Sunrays Textile Mills Ltd

Industry Overview:
Pakistan's textile industry is based on domestically grown cotton. Imports meet the
shortfall of domestically grown medium staple cotton and the requirements for
long staple and extra-long staple cotton. Exports of all textiles in PFY-97 totaled a
value of USD 5.4 billion. The major buyer of textile clothing and accessories was
the United States, which purchased USD 309.2 million of goods.

Pakistan's spinning and weaving industry is in a crisis, largely owing to higher

prices for domestically produced cotton, financial mismanagement and the
subsequent difficulty in obtaining loans for new, technically-advanced machinery.
Loans from financial institutions are unavailable to the spinning industry, and
several weaving units are working under contract for lack of working capital. The
East Asian crisis and rising electricity charges have further exacerbated the
situation.

Pakistan’s Position in Global Yarn Market

Pakistan held 4% share of the total global yarn exports and ranked 7th in 1997
among the yarn exporters. In the Asian export market, Pakistan had 13% share and
ranked 4th. Pakistan’s exports have decreased in the period 1996-97 from $1.67
billion to $1.45 billion. Pakistan used to hold 2nd position in Asian Yarn export
market but its position declined from 2nd to 4th in 1997. The performance looks
even more unsatisfactory in view of the fact that the total export market for yarn is
growing. This means that Pakistan is losing market share in yarn export market.
During the period 2016-2019, Pakistan’s market share dropped from 6.2% to 5.2%
in the global yarn exports. As a percentage of total Asian exports, Pakistan’s
market share dropped from 17.1% to 13.1%.

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Sunrays Textile Mills Ltd

SUNRAYS TEXTILE MILLS LIMITED

Sunrays Textile Mills Limited was established in 1987 as a public limited company
and is listed on Karachi Stock Exchange. The company operates a spinning unit of
192000 spindles in Muzaffargarh (40 KM from Multan), which started commercial
production in 1991.
Sunrays is part of family group of companies, Indus Group of companies, that is
the leading textile group in Pakistan, operating in the sector of yarn manufacturing
and cotton ginning. Indus group has been engaged in the textile industry since
1955. The current capacity of group includes 30,000 tons of cotton yarn and over
100,000 (16,000 tons) cotton bales annually. The group is involved in the supply of
yarn to the national and international markets for the weaving and knitting
industry. Other companies of Indus group are Indus dyeing and manufacturing
company Ltd, Yousuf Textile Mills Ltd, cotton ginning and seed crushing
factories.
Indus Dyeing and Manufacturing Company Ltd, was established in 1957. The
company has spinning factory at Hyderabad of 37,000 spindles
(Mill 1, Mill 2, and Mill 3) and another unit in Muzaffargarh of 15360 spindles. It
is public limited company and is listed on Karachi stock exchange. Over the years,
it has shown an outstanding export performance for which it has earned trophies
for highest export in cotton yarn from the FPCCI. In addition to manufacturing and
exporting cotton yarn it also exports raw cotton, mainly to Japan.
Yousuf Textile Mills Ltd, a public limited company listed in Karachi Stock
Exchange was set up in 1966. It consists of 15,696 spindles located in Karachi. Its
production facilities have been modernized over the years and latest automatic
cone winding machines of Murata; drawing machines of Toyoda and Toyoda ring
frames have been installed.
The group has been operating Cotton Ginning and Seed Crushing Factories, since
1960. These are located near Multan in Shujabad, Gellawala and Bahadurpur.
Annual production of these factories is over 100,000 cotton bales (16,000 tons).

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Vision:

To become a leading exporter of best quality yarn.

Mission Statement:

We will achieve sustainable competitive advantage by consistently

producing quality yarn that will satisfy both our customers and in return,
our investors and employees.

Goals

 To produce best quality yarn.

 To serve our customers, employees, suppliers, shareholders and the

society as a whole.

 To become profitable and groom, through providing high quality

product and services.

