AUDITED

FINANCIAL STATEMENTS
OF
NKR ENGINEERING (PRIVATE) LIMITED
FOR THE YEAR ENDED JUNE 30, 2020
NKR ENGINEERING (PRIVATE) LIMITED

STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2020

Note 2020 2019

Rupees Rupees

ASSETS
Non-current assets
Property, plant and equipment 5 30,617,665 12,321,344
Capital work in progress 6 28,933,231 -
Long-term deposits 985,224 1,470,274
Long-term loans 7 1,042,000 853,000
Deferred tax asset 8 5,319,618 4,330,958
66,897,738 18,975,576
Current assets
Stock in trade 9 293,647,878 278,936,951
Trade debts 10 101,164,560 97,080,384
Loans and advances 11 27,101,667 36,300,324
Short term deposits, prepayments and other receivables 12 8,466,375 6,797,159
Refunds due from the government - sales tax 824,428 674,539
Advance Income tax 26,263,568 25,907,841
Income tax refundable 22,137,165 21,301,651
Cash and bank balances 13 101,576,669 72,225,194
581,182,310 539,224,043
TOTAL ASSETS 648,080,048 558,199,619

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES
Share capital 14 1,500,000 1,500,000
Unappropriated profit 552,136,715 485,673,313
553,636,715 487,173,313
LIABILITIES
Non-current liability
Post employment benefits 15 19,795,721 16,317,703

Current liabilities
Trade and other payables 16 44,619,961 30,142,293
Income tax deducted at source 41,018 5,972
Provision for taxation 29,986,633 24,560,338
74,647,612 54,708,603
TOTAL LIABILITIES 94,443,333 71,026,306

Contingencies and Commitments 17 - -

TOTAL EQUITY AND LIABILITIES 648,080,048 558,199,619

The annexed notes 1 to 34 form an integral part of these financial statements

Chief Executive Director

NKR ENGINEERING (PRIVATE) LIMITED

STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED JUNE 30, 2020

Note 2020 2019

Rupees Rupees

Revenue 18 407,316,303 420,315,252

Cost of sales 19 (275,988,885) (305,209,599)

Gross profit 131,327,418 115,105,653

Administrative and general expenses 20 24,139,336 23,934,520

Selling and distribution expenses 21 7,449,295 7,055,800
Finance cost 22 1,082,272 980,097
Other expenses 23 227,130 277,884
Other income 24 (4,277,584) (5,863,418)
(28,620,449) (26,384,883)
Operating profit before statutory provision 102,706,969 88,720,770

Workers' profit participation fund (5,135,348) (4,436,039)

Workers' welfare fund (2,110,248) (1,781,390)
Profit before taxation 95,461,373 82,503,341
Taxation 25 (28,997,971) (24,089,828)
Profit after taxation 66,463,402 58,413,513

The annexed notes 1 to 34 form an integral part of these financial statements

Chief Executive Director

NKR ENGINEERING (PRIVATE) LIMITED

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JUNE 30, 2020

2020 2019
Rupees Rupees

Profit after taxation 66,463,402 58,413,513

Other comprehensive income - -

Total comprehensive income for the year 66,463,402 58,413,513

The annexed notes 1 to 34 form an integral part of these financial statements

Chief Executive Director

NKR ENGINEERING (PRIVATE) LIMITED

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2020

2020 2019
Rupees Rupees

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before taxation 95,461,373 82,503,341

Adjustments for non cash charges and other items

Depreciation 2,355,802 1,882,877
Provision for workers' profit participation fund 6,099,691 5,269,573
Provision for workers' welfare fund 2,110,248 1,781,390
Provision for gratuity 4,204,518 2,675,913
Provision against doubtful trade debts - net 1,294,624 -
Finance cost 117,929 146,563
Profit on savings account (2,305,460) (2,390,282)
Mark-up on loan given to Company (1,970,854) (3,213,848)
11,906,498 6,152,186
107,367,871 88,655,527
(Increase) / Decrease in operating assets
Stock in trade (14,710,927) (87,626,865)
Trade debts (5,378,800) (5,001,220)
Loans and advances 9,198,657 1,757,238
Short term deposits, prepayments and other receivables 301,638 2,438,353
Refunds due from the government - sales tax (149,889) (874,709)
(10,739,321) (89,307,203)
Increase / (Decrease) in operating liabilities
Trade and other payables 12,581,149 (7,137,476)
Cash generated from / (used in) operations 109,209,699 (7,789,152)
Finance cost paid (117,929) (146,563)
Workers' profit participation fund paid (4,532,030) (3,151,611)
Workers' welfare fund paid (1,781,390) (1,302,773)
Gratuity paid (726,500) -
Income tax paid (25,716,531) (24,674,106)
Decrease / (Increase) in long-term deposits 485,050 (46,500)
Increase in long-term loans (189,000) (609,500)
(32,578,330) (29,931,053)
Net cash generated from / (used in) operating activities 76,631,369 (37,720,205)

