himACKNOWLEDGEMENT

Even if all the trees on earth were pens, and the oceans ink, with seven more oceans added to it, the words of ALLAH would not be exhausted; for ALLAH infinite in Power and Wisdom. (Quran) All the praises for ALLAH Almighty, Who had blessed us with a unique opportunity to exhibit our caliber in a fruitful way. We would like to thank our Course Instructor Mr.Amjad iqbal who gave us opportunity to complete this project. He was always there for best advice, and able to point us in the right direction many times. Furthermore, we thank to our parents who supported greatly during the project and forced to continue even at times when things werent going so well.

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Table of Contents
Vision: ................................ ................................ ................................ ................................ ............... 3 Mission Statement: ................................ ................................ ................................ ............................ 4 Executive Summary:................................ ................................ ................................ .......................... 5 1. I. II. III. IV. 2. 3. 4. I. II. 5. 6. 7. 8. 9. 10. 11. 12. I. II. a) b) c) d) 13. 14. 15. Introduction: ................................ ................................ ................................ .............................. 7 Textile Technics (Pvt.) Ltd. ................................ ................................ ................................ .... 7 Pioneer Cement Ltd. ................................ ................................ ................................ ............... 7 Noon Sugar Mills Ltd. ................................ ................................ ................................ ........ 8 Noon Pakistan Ltd. (Nurpur Milk) ................................ ................................ ...................... 8

Management Experience and skills:................................ ................................ .......................... 10 Business Model:................................ ................................ ................................ ....................... 11 Relationship with Debtors and Creditors: ................................ ................................ ................. 12 Relationship with Debtors: ................................ ................................ ................................ ... 12 Relationship with Creditors: ................................ ................................ ................................ . 12 SWOT Analysis: ................................ ................................ ................................ ...................... 13 PEST Analysis: ................................ ................................ ................................ ........................ 14 Sector Analysis: ................................ ................................ ................................ ....................... 15 Economic Outlook: ................................ ................................ ................................ .................. 16 Future Prospects:................................ ................................ ................................ ...................... 19 Proposal with credit terms and conditions:................................ ................................ ............ 20 Financial Analysis: ................................ ................................ ................................ ............... 21 Identification of all possible Risk and their Mitigates:................................ ........................... 26 Capital Risk Management: ................................ ................................ ................................ ... 26 Financial Risk: ................................ ................................ ................................ ..................... 26 Credit Risk: ................................ ................................ ................................ ...................... 26 Liquidity Risk: ................................ ................................ ................................ ................. 28 Market Risk: ................................ ................................ ................................ .................... 29 Fair Value of Financial Instruments: ................................ ................................ ................. 30 Proposal with credit terms and conditions:................................ ................................ ............ 31 Securities/Collateral ................................ ................................ ................................ ............. 33 Conclusion/Decision ................................ ................................ ................................ ............ 33

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Vision:
Our vision at Nurpur is to be a transformative force in our community and world at large and to serve as a model of a sustainable business alternative that nurtures social and economic well-being in an environmentally sensitive manner.

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Mission Statement:
Nurpur is committed to supplying the consumer and our customers with the finest, high quality products and to leading the industry in healthy and nutritious products. Nurpur supports these goals with a corporate philosophy of adhering to the highest ethical conduct in all its business dealings, treatment of its employees, and social and environmental policies.

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Executive Summary:
Pakistan is the 4th largest milk producer in the worldyet its share in the global milk market is negligible and only 3% of the total milk production is being processed. Overall, the contribution of dairy sub-sector to national economy is Rs 540 billion (with 97% as informal non-documented economic activity) and is expected to grow at 4%. There is potential in the country for grooming of this industry. The Noon Group is well reputed business group in Pakistan; Noon Group has been in manufacturing and trading business since 1964, and due to its devotion towards serving its customers, it has emerged as a well established & widely respected group within the Pakistan industry. The company Noon Pakistan Ltd. (Nurpur Milk) was incorporated in 1966, with a paid up capital of Rs.5 Million and a total investment of Rs.18 Million. In the private sector, Noon Pakistan Ltd. was the first company in Pakistan to operate a Spray Dryer for milk powder manufacturing.and its products namely; milk powder, butter and cheese are marketed throughout Pakistan under the brand name of Nurpur. Nurpur purchase Milk from the milkmen or Dairy farms and use it as raw material, then it take to the plant and through UHT treatment it becomes hygenic milk and packed the milk into packets, the bulk production reached to the warehouses where it is stored and from where it is supplied to the Distributors on both credit and cash base. The acocount receivables are generated through credit sales and payment is received after couple of days or mont The hs. payment received from receivables contain the cost and profit margin of the company, the company pay to the creditors . that circle continue and the business continue. Being a part of Noon Group, the company has strong relationship with its debtors and creditors. In 2010 the total receivables was of Rs. 92007.844 Million, that showed the company is gaining trust of the debtors and increased its credit sales from previous years. In 2010 the total payables was of Rs.22826.760 Million that showed the creditor have trust on the company. In 2010 Nurpur is with the average monthly capacity of 0.487 Million liters (2009: 0.487 Million liters) and average monthly production 0.222 Million liters in 2010 (2009: 0.147 Million liters). Between 200609, consumption of LDP in Pakistan steadily increased in line with population growth, with a CAGR(Compounded Annual Growth Rate) of 2.4% (according to Tetra Pak data). In 2009, LDP consumption reached 18.9bn litres, maintaining its position as the fourth largest LDP consumer after India, China and the US. In the same period, packaged LDP grew at a CAGR of 8.4% compared with unpackaged products, which grew at a CAGR of 2.1%. Tetra Pak expects packaged LDP to continue growing, with a CAGR of 10.4% from 2009 12. In our country the dairy industry is not well established, only around 4% -6% milk is

