CONFIDENTIAL PROJECT REPORT

OF

M/S. MARGARINE (PVT.) LIMITED (PROPOSED) NOORIABAD INDUSTRIAL ESTATE, DISTT. DADU

PROJECT EVALUATION DEPARTMENT INDUSTRIAL DEVELOPMENT BANK

FEBRUARY, 1993 M/S. MARGARINE (PVT.) LTD. TABLE OF CONTENTS CONTENTS: SUMMARY OF PROJECT IINTRODUCTION: THE BORROWERS AND MANAGEMENT: - The borrowers - Management DESCRIPTION OF THE PROJECT: - The projects - Raw Materials - Location and Land - Building - Plant & Machinery - Utilities - Personnel - Environmental Hazards - Construction Schedule COST OF PROJECTS AND FINANCIAL PLAN: VCost of Project Financing Plan Debt Equity ratio Security 16-23 1-3 PAGE NUMBER I-ii

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MARKET PROSPECTS:

- Introduction
Domestic Production and Capacity Installed Capacities of End Users Raw Material Requirements Demand For Industrial Margarine/Shortening Proposed Scheme & Product Mix Conclusion

BSA MARGARINE PRODUCTS (PVT.) LTD. -: B :VIFINANCIAL PROJECTIONS: Profitability Debt Service Coverage Break Even Analysis Cash Flow Inter Financial Rate of Return 26 24-25

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ECONOMIC EVALUATION: Contribution to G.N.P Value added Per Worker Employment Opportunities Capital Employment Ratio Internal Economic Rate of Return Domestic Cost Per Dollar Saved

VIII- CONCLUSIONS AND RECOMMENDATION:

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M/S. MARGARINE (PVT.) LTD. LIST OF ANNEXES ANNEX NUMBER I II III IV V VI VII VIII IX X XA XI XII XIII XIV XV XVI XVII XVIII XIX DESCPRIPTION DETAILS OF BUILDING LIST OF LOCAL MACHINERY CONSTRUCTION SCHEDULE ESTIMATES OF WORKING CAPITAL APPRAISED COST OF PROJECTS FORECAST OF EARNING SALE ESTIMATE COST OF GOODS SOLD STATEMENT GENERAL, ADMINISTRATIVE ESTIMATES OF FINANCIAL EXPENSES COMPUTATION OF RESALE PRICE INCOME TAX COMMUTATION CASH FLOW FORECAST STATEMENT PROJECTED BALANCE SHEET BREAK EVEN ANALYSIS INTERNAL FINANCIAL RATE OF RETURN INTERNAL ECONOMIC RATE OF RETURN DOMESTIC COST PER DOLLAR SAVED SENSITIVITY ANALYSIS EFFECTIVE RATE OF PROTECTION

M/S. MARGARINE (PVT.) LTD. SUMMARY OF PROJECT 12Name of the project: Location Office: Factory: 345New/B&Mrep Expansion: Amount of Loan: Rated Capacity of the Project M/s BSA margarine (Pvt.) Ltd.(Proposed) 1017, Uni Plaza I.I Chundrigar Road, Karachi. 94 KM, Nooriabad Industrial Estate, District Dadu, Sindh New L/C Assistance Rs.24.150million (LMM) L/C Assistance Rs.3.800million (BOR) 18,000 tons of industrial margarine/ shortening based on 3 shifts and 300 days/ annum. 1,800 tons of Liquid Soap 300tons of Chain Lubricant 150 tons of Carbon Dioxide Gas a) Local Machinery Pre-Refine Machinery including Neutralizer & Bleacher, Hydrogenation Machinery, Post Refinery Machinery Including Post Refiner & Bleacher, Margarine Plant, Liquid Soap, Chain Lubricant plant, Boiler, Natural Gas Cracking Plant, Water Softening Plant, generator etc (Rs. IN MILLION) Fixed Cost RS.39.066 Net Working Capital RS. 8.534 Total: RS.47.600

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Machinery to be Purchase under the Scheme:

. 7Cost of proposed Scheme:

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-ii- CONTD. SUMMARY OF PROJECT BSA MARGARINE (PVT.) LTD. IDBP L/C Loan (LMM) RS.24.150 IDBP L/C Loan (BOR) RS. 3.800 Directors Loan RS. 0.650 Paid Up Capital: I- Sponsors RS. 19.000 Total : RS.47.600 Debt Equity Ratios : In Fixed Cost 73:27 In Overall Cost 60:40 Annual Recurring Foreign : RS. 229.472 million Exchange (C&F) Requirements of the projects at 100% Percentage of C&F Value : 95% of Imported Raw Materials to Cost to total Raw Materials. New Job Opportunities : 130 Persons. Projected Profit : Gross Profit RS.28.491 million (4th Yr.) Operation Operating Profit RS.21.214 million Net Profit Before Tex. RS.11.109 million Gross Profit to Sales. 9.35% Operating Profit to Sales 6.96% Pre-tax Profit to 3.65% Sales. Return on Equity 26.81% Return on Debt Service Coverage : 1.88 Times th (4 Yr.) With Dep. Break Even : 44%Capacity Utilization I.F.R.R. : 43% Contribution to G.N.P : Rs. 13.470 million Fourth Year (Rs. In Million) I.E.R.R. : 31.687% Brunos Ratio (Rs./US$) : 25.74

-ii- CONTD. SUMMARY OF PROJECT BSA MARGARINE (PVT.) LTD. 1920Effective Rate of Protection. Security IIIIII21First charge on fixed assets of the projects estimated at Rs.39.066 million (coverage : 1.37 times of Financial Assistance.)\ Outside collateral in shape of urban property to the extent of 25% of financial assistance. Personal Guarantee of all the Directors of the company. : 67%

Project Benefits:

The Projects being located in Nooriabad Industrial Estate, District Dadu, Sindh will enjoy tax holiday for the first five years as a Government incentives given to the project to be in Rural Area.

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M/S. MARGARINE (PVT.) LTD. INTRODUCTION

The sponsors of the captioned concern have approached us for financial assistance for setting up of an industrial margarine / shortening and their by-product unit at SITE, Nooriabad Industrial Estate, Dadu, Sindh. The Proposal of the sponsors has been processed for a local currency assistance of Rs. 24.150 mullion under SBP Scheme for LMM and local currency assistance of Rs. 3.800 million from Banks Own Resources. The rated capacity of the projects would be 18,000 tonnes of industrial margarine/shortening liquid soap 1,800 tonnes, chain lubricant 300 tones and carbon di-oxide 150 tonnes based on 3 shifts 300 days per annum. This is the first loan application of the company. However, the main sponsor Shaid Rasheed availed financial assistance in the name and style of M/s. imperial Rubber Industries Ltd. on 25-61965 which was later liquidated on 1-11-1983. II- THE BORROWERS AND MANAGEMENT THE BORROWERS: M/s . BSA Margarine (Pvt.) Ltd., will be incorporated as a private limited company with a paid up and subscribed capital of at least Rs. 19.000 million. The control and management of the company would be entrusted with the Board of Directors consisting of the following : S .NO 123NAME Shahid Rasheed Hussain Habib Ashraf Kamal

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BSA MARGARINE.

Brief resume in respect of the sponsors of the captioned concern is as under: SHAHID RASHEED: is the Chief Executive of the company. At present he is running a textile rubber cots and aprons manufacturing unit namely M/s. Bhitai Rubber Industries Located at Korangi, Karachi. He is the former member of National Assembly and was at that time member of Economic Committee/Bodies i.e. finance Committee, Budget Committee, Economic Deregulation Committee. Presently he is working as member of Deregulation, Disinvestments & Denationalization Committee. HUSSAIN HABIB: He will be the Financial Director of the company. Has done B.B.A from Boston University and had worked in top management position at Hanover Manufactures Limited, Bank in London. ASHRAF KAMAL: He is friend of Shahid Raeheed. He is looking after business in Punjab after graduation from American School. PAST OPERATIONS OF SISTER CONCERN: The financial statement of the sister concern of the company are summarized below: M/S. BHITTAI RUBBER INDUSTRIES LTD. BALANCE SHEET AS AT 31ST DECEMBER ASSETS: 1991 1990 Currents Assets 4,106 2,559 Long Term Deposit 67 67 Fixed Assets 27,484 28,619 Unallocated Capital Expenditure 26,620 24,021 Total Assets 58,187 55,266 LIABILITIES & OWNERS EQUITY: Current Liabilities 3,662 Long Term Liabilities 42,375 Total Liabilities 46,037 OWNERS EQUIT: Paid up Capital 12,880 Retained Earning/Loss (730) Total Owners Equity 12,150 1,993 47,493 49,486 5,780 --55,266