CASH FLOWS FROM INVESTING ACTIVITIES

Additions to property, plant and equipment (20,652,123) (5,260,121)
Additions to capital work in progress (28,933,231) -
Profit on savings account 2,305,460 2,390,282
Net cash used in investing activities (47,279,894) (2,869,839)

Net increase / (decrease) in cash and cash equivalents 29,351,475 (40,590,044)

Cash and cash equivalents at the beginning of the year 72,225,194 112,815,238
Cash and cash equivalents at the end of the year 101,576,669 72,225,194

The annexed notes 1 to 34 form an integral part of these financial statements

Chief Executive Director

NKR ENGINEERING (PRIVATE) LIMITED

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED JUNE 30, 2020

Share Unappropriated Total

capital Profit
Rupees

Balance as at July 1, 2018 1,500,000 427,259,800 428,759,800

Total comprehensive income for the

year ended June 30, 2019 - 58,413,513 58,413,513
Balance as at June 30, 2019 1,500,000 485,673,313 487,173,313

Total comprehensive income for the

year ended June 30, 2020 - 66,463,402 66,463,402
Balance as at June 30, 2020 1,500,000 552,136,715 553,636,715

The annexed notes 1 to 34 form an integral part of these financial statements

Chief Executive Director

NKR ENGINEERING (PRIVATE) LIMITED
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2020

1. LEGAL STATUS AND NATURE OF BUSINESS

1.1 NKR Engineering (Private) Limited (the Company) is a private limited company incorporated in Pakistan on
May 16, 1990 under the Companies Ordinance, 1984 (Repealed with the enactment of the Companies Act,
2017 on May 30, 2017).

The Company is engaged in the business of manufacturing, fabrication, assembling of all types of
machinery, equipments and trading of engineering goods.

The geographical location and address of the Company’s business units, including plant is as under:

- The registered office of the Company is situated at 304 - Anum Classic, Opposite Duty Free Shop, 48-
Darul Aman Society, Block - 7/8, Shahrah-e-Faisal, Karachi.

- The Company's plant is located at St - 1/3, Main Korangi Industrial Road, Sector 17, Karachi.

- The Company's newly acquired leasehold land which is under construction is located at Plot # WH13 - A8,
Korangi Creek Industrial Park, Karachi. (Refer note 5.1)

2. BASIS OF PREPARATION

2.1 Statement of compliance

These financial statements have been prepared in accordance with the accounting and reporting standards
as applicable in Pakistan. The accounting and reporting standards applicable in Pakistan comprise of:

- International Financial Reporting Standard for Small and Medium Sized Entities (IFRS for SMEs) issued by
the International Accounting Standards Board (IASB) as notified under the Companies Act, 2017; and

- Provisions of and directives issued under the Companies Act, 2017.

Where provisions of and directives issued under the Companies Act, 2017 differ from the IFRS for SMEs,
the provisions of and directives issued under the Companies Act, 2017 have been followed.

2.2 Basis of measurement

These financial statements have been prepared under the historical cost convention unless otherwise
specifically stated.

2.3 Functional and presentation currency

These financial statements are presented in Pakistan Rupee which is the Company’s functional currency.
Amounts presented in the financial statements have been rounded off to the nearest of Rupees, unless
otherwise stated.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The preparation of financial statements in conformity with the accounting and reporting standards as
applicable in Pakistan requires the use of certain critical accounting estimates. In addition, it requires
management to exercise judgement in the process of applying the Company’s accounting policies. The
areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements, are documented in the following accounting policies and notes, and
relate primarily to:
- Property, plant and equipment (refer note 4.1)
- Stock in trade (refer note 4.2)
- Impairment of non-financial assets other than inventories (refer note 4.3)
- Trade and other receivables (refer note 4.4)
- Taxation (refer note 4.10)
- Provisions (refer note 4.11)
- Contingent liabilities (refer note 4.12)
- Foreign currency transactions and translations (refer note 4.16)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these
financial statements.
 2

4.1 Property, plant and equipment

Initial recognition

All items of property, plant and equipment are initially recorded at cost.

Subsequent measurement
Items of property, plant and equipment other than capital work in progress are measured at cost less
accumulated depreciation and impairment loss (if any).

Capital work in progress is stated at cost less impairment loss (if any).

Depreciation

Depreciation is charged so as to write off the cost of assets (other than land and capital work in progress)
over their estimated useful lives, using the reducing-line method at rates specified in notes to the financial
statements. Full month's depreciation is charged in the month of addition whereas no depreciation is charged
for the month in which disposal is made.

Disposal

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amounts of the asset and is recognised as
other income in the statement of profit or loss.