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processed and packed by the companies and remaing 96% -94% is directly supplied by the milkmen to household, if government support, the ratio can b reversed. In 2008 the company has enough funds available to meet the working capital requirement, and it didnt need financing from any bank for working capital requirement, but in 2009 due to economic conditions of the country, company needs Rs. 77 30.10 Million for working capital, In 2010 the net sales of the company is Rs. 2436.416 Million (2009: Rs.1745.609 Million, 2008: Rs.1615.387 Million) that show a increased in the net sales of the company, the growth in the sales is 8.1% in 2009 as compare to 2008 and in 2010 is increased to 39.6% as compare to 2009. The cost of sales in 2010 is Rs. 2170.498 Million (2009: Rs. 1528.572 Million, 2008: Rs.
1404.037 Million) that show increase in the cost of sales. In 2010 the cost of sales is 86.9% of the sales (2009: 87.6% of the sales, 2008: 89.1% of the sales) the percentage of cost of sales to sales is decreased from previous years that didnt mean that the cost is decreased that is because of increased in the sales.

The operating profit ratio 3.67% in 2010, which decreased from previous year 2009 of 4.45% the minimum ratio is 0.04% in 2006 and after this the company is progressing and goes up to 4.45% in 2009 and again decreased in 2010. The net profit in 2010 is Rs.27.286 Million and the ratio to sales is 1.12% which is decreased from previous years 2009: Rs. 48.581 Million with the ratio of 2.78%,%) and that is because of large amount of administrative and distribution expenses, the large portion distribution is the freight and forwarding Expenses, which increased in 2010. Out of the total financial assets, which are subject to credit risk aggregated Rs.127.586 Million (2009: Rs. 81.499 Million). To manage exposure to credit risk in respect of trade debts, management performs credit reviews taking into account the customer's financial position, past experience and other factors. Concentration of credit risk arises when a number of counter parties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligation to be similarly affected by the changes in economic, political or other conditions. The Company believes that it is not exposed to major concentration of credit risk. Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities.

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1. Introduction:
The Noon Group is well reputed business group in Pakistan; Noon Group has been in manufacturing and trading business since 1964, and due to its devotio towards serving its n customers, it has emerged as a well established & widely respected group within the Pakistan industry. Noon Group is running following companies/businesses successfully under Noon Group management: I. Textile Technics (Pvt.) Ltd. II. Pioneer Cement Ltd. III. Noon Sugar Mills Ltd. IV. Noon Pakistan Ltd. (Nurpur Milk) V. Noon International VI. Textile Services (Pvt.) Ltd.

I.

Textile Technics (Pvt.) Ltd.

Noon Group is an engineering concern engaged in the production of textile weaving reeds in Pakistan. Our company was initially established as a joint venture b/w Noon Group, Pakistan and Blue Reed, Spain, in 2004. In July 2007 Mr. Noon took over 100% shareholding of the company. Blue Reed has been producing high quality reeds in Spain for more than fifty years. Thee s reeds are well known for their high quality and competitive. Before Textile Technics started producing reeds locally, Blue Reed had significant share of imported reed market in Pakistan. Blue Reed (initially) provided technology i.e. training of our eng ineers in Spain, as well as monitoring & management of quality standards. Sales & Marketing of Reeds, being produced by Textile Technics, has been outsourced and is managed by Textile Services, which is another company of Noon Group.

II.

Pioneer Cement Ltd.

Pioneer cement is a name synonymous with quality since the inception of the project. First unit was commissioned in November 1994; the state of art European (FLS) plant is equipped with special feature of quality controls. 2nd unit commissioned in January 2006. Due to its superior quality, Pioneer Cement has on the confidence of its customer.

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III.

Noon Sugar Mills Ltd.

