Reliance Fm

INSTITUTE OF MANAGEMENT SCIENCES, B.Z.U., MULTAN

ANALYSIS REPORT ON FINAL ACCOUNTS OF M/S RELIANCE WEAVING MILLS LIMITED;

SUBMITTED TO: MS. NAUSHEEN SARWAT,HONOURABLE TEARCHER,FINANCIAL MANAGEMENTINSTITUTE OF MANAGEMENT SCIENCES,BAHAUDDIN ZIKRIYA UNIVERSITY, MULTAN

SUBMITTED BYHAROON UR RASHID (ME-03-02)

RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITED

TABLE OF CONTENTS

THE PROJECT.................................................................3

BALANCE SHEET AS AT SEPTEMBER 30,2001/2002....................................................................5

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED SEPTEMBER30,2001/2002.............................7

RATIO ANALYSIS:.......................................................8

LIQUIDITY RATIOS:..................................................8ACTIVITY RATIOS.....................................................9DEBT RATIOS...........................................................10PROFITABILITY RATIOS........................................11

RATIO ANALYSIS OF M/S RELIANCE WEAVING MILLS LTD.:................................................................12

STATEMENT OF SOURCES AND USES OF CASH FOR THE YEAR ENDED ON 30.09.2002.................14

VERTICAL AND HORIZONTAL ANALYSIS OF BALANCE SHEET......................................................15

VERTICAL AND HORIZONTAL ANALYSIS OF INCOME STATEMENT.............................................16

ANSWERS TO ANALYTICAL QUESTIONS.............17

Annexure –I…….. Statement of cash Flows

Analysis of final accounts as of 30.09.2001 & 30.09.2002I.M.S., Baha uddin Zikriya University Multan

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THE COMPAMYTHE COMPAMY

Famous FATIMA GROUP.FATIMA GROUP OF INDUSTRIES established M/s Reliance weaving Mills Limited as a public limited company on 07.04.1990. The company was awarded “Certificate of Commencement of Business” on 14.05.1990. Presently the company has a paid up capital of Rs.205.406 millions against an authorised capital of Rs.400.000 millions. The company is listed at Karachi and Lahore Stock exchanges and also have been induced into central depository company (C.D.C.) The Company has following directors;

1. Mr. Fawad Ahmed Sheikh Chairman,2. Mr. Fazal Ahmed Sheikh, Chief Executive

Officer,3. Mr. Faisal ahmed sheikh, Director,4. Mrs. Ambreen Fawad Director,5. Mrs. Fatima Fazal Director,6. Mrs. Fadia Kashif Director,7. Syed Hussain Aqa Naqvi Director (N.I.T.

Nominee),

Their registered office is situated at 2nd flour trust plaza, L.M.Q. Road, Multan.

THE PROJECTTHE PROJECT

Their export oriented project consists of

A textile spinning unit, with installed capacity of 14400 spindles

Weaving unit No.1 with installed capacity of 116 looms and

Weaving unit No,2 with installed capacity of 116 looms


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDThe spinning unit of the company is located at Mukhtarabad, Rawat, Distt. Rawalpindi. The unit is in commercial production since 10.10.1999. with 14400 spindles and a very good combination of European and Japanese machinery with allied accessories. It is producing high quality yarn for in house consumption and for export markets. The installed capacity, after conversion into 20’s count, can approximately produce 4.849 million kilo-grams per annum. The spinning unit is built over a piece of land admeasuring 36 acres.

The company is increasing their plant capacity to 19690 spindles to achieve “Economies of Scale” and make the project more viable.

The weaving units are situated at Fazalpur , Khanewal Road, Multan.

Weaving unit # 1 is in commercial production since 01.05.1993, with 96 Tsudakoma brand air jet looms imported from Japan along with modern auxiliary machinery to produce high quality cloth for export markets. Further 20 looms of same brand were installed in 1999 coupled with yarn doubling and twisting machines to produce value added fabrics. The unit has an installed production capacity of approximately 16.085 million meters per annum. The unit # 1 is also installed with a power plant of 2.5MW utilizing which the company is saving power costs and production losses.

