Project No#1

Group members:
 M Shahzaib Tahir (BBA-18-07)
 Muneeb Ahmad (BBA-18-34)

Project sector:
 Textile Mills

Project Supervisor:
 Dr Muhammad Husnain Kamboh

University Of Sahiwal

Table of content:
 Credit Risk
  Models of Measure the credit Risk
 Qualitative Methods
 Quantitative Methods
 Altman z score Model
 Over view of the textile sector in Pakistan
 Selected companies
 Z score of Nishat Linen Group
 Z score of Chenab Ltd
 Z score of Al-Karam Textile Pvt Ltd
 Z score of Fateh Textile Mills
 Z score of Gul Ahmad Textile Mills
 Average Z score in 2018
 Average z score in 2019
 Conclusion

Credit Risk
Definition:
Credit risk is the possibility of a loss resulting from a borrower's failure to repay a
loan or meet contractual obligations. Traditionally, it refers to the risk that a
lender may not receive the owed principal and interest, which results in an
interruption of cash flows and increased costs for collection.

Credit Risk Management:

Credit risk management is the practice of mitigating losses by understanding the
adequacy of a bank's capital and loan loss reserves at any given time. A process
that has long been a challenge for financial institutions.

Altmans Z-Score Model:

Altman’s Z-Score model is a numerical measurement that is used to predict the chances of a
business going bankrupt in the next two years. The model was developed by American finance
professor Edward Altman in 1968 as a measure of the financial stability of companies.

Altman’s Z-score model is considered an effective method of predicting the state of financial
distress of any organization by using multiple balance sheet values and corporate income.
Altman’s idea of developing a formula for predicting bankruptcy started at the time of
the Great Depression when businesses experienced a sharp rise in incidences of default.

Overview of Pakistan Textile industry:

Pakistani Textile Manufacturing Sector contributes 8.50% of the national income. Cotton being
the prime crop of Pakistan makes the textile industry the most significant industry of the
country. The textile industry contributes more than 60% of the export earnings of the country.
During the 1990s, Pakistan’s textile manufacturing sector developed manifolds. Now, it
constitutes 46% of the total manufacturing, provides 38% of the manufacturing labor force,
shares 9% in GDP and also has the potential to meet the challenges of the highly competitive
global market especially after the removal of trade barriers under W.T.O. regime. Hence, the
country is facing much stronger competition not only from the regional competitors (Asian—
China, India, Bangladesh etc.) but from the global level competitors from American and
European textile players with the support of much advanced infrastructure and improved
systematic operations.

Pakistan’s Textile industry provides 9% of the global textile needs and ranked at world’s number
10 textile producers. Pakistan’s textile industry, based on locally-grown cotton, produces cotton
yarn, cotton cloth, and made-up textiles and apparel. Market for imported textile machinery
and equipment in Pakistan is directly proportional to the overall strength of the local textile
industry.

Theoretical Frame Work.

The reference of the theoretical framework that focuses on resource based view of a case study
for a firm, especially human resource based strategy of an organization is utilized. The
theoretical support rendered by Module is also relevant here which presented the concept of
strategic groups for different technology and collaboration that was further extended and
refined by Takala et al. to describe the usual development route of global industries .

According to the present situation of the country. Pakistani Textile Enterprise is confronted with
the following major challenges.

(a) Obsolete and low cost technological solutions and infrastructure. The technology is
something ever changing in accordance with the demand and requirements of the time. The
product manufacturers have to keep pace with the current trends, and try to shrink the lead
time for the sustainable growth of their business and attract their customers with the latest
products and innovative designs for achieving customer loyalty and attention. An intelligent
way to assess the technology status of the enterprise is to calculate the industrial failures and
losses it bears. The conscious study of some of the recent estimates of industrial failures and
losses to the textile enterprise in Pakistan, clearly hints towards the usage of obsolete
technology and its processes.
(b) Unskilled or poorly trained Human Resources. Also extensive training is required to refine
the skill level of workers in accordance with the latest techniques and requirements to compete
with the local as well as international standards. One of the major reasons for these losses is
unskilled workers. It has also been observed that if the industry has managed to attain advance
technology then the semi-skilled or even the skilled workers sometimes struggle to match their
expertise to required level of technological advances as sometimes the new equipment's
require more specialized skill levels.