Sugar Company was incorporated in 1964 as a Public Company for setting up a plant for the manufacture of white sugar in the province of Punjab. The plant went into production in 1966 with a daily crushing capacity of 1500 MT of sugar cane, which has since been raised to 4000 MT per day. The present equity of the company is Rs.300 Million with total investment of over Rs.600 Million. Annual sales revenue amounts to Rs.850 Million including export of 75 Million.

IV.

Noon Pakistan Ltd. (Nurpur Milk)

The company was incorporated in 1966, with a paid up capital of Rs.5 Million and a total investment of Rs.18 Million. In the private sector, Noon Pakistan Ltd., was the first company in Pakistan to operate a Spray Dryer for milk powder manufacturing. The installed capacity of the plant is 72,000 liters/2 shifts. The plant commenced its operation in June 1972 and its products namely; milk powder, butter and ch eese are marketed throughout Pakistan under the brand name of Nurpur. Annual sales revenue amounts to Rs.957 Million. The total no. of employees is 200. The company has recently (2004) put up a UHT Tetrapak milk plant. Core Values: y y y y y y y Customers are at the forefront of everything we do. Ideas are constantly challenged to develop next generation solutions. Business is conducted openly and fairly but we compete fiercely. Team-work is encouraged with individual flair for the best results. Tough goals are set and we enjoy the challenge of beating them. Environment We value preservation of the environment and sustainable organic agriculture. Community We value mutually supportive relationships among members of our local and global communities.

Products:

1. Dairy products a. UHT Milk b. Pasteurized Milk c. Flavored Milk d. Butter 2. Processed Dairy a. UHT Cream b. Cheese c. Skimmed milk Powder d. Full Cream milk Powder

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3. Fruit Products a. Apple Nectar b. Orange Juice c. Jams d. Marmalades e. Whey Powder 4. Others a. Water b. Desi Ghee

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2. Management Experience and skills:

BOARD OF DIRECTORS Mr. Manzoor Hayat Noon Mr. K. Iqbal Talib Mr. Javed All Khan Mr. Safdar M. Hayat Qureshi Mr. Salman Hayat Noon Mr. Adnan Hayat Noon Mr. Zaheer Ahmad Khan COMPANY SECRETARY Syed Anwar Ali AUDIT COMMITTEE Mr. Salman Hayat Noon Mr. K. Iqbal Talib Mr. Adnan Hayat Noon AUDITORS Hameed Chaudhri & Co. CHIEF FINANCIAL OFFICER Mr. Nauman Afzal LEGAL ADVISERS Hamid Law Associates Chairman Member Member Chairman and Chief Executive

Chartered Accountants

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3. Business Model:

Supplier Cash Paid Raw Material (Credit)

Cash Received

Production

Account Receivables

Inventory Distributors (Credit)

Nurpur purchase Milk from the milkmen or Dairy farms and use it as raw material, then it take to the plant and through UHT treatment it becomes hygenic milk and packed the milk into packets, the bulk production reached to the warehouses where it is stored and from where it is supplied to the Distributors on both credit and cash base. The acocount receivables are generated through credit sales and payment is received after couple of days or months. The payment received from receivables contain the cost and profit margin of the company, the company pay to the creditors . that circle continue and the business continue.

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4. Relationship with Debtors and Creditors:

Nurpur belong to well reputed group the Noon Group, being a part of Noon Group, Nurpur have a strong relationship with its debtors and creditors.

I. Relationship with Debtors:

In 2010 the total receivables was of Rs. 92007.844 Million (2009: Rs. 61764.021 Million, 2008: Rs.
50952.033 Million), that showed the company is gaining trust of the debtors and increased its credit sales with the passage of time, and debtors purchased more goods. The days receivables means after what interval the company is receiving amount from debtors, In 2010 the receivables days is 14 days (2009: 13 days, 2008: 11 days), it is increased from previous years, and that was because of attaining large market shares and new customers, for the new market shares company offer new debtors a relax payback time to maximize its earnings.

II. Relationship with Creditors:

In 2010 the total payables was of Rs.22826.760 Million (2009: Rs. 143963.484Million, 2008: Rs. 151367.052 Million), that showed the creditor have trust on the company and they provide raw material to the company for the production. In 2010 the days payables was 39 days that increased from the previous year 2009; 34 days. The increase in the days payables is because of company gives bill payables against the good purchased to attain the confidence of new creditors.

