Research Project On Azgard 9

Table of Contents
Executive Summary ........................................................................................................................ 1
Introduction to industry................................................................................................................... 2
History......................................................................................................................................... 2
Production ................................................................................................................................... 2
Trade ........................................................................................................................................... 3
Introduction to Azgard 9 ltd ............................................................................................................ 4
History......................................................................................................................................... 4
Status and nature of business ...................................................................................................... 5
Azgard Nine Limited ('ANL') - Parent Company ................................................................... 5
Farital AB ('FAB') - Subsidiary Company.............................................................................. 5
Mission............................................................................................................................................ 6
Vision .............................................................................................................................................. 6
Corporate Profile ............................................................................................................................. 7
BOARD OF DIRECTORS ......................................................................................................... 7
COMPANY SECRETARY ........................................................................................................ 7
CHIEF FINANCIAL OFFICER ................................................................................................. 7
HR & REMUNERATION COMMITTEE ................................................................................. 7
BANKERS .................................................................................................................................. 7
Product & Services ......................................................................................................................... 8
DEINM ....................................................................................................................................... 8
Machinery Details ....................................................................................................................... 8
Utilities Data ........................................................................................................................... 9
Technical Data ........................................................................................................................ 9
Services in DEINM Division .................................................................................................. 9

Garments Division .................................................................................................................... 11
Technical Data .......................................................................................................................... 11
Service & Machinery Details .................................................................................................... 11
Industry Analysis .......................................................................................................................... 12
Industry Layout ......................................................................................................................... 12
Share in GDP ........................................................................................................................ 12
World Textile Trade .............................................................................................................. 12
Exports Trend (1997 2014) ................................................................................................ 12
Reasons of Downfall in Textile Industry .............................................................................. 15
Growth trend in Pakistan (2010 2013) ............................................................................... 15
Producers of Textile Industry in Pakistan ................................................................................. 16
Analyzing External Environment ................................................................................................. 17
Natural Environment ..................................................................................................................... 17
Lack of (R&D) in cotton sector ................................................................................................ 17
Lack of modernize equipment .................................................................................................. 17
Finance Bill to burden industry further ..................................................................................... 17
Increasing cost of production .................................................................................................... 17
Energy crisis.............................................................................................................................. 17
Effect of Inflation ...................................................................................................................... 18
Removal of subsidy on Textile sector ....................................................................................... 18
The Effect of Global Recession on Textile Industry ................................................................ 18
GPEST analysis ............................................................................................................................ 19
POLITICAL Factors ................................................................................................................. 19
ECONOMICAL Factors ........................................................................................................... 19
SOCIAL Factors ....................................................................................................................... 19

TECHNOLOGICAL Factors .................................................................................................... 20
Factors ........................................................................................................................................... 21
Tax Policy ................................................................................................................................. 21
Export Restrictions.................................................................................................................... 21
Government stability and likely changes .................................................................................. 22
Health and safety law ................................................................................................................ 22
Laws regulating environment pollution .................................................................................... 22
Growth rates .............................................................................................................................. 22
Inflation rate .............................................................................................................................. 23
Exchange rates .......................................................................................................................... 23
Labor costs ................................................................................................................................ 23
Stage of business cycle ............................................................................................................. 23
Monetary policies...................................................................................................................... 23
Fiscal policies............................................................................................................................ 24
Lifestyle .................................................................................................................................... 24
Population Growth rate ............................................................................................................. 24
Social Classes............................................................................................................................ 24
Buying habits ............................................................................................................................ 24
Opportunities................................................................................................................................. 25
Threat ............................................................................................................................................ 25
EFE matrix .................................................................................................................................... 26
PORTER FIVE FORCE ANALYSIS OF TEXTILE INDUSTRY IN PAKISTAN .................... 26
ENTRY & EXIT BARRIER ......................................................................................................... 27
LEGAL ENVIRONMENT ....................................................................................................... 27
ENERGY CRISES .................................................................................................................... 28

BARGAINING POWER OF BUYERS ....................................................................................... 29
BARGAINING POWER OF SUPPLIER ..................................................................................... 30
LEVEL OF COMPETITION ........................................................................................................ 30
THREAT OF SUBSTITUTE ........................................................................................................ 31
Analyzing Internal Environment................................................................................................... 32
Supply chain.................................................................................................................................. 32
Supplier ..................................................................................................................................... 32
Alraheem Industrial Traders ................................................................................................. 32
New Arab Chemicals ............................................................................................................ 32
Manufacturing ........................................................................................................................... 32
Distributor ................................................................................................................................. 33
Wholesalers ............................................................................................................................... 33
Retailers .................................................................................................................................... 33
End users ................................................................................................................................... 33
Value chain ................................................................................................................................... 33
Product related cost (inbound & PD) ........................................................................................ 35
Market Related Cost (Outbound logistics, marketing sales, services)...................................... 35
Support Activities ......................................................................................................................... 36
Strength ......................................................................................................................................... 37
Weakness ...................................................................................................................................... 37
IFE Matrix ..................................................................................................................................... 38
IE Matrix ....................................................................................................................................... 38
Grand Strategy of the Azgard 9 .................................................................................................... 39
Organizational Structure ............................................................................................................... 39
Organizational Hierarchy .............................................................................................................. 39

Price Strategy ............................................................................................................................ 40
Price Skimming..................................................................................................................... 40
Distribution Channel ................................................................................................................. 40
Promotion.................................................................................................................................. 41
Segmentation............................................................................................................................. 41
Positioning ................................................................................................................................ 41
Differentiation ........................................................................................................................... 41
Human Resource management ..................................................................................................... 42
Employee Recruitment & selection .............................................................................................. 42
Internal Hiring ........................................................................................................................... 42
Transfers ............................................................................................................................... 42
Promotions ............................................................................................................................ 43
Present Employees ................................................................................................................ 43
External Sources ........................................................................................................................... 43
Advertisement ........................................................................................................................... 43
Schools, Colleges and Universities ........................................................................................... 43
Recommendation of Existing Employees ................................................................................. 44
Factory Gates ............................................................................................................................ 44
Central Application File ............................................................................................................ 44
Labor Contractors ..................................................................................................................... 44
Former Employees .................................................................................................................... 44
Training & Development .............................................................................................................. 45
On job training .......................................................................................................................... 45
Off job training ......................................................................................................................... 45
Performance Management ............................................................................................................ 45

Compensation Policy .................................................................................................................... 46
Financial Analysis ......................................................................................................................... 47
Internal Analysis ....................................................................................................................... 47
Liquidity Ratio ...................................................................................................................... 47
Leverage Ratios .................................................................................................................... 48
Coverage Ratios .................................................................................................................... 49
Efficiency Ratio .................................................................................................................... 49
Profitability Ratio.................................................................................................................. 50
External Analysis (Year 2016).................................................................................................. 51
Liquidity Ratios .................................................................................................................... 51
Leverage Ratios .................................................................................................................... 52
Coverage Ratios .................................................................................................................... 53
Efficiency Ratios ................................................................................................................... 54
Profitability Ratio.................................................................................................................. 55
Business Strategies........................................................................................................................ 56
Ginning ..................................................................................................................................... 56
Spinning sector.......................................................................................................................... 57
Weaving & Made-up sector ...................................................................................................... 57
Composite Weaving Units .................................................................................................... 58
Independent Shuttle less looms............................................................................................. 58
The Power looms sector ........................................................................................................ 58
Knitting ..................................................................................................................................... 58
Readymade Garment sector ...................................................................................................... 59
Corporate Strategies .................................................................................................................. 59
Core Values ............................................................................................................................... 59