Judgement and estimates

The useful lives, residual values and depreciation method are reviewed on a regular basis. The effect of any
changes in estimate is accounted for on a prospective basis.

4.2 Stock in trade

Measurement

Inventories are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost is
calculated using the weighted average method and comprises direct materials, direct labour costs and direct
overheads that have been incurred in bringing the inventories to their present location and condition.

Selling price less costs to complete and sell represents the estimated selling price in the ordinary course of
the business less all estimated costs of completion and estimated costs necessary to be incurred in order to
make the sale.

Impairment
At each reporting date, inventories are assessed for impairment. If inventory is impaired, the carrying amount
is reduced to its selling price less costs to complete and sell. The impairment loss is recognized immediately
in the cost of sales in the statement of profit or loss.

Judgements and estimates

Inventory write-down is made based on the current market conditions, historical experience and selling
goods of similar nature. It could change significantly as a result of changes in market conditions. A review is
made periodically on inventories for excess inventories, obsolescence and decline in net realisable value and
an allowance is recorded against the inventory balances for any such decline.

4.3 Impairment of non-financial assets other than inventories

The assets that are subject to depreciation are assessed at each reporting date to determine whether there
is any indication that the assets are impaired. If there is an indication of possible impairment, the recoverable
amount of the asset is estimated and compared with its carrying amount.

An impairment loss is recognized if the carrying amount of an asset exceeds its estimated recoverable
amount. The impairment loss is recognized in the statement of profit or loss account.

An impairment loss is reversed only to the extent that the asset carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation, if no impairment loss had been
recognized. The Company recognizes the reversal immediately in the statement of profit or loss account.
 3

4.4 Trade and other receivables

Measurement

Trade and other receivables are recognized and carried at transaction price less an allowance for
impairment.

Impairment

A provision for impairment of trade receivables is established when there is objective evidence that the
Company will not be able to collect all amounts due according to the original terms of the receivables. The
amount of the provision is recognized in the statement of profit or loss. Bad debts are written-off in the
statement of profit or loss on identification.
Judgement and estimates

The allowance for doubtful debts of the Company is based on the ageing analysis and management’s
continuous evaluation of the recoverability of the outstanding receivables. In assessing the ultimate
realisation of these receivables, management considers, among other factors, the creditworthiness and the
past collection history of each customer.
4.5 Impairment of financial assets other than trade receivables
The financial assets other than those that are carried at fair value are assessed at each reporting date to
determine whether there is any objective evidence of their impairment. A financial asset is impaired if there is
objective evidence of impairment as a result of one or more events that occurred after the initial recognition
of the asset, and that loss event(s) had an impact on the estimated future cash flows of that asset that can
be estimated reliably.
The impairment loss is recognized immediately in the statement of profit or loss and the carrying amount of
the related financial asset is reduced accordingly. An impairment loss is reversed only if the reversal can be
related objectively to an event occurring after the impairment loss was recognized.

4.6 Method of preparation of cash flow statement

The cash flow statement is prepared using indirect method.

4.7 Defined benefit plan - gratuity

The Company operates an Unfunded Gratuity Scheme for all its permanent employees who attain the
minimum qualifying period for entitlement of gratuity. The provision is made on the basis of gross salary,
employees from 5 to 10 years @ 50% of one month's gross salary, employees from 10 to 15 years @ 75%
of one month's gross salary and employees above 15 years @ 100% of one month's gross salary.

4.8 Liability for employees’ compensated absences

The Company accounts for the liability in respect of employees’ compensated absences in the year in which
these are earned. Provisions to cover the obligations are made using the salary levels of employees
prevailing on July. No actuarial valuation is carried out as it is paid off within one year of recognition.

4.9 Trade and other payables

Trade payables are obligations under normal short-term credit terms. These are measured at the
undiscounted amount of cash to be paid.

4.10 Taxation
Income tax comprises of current tax and deferred tax.

Income tax expense is recognized in the statement of profit and loss except to the extent that it relates to
items recognized in other comprehensive income or directly in equity (if any), in which case the tax amounts
are recognized directly in other comprehensive income or equity.

Current tax
Current tax is the expected tax payable on the taxable income for the year; calculated using rates enacted or
substantively enacted by the end of the reporting period. The calculation of current tax takes into account tax
credit and tax rebates, if any, and is inclusive of any adjustment to income tax payable or recoverable in
respect of previous years.
 4

Deferred tax

A deferred tax liability is recognized for all temporary differences that are expected to increase taxable profit
in the future. Deferred tax assets are recognized for all temporary differences that are expected to reduce
taxable profit in the future, and the carry forward of unused tax losses.

The amount of deferred tax provided is based on the expected manner of realization or settlement of the
carrying amount of assets and liabilities using the tax rates enacted at the balance sheet date.