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5. SWOT Analysis:
Strengths: y Having Strong Business Name called NOON Group y Provide Best Quality Products y Hygienic milk y Long term Storage y Taste y Nutritious y Growing sales & Profits y Environment Friendly y Innovative & Constantly growing Product Line y One of the pioneer of Dairy Products Weakness: y Low market campaign y Depend upon their own marketing company y Lack of research & Development y Relatively a small company in comparison to its rivals y Dependence on third party for supply of Milk y Comparatively weak distribution system Opportunities: y Target market has big profit margins y Bright scope of dairy products y Target Market can easily be located Threats: y Strong Competitors There is always a great danger of price war among competitors because all the competitors are well known in the market and also supported by well known groups like Nestle, Haleeb, Olpar, Tetra pack etc. y Animal diseases y Availability of natural Milk (alternate sources) y Price sensitive people y Uncertainty of Economic Conditions

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6. PEST Analysis:
Political Analysis: The political conditions are not very stable in the country, but this does not directly influence the trends and spending patterns of the customers. There are no restrictions or barriers on the growth of this industry. So the political conditions do not impact of this market because its a consumer base product and has to be purchase by customer in any condition . Economic Analysis: The economical conditions are not very favorable and the economyis facing problems, but it is directly influencing buying power of consumers, but in our product it not that much that it should be. If the country is out of its current problems, it will further boost up growth of this industry, as people will feel more secure economically and it will further increase the attractiveness of the market. Social Analysis: The social patterns are changing in the country, as the world is becoming a global village, and mutually share and accept patterns. People are becoming more attractive towards the branded products. It is becoming fashion and young generations as well as the children are getting more attracted towards this industry. People are moving towards branded food / dairy products due to hygienic reason. Technology Analysis: High technology is the basic requirement of dairy and food industry. The companies that are using latest technology have some cost benefits over the companies, which are not using high technology. The key to survival for companies in this industry is using high technology for quality, hygienic and cost purposes.

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7. Sector Analysis:

Capacity Companies (Million liters) Nestle 1.3 Haleeb food ltd 0.9 Vita 0.05 Halla 0.15 Prime 0.1 Nirala 1.0 Dairy Crest 0.15 K&K 0.04 Butt Dairies 0.04 Munno Dairies 0.06 Karachi Dairies 0.1 Military Dairy 0.18 Farms Nurpur 0.15 Total 4.22

Capacity Utilization Flush Lean 1.3 0.9 0.03 0.15 0.15 0.1 0.15 0 0.06 0.02 0 0.18 0.15 3.19 0.78 0.54 0.018 0.09 0.06 0.06 0.09 0 0.036 0.012 0 0.105 0.09 1.881

Average Monthly 1.04 0.72 0.042 0.12 0.08 0.08 0.12 0 0.048 0.016 0 0.144 0.12 2.53

Nestle is the largest company in milk industry with the production capacity of 1.3 Million liters with average monthly capacity of 1.04 Million liters. Haleeb Food limited is the second largest company in milk industry with the production capacity of 0.9 Million liters with average monthly capacity of 0.72 Million liters. Nurpur Milk is the 5th largest milk producing company in Pakistan with the producti n capacity of 0.15 Million liters with the o average monthly capacity of 0.12 Million liters according to 2005 data. Now Nestle is remained at the top in this industry with the average monthly capacity of 99.5 Million liters (2009: 80.58 Million liters) and average monthly production 62.5 Million liters in 2010 (2009: 53.33 Million liters). 2010 Nurpur is with the average monthly capacity of 0.487 Million liters (2009: 0.487 Million liters) and average monthly production 0.222 Million liters in 2010 (2009: 0.147 Million liters).

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8. Economic Outlook:
One of Pakistans longstanding traditions is that of the milkman who goes door to door delivering households their daily supply of milk. As a result, unprocessed, unpackaged milk represents nearly 94% of all liquid dairy products (LDP) consumed in Pakistan, and has played an important role as a tea creamer, yogurt and standalone refreshment. Between 200609, consumption of LDP in Pakistan steadily increased in line with population growth, with a CAGR(Compound annual growth rate) of 2.4% (according to Tetra Pak data). In 2009, LDP consumption reached 18.9bn litres, maintaining its position as the fourth largest LDP consumer after India, China and the US. In the same period, packaged LDP grew at a CAGR o 8.4% compared with unpackaged f products, which grew at a CAGR of 2.1%. Tetra Pak expects packaged LDP to continue growing, with a CAGR of 10.4% from 200912. Pakistan mirrors demographic drivers around the world. More urban, educated and sophisticated consumers, an emerging middle class and a large group of younger consumers are transforming its dairy industry. As elsewhere, they demand new, safer, more convenient products.
Going urban

During the past 11 years, Pakistans urban population has increased by three percentage points. By 2009, 35.5% were living in cities (59.9m people, 5m more than in 1998) according to Tetra Pak Pakistan. Thus, as people have moved further from the rural areas where most of the dairy farms are found, their access to good quality loose milk has been limited due to the lack of a cold supply chain. This has provided packaged milk companies with the opportunity to provide good quality, safe milk in an alternative form.
More educated, sophisticated consumers

This group values safety, hygiene and convenience. As a result, from 1999 to 2009, packaged LDP products grew by a CAGR of 19%. This has been partly due to dairy industry educational campaigns that have created awareness of the safety and nutritional benefits of packaged milk. Many consumers also appreciate the fact that packaged milk doesnt need to be boiled before use, as loose milk does. In addition, it can be stored for up to three months before opening, so they dont need to source milk daily.