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Objectives

 To increase our production capacity.

 To reduce production cost

 To increase export of yarn.

 To acquire good quality raw material.

 To have good human resource.

 To build good relationships with all stakeholders.

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Departments at Sunrays Textile Mills Ltd

Following departments are available at Sunrays Textile Mills Ltd:

1. Production Department
2. Sales Department
3. Purchase Department
4. MIS Department
5. Administration Department
6. Finance/Accounting Department
7. Human Resources Department

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ACCOUNTS / Finance DEPARTMENT

Accounting is the art or science of interpreting, measuring, and communicating the

results of economic activities whether you are paying your phone bill, balancing
your checkbook, preparing your income tax return or managing an international
corporation, you are working with accounting. Accounts Manager makes the
important financial decisions with consultation of Director and Chief executive of
company.
Record keeping for all departments like import department, Export department,
Purchase and sale department, are maintained here. Accountant is very much busy
person who gives instructions to six members of finance department and checks
their work time-to-time .His ten-year experience has made the work easier for him.
All types of tax rates, recent changes in tax policies, different codes, companies’
names are on his fingertips.
 Accounting and Finance department also designs the accounting policies.
 All the work in this department is being take place on accrual basis.
 Profit and loss accounts and balance sheet are prepared at the end of year.
 The financial year ends on June 30 of each year.
 The financial statements are presented to shareholders.

Without accounts department there is no possibility of doing business even sight

weaknesses on the part of accounts department can badly affect the performance of
whole organization.

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Functions of the Department

Basic function of accounting department is recording the business transactions on
vouchers. This is made for internal record keeping.
In order to see accounts in condense form ledger is used. From daybook all the
entries are posted in ledger. Ledger represents DR or CR balance of each party. So
from ledger we can see amount that is to be paid to a party or the amount that is to
be received and the balance at the end of the month.
After this all the DR balances and CR balances are automatically posted in trial
balance through Cranium Software. The trial balance must be equal at both sides.
Otherwise there is any error in recording the transactions. Now trial balance
becomes the source of profit and loss and balance sheet.

Accounting System
Accounting System at here is centralized and on accrual basis. Cranium Software
is used for recording Accounting Transactions. All accounts are maintained in
Multan head office. The process of accounting system starts from the preparation
of voucher. The following are different types of vouchers prepared at Sunrays
Textile Mills:
 Journal Voucher
 Bank Voucher
 Payment Voucher
 Credit Voucher

Journal Voucher (JV)

As accounting system is on accrual basis, so accounting entries are passed on
journal voucher at first step. This is also known adjustment voucher. This is
prepared for adjusting entry. Vouchers are prepared after every transaction.
Accounts Manager and Director verify the voucher respectively. If they have any
question they can ask relevant person if there is no enquiry then they will put their
signatures on voucher. Now it is time to record these vouchers in books of
accounts.

Bank Voucher (BV)

Bank voucher is used when any transaction is made with bank. Amount may be
drawn from bank and can be deposited in bank. You can receive DR advice or CR
advice from bank
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DR Advice
When issued by bank, it means bank has deducted some amount from your account
or when has been made through your account

CR Advice
When issued by bank to you, it means some amount has been added in your
account .It normally takes place when some foreign remittances has been received
by bank in your account. This is usually sent by your customer in foreign country
to which exports has been made.

Payment Voucher
This voucher is prepared at the time of making payments to any party. Party name
is debited with the amount to which payment has been made. Payment vouchers
are used for the payment up to Rs.5000. Payments more than this are made through
bank

Credit Voucher
As name of voucher represents, this voucher is prepared when some amount is
received from any party. In this case party name is credited by the amount that has
been received.

