Notes To Accounts

Notes to the Financial Statements
For the year ended June 30, 2017

1 THE COMPANY AND ITS OPERATIONS
Nishat Mills Limited is a public limited Company incorporated in Pakistan under the Companies
Act, 1913 (Now Companies Act, 2017) and listed on Pakistan Stock Exchange Limited. Its
registered office is situated at 53-A, Lawrence Road, Lahore. The Company is engaged in
the business of textile manufacturing and of spinning, combing, weaving, bleaching, dyeing,
printing, stitching, apparel, buying, selling and otherwise dealing in yarn, linen, cloth and other
goods and fabrics made from raw cotton, synthetic fibre and cloth and to generate, accumulate,
distribute, supply and sell electricity.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the preparation of these financial statements are
set out below. These policies have been consistently applied to all years presented, unless
otherwise stated:
2.1 Basis of preparation
a) Statement of compliance
These financial statements have been prepared in accordance with approved accounting
standards as applicable in Pakistan. Approved accounting standards comprise of such
International Financial Reporting Standards (IFRS) issued by the International Accounting
Standards Board as are notified under the repealed Companies Ordinance, 1984,
provisions of and directives issued under the repealed Companies Ordinance, 1984. In
case requirements differ, the provisions or directives of the repealed Companies Ordinance,
1984 shall prevail.
The Companies Ordinance, 1984 has been repealed after the enactment of the Companies
Act, 2017 on 30 May 2017. SECP vide its Circular 17 of 2017 and its press release dated
20 July 2017 has clarified that the companies whose financial year, including quarterly
and other interim period, closes on or before 30 June 2017 shall prepare their financial
statements in accordance with the provisions of the repealed Companies Ordinance, 1984.
The Companies Act, 2017 requires enhanced disclosures about Company’s operations
and has also enhanced the definition of related parties.
b) Accounting convention
These financial statements have been prepared under the historical cost convention
except for the certain financial instruments carried at fair value.
c) Critical accounting estimates and judgments
The preparation of financial statements in conformity with the approved accounting
standards requires the use of certain critical accounting estimates. It also requires the
management to exercise its judgment in the process of applying the Company’s accounting
policies. Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. The areas where various assumptions and
estimates are significant to the Company’s financial statements or where judgments were
exercised in application of accounting policies are as follows:
Financial instruments
The fair value of financial instruments that are not traded in an active market is determined
by using valuation techniques based on assumptions that are dependent on conditions
existing at balance sheet date.
Useful lives, patterns of economic benefits and impairments
Estimates with respect to residual values and useful lives and pattern of flow of economic
benefits are based on the analysis of the management of the Company. Further, the Company
reviews the value of assets for possible impairment on an annual basis. Any change in the
estimates in the future might affect the carrying amount of respective item of property, plant
and equipment, with a corresponding effect on the depreciation charge and impairment.
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Inventories
Net realizable value of inventories is determined with reference to currently prevailing
selling prices less estimated expenditure to make sales.
Taxation
In making the estimates for income tax currently payable by the Company, the management
takes into account the current income tax law and the decisions of appellate authorities on
certain issues in the past.
Provision for doubtful debts

The Company reviews its receivable against any provision required for any doubtful
balances on an ongoing basis. The provision is made while taking into consideration
expected recoveries, if any.
Impairment of investments in subsidiaries and equity method accounted for associated

companies
In making an estimate of recoverable amount of the Company’s investments in subsidiaries
and equity method accounted for associated companies, the management considers
future cash flows.
d) Amendments to published approved accounting standards that are effective in current

year and are relevant to the Company
The following amendments to published approved accounting standards are mandatory
for the Company’s accounting periods beginning on or after 01 July 2016:
IAS 1 (Amendments) ‘Presentation of Financial Statements’ (effective for annual periods

beginning on or after 01 January 2016). Amendments have been made to address perceived
impediments to preparers exercising their judgement in presenting their financial reports
by making the following changes: clarification that information should not be obscured
by aggregating or by providing immaterial information, materiality consideration apply to
the all parts of the financial statements, and even when a standard requires a specific
disclosure, materiality consideration do apply; clarification that the list of the line items
to be presented in these statements can be disaggregated and aggregated as relevant
and additional guidance on subtotals in these statements and clarification that an entity’s
share of other comprehensive income of equity-accounted associates and joint ventures
should be presented in aggregate as single line items based on whether or not it will
subsequently be reclassified to profit or loss; and additional examples of possible ways of
ordering the notes to clarify that understandability and comparability should be considered
when determining the order of the notes and to demonstrate that the notes need not be
presented in the order so far listed in IAS 1.
IAS 16 (Amendments) ‘Property, Plant and Equipment’ (effective for annual periods
beginning on or after 01 January 2016). The amendments clarify that a depreciation
method which is based on revenue, generated by an activity by using of an asset is not
appropriate for property, plant and equipment; and add guidance that expected future
reductions in the selling price of an item that was produced using an asset could indicate
the expectation of technological or commercial obsolescence of the asset, which, in turn,
might reflect a reduction of the future economic benefits embodied in the asset.
IAS 27 (Amendments) ‘Separate Financial Statements’ (effective for annual periods

beginning on or after 01 January 2016). The amendments have been made to permit
investments in subsidiaries, joint ventures and associates to be optionally accounted for
using the equity method in separate financial statements. However, the Company has not
availed this option.
Nishat Mills Limited 45

IAS 34 (Amendments) ‘Interim Financial Reporting’ (effective for annual periods beginning
on or after 01 January 2016). This amendment clarifies what is meant by the reference
in the standard to ‘information disclosed elsewhere in the interim financial report’. The
amendment also amends IAS 34 to require a cross-reference from the interim financial
statements to the location of that information.
The application of the above amendments does not result in any impact on profit or loss,
other comprehensive income and total comprehensive income.
e) Amendments to published approved accounting standards that are effective in

current year but not relevant to the Company
There are other amendments to published approved accounting standards that are
mandatory for accounting periods beginning on or after 01 July 2016 but are considered not
to be relevant or do not have any significant impact on the Company’s financial statements
and are therefore not detailed in these financial statements.
f) Standards, interpretations and amendments to published approved accounting

standards that are not yet effective but relevant to the Company
Following standards, interpretations and amendments to existing standards have been

published and are mandatory for the Company’s accounting periods beginning on or after
01 July 2017 or later periods:
IFRS 9 ‘Financial Instruments’ (effective for annual periods beginning on or after 01 January
2018). A finalized version of IFRS 9 which contains accounting requirements for financial
instruments, replacing IAS 39 ‘Financial Instruments: Recognition and Measurement’.
Financial assets are classified by reference to the business model within which they are
held and their contractual cash flow characteristics. The 2014 version of IFRS 9 introduces
a ‘fair value through other comprehensive income’ category for certain debt instruments.
Financial liabilities are classified in a similar manner to under IAS 39, however there are
differences in the requirements applying to the measurement of an entity’s own credit risk.
The 2014 version of IFRS 9 introduces an ‘expected credit loss’ model for the measurement
of the impairment of financial assets, so it is no longer necessary for a credit event to have
occurred before a credit loss is recognized. It introduces a new hedge accounting model
that is designed to be more closely aligned with how entities undertake risk management
activities when hedging financial and non-financial risk exposures. The requirements for
the derecognition of financial assets and liabilities are carried forward from IAS 39. The
management of the Company is in the process of evaluating the impacts of the aforesaid
standard on the Company’s financial statements.
IFRS 15 ‘Revenue from Contracts with Customers’ (effective for annual periods beginning
on or after 01 January 2018). IFRS 15 provides a single, principles based five-step model
to be applied to all contracts with customers. The five steps in the model are: identify the
contract with the customer; identify the performance obligations in the contract; determine
the transaction price; allocate the transaction price to the performance obligations in the
contracts; and recognize revenue when (or as) the entity satisfies a performance obligation.
Guidance is provided on topics such as the point in which revenue is recognized, accounting
for variable consideration, costs of fulfilling and obtaining a contract and various related
matters. New disclosures about revenue are also introduced. IFRS 15 replaces IAS 11
‘Construction Contracts’, IAS 18 ‘Revenue’, IFRIC 13 ‘Customer Loyalty Programmes’,
IFRIC 15 ‘Agreements for Construction of Real Estate’, IFRIC 18 ‘Transfer of Assets from
Customers’ and SIC 31’ Revenue-Barter Transactions Involving Advertising Services. The
aforesaid standard is not expected to have a material impact on the Company’s financial
statements.
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IFRS 16 ‘Lease’ (effective for annual periods beginning on or after 01 January 2019).
IFRS 16 specifies how an entity will recognize, measure, present and disclose leases. The
standard provides a single lessee accounting model, requiring lessees to recognize assets
and liabilities for all leases unless the lease term is 12 months or less or the underlying
asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS
16 approach to lessor accounting substantially unchanged from its predecessor, IAS 17
‘Leases’. IFRS 16 replaces IAS 17 ‘Leases’, IFRIC 4 ‘Determining Whether an Arrangement
Contains a Lease’, SIC-15 ‘Operating Leases–Incentives’ and SIC-27 ‘Evaluating the
Substance of Transactions Involving the Legal Form of a Lease’. The management of
the Company is in the process of evaluating the impacts of the aforesaid standard on the
Company’s financial statements.
IFRIC 22 ‘Foreign Currency Transactions and Advance Consideration’ (effective for annual
periods beginning on or after 01 January 2018). IFRIC 22 clarifies which date should be used
for translation when a foreign currency transaction involves payment or receipt in advance
of the item it relates to. The related item is translated using the exchange rate on the date
the advance foreign currency is received or paid and the prepayment or deferred income
is recognized. The date of the transaction for the purpose of determining the exchange
rate to use on initial recognition of the related asset, expense or income (or part of it) would
remain the date on which receipt of payment from advance consideration was recognized.
If there are multiple payments or receipts in advance, the entity shall determine a date of the
transaction for each payment or receipt of advance consideration. The interpretation is not
expected to have a material impact on the Company’s financial statements.
IFRIC 23 ‘Uncertainty over Income Tax Treatments’ (effective for annual periods beginning
on or after 01 January 2019). The interpretation addresses the determination of taxable
profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when
there is uncertainty over income tax treatments under IAS 12 ‘Income Taxes’. It specifically
considers: whether tax treatments should be considered collectively; assumptions for
taxation authorities’ examinations; the determination of taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits and tax rates; and the effect of changes in facts
and circumstances. The interpretation is not expected to have a material impact on the
IFRS 15 (Amendments), ‘Revenue from Contracts with Customers’ (effective for annual
periods beginning on or after 01 January 2018). Amendments clarify three aspects of
the standard (identifying performance obligations, principal versus agent considerations,
and licensing) and to provide some transition relief for modified contracts and completed
contracts. The aforesaid amendments are not expected to have a material impact on the
IAS 7 (Amendments), ‘Statement of Cash Flows’ (effective for annual periods beginning
on or after 01 January 2017). Amendments have been made to clarify that entities shall
provide disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities. The aforesaid amendments will result in certain
additional disclosures in the Company’s financial statements.
IAS 12 (Amendments), ‘Income Taxes’ (effective for annual periods beginning on or after
01 January 2017). The amendments clarify that the existence of a deductible temporary
difference depends solely on a comparison of the carrying amount of an asset and its tax
base at the end of the reporting period, and is not affected by possible future changes
in the carrying amount or expected manner of recovery of the asset. The amendments
further clarify that when calculating deferred tax asset in respect of insufficient taxable
temporary differences, the future taxable profit excludes tax deductions resulting from the
reversal of those deductible temporary differences. The amendments are not likely to have
significant impact on Company’s financial statements.

IAS 40 (Amendments), ‘Investment Property’ (effective for annual periods beginning on or
after 01 January 2018). Amendments have been made to state that an entity shall transfer
a property to, or from, investment property when, and only when, there is evidence of a
change in use. A change of use occurs if property meets, or ceases to meet, the definition
of investment property. A change in management’s intentions for the use of a property by
itself does not constitute evidence of a change in use. The list of examples of evidence in
paragraph 57(a) – (d) is now presented as a non-exhaustive list of examples instead of the
previous exhaustive list. The amendment is not likely to have a significant impact on the
Amendments to IFRS 10 and IAS 28 (deferred indefinitely) to clarify the treatment of the
sale or contribution of assets from an investor to its associates or joint venture, as follows:
require full recognition in the investor’s financial statements of gains and losses arising on
the sale or contribution of assets that constitute a business (as defined in IFRS 3 ‘Business
Combinations’); require the partial recognition of gains and losses where the assets do not
constitute a business, i.e. a gain or loss is recognized only to the extent of the unrelated
investors’ interests in that associate or joint venture. These requirements apply regardless
of the legal form of the transaction, e.g. whether the sale or contribution of assets occur
by an investor transferring shares in a subsidiary that holds the assets (resulting in loss of
control of the subsidiary), or by the direct sale of the assets themselves. The management
of the Company is in the process of evaluating the impacts of the aforesaid amendments
on the Company’s financial statements.
On 8 December 2016, IASB issued Annual Improvements to IFRSs: 2014 – 2016 Cycle,
incorporating amendments to three IFRSs more specifically in IFRS 12 ‘Disclosure of
Interests in Other Entities’ and IAS 28 ‘Investments in Associates and Joint Ventures’.
These amendments are effective for annual periods beginning on or after 01 January 2017
and 01 January 2018 respectively. These amendments have no significant impact on the
Company’s financial statements and have therefore not been analyzed in detail.
g) Standards and amendments to approved published standards that are not yet
effective and not considered relevant to the Company
There are other standards and amendments to published standards that are mandatory
for accounting periods beginning on or after 01 July 2017 but are considered not to be
relevant or do not have any significant impact on the Company’s financial statements and
are therefore not detailed in these financial statements.
2.2 Employee benefit
The Company operates an approved funded provident fund scheme covering all its
permanent employees and permanent employees of a Group Company. Equal monthly
contributions are made both by the Company, other Group Company and employees at
the rate of 9.5 percent of the basic salary to the fund. The Company’s contributions to the
fund are charged to profit and loss account.
2.3 Taxation
Current
Provision for current tax is based on the taxable income for the year determined in
accordance with the prevailing law for taxation of income. The charge for current tax is
calculated using prevailing tax rates or tax rates expected to apply to the profit for the
year, if enacted. The charge for current tax also includes adjustments, where considered
necessary, to provision for tax made in previous years arising from assessments framed
during the year for such years.
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Deferred
Deferred tax is accounted for using the balance sheet liability method in respect of all
temporary differences arising from differences between the carrying amount of assets
and liabilities in the financial statements and the corresponding tax bases used in the
computation of the taxable profit. Deferred tax liabilities are generally recognized for all
taxable temporary differences and deferred tax assets to the extent that it is probable
that taxable profits will be available against which the deductible temporary differences,
unused tax losses and tax credits can be utilized.
Deferred tax is calculated at the rates that are expected to apply to the period when the
differences reverse based on tax rates that have been enacted or substantively enacted by
the balance sheet date. Deferred tax is charged or credited in the profit and loss account,
except to the extent that it relates to items recognized in other comprehensive income or
directly in equity. In this case, the tax is also recognized in other comprehensive income or
directly in equity, respectively.
2.4 Foreign currencies
These financial statements are presented in Pak Rupees, which is the Company’s
functional currency. All monetary assets and liabilities denominated in foreign currencies
are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet
date, while the transactions in foreign currencies during the year are initially recorded in
functional currency at the rates of exchange prevailing at the transaction date. All non-
monetary items are translated into Pak Rupees at exchange rates prevailing on the date
of transaction or on the date when fair values are determined. Exchange gains and losses
are recorded in the profit and loss account.
2.5 Property, plant, equipment and depreciation
Owned
Property, plant and equipment except freehold land and capital work-in-progress are
stated at cost less accumulated depreciation and accumulated impairment losses (if any).
Cost of property, plant and equipment consists of historical cost, borrowing cost pertaining
to erection / construction period of qualifying assets and other directly attributable costs
of bringing the asset to working condition. Freehold land and capital work-in- progress are
stated at cost less any recognized impairment loss.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate
asset, as appropriate, only when it is probable that future economic benefits associated
with the item will flow to the Company and the cost of the item can be measured reliably.
All other repair and maintenance costs are charged to profit and loss account during the
period in which they are incurred.
Leased
Leases where the Company has substantially all the risk and rewards of ownership
are classified as finance lease. Assets subject to finance lease are capitalized at the
commencement of the lease term at the lower of present value of minimum lease payments
under the lease agreements and the fair value of the leased assets, each determined at
the inception of the lease.
The related rental obligation net of finance cost is included in liabilities against assets
subject to finance lease. The liabilities are classified as current and long term depending
upon the timing of payments.