(c) In addition to above , there are more issues involved in the decision of Human Resource
Training aspect here that are important if the industry wants to be in the lead and these are as
follows:

 The Frequency and quality of the training programs be improved in comparison with the
global standards and requirements.
 Training of the trainers up to the competitive level.
 Succession planning and balanced supply of the trained labor force be maintained at all
times.
 Product specific trained skilled labor force be imported on temporary basis on the
occasion of skill shortages & emergencies.

(d) Lack of expertise in the field of “Product development and design”. Currently, no priority is
given to establish and upgrade the areas of designing and development to create high demand
of the local product global.

Research and General Suggestion.

With respect to Pakistan textile Sector, it is assumed that a complete revival on the basis of
industrial revolution is required to bring about necessary and positive change otherwise it is
feared that the hopes of enhanced exports remain dangerously slim and grim. Therefore my
initial suggestion is to conduct a proper research through case study taking the case company
examples among the leading textile enterprises of Pakistan, namely, Nishat Mills, Gul Ahmad
textile, Nishat Chunnia, Chenab textile Mills etc. to assess the real scenario and health of the
Pakistani textile sector on the basis of quantitative and qualitative research tools, supported by
relevant theoretical frameworks.

To survive in the current highly competitive global market and face the intense innovative
corporate battle Pakistani textile industry will have to overpower the following key challenges .

 Offer quality products at the competitive cost.

 At the right time, by identifying the customers, tastes, desires and needs.
 Efforts to diversify the market.
 To overcome the Quality, and productivity issues of the textile enterprise.
 In line with the customer’s desires and tastes.
 Establish the market intelligence and refine the marketing and publicity framework.
 Efforts to build a high class image of the Pakistani textile products in the international markets.
 Intensive efforts to improve the HR skill levels on the basis of intense trainings and provision of
required infrastructure.
 Development of strong R & D facilities and infrastructure to cope with the current product
innovation challenges and sustainable growth of the enterprise.

List of major Textile Mills in Pakistan:

  Nishat Linen Group
  Chenab Ltd
 Al-Karam Textile Pvt Ltd
  Fateh Textile Mills
 Gul Ahmad Textile Mills Ltd

Nishat Mills Limited

About:
Nishat Mills Limited is the flagship company of Nishat Group. It was established in 1951. It is
one of the most modern, largest vertically integrated textile companies in Pakistan. Nishat Mills
Limited has 227,640 spindles, 805 Toyota air jet looms. The Company also has the most modern
textile dyeing and processing units, 2 stitching units for home textile, Two stitching units for
garments and Power Generation facilities with a capacity of 120 MW. The Company’s total
export for the year 2016 was Rs. 35.931 billion (US$ 344.744 million). Due to the application of
prudent management policies, consolidation of operations, a strong balance sheet and an
effective marketing strategy, the growth trend is expected to continue in the years to come.
The Company’s production facilities comprise of spinning, weaving, processing, stitching and
power generation.

Chenab Group Limited

About:
It was set up in 1974 as Chenab Fabrics & Processing Mills Limited and later converted to
Chenab Limited and is traded on the Pakistan Stock Exchange. It was founded by Mian
Muhammad Latif and his father Haji Muhammad Saleem who was a cotton industrialist in Toba
Tek Singh District.
Mian Muhammad Latif, the group's chairman, laid the foundation by setting up a processing
unit in Faisalabad, later joined by his younger brothers Mian Muhammad Naeem and Mian
Javed Iqbal. Chenab Group soon started exporting its products worldwide and by the 1990s, it
started exporting to 35 countries worldwide. Chenab is a vertically integrated unit with having
complete operation range from ginning to retailing. The Group's textile mills division was listed
on Karachi Stock Exchange in 2004. The Group's downfall began in 2007-8 when it sustained 4
billion Pakistani Rupees in losses. As per last annual report (ending June 2014), it has negative
equity of Pakistani Rupees 4.7 billion and the auditors state, "in our opinion, because of the
significance of the matters discussed the balance sheet, profit and loss account, statement of
comprehensive income, cash flow statement and statement of changes in equity together with
the notes forming part thereof, do not conform with approved accounting standards as
applicable in Pakistan and do not give the information required by the Companies Ordinance
1984 in a manner so required and do not give a true and fair view of the state of the Companies
affairs.