Weaving unit # 2: During the financial year ending 30.09.2001, the company implemented an expansion project for its weaving unit with a cost of about Rs.500.000 millions, comprising of 108 Tsudakoma air jet looms of Japanese origin along with modern auxiliary machinery. The project started its commercial production on 01.10.2001. The installed production capacity of the unit is approximately 21.700 million meters per annum. Another 48 air jet looms expansion project is in advance


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDstages of implementation with will add to the installed production capacity by about 9.00 million meters per annum.

All the units of the company are ISO- 9002

In short the company is flourishing and expanding day by day steadily. It is presently being rated as Pakistan’s 3rd largest capacity holder for weaving. The progressiveness of the company is also reflected in their profit capitalization and dividend policies. For the last two years they have announced cash dividends of 7.5%. In the year 2000 they announced a cash dividend of 52.50%, issued bonus shares of 20% and allotted right share issue of 25%.

As on 25.11.2003 their share had a closing market quotation of Rs13.20 per share. It is worth mentioning that about 7% of their shares are held by banks and financial institutions.

BALANCE SHEET AS AT SEPTEMBER 30,2001/2002.

ASSTES 2002 2001

FIXED CAPITAL EXPENDITURE

Operating fixed assets 963,961,057 537,836,670

Capital work-in- progress 40,260,082 475,214,695


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITED1,004,221,139 1,013,051,365

LONG TERM DEPOSITS 4,027,780 3,996,550

CURRENT ASSETS

Stores spares and loose tools 38,527,545 36,333,854

Stock in trade 249,798,561 185,452,931

Trade debtors 73,023,993 304,471,808

Loans and advances 42,257,966 43,031,404

Deposits and prepayments 18,932,478 8,320,287

Other receivables 35,466,363 36,343,584

Cash and bank balances 36,897,243 10,514,208 494,904,149 624,468,076

GRAND TOTAL 1,503,153,068 1,641,515,991


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SHARE HOLDER' S EQUITY AND LIABILITIESAMOUNT IN RUPEES

SHARE CAPITAL AND RESERVES 2002 2001Authorised Capital

40,000,000 ordinary shares of Rs10/= each 400,000,000 400,000,000

Issued, subscribed and paid up capital 205,406,250 164,325,000 Capital reserve-share premium 41,081,250 41,081,250 General reserve 200,000,000 100,000,000 Un-appropriated profit 22,660,143 83,894,927

469,147,643 389,301,177

REDEEMABLE CAPITAL 150,000,000

LONG TERM LOANS 352,395,341 472,654,396

LAIBILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE

25,026,591 34,838,087

CURRENT LIABILITIESShort term bank borrowings 252,029,514 504,643,382 Current portion of long term liabilities 91,085,082 86,055,167 Creditors, accrued and other liabilities 124,046,467 108,423,391 Provision for taxation 21,017,438 27,333,505 Dividends 18,404,992 18,266,886

506,583,493 744,722,331

CONTIGENCIES AND COMMITMENTS

GRAND TOTAL 1,503,153,068 1,641,515,991


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PROFIT AND LOSS ACCOUNT FOR THEPROFIT AND LOSS ACCOUNT FOR THE YEAR ENDEDYEAR ENDED

SEPTEMBER30,2001/2002SEPTEMBER30,2001/2002

AMOUNT IN RUPEES

2002 2001Sales 2,032,159,094 1,252,560,023 Cost of goods sold 1,721,195,792 1,057,331,258 Gross Profit 310,963,302 195,228,765

Operating expensesAdministrative 25,469,915 27,366,056 Selling 64,920,432 33,830,380

90,390,347 61,196,436 Operating profit 220,572,955 134,032,329 Other charges

Financial 134,852,785 96,833,133 Worker's profit participation fund 4,785,755 1,910,077 Others 5,746,292

145,384,832 98,743,210 Profit before taxation 75,188,123 35,289,119 Taxation 21,017,438 15,566,803 Profit for the year after tax 54,170,685 19,722,316 Un appropriated profit brought forward 83,894,927 76,496,986 Profit available for appropriation 138,065,612 96,219,302

Appropriations:Proposed dividend @7.5% 15,405,469 12,324,375 Transferred to "General Reserve" 100,000,000

115,405,469 12,324,375 Un-appropriated profit carried forward 22,660,143 83,894,927

Earning per share* 2.82 2.67


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITED(*weighted average of nmber of shares outstanding during the year) 19,240,496 7,393,796

