INDUSTRY PROFILE

The macro economy growth has ranged in 2.7% to 3%. This is much lower than the regional
growth which is ranging from 5% to 8%. Interest rates were reduced during the year but the rate
cuts were lower than expectations. In the regional context interest rates are ranging from 8.5% to
11%. The lower growth is because of acute power shortage forcing industry to resort to higher
energy cost alternatives, governance problems etc. All these factors are escalating the cost of
production for the local industry. Due to pressures on the country's forecast reserves there have
been fears of massive devaluation of Pak rupee. Although actual devaluations less than what was
feared, this has also resulted in increase in input costs in addition to the impact of high inflation
in the country. The current year 2012 likely to be election year which is expected to ignite the
infrastructure rebuilding activity. Directors are optimistic that PEL would achieve additional
sales in the year 2012 because of sizeable orders in hand and enhanced re-building activity for
power infrastructure.
COMPETITOR’S SHARES
There were four major players in the market in 1999-2000 namely, Dawlance, PEL, WAVES,
and Philips. Philips left the market in 2001-02 and since then, the main competition is between
the remaining three brands and other brands like Haiers, LG, Orient, and other brands.
Dawlance is the market leader with a share of 40%, PEL with 20%, WAVES with 14% and other
imported brands with 26%.
DAWLANCE
The company started their operations in early 80’s. Currently United Refrigeration Limited is the
leader in the Industry, its annual sales are approximated up to 240,000 refrigerators per annum,
and they are also dealing in deep freezers, Microwave ovens, washing machines, Split air
conditioners, Televisions and kitchen appliances.
Till 2002-03 Company had a focus on the exclusive dealership network, which was quite
successful, but now due to high growth in the market, better business opportunities, invasion of
new brands and better margin offers by them forced the dealers to retaliate against the
exclusivity. Like every other brand, they also got into agreements with different financial
institutions to cater the hire purchase customer. Company also got its own network of retail

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outlets in Karachi to cater the same. Company’s R&D made them
the most progressive and dynamic brand in the market; they normally introduce new design after
every two three years.
Dawlance offer their products at competitive rates to their customers. They used to offer very
controlled credit and incentive policy but now they have increased their incentives and relaxed
credit policy, because of improved competition products.
Reasons for Growth:
Following are the reasons for growth in the market share.
 Quality product.
 Strong brand name.
 Strong dealership network.
 Better product range.
 Timely availability.
 Heavy advertising.
Dawlance has grown from 107,000 units in 1999-2000 to 246,500 units in 2003-04. The overall
internal growth is almost 130.37% at an average rate of 26.07% per year.
WAVES
Cool Industries is basically deep freezers manufacturer that started its operations in late 80’s and
added refrigerators in their product line by mid 90’s. In the beginning they didn’t get a good
response for their refrigerators but as time passed, their market share position is getting better. In
year 2003-04, like all other brands, Waves got a good growth in refrigerator market.
They have successfully launched their split air conditioners and microwave ovens in the year
2002-03 and are among the leading brands in split air conditioners. They are the pioneers of low
price split AC in Pakistan.
Waves in the beginning, considered to be a low price and low quality product, were not very
much accepted, but later with the re-launch of their refrigerators, got a good response from the
dealers. Currently WAVES is the third largest manufacturer of refrigerators and expected to sell
79,500 units in current year

Reasons for Growth:

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Following are the reasons for growth in the market share.
 Improved quality product.
 Strong distribution network.
 Low prices.
 Heavy advertising.
WAVES has grown from 25,000 units in 1999-2000 to 79,500 units in 2003-04. The overall
internal growth is almost 218% at an average rate of 43.6% per year.
PEL
The Company is currently organized into two main operating divisions - Power Division and
Appliances Division. PEL got into appliances business in 1983 with window room air
conditioners. The product was a big success and became the leaders in this product. In 1987 PEL
added refrigerators in their product line. The initial product didn’t get a good response from the
market and the maximum sales achieved till ’93 were 34,000 units.
PEL re-launched refrigerators under the silver bullet brand CRYSTAL in 99. During the first
year of launch 50,000 units were sold against 27,000 units in 97-98. Before the launch of Crystal,
the product was at the decline stage of product life cycle.
From ’99 onwards PEL refrigerator sales grew at an average internal growth of 36% per annum
and emerged as the second largest manufacturers in Pakistan market. Currently PEL holds 31%
of the market share with an internal growth of 70%.
Reasons for PEL Growth:
Following are the reasons for growth in the market share.
 Improved quality product.
 Restoration of dealer’s confidence in product.
 Introduction of differentiated features i.e. Jumbo Freezers, water dispenser etc.
 Relatively better retailer margins as compared to core competitor Dawlance.
 Focus on the dealers’ network.
PEL has grown from 49,550 units in 1999-2000 to 166,500 units in 2003-04. The overall internal
growth is almost 236% at an average rate of 47.20% per year.