Each lease payment is allocated between the liability and finance cost so as to achieve a
constant rate on the balance outstanding. The finance cost is charged to profit and loss
account over the lease term.
Depreciation of assets subject to finance lease is recognized in the same manner as for
owned assets. Depreciation of the leased assets is charged to profit and loss account.
Depreciation
Depreciation on property, plant and equipment is charged to profit and loss account
applying the reducing balance method so as to write off the cost / depreciable amount of
the assets over their estimated useful lives at the rates given in Note 12.1. The Company
charges the depreciation on additions from the date when the asset is available for use
and on deletions upto the date when the asset is de-recognized. The residual values and
useful lives are reviewed by the management, at each financial year-end and adjusted if
impact on depreciation is significant.
De-recognition
An item of property, plant and equipment is de-recognized upon disposal or when no

future economic benefits are expected from its use or disposal. Any gain or loss arising on
de-recognition of the asset is included in the profit and loss account in the year the asset
is de-recognized.
2.6 Investment properties
Land and buildings held for capital appreciation or to earn rental income are classified
as investment properties. Investment properties except land, are stated at cost less
accumulated depreciation and any recognized impairment loss. Land is stated at cost
less any recognized impairment loss. Depreciation on buildings is charged to profit and
loss account applying the reducing balance method so as to write off the cost of buildings
over their estimated useful lives at a rate of 10% per annum.
2.7 Operating leases
Assets leased out under operating leases are included in investment properties. They
are depreciated over their expected useful lives on a basis consistent with similar owned
property, plant and equipment.
2.8 Investments
Classification of an investment is made on the basis of intended purpose for holding such
investment. Management determines the appropriate classification of its investments at
the time of purchase and re-evaluates such designation on regular basis.
Investments are initially measured at fair value plus transaction costs directly attributable
to acquisition, except for “Investment at fair value through profit or loss” which is initially
measured at fair value.
The Company assesses at the end of each reporting period whether there is any objective
evidence that investments are impaired. If any such evidence exists, the Company applies the
provisions of IAS 39 ‘Financial Instruments: Recognition and Measurement’ to all investments,
except investments in subsidiaries and equity method accounted for associates, which are
tested for impairment in accordance with the provisions of IAS 36 ‘Impairment of Assets’.
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a) Investment at fair value through profit or loss
Investments classified as held-for-trading and those designated as such are included in

this category. Investments are classified as held-for-trading if these are acquired for the
purpose of selling in the short term. Gains or losses on investments held-for-trading are
recognized in profit and loss account.
b) Held-to-maturity
Investments with fixed or determinable payments and fixed maturity are classified
as held-to-maturity when the Company has the positive intention and ability to hold to
maturity. Investments intended to be held for an undefined period are not included in this
classification. Other long-term investments that are intended to be held to maturity are
subsequently measured at amortized cost. This cost is computed as the amount initially
recognized minus principal repayments, plus or minus the cumulative amortization, using
the effective interest method, of any difference between the initially recognized amount
and the maturity amount. For investments carried at amortized cost, gains and losses
are recognized in profit and loss account when the investments are de-recognized or
impaired, as well as through the amortization process.
c) Investment in subsidiaries
Investments in subsidiaries are stated at cost less impairment loss, if any, in accordance
with the provisions of IAS 27 ‘Separate Financial Statements’.
d) Investment in associates - (with significant influence)
The Company is required to prepare separate financial statements, hence, in accordance

with the requirements of IAS 27 ‘Separate Financial Statements’, the investments in associated
undertakings are accounted for in accordance with IAS 39 ‘Financial Instruments:
Recognition and Measurement’ and are classified as available for sale.
e) Available-for-sale
Investments intended to be held for an indefinite period of time, which may be sold in
response to need for liquidity, or changes to interest rates or equity prices are classified as
available-for-sale. After initial recognition, investments which are classified as available-
for-sale are measured at fair value. Gains or losses on available-for-sale investments are
recognized directly in statement of other comprehensive income until the investment is
sold, de-recognized or is determined to be impaired, at which time the cumulative gain or
loss previously reported in statement of other comprehensive income is included in profit
and loss account. These are sub-categorized as under:
Quoted
For investments that are actively traded in organized capital markets, fair value is
determined by reference to stock exchange quoted market bids at the close of business on
the balance sheet date. Fair value of investments in open-end mutual funds is determined
using redemption price.
Unquoted
Fair value of unquoted investments is determined on the basis of appropriate valuation

techniques as allowed by IAS 39 ‘Financial Instruments: Recognition and Measurement’.

2.9 Inventories
Inventories, except for stock in transit and waste stock / rags, are stated at lower of cost
and net realizable value. Cost is determined as follows:
Stores, spare parts and loose tools
Useable stores, spare parts and loose tools are valued principally at moving average cost,
while items considered obsolete are carried at nil value. Items in transit are valued at cost
comprising invoice value plus other charges paid thereon.
Stock-in-trade
Cost of raw material, work-in-process and finished goods is determined as follows:
i) For raw materials: Annual average basis.

ii) For work-in-process and finished goods: Average manufacturing cost including a portion
of production overheads.
Materials in transit are valued at cost comprising invoice value plus other charges paid
thereon. Waste stock / rags are valued at net realizable value.
Net realizable value signifies the estimated selling price in the ordinary course of business
less the estimated costs of completion and the estimated costs necessary to make a sale.
2.10 Trade and other receivables
Trade debts and other receivables are carried at original invoice value less an estimate
made for doubtful debts based on a review of all outstanding amounts at the year end.
Bad debts are written off when identified.
2.11 Non–current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as assets held for sale when their
carrying amount is to be recovered principally through a sale transaction and a sale is
considered highly probable. They are stated at the lower of carrying amount and fair value
less costs to sell.
2.12 Borrowings
Borrowings are recognized initially at fair value and are subsequently stated at amortized
cost. Any difference between the proceeds and the redemption value is recognized in
the profit and loss account over the period of the borrowings using the effective interest
method.
2.13 Borrowing cost
Interest, mark-up and other charges on long-term finances are capitalized up to the date
of commissioning of respective qualifying assets acquired out of the proceeds of such
long-term finances. All other interest, mark-up and other charges are recognized in profit
and loss account.
2.14 Share capital
Ordinary shares are classified as share capital.
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2.15 Trade and other payables
Liabilities for trade and other amounts payable are initially recognized at fair value, which
is normally the transaction cost.
2.16 Revenue recognition
Revenue from different sources is recognized as under:
- Revenue from sale of goods is recognized on dispatch of goods to customers.
- Revenue from sale of electricity is recognized at the time of transmission.
- Dividend on equity investments is recognized when right to receive the dividend is

established.
- Operating lease rentals are recorded in profit and loss account on a time proportion
basis over the term of the lease arrangements.
- Profit on deposits with banks is recognized on time proportion basis taking into account
the amounts outstanding and rates applicable thereon.
2.17 Financial instruments
Financial instruments carried on the balance sheet include investments, deposits, trade
debts, loans and advances, other receivables, cash and bank balances, long-term
financing, short-term borrowings, accrued mark-up and trade and other payables etc.
Financial assets and liabilities are recognized when the Company becomes a party to
the contractual provisions of instrument. Initial recognition is made at fair value plus
transaction costs directly attributable to acquisition, except for “financial instruments at
fair value through profit or loss” which are initially measured at fair value.
Financial assets are de-recognized when the Company loses control of the contractual
rights that comprise the financial asset. The Company loses such control if it realizes the
rights to benefits specified in contract, the rights expire or the Company surrenders those
rights. Financial liabilities are de-recognized when the obligation specified in the contract
is discharged, cancelled or expired. Any gain or loss on subsequent measurement
(except available for sale investments) and de-recognition is charged to the profit or loss
currently. The particular measurement methods adopted are disclosed in the individual
policy statements associated with each item.
2.18 Provisions
Provisions are recognized when the Company has a legal or constructive obligation as a
result of past events and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligations and a reliable estimate of the amount can
be made.
2.19 Impairment
a) Financial assets
A financial asset is considered to be impaired if objective evidence indicate that one or

more events had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated
as a difference between its carrying amount and the present value of estimated future
cash flows discounted at the original effective interest rate. An impairment loss in respect
of available for sale financial asset is calculated with reference to its current fair value.
Individually significant financial assets are tested for impairment on an individual basis.
The remaining financial assets are assessed collectively in groups that share similar credit
risk characteristics.
b) Non-financial assets
The carrying amounts of the Company’s non-financial assets are reviewed at each balance
sheet date to determine whether there is any indication of impairment. If such indication
exists, the recoverable amount of such asset is estimated. An impairment loss is recognized
wherever the carrying amount of the asset exceeds its recoverable amount. Impairment
losses are recognized in profit and loss account. A previously recognized impairment loss
is reversed only if there has been a change in the estimates used to determine the asset’s
recoverable amount since the last impairment loss was recognized. If that is the case,
the carrying amount of the asset is increased to its recoverable amount. That increased
amount cannot exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognized for the asset in prior years. Such
reversal is recognized in profit and loss account.
2.20 Derivative financial instruments
Derivative that do not qualify for hedge accounting are recognized in the balance sheet
at estimated fair value with corresponding effect to profit and loss account. Derivative
financial instruments are carried as assets when fair value is positive and liabilities when
fair value is negative.
2.21 Off setting
Financial assets and financial liabilities are set off and the net amount is reported in the
financial statements when there is a legal enforceable right to set off and the Company
intends either to settle on a net basis or to realize the assets and to settle the liabilities
simultaneously.
2.22 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash at banks on current, saving and
deposit accounts and other short term highly liquid instruments that are readily convertible
into known amounts of cash and which are subject to insignificant risk of changes in
values.
2.23 Segment reporting
Segment reporting is based on the operating (business) segments of the Company. An

operating segment is a component of the Company that engages in business activities
from which it may earn revenues and incur expenses, including revenues and expenses
that relate to the transactions with any of the Company’s other components. An operating
segment’s operating results are reviewed regularly by the chief executive officer to make
decisions about resources to be allocated to the segment and assess its performance,
and for which discrete financial information is available.
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Segment results that are reported to the chief executive officer include items directly
attributable to a segment as well as those that can be allocated on a reasonable basis.
Those incomes, expenses, assets, liabilities and other balances which can not be allocated
to a particular segment on a reasonable basis are reported as unallocated.
The Company has following reportable business segments: Spinning at Faisalabad (I

and II) and Feroze Wattwan (Producing different quality of yarn using natural and artificial
fibres), Weaving at Bhikki and Lahore (Producing different quality of greige fabric using
yarn), Dyeing (Producing dyed fabric using different qualities of greige fabric), Home
Textile (Manufacturing of home textile articles using processed fabric produced from
greige fabric), Garments (I and II) (Manufacturing of garments using processed fabric)
and Power Generation (Generation and distribution of power using gas, oil, steam, coal
and biomass).
Transaction among the business segments are recorded at cost. Inter segment sales and
purchases are eliminated from the total.
2.24 Government Grants
Government grants are recognized when there is reasonable assurance that entity will
comply with the conditions attached to it and grant will be received.
2.25 Dividend and other appropriations
Dividend distribution to the Company’s shareholders is recognized as a liability in the

Company’s financial statements in the period in which the dividends are declared and
other appropriations are recognized in the period in which these are approved by the
Board of Directors.
3 ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL

2017 2016 2017 2016
(Number of Shares) (Rupees in thousand)
256,772,316 256,772,316 Ordinary shares of Rupees 10 each fully

paid-up in cash 2,567,723 2,567,723

2,804,079 2,804,079 Ordinary shares of Rupees 10 each
issued to shareholders of Nishat
Apparel Limited under the Scheme
of Amalgamation 28,041 28,041

issued as fully paid for consideration
other than cash 372,523 372,523

issued as fully paid bonus shares 547,712 547,712

351,599,848 351,599,848 3,515,999 3,515,999

3.1 Ordinary shares of the Company held by the associated companies:
2017 2016
(Number of shares)

D.G. Khan Cement Company Limited 30,289,501 30,289,501
Adamjee Insurance Company Limited 1,402,950 2,788,150
MCB Bank Limited 227 227

31,692,678 33,077,878
2017 2016
Note (Rupees in thousand)
4 RESERVES

Composition of reserves is as follows:

Capital reserves

Premium on issue of right shares 5,499,530 5,499,530
Fair value reserve - net of deferred income tax 4.1 39,631,520 35,528,222

45,131,050 41,027,752
Revenue reserves

General reserve 35,848,028 32,683,028
Unappropriated profit 4,267,719 4,928,376

40,115,747 37,611,404

85,246,797 78,639,156
4.1 This represents the unrealized gain on re-measurement of available for sale investments
at fair value and is not available for distribution. This will be transferred to profit and loss
account on realization. Reconciliation of fair value reserve - net of deferred tax is as under:

Balance as on 01 July 35,789,789 33,104,191
Fair value adjustment during the year 4,625,023 2,685,598

40,414,812 35,789,789
Less: Deferred income tax liability on unquoted
equity investments 783,292 261,567
Balance as on 30 June 39,631,520 35,528,222

5 LONG TERM FINANCING

From banking companies - secured

Long term loans 5.1 4,946,603 2,975,216
Long term musharika 5.2 2,392,050 3,635,008
7,338,653 6,610,224
Less: Current portion shown under current liabilities 10 2,093,024 1,980,768
5,245,629 4,629,456
56
Rate of
Number of Interest Interest
Lender 2017 2016 Interest Per Security
Annum Installments Repricing Payable
(Rupees in thousand)
5.1 Long term loans
Allied Bank 192,727 256,970 3 Month Twenty four Quarterly Quarterly First pari passu
Limited offer KIBOR equal quarterly hypothecation charge of
+ 0.50% installments Rupees 1,334 million over
commenced on 24 all present and future plant,
August 2014 and machinery and equipment
ending on 24 May of the Company (excluding
2020. plant and machinery
in respect of which the
Company has already
created exclusive charges
in the favour of its existing
creditors).