Cash flow statement is annexed as annexure-I

RATIO ANALYSIS:RATIO ANALYSIS:

Usually ration analysis are conducted on following four major categories:

1. Liquidity ratio analyses2. Activity3. Debt 4. Profitability

A brief description of each of the ratios usually considered in each category is as under:

LIQUIDITY RATIOS:

Liquidity is a firm’s ability to satisfy it short term obligations as they become due.

a. NET WORKING CAPITAL:

It is given by the following formula;CURRENT ASSETS- CURRENT

LIABILITIESIt is a common measure of firm’s over all liquidity.

b. CURRENT RATIO:

It is given by the following formula;CURRENT ASSETSCURRENT LIABILITIES

It is a useful determinant of a firms ability to meet its short term financial obligations. At current ratio value “1”, firms “Net Working Capital” is always zero.


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDc. QUICK (ACID TEST ) RATIO:

It is given by the following formula;

CURRENT ASSETS-INVENTORYCURRENT LIABILITIES

The inventory is usually considered comparatively less liquid due to the reason that it is usually sold on credit the acid test ratio is a better measure of a firm’s liquidity. Usually a quick ratio of above 1.0 is considered very well.

ACTIVITY RATIOS

Activity ratios measure the speed with which accounts are converted into sales or cash.

a. INVENTORY TURN OVER:


COST OF GOODS SOLDINVENTORY

It shows that how many times in a year a firm sells its average inventory held to make profit. It can easily be converted in AVERAGE AGE OF INVENTORY by dividing it into 360.

b. AVERAGE COLLECTION PERIOD (DAYS):


ACCOUNTS RECEIVABLEAVERAGE SALE PER DAY

It is meaningful in firm’s credit terms and shows that for how much time (number of days) a firm’s cash remains stuck up in accounts receivable after making credit sales.


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDc. AVERAGE PAYMENT PERIOD (DAYS):


ACCOUNTS PAYABLEAVERAGE PURCHASES PER DAY

It shows that on the average, for how much time, a firm avails credit on its purchases. Prospective lenders and suppliers are especially interested in this figure.

d. TOTAL ASSET TURN OVER :

It is given by the following formula;SALES

TOTAL ASSETS

Generally a high Total Asset Turnover Ratio shows that the firms assets are efficiently being utilized. It is for the greatest interest for the prospective lenders and management as it indicates whether the firm’s operations have been financially efficient or not.

DEBT RATIOS

The debt position of a firm indicates the amount of other people’s money being used in attempt to generate profits

a. DEBT RATIO:


TOTAL LIABILITIESTOTAL ASSTES

It measures the proportion of total assets financed by the firm’s creditors. Higher the ratio more financial leverage the firm possesses.


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDb. TIMES INTEREST EARNED RATIO

It is also called “Interest Coverage Ratio” and is given by the following formula;

EARNINGS BEFORE INTEREST & TAXES

INTEREST PAIDIt measures the firm’s ability to make contractual interest payments. As a rule, a value of at least 3.0 to 5.0 is considered good.

c. FIXED PAYMENT COVERAGE RATIO:


EBIT + LEASE PAYMENTSINTT+LEASE PAYMENT+ (PRINC. REPAYMENTS +PREFERRED

STOCK DIVIDEND)X[1/(1-T)]

Here “T” is the corporate tax rate applicable to the firm in decimals. This ratio measures a firm’s ability to meet all fixed payment obligations.

PROFITABILITY RATIOS

These ratios measure firms efficiency in terms of earning profit by utilizing resources.

a. GROSS PROFIT MARGIN It is given by the following formula in percentage;

GROSS PROFITS X100SALES

It measures the percentage of each sales rupee remaining after firm has paid for its costs.

b. OPERATING PROFIT MARGIN: It is given by the following formula in percentage;

OPERATING PROFITS X 100SALES


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDIt measures the percentage of each sales rupee remaining after firm has paid for its all costs and expenses other than interest and taxes.

c. NET PROFIT MARGIN It is given by the following formula in percentage;

NET PROFITS AFTER TAXES x 100SALES

It measures the percentage of each sales rupee remaining after firm has paid for its all costs and expenses including interest and taxes.

d. RETURN ON TOTAL ASSTES (ROA): It is given by the following formula in percentage;