Respect for All ...................................................................................................................... 59
Integrity ................................................................................................................................. 59
Ethics..................................................................................................................................... 59
Work ethics ........................................................................................................................... 60
Functional Strategies ..................................................................................................................... 60
References ..................................................................................................................................... 61
1
Executive Summary
The textile & apparel sector is amongst the largest and most significant in Pakistans economy,
accounting for over 60% of total merchandise exports and providing employment to
38% of large scale manufacturing sector workforce.
There is an abundant supply of local raw material as Pakistan is the 4th largest producer in the
world. There is also an abundance of local labor available at a competitive cost
when benchmarked against regional competitors. Against this backdrop the industry remains
largely fragmented with few large scale integrated players. Worldwide denim production
capacity is over 6 billion linear meters.
Denim is the worlds largest cotton textile product with estimated per annum global sales of 4
billion units.
Azgard9 is Pakistans largest denim products business by sales with a fully vertically integrated
Manufacturing chain. From cotton to retail ready apparel products. In house capability for
spinning. Weaving, Design, finishing and stitching enables control over the entire value chain
and provides a significant competitive advantage in facilitating faster speed to market and
control over product quality.
With Longstanding relationship with global retailers and brands, and an ability to rapidly build
up manufacturing capacity, Azgard9 is well poised to cater to an expected increase in global
demand for denim products. The Textile Industry is dominated by Punjab. 3% of United States
imports regarding clothing and other form of textiles is covered by Pakistan.
Textile exports in 1999 were $5.2 billion and rose to become $10.5 billion by 2007. Textile
exports managed to increase at a very decent growth of 16% in 2006.
In the period July 2007 June 2008, textile exports were US$10.62 billion. Textile exports share
in total export of Pakistan has declined from 67% in 1997 to 55% in 2008, as exports of other
textile sectors grew.
University of Education
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Exports of whole industry were higher in year 2011 as compared to year 2010 and 2012 and then
in 2012 energy crisis get raised again. But in 2013 and 2014, the industry profit is again
increasing as per high regional and national demand.
Introduction to industry
The Textile industry in Pakistan is the largest manufacturing industry in Pakistan. Pakistan is the
8th largest exporter of textile commodities in Asia. This sector contributes 8.5% to the GDP. In
addition, the sector employs about 45% of the total labor force in the country (and 38% of the
manufacturing workers). Pakistan is the 4th largest producer of cotton with the third largest
spinning capacity in Asia after China and India and contributes 5% to the global spinning
capacity. At present, there are 1,221 ginning units, 442 spinning units, 124 large spinning units
and 425 small units which produce textile.
History
The origin of the Indian textiles is thought to be the Indus Valley civilization, situated in modern
Pakistan, where people used homespun cotton to weave garments. Historically, the Indus valley
region engaged in significant trade with the rest of the world. The silk from the region, for
example, is known to have been popular in Rome, Egypt, Britain, and Indonesia.
In the 1950s, textile manufacturing emerged as a central part of Pakistan's industrialization,

shortly following independence from the British rule in the South Asia. In 1974, the Pakistan
government established the Cotton Export Corporation of Pakistan (CEC). The CEC served as a
barrier to private manufacturers from participating in international trade. However, in the late
1980s, the role of the CEC diminished and by 1988-89, private manufacturers were able to buy
cotton from ginners and sell in both domestic and foreign markets. Between 1947 and 2000, the
number of textile mills in Pakistan increased from 3 to 600. In the same time period, spindles
increased from 177,000 to 805 million.
Production
There are six primary sectors of the textile production in Pakistan:
Spinning
Weaving
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Processing
Printing
Garment manufacturing
Filament yarn manufacturing
Cotton is the largest segment of textile production. Other fibers produced include synthetic fiber,
filament yarn, art silk, wool, and jute.
Cotton: Cotton spinning is perhaps the most important segment in the Pakistan textile industry
with 521 units installed and operational.
Synthetic fibers: Within synthetic fibers, nylon, polyester, acrylic, and polyolefin dominate the
market. There are currently five major producers of synthetic fibers in Pakistan, with a total
capacity of 636,000 tons per annum.
Filament yarn: Three types of filament yarn are produced in Pakistan. These are acetate rayon
yarn, polyester filament yarn, and nylon filament yarn. There are currently about 6 units in the
country.
Artificial Silk: This fiber resembles silk but costs less to produce. There are about 90,000 looms
in the country located mainly in Karachi, Faisalabad, Gujranwala, and Jalapur Jattan, as well as
some in FATA.
Wool: The main products manufactured from wool include woolen yarn, acrylic yarn, fabrics,
shawls, blankets, and carpets.
Jute: Jute sakes and hessian cloth are primarily used for packing agricultural products such as
grain and rice. The production of jute products was approximately 100,000 tons in 2009-10.
Trade
Textiles comprise 57% of Pakistan's export revenues. However, in recent years, textile exports
have declined significantly. Textile exports were recorded at $11.625 billion dollars in 2014-
2015. In 2015-2016, this number had dropped 7.7% to $10.395 billion.
The Pakistan Textile Exporters Association recently requested the government to take significant
measures to ensure the growth of textile exports and sustain the employment provided by the
sector. Specifically, the PTEA has requested:
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Zero rating on export value chain (i.e. no tax, no refund) to boost export growth
Subsidize a decrease in cost of production to boost competitiveness of Pakistani
exports
Guarantee energy supply to textile mills at competitive rates
Furthermore, the Pakistan Textile Mills Association has demanded that the removal of duty on
cotton imports and a rebate of five percent on textile exports. This plea has come at a time with
about 110 mills have been shut down due to various barriers to growth including the energy
crisis.
Introduction to Azgard 9 ltd
History
Established in 1886 by the Shaikh Family, Azgard Nine Limited, is one of the leading textile
exporters of the country. Being
vertically integrated, the company is
involved in composite spinning,
weaving, dyeing, and stitching of yarn,
denim, and denim products in Pakistan
and internationally. The company has
affiliations with well-known
international retailers such as H&M,
Zara, and Gap, with customer bases
across USA, Canada and Europe. The company also engages in the manufacture and sale of
nitrogenous and phosphate fertilizers; and import, export, wholesale and retail marketing, and
manufacture of textile and apparel products and accessories. In addition, it involves in the
development, implementation, and sale of software products, as well as provides related services.
The company's subsidiaries include Nafees International, Agritech Limited, Hazara Phosphate
Fertilizers (Private) Limited and Farital AB.
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Status and nature of business

The Group comprises the following companies
Azgard Nine Limited ('ANL') - Parent

Company
Azgard Nine Limited ("the Company") was
incorporated in Pakistan as a Public Limited
Company and is listed on Karachi Stock
Exchange (Guarantee) Limited. The Company is
a composite spinning, weaving, dyeing and
stitching unit engaged in the manufacture and sale of yarn, denim and denim products. The
registered office of the Company is situated at Ismail Aiwan-e-Science, off Shahrah-e-Roomi,
Lahore. The Company has three production units with Unit I located at 2.5 K.M off Manga,
Raiwand Road, District Kasur, Unit II at Alipur Road, Muzaffargarh and Unit III at 20 K.M off
Ferozpur Road, 6 K.M Bandian Road on Ruhi Nala, Der Khud Lahore.
Farital AB ('FAB') - Subsidiary Company

Montenello SRL ("MSRL") is a limited liability
company incorporated in Italy and onwer of an Italian
fabric brand and was acquired through Farital AB a
special purpose vechile incorporated in Sweden. During
the period, Farital AB has been wound up and
consequently the investment in MSRL has been
transmitted to ANL. MSRL is engaged in import,
export, wholesale and retail marketing and
manufacturing of textile and apparel products and accessories. Effective control of MSRL was
obtained on 31 December 2008 by ANL. Proportion of interest held by ANL is 100%.
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Mission
To retain a leadership position as the largest value added denim Products Company in Pakistan.
Vision
To become a major global fashion Apparel Company.
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Corporate Profile
Mr. Farrukh Hussain

BOARD OF DIRECTORS
Mr. Aehsun M.H. Shaikh Chairman HR & REMUNERATION COMMITTEE
Mr. Nasir Ali Khan Bhatti Chairman
Mr. Ahmed H. Shaikh Chief Executive
Mr. Ahmed H. Shaikh
Mr. Nasir Ali Khan Bhatti
Mr. Aehsun M.H. Shaikh
Mr. Usman Rasheed
Mr. Farrukh Hussain BANKERS

JS Bank Limited
Mr. Yasir Habib Hashmi
MCB Bank Limited
Mr. Munir Alam
KASB Bank Limited
COMPANY SECRETARY
Faysal Bank Limited
Mr. Muhammad Ijaz Haider
Habib Bank Limited
CHIEF FINANCIAL OFFICER
Mr. Zahid Rafiq, FCA HSBC Bank Middle East Limited
AUDIT COMMITTEE United Bank Limited
Mr. Nasir Ali Khan Bhatti Chairman NIB Bank Limited
Mr. Aehsun M.H. Shaikh National Bank of Pakistan
Allied Bank Limited
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Product & Services