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Households choose premium products

The growing middle class can afford safer, healthier products that cost at least20% more than loose milk. The number of Pakistani households in the top three socio -economic groups (as defined by SEC A-C, a tool used to measure consumers prosperity has grown by 1% ) annually in recent years, according to Tetra Pak Pakistan. These consumers, who now make up 42% of the population, are increasingly able to afford premium packaged products such as skimmed and RTD flavoured milk.
Youthful population

Currently, 30% of Pakistans population is under 9 years of age, and 53% is under 19. Producers are promoting RTD flavoured milk to younger consumers who most often choose chocolate, strawberry, mango and banana. Adults also like flavoured products. One of Pakistans most popular flavoured milk brands also offers traditional flavours such as saffron, pistachio and cardamom to appeal to adult tastes. Flavoured milk still represents just2.4% of the RTD LDP market in Pakistan. However, it grew by a CAGR of 56.3% from 2006 to 2009 and is forecast to grow at 23.1% CAGR from 2009 to 2012, according to Tetra Pak.
Targeting consumer segments

While nearly 72.8% of RTD LDP in Pakistan are still sold as plain 3.5% long-life milk, dairy producers are increasingly segmenting the market and developing specialised products. With the exception of white milk and tea creamers, all other products are positioned as premium and command higher prices.
Outlook bright for packaged milk

Pakistans population is growing by 1.7% a year, and LDP consumption is expected to grow at a CAGR of 2.8% from 2009 to 2012. Milk has always played a central role in the Pakistani diet, but with demographic changes driving new preferences for packaged milk, the era of nothing but plain, white unpacked milk is rapidly changing.
Meeting needs of tea-drinkers

In 2007, dairy producers in Pakistan realised that consumers were buying small packages (250ml) of plain white milk for use as creamer in the countrys most popular beverage, tea. Consumers preferred the richer taste of tea made with UHT milk, and smaller packages were more affordable. So producers began developing and marketing special tea creamer recipes in 200ml packages. In addition to improving the taste profile of tea, the new size also made tea creamer more affordable than plain white milk. Today, tea creamers represent more than 25% of the LDP market that will achieve a CAGR of 28% from 2009 to 2012, according to Tetra Pak.

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This sector is expected to improve due to availability of fodders and green pastures. Increased demand for processed food and dairy products is encouraging the private secor to t increase investment in livestock and dairy sectors. Pakistan is the 4th largest milk producer in the worldyet its share in the global milk market is negligible and only 3% of the total milk production is being processed. Overall, the contribution o dairy sub-sector to national f economy is Rs 540 billion (with 97% as informal non-documented economic activity) and is expected to grow at 4%.

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9. Future Prospects:
The management of the company looks forward to the future with confidence and envisages still better performance in the coming year. We have set clearly defined goals for each Department and are also in the process of removing bottlenecks in our production facilities and adding some new equipment to facilitate availability of all the products in line with the growing demands for our products. However, we do anticipate very severe competition both in selling our brands andcollection of raw milk, especially after the recent devastating floods, which has resulted in loss of a very large number of milk producing cattle.

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10. Proposal with credit terms and conditions:

2008 Working Capital
Rs. (28250.62)

2009
Rs. 7730.10

2010
Rs. (43319.55)

2008 Funds Stuck in inventory (Days inventory*Daily cost of 73086.8486 sales) Funds Stuck in Receivables (Days receivables* Daily 48682.9044 sales) Funds available from payables (Days payables * daily 150020.374 cost of sales) 2008 Days Inventory Days Receivables Days payables Sales Daily sales Cost of sales Daily Cost of Sales
19 11 39 1615387.282 4425.719 1404036.829 3846.676

2009
87945.226 62172.3861 142387.509

2010
83251.9914 93451.5773 220023.12

2009
21 13 34 1745609.302 4782.491 1528571.786 4187.868

2010
14 14 37 2436416.122 6675.113 2170498.348 5946.571

In 2008 the company has enough funds available to meet the working capital requirement, and it didnt need financing from any bank to meet working capital requirement, but in 2009 due to economic conditions of the country, company needs Rs. 7730.10Million for working capital, and in 2010 company recover from previous situation of 2009 and not only meet its requirement but also generate more funds then 2008.