NET PROFITS AFTER TAXES%TOTAL ASSETS

It measures the firm’s over all effectiveness in generating profits utilizing its over all assets

e. RETURN ON EQUITY (ROE): It is given by the following formula in percentage;

NET PROFITS AFTER TAXES X 100STOCK HOLDER'S EQUITY

It measures the return earned on owner’s investment in the firm.

f. EARNING PER SHARE (EPS): It is given by the following formula;

EARING AVAILABLE FOR COMMON STOCK HOLDERSNO. OF SHARES OF COMMON STOCKS

It represents the amount earned on each share during a particular accounting period (it is not the declared dividend). It is of particular interest for stock investors.

g. PRICE EARNING (P/E) RATIO: It is given by the following formula;

MARKET PRICE PER SHARE OF COMMON STOCK


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDEARNING PER SHARE

It measures the amount investors are willing to pay (as price of a share) for each rupee of the firm’s earnings. Higher the P/E ratio, greater is the investors confidence in the firm.

Now we shall apply all the above ratios to analyse the final accounts of M/s Reliance Weaving Mills Limited.

RATIO ANALYSIS OF M/S RELIANCE WEAVING MILLS LTD.:

LIQUIDITY YEAR 2002 YEAR 2001

RATIO FIGURES RESULTS FIGURES RESULTSNET WORKING CAPITAL =494904149-

506583493

(11,679,344)

=624468076-744722331 (120,254,255)

CURRENT RATIO

=494904149/ 506583493

0.98 =624468076/ 744722331

0.84

QUICK RATIO (ACID TEST )

=(494904149-249798561) /506583493

0.48 =(624468076-185452931)/ 744722331

0.59

ACTIVITY YEAR 2002 YEAR 2001

RATIO FIGURES RESULTS FIGURES RESULTSINVENTORY TURN OVER

=1721195792/ 249798561 6.89 =1057331258/ 185452931

5.70

AVERAGE COLLECTION PERIOD (DAYS)

=73023993/ (2032159094 /360) 13 =304471808/ (1252560023/360)

88

AVERAGE PAYMENT PERIOD (DAYS)

=41426880/ ((1721195792*0.7)/ 360)

ASSUMING PURCHASES @70% OF CGS

12 =27526544/ ((1057331258*0.7)

/360)

13

TOTAL ASSET TURN OVER

=2032159094/ 1503153068 1.35 =1252560023 / 1641515991

0.76

DEBT DEBT RATIO =(1503153068-469147643)/

15031530680.69 =(1641515991-

389301177) / 1641515991

0.76


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDTIMES INTEREST EARNED RATIO

=(75188123+ 131246133)/ 131246133

1.57 =(35289119+ 94176826)/ 94176826

1.37

FIXED PAYMENT COVERAGE RATIO*

=(75188123+ 131246133+ 8296318)/

(131246133+8296318+128557608)

0.80 =(35289119+ 94176826 +1865595)/ (94176826+ 1865595+

58931910)

0.85

PROFITABILITY GROSS PROFIT MARGIN

=310963302/ 2032159094 15.30% =195228765/ 1252560023

15.59%

OPERATING PROFIT MARGIN

=220572955/ 2032159094 10.85% =134032329/ 1252560023

10.70%

NET PROFIT MARGIN

=54170685/ 2032159094 2.67% =19722316/ 1252560023

1.57%

RETURN ON TOTAL ASSTES (ROA)

=54170685/ 1503153068 3.60% =19722316/ 1641515991

1.20%

RETURN ON EQUITY (ROE)

=54170685/ 469147643 11.55% =19722316/ 389301177

5.07%

EARNING PER SHARE (EPS)**

=54170685/ 20540625 2.64 =19722316/ 16432500 1.20

** here we are considering only number of shares outstanding at the close of the period

PRICE EARNING (P/E) RATIO.

=13.20/2.64 5.00 market quotation not available

STATEMENT OF SOURCES AND USES OF CASH FOR THE YEAR ENDED ON 30.09.2002.