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BSA MARGARINE

The company has started commercial production from July 1991. The profit & Loss Account depicts picture of half year operations. M/SBHITTAI RUBBER INDUSTRIES LTD. PROFIT & LOSS ACCOUNT FOR THE PERIOD JULY, 1991 OT 31ST DECEMBER ,1991 (Rs.in000) Sales 4,486 Cost of Goods Sold 3,155 Gross Profit Operating Expenses Operating Profit Financial Expenses Profit /Loss After Interest Other Income Net Profit / Loss 1,331 695 636 1,403 767 36 731

CREDIT WORTHINESS: The credit worthiness of directors is being investigated and sanction letter will be issued after receipt of satisfactory credit report on the sponsors and the company.

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BSA MARGARINE III THE PROJECT

The scheme envisages establishment of a margarine/shortening and their by-product manufacturing unit with a rated capacity of 18,000 tonnes to rated capacity of the project is based on 15 tonnes of processing (deodorizing )per batch of approx. 8 hours Which gives annual production of 18,000 tonnes of main products viz maragine/shortening in 300 days from 2 deodorization per day . The product range, their rated capacities and proposed selling price would be as under: S. NO ITEM RATED CAPACITY (TONNES) PROPOSED SELLING (RS./TONNES)

(MAIN PRODUCT) 1. Industrial Margarine /Shortening 18,000 24,625 (BY PRODUCT) 1Liquid Soap 1,800 15,500 2Chain Lubricant 300 14,000 (for confectionary units etc.) 3Carbon Di-oxide 150 4,500 On the basis of market demand, the proposed unit is expected to operate on the following capacity utilization: First Year 50% Second Year 55% Third Year Fourth 7 subsequent Year 60% 65%

The fixed cost of the project has been estimated at Rs.39.066 million. PRODUCT IDENTIFICATION: Margarine and shortening are diversified dibble fats products and can be classified under less Cholestrol caloric contanied food products obtained from various types of vegetable fats of saturated, unsaturated and semi-saturated categories. (saturated fats of satured, unsaturated single bond carbon linkages whereas un-saturated fats contain one or more double bond linkages).

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BSA MARGARINE

Margarine: are grainless greasy paste product containing above mentioned types of vegetable fats along with the additions of water (potable grade /disinfected), emulsifier, antioxidant, salts (in some cases), and vitamins A & D in certain quantity and specific ratio. Shortening: are from same raw materials but without addition of water, and salt they are also grainless paste products but their uses are different. Margarine /shortening, in fact, are essential ingredients of most types of bakery product classified by single fat or oil or a combination of several fats and oils. On processing shortening, certain physical changes are brought under control to achieve physical properties. Fats and oils are glycerol items of fatty acids predominantly they are triglyceroid having 3 fatty acids attached to the glycerol. While single pure triglyceride will have a definite melting point. As temperature increases the triglyceroide melt and fat softens. The process is basically interest verification i.e molecular rearrangement. As both margarine/shortening produce uniform, unbroken greasy film these are widely used in biscuits, confectionaries, ice cream, and chocolate/toffee. Etc. By-products namely liquid soap and chain lubricants prepared fro lye obtained from soap stock (from bleacher) are widely used for cleaning of clothes and lubrication of conveyor chains of edible products respectively. Carbon di-oxide gas released from cracking plant is filled in cylinders (liquid form) and are used by bottlers and for multifarious applications. MANUFACTURING PROCESS: Essentially production of margarine and shortening involves almost the same process of refining, bleaching and filtering, hydrogenation and deodorization like oil/ghee manufacturing unit. The basic difference, however is that in case of margarine/shortening ready oil after passing through the above mentioned process is mixed/blended with distill water in presence of emulsifier, antioxidant and vitamins in stainless steel tanks and then transferred to votator/cutter at constant flow and pressure. Here the blades scrap them to fine paste. The pasties then transferred to pinner/polisher to get a special shine commercially appreciated in the market. The steps involve in the process is briefly described hereunder. It is to be mentioned that every batch for hydrogenation will be maintained at different melting point based on the specific requirement of each customer: a) Refining (Neutralization) Edible oil refining is done through etherification of free fatty acids, glycerol, mono and diglycerides by mixing alkaline solution of sodium hydroxide (caustic soda) at temperature ranging from 80 to 90 with proper agitation. The impurities mixed esterified products (Soap) is separated by settling/decanting process.