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My Leanings at STML
I spent most of my time in accounting department. Here is a brief summary of my
observations during internship period.
Week 1st: Division of Accounts Department:

The accounting department is mainly divided into following three sections:

1. Stores section
2. Salaries and Wages Section
3. General Accounting

Week 2nd & 3rd: Types of report

Reports and Records Kept and provided to Department

For maintain records and payment purposes the following reports are prepared and
sent to Accounts department:

Reporting done for Warping Department

(1). "Daily Yarn Performance on Warping” Report

This is very important report. The success of the whole Warping process can be
judged from this report because this report contains very important information.
With the help of this report, one can calculate the Amount of Yam consumed for
the process. Weight of Beams produced and the Amount of Yarn Wasted during
the process etc.

(2). Stock Report (Beam Stock)

The Stock Report gives information as;
 No. of Beams Produced.
 Quality Code of the Beams and
 Length of the Beams.

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Reporting at the Main Office of the Mills

At the Main Office of the Mills, "Stock Report of Sized Beams" is prepared.
Along with this a "Material Statement" is made which gives all the detail about
the chemicals used in the Sizing process.
Week 4th: Inspection of documents & reports:
Documentation for Spinning

(1). Cotton Stock Report

This report is prepared about the daily stock of cotton. This report contains
information as;
 Daily Incoming Cotton
 Cotton in Opening Balance
 Previous Outgoing Cotton
 Daily Outgoing Cotton and
 Remaining Stock of Cotton

(2). Daily Cotton Issuance Report

This report is prepared when the bales are issued to the Blow Room. This report
contains information as;
 Date of Issuance of Cotton.
 No. of Bales Issued.
Station (Ginning factory from which the bales are transferred or purchased).
 Purchase Weight of Bales.
 Mills Weight of Bales.
 Shortage or Excess in Weight of the Bales (due to the moisture).

Week 5, 6 and 7: Supporting Export at SUNRAYS

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There are various steps involved in export. These are explained below.

(1). Receipt and Checking of Letter Of Credit (Lc)

At Sunrays Textile Mills, the export procedure begins by the Sales Contract. After
the contract, the buyer opens Letter Of Credit (explained below). The concern
person of SUNRAYS studies the Letter Of Credit on receipt and makes sure that
its particulars are according to the sales contract. If there is any discrepancy
between the sales contract and LC, it is removed.
Letter of Credit
After the contract is developed, the buyer opens Letter of Credit in his bank
(foreign bank) and that LC is sent to SUNRAYS's bank by that foreign bank. Then
SUNRAYS's bank forwards the LC to it.
It is a document that is cashed when exporter hands over the negotiable documents
(explained later) to its bank. In an LC the buyer quotes following important
explanation;
 Product Specification.
 Amount of the transaction in US dollars.
 Shipment detail
 Packing detail.
 Bank detail (that opens LC)

Bill Of Lading

When the goods are cleared from the custom and reach shipment, then the
shipping company issues Bill of Lading to the exporter. Bill of Lading has
following important information;

 Shipper and Consignee's particulars.

 Place of Receipt, Loading and place of Delivery.
 Forwarding Agent.
 Country of Origin of Goods.
 Port of Discharge.
 Description of Goods and Packages.
 Container Numbers.
 Weight of Goods and
 Total Freight (in US $ and local currency).
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Financial Analysis
Sunrays Textile Mills Ltd.
Balance Sheet
As on June. 30 (2019)

Items 2019 2018

Current Assets
Stores, Spares and Loose Tools 95,179,573 33,237,233
Stock in Trade 989,776,408 781,110,255
Trade Debts 416,257,810 366,148,685
Advance Deposits Prepaid & Other Receivable 348,311,909 179,509,904
Cash & Bank Balance 13,334,722 44,073,543
Fixed Assets
Property, plant and equipment 1,560,871,901 1,332,407,578
Long term Security & Deposits 11,802,332 9,776,419
Total 3,435,534,645 2,746,263,653