Services of the company are related to its product and production and products of the company
are sort in product divisions. Which are:
DEINM
Garments
DEINM
Production started in 1995. DBU is one of the largest denim fabric producers in Pakistan with
yearly production capacity of 42 million meters and self-power generation capacity of 13 MW.
Company is leader in various segments in the market from more than 20 years. Its main areas of
operation are the production and sales of Indigo and Twill. It is improving production,
innovating industrial facilities and constantly investing in technology and training its more than
1,000 professionals.
Machinery Details
Warping section Picanol omni plus Belgium
Colman Company USA
Inspection department
Griffin Company USA
P.L.M impianti spa Italy
Karl Mayer Company Germany
Finishing department
Dyeing section
Cibitex Italy
G.M.C (Greenville machinery). USA
Brugmen
Morrison USA
Sizing section
Re-beaming area
Benninger zell germany
West point USA
Benninger Switzerland
Mac coy USA
Menninger
Weaving sheds
Morrison
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Utilities Data
Power generation capacity on natural gas =13 MW
Power generation capacity on diesel gen = 4MW
Standby local power (Wapda) = 5MW
Technical Data
Total production (finished fabrics) = 82,000 meters per day
Total no of warping machines = 05
Dyeing machines = 02
Total no of re-beaming machines = 28
Sizing machines = 03
Total no of looms (air jet Omni plus) =179
Total no of finishing machines (Capability of flat finish) = 03
Total no of inspection frames =14 Well-equipped testing lab
Services in DEINM Division
1. Yarn
Denim business unit receives high quality cotton yarn
from its sister companies. Best cotton factories and
spinning mills have been producing the qualities which
we need for our hi-tech denim manufacturing.
2. Warping
Yarns are converted into ropes and ropes are winded
onto beams to make balls which are essential to feed
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Rope Dyeing machines. Karl Mayer, Griffin, Barber Colman.
3. Dyeing
Continuous process of rope dyeing with indigo. This is
the step where ring-dyed yarn is produced that fades
better and faster than fully dyed yarn.
Morrison, GMC.
4. Re-beaming
Indigo dyed ropes are separated and transferred to sizing
beams. Karl Mayer, Griffin, Barber Colman, McCOY.
5. Sizing
Sizing process plays an important role for the fabric quality. Strength is given by sizing to bear
high tension and abrasion during the weaving process.
6. Weaving
Its a process of Interlacement warp and weft yarns to form the fabric. Hi-tech looms are used for
better production efficiency and selvedge looms are used for real selvedge fabrics. Picanol Omni
plus 800, Picanol Omni plus, Picanol President.
7. Finishing
Final chemical and mechanical finishing processes such as
singing, bleaching, mercerizing, fabrics dyeing, coating and
sanforizing etc. are applied on state of the art equipment.
Benninger, Monforts, Morrison, Brugman, Cibitex.
8. Quality Control and Dispatch

Packing is done on fully automatic machines after physical
faults determination in visual metre by metre inspection.
Afterwards, shade evaluation is done; our lab is equipped with
Hunterlab device.
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Garments Division
Production started in 1996.
Technical Data
Total production output per day = 22,000 pieces /day
Total no of machines in stitching department = 1831
Total no of spray booth positions = 30
Total no of hydro-extractors = 10
Total no of machines in finishing department = 92
Total no of cutting tables = 4
Total no of sandblast positions = 52
Total no of washing machines = 21
Service & Machinery Details

Cutting department
Gerber USA
Finishing department
Eastman USA
Malavasi Italy
Stitching department Macpi Italy
Vibmac Italy Juki Japan
Juki Japan Brother USA
Brother USA
Laundry department
Reece USA
Tonello Italy (special agreement with the
Kansai Japan industry standard in garment washing)
Macpi Italy Maino Italy
Omi Italy
CAD Room
Gerber USA
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Industry Analysis
Industry Layout
Pakistan is the 8th largest exporter of textile products in Asia. For Pakistan which was one of the
leading producers of cotton in the world, the development of a textile Industry making full use of
its abundant resources of cotton has been a priority area towards industrialization.
Share in GDP
This sector contributes 9.5% to the GDP and provides employment to about 15 million people or
roughly 30% of the 49 million workforce of the country. Pakistan is the 4th largest producer of
cotton with the third largest spinning capacity in Asia after China and India, and contributes 5%
to the global spinning capacity.
At present, there are 1,221 ginning units, 442 spinning units, 124 large spinning units and 425
small units which produce textile products.
World Textile Trade

The annual volume of total world textile trade is $18 trillion which is growing at 2.5%. Even
with so many advantages, Pakistans total share in global textile trade is less than 1%. To some
this may seem like a depression state of affairs. But to others, it is simply an opportunity.
Exports Trend (1997 2014)

The Textile Industry is dominated by Punjab. 3% of United States imports regarding clothing
and other form of textiles is covered by Pakistan.
1997 - 2007
Textile exports in 1999 were $5.2 billion and rose to become $10.5 billion by 2007. Textile
exports managed to increase at a very decent growth of 16% in 2006.
2007 2008
In the period July 2007 June 2008, textile exports were US$10.62 billion. Textile exports share
in total export of Pakistan has declined from 67% in 1997 to 55% in 2008, as exports of other
textile sectors grew.
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2010 2014
Exports of whole industry were higher in year 2011 as compared to year 2010 and 2012 and then
in 2012 energy crisis get raised again. But in 2013 and 2014, the industry profit is again
increasing as per high regional and national demand.
July 1, 2014
The exports of textiles and garments from Pakistan remained almost stable and earned US$
9.179 billion in the first eight months of fiscal year 2014-15 that began on July 1, 2014,
compared to exports of $9.136 billion in the corresponding period of previous fiscal, according
to the data released by the Pakistan Bureau of Statistics.
July-February 2014-15
In July-February 2014-15, Pakistans knitwear exports grew by 9.48 per cent year-on-year to
US$ 1.622 billion, while exports of non-knit readymade garments were up by 10.54 per cent to
$1.384 billion.
Raw cotton
Raw cotton exports fetched $139.341 million in the eight-month period, showing a drop of 14.56
per cent compared to exports of $163.093 million made during the corresponding period of
previous fiscal. Likewise, cotton yarn exports fell by 4.76 per cent to $1.327 billion, as against
exports of $1.394 billion made during the same period last fiscal.
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Cotton Fabric
Exports of cotton fabric dropped 12.35 per cent to $1.646 billion during the period under review,
while bed-wear exports declined by 0.33 per cent to $1.418 billion, the data showed.
Garments
The increase in exports of garments along with a decline in exports of raw cotton, yarn and
fabric, however, is a good sign for Pakistans value-added textile industry, as the country is
exporting more finished goods compared to last fiscal.
Synthetic Fiber
On the other hand, the import of synthetic fiber by Pakistan surged 28.06 per cent year-on-year
to $358.998 million, whereas imports of synthetic and artificial silk yarn witnessed a growth of
19.99 per cent to register $437.805 million. This shows that textile enterprises have increased the
use of synthetic fiber and yarn in recent months.
Textile Machinery
Meanwhile, the value of textile machinery imports made by Pakistan during the period decreased
by 22.75 per cent year-on-year to $284.456 million, which points at lower intent of entrepreneurs
to invest in the industry.
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In 2013-14, Pakistan textiles and garment exports grew by 5.3 per cent year-on-year to US$
13.738 billion, with knitwear and woven garment exports registering a growth of 10.53 per cent
and 8.67 per cent, respectively.
Reasons of Downfall in Textile Industry

The past few years, however, have probably been the worst ever for the textile sector in Pakistan.
Some of it is obviously not their fault, but some of it is. The major reason of decline of textile
export of Pakistan are:
Lack of Research & development (R&D)

Lack of modernize equipment
Increasing cost of production
Energy crisis
Removal of subsidy on Textile sector
Lack of new investment
United States & EU cuts imports of textile from Pakistan
Raw material Prices
Export Performance of the Textile Sector
Effect of Inflation
Supply chain management
Growth trend in Pakistan (2010 2013)

Over the past few years, textile sector face a huge decline in national and international market
but now it is coming back to its original form and start helping the Pakistans economy. As a
largest industry of the country, textile is shining star in terms of profitability because of regional
demand and profit margin.
The profit of the industry is increasing very quickly with the passage of time. According to their
profitability analysis from year 2010 to 2013, it is seen that the net profit, gross margin ratio on
profit, return on asset and return of equity for the industry was high in year 2011 as compared to
year 2010 and 2012.
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30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 -
-5.00% 02 03 04 05 06 07 08 09 10 11 12 13 14
Growth Trend in Pakistan
The energy crisis was low for textile industry in 2011. The electricity compensation for the
textile industry is available for the very short period of time, for two quarter, and then in 2012
energy crisis get raised again. But in 2013, the industry profit is again increasing as per high
regional and national demand.
The global recession which has hit the global textile really hard is not the only cause for concern.
Serious internal issues also affected Pakistan's textile industry very badly. The high cost of
production resulting from an instant rise in the energy costs has been the primary cause of
concern for the industry. Depreciation of Pakistani rupee during last year has significantly raised
the cost of imported inputs. Furthermore, double digit inflation and energy crises have affected
the overall textile sector.
Producers of Textile Industry in Pakistan