Judgement and estimates

Significant judgment is required in determining the income tax expenses and corresponding provision for tax.
There are many transactions and calculations for which the ultimate tax determination is uncertain during the
ordinary course of business.

Further, the carrying amount of deferred tax assets is reviewed at each reporting date and is adjusted to
reflect the current assessment of future taxable profits. If required, carrying amount of deferred tax asset is
reduced to the extent that it is no longer probable that sufficient taxable profits to allow the benefit of part or
all of that recognized deferred tax asset to be utilised. Any such reduction shall be reversed to the extent that
it becomes probable that sufficient taxable profit will be available.
Off-setting

Deferred tax assets and liabilities are offset if there is a legally enforceable right to set off current tax assets
against current tax liabilities, and they relate to income taxes levied by the same tax authority.

4.11 Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a
past event, it is probable that the Company will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation.

The amount recognized as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation.

Where the effect of the time value of money is material, the amount expected to be required to settle the
obligation is recognized at present value using a pre-tax discount rate. The unwinding of the discount is
recognized as finance cost in the statement of profit or loss.

When some or all of the economic benefits required to settle a provision are expected to be recovered from
a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be
received and the amount of the receivable can be measured reliably.

As the actual outflows can differ from estimates made for provisions due to changes in laws, regulations,
public expectations, technology, prices and conditions, and can take place many years in the future, the
carrying amounts of provisions are reviewed at each reporting date and adjusted to take account of such
changes. Any adjustments to the amount of previously recognized provision is recognized in the statement of
profit or loss unless the provision was originally recognized as part of cost of an asset.

4.12 Contingent liabilities

A contingent liability is disclosed when the Company has a possible obligation as a result of past events,
whose existence will be confirmed only by the occurrence or non-occurrence, of one or more uncertain future
events not wholly within the control of the Company; or the Company has a present legal or constructive
obligation that arises from past events, but it is not probable that an outflow of resources embodying
economic benefits will be required to settle the obligation, or the amount of the obligation cannot be
measured with sufficient reliability.

4.13 Off-setting of financial assets and liabilities

Financial assets and financial liabilities are off-set and the net amount is reported in the statement of
financial position if the Company has a legally enforceable right to set-off the recognized amounts and
intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously.
 5

4.14 Revenue recognition

Revenue is recognized to the extent the Company has delivered goods under an agreement, the amount of
revenue can be measured reliably and it is probable that the economic benefits associated with the
transaction will flow to the Company.

Revenue is measured at the fair value of the consideration received or receivable, exclusive of sales tax and
trade discounts.

Revenue from the sale of goods is recognized when the significant risks and rewards of ownership of the
goods have been transferred to the buyer. This is usually at the point that the customer has signed for the
delivery of the goods.

4.15 Operating leases

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of
the relevant lease. Minimum lease payments receivable under operating leases are recognised as revenue
on a straight-line basis over the term of the lease.

4.16 Foreign currency transactions and translations

Transactions in foreign currencies are recorded at the rates of exchange ruling on the date of the
transaction. All monetary assets and liabilities denominated in foreign currencies are translated into Pakistan
Rupees at the rate of exchange ruling on the balance sheet date and exchange differences, if any, are
charged in the statement of profit or loss.

4.17 Dividend distribution

Final dividend distributions to the Company’s shareholders are recognized as a liability in the financial
statements in the period in which the dividends are approved by the Company’s shareholders at the Annual
General Meeting, while interim dividend distributions are recognized in the period in which the dividends are
declared by the Board of Directors. Movement in reserves is recognized in the year in which the
appropriation is approved.

4.18 Transactions with related parties

“Related party”, in relation to a company, means an entity which has the ability to control the company or
exercise significant influence over the company in making financial and operating decisions or vice versa. In
considering each possible related party relationship, attention is directed to the substance of the relationship
and not merely to the legal form.

5. PROPERTY, PLANT AND EQUIPMENT

Leasehold Plant and Furniture and Computer Electrical
Building Tools Vehicles Total
Land machinery fixtures equipment equipment
(Rupees)
Net carrying value basis
Year ended June 30, 2020
Opening NBV 680,000 3,102,604 1,505,105 209,951 785,023 1,192,493 1,818,629 3,027,539 12,321,344
Additions (at cost) 16,786,963 - 789,540 101,600 - 397,200 - 2,576,820 20,652,123
Depreciation charge - (310,260) (337,226) (28,476) (117,754) (426,102) (272,794) (863,190) (2,355,802)
Disposal - - - - - - - - -

Closing NBV 17,466,963 2,792,344 1,957,419 283,075 667,269 1,163,591 1,545,835 4,741,169 30,617,665

Gross carrying value basis

At June 30, 2020
Cost 17,466,963 4,925,560 6,656,720 596,678 2,166,195 5,324,623 4,188,136 11,294,462 52,619,337
Accumulated depreciation - (2,133,216) (4,699,301) (313,603) (1,498,926) (4,161,032) (2,642,301) (6,553,293) (22,001,672)

