Stiff Competition from India and China

Economic Review, December 1995 | Go to article overview

Stiff Competition from India and China


There were 8 companies on the list of Karachi Stock Exchange in the Leather and Tanneries sector in 1994. The total Paid-up Capital of these companies stood at Rs. 361.05 million, while Free Reserves and Surplus stood at Rs. 708.51 million during the year under review. General Break-up Values per Rs. 10/-worked out to Rs. 29.62. The high Break-up Value of shares in the descending order were as follows:-

Break-up Values of Companies

Company                   1994      1993

Bata Pakistan            58.71     55.61
Universal Leather        37.12     43.75
National Tannery         35.92     38.35
Service Industries       24.45     22.61
Pak Leather              20.64     19.66
Hilal Tannery            14.56     14.01
Leather-up               11.96     12.17
Fateh Industries         11.03     25.16

It will be seen from the above table that 4 companies showed increase in their [TABULAR DATA OMITTED] Break-up Values, while 4 companies namely Universal Leather, National Tanneries, Leather-up and Fateh Industries showed decline as compared to previous year. The Break-up Value of Fateh Industries decreased from Rs. 25.16 to Rs. 11.03 in 1994 due to decrease in its free reserves and surplus from Rs. 30.31 million to Rs. 2.06 million during the year under review.

Earning Per Share

The highest earning per share was at Rs. 5.13 of Universal Leather, followed by Bata Pakistan at Rs. 3.90, Service Industries at Rs. 3.89 and Pak Leather Crafts Ltd. at Rs. 2.38.

Dividend

Out of 8 companies, 4 companies have paid dividend and bonus during the year under review. The highest dividend of 30 per cent (cash) was paid by Universal Leather & Footwear Industries, followed by 14 per cent (cash) by Pak Leather Crafts, 10 per cent (cash) by National Tanneries and 8 per cent (cash) by Bata Pakistan Ltd.

Watchout

Leather and allied products industries are passing through a difficult period because of recession in the international market as well as stiff competition from neighbouring countries like India and China.

Among its problems is "tough competition" from China and India. Other problems arise from Government policies in the shape of higher taxes and lower incentives. Thus the mark up on export refinance facility has been increased from 8% to 12%, the government has imposed CED equal to 1% and duty drawback on leather garments has been cut down from 20% to 12% thus affecting the profitability. The investors should watch the scrips of Pak Leather, Universal Leather and Bata in the backdrop of low quotations in the market.

National Tanneries is further injecting capital through 50 per cent right issue to alleviate erosion for revamping its old plant.

There were 27 companies on the list of Karachi Stock Exchange in the Miscellaneous sector in 1994. Of these we have analysed 16 companies. The total Paid-up Capital of these 16 companies stood at Rs. 907.34 million, while Free Reserves and Surplus stood at Rs. 634.51 million during the year under review. General Break-up Values per Rs. 10/-worked out to Rs. 16.99. The high Break-up Value of shares in the descending order were as follows:-

Company                     1994      1993

Grays of Cambridge         94. … 

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