All Pakistan Textile Mills Association (APTMA) is Pakistans national trade association. It deals
with the organization of the textile sector. It represents the 396 textile mills such as:
315 are spinning

44 are weaving
37 composite units
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Analyzing External Environment
Natural Environment
Lack of (R&D) in cotton sector

The lack of research & development (R&D) in the cotton sector of Pakistan has resulted in low
quality of cotton in comparison to rest of Asia.
Lack of modernize equipment

Moreover, critics argue that the textile industry has obsolete equipment and machinery. The
inability to timely modernize the equipment and machinery has led to the decline of Pakistani
textile competitiveness.
Finance Bill to burden industry further

All Pakistan Textile Mills Association (APTMA) has told that governments actions are not
matching with its words for the textile industry.
Increasing cost of production

The cost of production of textile rises due to many reasons like increasing interest rate, double
digit inflation & decreasing value of Pakistani rupee. The increasing interest rate caused barrier
in opening new manufacturing units & also increase the production cost of existing units. The
value Pakistani rupee is continuously decreasing which increased the cost of imported raw
material. The removal of subsidy & implementation of new taxes from government also increase
the cost of production. The instant increase in cost of electricity also caused an increase in
production.
Energy crisis
Electricity crisis:-
As a consequence of load-shedding the textile production capacity of various sub-sectors has
been reduced by up to 30 per cent.
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Gas Shortage:-
Gas load-shedding continues in Punjab and NWFP despite a significant increase in temperature.
A spokesman for the All Pakistan Textile Mills Association claimed that 60 to 70 per cent of the
industry had been affected and was unable to accept export orders coming in from around the
globe.
Effect of Inflation
The increase in inflation cause the increase in the cost of production of textile good which return
in downsizing. The double digit inflation cause reduction in exports of textile.
Removal of subsidy on Textile sector

The provisions of Finance Bill 2009-10 are not textile industry friendly at all. Provisions like
reintroduction of 0.5% minimum tax on domestic sales, 1%withholding tax on import of textile
and articles, 16% Federal Excise Duty on banking and insurance services besides withdrawal of
exemption of 16% sales tax and 4% withholding tax on machinery and parts in the Finance Bill
2009-10 are nothing but last stick on industrys back.
The Effect of Global Recession on Textile Industry

In economics, the term recession means The reduction of a countrys Gross Domestic Product
(GDP) for at least two quarters; or in normal terms, it is a period of reduced economic activity
The International Monetary Fund regards periods when global growth is less than 3% to be
global recession. On the October 8, 2008, IMF released its World Economic Outlook, according
to which the world economy was predicted to experience an all-time low.
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GPEST analysis
POLITICAL Factors
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 are favorable for this market because food and dairy
products are consumer goods and they have to purchase it in any condition.
Government stability and likely changes Competition regulation

Tax policy (rates and incentives) Government involvement in trade
Regulation/de-regulation unions and agreements
Trade control Consumer protection and e-commerce
Export restrictions Health and safety law
Tariffs Laws regulating environment pollution
ECONOMICAL Factors
The economic conditions are not very favorable and the economy is facing problems, but it is not
directly influencing buying power of consumers. If the country is out of its current problems, it
will further boost up the growth of this industry, as people will feel more secure economically
and it will further increase the attractiveness of the market.
Growth rates Credit availability

Inflation rate Trade flows and patterns
Interest rates Level of consumers disposable income
Exchange rates Monetary policies
Unemployment trends Fiscal policies
Labor costs Price fluctuations
Stage of business cycle Stock market trends
SOCIAL Factors
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 products due to hygienic reason.
20
Education level Attitudes toward green or ecological

Attitudes toward imported goods and products
services Attitudes toward and support for
Attitudes toward work, leisure, career renewable energy
and retirement Population growth rate
Attitudes toward product quality and Age distribution and life expectancy
customer service rates
Attitudes toward saving and investing Average disposable income level
Emphasis on safety Social classes
Lifestyles Minorities
Buying habits
TECHNOLOGICAL Factors
High tech 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
tech technology. The key to survival for companies in this industry is using high technology for
quality and cost purposes.
Basic infrastructure level

Rate of technological change
Spending on research & development
Technology incentives
Legislation regarding technology
Technology level in your industry
Communication infrastructure
Access to newest technology
Internet infrastructure and penetration
21
Chance of
occurrence /
impact on
High Medium Low
company
High 1 2 3
Medium 4 5 6
Low 7 8 9
Factors
Tax Policy
Recently government announced budget for 2017-18 and according to it will continue the sale
tax 0% for the textile sector that export the goods.
Chance of occurrence: High
Impact on company: High
Export Restrictions
Currently there is no export restriction on the export of the textiles in Pakistan which facilitates
the company to gain the maximum market share.
22
Chance of occurrence: Low
Government stability and likely changes

In the past few year there were a little bit political instability as some political parties were doing
protest against the ruling party. Due to which there is a big chance for the of foreign investment
but now there are still some chance of instability but its effects are very low.
Chance of occurrence: Medium
Health and safety law

In Pakistan there are health and safety law for the labor that work in the textile sector as there is a
large chance of throat infection and lungs problem in that industry.
Impact on company: Medium
Laws regulating environment pollution

In the current scenario there are laws regulating environment pollution which are very strict for
the company who pollutes the environment. But our company is not involved in the production
of any product that is dangerous or its production process is also no harming the environment.
Impact on company: Low
Growth rates
In the past decade there are fluctuation in the growth of the industry in the year 2004-5 there is
very dominant growth in the sector then after that growth rate is decreasing year by year.
23
Inflation rate
Inflation rate is very important for any industry of any economy as there is direct relation of
inflation rate with the number of factors like salary, wedges, product price.
Exchange rates
The difference in the rates of the currency is a vital factor that effect the overall performance of
the company.
Labor costs
Due to political instability and other factors the due to which there are unexpected off days as a
result of which labor cost hight.
Stage of business cycle

In accordance to our company business cycles dont effect as much to us because our product is
for all seasons.
Monetary policies
Interest rate and inflation rate are the major tools of monetary policy which has large effect on
the industrial sector. Current monetary policy helps the textile sector to improve production.
24
Fiscal policies
Fiscal policies make by government can be in favor of the industry and can be against the favor it
depends upon the measure which are taken to make the budget. Current budget is supportive to
the textile industry.
Lifestyle
Lifestyle of the country inhabitant is also very important as they are making the product for the
customer so they have to keep in mind the lifestyle of the people.
Population Growth rate

Population growth rate is directly effecting our sector and our production as we will have to
produce more goods for customers
Social Classes
Social classes does not effect too heavily on the industry sector as there are different quality of
product for each sector.
Buying habits
Buying habits or buying pattern of customers is different in different classes.
25
1 2 3 4 5 7
High/High High/Medium High/Low Medium/High Medium/Medium Low/High
Health and Population

Tax Policy Lifestyle Social Class Buying Habits
Safety law Growth Rate
Growth Stage of Exchange
Fiscal Policy Labor Cost Inflation Rate
Rate business cycle Rate
Monetary Environmental Government Export
Policy pollution Stability Restrictions
Opportunities
Tax policy not changed
Lifestyle
Fiscal policy
Monetary policy
Stage of business cycle
Environment pollution
Buying habits
No export restriction
Labor cost
Threat
Growth Rate is reducing annually
Lifestyle
Social class
Buying habits
Inflation rate
Health and safety law
Exchange rate
Population growth rate
Government stability
26
EFE matrix
Weighted
Opportunities Weight Rating
score
1 Tax Policy 0.12 3 0.36
2 Fiscal Policy 0.15 3 0.45
3 Monetary Policy 0.075 4 0.3
4 Labor Cost 0.1 2 0.2
5 Stage of business cycle 0.05 1 0.05
6 Lifestyle 0.05 2 0.1
Weighted
Threats Weight Rating
score
1 Growth rate 0.05 3 0.15
2 Buying Habits 0.05 3 0.15
3 Inflation Rate 0.1 4 0.4
4 Exchange Rate 0.1 4 0.4
5 Population Growth rate 0.055 3 0.165
6 Government Stability 0.1 4 0.4
Total 1 3.125
PORTER FIVE FORCE ANALYSIS OF TEXTILE INDUSTRY IN

PAKISTAN
Porter five force analysis consist of following five forces
Entry & Exit barrier

Level of competition
Bargaining power of buyers
Bargaining power of supplier
Threat of substitute
27
ENTRY & EXIT BARRIER

In entry and exit barrier we are choosing following indicators to understand this force
Legal environment and Incentive from government in textile industry