Bank Alfalah 250,002 500,001 3 Month Sixteen unequal Quarterly Quarterly First pari passu charge of
Limited offer KIBOR installments Rupees 1,334 million on all
+ 0.50% commenced on 17 present and future plant and
August 2014 and machinery (excluding plant
ending on 17 May and machinery in respect
2018. of which the Company has
already created exclusive
charges in the favour of
existing creditors).

The Bank of 55,555 166,667 3 Month Eighteen equal Quarterly Quarterly First pari passu charge of
Punjab offer KIBOR quarterly Rupees 667 million over
+ 0.50% installments all present and future fixed
commenced on 18 assets of the Company
September 2013 excluding land and building.
and ending on 18
December 2017.

Pak Brunei - 255,003 SBP rate Seven unequal - Quarterly
Investment for LTFF + quarterly
Company 0.85% installments
Limited commenced on 24 First pari passu charge of
October 2015 and Rupees 400 million over
ended on 24 April all the present and future
2017. plant and machinery of the
Company with 25% margin
excluding those assets (part
of the plant and machinery)
on which the Company has
Pak Brunei 164,621 - SBP rate Eighty unequal - Quarterly created exclusive charges in
Investment for LTFF + installments favour of existing creditors.
Company 0.25% commencing on 30
Limited August 2018 and
ending on 22 June
2023.

Faysal Bank - 180,000 SBP rate Eight unequal - Quarterly
Limited for LTFF + installments
0.75% commenced on 13
February 2016 and First pari passu charge of
ended on 16 March Rupees 267 million on all
2017. present and future plant and
machinery of the Company
Faysal Bank 198,594 - SBP rate Twenty unequal - Quarterly (excluding land and
Limited for LTFF + installments building).
0.30% commencing on 22
November 2018 and
ending on 25 May
2023.

Rate of
Allied Bank - 241,039 SBP rate Thirty one unequal - Quarterly First pari passu charge of
Limited for LTFF + installments Rupees 400 million on all
0.50% commenced on 26 present and future plant and
September 2015 machinery of the Company
and ended on 25 with 25% margin.
April 2017.

Bank Alfalah 150,000 225,000 3 Month Sixteen equal Quarterly Quarterly First pari passu charge of
Limited offer KIBOR quarterly installments Rupees 400 million on all
+ 0.50% commenced on present and future plant and
17 July 2015 and machinery of the Company
ending on 17 April with 25% margin.
2019.

Pakistan Kuwait 115,683 132,603 SBP rate One hundred - Quarterly First pari passu charge of
Investment for LTFF + and sixty unequal Rupees 400 million on all
Company 1.00% installments present and future plant and
(Private) Limited commenced on machinery of the Company
11 June 2016 and with 25% margin.
ending on 15 May
2021.

Pakistan Kuwait 34,991 6,774 SBP rate Two hundred and - Quarterly Ranking hypothecation
Investment for LTFF + thirty six unequal charge of Rupees 267
Company 0.75% installments million on plant and
(Private) Limited commenced on 15 machinery of the company
September 2016 (excluding plant and
and ending on 16 machinery in respect of
September 2022. which the Company has
already created exclusive
charges in favour of its
existing charge holders/
creditors), to be upgraded to
first pari passu charge within
150,674 139,377 180 days of first drawdown.

The Bank of 426,785 466,717 SBP rate One hundred - Quarterly First pari passu charge
Punjab for LTFF + and sixty unequal of Rupees 667 million
0.50% installments on present and future
commenced on 30 fixed assets (plant and
January 2017 and machinery) of the Company.
ending on 07 April
2022.

National Bank of 104,285 108,763 SBP rate One hundred and - Quarterly First pari passu
Pakistan for LTFF + twenty unequal hypothecation charge of
0.50% installments Rupees 534 million on all
commenced on present and future plant and
12 April 2017 and machinery (excluding plant
ending on 03 June and machinery which is
2022. under exclusive charges of
the Company’s creditors).

Allied Bank 998,884 - SBP rate Two hundred and - Quarterly Initially ranking charge
Limited for LTFF + forty unequal which is to be upgraded
0.25% installments to first pari passu charge
commencing on 27 of Rupees 1,333 million
March 2018 and (inclusive of 25% margin)
ending on 05 June on all present and future
2023. plant and machinery of the
Company. Ranking charge
to be upgraded to first
pari passu charge within
90 days from date of first
disbursement of loan.

58
Rate of
Bank Alfalah 998,269 - SBP rate Four hundred - Quarterly First pari passu charge of
Limited for LTFF + and sixty unequal Rupees 1,334 million on all
0.35% installments present and future plant and
commencing on 02 machinery (excluding plant
February 2018 and and machinery in respect
ending on 25 May of which the Company has
2023. already created exclusive
charges in the favour of
existing creditors).

Bank Alfalah 280,911 - SBP rate Twenty equal - Quarterly Ranking hypothecation
Limited for LTFF + quarterly charge of Rupees 400
0.35% installments million with 25% margin on
commencing on 31 present and future plant and
August 2018 and machinery of the Company,
ending on 31 May which is to be upgraded to
2023. first pari passu level within
180 days of disbursement.

Habib Bank 975,296 435,679 SBP rate One hundred and - Quarterly Note 5.3
Limited for LTFF + eighty unequal
0.40% installments
commencing on 17
September 2017
and ending on 25
November 2022.

4,946,603 2,975,216

5.2 Long term musharika

Habib Bank 468,630 754,341 3 Month Forty two unequal Quarterly Quarterly
Limited offer KIBOR installments
+ 0.35% commenced on 28
August 2015 and
ending on 04 May
2019.

Habib Bank 740,206 970,131 3 Month Fifty six unequal Quarterly Quarterly Note 5.3
Limited offer KIBOR installments
+ 0.35% commenced on
19 May 2016 and
ending on 01 June
2020.

Meezan Bank - 37,500 3 Month Sixteen equal Quarterly Quarterly First exclusive charge
Limited offer KIBOR quarterly of Rupees 400 million
+ 0.50% installments over specific plant and
commenced on machinery of the Company.
14 March 2013
and ended on 14
December 2016.

Dubai Islamic 285,714 514,286 3 Month Fourteen Quarterly Quarterly First pari passu hypothecation
Bank Pakistan offer KIBOR equal quarterly charge of Rupees 1,067
Limited + 0.40% installments million on all present and
commenced on future fixed assets (excluding
03 June 2015 land and building) of the
and ending on 03 Company including but
September 2018. not limited to plant and
machinery, furniture and
fixtures, accessories etc.
(excluding plant and
machinery in respect of which
the Company has already
created exclusive charges
in favour of existing charge
holders).

Rate of
Meezan Bank 175,000 275,000 3 Month Sixteen equal Quarterly Quarterly Exclusive hypothecation
Limited offer KIBOR quarterly charge of Rupees 533
+ 0.50% installments million over specific assets
commenced on of the Company with 25%
17 June 2015 and margin.
ending on 17 March
2019.

Meezan Bank 222,500 333,750 3 Month Sixteen equal Quarterly Quarterly Exclusive hypothecation
Limited offer KIBOR quarterly charge of Rupees 594
+ 0.50% installments million over specific assets
commenced on of the Company with 25%
17 July 2015 and margin.
ending on 17 April
2019.

Standard 500,000 750,000 3 Month Sixteen equal Quarterly Quarterly Specific charge of Rupees
Chartered offer KIBOR quarterly 1,334 million over fixed
Bank (Pakistan) + 0.20% installments assets of the Company
Limited commenced on 27 inclusive of 25% margin.
September 2015
and ending on 27
June 2019.
TOTAL 2,392,050 3,635,008
5.3 Long term loans and long term musharika from Habib Bank Limited are secured against first pari passu hypothecation
charge of Rupees 4,000 million on present and future fixed assets of the Company excluding specific and exclusive
charges.
6 DEFERRED INCOME TAX LIABILITY

This represents deferred income tax liability on surplus on revaluation of unquoted equity
investments available for sale. Provision for deferred income tax on other temporary differences
was not considered necessary as the Company is chargeable to tax under section 169 of the
Income Tax Ordinance, 2001.

2017 2016

7 TRADE AND OTHER PAYABLES

Creditors 7.1 4,185,082 3,853,639
Accrued liabilities 698,678 558,501
Advances from customers 7.1 545,479 560,082
Securities from contractors - Interest free,
repayable on completion of contracts 11,613 11,199
Retention money payable 95,018 61,580
Income tax deducted at source 1,294 876
Dividend payable 75,271 66,817
Payable to employees’ provident fund trust 4,685 7,585
Fair value of forward exchange contracts 27,536 827
Workers’ profit participation fund 7.2 192,734 301,483
Workers’ welfare fund - 315,307
5,837,390 5,737,896
60
2017 2016
7.1
This includes amounts due to following related parties:

Creditors

Nishat Linen (Private) Limited - subsidiary company 15,815 27,870
Nishat USA Inc. - subsidiary company 296 2,950
Nishat Hospitality (Private) Limited - subsidiary company - 270
Nishat International FZE - subsidiary company 1,264 1,261
D.G. Khan Cement Company Limited
- associated company 10,205 2,656
Security General Insurance Company Limited
Adamjee Insurance Company Limited
Adamjee Life Assurance Company Limited
- associated company - 3,636
Nishat (Chunian) Limited - related party 42,350 32,822
107,708 137,017
Advance from customer
Nishat (Chunian) Limited - related party 155 -
155 -

7.2 Workers’ profit participation fund

Balance as on 01 July 301,483 241,876
Add: Provision for the year 30 192,734 301,483
Interest for the year 32 2,780 3,128

496,997 546,487

Less: Payments during the year 304,263 245,004

Balance as on 30 June 192,734 301,483

7.2.1 The Company retains workers’ profit participation fund for its business operations till the date of
allocation to workers. Interest is paid at prescribed rate under the Companies Profit (Workers’
Participation) Act, 1968 on funds utilized by the Company till the date of allocation to workers.
8 ACCRUED MARK-UP

Long term financing 43,834 50,450
Short term borrowings 8.1 66,917 62,870

110,751 113,320

8.1 This includes mark-up of Rupees 1.267 million (2016: Rupees 0.580 million) payable to MCB
Bank Limited - associated company.

2017 2016

9 SHORT TERM BORROWINGS

From banking companies - secured

State Bank of Pakistan (SBP) refinance 9.1 and 9.3 12,009,969 9,993,000
Other short term finances 9.1 and 9.4 1,525,000 -
Temporary bank overdrafts 9.1, 9.2 and 9.5 1,162,424 482,657
14,697,393 10,475,657

9.1 These finances are obtained from banking companies under mark-up arrangements and
are secured against joint pari passu hypothecation charge on all present and future current
assets, other instruments and ranking hypothecation charge on plant and machinery of the
Company. These form part of total credit facility of Rupees 34,244 million (2016: Rupees
31,841 million).

9.2 These finances include Rupees 113.010 million (2016: Rupees 6.762 million) from MCB
Bank Limited - associated company.

9.3 The rates of mark-up range from 2.15% to 2.85% (2016: 2.70% to 4.00%) per annum on
the balance outstanding.

9.4 The rates of mark-up ranged from 0.87% to 5.92% (2016: 1.00% to 2.60%) per annum
during the year on the balance outstanding.

9.5 The rates of mark-up range from 6.24% to 8.03% (2016: 6.55% to 9.01%) per annum on
the balance outstanding.
10 CURRENT PORTION OF NON-CURRENT LIABILITIES

Current portion of long term financing 5 2,093,024 1,980,768

11 CONTINGENCIES AND COMMITMENTS

a) Contingencies

i) The Company is contingently liable for Rupees 0.631 million (2016: Rupees 0.631
million) on account of central excise duty not acknowledged as debt as the case is
pending before Court.

ii) Guarantees of Rupees 1,519.832 million (2016: Rupees 973.358 million) are given by the
banks of the Company to Sui Northern Gas Pipelines Limited against gas connections,
Shell Pakistan Limited and Pakistan State Oil Limited against purchase of furnace oil,
Director Excise and Taxation, Karachi against infrastructure cess, Chairman Punjab
Revenue Authority, Lahore against infrastructure cess and Government of Punjab
against fulfillment of sales orders.

62
iii) Post dated cheques of Rupees 3,179.346 million (2016: Rupees 5,800.306 million) are
issued to customs authorities in respect of duties on imported items availed on the
basis of consumption and export plans. If documents of exports are not provided on
due dates, cheques issued as security shall be encashable.

iv) The Company has challenged, before Honourable Lahore High Court, Lahore, the
vires of clauses (h) and (i) to sub-section (1) of section 8 of the Sales Tax Act, 1990
whereby claim of input sales tax in respect of building materials, electrical and gas
appliances, pipes, fittings, wires, cables and ordinary electrical fittings and sanitary
fittings have been disallowed. The Honourable Lahore High Court has issued stay
order in favour of the Company and has allowed the Company to claim input sales tax
paid on such goods in its monthly sales tax returns. Consequently, the Company has
claimed input sales tax amounting to Rupees 75.342 million (2016: Rupees 77.482
million) paid on such goods in its respective monthly sales tax returns.

v) The Company has challenged, before Honourable Lahore High Court, Lahore, the
vires of first proviso to sub-clause (x) of clause (4) of SRO 491(1)/2016 dated 30
June 2016 issued under sections 3 and 4 read with sections 8 and 71 of the Sales
Tax Act, 1990 whereby through amendment in the earlier SRO 1125(I)/2011 dated 31
December 2011 adjustment of input sales tax on packing material of all sorts has
been disallowed. The Honourable Lahore High Court has issued stay order in favour
of the Company. Consequently, the Company has claimed input sales tax amounting
to Rupees 97.221 million (2016: Rupees Nil) paid on packing material in its respective
monthly sales tax returns. The management, based on advice of the legal counsel, is
confident of favorable outcome of its appeal.

b) Commitments

i) Contracts for capital expenditure are approximately of Rupees 728.034 million (2016:
Rupees 1,031.214 million).

ii) Letters of credit other than for capital expenditure are of Rupees 980.674 million
(2016: Rupees 338.967 million).

iii) Outstanding foreign currency forward contracts of Rupees 444.689 million (2016:
Rupees 3,345.460 million).