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11. Financial Analysis:

Sales analysis: In 2010 the net sales of the company is Rs. 2436.416 Million (2009: Rs.1745.609 Million, 2008: Rs.1615.387 Million, 2007: Rs.1152.735 Million, 2006: Rs.1123.211 Million, 2005: Rs. 928.498 Million) that show a increased in the net sales of the company, the growth in the sales is 8.1% in 2009 as compare to 2008 and i 2010 is increased to 39.6% as compare to n 2009. There are two ways of increase in the net sale, whether it is due to increase in the production or increase in the prices, in this scenario both factors impact in the sales of the company. There is also a reason of the expenses with is deducted f orm the sales and the company was also facing increased amount of expenses but the percentage of Expense is low than the percentage increase in the sales.

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The cost of sales analysis: The cost of sales in 2010 is Rs. 2170.498 Million (2009: Rs. 1528.572 Million, 2008: Rs. 1404.037 Million, 2007: Rs. 988.921 Million, 2006: Rs. 925.831 Million, 2005: Rs. 785.825 Million), that show a increase in the cost of sales. The production expenses increased with the increase in the production of the products. Higher the production higher the cost of production is but with slow pace. The increased amount of the cost of production is due to increase the Raw material consumption. In 2010 the cost of sales is 86.9% of the sales (2009: 87.6% of the sales, 2008: 89.1% of the sales) the percentage of cost of sales to sales is decreased from previous years that didnt mean that the cost is decreased that is because of increased in the sales.

Gross Profit: The gross profit of 2010 is Rs.265.918 Million that is increased from 2009 and 2008; the ratio in the year 2010 is 10.91% that decreased from previous years; in 2009which is 12.43% it is because of increase in the cost of sales.

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Operating Profit: The operating profit ratio 3.67% in 2010, which decreased from previous year of 4.45% (2009) the minimum ratio is 0.04% in 2006 and after this the company is progressing and goes upto 4.45% in 2009 and again decreased in 2010.

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Net Profit/ (loss) after tax: The net profit in 2010 is Rs.27.286 Million and the ratio to sales is 1.12% which is decreased from previous years (2009: Rs. 48.581 Million with the ratio of 2.78%, 2008: Rs. 34.813 Million with the ratio of 2.16%, 2007: Rs. 17.544 Million with the ratio of 1.52%, 2006: Rs. (11.865 Million with the ratio of 1.06%) and that is because of large amount of administrative and distribution expenses, the large portion distribution is the freight and forwarding Expenses, which increased in 2010. The company faced a loss in 2006 and after this it is recovering and since then it is in profit.

Current Ratio: The current ratio of 2010 is 0.73 (2009: 0.81, 2008: 0.85) which shows that the current liabilities is greater than the current assets, the increase in current liabilities is due increase in the creditors and bill payable, and the current assets were not much increased. On the average industrys ratio was between0.5 to 1. Nestls current ratio in 2010 was 0.9% (2009: 1 and 2008: 1.1) Quick Ratio: The quick ratio of 2010 is 0.7 (2009: 0.6, 2008: 0.6) which shows that there were sufficient funds to the company for paying its debts; the quick ratio is increased because there was enough increase in the cash and bank balances and it almost 100% increase in one year.

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Debt Equity Ratio: The debt equity ratio shows that how much leverage the companyis; the Nurpur Company is directed towards debt and its debt equity ratio was 1.21 in 2010 (2009: 1.43, 2008: 1.79). Now the company is moving towards Equity and that is shown in the debt equity ratio.This also shows that company is also paying its debts. And it is the signal of healthy company. Interest Coverage Ratio: The interest coverage ratio shows that how much the profit is available to pay the interest expense. This ratio is beneficial for banking industry because they interest in their markup, the higher the ratio the higher the trust of bank. In this company the interest coverage ratio was 2.24 in 2010, (2009: 1.90, 2008: 2.37). The interest ratio is decreased in 2009 as compare to 2008 it is because of high profits and low markup expense; its mean the company is paying back its debts. Admin and distributed Expenses to sales:
The admin and distributed expenses in 2010 was Rs. 189,553.805 Million and it increased from previous years (2009:139360.045 Million, 2008: Rs. 204040.155 Million) but decreased from 2008. The admin and distribution expenses have major portion of distribution expenses which is directly related to the sales of the company. The higher the sales means higher the distribution expenses, in 2008 and 2010 company has more sales then 2009, in 2009 the sales id decreased because there was flood in the country.

