.9 Inventory Turnover Ratio

Inventory Turnover Ratio

3.50 3.24

3.00 2.74 2.83 2.79

2.64
2.50

2.00

1.50

1.00

0.50

0.00
2017 2016 2015 2014 2013

Interpretation:

Inventory turnover ratio increased to 2.74 times in 2017 from 2.64 times in 2016. This indicates
that company is effectively managing its inventory.

27
4.3.10. No. of days in Inventory:

It measures the number of days it will take a company to sale all of its inventory.

Table 4.12 No. of days in Inventory

PARTICULARS 2017 2016 2015 2014 2013

No. of days in 133 138 129 131 113
inventory

Figure 4.10 No. of days in Inventory

No. of days in inventory

160
138
140 133 129 131
113
120
100
80
60
40
20
0
2017 2016 2015 2014 2013

Interpretation:

No. of days in inventory decreased in 2017 to 133 days from 138 days in 2016. It indicates that
company effectively manages its inventory.

28
4.3.11. No. of days in Receivables:

It measures the period, in how many days account receivable will be realized.

Table 4.13 No. of days in Receivables

PARTICULARS 2017 2016 2015 2014 2013

No. of days in 83 86 92 95 108

receivables

Figure 4.11 No. of days in Receivables

No. of days in Receivables

120 108

86 92 95
100 83

80

60

40

20

0
2017 2016 2015 2014 2013

Interpretation:

No. of days in receivable has greatly improved in past 5 years from 108 days in 2013 to 83 days
in 2017. It indicates that company is effectively managing its account receivables.

29
4.3.12. No. of days in Payable:

It measures the period in how many days, company pay its outstanding accounts.

Table 4.14 No. of days in Payable

PARTICULARS 2017 2016 2015 2014 2013

No. of days in 13 15 16 21 35
payables

Figure 4.12 No. of days in Payables

No. of days in Payables

40
35
35
30
25 15 21
13 16
20
15
10
5
0
2017 2016 2015 2014 2013

Interpretation:

No. of days in payables has decreased in past 5 years from 35 days in 2013 to 13 days in 2017.
This indicates that there’s a trust deficit among local suppliers of company.

30
4.3.13. Total Assets Turnover:

Its an efficiency ratio calculates a company’s ability to generate sales from its resources.

Table 4.15 Total Assets Turnover

PARTICULARS 2017 2016 2015 2014 2013

Total assets 0.71 0.674 0.69 0.63 0.61
turnover

Figure 4.13 Total Assets Turnover

Total Asset Turnover

0.72 0.71
0.70 0.69
0.67
0.68
0.66
0.63
0.64
0.62 0.61

0.60
0.58
0.56
2017 2016 2015 2014 2013

Interpretation:

Total assets turnover was 0.71 times in 2017 and 0.674 times in 2016. It indicates that company
is efficiently availing its assets.

31
4.3.14. Operating Cycle:

Its an efficiency ratio, used to measure, the amount of time a company required for realization of
cash.
Table 4.16 Operating Cycle

PARTICULARS 2017 2016 2015 2014 2013

Operating cycle 203 209 206 206 186
(In days)

Figure 4.14 Operating Cycle

Operating Cycle
215
209
210 206 206
205 203
200
195
190
186
185
180
175
170
2017 2016 2015 2014 2013

Interpretation:

The opening cycle of company has decreased in 2017 to 203 days as compared to 209 days in
2016. But it has drastically increased as compared to operating cycle ration in 2013 (186 days).
This indicates that company although performed better in 2017 than 2016 but performance has
decreased compared to 2013.

32
4.3.15. Earnings Per Share:

Portion of company’s profit allocated for each outstanding share of common stock.

Table 4.17 Earnings Per Share

Particulars 2017 2016 2015 2014 2013

Earnings per 6.56 7.51 6.61 6.13 3.75
share

Figure 4.15 Earnings Per Share

Earning Per Share

8.00 7.51
7.00 6.56 6.61
6.13
6.00
5.00
4.00 3.75

3.00
2.00
1.00
0.00
2017 2016 2015 2014 2013

Interpretation:

Earnings per share has improved in 5 years from 3.75 PKR in 2013 to 6.56 PKR in 2017 but
earnings per share declined in 2017 as compared to 2016 (7.51 PKR). This indicates that
company’s performance has improved over the span of 5 years.

33
4.3.16. Price Earnings Ratio:

The price/earnings ratio is the ratio of a company's stock price to the company's earnings per
share.