-: 6 :BSA MARGARINE The process involves the neutralization of free fatty acid contents of the oil with caustic soda. The edible oil, from storage tanks, in measured quantity, is obtained and pumped in to neutralization tank which is made of mild steel cylinder with a conical bottom. The oil is constantly stirred with the help of an electrically driven equipment. Steam is passed in to the tank and the temperature is raised to about 80 to 90 C.A measured solution of caustic soda and hot water is then pumped into the neutralizing tank so as to neutralize the fatty acids which are present in edible oil.

The caustic soda and free fatty acids react with each other whereby the free fatty acids are neutralized resulting in a preciitate in the form of suspended particle, which is called Foots and is drained in to the soap stock tank. The oil free most of the free fatty acids is taken to the bleacher for further processing. b) Bleaching And Filtering: In order to further remove traces of remaining esterified impurities (soap) and colour pigment of oil it is thoroughly washed with hot water and steam and then bleached with the help of fullers earth and activated carbon under vacuum wherein bleaching agents absorbs all the impurities of oil turn in to pale yellow colour. It is then passed through filter press for complete separation. C) Hydrogenation It is the addition of hydrogen at double bonds in the fatty acid where mono-saturation acids are converted into polysaturated and semi-saturation to saturated. The process involves introduction of refined bleached oil in the Autoclave through heat exchangers to get saturated oil from un or semi-saturated oil by absorbing hydrogen in the presence of nickle catayst. Post Neutralization: The hundrogenated oil is again refined in the post neutralizer but with different (low) concentration of caustic soda.

d)

e) Post Bleaching: After post refining the oil is again bleached with fullers earth in the same vacuumed bleaching vessel and temperature conditions.

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BSA MARGARINE

f) De-Odorization: the refined/bleached (semi-un-saturated oils) and refined/bleached and hydrogenated (fully saturated oils) is charged in the deodrizer through heat exchangers wherein all volatile remaining free fatty aids and other impurities are sucked off by high level vacuum system at 220-250o C under open steam agitation. Up to this stage the process describe above is almost the same as empolyed in case of cooking oil/ghee units. After this stage process of margarine/shortening commence. g) Blending: the blending of all above mentioned oils/vegetable fats will be done according to production planning. Unsaturated soyabean oil, 2-4 Di Nitro Benzy1 Toulene etc. are added in the stainless steel blending tanks under agitation at 42-44o C. Normal blending ratio is given hereunder: Products R.B.D.Un- + R.B.D. Semi+ R.B.H.D. + H20 + Emulsifier +Anti-

Saturated Saturated Oil Oil (Soyabean Oil Oil)

Oil (fully Saturated Oil)

Oxidant

Ind. Margarine 10-12% 35-40% 35-40% 8-10% 0.01-0.1% 0.01% Shortening 8-10% 40-45% 45-50% ---------0.1% h) Votating/Cutting/Pasting: The blended products will introduced in the votator / cutter, which is three shell structure, where outer shell contains liquid foreon-22 and inner shell contains rows of high speed blades. due to the introduction of product from 42-44o C to 0 25o C, the product will quickly solidity at the inner wall of the middle shell and simultaneously these high speed blades will scrap them in paste from. The same process will take place in Votator # 2 but at a higher tem temperature of 100C. here entire product will become grain less paste.