NBV 17,466,963 2,792,344 1,957,419 283,075 667,269 1,163,591 1,545,835 4,741,169 30,617,665

Net carrying value basis

Year ended June 30, 2019
Opening NBV 680,000 433,061 1,770,712 233,279 609,536 639,071 2,095,061 2,483,380 8,944,100
Additions (at cost) - 2,806,396 - - 302,430 900,450 38,306 1,212,539 5,260,121
Depreciation charge - (136,853) (265,607) (23,328) (126,943) (347,028) (314,738) (668,380) (1,882,877)
Disposal - - - - - - - - -

Closing NBV 680,000 3,102,604 1,505,105 209,951 785,023 1,192,493 1,818,629 3,027,539 12,321,344

Gross carrying value basis

At June 30, 2019
Cost 680,000 4,925,560 5,867,180 495,078 2,166,195 4,927,423 4,188,136 8,717,642 31,967,214
Accumulated depreciation - (1,822,956) (4,362,075) (285,127) (1,381,172) (3,734,930) (2,369,507) (5,690,103) (19,645,870)

NBV 680,000 3,102,604 1,505,105 209,951 785,023 1,192,493 1,818,629 3,027,539 12,321,344

Rate of Depreciation - 10% 15% 10% 15% 30% 15% 20%

 6

5.1 Additions made to leasehold land bearing address Plot # WH13 - A8, Korangi Creek Industrial Park, Karachi
was originally allotted to the Company in the financial year ended June 30, 2013. Subsequently, in the
financial year ended June 30, 2014, the board of directors decided to transfer this land to Fida International
(associated undertaking) in exchange of repayment of first two installments paid by the Company. To
facilitate this transfer, documents along with payment of transfer fee were submitted to National Industrial
Park (NIP) which was the original allottee of the land. Upon receipt of transfer documents and repayment of
first two installments by the associated undertaking to the Company, NIP collected the remaining
installments from the associated undertaking up until the final installment which was paid on May 3, 2017. In
the current year, the Company decided to purchase this land from its associated undertaking in exchange for
full repayment of installments and cantonment taxes paid thereagainst. To facilitate the transfer, when the
transfer documents were duly submitted by the Company to NIP, it was informed that the application
submitted earlier in the financial year ended June 30, 2014 was still in process and that the leasehold is in
the name of the Company. The Company was advised by NIP to pass a board resolution for withdrawal of
application submitted earlier in June 30, 2014 and to pay-off the full sum of installments and cantonment
taxes paid by its associated undertaking to ensure proper title to such leasehold land. Accordingly, during the
year, the Company submitted the board resolution to NIP and paid the full sum of installments along with
cantonment taxes amounting to Rs. 16,786,963 (reflected in additions to leasehold land) and construction
cost (reflected in capital work in progress) amounting to Rs. 21,528,521 to the associated undertaking.

2020 2019
Rupees Rupees

5.2 Allocation of depreciation

Cost of sales - note 19 675,962 425,788
Administrative and general expenses - note 20 1,679,840 1,457,089
2,355,802 1,882,877

6. CAPITAL WORK IN PROGRESS

This is stated at cost and consists of expenditure incurred in the course of construction. This will be
subsequently transferred to property, plant and equipment upon completion.
2020 2019
Rupees Rupees
7. LONG-TERM LOANS
Loans to employees - note 7.1 and 7.2 1,759,000 2,061,000
Less: Current portion reflected in current liabilities - note 11 (717,000) (1,208,000)
1,042,000 853,000
7.1 The loans are granted to the employees of the Company in accordance with the terms of their employment
letter and are secured against their retirement benefits plan.
7.2 These loans are initially recognized at fair value and subsequently at amortized cost using the effective
interest method. However, the impact of discounting is not material, therefore, no impact has been taken in
the financial statements.
2020 2019
Rupees Rupees
8. DEFERRED TAX ASSET
Credit balance arising in respect of:
- accelerated tax depreciation allowance (421,141) (401,176)
Debit balance arising in respect of:
- provision for post employment benefit obligations 5,740,759 4,732,134
5,319,618 4,330,958
8.1 Deferred tax balance has been recognized at the rate at which these are expected to be settled / realized.
9. STOCK IN TRADE
Stock in hand - note 9.1 288,267,296 278,936,951
Items in transit 5,380,582 -
293,647,878 278,936,951
 7

9.1 This includes raw material and finished goods amounting to Rs. 278,475,498 (2019: Rs. 267,909,038) and
Rs. 9,791,798 (2019: Rs. 11,027,913) respectively.