Table 4.18 Price Earnings Ratio

Particulars 2017 2016 2015 2014 2013

Price earnings 7.25 9.45 8.78 6.68 5.33
ratio

Figure 4.16 Price Earnings Ratio

Price Earning Ratio

10.00 9.45
8.78
9.00
8.00 7.25
7.00 6.68
6.00 5.33

5.00
4.00
3.00
2.00
1.00
0.00
2017 2016 2015 2014 2013

Interpretation:

Price earnings ratio has increased from 5.53 times in 2013 to 7.25 times in 2017. This indicates
that value of company in stock market has improved in 5 years. But price earnings ratio decreased
in 2017 as compared to 2016 (9.45 times), which indicates that value of company deprecated in
2017 as compared to 2016.

34
4.3.17. Dividend to Yield Ratio:

It’s a financial ratio shows how much a company pay out in dividend each year relative to share
price.
Table 4.19 Dividend to Yield Ratio

Particulars 2017 2016 2015 2014 2013

Dividend 6.84% 4.21% 2.00% ------- --------
yield ratio

Figure 4.17 Dividend to Yield Ratio

Dividend to Yield Ratio

8.00%
6.84%
7.00%
6.00%
4.21%
5.00%
4.00% 2.00%
3.00% 0.00%
2.00% 0.00%
1.00%
0.00%
2017 2016 2015 2014 2013

Interpretation:

Dividend yield ratio has drastically boomed in past 5 years to 6.84% in 2017. In year 2013 and
2014, company was not in a situation to pay to shareholders.

35
4.3.18. Market Value Per Share:

Calculate or measure the current market share price of company’s stock

Table 4.20 Market Value Per Share

Particulars 2017 2016 2015 2014 2013

Market value 47.49 71.28 62.54 40.93 19.99
per share

Figure 4.18 Market Value Per Share

Market Price Per Share

80.00 71.28
70.00 62.54

60.00
47.49
50.00 40.93
40.00
30.00 19.99
20.00
10.00
0.00
2017 2016 2015 2014 2013

Interpretation:

Market value per share increased in past 5 years from 19.99 in 2013 to 47.49 in 2017. But there
has been a decline in market value per share in 2017 as compared to 2016 (71.28).

36
4.3.19. Financial Leverage Ratio:

This ratio measure, how much assets company hold relative to its equity

Table 4.21 Financial Leverage Ratio

Particulars 2017 2016 2015 2014 2013

Financial 0.59 0.55 0.94 1.19 1.70
leverage ratio

Figure 4.19 Gross Profit Ratio

Financial leverage Ratio

1.80 1.70
1.60
1.40
1.20 1.19
0.55 0.94
1.00 0.59
0.80
0.60
0.40
0.20
0.00
2017 2016 2015 2014 2013

Interpretation:

Financial leverage ratio decreased in past 5 years to 0.59 times in 2017 from 1.70 times in 2013.
It indicates that company is less dependent on borrowing now as compared to 2013.

37
4.3.20. Interest Cover Ratio:

Interest coverage ratio measure the ability of company to honor its repayment of debt

Table 4.22 Interest Cover Ratio

Particulars 2017 2016 2015 2014 2013

Interest cover 4.49 5.16 3.67 2.47 1.51
ratio

Figure 4.20 Interest Cover Ratio

Interest Cover Ratio

6.00
5.16
5.00
4.49
4.00 3.67
2.47
3.00

2.00 1.51

1.00

0.00
2017 2016 2015 2014 2013

Interpretation:

Interest cover ratio has increased in past 5 years from 1.51 times in 2013 to 4.49 times in 2017. It
indicates that company is now better able to pay its interests as compared to 2013.

38
4.4 Horizontal Analysis of Balance Sheet 2013-2017:

Five horizontal analysis of Balance Sheet of Pak Elektron Limited taking year 2013 as base:

Table 4.23 Horizontal Analysis of Balance Sheet

(Rupees in Million)

Particulars 2017 2016 2015 2014 2013

Assets
Property, Plant and Equipment 17.47% 10.96% 4.67% (2.37) % 100.00%
Intangible Assets (9.46) % (7.16) % (3.15) % (1.43) % 100.00%
Long term Assets 820.31% 916.41% 580.47% 100.78% 100.00%
Total Non-Current Assets 23.56% 18.13% 9.31% (1.48) % 100.00%
Cash and cash equivalents 74.10% 98.56% 107.91% 22.30% 100.00%
other Current Assets 112.04% 87.61% 62.95% 47.96% 100.00%
Total Current Assets 111.15% 87.87% 64.00% 47.36% 100.00%
Total Assets 61.79% 48.57% 33.18% 19.84% 100.00%
Equity & Liabilities
Shareholder's Equity 141.99% 128.63% 79.21% 39.62% 100.00%
Long term debt (29.33) % (19.62) % 6.97% 28.21% 100.00%
Deferred Liabilities/Income (0.89) % (4.32) % (6.83) % (1.37) % 100.00%
Current Liabilities 33.83% 0.81% (0.77) % (8.15) % 100.00%
Total Equity and Liabilities 61.79% 48.57% 33.18% 19.84% 100.00%