2017 2016

12 PROPERTY, PLANT AND EQUIPMENT

Operating fixed assets - owned 12.1 23,481,153 23,058,934
Capital work-in-progress 12.2 4,286,546 1,656,161
27,767,699 24,715,095

64
12.1 Operating fixed assets
O
wned Assets Leased Assets

Furniture,
Freehold Buildings on Plant and Stand-by Electric Factory fixtures and Computer Plant and
Vehicles Total
land freehold machinery equipment installations equipment office equipment machinery
land equipment
- ---------------------------------------------------------------- (Rupees in thousand) -----------------------------------------------------------------

At 30 June 2015

Cost 957,547 6,695,119 26,261,518 318,713 751,870 359,959 324,599 160,506 595,897 36,425,728 300,000
Accumulated depreciation - (2,971,181) (10,551,458) (229,849) (492,213) (164,710) (186,624) (133,048) (243,423) (14,972,506) (118,809)
Net book value 957,547 3,723,938 15,710,060 88,864 259,657 195,249 137,975 27,458 352,474 21,453,222 181,191

Year ended 30 June 2016

Opening net book value 957,547 3,723,938 15,710,060 88,864 259,657 195,249 137,975 27,458 352,474 21,453,222 181,191
Additions 10,909 1,419,610 2,004,393 - 73,895 11,493 32,620 36,409 72,603 3,661,932 -
Assets transferred from leased assets to owned assets:

Cost - - 300,000 - - - - - - 300,000 (300,000)
Accumulated depreciation - - (118,809) - - - - - - (118,809) 118,809
- - 181,191 - - - - - - 181,191 (181,191)
Disposals / Adjustments:
Cost (17,989) (9,450) (129,086) - - - (570) (864) (67,879) (225,838) -
Accumulated depreciation - 8,756 96,013 - - - 309 698 42,531 148,307 -
(17,989) (694) (33,073) - - - (261) (166) (25,348) (77,531) -
Depreciation charge - (406,359) (1,599,124) (8,568) (27,759) (20,174) (14,931) (13,990) (68,975) (2,159,880) -
Closing net book value 950,467 4,736,495 16,263,447 80,296 305,793 186,568 155,403 49,711 330,754 23,058,934 -

At 30 June 2016

Cost 950,467 8,105,279 28,436,825 318,713 825,765 371,452 356,649 196,051 600,621 40,161,822 -
Accumulated depreciation - (3,368,784) (12,173,378) (238,417) (519,972) (184,884) (201,246) (146,340) (269,867) (17,102,888) -
Net book value 950,467 4,736,495 16,263,447 80,296 305,793 186,568 155,403 49,711 330,754 23,058,934 -


Opening net book value 950,467 4,736,495 16,263,447 80,296 305,793 186,568 155,403 49,711 330,754 23,058,934 -
Additions 179,306 390,466 2,168,063 - 24,310 21,845 32,773 12,983 40,009 2,869,755 -

Disposals:
Cost - (11,159) (360,424) - - - (90) (1,098) (54,013) (426,784) -
Accumulated depreciation - 8,648 262,897 - - - 42 670 27,494 299,751 -
- (2,511) (97,527) - - - (48) (428) (26,519) (127,033) -
Adjustment - - - - (26,198) - - - - (26,198) -
Depreciation charge - (480,104) (1,661,438) (7,711) (28,581) (19,766) (17,051) (16,816) (62,838) (2,294,305) -
Closing net book value 1,129,773 4,644,346 16,672,545 72,585 275,324 188,647 171,077 45,450 281,406 23,481,153 -

At 30 June 2017

Cost 1,129,773 8,484,586 30,244,464 318,713 823,877 393,297 389,332 207,936 586,617 42,578,595 -
Accumulated depreciation - (3,840,240) (13,571,919) (246,128) (548,553) (204,650) (218,255) (162,486) (305,211) (19,097,442) -
Net book value 1,129,773 4,644,346 16,672,545 72,585 275,324 188,647 171,077 45,450 281,406 23,481,153 -

Annual rate of depreciation (%) - 10 10 10 10 10 10 30 20 10
12.1.1 Detail of operating fixed assets, exceeding the book value of Rupees 50,000 disposed of during the year is as follows:

Net book Sale Gain / Mode of
Description Quantity Cost Accumulated
Nos. depreciation value proceeds (Loss) disposal Particulars of purchasers
---------------------------- (Rupees in thousand) ----------------------------

Building

Building - demolished 1 11,000 8,557 2,443 2,500 57 Negotiation Al-Hasnan Construction Company, Lahore

11,000 8,557 2,443 2,500 57
Plant and Machinery

Ring Spinning Frames 2 8,257 5,755 2,502 3,000 498 Negotiation Sapphire Textile Mills Limited, Karachi
Ring Spinning Frames 4 19,530 13,261 6,269 5,880 (389) Negotiation Sapphire Textile Mills Limited, Karachi
Slub Device 2 4,717 3,374 1,343 392 (951) Negotiation Sapphire Textile Mills Limited, Karachi
Ring Spinning Frames 2 3,680 2,761 919 2,068 1,149 Negotiation Crescent Cotton Mills Limited, Faisalabad
Ring Spinning Frames 2 6,039 4,441 1,598 2,356 758 Negotiation Crescent Cotton Mills Limited, Faisalabad
Ring Spinning Frames 2 6,039 4,453 1,586 2,352 766 Negotiation Crescent Cotton Mills Limited, Faisalabad
Airjet Weaving Looms 4 10,784 8,162 2,622 2,223 (399) Negotiation Al-Karam Textile Mills Limited, Karachi
Airjet Weaving Looms 4 14,475 12,227 2,248 2,223 (25) Negotiation Al-Karam Textile Mills Limited, Karachi
Airjet Weaving Looms 36 85,628 65,441 20,187 14,380 (5,807) Negotiation Tithi Textile Mills (Private) Limited, Bangladesh
Airjet Weaving Looms 32 71,297 54,102 17,195 12,735 (4,460) Negotiation Tithi Textile Mills (Private) Limited, Bangladesh
Quilting Machine 1 806 725 81 231 150 Negotiation Sang Joon Quilting, Lahore
Switch Track System 1 2,175 1,664 511 605 94 Negotiation Mr. Muahmmad Riaz, Faisalabad
Dyeing and Washing Range (Pad Steam) 1 52,796 38,683 14,113 8,991 (5,122) Negotiation Yasir Afzal Textile (Private) Limited, Sargodha
Wascator Machine 1 2,800 1,846 954 984 30 Insurance Claim Adamjee Insurance Company Limited, Security
General Insurance Company Limited and IGI
Insurance Company Limited
Steam Fired Absorption Chiller 1 10,212 7,349 2,863 4,850 1,987 Negotiation Global Pharmaceuticals (Private) Limited,
Islamabad
Rice Husk Boiler 1 17,123 7,313 9,810 3,500 (6,310) Negotiation Industrial Boilers (Private) Limited, Gujranwala

360,424 262,897 97,527 85,301 (12,226)
Vehicles

Toyota Corolla LED-11-8758 1 1,457 884 573 783 210 Company Policy Mr. Abdul Rehman, Company’s employee, Sargodha
Honda City LEC-12-3430 1 1,444 852 592 843 251 Company Policy Mr. Muhammad Ashfaq, Company’s employee, Faisalabad
Honda Civic LEA-11-500 1 2,042 1,346 696 1,542 846 Negotiation M/s Argosy Enterprises, Lahore
Honda Civic LEE-11-7770 1 1,918 1,214 704 1,024 320 Company Policy Miss Zunnaria Aslam, Company’s employee, Lahore
Honda Civic LE-11-5887 1 1,812 1,267 545 1,072 527 Company Policy Mr. Muhammad Azam, Company’s employee, Lahore
Audi A6 LEA-16-800 1 7,890 1,619 6,271 5,544 (727) Negotiation Mr. Shahzad Hussain Shah, Lahore
Suzuki Swift LE-17-2381 1 1,361 95 1,266 1,288 22 Negotiation Mr. Amir Saleem, Lahore
Suzuki Swift LEB-13-7286 1 1,198 692 506 539 33 Company Policy Mr. Munir-ud-Din Pasha, Company’s
ex-employee, Faisalabad
Suzuki Cultus LEB-13-8715 1 826 472 354 478 124 Company Policy Mr. Khurram Jabbar, Company’s employee, Lahore
Honda City LEC-12-1106 1 1,424 841 583 785 202 Company Policy Mr. Zia-ur-Rehman, Company’s employee, Swabi
Toyota Corolla LED-11-5273 1 1,416 900 516 788 272 Company Policy Mr. Malik Muhammad Hussain Azeem,
Nishat Mills Limited

Company’s employee, Lahore
65
66

Net book Sale Gain / Mode of
Description Quantity Cost Accumulated
Nos. depreciation value proceeds (Loss) disposal Particulars of purchasers
---------------------------- (Rupees in thousand) ----------------------------
Toyota Corolla LEA-12-2824 1 1,495 935 560 798 238 Company Policy Mr. Arshad Khan, Company’s employee, Sheikhupura
Honda City LED-15-3618 1 1,691 466 1,225 1,629 404 Negotiation Mr. Muhammad Usman, Lahore
Toyota Corolla LEB-15-9692 1 1,281 419 862 1,227 365 Negotiation Mr. Sheikh Wasif Samad, Lahore
Honda Civic LEA-12-7690 1 1,913 1,181 732 1,218 486 Negotiation Mr. Muhammad Naeem, Lahore
Toyota Corolla LEB-11-2318 1 1,449 962 487 772 285 Company Policy Mr. Sohail Ahmad, Company’s employee, Lahore
Honda City LED-10-5692 1 1,337 932 405 712 307 Company Policy Mr. Jawwad Khalid, Company’s ex-employee, Lahore
Toyota Corolla LEC-11-3318 1 1,406 896 510 749 239 Company Policy Mr. Shoaib Alam, Company’s employee, Faisalabad
Toyota Corolla LED-11-8835 1 1,426 870 556 769 213 Company Policy Mr. Abrar Ahmed Sayal, Company’s employee, Lahore
Toyota Corolla LEC-13-2842 1 1,206 643 563 805 242 Negotiation Mr. Asif Afzal, Lahore
Suzuki Cultus LEB-14-3609 1 1,072 486 586 896 310 Negotiation Mrs. Sabin Ahmed, Lahore
Honda City LEE-13-4056 1 1,219 624 595 853 258 Negotiation Miss Rahela Rasheed, Lahore
Honda Civic LEA-12-7691 1 1,913 1,150 763 1,311 548 Negotiation Mr. Haji Gul Khan, Lahore
Toyota Corolla LEA-16A-6480 1 1,355 81 1,274 1,355 81 Negotiation Mr. Ali Akbar, Lahore
Honda Civic LED-13-2488 1 2,374 1,293 1,081 1,112 31 Company Policy Mr. Faisal Naseem Kari, Company’s employee, Lahore
Toyota Corolla LEF-15-2875 1 1,695 515 1,180 1,639 459 Negotiation Mr. Rehan Khan, Lahore
Suzuki Cultus LED-13-1589 1 1,033 579 454 630 176 Negotiation Mr. Syed Hashim Raza, Lahore
Toyota Corolla LEC-12-2994 1 1,660 1,008 652 971 319 Company Policy Mr. Abdul Qadir Khan, Company’s employee, Karachi
Suzuki Bolan LEB-11-3093 1 605 413 192 518 326 Negotiation Mr. Adnan Rafique Qureshi, Lahore
Suzuki Cultus LZS-3250 1 631 556 75 365 290 Negotiation Mr. Jahanzeb Khan, Lahore
Honda Civic LWA-8802 1 1,024 891 133 864 731 Negotiation Mr. Khurram Imtiaz, Lahore

50,573 25,082 25,491 33,879 8,388

Computer Equipment

Dell Inspiron Laptop 1 85 11 74 74 - Insurance claim Security General Insurance Company Limited
MacBook 1 173 26 147 173 26 Company Policy Mr. Faisal Naseem Kari, Company’s employee, Lahore

258 37 221 247 26

Aggregate of other items of property,
plant and equipment with individual
book values not exceeding Rupees 50,000 4,529 3,178 1,351 2,882 1,531

426,784 299,751 127,033 124,809 (2,224)
2017 2016
12.1.2 Depreciation charge for the year has

been allocated as follows:

Cost of sales 27 2,201,908 2,065,498
Distribution cost 28 6,362 6,098
Administrative expenses 29 83,586 86,860
Capital work in progress 2,449 1,424
2,294,305 2,159,880

12.1.3 Operating fixed assets having cost of Rupees 13.397 million (2016: Rupees 8.484 million)
have been fully depreciated and are still in use of the Company.

12.2 Capital work in progress
Buildings on freehold land 1,549,595 352,217

Plant and machinery 2,283,890 962,867
Factory equipment - 1,380
Unallocated expenses 20,046 12,284
Letters of credit against machinery 534 1,883
Advances against purchase of land 391,941 314,988
Advances against furniture, fixtures and office equipment 17,560 -
Advances against vehicles 22,980 10,542

4,286,546 1,656,161

13 INVESTMENT PROPERTIES
Note Land Buildings Total

---------- (Rupees in thousand)----------

At 30 June 2015
Cost 414,463 153,673 568,136

Accumulated depreciation - (88,894) (88,894)
Net book value 414,463 64,779 479,242

Opening net book value 414,463 64,779 479,242

Depreciation charge 30 - (6,477) (6,477)
Closing net book value 414,463 58,302 472,765

At 30 June 2016
Cost 414,463 153,673 568,136

Net book value 414,463 58,302 472,765

Opening net book value 414,463 58,302 472,765

Depreciation charge 30 - (5,830) (5,830)
Closing net book value 414,463 52,472 466,935

At 30 June 2017
Cost 414,463 153,673 568,136

Net book value 414,463 52,472 466,935

13.1 Depreciation at the rate of 10 percent per annum on buildings amounting to Rupees
5.830 million (2016: Rupees 6.477 million) charged during the year is allocated to other
expenses. No expenses directly related to investment properties were incurred during
the year. The market value of land and buildings is estimated at Rupees 1,688.261 million
(2016: Rupees 1,543.346 million). The valuation has been carried out by an independent
valuer.

13.2 Land and building having book value of Rupees 239.383 million (2016: Rupees 239.383
million) and Rupees 17.799 million (2016: Rupees 19.777 million) respectively have been
given on operating lease to Nishat Hospitality (Private) Limited - subsidiary company.

13.3 Land and building having book value of Rupees 165.433 million (2016: Rupees 165.433
million) and Rupees 25.130 million (2016: Rupees 27.923 million) respectively have been
given on operating lease to Nishat Linen (Private) Limited - subsidiary company.