2020 2019
Rupees Rupees

10. TRADE DEBTS

Due from related parties - note 10.1 - 6,438,220
Others 102,459,184 90,642,164
102,459,184 97,080,384

Less: Provision against doubtful trade debts - note 10.2 (1,294,624) -

101,164,560 97,080,384

10.1 Age analysis of trade receivables from related parties:

- Not yet due - 6,438,220
10.2 Provision for doubtful debts
Opening - -
Charge for the year 1,294,624 -
1,294,624 -
10.3 The maximum aggregate balance due from related parties, i.e. NKR Cooling Tower (Private) Limited and
Fida International, at the end of every month during the year was Rs. 4,775,907 (2019: Rs. 9,091,982). The
balance due as at June 30, 2020 was neither past due nor impaired.
11. LOANS AND ADVANCES
Current portion of loans to employees - note 7 717,000 1,208,000
Advance to local suppliers 3,243,662 184,732
Advance to foreign suppliers 1,400,139 40,480
Advance against letters of credit 4,440,866 14,867,112
Loan to Company - note 11.1 17,300,000 20,000,000
27,101,667 36,300,324
11.1 Purpose:
- For use in capital and revenue expenditures of Smart Lubricants (Private) Limited.
Tenure:
- The loan was originally disbursed on July 3, 2017 which was receivable in full by December 31, 2017.
Subsequently, in the financial year ended June 30, 2018, the terms of the loan were revised mutually
changing the repayment clause to "payable on demand of lender".
Security:
- The loan and the mark-up thereon is secured against personal guarantee of Mr. Syed Anwar given on
behalf of Smart Lubricants (Private) Limited.
Interest rate:
- Interest rate is yearly Kibor + 2%
2020 2019
Rupees Rupees
12. SHORT TERM DEPOSITS, PREPAYMENTS AND
OTHER RECEIVABLES
Deposits - earnest money 921,520 882,500
Prepayments 175,829 477,982
Other receivables - note 12.1 2,184,324 2,222,829
Mark-up receivable on loan to Company - note 11.1 5,184,702 3,213,848
8,466,375 6,797,159
12.1 This includes an amount of Rs. 1,962,235 (2019: Rs. 1,962,235) receivable from The Collector of Customs
as per the provisions of SRO 567(I)/05 dated June 06, 2005.
 8

2020 2019
Rupees Rupees
13. CASH AND BANK BALANCES
Cash in hand 8,717 6,310
Balance with banks - in current accounts 22,914,423 38,516,032
Balance with bank - in saving account 78,653,529 33,702,852
101,576,669 72,225,194

13.1 Cash and cash equivalents comprise of cash and balances with banks.

14. SHARE CAPITAL

2020 2019 2020 2019
(Number of shares) Rupees Rupees

Authorised Share Capital

20,000 20,000 Ordinary shares of Rs. 100 each 2,000,000 2,000,000

Issued, subscribed and paid up Share Capital

Ordinary shares of Rs. 100 each

15,000 15,000 fully paid in cash 1,500,000 1,500,000

2020 2019
Rupees Rupees

15. Post employment benefits

Opening balance 16,317,703 13,641,790
Expense for the year - note 15.1 4,204,518 2,675,913
Payments made during the year (726,500) -
19,795,721 16,317,703

15.1 Allocation of expense for the year

Cost of sales 3,636,047 2,194,249

Administrative and general expenses 368,697 342,372
Selling and distribution expenses 199,774 139,292
4,204,518 2,675,913

16. TRADE AND OTHER PAYABLES

Local creditors - note 16.1 20,055,295 5,574,297
Foreign creditors 1,554,510 2,995,544
Advance from customers 4,528,478 5,366,698
Accrued expenses 3,589,886 3,210,481
Workers' profit participation fund - note 16.2 10,311,700 8,744,039
Workers' welfare fund 4,580,092 4,251,234
44,619,961 30,142,293

16.1 This includes balances due to NKR Cooling Tower (Private) Limited (related party) and Fida International
(related party) amounting to Rs. 2,543,406 (2019: Rs. Nil) and Rs. 184,958 (2019: Rs. Nil) respectively.

2020 2019
Rupees Rupees

16.2 Workers' profit participation fund

Opening Balance 8,744,039 6,626,077
Allocation for the year 5,135,348 4,436,039
Interest on fund utilized in company's business 964,343 833,534
14,843,730 11,895,650
Less: Paid during the year (4,532,030) (3,151,611)
10,311,700 8,744,039
 9

17. CONTINGENCIES AND COMMITMENTS

17.1 CONTINGENCIES

There are no contingencies as at June 30, 2020.

17.2 COMMITMENTS

17.2.1 Commitments in respect of non-capital expenditure as at June 30, 2020 amounted to Rs. 26,933,345
(2019: Rs. 17,660,968).

17.2.2 The Company has leased headoffice under non-cancellable operating lease agreement. The lease term is
2 years and the same is normally revised at the end of the lease period.