39
4.5 Horizontal Analysis of Income Statement 2013-2017:

Last five years horizontal analysis of Income Statement as follows:

Table 4.24 Horizontal Analysis of Income Statement

(Rupees in Million)

Particulars 2017 2016 2015 2014 2013

Revenue 124.58% 80.97% 55.51% 27.95% 100.00%

Sales Tax and Discount 375.37% 205.40% 75.99% 51.15% 100.00%

Cost of Sales 76.28% 49.43% 42.48% 14.46% 100.00%

Gross Profit 124.81% 104.29% 83.33% 55.59% 100.00%

Other Income (60.87) % (9.57) % (21.74) % (30.43) % 100.00%

Operating Expenses 167.77% 82.10% 53.23% 27.39% 100.00%

Financial Cost (14.95) % (17.70) % (8.47) % 4.07% 100.00%

Shares of Profit/(Loss) of (76.19) % (100.00) % (38.10) % (47.62) % 100.00%

Profit before taxation 364.90% 431.48% 353.42% 228.39% 100.00%

Taxation 74.56% 166.27% 275.15% 79.88% 100.00%

Profit After Tax 444.98% 504.61% 374.46% 269.19% 100.00%

40
4.6 Vertical Analysis of Balance Sheet 2013-17:

Five years Vertical analysis of Balance Sheet is as follows:

Table 4.25 Vertical Analysis of Balance Sheet

(Rupees in Million)
Particulars 2017 2016 2015 2014 2013

Assets

Property, Plant and Equipment 39.63% 40.77% 42.90% 44.48% 54.59%

Intangible Assets 0.72% 0.80% 0.93% 1.06% 1.29%

Long term Assets 2.68% 3.23% 2.41% 0.79% 0.47%

Total Non-Current Assets 43.03% 44.80% 46.25% 46.32% 56.35%

Cash and cash equivalents 1.10% 1.37% 1.60% 1.05% 1.02%

other Current Assets 55.86% 53.83% 52.15% 52.63% 42.63%

Total Current Assets 56.97% 55.20% 53.75% 53.68% 43.65%

Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%

Equity & Liabilities

Shareholder's Equity 61.48% 63.26% 55.31% 47.90% 41.11%

Long term debt 9.22% 11.42% 16.95% 22.58% 21.10%

Deferred Liabilities/Income 5.58% 5.87% 6.38% 7.50% 9.11%

Current Liabilities 23.72% 19.45% 21.36% 21.98% 28.67%

Total Equity and Liabilities 100.00% 100.00% 100.00% 100.00% 100.00%

41
4.7 Vertical Analysis of Income Statement:

Five years vertical analysis of income statement is as follows:

Table 4.26 Vertical Analysis of Income Statement

(Rupees in Million)

Particulars 2017 2016 2015 2014 2013

Revenue 100.00% 100.00% 100.00% 100.00% 100.00%

Sales Tax and Discount (26.80) % (21.36) % (14.33) % (14.95) % (12.66) %

Cost of Sales (51.68) % (54.36) % (60.32) % (58.89) % (65.84) %

Gross Profit 21.53% 24.28% 25.35% 26.15% 21.51%

Other Income 0.04% 0.11% 0.12% 0.13% 0.24%

Operating Expenses (9.40) % (7.93) % (7.77) % (7.85) % (7.88) %

Financial Cost (3.65) % (4.39) % (5.68) % (7.85) % (9.65) %

Shares of Profit/(Loss) of (0.01) % (0.00) % (0.04) % (0.05) % (0.11) %

Profit before taxation 8.51% 12.07% 11.98% 10.55% 4.11%

Taxation (0.70) % (1.32) % (2.16) % (1.26) % (0.90) %

Profit After Tax 7.81% 10.75% 9.82% 9.29% 3.22%

42
 Chapter No. 05

SWOT Analysis of Pak Elektron Limited

5.1 Strengths:

i) Strong supplier system

ii) Methodological Alliance with globally reputed association.
iii) Monopoly in Power sector of Pakistan, PEL is the sole manufacturer of transformers,
Electric Meters and Switch Gears.