Energy crises
Lets start with legal environment regarding textile industry
LEGAL ENVIRONMENT
Generally speaking legal environment is not in the favor of textile industry.
The Textile Industry was one of those five industries of Pakistan that enjoyed 0% rating facility,
which means that their products were not subject to any sales tax. This exemption was given by
the government through SRO 509 (I)/2007 dated 9th June, 2007. But recently a new SRO
231(I)/2011 dated 15th March, 2011 has been issued to have changes in the previous one. The
applicability of the new sales tax regime for textile sector has become applicable from April 1,
2011 instead of date of the promulgation of the Presidential Ordinance or issuance of relevant
notification i.e., March 15, 2011. This new SRO finished the facility of 100% zero rating and
imposed a tax of 4% if the finished fabrics have been sold to the un-registered persons like
wholesale market
All Pakistan Textile Mills Association (APTMA) has told that governments actions are not
matching with its words for the textile industry. Chairman APTMA said that this government
policy is textile industry friendly.
NO SUBSIDY FROM THE GOVERNNMENT

Especially the provisions of Finance Bill 2009-10 are not textile industry friendly at all.
Provisions like
Reintroduction of 0.5% minimum tax on domestic sales

1%withholding tax on import of textile and articles
16% Federal Excise Duty on banking and insurance services besides
28
Reintroduction of minimum tax on domestic sales would invite unavoidable liquidity problem,
which is already reached to the alarming level. The textile industry was facing negative
generation of funds due to unaffordable markup rate
The government has raised special excise duty from one per cent to 25 per cent.
So instead of given subsidy to the textile industry the government of Pakistan is making
unfriendly policies for the textile industry.
So we conclude that entry and exit barrier are very high.
INFLATION RATE
The
categories which recorded the highest price increases were: Alcoholic Beverages and Tobacco
(18.5 percent); Recreation and Culture (17 percent); Clothing and Footwear (15.7 percent);
Health Care (13.2 percent); Restaurants and Hotels (9.8 percent) and Miscellaneous Goods and
Services (8.6 percent).
The increase in inflation causes the increase in the cost of production of textile good which
return in downsizing. The increase inflation also cause reduction in exports of textile.
ENERGY CRISES
In spite of the rates of utilities in Pakistan being higher than competing countries, their tariffs are
increased on regular basis making the industry un-competitive. The cost of production has also
risen due to instant increase in electricity tariff. As a consequence of load-shedding the textile
29
production capacity of various sub-sectors has been reduced by up to 30 percent which, along
with other consequences, has also reduced the export order. Due to load shedding some mill
owner uses alternative source of energy like generator which increase their cost of production
further. Due to such dramatic situation the capability of competitiveness of this industry in
international market affected badly.
A spokesman for the All Pakistan Textile Mills Association (APTMA) claimed that
60 to 70 per cent of the industry had been affected and was unable to accept
export orders coming in from around the globe, as a result of gas load shedding.
Another jerk has been given to the industry in the form of a Two-day weekend for the
conservation of energy. Either adequate energy resources are unavailable to the industry or the
prices of fuel are out of range of the industry. The textile industry being an energy intensive
sector is vulnerable to a higher rate of energy losses across various production processes
resulting in higher energy bills, and productivity losses- all of which have significant financial
impact
We conclude that in exile industry entry and exit barrier are very high.
BARGAINING POWER OF BUYERS

Bargaining power of buyer is very high because of new emerging trends of WHO. In past USA
and EU was the major importer of Pakistani textile goods but not now. Pakistani textile industry
is achieving the national quality standards very hardly It is not easy for Pakistani textile industry
to achieving international quality standards. Now a day WHO quality standard is the metals of
most immediate concern are chromium, Zinc, iron, mercury and lead. The fate of these chemicals
varies, ranging from 100% retention on the fabric to 100% discharge with the effluent. Most of
these metals are non-degradable into non-toxic end products. Experts say that textile wastewater
contains substantial pollution loads in terms of COD, BOD, TSS, TDS and heavy metals. The
values of these parameters are very high as compared to the values in National Environment
Quality Standards (NEQS) set by the government.
United States cancel more than 50% of textile orders of Pakistan .US also impose a high
duties on the import of textile of Pakistan which effect the export in a bad manner. US & EU are
30
the major importer of Pakistan textile which creates a huge difference in export of Pakistan
textile after imposing restriction on import of Pakistani textile goods.
BARGAINING POWER OF SUPPLIER

Bargaining power of supplier is low because of the new emerging trends of WHO .Now the
buyers have very much power to exercise as compare to suppliers.
So, bargaining power of supplier level is low.
LEVEL OF COMPETITION
Two types of competition is facing by textile industry
Internal
External
On national stage the level of competition is low because textile industry needs huge investment.
Most importantly now a days our country legal and tax policies are not in the favor of textile
industry .Now a days Pakistan is also facing severe energy crisis. The high cost of production
resulting is because of increasing energy crisis.
So on internal level this competition is low because of unattractiveness of this

industry.
While on international level industry is facing competition from other developing countries
like Bangladesh, India. China also competing Pakistan in major export markets i.e. the EU and
the USA. Also the current recession in the West has resulted in
a slowdown in demand for textile products. Due to all the other problems faced by the Textile
Industry, its production capacity and quality is getting low. So Pakistan is lagging behind its
competitors in the sphere of this international and regional competition. This is a huge threat to
the Textile Industry of Pakistan.
No of player is low to moderate but the rule of game is very high.
31
So, we conclude that in textile industry level of competition is very high.
THREAT OF SUBSTITUTE
In textile industry threat of substitute is low because people dont have any option to purchase
another product to satisfy their need.
As USA cut off 50% textile trade from Pakistan but it does not mean that USA find a
substitution for textile products .In fact they shift to another suppliers as China ,Bangladesh or
India.
Porters Five
forces LOW MEDIUM HIGH
Entry & Exit barrier
Level of competition
Bargaining power of
buyers
Bargaining power of
suppliers
Threat Of Substitute
CONCLUSION
Porter five forces results show that textile industry is not a favorable business in Pakistan to
operate.
Among the five porter forces three are listed on table as high and remaining two are listed as
low .So simply the answer to start a textile business in Pakistan is in no.
32
Analyzing Internal Environment
Supply chain
Supply chain process consist of the following components:
Suppliers
Manufacturing
Distributor
Whole seller
Retailer
End users
Supplier
A party that supplies goods or services. A supplier may be distinguished from a contractor or
subcontractor, who commonly adds specialized input to deliverables. Also called vendor.
Azgard 9 has the following vendors:
Alraheem Industrial Traders Brendreth Road, Lahore

New Arab Chemicals Circular Road, Lahore
Alraheem Industrial Traders

This firm deals in industrial equipments like valve and fitting which is used for production of
the product.
New Arab Chemicals

New Arab Chemicals deals in the supply of chemical needed in different industry for different
products.
Manufacturing
After getting the supplies or required material next step of supply chain is manufacturing. In this
step the raw material is transferred into the finished goods.
Value chain part of the internal environment also falls inside the manufacturing step of supply
chain. Which discussed in detail in the coming portion of the report.
33
Distributor
After manufacturing the next step is distribution of the product. Different distributor pick up the
goods in bulk quantity and then supply it to wholesalers.
Wholesalers
Wholesalers get the goods from distributor and then supply them in different geographical region
different wholesalers has picked up their geographical region and they only work in that
particular region.
Retailers
In that particular region where the wholesalers supply the goods there are some retailers who buy
these good and then sell it to the end users.
End users
Finally after the retailer the finished goods reach to the end user who buy them form the retailers.
In case of Azgard 9 the supply chain does not consist of the Distributor, Wholesalers, Retailers
and end users as the company do production on behalf of the global client who outsource the
production of its product.
So after the manufacturing of the goods Azgard 9 send it to the company who places the order.
Then the company itself distribute or follow the other steps of supply chain to distribute the
product in different geographical region of the globe.
Value chain
34
35
Product related cost (inbound & PD)
Market Related Cost (Outbound logistics, marketing sales, services)
36
Support Activities
2015
Operating
Primary Activities Support Activities Total cost Sales-net
Profit
10,197,978,794 388,789,753 10,586,768,547 10,701,888,196 115,119,649
2014
Operating
Primary Activities Support Activities Total cost Sales-net
Profit
12,937,985,407 394,864,679 13,332,850,086 13,301,847,243 (31,002,843)
*primary activities= Market related cost + Product related cost
37
Strength
The production of the textile products (Cotton, Yarn, and Polyester) in Azgard9 is completely
automated.
The company has imported the machinery for spinning process. The use of this advance
machinery has helped the company produce good quality garments with much efficiency.
Azgard9 factory is the only garments factory that produces both readymade garments and
finished products of yarn.
Azgard9, having a good brand image, has the advantage to charge their customers at a higher
price than the other competitors.
The price of Azgard9 garments is high in the international market as compared to its local
competitors who are involved in the exports as well.
The company brand image is very strong in the market, both local and
international.
The Azgard9 factory compensates its employees, better than all the other industries`
Weakness
Delay in capacity expansion
Large investment needed for business expansion
Wastage of raw material
Workers leave the organization after working short time
Lack of online market facility to access international buyers
Disputes between Middle level and Lower management
Relative weak position in textile market as compare to the other textile mills in Pakistan
The cost of freight charges further reduces the retention price of the garments, hampering the
profitability of the company.
Wastes produce by the company may dangerous for human health
38
IFE Matrix
Weighted
Opportunities Weight Rating
score
1 Automated production 0.12 3 0.36
2 Imported the machinery for spinning process 0.15 3 0.45
3 a good brand image 0.08 4 0.32
4 compensates its employees 0.1 2 0.2
Weighted
Threats Weight Rating
score
1 Waste of raw material 0.2 3 0.6
2 Large investment for business expansion 0.15 3 0.45
3 Delay in capacity expansion 0.1 4 0.4
4 Disputes btw Middle level and Lower management 0.1 4 0.4
Total 1 3.18
IE Matrix
39
Grand Strategy of the Azgard 9