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12. Identification of all possible Risk and their Mitigates:

I. Capital Risk Management:
The Company's prime objective when managing capital is to safeguard its ability to continue as a going concern in order to provide adequate returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to the ordinary shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Company monitors capital o the basis of gearing n ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and bank balances. Total capital is calculated as equity as shown in the balance sheet plus net debt.
2010
Total Borrowings Less: Cash and bank balances Net debt Total Equity Total capital Gearing Ratio 288,126.455 23,350.614 264,775.841 237,462.893 502,238.734 53%

2009 Rupees(000) 299,144.168 10,842.562 288,301.606 209,803.656 498,105.262 58%

2008
303,591.554 29,292.255 274,299.299 169,836.202 444,135.501 62%

For the purpose of calculating the gearing ratio, the amount of total borrowings has bee n determined by including the effect of liabilities against assets subject to finance lease and short term finances under mark-up arrangements.

II. Financial Risk:

The Company has exposures to the following risks from its use of financial instruments:

a) Credit Risk:

Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties fail completely to perform as contracted. Credit risk arises from cash equivalents, deposits with banks, as well as credit exposures to customers and other counter parties, which include trade debts and other recevables. Out of i the total financial assets, which are subject to credit risk aggregated Rs.127.586 Million (2009: Rs. 81.499 Million, 2008: Rs. 86.329 Million). To manage exposure to credit risk in respect of trade debts, management performs credit reviews taking into account the customer's financial position, past experience and other factors. Where considered necessary, advance payments are obtained from certain parties.

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In respect of other counter parties, due to the Company's long standing business relationship with them, management does not expect non -performance by these counter parties on their obligations to the Company. Concentration of credit risk arises when a num of counter ber parties are engaged in similar business activities or have similar economic features that would cause their abilities to meet contractual obligation to be similarly affected by the changes in economic, political or other conditions. The Company believes that it is not exposed to major concentration of credit risk. The maximum exposure to credit risk as at 30 June, 2010 along with comparative is tabulated below:
2010
Security deposits Trade Debts Due from associated companies Other receivables Bank Balances Total 11,011.268 92,007.844 1,003.924 314.005 23,248.63 127,585.67

2009 Rupees(000) 7,222.851 61,764.021 1,265.054 422.465 10,824.551 81,498.94

2008
5,342.498 50,952.033 0 770.716 29,263.505 86,328.75

The management does not expect any losses from non-performance by these counter parties. All the trade debts at the balance sheet date represent domestic parties. The aging of trade debts at the balance sheet date is as follows:
2010
Not past due Past due 1-45 days Past due 45-180 days Past due 180 days Total 63,131.992 11,800.335 3076.027 13999.49 92007.844

2009 Rupees(000) 44,415.533 744.306 6460.297 10143.885 61764.021

2008
38,512.745 1169.509 70.516 11199.263 50952.033

Based on past experience, the management believes that no impairment allowance is necessary in respect of trade debts past due 180 days as some of the debts have been recovered subsequent to the year-end and for other debts there are reasonable grounds to believe that the amounts will be recovered in short course of time.

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b) Liquidity Risk:

Liquidity risk is the risk that an entity will encounter difficulties in meeting obligations associated with financial liabilities. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The Company's treasury department maintains flexibility in funding by maintaining availability under committed credit lines. Financial liabilities in accordance with their contractual maturities are presented below:

2008 Carrying amount

Term and Demand finance 87,286.819 Loan from Chief executive 56,545.2 Liabilities against assets subject to 31,316.398 finance lease Trade and other payables 1863,43.072 Accrued and profit and 9,896.304 Interest/mark-up short term finance 123,943.137 Short term loan from Chief executive 4,500 Dividend 20,114.334 Total 519,945.264

Contractual Cash flows

111,949.402 87,645.06 37,459.595 186,343.072 9,896.304 0 4,668.75 20,114.334 458,076.517

Less than 1 year Rupees (000) 18,406.18 8,481.78

14,830.15 186,343.072 9,896.304 0 4,668.75 20,114.33 262,740.6

Between 1 to 5 Years

5 Years and above

22,494.244 71,048.983 9,047.232 7,0116.048 22,629.443 0 0 0 0 0

0 0 0 0 20,114.334 20,114.334 74,285.253 161,279.37

2009 Carrying amount

Term and Demand finance Loan from Chief executive Liabilities against assets subject to finance lease Trade and other payables Accrued and profit and Interest/mark-up short term finance Dividend 95,201.292 48,152.046 25,843.184 157,899.416 9,019.066 13,0339.972 5,206.912

Contractual Cash flows

114,168.184 65,005.261 29,291.118 157,899.416 9,019.066 130,339.972 5,206.912

Less than 1 year Rupees (000) 35,236.57

6,741.286 17,886.69 157,899.4 9,019.066 130,339.972 5,206.912

Between 1 to 5 Years
42,647.576 6,741.286 11,404.426 0 0 0 0

5 Years and above

36,284.035 51,522.689 0 0 0 0 0

Total

471,661.888

510,929.929

36,2329.9

60,793.288

87,806.724

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2010 Carrying amount Contractual Cash flows Less than 1 year Between 1 to 5 Years 5 Years and above
0 0 0 0 0 0 0 0