The future minimum lease payments under non-cancellable operating lease are as follows:

2020 2019
Rupees Rupees

No later than 1 year 1,939,551 -

2020 2019
Rupees Rupees

18. Revenue

Gross local sales 476,479,211 494,130,760

Less: Sales tax 68,948,814 71,785,256

Less: Sales return and discount 214,094 2,030,252
(69,162,908) (73,815,508)
407,316,303 420,315,252

19. COST OF SALES

Opening stock - note 9.1 278,936,951 191,310,086

Purchases:
Local 73,659,348 94,128,267
Import 176,640,169 266,595,550
Closing stock - note 9.1 (288,267,296) (278,936,951)
240,969,172 273,096,952

Salaries and benefits - note 19.1 26,654,835 22,928,478

Power and fuel 3,290,424 3,521,969
Out sourced job cost 283,482 416,346
Communication expenses 72,482 114,208
Workshop expenses 1,010,970 1,137,619
Security 933,162 867,496
Insurance 312,970 445,967
Repair and maintenance 619,242 916,077
Entertainment 414,062 448,542
Vehicle running and maintenance 38,130 73,038
Traveling and conveyance 306,939 275,047
Carriage inwards 407,053 542,072
Depreciation - note 5.1 675,962 425,788
35,019,713 32,112,647
275,988,885 305,209,599

19.1 Salaries and benefits include provision for gratuity amounting to Rs. 3,636,047 (2019: Rs. 2,194,249).
 10

2020 2019
Rupees Rupees

20. ADMINISTRATIVE AND GENERAL EXPENSES

Salaries and benefits - note 20.1 10,467,492 13,157,159
Rent, rates and taxes 1,975,422 1,687,377
Electricity, water and gas 209,989 259,625
Communication 873,208 843,508
Printing and stationery 458,563 490,830
Computer expenses 371,720 365,352
Traveling and conveyance 445,874 1,968,261
Fees and subscription 105,987 97,828
Entertainment 190,911 126,176
Vehicle running and maintenance 259,390 254,254
Repairs and maintenance 144,605 163,915
Donations - note 20.2 2,400,000 2,570,330
Sales tax penalty 30,559 97,309
Sales tax refundable written off 3,206,449 -
Miscellaneous 14,500 282,676
Bad debts 10,203 61,861
Provision for doubtful debts 1,294,624 -
Income tax penalty - 50,970
Depreciation - note 5.1 1,679,840 1,457,089
24,139,336 23,934,520

20.1 Salaries and benefits include provision for gratuity amounting to Rs. 368,697 (2019: Rs. 342,372).

20.2 None of the Directors or their spouse have any interest in the donees. Donations amounting to Rs.
2,400,000 (2019: Rs. 2,400,000) have been given to Indus Hospital.

2020 2019
Rupees Rupees

21. SELLING AND DISTRIBUTION EXPENSES

Salaries and benefits - note 21.1 5,127,869 4,950,086
Traveling and conveyance 844,492 735,166
Advertisement 569,871 397,873
Carriage outwards 877,063 972,675
Commission 30,000 -
7,449,295 7,055,800

21.1 Salaries and benefits include provision for gratuity amounting to Rs. 199,774 (2019: Rs. 139,292).
2020 2019
Rupees Rupees

22. FINANCE COST

Bank charges 117,929 146,563
Interest on WPPF utilized in Company's business 964,343 833,534
1,082,272 980,097

23. OTHER EXPENSES

Auditor's remuneration - note 23.1 227,130 277,884
227,130 277,884

23.1 Audit services

Audit fee 196,020 186,624
Out of pocket expenses 18,150 17,280

Non-audit services
Fee for corporate services 12,960 73,980
227,130 277,884
 11

2020 2019
Rupees Rupees

24. OTHER INCOME

Profit on saving account 2,305,460 2,390,282

Mark-up on loan given to company 1,970,854 3,213,848
Commission on imports - 238,415
Exchange gain 1,270 20,873
4,277,584 5,863,418

25. TAXATION

Current 29,986,631 24,560,338

Deferred (988,660) (470,510)
28,997,971 24,089,828

25.1 Major components of taxation are as under:

Current tax expense 29,986,631 24,560,338

Amount of deferred tax income relating to the origination and
reversal of temporary differences (988,660) (599,191)
Amount of deferred tax expense relating to changes in tax rates - 128,681
28,997,971 24,089,828

25.2 Income tax of the estimated assessable profit for the year is calculated at the enacted corporation tax rate
of 29% (2019: 29%).