ACCOUNTS 2002 2001 CHANGE CLASSIFICATIONASSTES Sources Uses

LONG TERM DEPOSITS 4,027,780 3,996,550 31,230 31,230

CURRENT ASSETS

Stores spares & loose tools 38,527,545 36,333,854 2,193,691 2,193,691

Stock in trade 249,798,561 185,452,931 64,345,630 64,345,630

Trade debtors 73,023,993 304,471,808 (231,447,815) 231,447,815

Loans and advances 42,257,966 43,031,404 (773,438) 773,438

Deposits and prepayments 18,932,478 8,320,287 10,612,191 10,612,191

Other receivables 35,466,363 36,343,584 (877,221) 877,221


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDCash and bank balances 36,897,243 10,514,208 26,383,035 26,383,035

Gross fixed assets 1,352,558,112 823,510,465 529,047,647 529,047,647

Accumulated Depreciation 388,597,055 285,673,795 102,923,260 102,923,260

Capital work in progress 40,260,082 475,214,695 (434,954,613) 434,954,613

EQUITY

Paid up capital 205,406,250 164,325,000 41,081,250 41,081,250 Capital reserve-share premium 41,081,250 41,081,250 0

General reserve 200,000,000 100,000,000 100,000,000 100,000,000

Un-appropriated profit 22,660,143 83,894,927 (61,234,784) 61,234,784

LONG TERM LIABILITIESREDEEMABLE CAPITAL 150,000,000 150,000,000 150,000,000 LONG TERM LOANS 352,395,341 472,654,396 (120,259,055) 120,259,055 FINANCE LEASE LIABILITY 25,026,591 34,838,087 (9,811,496) 9,811,496

CURRENT LIABILITIESShort term bank borrowings 252,029,514 504,643,382 (252,613,868) 252,613,868 Current portion of long term liab. 91,085,082 86,055,167 5,029,915 5,029,915 Creditors, accrued & other liab. 124,046,467 108,423,391 15,623,076 15,623,076 Provision for taxation 21,017,438 27,333,505 (6,316,067) 6,316,067 Dividends 18,404,992 18,266,886 138,106 138,106

TOTALS: 1,082,848,694 1,082,848,694


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Vertical and Horizontal Analysis of Balance Sheet

AMOUNT IN RUPEES

BALANCE SHEET AS AT SEPTEMBER 30,2001/2002.ASSTES 2002 Vertical 2001 Vertical Horizontal

Operating fixed assets 963,961,057 64.13% 537,836,670 32.76% 79.23%

Capital work-in- progress 40,260,082 2.68% 475,214,695 28.95% -91.53%

1,004,221,139 66.81% 1,013,051,365 61.71% -0.87%

LONG TERM DEPOSITS 4,027,780 0.27% 3,996,550 0.24% 0.78%

CURRENT ASSETS

Stores spares and loose tools 38,527,545 2.56% 36,333,854 2.21% 6.04%

Stock in trade 249,798,561 16.62% 185,452,931 11.30% 34.70%

Trade debtors 73,023,993 4.86% 304,471,808 18.55% -76.02%

Loans and advances 42,257,966 2.81% 43,031,404 2.62% -1.80%

Deposits and prepayments 18,932,478 1.26% 8,320,287 0.51% 127.55%

Other receivables 35,466,363 2.36% 36,343,584 2.21% -2.41%

Cash and bank balances 36,897,243 2.45% 10,514,208 0.64% 250.93%Total current assets 494,904,149 32.92% 624,468,076 38.04% -20.75%

GRAND TOTAL 1,503,153,068 100.00% 1,641,515,991 100.00% -8.43%

SHARE HOLDER' S EQUITY AND LIABILITIES

Paid up capital 205,406,250 13.67% 164,325,000 10.01% 25.00%

Capital reserve-share premium 41,081,250 2.73% 41,081,250 2.50% 0.00%

General reserve 200,000,000 13.31% 100,000,000 6.09% 100.00%

Un-appropriated profit 22,660,143 1.51% 83,894,927 5.11% -72.99%

469,147,643 31.21% 389,301,177 23.72% 20.51%

REDEEMABLE CAPITAL 150,000,000 9.98% 0.00%

LONG TERM LOANS 352,395,341 23.44% 472,654,396 28.79% -25.44%

LAIBILITIES AGAINST ASSETS SUBJECT TO FINANCE LEASE 25,026,591 1.66% 34,838,087 2.12% -28.16%


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c/o next page

CURRENT LIABILITIES 2002 vertical 2001 vertical Horizontal

Short term bank borrowings 252,029,514 16.77% 504,643,382 30.74% -50.06%Current portion of long term liabilities 91,085,082 6.06% 86,055,167 5.24% 5.84%Creditors, accrued and other liabilities 124,046,467 8.25% 108,423,391 6.61% 14.41%