The IFE and EFE weighted score that we put in the IE matrix suggest that company is growing
with its current strategies and it is working effectively and efficiently.
Organizational Structure
Company is following matrix structure.
It is divided into 6 different zones based on customer and functional approach.
Textile Spinning
Apparel Dying
Human resource & shared service weaving
Organizational Hierarchy
CEO
Business Unit
Manager
General Manager
Manager
Assistant Manager
Management Trainee
Management Staff
40
Shift
Incharge
Senior
Supervisor
Supervisor
Assistant Supervisor
Skilled Workforce
Unskilled Workforce
Non-management Staff
Price Strategy
Price Skimming
Designed to help businesses maximize sales on new products and services, price skimming
involves setting rates high during the introductory phase. The company then lowers prices
gradually as competitor goods appear on the market.
One of the benefits of price skimming is that it allows businesses to maximize profits on early
adopters before dropping prices to attract more price-sensitive consumers. Not only does price
skimming help a small business recoup its development costs, but it also creates an illusion of
quality and exclusivity when your item is first introduced to the marketplace.
Distribution Channel
A distribution channel is a chain of businesses or intermediaries through which a good or service
passes until it reaches the end consumer. It can include wholesalers, retailers, distributors and
even the internet itself. Channels are broken into direct and indirect forms, with a "direct"
channel allowing the consumer to buy the good from the manufacturer, and an "indirect" channel
allowing the consumer to buy the good from a wholesaler or retailer.
41
Promotion
Promotions refer to the entire set of activities, which communicate the product, brand or service
to the user. The idea is to make people aware, attract and induce to buy the product, in preference
over others.
Segmentation
Market segmentation is the process of dividing a market of potential customers into groups, or
segments, based on different characteristics. The segments created are composed of consumers
who will respond similarly to marketing strategies and who share traits such as similar interests,
needs, or locations.
Positioning
Refers to the place that a brand occupies in the mind of the customer and how it is distinguished
from products from competitors. In order to position products or brands, companies may
emphasize the distinguishing features of their brand (what it is, what it does and how, etc.) or
they may try to create a suitable image (inexpensive or premium, utilitarian or luxurious, entry-
level or high-end, etc.) through the marketing mix. Once a brand has achieved a strong position,
it can become difficult to reposition it.
Positioning is one of the most powerful marketing concepts. Originally, positioning focused on
the product and with Rise and Trout grew to include building a product's reputation and ranking
among competitor's products. Primarily, it is about "the place a brand occupies in the mind of its
target audience". Positioning is now a regular marketing activity or strategy. A national
positioning strategy can often be used, or modified slightly, as a tool to accommodate entering
into foreign markets.
Differentiation
In marketing, product differentiation (or simply differentiation) is the process of distinguishing a
product or service from others, to make it more attractive to a particular target market. This
involves differentiating it from competitors' products as well as a firm's own products.
42
Human Resource management

Human resource management of consist of the following functions
Employee Recruitment & Selection

Training & Development
Performance Management
Compensation Policy
Employee Recruitment & selection

There are 2 major source of hiring for Azgard 9.
Internal Hiring
External Hiring
Internal Hiring
Best employees can be found within the organization. When a vacancy arises in the organization,
it may be given to an employee who is already on the pay-roll. Internal sources include
promotion, transfer and in certain cases demotion. When a higher post is given to a deserving
employee, it motivates all other employees of the organization to work hard. The employees can
be informed of such a vacancy by internal advertisement.
Methods of internal sources:
Transfers
Promotions
Present Employees
Transfers
Transfer involves shifting of persons from present jobs to other similar jobs. These do not
involve any change in rank, responsibility or prestige. The numbers of persons do not increase
with transfers.
43
Promotions
Promotions refer to shifting of persons to positions carrying better prestige, higher
responsibilities and more pay. The higher positions falling vacant may be filled up from within
the organization. A promotion does not increase the number of persons in the organization.
A person going to get a higher position will vacate his present position. Promotion will motivate
employees to improve their performance so that they can also get promotion.
Present Employees
The present employees of a concern are informed about likely vacant positions. The employees
recommend their relations or persons intimately known to them. Management is relieved of
looking out prospective candidates.
The persons recommended by the employees may be generally suitable for the jobs because they
know the requirements of various positions. The existing employees take full responsibility of
those recommended by them and also ensure of their proper behavior and performance.
External Sources
All organizations have to use external sources for recruitment to higher positions when existing
employees are not suitable. More persons are needed when expansions are undertaken.
Methods of External Sources:
Advertisement
It is a method of recruitment frequently used for skilled workers, clerical and higher staff.
Advertisement can be given in newspapers and professional journals. These advertisements
attract applicants in large number of highly variable quality.
Company also use its own website for advertisement purpose as they have not to pay extra
money for placing the ad on their own websites.
Schools, Colleges and Universities

Direct recruitment from educational institutions for certain jobs (i.e. placement) which require
technical or professional qualification has become a common practice. A close liaison between
44
the company and educational institutions helps in getting suitable candidates. The students are
spotted during the course of their studies. Junior level executives or managerial trainees may be
recruited in this way.
Recommendation of Existing Employees

The present employees know both the company and the candidate being recommended.
Company encourage their existing employees to assist them in getting applications from persons
who are known to them.
In certain cases rewards may also be given if candidates recommended by them are actually
selected by the company. If recommendation leads to favoritism, it will impair the morale of
employees.
Factory Gates
Certain workers present themselves at the factory gate every day for employment. This method
of recruitment is very useful for unskilled or semi-skilled labor. The desirable candidates are
selected by the first line supervisors. The major disadvantage of this system is that the person
selected may not be suitable for the vacancy.
Central Application File

A file of past applicants who were not selected earlier may be maintained. In order to keep the
file alive, applications in the files must be checked at periodical intervals.
Labor Contractors
The contractors keep themselves in touch with the labor and bring the workers at the places
where they are required. They get commission for the number of persons supplied by them.
Former Employees
In case employees have been laid off or have left the factory at their own, they may be taken
back if they are interested in joining the concern (provided their record is good).
Short listed candidates are hired after written, physical and medical examination, and final
interview.
45
Training & Development

Organizational Development and Learning section of HR is mainly responsible for training and
development of employees.
Industrial engineering department also provides technical training to machine operators.
Training is conducted after training need assessment
Two methodologies are used for training and development:
In house or on the job training

External or off the job training
On job training
Employee training at the place of work while employee is doing the actual job. Usually a
professional trainer (or sometimes an experienced employee) serves as the course instructor
using hands-on training often supported by formal classroom training.
Off job training