Items 2019 2018

Current Liabilities
Trade &Other Payable 410,029,800 303,122,887
Markup accrued on secured loans 30,091,682 22,944,867
Short term borrowings 1,225,513,404 822,806,614
Current Portion of Long term 95,665,313 89,600,000
Liabilities
Current maturity of Liabilities against 30,187,935 25,027,388
assets subject to Finance lease
Non-current Liabilities
Long term loans 325,141,017 357,821,659
Liabilities against Assets Subject to
Finance Lease 60,483,487 63,799,405
Defferd Liabilities 112,335 203,250
Shareholder’s Equity
Paid Up Share Capital 450,000,000 450,000,000
Share Deposit money 178,605,410 178,605,410
Unappropriated Profit 339,080,782 135,465,624
Total 3,435,534,645 2,746,263,653

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Sunrays Textile Mills Ltd.

Profit & Loss
As on June. 30 (2019)

Item 2019 2018

Sales 2,505,047,883 1,506,834,091

Less Cost of Goods Sold 1,891,361,595 1,158,561,318

Gross Profit 613,686,288 348,272,773

Less Distribution & Selling Costs 114,090,556 78,754,793

Administrative Expenses 74,680,884 53,796,277

Other Operating Expenses 15,284,001 5,224,110

Add Other Operating Income 259,428 428,359

Profit From Operation 409,890,275 210,925,952

Less Finance Cost 181,902,364 116,661,747

Profit Before Taxation 227,987,911 94,264,205

Less Tax 30,615,842 13,475,103

Profit After Tax 197,372,069 80,789,102

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LIQUIDITY RATIOS

This analysis is also called analysis for short-term solvency or short-term

financial position. The short-term creditors of a company like suppliers of goods
on credit and commercial banks providing short-term loans are primarily
interested in knowing the company’s ability to meet its current or short-term
obligations as and when these become due. The short-term obligations of a
Company can be met only when there are sufficient liquid assets.

 CURRENT RATIO:
Current ratio may be defined as the relationship between current asset and current
liabilities. It is a measure of general liquidity and is most widely used to make the
analysis for a short-term financial position or liquidity of a firm. It is calculated
by dividing the total of the current assets by total of the current liabilities.

CURRENT RATIO: (Current Assets/Current liabilities)

YEAR 2019 1.04

YEAR 2018 1.11
Company ratio has improved in fiscal year 2019 and assets are .25 times greater
than current liability so performance is well
.
 QUICK RATIO:
This ratio is also termed as “acid test ratio” or Quick ratio. It is the ratio of liquid
assets to current liabilities. The true ‘liquidity’ refers to the ability of a firm to
pay its short-term obligations as and when they become due.

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Liquid assets = (current assets- inventory)/Current liabilities

YEAR 2019 2018

0.49 0.49
Liquidity is satisfactory in both year and company has ability to meet its short-
term obligation in a nice way

“ACTIVITY ANALYSIS”
Activity ratios are used to measure the speed with which different accounts are
converted into cash or sales.

 INVENTORY TURNOVER RATIO:

Inventory turnover ratio measures the velocity of conversion of stock into sales.
Usually, a high inventory turnover/stock velocity indicates efficient management
of inventory because more frequently the stocks are sold; the lesser amount of
money is required to finance the inventory. A low inventory turnover ratio
indicates an inefficient management of inventory.
YEAR 2019 2018
Ratio 24.45 21.25
Inventory turnover of the Company is constant. The stock turnover of the
Company is slow. There is high investment in the stock.

 AVERAGE COLLECTION PERIOD:

The Debtors/Receivables Turnover Ratio, when calculated in terms of days
known as Average Collection Period or Debtors Collection Period Ratio. The
Ratio measures the quality
Of debtors. A short collection period implies prompt payment by debtors. It
reduces the chances of bad debts. Similarly a longer collection period implies too
liberal and inefficient credit collection performance.