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With restructuring of power sector in Pakistan and increase in
economic, commercial & industrial activities, more power utilities and other customers
demanded high value packaged solutions for their transmission systems and enterprise
electrification requirements. To meet this demand PEL established an Engineering Procurement
and Construction division. The ‘power projects’ sector of PEL is a project based business that
deals with grid stations installations and housing underground electrification as well as other
electrical works. The two significant power projects are located in Mangla Dam which is a
ranging assignment by PEL and Shalimar Grid Station installation as well. Its major competitor
includes Siemens that has a much more market share as compared to PEL.
The second division of PEL consists of appliances manufacturing. The company is well known
for its air conditioners. PEL window-type air conditioners were introduced in 1981 in technical
collaboration with General Corporation of Japan. Ever since their launch, PEL air conditioners
have a leading position in the market. With the shift of customers’ preference from window type
to split type air conditioners, PEL has started manufacturing split type air conditioners more
now.
According to a study conducted by National Engineering Exports Development Strategy
(NEEDS), Pakistani home appliances sector has matured and is ready to take-off. The study
indicates that an industry which was not prepared to talk about exports at the time of Engineering
Vision in 2002 has taken the initiative of exports itself. It has occupied more than 95% of the
domestic market with a large pool of low cost human resource.
Pakistani home appliances industry has freight advantage over Chinese competitors in Middle
East and African markets. The existing exporting markets of the Pakistani home appliances
products are Afghanistan, UAE, Sri Lanka and Iraq, while potential also exists to expand further
in the Middle East markets, and create new markets for South Asia and Africa.
In rural areas, refrigerators were being sold on easy installments, and there was also a market for
second hand refrigerators. The market penetration of washing machines was almost equal to that
of refrigerators. These commodities had become increasingly affordable over the last few years,
and people had more disposable income, and had alternate sources for generating funds, like
loans. A couple of years ago, owning a split type air-conditioner was considered a sign of repute
and stature, whereas now it’s a necessity.

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COMPANY PROFILE
INTRODUCTION OF PEL

Pak Electron Limited (PEL) is the well renowned company in home appliances and power
sectors. It is the journey of years to reach this position. PEL was established in 1956 with the
technical collaboration of M/s AEG Germany with object of initially producing transformers,
switchgears and electric motors. AEG experts and PEL personnel carried out the designing
and production of these equipments jointly. It is the oldest composite electrical equipment-
manufacturing unit of Pakistan producing power and consumer products.

After the joint venture agreement with AEG, Saigol Group acquired the PEL COMPANY in
October 1978. SAIGOL GROUP is one of the leading industrial groups in PAKISTAN,
having diversified business activities in the fields of:

Textile

 Kohinoor Industries Ltd. Kohinoor Nagar, Faisalabad

 Azam Textile Mills Ltd. 06-Egerton Road, Lahore
 Saritow Spinning Mills Ltd. 06-Egerton Road, Lahore

Fuel & Energy

 Kohinoor Power Co. Ltd. Kohinoor Nagar, Faisalabad

 Kohinoor Energy Ltd. 06-Egerton Road, Lahore

Engineering

 Pak Elektron Ltd. 14km, Ferozepur Road, Lahore

 PEL Appliances Ltd. Gadoon Amazai, Sawabi
 PEL Daewoo Electronics Hattar, District, Haripur

Banking & Finance

 Union Bank Ltd. 06-Egerton Road, Lahore

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  Union Leasing Ltd. 07-Egerton
Road, Lahore

Trading

 Saritow Pakistan Ltd. 06-Egerton Road, Lahore

 Saigol Computer Ltd. 162-Shadman Colony, Lahore

Automobiles

 Kohinoor Motor Works Ltd. 07-Egerton Road, Lahore

In October 1978, PEL floated its shares to the general public and was listed on Karachi Stock
Exchange (KSE) and Lahore Stock Exchange (LSE).

In 1980, Appliances Division was established and company expanded its consumer products. In
1981 its starts the production of Window Type Air Conditioners with the technical collaboration
of General Corporation of Japan. This air conditioner was well received in the market for its
quality. Subsequently in 1987 the production of Refrigerators and Deep Freezers was started.

In 1993 the company has started the assembly of Compressors for Refrigerators and Deep
Freezers under technical collaboration with Messrs. NECCHI COMPRESSORI of Italy.

It was in early 70s that PEL became known in overseas markets due to its quality. The company
started its export to countries like Saudi Arabia, Abu Dhabi, Qatar etc. Later on PEL supplied
electrical equipments to various other countries in the Middle East, Far East and Africa with
great success.

PEL products right from the beginning have been of a high standard and the name PEL is
synonymous with QUALITY all over Pakistan. Since its inception, the company has been acting
as an institution working for the advancement and development of engineering know how in
Pakistan. The company has produced hundreds of engineers, skilled workers and technicians
through its apprenticeship schemes and training programs.

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