Employee training at a site away from the actual work environment. It often utilizes lectures,
case studies, role playing, simulation, etc.
Performance Management
This is mostly done through the usage of Management by Objective (MBO) approach
Employees performance is initially evaluated in probation period by his or her immediate

supervisor against a set of performance standards and objectives.
Annual appraisal of managers and executives is done by giving a 30% rating to their
competencies and 70% to the goals and objectives including personal, department and goals
about subordinates.
46
Compensation Policy
Company strictly follows the minimum wage concept as per law and order.
Apart from handsome salaries, employees enjoy following benefits:
Increments and promotions
Free pick n drop facility
Free accommodation
Provident Fund
Leaves
Casual Leave
Sick Leave
Earned Leave
Maternity Leave
Exam Leave
Loan Facility
Social Security Benefit
CBL Clinic
Group Life insurance
Pension
Worker Welfare Fund
Canteen
47
Financial Analysis
Financial analysis includes both, internal and external analysis of business through ratios.
Internal Analysis
Ratios for internal analysis are:
Liquidity ratio
Leverage ratio
Coverage ratio
Efficiency ratio
Profitability ratio
Liquidity Ratio
Ratios 2016 2015 2014
Current ratio 0.48 0.61 0.80
Acid-test ratio 0.35 0.39 0.66
Interpretation
o A current ratio of 2:1 is generally considered as safe. Company is not in a condition to pay its
short term bills, as it has much more liabilities than its assets. Companys liquidity has also been
showing a decreasing trend from past 3 years, in 2012 no doubt it wasnt enough but at least it
was better than that of 2013 and 2014.
Liquidity Ratios
1
0.8
0.6
0.4
0.2
0
2014 2015 2016
Current ratio Acid-test ratio
48
Leverage Ratios
Ratios 2016 2015 2014
Debt to Equity 4.25 3.5 3.08
Debt to total Assets 0.81 0.77 0.75
Long term Debt to

0.57 1.33 0.25
Total capitalization
Interpretation
o Companys leverage ratios are too high showing that company has been provided its financing
more by creditors than its shareholders and most of its assets are financed with debts. These
ratios are showing their increasing trend, which is not favorable for company. So company has a
smaller creditor cushion or less margin of safety in case of shrinking asset value or outright
losses.
Leverage Ratios
6
0
2014 2015 2016
Debt to Equity ratio Debt to total Assets ratio LTD to total Capitalization
49
Coverage Ratios
Ratios 2016 2015 2014
Interest coverage -1.93 0.85 -1.96
Interpretation
o In 2012 and 2014 the company is in loss and in 2013 although there isnt a loss at all but still the
ratio is not favorable showing the difficulties company has faced while paying its interest related
expenses.
Coverage ratio
1
0.5
0
2014 2015 2016
-0.5
-1
-1.5
-2
-2.5
Interest Coverage ratio
Efficiency Ratio
Ratios 2016 2015 2014
Receivable turnover 5.50 6.38 4.83
Inventory turnover 7.98 6.00 4.18
Payable turnover 4.82 5.30 3.12
Capital turnover 0.64 0.66 0.35
50
Interpretation
o Companys receivable turnover have been very liquid or efficient, especially in 2013 as that was
the year of some profit to the company. Company is also showing its efficient behavior in its
inventory liquidity and ratio is showing an increasing trend. Payable turnover was quick in 2013
than that of 2014 and 2012, because of availability of resources in that year.
Efficiency Ratios
10
0
2014 2015 2016
Receivable turnover Inventory turnover Payable turnover Capital turnover
Profitability Ratio
Ratios 2016 2015 2014
Gross profit margin 0.07 0.03 -0.90
Net profit margin -0.16 0.7 -0.53
Return on Assets -0.10 0.04 -0.19
Return on Equity -0.54 0.21 -0.75
Interpretation
o Profitability ratios shows the operational efficiency of a firm, net profit margin of the company
has been in loss in 2012, after that although it has increased, but not up to a certain satisfactory
limit. Return on investment and equity are something which clear the vague picture of a
companys operations, but their trend are so uncertain in 2012 and 2014 the company has a
very poor condition in its earning power while in 2013 condition is quiet better than other two
years.
51
Profitability Ratios
0.8
0.6
0.4
0.2
0
2014 2015 2016
-0.2
-0.4
-0.6
-0.8
-1
Gross Profit Margin Net Profit Margin Return on Assets Return on Equity
External Analysis (Year 2016)

Ratios for external analysis are:
Liquidity ratio
Leverage ratio
Coverage ratio
Efficiency ratio
Profitability ratio
Liquidity Ratios
Ratios Azgard9 Crestex
Current ratio 0.48 0.76
Acid-test ratio 0.35 0.53
Interpretation
o Competitor is showing a better condition in its liquidity of assets. It is in stable condition and it
has almost more than twice of its assets than that of Azgard9.
52
Liquidity Ratios
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Current ratio Acid-test ratio
Azgard9 CRESTEX Column1
Leverage Ratios
Debt to Equity 4.25 2.15
Debt to total Assets 0.81 0.55
Long term Debt to

0.57 0.04
Total capitalization
Interpretation
o Crestexs leverage ratios are showing that it has more finances provided by its shareholders than
its creditors while the Azgard9, due to its loss in this year is not in a good condition and most of
its finances are provided by its creditors.
53
Leverage Ratios
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Debt to Equity ratio Debt to total Assets ratio LTD to total Capitalization
Coverage Ratios
Interest coverage -1.93 0.72
Interpretation
o Crestex, from its interest coverage ratio is showing that it has resources to pay its interest
related expenses without bearing any difficulty while that Azgard9s negative ratio is showing
the difficulties it has to face while paying such expenses.
54
Coverage Ratio
1
0.5
0
Interest coverage ratio
-0.5
-1
-1.5
-2
-2.5
Efficiency Ratios
Receivable turnover 5.50 5.52
Inventory turnover 7.98 7.41
Payable turnover 4.82 10.76
Capital turnover 0.64 1.04
Interpretation
o Both of companies have almost same ratio of receivable turnover, receivable turnover have
been very liquid or efficient. Both the companies are also showing its efficient behavior in its
inventory liquidity. Payable turnover of Crestex is too high when compared with Azgard9 which
is quite less favorable in process of raising funds of the company.
55
Efficiency Ratios
12
10
0
Receivable turnover Inventory turnover Payable turnover Capital turnover
Profitability Ratio
Gross profit margin 0.77 0.11
Net profit margin -0.16 0.02
Return on Assets -0.10 0.02
Return on Equity -0.54 0.08
Interpretation
o Profitability ratios shows the operational efficiency of a firm, net profit margin of Azgard9 has
been in loss, due to its less efficiency in companys operations, while that of Crestex in quite
satisfactory. Return on investment and equity are something which clear the vague picture of a
companys operations, but Azgard9 has a very poor condition due to losses while Crestex, being
in profit, has a better condition of these ratios.
56
Profitability Ratios
1
0.8
0.6
0.4
0.2
0
Gross profit margin Net profit margin Return on Assets Return on Equity
-0.2
-0.4
-0.6
-0.8
Business Strategies
Ginning
In Pakistan Cotton processing industry has catered to low quality products (lint, yarn and fabric)
over the past few decades. Whereas the Azgard9 producing well quality and standard denim
garments in Pakistan and export good quality products. Azgard9 is one of the largest firms in the
textile sector with good market share. Ginning is the first mechanical process involved in the
processing of cotton. During the process lint (fiber) is separated from seed to cotton.
The ginning industry has mushroomed in the cotton growing area of Pakistan
informally, without adequate regulations. There are 1,221 ginning factories in the country with
installed capacity of more than one billion bales on a single shift basis and a total capacity of
around 20million bales on three shift bases, part of which lies unutilized. Out of 1,221 ginning
units, 75 percent are based in Punjab and 22 percent in Sindh and only 700-800 units are
operational with an average production of about 10 million bales per year. Changing global
demands and textile market profiles are demanding a shift to quality products. In this, the
ginning factory plays a pivotal role for determining quality of cotton fiber as raw material for
downstream industry. Yet this component of local textile industry is the most neglected and
antiquated. Most Pakistani cotton continues to carry an unacceptable level of contamination. This
phenomenon is clearly reflected in the rising volume of imports from countries who produce
57
contamination free cotton or longer staple cotton which the saw gins of Pakistan cannot handle.
By having an efficient raw material, Pakistan has the chance to produce textile products of better
quality and more economically by saving freight costs and avoiding supply shortages as well as
time lags. Unless up-gradation of this industry is undertaken, it would not be possible to remain
competitive in export markets.
Spinning sector
This is the first process that adds value to cotton by converting into a new product i.e. conversion
from ginned cotton into cotton yarn. If spinning industry produces sub-standard yarn, its effect
goes right across the entire value chain. Pakistan has the third largest spinning capacity in Asia
with a spinning capacity of 5% of the total world and 7.6% of the capacity in Asia and an annual
growth rate of 6.2%, while Azgard9 has the fifth largest spinning capacity in Pakistan. At
present, cotton-spinning sector is comprised of 458 textile units (50 composite units and 408
spinning units). Almost 70 percent of total production is consumed in local industry and the rest
is being exported. Major shareholders of machinery market in this sector are
Switzerland (Reiter), Germany, Japan and China respectively.
Weaving & Made-up sector

The weaving sector is one of the most important sub-sectors. The exports of woven fabrics and
other related woven made-ups comprise a major portion of textile exports from Pakistan. The
weaving sector can be broadly classified into three main segments:
Composite Weaving units