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ACP = Account receivables /average sale per day

YEAR 2019 2018
59.8 Days 87.47 Days
The debtors of the Company are turning into cash promptly. These ratios show
that the debtor’s management of the Company is efficient.

 AVERAGE PAYMENT PERIOD:

This ratio is similar to Debtor collection period. This ratio gives the average
credit period enjoyed from the creditors.

Average payment period = Account payable /Average purchase per day

YEAR 2019 2018
17.80 Days 24.97 Days

The average payment period ratio represents the number of days taken by the firm
to pay its creditors. A higher creditors turnover ratio or a lower credit period ratio
signifies that the creditors being paid promptly, thus enhancing the
creditworthiness of the Company.

“LONG TERM SOLVENCY ANALYSIS”

Liquidity Ratios, which indicate the short-term financial position of the business,
have been already explained. Now the long-term solvency ratios are dealt with.
The term solvency refers to the ability of concern to meet its long-term
obligations.

 DEBT EQUITY RATIO:

Debt Equity Ration indicates the relationship between the external equities or
outsiders funds and the internal equities or shareholders’ funds. It is determined
to ascertain soundness of the long-term financial policies of the company.

DEBT EQUITY RATIO = LONG TERM DEBTS / SHAREHOLDERS

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EQUITY

Year 2019 2018

0.39 0.55
To assess the extent to which the firm is using borrowed money, we may use debt
Equity ratio.
Long-term financial position of the company is satisfactory.
In 2019 shareholders are providing .39 of the total long-term funds of the
Company. Creditors would generally like this ratio to be low. The lower the
ratio, the higher the level of firm financing by the shareholders and larger is the
creditor’s margin of protection. Debt Equity ratio will vary according to the
nature of the business. But generally it must be 1:1.

 TOTAL DEBT ASSET RATIO: (TOTAL DEBT / TOTAL ASSETS)

This ratio shows the %age of total assets financed by the borrowed money.

YEAR 2019 2001

63.37% 61.37%

This ratio shows the outsiders financing in the total assets of the company is more
than 50%. The higher this ratio, the more financial leverage a firm has. This ratio
serves a similar purpose to equity ratio.

“PROFITIBILTY RATIOES”
Profitability ratios allow the analyst to evaluate the firms earning with respect to
the given level of sales. Without profit a firm cannot attract the outside capital

Following profitability ratios are calculated to analyze the profitability of

company

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Sunrays Textile Mills Ltd

1- Gross profit margin = Gross profit/sales*100

YEAR 2019 2018

Ratio 24.40 % 23.11%

2 -Operating profit margin = operating profit/sales*100

YEAR 2019 2018

Ratio 9.09% 6.23 %

3- Net profit ratio = net profit/sales*100

YEAR 2019 2018

Ratio 7.88% 5.36 %
4- Earnings Per Share = Net profit/ Outstanding Common shares

Year 2019 2018

43.86 17.95
So the company performance is satisfactory in term of profit.

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SWOT ANALYSIS
STRENGTHS

Goodwill:
LUCUS are Sunrays Textile Mills’ Brands that are known as quality yarn in
national and international markets. Company has good image and reputation in
market. The company is exporting its yarn to the developed countries like USA
and Japan, which are very quality conscious. With this fact, we can well imagine
its repute.

Qualified Human Resource:

Sunrays Textile Mill has professional management, skilled technical staff and
trained labor force. Management of Indus group includes Mian Mohammad
Ahmed, who started his textile business 40 years ago. He is responsible for
strategic corporate planning. Shazad Ahmad MBA (Marketing) from USA. Mr.
Naveed Ahmed Graduate from USA in Accounting. Irfan Ahmad, B.Sc Textile
from USA. Riaz Ahmad , Kashif Riaz has completed his MBA from Bahauddin
Zakariya University. The other management staff includes 24 personnel including
managers, assistant managers and engineers in different sections of organization. A
recent figure of total employees in this organization is approximately 700 including
management staff and labor force.
Backward integration:
One of the great strength of Sunrays Textile Mill is that it has its own suppliers of
ginned cotton. It owns several ginning factory. Few advantages are reducing in
transaction cost, on time delivery of raw material etc.
Technology:
The company invested Rs. 20 million this year and replaced the old 1990 model
technology with the state of art latest technology (2000 Reiter Swiss Model). This
will improve the productivity and quality of yarn and company will become able to
charge better prices of yarn and compete in international market.