2017 2016
14 LONG TERM INVESTMENTS

Subsidiary companies

Nishat Power Limited - quoted 14.1
180,632,955 (2016: 180,632,955)
fully paid ordinary shares of Rupees 10 each.
Equity held 51.01% (2016: 51.01%) 1,806,329 1,806,329

Nishat USA Inc. - unquoted
200 (2016: 200) fully paid shares with no
par value per share 3,547 3,547

Nishat Linen (Private) Limited - unquoted 14.2
1,067,913 (2016: 1,067,913)
Equity held 100% (2016: 100%) 261,603 261,603

Nishat Linen Trading LLC - unquoted 14.3
4,900 (2016: 4,900) fully paid shares of
UAE Dirhams 1,000 each 259,403 259,403

Nishat Hospitality (Private) Limited - unquoted
119,999,901 (2016: 119,999,901)
Equity held 100% (2016: 100%) 1,199,999 1,199,999

Nishat International FZE - unquoted
18 (2016: 18) fully paid shares of
UAE Dirhams 1,000,000 each 492,042 492,042
Advance for purchase of shares 9,070 9,070
501,112 501,112

68
2017 2016
Nishat Commodities (Private) Limited 14.4

1,000 (2016: 1,000) fully paid ordinary shares of
Rupees 10 each. Equity held 100% (2016: 100%) 10 10

Hyundai Nishat Motor (Private) Limited 14.5
6,000,000 (2016: Nil) fully paid ordinary shares of
Rupees 10 each. Equity held 100% (2016: Nil) 60,000 -

Available for sale

Associated companies (with significant influence)

D.G. Khan Cement Company Limited - quoted
137,574,201 (2016: 137,574,201)
Equity held 31.40% (2016: 31.40%) 3,418,145 3,418,145

Nishat Paper Products Company Limited
- unquoted 14.6
11,634,199 (2016: 11,634,199)
Equity held 25% (2016: 25%) 116,342 116,342

Lalpir Power Limited - quoted 14.7
109,393,555 (2016: 109,393,555)
Equity held 28.80% (2016: 28.80%) 1,640,306 1,640,306

Pakgen Power Limited - quoted 14.7
102,524,728 (2016: 102,524,728)
Equity held 27.55% (2016: 27.55%) 1,272,194 1,272,194

Nishat Dairy (Private) Limited - unquoted 14.8
60,000,000 (2016: 60,000,000)
Equity held 12.24% (2016: 12.24%) 600,000 600,000

Nishat Energy Limited - unquoted
250,000 (2016: 250,000)
Equity held 25% (2016: 25%) 2,500 2,500

Nishat Hotels and Properties Limited - unquoted 14.9
71,062,000 (2016: 71,062,000)
Equity held 7.40% (2016: 7.40%) 710,620 710,620


2017 2016
Associated companies (others)

MCB Bank Limited - quoted
86,681,691 (2016: 84,913,391)
Equity held 7.79% (2016: 7.63%) 9,933,520 9,534,351

Adamjee Insurance Company Limited - quoted
102,809 (2016: 102,809)
Equity held 0.03% (2016: 0.03%) 2,774 2,774

21,788,404 21,329,235

Less: Impairment loss recognized 14.10 (116,498) (113,998)
Add: Fair value adjustment 38,336,416 34,183,843
60,008,322 55,399,080

14.1 The Company has pledged its 180,585,155 (2016: 180,585,155) shares to lenders of NPL
for the purpose of securing finance.

14.2 Investment in Nishat Linen (Private) Limited includes 2 shares held in the name of nominee
directors of the Company.

14.3 The Company is also the beneficial owner of remaining 5,100 (2016: 5,100) shares of
UAE Dirham 1,000 each of Nishat Linen Trading LLC held under Nominee Agreement
dated 30 December 2010, whereby the Company has right over all dividends, interests,
benefits and other distributions on liquidation. The Company through the powers given to
it under Article 11 of the Memorandum of Association of the investee company, exercises
full control on the management of Nishat Linen Trading LLC.

14.4 Investment in Nishat Commodities (Private) Limited includes 2 shares held in the name of
nominee directors of the Company.

14.5 Investment in Hyundai Nishat Motor (Private) Limited includes 4 shares held in the name
of nominee directors of the Company.

14.6 Fair value per ordinary share of Nishat Paper Products Company Limited is determined at
Rupees 27.50 by an independent valuer using present value technique.

14.7 Investments in Lalpir Power Limited and Pakgen Power Limited include 550 and 500
shares respectively, held in the name of nominee director of the Company.

14.8 Fair value per ordinary share of Nishat Dairy (Private) Limited is determined at Rupees
8.455 by an independent valuer using present value technique.

14.9 Fair value per ordinary share of Nishat Hotels and Properties Limited is determined at
Rupees 45.01 by an independent valuer using present value technique.
70
2017 2016
14.10 Impairment loss recognized

Add: Impairment loss recognized during the year 30 2,500 -

15 LONG TERM LOANS

Considered good:

Executives - secured 15.1 & 15.2 190,814 133,518
Other employees - secured 15.2 36,988 8,348

227,802 141,866
Less: Current portion shown under current assets 20
Executives 50,314 40,721
Other employees 9,962 3,383
60,276 44,104
167,526 97,762
15.1 Reconciliation of carrying amount of loans to executives:

Add: Disbursements 112,956 70,085
Transferred from other employees during the year 3,553 693

250,027 191,476
Less: Repayments 59,213 57,958


15.1.1 Maximum aggregate balance due from executives at the end of any month during the year
was Rupees 190.814 million (2016: Rupees 133.518 million).

15.2 These represent house construction loans given to executives and other employees and
are secured against balance to the credit of employees in the provident fund trust. These
are recoverable in equal monthly instalments.

15.3 The fair value adjustment in accordance with the requirements of IAS 39 ‘Financial
Instruments: Recognition and Measurement’ arising in respect of staff loans is not
considered material and hence not recognized.
16 LONG TERM DEPOSITS

Security deposits 121,646 63,687


2017 2016
17 STORES, SPARE PARTS AND LOOSE TOOLS

Stores 17.1 1,723,258 928,269
Spare parts 384,241 343,474
Loose tools 3,816 2,822
2,111,315 1,274,565
Less: Provision for slow moving, obsolete and
damaged store items 17.2 4,437 5,056
2,106,878 1,269,509

17.1 These include stores in transit of Rupees 905.454 million (2016: Rupees 96.569 million).

17.2 Provision for slow moving, obsolete and damaged store items

Less: Provision reversed during the year 31 619 859

18 STOCK IN TRADE

Raw materials 7,433,874 5,312,509
Work-in-process 18.2 1,992,931 1,746,041
Finished goods 18.3 3,295,907 2,875,186
12,722,712 9,933,736

18.1 Stock in trade of Rupees 526.776 million (2016: Rupees 476.569 million) is being carried
at net realizable value.

18.2 This includes stock of Rupees 57.678 million (2016: Rupees 9.511 million) sent to outside
parties for processing.

18.3 Finished goods include stock in transit of Rupees 558.410 million (2016: Rupees 523.636
million).

18.4 The aggregate amount of write-down of inventories to net realizable value recognized as
an expense during the year was Rupees 13.320 million (2016: Rupees 8.608 million).
72
2017 2016
19 TRADE DEBTS

Considered good:
Secured (against letters of credit) 483,147 594,580
Unsecured:
- Related parties 19.1 &19.3 167,860 261,957
- Others 19.2 1,594,613 1,396,832
2,245,620 2,253,369

Considered doubtful:
Others - unsecured 19.4 131,758 131,758
Less: Provision for doubtful debts 131,758 131,758
- -

19.1 This represents amounts due from following related parties:

Nishat Hospitality (Private) Limited
- subsidiary company - 206
Nishat International FZE - subsidiary company 63,172 112,780
Nishat Developers (Private) Limited
- associated company 20 -

167,860 261,957

19.2 As at 30 June 2017, trade debts due from other than related parties of Rupees 39.925
million (2016: Rupees 106.242 million) were past due but not impaired. These relate to a
number of independent customers from whom there is no recent history of default. The
ageing analysis of these trade debts is as follows:

Upto 1 month 26,898 104,478
1 to 6 months 8,723 -
More than 6 months 4,304 1,764
39,925 106,242

19.3 As at 30 June 2017, trade debts due from related parties amounting to Rupees 104.688
million (2016: Rupees 149.177 million) were past due but not impaired. The ageing
analysis of these trade debts is as follows:

Upto 1 month 104,675 149,151
1 to 6 months 13 26
More than 6 months - -
104,688 149,177

19.4 As at 30 June 2017, trade debts of Rupees 131.758 million (2016: Rupees 131.758 million)
were impaired and provided for. The ageing of these trade debts was more than 5 years.
These trade debts do not include amounts due from related parties.


2017 2016
20 LOANS AND ADVANCES

Considered good:

Employees - interest free:
– Executives 542 11
– Other employees 4,726 4,868

5,268 4,879
Current portion of long term loans 15 60,276 44,104
Advances to suppliers 198,912 86,174
Letters of credit 1,473 716
Income tax 1,981,917 2,232,390
Other advances 20.1 5,390,153 3,743,381
7,637,999 6,111,644
Considered doubtful:

Others 108 108
Less: Provision for doubtful debts 108 108

- -
7,637,999 6,111,644

20.1 These include amounts due from following subsidiary companies:

Nishat Linen (Private) Limited 5,098,299 3,324,507
Nishat Hospitality (Private) Limited 150,000 292,000
Nishat Commodities (Private) Limited 94,783 107,784

5,343,082 3,724,291

21 SHORT TERM DEPOSITS AND PREPAYMENTS

Deposits 1,117 1,117
Prepayments - including current portion 59,337 64,316

60,454 65,433

22 OTHER RECEIVABLES

Considered good:

Export rebate and claims 257,174 241,194
Duty draw back 798,376 50,403
Sales tax refundable 1,736,092 1,673,414
Fair value of forward exchange contracts - 22,494
Miscellaneous receivables 36,643 35,587
2,828,285 2,023,092

74
2017 2016
23 ACCRUED INTEREST

On short term loans and advances to:
Nishat Hospitality (Private) Limited - subsidiary company 351 718
Nishat Commodities (Private) Limited - subsidiary company 341 523
On deposits with MCB Bank Limited - associated company - 1,758
On term deposit receipts - 3,413
11,917 13,662

24 SHORT TERM INVESTMENTS

Available for sale

Associated company (Other)

Security General Insurance Company Limited - unquoted 24.1
10,226,244 (2016: 10,226,244) fully paid ordinary
shares of Rupees 10 each.
Equity held 15.02% (2016: 15.02%) 11,188 11,188

Related party (Other)

Nishat (Chunian) Limited - quoted
32,689,338 (2016: 32,689,338) fully paid ordinary
shares of Rupees 10 each.
Equity held 13.61% (2016: 13.61 %) 378,955 378,955

Others

Alhamra Islamic Stock Fund - quoted
(Formerly MCB Pakistan Islamic Stock Fund)
1,108,714 (2016: 997,990) units. 3,025 1,715

Pakistan Petroleum Limited - quoted
434,782 (2016: 434,782) fully paid ordinary
shares of Rupees 10 each. 95,217 95,217

488,385 487,075

Less: Impairment loss recognized 24.2 (30,808) (27,804)
Add: Fair value adjustment 2,078,396 1,605,946
2,535,973 2,065,217

24.1 Fair value per ordinary share of Security General Insurance Company Limited is determined
at Rupees 76.31 by an independent valuer using present value technique.

24.2 Impairment loss recognized

Add: Impairment loss recognized during the year 30 3,004 4,004


2017 2016
25 CASH AND BANK BALANCES

With banks:
On current accounts 25.1 & 25.2
Including US$ 87,659 (2016: US$ 329,889) 20,418 62,583

Term deposit receipts 25.3 - 1,981,000

On PLS saving accounts 25.4
Including US$ 894 (2016: US$ 896) 94 94
20,512 2,043,677
Cash in hand 23,433 71,491
43,945 2,115,168

25.1 Cash at banks includes balance of Rupees 1.113 million (2016: Rupees 3.284 million) with
MCB Bank Limited - associated company.

25.2 Cash at banks includes balance of Rupees 0.778 million (2016: Rupees 0.010 million) with
MCB Islamic Bank Limited - related party.

25.3 These deposits of one month with banking companies have been matured and carried
rate of profit ranged from 6.08% to 6.90% (2016: 6.10% to 7.10%) per annum.

25.4 Rate of profit on Pak Rupees bank deposits and US Dollar bank deposit ranges from
3.75% to 3.90% (2016: 4.25% to 5.80%) and Nil (2016: 0.01% to 0.10%) per annum
respectively.

26 REVENUE

Export sales 36,712,413 35,931,078
Local sales 26.1 7,333,545 8,470,038
Processing income 4,187,169 3,439,346
Export rebate 173,000 158,717
Duty draw back 841,530 -
49,247,657 47,999,179

26.1 Local sales

Sales 26.1.1 7,441,430 8,857,958
Less: Sales tax 107,885 387,920

7,333,545 8,470,038

26.1.1 This includes sale of Rupees 1,988.253 million (2016: Rupees 2,600.012 million) made to
direct exporters against standard purchase orders (SPOs). Further, local sales includes
waste sales of Rupees 1,063.409 million (2016: Rupees 1,169.215 million).

76
2017 2016
27 COST OF SALES

Raw materials consumed 27.1 24,885,631 24,639,552
Processing charges 321,876 277,302
Salaries, wages and other benefits 27.2 5,283,799 4,466,527
Stores, spare parts and loose tools consumed 4,886,261 4,523,950
Packing materials consumed 1,147,088 996,473
Repair and maintenance 331,861 304,105
Fuel and power 4,921,472 4,214,043
Insurance 44,315 39,217
Other factory overheads 511,219 440,740
Depreciation 12.1.2 2,201,908 2,065,498

44,535,430 41,967,407
Work-in-process

Opening stock 1,746,041 1,530,684
Closing stock (1,992,931) (1,746,041)
(246,890) (215,357)
Cost of goods manufactured 44,288,540 41,752,050

Finished goods

Opening stock 2,875,186 2,882,924
Closing stock (3,295,907) (2,875,186)

(420,721) 7,738

43,867,819 41,759,788

27.1 Raw materials consumed

Opening stock 5,312,509 5,936,585
Add: Purchased during the year 27,006,996 24,015,476
32,319,505 29,952,061
Less: Closing stock 7,433,874 5,312,509
24,885,631 24,639,552

27.2 Salaries, wages and other benefits include provident fund contribution of Rupees 153.868
million (2016: Rupees 133.462 million) by the Company.


2017 2016
28 DISTRIBUTION COST

Salaries and other benefits 28.1 373,511 349,113
Outward freight and handling 1,123,357 926,083
Commission to selling agents 491,017 495,921
Fuel cost 133,833 117,456
Travelling and conveyance 103,337 104,838
Rent, rates and taxes 14,193 17,499
Postage and telephone 77,809 72,149
Insurance 20,112 20,092
Vehicles’ running 9,459 12,977
Entertainment 7,728 7,065
Advertisement 13 1,220
Electricity and gas 784 553
Printing and stationery 1,461 3,170
Fee and subscription 1,215 442
Depreciation 12.1.2 6,362 6,098
2,367,862 2,137,894

28.1 Salaries and other benefits include provident fund contribution of Rupees 19.088 million
(2016: Rupees 18.422 million) by the Company.

29 ADMINISTRATIVE EXPENSES

Salaries and other benefits 29.1 809,856 767,824
Vehicles’ running 41,259 41,857
Travelling and conveyance 35,142 29,934
Rent, rates and taxes 989 1,609
Insurance 7,881 7,062
Entertainment 22,836 24,807
Legal and professional 27,421 22,024
Auditors’ remuneration 29.2 4,467 4,061
Advertisement 388 717
Postage and telephone 5,948 7,487
Electricity and gas 3,821 4,346
Printing and stationery 21,141 20,606
Fee and subscription 3,553 4,242
Depreciation 12.1.2 83,586 86,860
Miscellaneous 44,040 47,409

1,128,721 1,092,406

29.1 Salaries and other benefits include provident fund contribution of Rupees 32.733 million
(2016: Rupees 32.596 million) by the Company.