Independent Shuttle less weaving units.
The power Loom sector
Investments have taken place in shuttle less loom, both in integrated and in-dependent weaving
sector. During the period of 1999 2009 an investment of approximately USD0.93 billion and
USD 0.61 billion has been made in weaving and made-up sector respectively. Further investment
in this sector will be forthcoming in the medium term.
58
Composite Weaving Units

The composite weaving units comprise of integrated textile mills having their own spinning and
dyeing facility. A total of fifty such units currently exist with an installed capacity of about
10,416 Looms. Recent phenomenon of induction of shuttle-less looms, viz. Projectile and Air jet
looms, in this sector is a healthy sign. As a pace of investment in-crease, the number of modern
looms in this sector is on increase. However, the textile millers still prefer to setup an
independent weaving unit rather than integrated ones.
Independent Shuttle less looms

This is a new segment of weaving units, which is in the process of coming up on the same
pattern as independent spinning units. Motivated by market demand and government
incentives as well as shift towards high quality fabrics. The entrepreneurs are establishing
independent weaving units with shuttle-less looms. These looms are both second hand and new
ones and employ the modern technology of rapier, projectile and air-jet looms
The Power looms sector

The Power loom sector has modernized and registered a robust growth over the two decades. The
growth in Power loom sector is to a larger extent a result of the government policies pursued, as
well as increased demand for the product. This sector is producing comparatively low value
added grey cloth of mostly inferior quality. The problem of the Power loom sector revolve
around access to credit facilities to modernize their equipment as well as purchase of
yarn especially when prices of yarn increase and the prices of cloth increase with a time lag.
Knitting
The knitting (hosiery) is playing a pivotal role in the value addition of the textile sector. There
are about 18,000 Knitting Machines spread all over the country producing 80million dozens of
knitwear. The capacity utilization is approximately 70%. There is greater reliance on the
development of this industry as there are substantial value additions in the form of knitwear. The
products made in Pakistan includes T-Shirts, jogging suits, jerseys, pajamas, sport shirts,
children wear, gloves, nightgowns, tracksuits, sweaters and socks etc. The knitwear industry
is export oriented and highly value added. The bulk of knit wear garments are mainly exported to
developed countries like USA, Germany, UK, Canada, France, etc. About 15% of the total
output is consumed domestically.
59
Readymade Garment sector

The garment industry provides highest value addition in the textile sector. This industry is
distributed in small, medium and large scale units most of them having 50 machines and below,
large units are now coming up in the organized sector of the industry. The industry enjoys the
facility of duty free import of machinery and income tax exemption. This sector has further
export performance for the future. Pakistan with total exports of around USD 1 billion has a
meager share of 1% in the global market apparel market. The apparel export product mix from
Pakistan is heavily tilted towards mens wear and knitted garments.
Corporate Strategies
Core Values
o Respect For All
o Integrity
o Hard Work
o Ethics
Respect for All

o Does not discriminate on the basis of race, religion or ethnic background
o Respect for Women
o Strongly prohibit all forms of harassments.
o Attract, retain and develop outstanding people
Integrity
o Honesty to self, colleagues and Azgard9
o Hard Work
o Company mission can be only achieved by hard work
o Honesty and hard work is appreciated and rewarded such as:
o Incentives upon achievement of target
o Performance based incentives and promotions
Ethics
o Professional behavior shall be entertained. e.g. gifts and favors will not be accepted
o Personal beliefs of employee will be respected
o Responsibility and accountability
60
o Changes in Policies/Procedures shall be informed beforehand to the concerned individuals
Work ethics
o Attendance
o Teamwork
o Appearance
o Attitude
o Productivity
o Cooperation
o Respect
o Character
o Communication
Functional Strategies
Organizational plan for human resources, marketing, research and development and other
functional areas. The functional strategy of a company is customized to a specific industry and is
used to back up other corporate and business strategies.
AZGARD 9 is an equal opportunity employer and safe guards the
o Rights of gender
o Religion
o Race Encourage
Employees on the basis of
o Education
o Experience
o Professionalism
The Company does not discriminate on the basis of
o Religion o Gender
o Race o Cost
o Ethnic Values o Nationality
61
References
http://www.azgard9.com/
http://www.azgard9.com/division.php
http://www.azgard9.com/investor-relation.html
http://www.azgard9.com/mission-vision.html
http://www.azgard9.com/financial_information.php
https://www.slideshare.net/FaisalAliShaikh1/denim-project-azgard9
https://www.slideshare.net/MeriamChuhdary1/bs0902004062
https://www.slideshare.net/alimehdi90475/porter-five-forces-analysis-on-textile-
industry?from_action=save
http://documentslide.com/documents/project-on-azgard9.html
https://tribune.com.pk/story/1281245/assessment-declining-trend-pakistans-exports/
http://www.pkrevenue.com/inland-revenue/fbr-issues-sro-to-apply-zero-rate-sales-tax-for-
export-oriented-sectors/
http://www.pkrevenue.com/inland-revenue/budget-proposals-20172018-textile-industry-
suggests-continuation-of-sales-tax-zero-rating/
https://en.wikipedia.org/wiki/Textile_industry_in_Pakistan
https://en.wikipedia.org/wiki/Textile_manufacturing

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Table of Contents

Executive Summary ........................................................................................................................ 1

Introduction to Azgard 9 ltd ............................................................................................................ 4

Status and nature of business ...................................................................................................... 5

Azgard Nine Limited ('ANL') - Parent Company ................................................................... 5

Farital AB ('FAB') - Subsidiary Company.............................................................................. 5

Corporate Profile ............................................................................................................................. 7

BOARD OF DIRECTORS ......................................................................................................... 7

COMPANY SECRETARY ........................................................................................................ 7

CHIEF FINANCIAL OFFICER ................................................................................................. 7

HR & REMUNERATION COMMITTEE ................................................................................. 7

Product & Services ......................................................................................................................... 8

Machinery Details ....................................................................................................................... 8

Utilities Data ........................................................................................................................... 9

Technical Data ........................................................................................................................ 9

Services in DEINM Division .................................................................................................. 9

Technical Data .......................................................................................................................... 11

Service & Machinery Details .................................................................................................... 11

Industry Analysis .......................................................................................................................... 12

Industry Layout ......................................................................................................................... 12

Share in GDP ........................................................................................................................ 12

World Textile Trade .............................................................................................................. 12

Exports Trend (1997 2014) ................................................................................................ 12

Reasons of Downfall in Textile Industry .............................................................................. 15

Growth trend in Pakistan (2010 2013) ............................................................................... 15

Producers of Textile Industry in Pakistan ................................................................................. 16

Analyzing External Environment ................................................................................................. 17

Natural Environment ..................................................................................................................... 17

Lack of (R&D) in cotton sector ................................................................................................ 17

Lack of modernize equipment .................................................................................................. 17

Finance Bill to burden industry further ..................................................................................... 17

Increasing cost of production .................................................................................................... 17

Effect of Inflation ...................................................................................................................... 18

Removal of subsidy on Textile sector ....................................................................................... 18

The Effect of Global Recession on Textile Industry ................................................................ 18

GPEST analysis ............................................................................................................................ 19

POLITICAL Factors ................................................................................................................. 19

ECONOMICAL Factors ........................................................................................................... 19

SOCIAL Factors ....................................................................................................................... 19

Tax Policy ................................................................................................................................. 21

Government stability and likely changes .................................................................................. 22

Health and safety law ................................................................................................................ 22

Laws regulating environment pollution .................................................................................... 22

Growth rates .............................................................................................................................. 22

Inflation rate .............................................................................................................................. 23

Exchange rates .......................................................................................................................... 23

Labor costs ................................................................................................................................ 23

Stage of business cycle ............................................................................................................. 23

Population Growth rate ............................................................................................................. 24

Buying habits ............................................................................................................................ 24

EFE matrix .................................................................................................................................... 26

PORTER FIVE FORCE ANALYSIS OF TEXTILE INDUSTRY IN PAKISTAN .................... 26

ENTRY & EXIT BARRIER ......................................................................................................... 27

LEGAL ENVIRONMENT ....................................................................................................... 27

ENERGY CRISES .................................................................................................................... 28

BARGAINING POWER OF SUPPLIER ..................................................................................... 30

LEVEL OF COMPETITION ........................................................................................................ 30

THREAT OF SUBSTITUTE ........................................................................................................ 31

Analyzing Internal Environment................................................................................................... 32

Alraheem Industrial Traders ................................................................................................. 32

New Arab Chemicals ............................................................................................................ 32

End users ................................................................................................................................... 33

Value chain ................................................................................................................................... 33