Al- Karam Textile Mills

About:
The Al-Karam group was founded in March 1986 with a vision to be a provider of innovative
textile solutions worldwide. We are a manufacturer and supplier of distinguished fabric for
apparel, home and industrial markets with clients all over the world. Our ability to create
forward-thinking solutions that give our clients a competitive advantage is what sets up apart.
Our core services include:
 Fiber manufacturing
 Spinning
 Weaving
 Knitting
 Dyeing and printing of woven and knitted fabrics Designing
 Cutting and Stitching
With a constructed area of over one million square feet, Al Karam has the capacity to fulfill
small, medium and large scale orders. We are one of the few vertically integrated operations in
Pakistan. Offering a diversified range of products, our customers can mix and match from a
wide variety of print, yarn dyed, solids, dobby and jacquard. We also deal in twill, sateen,
basket weave and percale, knitted to woven fabric; and thread counts ranging from 130 to
1000.

Fateh Textile Mills

About:

Incorporated as a private company in 1952, FATEH TEXTILE MILLS LTD is the foundation stone of
FATEH GROUP. Due to rapid growth and business expansion, the company became public
limited in 1961 and since then is listed on Karachi Stock Exchange. FATEH TEXTILE MILLS LTD.
Has been awarded “KSE TOP 25 Companies Award” for nine consecutive years. By virtue of the
break-up Value per share, Earning Per Share and Market Price Per share of its stocks FTML
ranks amongst the top three companies in textile Category, In today’s business customers
needs QUALITY, SATISFACTION, ON TIME DELIVERY, and we provide all services to our all
Valued Customers. The company is fully integrated composite unit comprising spinning,
weaving, bleaching, dyeing, roller & rotary printing and finishing processes. Annual production
of fabrics is around 60 million meters. The cloth produced is particularly meant the cloth
produced is particularly meant for export to international market either in the form of piece
goods, ready-made garments or bed wears.

Gul Ahmad Textile Mills

About:
Gul Ahmed Textile Mills Limited  is a Pakistani textile company which manufactures and sell
clothing through a chain of retail outlets under the name 'Ideas by Gul Ahmed
The Gul Ahmed began trading in textiles in the early 20th century.
In 1953, the group decided to enter the field of manufacturing under the name Gul Ahmed Textile
Mills Limited, and was incorporated as a privately limited company.
In 1970, it was listed on the Karachi Stock Exchange, and was one of the leading composite textile
houses in Pakistan.
In 2003, Gul Ahmed expanded to the retail sector and founded Ideas by Gul Ahmed retail chain. It
offers a range of home textiles and furnishings for the bedroom, kitchen and bathroom, as well as
men's and women's apparel. It also provides in-house monogramming, embroidery and tailor-
made services.

 
 
 Conclusion
To conclude, it must be acknowledged that Pakistan’s private sector—Textile manufacturing
enterprise has managed a successful shift from core textiles products towards high quality
readymade clothing production and their successful export operations to the European as well
as the American markets, even though, the tough quota restrictions, lack of Government
support and the economic, power, political and security crisis in Pakistan are the major
concerns of the hour for Pakistani Textile Industry.

Pakistani Textile industry showed presence of mind by timely responding to the foreign market
demands, highlighted by the growing international focus on fashion and diversity in the textile
products and the said fact is also evident from the national export growth. Limited resources
and the lack of Government support have forced the Pakistani textile sector a slower pace
growth although it has achieved international recognition and fair acknowledgment due to
having great potential and quality to impress the international buyers.

That is the core reason why Pakistan’s textile exports share struggle and continue to be
concentrated in the low-value segment. There is a great need to develop and organize the
textile sector of Pakistani origin with the key focus on S. A. Z. Kazmi, J. Takala 129 “Quality of
the Product”, “Commitment to meet the deadlines and targets with utmost reliability”, at the
“required destinations” and on the highly competitive costs, by focusing on productivity and
efficiency issues of the industry and develop strong international appearance on the basis of
strong positive reputation.

Here, complete revival of research and development sections within the industrial units, as
well as a superior and smart R & D support system at Governmental level to support the textile
sector is a need of the hour to win the foreign market share. Though currently, APTMA (All
Pakistan Textile Manufacturing Association) is assuming a superficial role by doing what the
government requires for bargaining purposes instead of focusing more on the revolutionary
steps for the true revival of the Pakistani textile industry.

Pakistani textile industry is currently facing multi-level pressures with regards to the
competitive aspect as it has to cope with not only to international competition but at the
national level textile manufacturers and related sectors energy and raw material suppliers.
References:
[1] Goliath (2004) -SMR: Competitiveness of Firms; Review of Theory, Frameworks & Models.
http://goliath.ecnext.com/coms2/summary_0199-630912_ITM

[2] Government of Pakistan (2006) Pakistan Economic Survey: 2005-2006. Finance Division, Government
of Pakistan. http://www.finance.gov.pk