Term and Demand finance Loan from Chief executive Liabilities against assets subject to finance lease Trade and other payables Accrued and profit and Interest/mark-up short term finance Dividend Total

63,006.876 37,724.233 10,710.807 241,183.973 8,621.157 176,684.539 929.401 538,860.986

Rupees (000) 70,116.223 38,459.61 51,210.647 52,813.93

11,309.902 241,183.973 8,621.157 176,684.539 929.401 560,055.842 10,854.93 241,184.973 8,621.157 176,684.539 929.401 575,812.7

31,656.61 45,929.254 454.969 0 0 0 0 78,040.833

c) Market Risk:

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates and equity prices will affect the Company's income or the value of its holdings of financial instruments.
i. Currency risk

The Company is exposed to currency risk on import of stores and spares denominated in Euro and plant & machinery denominated in US Dollar. The Company's exposure to foreign currency risk for Euro and US Dollar are commitments against irrevocable letters of credit outstanding as at 30 June, 2010 amounting Rs.49.350 Million (2009: Rs.0.365 Million).

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ii.

Interest rate risk

At the reporting date, the profit, interest and mark-up rate profile of the Company's significant financial assets and liabilities is as follows:
2010 2009 Effective rate 2008 2010 2009 Carrying Amount Rupees(000) Fixed rate instruments Financial assets
Term deposit receipt Bank balances at PLS accounts 7% 5% 7% 1.20% 0% 1.84% 7,410.000 90.002 3,800.000 86.081 0.000 93.499

2008

Variable rate instruments Financial Liabilities

Term and demand finance 13.84% to 14.76% 13.64% to 14.07% 13.30% to 15% 13.59% to 14.77% 0% 13.97% to 17.02% 15.59% to 20.00% 12.92% to 15 % 14.02% to 16.75 % 0% 11.32% to 12.32% 11.59% to 14.79% 7.5% to 14.80% 11.07 % to 11.39 % 11.77% to 14.79 % 63006.876 95201.292 87286.82

Loan from chief executive liability against assets subjects to finance lease Short term finance Short term loan from chief executive

37724.233 10710.807

48152.046 25843.184

56545.2 31316.4

176684.539 129947.646 123943.1

0.000

0.000

4500

iii.

Other Price Risk:

Other price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk). The Company is not exposed to any price risk.
d) Fair Value of Financial Instruments:

Carrying values of the financial assets and financial liabilities approximate their fair values. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arms length transaction.

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13. Proposal with credit terms and conditions:

2008 Working Capital
Rs. (28,250.62)

2009
Rs. 7,730.10

2010
Rs. (43,319.55)

2008 Funds Stuck in inventory (Days inventory*Daily cost of sales) Funds Stuck in Receivables (Days receivables* Daily sales) Funds available from payables (Days payables * daily cost of sales)
73,086.8486 48,682.9044 150,020.374

2009
87,945.226 62,172.3861 142,387.509

2010
83,251.9914 93,451.5773 220,023.12

2008 Days Inventory Days Receivables Days payables Sales Daily sales Cost of sales Daily Cost of Sales
19 11 39

2009
21 13 34

2010
14 14 37

1,615,387.282 1,745,609.302 2,436,416.122 4,425.719 4,782.491 6,675.113

1,404,036.829 1,528,571.786 2,170,498.348 3,846.676 4,187.868 5,946.571

In 2008 the company has enough funds available to meet the working capital requirement, and it didnt need financing from any bank to meet working capital requirement, but in 2009 due to economic conditions of the country, company needs Rs. 7730.10Million for working capital, and in 2010 company recover from previous situation of 2009 and not only meet its requirement but also generate more funds then 2008.

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2010

2009

2008

From the above table it shows that the company increased its production with the passage of time and it need new plants for more productions, and required loan from banks and other sources like issuing shares etc.

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14. Securities/Collateral
In the end of 2010 the company has free hold Land of Rs. 8807.460 Million and building on 1 free hold Land was Rs.35047.068 Million, the company can use both Land and Building as collateral for the loan from bank. As a bank we prefer freehold Land as collateral. Lets suppose the company wants to take loan of Rs. 75 Million against mortgage of its part of free hold land, then company has to mortgage the Land of Rs. 100 Million, the remaining Rs 25 Million is the margin for the bank.

15. Conclusion/Decision
The company has no need of running finance facility for the working capital requirementbut it need for the buy and installation of new plants, and from the companys detail analysis it is clearly shown that the company management have capability to increa its production and se market share, and also there is potential in the industry to groom. From the detailed analysis we come to point that the company needs finance for new machinery, and our bank should give it the facility.

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References:
1. Financial Statements of the Company 2008, 2009 and 2010. 2.

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