Provision for taxation 21,017,438 1.40% 27,333,505 1.67% -23.11%

Dividends 18,404,992 1.22% 18,266,886 1.11% 0.76%

Total Current Liabilities 506,583,493 33.70% 744,722,331 45.37% -31.98%

GRAND TOTAL 1,503,153,068 100.00% 1,641,515,991 100.00% -8.43%

Vertical and Horizontal Analysis of Income Statement

AMOUNT IN RUPEES

2002 vertical 2001 Vertical HorizontalSales 2,032,159,094 100.00% 1,252,560,023 100.00% 62.24%Cost of goods sold 1,721,195,792 84.70% 1,057,331,258 84.41% 62.79%Gross Profit 310,963,302 15.30% 195,228,765 15.59% 59.28%Operating expenses

Administrative 25,469,915 1.25% 27,366,056 2.18% -6.93%Selling 64,920,432 3.19% 33,830,380 2.70% 91.90%

90,390,347 4.45% 61,196,436 4.89% 47.71%Operating profit 220,572,955 10.85% 134,032,329 10.70% 64.57%Other charges

Financial 134,852,785 6.64% 96,833,133 7.73% 39.26%Worker's profit participation fund 4,785,755 0.24% 1,910,077 0.15% 150.55%Others 5,746,292 0.28% 0.00%

145,384,832 7.15% 98,743,210 7.88% 47.24%Profit before taxation 75,188,123 3.70% 35,289,119 2.82% 113.06%Taxation 21,017,438 1.03% 15,566,803 1.24% 35.01%Profit for the year after tax 54,170,685 2.67% 19,722,316 1.57% 174.67%


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ANSWERS TO ANALYTICAL QUESTIONSANSWERS TO ANALYTICAL QUESTIONS

Question No,1As a long-term creditor would you like to invest in the company? Why?Answer:Yes, in principle I would like to invest/make long term loan to the company, despite the fact that company fiancé port-folio has already been loaded with debt quite heavily. Following vindications backs my decision:

a. Company’s interest coverage ratio is improving. This indicates that further investment in the business shall further improve the profitability.

b. Company has a good equity built up, which they are using effectively in their expansion plans.

c. The financials of the company does not reflect a business risk.

d. With backing of good reputation Fatima Group and market response to TFC issue of year 2002, my decision gets reinforcement.

However, my final decision would depend on negotiations over terms of loan, amount of loan and collateral.

Question No,I1As a short term creditor would you like lend the company? Why?Answer:Yes, I would like to lend short term finances to the company. My decision is due to following facts:

a. Although the company is in liquidity crunch, as evident from various liquidity ratios, yet over the time they are improving and on final implementation of expansion plans, they will be all right.


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDb. The risk is fairly mitigated by backing of Fatima

Group.c. The company has fairly improved in cash flow

from operations.d. Their profitability ratios are also fine.e. As their weaving unit # 2 has started commercial

production it will improve in efficiency in back drop of management’s expertise in the field. Hence, over all operational results and liquidity is also expected to improve.

Question No,I1IWould you like to invest in the shares of the company? Why?Answer:Yes, I would like to invest in the shares of the company. I have framed my opinion due to following reasons:

a. The company is a being managed by famous Fatima Group.

b. Its shares have a fair market price. (Rs.13.20, as on 25.11.03).

c. The company has a good “Return on equity” (i.e. 11.55%).

d. Very good P/E ratio (i.e. 5.00)e. EPS is at Rs.2.64f. Company’s 20,540,625 shares have backing of

reserves and un appropriated profit of Rs.263,741,393/-; this gives an extra equity of Rs.13/- per share. As the share is available around Rs13/- I will prefer to invest in it.

g. The company is expanding and improving in quality and output quantity to be competitive in coming post WTO implementation scenario. This effort on the part of the management also


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RELIANCE WEAVING MILLS LIMITEDRELIANCE WEAVING MILLS LIMITEDstrengthens the share and makes it attractive to invest.

h. The company has declared 25% right share issue in year 2000 and 2002. Moreover, a tradition of declaring high dividends as much as 52% in year 2000 along with bonus shares of 20% ( & right share as already mentioned) makes the share more attractive.


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