5.2 Weaknesses:

i) Less utilization of capacity.

ii) The Company has high financial leverage.
iii) Absence of effective digital marketing such as commercials on TV.

5.3 Threats:

i) Working capital issues

ii) Deflation of Pak Rupee.
iii) Change in monitoring frame work
iv) Political unrest or civil commotions in the country
v) Dependence on WAPDA/DISCOs Financial health

5.4 Opportunities:

i) Upward growth in the Appliances market.

ii) Local industry preferential protection in international tenders.
iii) Government has plans to upgrade existing electricity infrastructure resulting into more
orders for Power Division.

43
5.5 Comparison of PEL with its Competitors:

PEL has following competitors in the local appliance market:

• Haier
• Orient
• Waves
• Dawlance

Market share of PEL in Home Appliances market

Figure 5.1 Market Share in terms of Sales

40% 38%

35%
30%
30%

25%

20%
14%
15% 10%

5%
10%

5%

0%
PEL Dawlance Oreint Waves Haeir
Market Share 30% 38% 14% 5% 10%
Market Share

Interpretation:

Dawlance is leading the market with 38% market share. PEL is no.2 in appliances market with
30% market share.

44
 Chapter No. 06

Learning as Student Intern at PEL

6.1 Duties:

I did my internship at PEL head office in finance department. I had following duties to perform
there:

Week 1 to 3:

First 3 weeks I worked at PD Receivable and Treasury Section of finance department and I learned
and performed following duties;

• RTGS request process

• Reconciliation of accounts
• Journal entries in ORACLE
• Preparation of payment vouchers
• Process of sales in power division
• Collection plans of power divisions
• Entries in cheque management system
• Bidding process of PEL WAPDA marketing
• Contacting different banks for bank balance updates

Week 4 to 6:

For week 4 to 6 I learned and performed following duties in Corporate Finance and Material
Management Section of PEL Finance;

• Preparation of BBFS
• Calculation of markup
• Release of pledge stock
• Imbursement of government duties
• Booking keeping of inventory in ORACLE

45
6.2 Accomplishments:

Accomplishments refer “what did you achieve after performing some tasks, duties and
responsibilities. While working at PEL I accomplished different skills such as multi-tasking,
completing tasks within given time, working in competitive and diverse corporate environment. It
also enhanced my self-confidence and social skills.

6.3 Problems Encountered:

I worked in a pleasant environment and didn’t encounter much problems; I just had limited access
to the software.

6.4 Objectives of Internship:

Some major purposes of internship of my internship are as follows:

• To enhance my knowledge about finance.
• To be consistent in life and be punctual.
• To complete the requirement of degree program.
• To learn how to work in a corporate environment.

46
 Chapter No. 07

Conclusion & Recommendations

7.1 Conclusion

I was fortunate to work in PEL because it is a rapidly growing company, it has exceled a lot in past
few years; Equity of the company grown almost 6 times over the past 6 years, current liabilities
increased due to increase in business volume of the company, current assets recorded an increase
of rupees 14,001 million since 2012 and sales revenue increased 109% over the last 6 years. PEL
is also involved in social welfare work such as donation of equipment to different government
hospitals of Lahore, youth financial literacy program and donation of electrical equipment to
Fountain House, Farooqabad.

7.2 Suggestion and Recommendations:

PEL should expand its EPC division because it has great potential due to boom of housing sector
in Pakistan. PEL needs to facilitate employees working at production line. They work in very
adverse environment at low wages. PEL should also take more safety measure for employees
working at production line. This will motivate employees and enhance production. PEL should
improve their commercial marketing to enhance their appliances division. PEL should also work
to increase its exports to lower trade deficit. PEL should further diversify its product range in
power division to mitigate the requirement of power sector.

47
Bibliography:
(n.d.). Retrieved from www.tribune.com.pk: https://tribune.com.pk/story/950922/pak-
elektron-a-story-of-recovery-after-years-of-frozen-growth/
Pak Elektron limited. (2018, september). Retrieved from https://en.wikipedia.org/:
https://en.wikipedia.org/wiki/PEL_(Pakistan)
PAK ELEKTRON LIMITED. (2018, september). Retrieved from www.pel.com.pk:
http://www.pel.com.pk
PEL. (n.d.). Retrieved from en.wikipedia.org: https://en.wikipedia.org/wiki/PEL_(Pakistan)

48