26. TRANSACTIONS WITH RELATED PARTIES

Related parties comprise companies where directors also hold directorship and key management
personnel. Significant transactions with related parties during the year are as under:
Name of the party Relationship with the Company Nature of transactions 2020 2019
Rupees Rupees

NKR Cooling Tower (Private) Limited Associated company by virtue of Purchases 3,324,952 2,690,988
common directorship
NKR Cooling Tower (Private) Limited Associated company by virtue of Sales 9,105,250 10,301,851
common directorship
Fida International Associated company by virtue of Purchases 1,394,112 852,524
common directorship
Fida International Associated company by virtue of Sales 581,329 3,159,331
common directorship

Key management personnel

Majid Hassan Director Travelling & conveyance 313,088 1,591,335
Majid Hassan Director Fees and subscription 56,032 48,188
Kanwal hassan Director Rent of premises 1,763,228 1,602,931

27. REMUNERATION OF DIRECTOR, CHIEF EXECUTIVE & EXECUTIVES

Chief Executive Directors Executives

2020 2019 2020 2019 2020 2019
(Rupees)

Managerial remuneration - - - - 5,700,000 5,496,000

Bonus - - - - 156,500 746,000
Post employment benefits - - - - 434,185 -

- - - - 6,290,685 6,242,000

Number of persons 1 1 2 2 3 5
 12

27.1 No fees was paid to any of the Directors for attending Board meetings.

27.2 Chief Executive Officer and Executive Director are provided with Company maintained cars in accordance
with their terms of employment.

28. FINANCIAL INSTRUMENTS

28.1 Financial assets and liabilities by category and their respective maturities
Interest bearing Non-interest bearing Total
Fair value Amortized Total Maturity up Maturity Total
through profit cost to one after one
or loss year year
Rupees
Financial assets
at amortised cost

Long-term deposits - - - - 985,224 985,224 985,224

Long-term loans - - - - 1,042,000 1,042,000 1,042,000
Trade debts - - - 101,164,560 - 101,164,560 101,164,560
Loans and advances - 17,300,000 17,300,000 717,000 - 717,000 18,017,000
Short term deposits - - - 8,290,546 - 8,290,546 8,290,546
and other receivables
Bank balances - - - 101,567,952 - 101,567,952 101,567,952
June 30, 2020 - 17,300,000 17,300,000 211,740,058 2,027,224 213,767,282 231,067,282
June 30, 2019 - 20,000,000 20,000,000 196,826,445 2,323,274 199,149,719 219,149,719

Financial liabilities
at amortised cost
Post employment benefits - - - - 19,795,721 19,795,721 19,795,721
Trade and other payables - - - 25,199,691 - 25,199,691 25,199,691
June 30, 2020 - - - 25,199,691 19,795,721 44,995,412 44,995,412
June 30, 2019 - - - 11,780,322 16,317,703 28,098,025 28,098,025

On balance sheet gap

June 30, 2020 - 17,300,000 17,300,000 186,540,367 (17,768,497) 168,771,870 186,071,870
June 30, 2019 - 20,000,000 20,000,000 185,046,123 (13,994,429) 171,051,694 191,051,694

29. IMPACT OF COVID-19

The pandemic of COVID-19 that has rapidly spread all across the world has not only endangered human
lives but has also adversely impacted the global economy. On March 20, 2020, the Government of Sindh
announced a temporary lock down as a measure to reduce the spread of the COVID–19. Complying with
the lockdown, the Company temporarily suspended its operations from March 23, 2020 to April 13, 2020.

After implementing all the necessary Standard Operating Procedures (SOPs) to ensure safety of
employees, the Company henceforth resumed its operations and has taken all necessary steps to ensure
smooth and adequate continuation of its business in order to maintain business performance despite
slowed down economic activity. The lockdown has caused disruptions in supply chain including supply to
the customers resulting in a decline in sales. However, after the lockdown, there's been a steady increase
in the overall economic activity due to measures taken by the Government of Pakistan. Accordingly, the
company forecasts an increase in turnover of the next reporting period.

2020 2019
Number Number

30. NUMBER OF EMPLOYEES

Total employees of the Company at the year end 76 68

Average employees of the Company during the year 72 67

31. PLANT CAPACITY AND PRODUCTION

The Company's primary activity pertains to making of heat exchangers as per customers' requirements
which is done via assembly of different parts available in stock. As a result, due to the nature of such
activity, the plant's capacity cannot be ascertained.
 13

32. RECLASSIFICATION

Corresponding figures have been rearranged and reclassified, wherever considered necessary, for the
purposes of comparison and to reflect the substance of the transactions. Following major reclassifications
have been made during the year:

Description Reclassified From Reclassified To Amount in Rs.

Loans to employees Loans and advances Long-term loans 1,042,000

Balances with banks Balance with banks - Balance with banks - savings 87,641
current accounts account

33. DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue on __________________________ by the Board of
Directors of the Company.

34. GENERAL

Figures in these accounts have been rounded off to the nearest rupee.

Chief Executive Director