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WEAKNESSES

High manufacturing cost:

The main weakness is that the cost of production is very high. E.g. in the recent
year 2001, cost of goods sold was 82 % of the revenue. The main reason for this is
the high price of cotton and electricity charges. It their weakness because, in other
similar mills, gas is used instead of electricity. And it is considerably cheap as
compared to electricity.

OPPORTUNITIES

Demand:
Yarn and textile has a great demand all over the world, so whatever is produced, is
sold. It is a major opportunity for the company to expand its operations and
increase the market share.

Government policies:

The government’s policies are favorable to textile and related industries. E. g. there
is no sales tax on exports and there are rebates on the import of raw material like
cotton. The machineries imported under Balancing, Modernizing and Replacement
(BMR) are exempted from duty.

Cheap labor:

Pakistan has one of the cheapest labor countries in the world. The local textile
industry is labor intensive. A textile unit of average size employs around 700
employees.

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THREATS
High financial charger:

The financial cost in our country is very high as compare to other competing
countries like china, India. Interest paid on loans, by the local textile industry
comprises 41% of its total operating cost. Interest rates in Pakistan are
considerably higher than those of competing countries thus making our industry
uncompetitive.

Competitors:

This a major threat for yarn producers. There are approximately 503 yarn
producers in Pakistan. So, according to Mr. Kashif Riaz, every one of them who
produces quality yarn of grade A is their competitor.

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Findings

STML is one of the major yarn-producing units of Pakistan. SPML is

famous for its quality yarn at competitive rates. Beside this it is also
famous for its fair dealings in the market that is why it is considered
as a good credit risk among its competitors. Organizational structure
is highly formalized and centralized. Departmentalization is done on
the basis of different functions. Every employee clearly knows his
responsibility and authority because the jobs are well defined. There
is good cooperation between sales and marketing department and
production department. There is complete integration between sales
order and production schedule that is why an order never late.

There is strictly needed a strategic focus to face the present intense

competitive situation. The market for textile products is becoming more
competitive every year. The customer is emphasizing on quality over all
other things and easily searches for the most cost-effective supplier
anywhere in the world. Keeping this in mind, STML’s focus should be on
meeting its customers demand and requirements, improving its
competitiveness, increasing productivity, and enhancing its existing
quality control systems.
Every element of cost and quality should scrutinize and measured
according to worldwide standards. Each activity should be analyzed to
reduce cost and should be seen how it effect on the cost and quality of
other activities. The quality assurance department has should be further
strengthened with the addition of trained staff and state of the art
equipment.

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Suggestions
Here is some suggestion for improvement

1. Responsibilities at each level of management must be fixed, so that

the error can have a shoulder.
2. Activities must be arranged according to the priority and urgency.
3. Time management policy must be observed.
4. Employees should be provided more job security.
5. Bonus, on time pay and fringe benefits shall increase the employee
morale.

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Table of Contents

Industry Overview:....................................................................................................1

SUNRAYS TEXTILE MILLS LIMITED.................................................................2

Vision:....................................................................................................................3

Mission Statement:.................................................................................................3

Goals ......................................................................................................................3

Objectives...............................................................................................................4

Departments at Sunrays Textile Mills Ltd.................................................................5

Functions of the Department..................................................................................7

My Leanings at STML..............................................................................................9

Financial Analysis...................................................................................................13

SWOT ANALYSIS.................................................................................................21

Findings...................................................................................................................24

Suggestions..............................................................................................................25

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