78
2017 2016
29.2 Auditors’ remuneration

Audit fee 3,549 3,226
Half yearly review 781 710
Reimbursable expenses 137 125

4,467 4,061

30 OTHER EXPENSES

Workers’ profit participation fund 7.2 192,734 301,483
Impairment loss on equity investments 14.10 & 24.2 5,504 4,004
Loss on sale of property, plant and equipment 2,224 -
Depreciation on investment properties 13 5,830 6,477
Net exchange loss - 4,753
Donations 30.1 1,215 169

207,507 316,886

30.1 There is no interest of any director or his spouse in donees’ fund.

31 OTHER INCOME

Income from financial assets

Dividend income 31.1 3,403,733 3,700,227
Profit on deposits with banks 29,531 27,609
Net exchange gain 143,040 -
Interest income on loans and advances
to subsidiary companies 134,790 118,324
3,711,094 3,846,160

Income from non-financial assets

Gain on sale of property, plant and equipment - 26,808
Scrap sales 114,052 124,461
Rental income 80,319 73,150
Reversal of provision for slow moving, obsolete
and damaged store items 17.2 619 859
Reversal of provision for workers’ welfare fund 31.2 346,655 -
Others 6,927 7,616
548,572 232,894
4,259,666 4,079,054


2017 2016
31.1 Dividend income

From related party / associated companies /
subsidiary company

Nishat (Chunian) Limited - related party 81,723 49,034
D.G. Khan Cement Company Limited
MCB Bank Limited - associated company 1,367,196 1,344,739
Adamjee Insurance Company Limited
- associated company 411 309
Security General Insurance Company Limited
Nishat Paper Products Company Limited
Pakgen Power Limited - associated company 205,050 205,049
Lalpir Power Limited - associated company 218,788 218,787
Nishat Power Limited - subsidiary company 632,215 1,128,956

3,399,410 3,697,510
Others

Pakistan Petroleum Limited 2,826 2,717
Alhamra Islamic Stock Fund (Formerly MCB
Pakistan Islamic Stock Fund) 1,497 -

4,323 2,717

3,403,733 3,700,227

31.2 Provisions for workers’ welfare fund recognized in prior years have been reversed during
the year in view of judgement of Honourable Supreme Court of Pakistan announced on 10
November 2016 declaring amendments made in Worker Welfare Ordinance, 1971 through
Finance Acts 2006 and 2008 to be unlawful and ultra vires the Constitution of the Islamic
Republic of Pakistan, 1973.

32 FINANCE COST

Mark-up on:

Long term financing 346,821 462,445
Short term borrowings 323,605 329,014
Interest on payable to employees’ provident fund trust - 251
Interest on workers’ profit participation fund 7.2 2,780 3,128
Bank charges and commission 241,866 251,383

915,072 1,046,221

80
2017 2016
33 TAXATION

Current 33.1 758,000 802,000

33.1 The Company falls under the ambit of presumptive tax regime under section 169 of the
Income Tax Ordinance, 2001. Provision for income tax is made accordingly. Further,
provision against income from other sources is made under the relevant provisions of the
Income Tax Ordinance, 2001.

33.2 Provision for deferred income tax is not required as the Company is chargeable to tax under
section 169 of the Income Tax Ordinance, 2001 and no temporary differences are expected
to arise in the foreseeable future except for deferred tax liability as explained in note 6.

33.3 Reconciliation of tax expense and product of accounting profit multiplied by the applicable
tax rate is not required in view of presumptive taxation.

34 EARNINGS PER SHARE - BASIC AND DILUTED

There is no dilutive effect on the basic earnings per share which is based on:

2017 2016

Profit attributable to ordinary shareholders (Rupees in thousand) 4,262,342 4,923,038

Weighted average number of ordinary shares (Numbers) 351,599,848 351,599,848

Earnings per share (Rupees) 12.12 14.00

2017 2016
35 CASH GENERATED FROM OPERATIONS

Profit before taxation 5,020,342 5,725,038

Adjustments for non-cash charges and other items:

Depreciation 2,300,135 2,166,357
Loss / (gain) on sale of property, plant and equipment 2,224 (26,808)
Dividend income (3,403,733) (3,700,227)
Impairment loss on equity investments 5,504 4,004
Net exchange (gain) / loss (143,040) 4,753
Interest income on loans and advances to subsidiary companies (134,790) (118,324)
Finance cost 915,072 1,046,221
Reversal of provision for slow moving, obsolete and
damaged store items (619) (859)
Reversal of provision for workers’ welfare fund 31.2 (346,655) -
Working capital changes 35.1 (4,129,076) 1,695,503

85,364 6,795,658


2017 2016
35.1 Working capital changes

(Increase) / decrease in current assets:
- Stores, spare parts and loose tools (836,750) 67,113
- Stock in trade (2,788,976) 416,457
- Trade debts 76,434 807,669
- Loans and advances (141,885) (558)
- Short term deposits and prepayments 4,979 (20,584)
- Other receivables (822,516) (450,850)
(4,508,714) 819,247
Increase in trade and other payables 379,638 876,256
(4,129,076) 1,695,503

36 EVENTS AFTER THE REPORTING PERIOD
36.1 The Board of Directors of the Company has proposed a cash dividend for the year ended
30 June 2017 of Rupees 5.00 per share (2016: Rupees 5.00 per share) at their meeting
held on 25 September 2017.The Board of Directors also proposed to transfer Rupees 2,504
million (2016: Rupees 3,165 million) from un-appropriated profit to general reserve. However,
these events have been considered as non-adjusting events under IAS 10 ‘Events after the
Reporting Period’ and have not been recognized in these financial statements.
36.2 Under Section 5A of the Income Tax Ordinance, 2001, a tax shall be imposed at the rate of
7.5% of accounting profit before tax of the Company if it does not distribute at least 40%
of its after tax profit for the year within six months of the end of the year ended 30 June
2017 through cash or bonus shares. The requisite cash dividend has been proposed by
the Board of Directors of the Company in their meeting held on 25 September 2017 and will
be distributed within the prescribed time limit. Therefore, the recognition of any income tax
liability in this respect is not considered necessary.
37 REMUNERATION OF CHIEF EXECUTIVE OFFICER, DIRECTORS AND EXECUTIVES

The aggregate amount charged in the financial statements for remuneration including all benefits
to Chief Executive Officer, Director and Executives of the Company is as follows:

Chief Executive Officer Director Executives
2017 2016 2017 2016 2017 2016

--------------------( Rupees in thousand )------------------
Managerial remuneration 24,486 20,071 10,228 7,714 645,505 537,945

Allowances
Cost of living allowance - - 1 1 1,923 1,674
House rent 8,791 8,028 288 288 168,859 148,842
Conveyance - - - - 766 785
Medical 2,197 2,007 848 768 52,229 44,033
Utilities - - 3,063 2,747 74,938 65,406
Special allowance - - 2 2 1,092 891
Contribution to provident fund trust - - 810 733 53,696 42,420
Leave encashment - - - - 20,799 15,968

35,474 30,106 15,240 12,253 1,019,807 857,964

Number of persons 1 1 1 1 495 419
82
37.1 Chief Executive Officer, one Director and certain executives of the Company are provided
with Company maintained vehicles and certain executives are also provided with free
housing facility alongwith utilities.

37.2 Aggregate amount charged in the financial statements for meeting fee to four Directors
(2016: one Director) was Rupees 0.682 million (2016: Rupees 0.375 million).

37.3 No remuneration was paid to non-executive Directors of the Company.

38 TRANSACTIONS WITH RELATED PARTIES

The related parties comprise subsidiary companies, associated undertakings, other related
parties and key management personnel. The Company in the normal course of business carries
out transactions with various related parties. Detail of transactions with related parties, other than
those which have been specifically disclosed elsewhere in these financial statements are as
follows:
2017 2016
Subsidiary companies

Investment made 60,000 10
Dividend income 632,215 1,128,956
Purchase of goods and services 453,982 851,491
Sale of goods and services 4,979,733 4,130,009
Interest income 134,790 118,324
Short term loans made 21,792,896 15,509,708
Repayment of short term loans made 20,174,125 15,556,374

Associated companies

Investment made 399,169 632,379
Purchase of goods and services 124,508 58,449
Sale of goods 336 315
Rental income 650 605
Sale of operating fixed assets 79 -
Dividend income 2,685,472 2,519,520
Dividend paid 158,463 141,968
Insurance premium paid 147,693 109,221
Insurance claims received 32,539 21,060
Profit on term deposit receipt 11,059 1,758
Finance cost 4,929 2,388

Other related parties

Dividend income 81,723 49,034
Purchase of goods and services 1,454,116 808,647
Sale of goods and services 43,143 28,486
Sale of operating fixed assets - 9,750
Company’s contribution to provident fund trust 205,689 184,772

39 PROVIDENT FUND RELATED DISCLOSURES

The Company operates defined contribution provident fund maintained for its permanent
employees and the employees of a Group company. The following information is based on
audited financial statements of the provident fund:

2017 2016
Size of fund - total assets 4,642,647 4,145,105

Cost of investments out of provident fund trust 3,460,986 2,837,307
Fair value of investments out of provident fund trust 4,253,661 3,797,964
Percentage of investments out of provident fund trust 91.62% 91.63%
39.1 The break-up of cost of investments is as follows:
2017 2016 2017 2016

(Percentage) (Rupees in thousand)

Investment in listed debt securities 0.00% 0.00% - -
Investment in listed equity securities 25.61% 31.24% 886,478 886,478
Investment in listed debt collective
investment schemes 74.38% 51.47% 2,574,342 1,460,236
Investment in listed equity collective
investment schemes 0.00% 1.70% - 48,364
Investment in Government securities 0.00% 1.74% - 49,343
Bank balances 0.01% 13.85% 166 392,886

100% 100% 3,460,986 2,837,307
39.2 As at the reporting date, the Nishat Mills Employees Provident Fund Trust is in the process
of regularizing its investments in accordance with section 218 of the Companies Act, 2017
and the rules formulated for this purpose in terms of SRO 770(1)/2016 issued by Securities
and Exchange Commission of Pakistan on 17 August 2016 which allows transition period
of two years for bringing the Employees Provident Fund Trust in conformity with the
requirements of rules.
40 NUMBER OF EMPLOYEES
2017 2016
Number of employees as on June 30 19,005 18,747
Average number of employees during the year 19,104 17,882
84
41 SEGMENT INFORMATION
Spinning Weaving Garments Elimination of Inter-
Dyeing Home Textile Power Generation Total Company
Faisalabad I Faisalabad II Feroze Wattwan Bhikki Lahore I II segment transactions
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

……………………………………………….. ………………………………………………..…………………………………………….. (Rupees in thousand) …………………… ………………………………………………..…………………………..……………………………………………………………………

Revenue
External 7,260,539 7,812,714 - - 3,294,947 3,434,222 8,453,904 8,247,514 2,986,586 3,205,304 12,662,698 13,824,325 9,197,823 7,355,298 4,379,132 4,032,632 993,872 69,982 18,156 17,188 - - 49,247,657 47,999,179
Intersegment 2,398,399 2,478,790 - - 931,617 1,059,204 5,900,393 5,509,029 2,788,462 2,198,991 1,141,771 804,847 735,056 826,789 52,972 10,437 57,777 115,507 5,383,838 4,587,257 (19,390,285) (17,590,851) - -
9,658,938 10,291,504 - - 4,226,564 4,493,426 14,354,297 13,756,543 5,775,048 5,404,295 13,804,469 14,629,172 9,932,879 8,182,087 4,432,104 4,043,069 1,051,649 185,489 5,401,994 4,604,445 (19,390,285) (17,590,851) 49,247,657 47,999,179

Cost of sales (9,199,049) (9,845,980) - - (4,009,284) (4,193,195) (13,087,192) (12,541,307) (5,397,024) (5,056,317) (12,176,215) (12,321,739) (8,571,009) (6,989,815) (4,094,491) (3,619,696) (1,324,907) (181,435) (5,398,933) (4,601,155) 19,390,285 17,590,851 (43,867,819) (41,759,788)
Gross profit / (loss) 459,889 445,524 - - 217,280 300,231 1,267,105 1,215,236 378,024 347,978 1,628,254 2,307,433 1,361,870 1,192,272 337,613 423,373 (273,258) 4,054 3,061 3,290 - - 5,379,838 6,239,391

Distribution cost (228,630) (218,284) - - (88,294) (99,036) (402,901) (379,662) (127,503) (129,422) (636,866) (624,011) (468,645) (403,628) (363,659) (282,557) (51,335) (1,292) (29) (2) - - (2,367,862) (2,137,894)
Administrative expenses (202,194) (209,312) - - (67,894) (64,135) (171,851) (168,040) (89,812) (89,905) (204,932) (208,168) (209,158) (181,834) (95,358) (102,192) (31,858) (4,762) (55,664) (64,058) - - (1,128,721) (1,092,406)
(430,824) (427,596) - - (156,188) (163,171) (574,752) (547,702) (217,315) (219,327) (841,798) (832,179) (677,803) (585,462) (459,017) (384,749) (83,193) (6,054) (55,693) (64,060) - - (3,496,583) (3,230,300)

Profit / (loss) before taxation and
unallocated income and expenses 29,065 17,928 - - 61,092 137,060 692,353 667,534 160,709 128,651 786,456 1,475,254 684,067 606,810 (121,404) 38,624 (356,451) (2,000) (52,632) (60,770) - - 1,883,255 3,009,091

Unallocated income and expenses

Other expenses (207,507) (316,886)
Other income 4,259,666 4,079,054
Finance cost (915,072) (1,046,221)
Taxation (758,000) (802,000)
Profit after taxation 4,262,342

4,923,038

41.1 Reconciliation of reportable segment assets and liabilities
Spinning Weaving Garments

Dyeing Home Textile Power Generation Total Company
Faisalabad I Faisalabad II Feroze Wattwan Bhikki Lahore I II
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

……………………………………………….. ………………………………………………..…………………………………………….. (Rupees in thousand) …………………… ………………………………………………..…………………………..……………………………………………………………………
Total assets for reportable segments 5,246,925 5,101,420 2,226,310 - 6,573,091 6,131,241 5,388,974 5,158,631 1,001,029 1,043,317 6,052,518 5,577,425 7,483,326 5,396,834 2,059,565 1,816,734 2,590,105 1,943,239 7,513,802 6,646,771 46,135,645 38,815,612
Unallocated assets:

Long term investments 60,008,322 55,399,080
Short term investments 2,535,973 2,065,217
Other receivables 2,828,285 2,023,092
Cash and bank balances 43,945 2,115,168
Other corporate assets 7,173,741 6,181,050

Total assets as per balance sheet
118,725,911
106,599,219

Total liabilities for reportable segments 658,522 576,547 32,220 - 67,385 101,081 467,615 477,581 124,158 157,231 468,085 531,458 765,205 802,069 309,785 293,277 250,650 123,833 2,084,308 1,662,330 5,227,933 4,725,407
Unallocated liabilities:

Deferred income tax liability 783,292 261,567
Provision for taxation 1,195,636 1,245,400
Other corporate liabilities 22,756,254
18,211,690

Total liabilities as per balance sheet
29,963,115
24,444,064

41.2 Geographical information

The Company’s revenue from external customers by geographical locations is detailed below:
2017 2016
(Rupees In thousand)

Europe 13,799,308 12,504,096
Asia, Africa and Australia 18,331,288 19,587,109
United States of America and Canada 5,596,347 3,998,590
Pakistan 11,520,714 11,909,384
49,247,657
47,999,179

41.3 All non-current assets of the Company as at reporting dates are located and operating in Pakistan.

41.4 Revenue from major customers

The Company’s revenue is earned from a large mix of customers.
Nishat Mills Limited

85
2017 2016
(Figures in thousand)

42 PLANT CAPACITY AND ACTUAL PRODUCTION

Spinning

100 % plant capacity converted to 20s count based
on 3 shifts per day for 1,095 shifts (2016: 1,098 shifts) (Kgs.) 77,455 78,568

Actual production converted to 20s count based
on 3 shifts per day for 1,095 shifts (2016: 1,098 shifts) (Kgs.) 67,633 68,406

Weaving

100 % plant capacity at 50 picks based on 3 shifts
per day for 1,095 shifts (2016: 1,098 shifts) (Sq.Mtr.) 298,257 300,060

Actual production converted to 50 picks based
on 3 shifts per day for 1,095 shifts (2016: 1,098 shifts) (Sq.Mtr.) 283,004 287,850

Dyeing and Finishing

Production capacity for 3 shifts per day for 1,095 shifts
(2016: 1,098 shifts) (Mtr.) 54,000 54,000

Actual production on 3 shifts per day for 1,095 shifts
(2016: 1,098 shifts) (Mtr.) 48,364 50,986

Power Plant

Generation capacity (MWH) 799 775

Actual generation (MWH) 396 383

Processing, Stitching and Apparel

The plant capacity of these divisions are indeterminable due to multi product plants involving
varying processes of manufacturing and run length of order lots.
42.1 Reason for low production

Under utilization of available capacity for spinning, weaving, dyeing and finishing is mainly
due to normal maintenance. Actual power generation in comparison to installed is low due
to periodical, scheduled and unscheduled maintenance and low demand.

43 FINANCIAL RISK MANAGEMENT

43.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including
currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The
Company’s overall risk management programme focuses on the unpredictability of financial
markets and seeks to minimize potential adverse effects on the Company’s financial
performance. The Company uses derivative financial instruments to hedge certain risk
exposures.

86
Risk management is carried out by the Company’s finance department under policies
approved by the Board of Directors. The Company’s finance department evaluates and
hedges financial risks. The Board provides principles for overall risk management, as well
as policies covering specific areas such as currency risk, other price risk, interest rate risk,
credit risk, liquidity risk, use of derivative financial instruments and non-derivative financial
instruments and investment of excess liquidity.

a) Market risk

i) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from
future commercial transactions or receivables and payables that exist due to transactions
in foreign currencies.

The Company is exposed to currency risk arising from various currency exposures,
primarily with respect to the United States Dollar (USD), Arab Emirates Dirham (AED)
and Euro. Currently, the Company’s foreign exchange risk exposure is restricted to bank
balances and the amounts receivable / payable from / to the foreign entities. The Company’s
exposure to currency risk was as follows:

2017 2016

Cash at banks - USD 88,553 330,785
Trade debts - USD 13,060,978 11,248,718
Trade debts - Euro 987,388 1,021,991
Trade debts - AED 2,418,810 3,964,146
Trade and other payables - USD (1,286,749) (1,059,090)
Trade and other payables - Euro (222,468) (182,684)
Trade and other payables - AED (44,319) -
Net exposure - USD 11,862,782 10,520,413
Net exposure - Euro 764,920 839,307
Net exposure - AED 2,374,491 3,964,146

The following significant exchange rates were applied during the year:

Rupees per US Dollar

Average rate 104.55 104.29
Reporting date rate 104.80 104.50

Rupees per Euro


Rupees per AED



Sensitivity analysis

If the functional currency, at reporting date, had weakened / strengthened by 5% against the
USD, Euro and AED with all other variables held constant, the impact on profit after taxation
for the year would have been Rupees 58.369 million higher / lower (2016: Rupees 51.080
million higher / lower), Rupees 4.298 million (2016:Rupees 4.462 million) higher / lower and
Rupees 3.183 million (2016: Rupees 5.301 million) higher / lower respectively, mainly as a
result of exchange gains / losses on translation of foreign exchange denominated financial
instruments. Currency risk sensitivity to foreign exchange movements has been calculated
on a symmetric basis. In management’s opinion, the sensitivity analysis is unrepresentative
of inherent currency risk as the year end exposure does not reflect the exposure during the
year.

ii) Other price risk

Other price risk represents the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than those arising
from interest rate risk or currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer, or factors affecting all similar
financial instruments traded in the market. The Company is not exposed to commodity
price risk.

Sensitivity analysis

The table below summarizes the impact of increase / decrease in the Pakistan Stock
Exchange (PSX) Index on the Company’s profit after taxation for the year and on equity
(fair value reserve). The analysis is based on the assumption that the equity index had
increased / decreased by 5% with all other variables held constant and all the Company’s
equity instruments moved according to the historical correlation with the index:

Index Impact on profit Impact on statement of other
after taxation comprehensive income
(fair value reserve)
2017 2016 2017 2016
-------------------- (Rupees in thousand) ------------------------

PSX 100 (5% increase) 3,220 3,371 2,678,410 2,544,586
PSX 100 (5% decrease) (3,220) (3,371) (2,678,410) (2,544,586)
Equity (fair value reserve) would increase / decrease as a result of gains / losses on equity
investments classified as available for sale.
iii) Interest rate risk
This represents the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.

The Company’s interest rate risk arises from long term financing, short term borrowings,
term deposit receipts, bank balances in saving accounts and loans and advances to
subsidiary companies. Financial instruments at variable rates expose the Company to
cash flow interest rate risk. Financial instruments at fixed rate expose the Company to fair
value interest rate risk.

88
At the balance sheet date, the interest rate profile of the Company’s interest bearing
financial instruments was:
2017 2016
Fixed rate instruments

Financial liabilities

Long term financing 4,298,318 1,826,578
Short term borrowings 12,009,969 9,993,000

Floating rate instruments

Financial assets
Bank balances - saving accounts 94 94
Term deposit receipts - 1,981,000
Loans and advances to subsidiary companies 5,343,082 3,724,291

Long term financing 3,040,335 4,783,646
Short term borrowings 2,687,424 482,657
Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair
value through profit or loss. Therefore, a change in interest rate at the balance sheet date
would not affect profit or loss of the Company.

Cash flow sensitivity analysis for variable rate instruments

If interest rates at the year end date, fluctuates by 1% higher / lower with all other variables
held constant, profit after taxation for the year would have been Rupees 3.654 million
(2016: Rupees 4.171 million higher / lower) lower / higher, mainly as a result of higher / lower
interest expense / income on floating rate financial instruments. This analysis is prepared
assuming the amounts of financial instruments outstanding at balance sheet dates were
outstanding for the whole year.

b) Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial
loss for the other party by failing to discharge an obligation. The carrying amount of
financial assets represents the maximum credit exposure. The maximum exposure to
credit risk at the reporting date was as follows:

Investments 58,452,293 53,432,293
Loans and advances 5,623,223 3,890,126
Deposits 122,763 64,804
Trade debts 2,245,620 2,253,369
Other receivables 36,643 58,081
Accrued interest 11,917 13,662
Bank balances 20,512 2,043,677
66,512,971 61,756,012


The credit quality of financial assets that are neither past due nor impaired can be assessed by
reference to external credit ratings (if available) or to historical information about counterparty default
rate:
Rating 2017 2016
Short term Long term Agency (Rupees in thousand)
Banks

National Bank of Pakistan A1+ AAA PACRA 2,453 6,960
Allied Bank Limited A1+ AA+ PACRA 1,874 13,920
Askari Bank Limited A1+ AA+ PACRA 40 55
Bank Alfalah Limited A1+ AA+ PACRA 71 9,339
Faysal Bank Limited A1+ AA PACRA 5 255
Habib Bank Limited A-1+ AAA JCR-VIS 371 880,369
Habib Metropolitan Bank Limited A1+ AA+ PACRA 2,296 14,288
JS Bank Limited A1+ AA- PACRA - 400,043
MCB Bank Limited A1+ AAA PACRA 1,113 3,284
NIB Bank Limited A1+ AA - PACRA 204 190
Samba Bank Limited A-1 AA JCR-VIS 150 98
Silkbank Limited A-2 A - JCR-VIS 2,194 167
Standard Chartered Bank (Pakistan) Limited A1+ AAA PACRA 160 7,749
United Bank Limited A-1+ AAA JCR-VIS 141 141
Al-Baraka Bank (Pakistan) Limited A1 A PACRA 271 293
Deutsche Bank AG P-2 A3 Moody’s - 134
Bank Islami Pakistan Limited A1 A+ PACRA 89 348
Meezan Bank Limited A-1+ AA JCR-VIS 7,405 4,071
Dubai Islamic Bank Pakistan Limited A-1 AA- JCR-VIS 328 443
The Bank of Punjab A1+ AA PACRA 220 96
Soneri Bank Limited A1+ AA- PACRA 74 138
Summit Bank Limited A-1 A- JCR-VIS 269 280
Industrial and Commercial Bank of China P-1 A1 Moody’s 6 6
PAIR Investment Company Limited A1+ AA PACRA - 200,000
MCB Islamic Bank Limited A1 A PACRA 778 501,010
20,512 2,043,677
Investments

Adamjee Insurance Company Limited AA+ PACRA 7,028 5,157
Security General Insurance Company Limited AA- JCR-VIS 780,365 829,348
Alhamra Islamic Stock Fund (Formerly
MCB Pakistan Islamic Stock Fund) 3 Star 4 Star PACRA 13,582 10,599
Nishat (Chunian) Limited A-2 A- JCR-VIS 1,677,617 1,157,856
MCB Bank Limited A1+ AAA PACRA 18,240,428 18,682,644
Pakistan Petroleum Limited Unknown - 64,409 67,413
D.G. Khan Cement Company Limited Unknown - 29,325,317 26,206,509
Pakgen Power Limited A1+ AA PACRA 2,073,050 2,465,720
Lalpir Power Limited A1+ AA PACRA 2,244,756 2,373,840
Nishat Paper Products Company Limited Unknown - 319,940 410,687
Nishat Energy Limited Unknown - - 2,500
Nishat Hotels and Properties Limited A2 A- PACRA 3,198,501 710,620
Nishat Dairy (Private) Limited Unknown - 507,300 509,400
58,452,293 53,432,293
58,472,805 55,475,970
90
The Company’s exposure to credit risk and impairment losses related to trade debts is disclosed
in Note 19.

Due to the Company’s long standing business relationships with these counterparties and after
giving due consideration to their strong financial standing, the management does not expect
non-performance by these counterparties on their obligations to the Company. Accordingly, the
credit risk is minimal.

c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated
with financial liabilities.

The Company manages liquidity risk by maintaining sufficient cash and the availability of funding
through an adequate amount of committed credit facilities. At 30 June 2017, the Company had
Rupees 19,546.607 million (2016: Rupees 21,365.343 million) available borrowing limits from
financial institutions and Rupees 43.945 million (2016: Rupees 2,115.168 million) cash and bank
balances. The management believes the liquidity risk to be low. Following are the contractual
maturities of financial liabilities, including interest payments. The amount disclosed in the table
are undiscounted cash flows:

Contractual maturities of financial liabilities as at 30 June 2017
Carrying Contractual 6 months 6-12 1-2 More than

amount cash flows or less months Year 2 Years
------------------------------------ (Rupees in thousand) -----------------------------------
Non-derivative financial liabilities:

Long term financing 7,338,653 7,849,390 1,155,841 1,180,744 2,104,254 3,408,551
Trade and other payables 5,093,198 5,093,198 5,093,198 - - -
Short term borrowings 14,697,393 14,953,191 13,752,607 1,200,584 - -
Accrued mark-up 110,751 110,751 110,751 - - -
27,239,995 28,006,530 20,112,397 2,381,328 2,104,254 3,408,551

Contractual maturities of financial liabilities as at 30 June 2016
Carrying Contractual 6 months 6-12 1-2 More than

amount cash flows or less months Year 2 Years
------------------------------------ (Rupees in thousand) -----------------------------------
Non-derivative financial liabilities:

Long term financing 6,610,224 7,257,737 1,138,403 1,171,488 2,309,769 2,638,077
Trade and other payables 4,552,563 4,552,563 4,552,563 - - -
Short term borrowings 10,475,657 10,790,100 10,633,979 156,121 - -
Accrued mark-up 113,320 113,320 113,320 - - -
21,751,764 22,713,720 16,438,265 1,327,609 2,309,769 2,638,077
The contractual cash flows relating to the above financial liabilities have been determined on the
basis of interest rates / mark-up rates effective as at 30 June. The rates of interest / mark up have
been disclosed in note 5 and note 9 to these financial statements.

43.2 Financial instruments by categories

Loans and Available Total
receivables for sale

---------------- (Rupees in thousand) ----------------
As at 30 June 2017

Assets as per balance sheet
Investments - 58,452,293 58,452,293
Loans and advances 5,623,223 - 5,623,223
Deposits 122,763 - 122,763
Trade debts 2,245,620 - 2,245,620
Other receivables 36,643 - 36,643
Accrued interest 11,917 - 11,917
Cash and bank balances 43,945 - 43,945
8,084,111 58,452,293 66,536,404
Financial liabilities at
amortized cost

Liabilities as per balance sheet

Long term financing 7,338,653
Accrued mark-up 110,751
Short term borrowings 14,697,393
Trade and other payables 5,093,198
27,239,995
Loans and Available Total

receivables for sale

---------------- (Rupees in thousand) ----------------
As at 30 June 2016

Assets as per balance sheet

Investments - 53,432,293 53,432,293
Loans and advances 3,890,126 - 3,890,126
Deposits 64,804 - 64,804
Trade debts 2,253,369 - 2,253,369
Other receivables 58,081 - 58,081
Accrued interest 13,662 - 13,662
Cash and bank balances 2,115,168 - 2,115,168
8,395,210 53,432,293 61,827,503

92
Financial liabilities at
amortized cost
Liabilities as per balance sheet

Long term financing 6,610,224
Accrued mark-up 113,320
Short term borrowings 10,475,657
Trade and other payables 4,552,563
21,751,764
43.3 Offsetting financial assets and financial liabilities

As on balance sheet date, recognized financial instruments are not subject to off setting
as there are no enforceable master netting arrangements and similar agreements.

43.4 Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability
to continue as a going concern in order to provide returns for shareholders and benefits
for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. In order to maintain or adjust the capital structure, the Company may adjust the
amount of dividends paid to shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry and the requirements of the lenders, the Company
monitors the capital structure on the basis of gearing ratio. This ratio is calculated as
borrowings divided by total capital employed. Borrowings represent long term financing,
and short term borrowings obtained by the Company as referred to in note 5 and note 9
respectively. Total capital employed includes ‘total equity’ as shown in the balance sheet
plus ‘borrowings’. The Company’s Strategy, which was unchanged from last year.

2017 2016
Borrowings Rupees in thousand 22,036,046 17,085,881

Total equity Rupees in thousand 88,762,796 82,155,155
Total capital employed Rupees in thousand 110,798,842 99,241,036

Gearing ratio Percentage 19.89 17.22

The increase in the gearing ratio resulted primarily from increase in borrowings of the
Company.


44 RECOGNIZED FAIR VALUE MEASUREMENTS - FINANCIAL INSTRUMENTS

i) Fair value hierarchy
Judgements and estimates are made in determining the fair values of the financial instruments
that are recognised and measured at fair value in these financial statements. To provide an
indication about the reliability of the inputs used in determining fair value, the Company has
classified its financial instruments into the following three levels. An explanation of each level
follows underneath the table.

Recurring fair value measurements Level 1 Level 2 Level 3 Total
At 30 June 2017
-------------------- (Rupees in thousand) --------------------

Financial assets

Available for sale financial assets 53,632,605 13,582 4,806,106 58,452,293

Total financial assets 53,632,605 13,582 4,806,106 58,452,293


Derivative financial liabilities - 27,536 - 27,536

- 27,536 - 27,536

Recurring fair value measurements Level 1 Level 2 Level 3 Total
At 30 June 2016
Financial assets

Available for sale financial assets 50,959,140 10,599 2,460,056 53,429,795
Derivative financial assets - 22,494 - 22,494

Total financial assets 50,959,140 33,093 2,460,056 53,452,289


Derivative financial liabilities - 827 - 827
- 827 - 827
The above table does not include fair value information for financial assets and financial liabilities
not measured at fair value if the carrying amounts are a reasonable approximation of fair value.
Due to short term nature, carrying amounts of certain financial assets and financial liabilities are
considered to be the same as their fair value. For the majority of the non-current receivables, the
fair values are also not significantly different to their carrying amounts.

There were no transfers between levels 1 and 2 for recurring fair value measurements during the
year. Further there was no transfer in and out of level 3 measurements.

94
The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy
levels as at the end of the reporting period.

Level 1: The fair value of financial instruments traded in active markets (such as publicly
traded derivatives, and trading and available-for-sale securities) is based on
quoted market prices at the end of the reporting period. The quoted market
price used for financial assets held by the Company is the current bid price.
These instruments are included in level 1.

Level 2: The fair value of financial instruments that are not traded in an active market
(for example, over-the-counter derivatives) is determined using valuation
techniques which maximise the use of observable market data and rely as little
as possible on entity-specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2.

Level 3: If one or more of the significant inputs is not based on observable market data,
the instrument is included in level 3. This is the case for unlisted equity securities.

ii) Valuation techniques used to determine fair values

Specific valuation techniques used to value financial instruments include the use of quoted
market prices or dealer quotes for similar instruments and the fair value of the remaining
financial instruments is determined using discounted cash flow analysis.

iii) Fair value measurements using significant unobservable inputs (level 3)

The following table presents the changes in level 3 items for the year ended 30 June 2017
and 30 June 2016:

Unlisted equity
securities

Balance as on 01 July 2015 2,150,001
Add: Investment made during the year 210,620
Add : Surplus recognized in other comprehensive income 99,435
Balance as on 30 June 2016 2,460,056

Add : Surplus recognized in other comprehensive income 2,346,050
Balance as on 30 June 2017 4,806,106


iv) Valuation inputs and relationships to fair value

The following table summarises the quantitative information about the significant
unobservable inputs used in level 3 fair value measurements.
Range of inputs Relationship of

Fair value at
(probability- unobservable
Description Unobservable inputs weighted average) inputs to fair
value
30 June 2017 30 June 2016 30 June 2017
Available for sale financial assets:
Nishat Paper Products 319,940 410,687 Revenue growth 12.50%
Increase / decrease
Company Limited factor in revenue growth
factor by 0.05%
and decrease
Risk adjusted 16.38% / increase in
discount rate discount rate by
1% would increase
/ decrease fair
value by Rupees
+ 44.792 million
/ - 39.324 million.

Nishat Dairy (Private) Limited 507,300 509,400 Terminal growth factor 4% Increase / decrease
in terminal growth
factor by 1% and
Risk adjusted 15.46% decrease / increase
discount rate in discount rate by
1% would increase
/ decrease fair
value by Rupees
+ 81.780 million
/ - 58.260 million.

Security General Insurance 780,365 829,348 Net premium revenue 8% Increase / decrease
Company Limited growth factor in net premium
revenue growth
Risk adjusted 17.49% factor by 0.05%
discount rate and decrease /
increase in discount
rate by 1%
would increase
/ decrease fair
value by Rupees
+49.393 million
/ - 43.973 million.

Nishat Hotels and 3,198,501 710,620 Terminal growth factor 4% Increase / decrease
Properties Limited in terminal growth
Risk adjusted 8.60% factor by 1% and
discount rate decrease / increase
in discount rate by
1% would increase
/ decrease fair
value by Rupees
+ 2,981 million
/ - 1,190 million.
There were no significant inter-relationships between unobservable inputs that materially affect fair values.
Valuation processes
Independent valuers perform the valuations of non-property items required for financial reporting purposes, including level 3
fair values. The independent valuers report directly to the Chief Financial Officer. Discussions of valuation processes and results
are held between the Chief Financial Officer and the valuation team at least once every six month, in line with the Company’s
half yearly reporting periods.
The main level 3 inputs used by the Company are derived and evaluated as follows:
Discount rates for financial instruments are determined using a capital asset pricing model to calculate a rate that reflects
current market assessments of the time value of money and the risk specific to the asset.
Earnings growth factor for unlisted equity securities are estimated based on market information for similar types of companies.
Changes in level 2 and 3 fair values are analysed at the end of each half yearly reporting period during the valuation discussion
between the Chief Financial Officer and the independent valuers. As part of this discussion the independent valuers present a
report that explains the reason for the fair value movements.
96
45 RECOGNIZED FAIR VALUE MEASUREMENTS - NON-FINANCIAL ASSETS

i) Fair value hierarchy
Judgements and estimates are made for non-financial assets not measured at fair value in
these financial statements but for which the fair value is described in these financial statements.
To provide an indication about the reliability of the inputs used in determining fair value, the
Company has classified its non-financial assets into the following three levels.

At 30 June 2017 Level 1 Level 2 Level 3 Total

Investment properties - 1,688,261 - 1,688,261

Total non-financial assets - 1,688,261 - 1,688,261

At 30 June 2016 Level 1 Level 2 Level 3 Total

Investment properties - 1,543,346 - 1,543,346

Total non-financial assets - 1,543,346 - 1,543,346
The Company’s policy is to recognise transfers into and transfers out of fair value hierarchy levels
as at the end of the reporting period.

There were no transfers between levels 1 and 2 for recurring fair value measurements during the
year. Further, there was no transfer in and out of level 3 measurements.

ii) Valuation techniques used to determine level 2 fair values

The Company obtains independent valuations for its investment properties at least annually. At
the end of each reporting period, the management updates the assessment of the fair value of
each property, taking into account the most recent independent valuations. The management
determines a property’s value within a range of reasonable fair value estimates. The best
evidence of fair value is current prices in an active market for similar properties.

Valuation processes

The Company engages external, independent and qualified valuers to determine the fair value
of the Company’s investment properties at the end of every financial year. As at 30 June 2017,
the fair values of the investment properties have been determined by Al-Hadi Financial & Legal
Consultants.

Changes in fair values are analysed at the end of each year during the valuation discussion
between the Chief Financial Officer and the valuers. As part of this discussion the team presents
a report that explains the reason for the fair value movements.

46 INFORMATION FOR ALL SHARES ISLAMIC INDEX SCREENING
46.1
2017 2016
Carried under Carried under
Description Note
Non-Shariah Shariah Non-Shariah Shariah
arrangements arrangements arrangements arrangements
--------------------------- (Rupees in thousand) ---------------------------
Assets

Loans and advances
Loans to employees 15 97,753 130,049 26,255 115,611

Other advances
Loans to subsidiary companies 20.1 5,343,082 - 3,724,291 -

Deposits
Deposits 16 and 21 - 122,763 - 64,804

Bank balances 25 9,664 10,848 1,537,504 506,173

Liabilities

Loan and advances
Long term financing 5 4,946,603 2,392,050 2,975,216 3,635,008
Short term borrowings 9 10,942,393 3,755,000 9,225,657 1,250,000

Income
Profit on deposits with banks 31 15,889 13,642 25,851 1,758

Other comprehensive income
Unrealized gain / (loss) on investments 4.1 5,146,777 (521,754) (2,305,732) 4,991,330
2017 2016
46.2 Dividend income earned from 31.1

D.G. Khan Cement Company Limited 825,445 687,871
MCB Bank Limited 1,367,196 1,344,739
Nishat (Chunian) Limited 81,723 49,034
Security General Insurance Company Limited 51,131 51,131
Adamjee Insurance Company Limited 411 309
Pakgen Power Limited 205,050 205,049
Lalpir Power Limited 218,788 218,787
Nishat Power Limited 632,215 1,128,956
Pakistan Petroleum Limited 2,826 2,717
Nishat Paper Products Company Limited 17,451 11,634
Alhamra Islamic Stock Fund (Formerly MCB
Pakistan Islamic Stock Fund) 1,497 -
3,403,733 3,700,227
98
2017 2016
46.3 Sources of other income 31

Dividend income 3,403,733 3,700,227
Profit on deposits with banks 29,531 27,609
Gain on sale of property, plant and equipment - 26,808
Net exchange gain 143,040 -
Interest income on loans and advances to
subsidiary companies 134,790 118,324
Scrap sales 114,052 124,461
Reversal of provision for slow moving, obsolete
and damaged store items 619 859
Reversal of provision for workers’ welfare fund 346,655 -
Others:
Service fee - 3,630
Licence fee 4,041 3,673
Interest income 2,886 313
4,259,666 4,079,054

46.4 Exchange gain / (loss)

Earned from actual currency 170,576 (26,419)
Earned from derivative financial instruments (27,536) 21,666

46.5 Revenue (external) from different business segments 41

Spinning:
- Faisalabad - I 7,260,539 7,812,714
- Feroze Wattwan 3,294,947 3,434,222
Weaving:
- Bhikki 8,453,904 8,247,514
- Lahore 2,986,586 3,205,304
Dyeing 12,662,698 13,824,325
Home Textile 9,197,823 7,355,298
Garments:
- I 4,379,132 4,032,632
- II 993,872 69,982
Power Generation 18,156 17,188
49,247,657 47,999,179


46.6 Relationship with banks

Relationship
Name Non Islamic Islamic
window window
operations operations
National Bank of Pakistan a 0

Allied Bank Limited a 0
Askari Bank Limited a 0
Bank Alfalah Limited a 0
Faysal Bank Limited a 0
Habib Bank Limited a a
Habib Metropolitan Bank Limited a 0
JS Bank Limited a 0
MCB Bank Limited a 0
NIB Bank Limited a 0
Samba Bank Limited a 0
Silk Bank Limited a 0
Standard Chartered Bank (Pakistan) Limited a a
United Bank Limited a 0
Al-Baraka Bank (Pakistan) Limited 0 a
Citibank N.A. a 0
Bank Islami Pakistan Limited 0 a
Meezan Bank Limited 0 a
Dubai Islamic Bank Pakistan Limited 0 a
The Bank of Punjab a 0
Soneri Bank Limited a 0
Summit Bank Limited a 0
Industrial and Commercial Bank of China a 0
MCB Islamic Bank Limited 0 a
Saudi Pak Commercial Bank Limited a 0
Pak Brunei Investment Company Limited a 0
Pakistan Kuwait Investment Company (Private) Limited a 0

47 DATE OF AUTHORIZATION FOR ISSUE

These financial statements were authorized for issue on 25 September 2017 by the Board of
Directors of the Company.

48 CORRESPONDING FIGURES

Corresponding figures have been re-arranged, wherever necessary, for the purpose of comparison.
However, no significant rearrangements have been made.

49 GENERAL

Figures have been rounded off to the nearest thousand of Rupees unless otherwise stated.
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER DIRECTOR
100

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Notes to the Financial Statements

For the year ended June 30, 2017

Provision for doubtful debts

Impairment of investments in subsidiaries and equity method accounted for associated

d) Amendments to published approved accounting standards that are effective in current

IAS 1 (Amendments) ‘Presentation of Financial Statements’ (effective for annual periods

IAS 27 (Amendments) ‘Separate Financial Statements’ (effective for annual periods

Nishat Mills Limited 45

e) Amendments to published approved accounting standards that are effective in

f) Standards, interpretations and amendments to published approved accounting

Following standards, interpretations and amendments to existing standards have been

Nishat Mills Limited 47

2.2 Employee benefit

2.4 Foreign currencies

2.5 Property, plant, equipment and depreciation

Nishat Mills Limited 49

An item of property, plant and equipment is de-recognized upon disposal or when no

2.6 Investment properties

2.7 Operating leases

Investments classified as held-for-trading and those designated as such are included in

d) Investment in associates - (with significant influence)

The Company is required to prepare separate financial statements, hence, in accordance

Fair value of unquoted investments is determined on the basis of appropriate valuation

Nishat Mills Limited 51

Stores, spare parts and loose tools

Cost of raw material, work-in-process and finished goods is determined as follows:

i) For raw materials: Annual average basis.

2.10 Trade and other receivables

2.11 Non–current assets (or disposal groups) held for sale

2.13 Borrowing cost

2.14 Share capital

Ordinary shares are classified as share capital.

2.16 Revenue recognition

Revenue from different sources is recognized as under:

- Revenue from sale of goods is recognized on dispatch of goods to customers.

- Revenue from sale of electricity is recognized at the time of transmission.

- Dividend on equity investments is recognized when right to receive the dividend is

2.17 Financial instruments

A financial asset is considered to be impaired if objective evidence indicate that one or

Nishat Mills Limited 53

2.20 Derivative financial instruments

2.21 Off setting

2.22 Cash and cash equivalents

2.23 Segment reporting

Segment reporting is based on the operating (business) segments of the Company. An

The Company has following reportable business segments: Spinning at Faisalabad (I

2.24 Government Grants

2.25 Dividend and other appropriations

Dividend distribution to the Company’s shareholders is recognized as a liability in the

3 ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL

256,772,316 256,772,316 Ordinary shares of Rupees 10 each fully

Nishat Mills Limited 55

Balance as on 30 June 39,631,520 35,528,222

Nishat Mills Limited 57

Nishat Mills Limited 59

TOTAL 2,392,050 3,635,008

6 DEFERRED INCOME TAX LIABILITY

Nishat Mills Limited 61

10 CURRENT PORTION OF NON-CURRENT LIABILITIES