-: 8 :BSA MARGARINE i) Polishing/Pinning: Polisher/Pinner is two shell and single shaft reactor. The outer shall contains liquied F-22 the inner wall of middle shell and rotating shaft contains special designed stainless steel pins. When product will enter from votator # 2, it will be hammered with high speed pins and consequently a portion of un-saturated vegetable fats will appear on the surface of the product giving a shining appearance to the product. The product is now ready for packing and deliver. j) Liquid Soap & Chain Lubricant Plant. Soap stock from nrutralizing tank is pumped in to evaporator having tube bundles and separating plates. The water contents of soap stock is evaporated. It is then fed to converter having water and steam jacket with agitation system. Here stock is formed in a fine paste for making liquid soap. Chemicals such as nonipol (2-4 Di Nitro Pheny1 Amino Propy1), potassium hydroxide and common salt is added in desired quantity according to required specification for liquid soap and chain lubricants. Soap stock having light yellow color containing oil emulsion and Beta Carotene when reacts with Potassium Hydro and alkaline group, it turns the appearance of soap stock in transparent shape. Products are identified on the concentration of water and PH value describe below. a) Liquid soap containing 70% water, PH 7.5-8.5 (Mild Alkaline) b) Detergents containing 50% water, PH 8-9 (Highly Alkaline) c) Chain Lubricant containing 30% water, PH 7-7.2 (Neutral) (Bio-Grease) Usage: Liquid soap is mainly consumed in dish washing plants of hotels, washing machines of laundries and by dyeing and bleaching factories etc. Chain lubricants which acts as a bio-grease is used in roller, bushes and ball bearing in conveyor system of all food processing industries like beverages, biscuits and toffees etc. k) Carbon Di-oxide Gas (Liquid Form): Carbon di-oxide gas released from the cracking plant is compressed and filled in cylinders in liquid form.

-: 9 :BSA MARGARINE 1) Packing: Industrial Margarine/shortening need not to be chilled before packing/filling like cooking oil vegetable ghee. Industrial margarine/shortening would be packed in polythen bags in cartons of 16 Kg. Each . Liquid soap and chain lubricants would be packed in plastic drums of 50 kg. Each

Carbon dioxide gas, as such would be sold directly to the consumers with their own arrangement of filling system inclusive of compressors and cylinders. Production process flow chart is given at next page. Natural Gas & Steam Cracking/Reforming Process Description: At first stage, the natural gas (Methane), will in sulfur removal tower, where all the traces of sulfur will be removed in another twin towers containing activated carbon catalyst. At second stage the dry steam and sulfur/iron free will be mixed to gether and will enter in the reformer through top mounted super heaters, which gains heat energy form flue gases of the reformer burners. The methane and steam mixture will start cracking at the temperature of 550oC, (in super heaters installed on top of reformer). At this stage 20-25%cracking process will be perfomed. The semi cracked mixture will completely cracked in the reformer and will start reforming in form of Co2 and H2 Gases (96-97% reforming will be completed at this stage) and small quantity of carbon mono-oxide and oxygen will be left untreated. At third stage, the mixture of H2, CO2 and O2 will convertor will enter in low temperature shift convertor, where all carbon di-oxide and oxygen gases will be left as gases mixture. At fourth stage, the reacted gases mixture from H.T.S. convertor will enter in low temperature shift convertor, where all carbon mono-oxide and oxygen will be removed and remaining hydrogen carbon di-oxide gases will be lefts as gases mixture. At fifth stage, the reacted gases mixture will enter in the mono ethylene amine tower (MEA TOWER), where the carbon dioxide gas of thh mixture will be absorbed in the MEA solution, (at ambient temperature)and hydrogen gas will be released for collection. At sixth stage the MEA rich solution will enter in the re-boiler, where it will be boiled up to 105110oC through steam heating. All carbon dioxide gas will evolve from stripper of MEA re-boiler, which will pass through heat exchangers and coolers and will be available for collection. The MEA solution will be sent to MEA tower througvarious heat exchangers/coolers for Co2 absorption again.

10 :BSA MARGARINE LAND AND LOCATION The sponsors reportedly own a factory building one plot No. A/327,SITE, Nooriabad, District Dadu. The area of plot as per drawing is 617x288sq. fts or 16,515 sq. meters approx. Eqt. to 4 acres. It is located at 94 KM on Karachi-Hyderabad Super Highway and very near to SITE Office, Nooriabad. Infra-structure facilities are available at the plot. However, presently electricity and water lines are disconnected. The cost of land including its development is estimated at Rs.600.000/- on the basis of average purchase price @ Rs.150,000/- acre. BUILDING & CIVIL WORKS:

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Existing Factory Building: Single storey building reported constructed during 1986-87 have an approx. covered area of 1424 sq.m. and a height of 14 feet as pr drawing from K/s. engineering Associates submitted by the sponsors. The construction of existing factory building is RCC having pre-fabricated roof slabs of approx. 225,000 and 45,000 liters respectively is constructed. Keeping in view the quality of construction and age of factory building its estimated cost been worked out at Rs 3.522 million as per details in Annes-I . The factory building was constructed for M/s. Bhittai industries, a rubber cots and aprons manufacturing unit financed by NDEF in 1987 Later in 1989 they shifted entire machinery to Korangi in view the permission of NDFC and Sindh Government and presently under is lying vacant. The premises (including land and building), however, is reportedly under lien with NDFC and shall be cleared by the sponsors for creating with IDBP. Proposed Modification / Expansion: In order to use the present factory building for proposed margarine/shortening plant the factory was inspected on January 31,1993 and it was observed that machinery other than refinery can be accommodated in the existing premises. Hence it is proposed that a portion of the factory building having a covered area of 372 sq. meters would be modified and one more floor would be constructed to house refinery machinery. In this connection, it is proposed that roof slabs would be removed and two floor refinery section would be constructed at 22 feet and 40 feet level with the support of additional 4/5 new columns. Beside, a new ACC construction would be made to accommodate boiler. It is estimated that a cost of Rs.2.116 million would be incurred to undertake modification/ expansion as per details given at Annex-I

-: PLANT AND MACHINERY:

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BSA MARGARINE

The machinery proposed to be fabricated/manuufactured locally shall mainly be comprised on the following: a) Pre-Refining Machinery

Including storage tanks, vessels including neutralizer and bleacher, pumps filters, steam vacuum system, piping/values and fittings etc. b) Hydrogenation Machinery:

Including hydrogenation autoclaves, tanks heat exchangers, filter press and catalyst mixing tanks etc. c) Post Refining machinery:

Including post bleacher, post refiner tanks and pressure vessels, filter press and deodorization vessel etc. d) Blending Section:

Including blending tanks, pumps and gauges etc. e) Margarine Plant:

Including blending tanks, votator/mixer, pinner/polisher and chilling system etc. f) Liquid Soap & Chain Lubrication Processing Machinery:

Including emulsion convertor, evaporators and vacuum system etc. g) Utilities:

Including package type boiler, water softening plant, electrical equipment and installation, hydrogen gas generation system comprising on cracking plant, gas holders and gas compressors, etc.

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BSA MARGARINE

Misc. Machinery Including Standby Generator And Workshop Equipments etc: Almost all the machinery would be domestically fabricated/manufactured. The tanks and vessel are M.S welded construction with top and bottom dished ends with agitation system etc. Margarine Plants is stainless steel cylindrical construction with rotating cutter/pinner. The total cost of machinery / equipment on the basis of quotation from M/s. Tech Engg, and others is estimated at Rs.28.650 million. Bank shall finance Rs. 24.150 million under LMM and Rs.3.800 Million under BOR. Item such as crude oil storage tanks, temperature indicators, gas analyzing kit, gas flow meters, hydrogen gas compressors and workshop equipment worth Rs.1.906 million are not eligible under LMM financing. Moreover item such as chilling system of margarine plant, boiler and air compressor containing under LMM. All these and other item including standby diesel generating sets shall be financed from BOR. The balance cost of machinery worth Rs.0.700 million shall be financed by sponsors from their own resource. RAW MATERIAL: The raw material required is edible oil. Other are processing chemicals and additives. The proposed unit would sue soybean and R.B.D. Palm oil: the normal blending ration begin 32:68 Chemicals used during process are absorbent like caustic soda, fullers earth activated carbon (for

soybean oil) and antioxidant (to create activated oxygen free area) etc. Nickel catalyst is required to expedite the processing. Additives namely citric acid (food grade), phosphoric acid (for soybean oil) and vitamin A&D etc. are used . filter cloth is used in filter press. Nonipol (2-4Di phenyl amino propyI) and potassium hydroxide are used for clarification of liquid syrup obtained from soap stock. Various types of catalyst are used in gas cracking plant. Packing materials include polythene bags, corrugated cartons and plastic drums. Imported raw materials constitute 95% of total raw materials. UTILITIES POWER: The project would require connected load of 1000 Kw. Maximum demand is estimated at 800 KW. Besides, standby electric generator of 320 KVA is proposed to be acquired for meeting power requirements for boiler, hydrogen checking plant and votator/mixer etc.

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BSA MARGARINE.

Boiler is package type and natural gas fired. It is estimated that gas eqvt. To 2000 tonnes of oil is required annually. Water: To, meet water requirement for the project estimated to 50,000 litres per day at an estimated cost of Rs. 500.000/- annually. The sponsors shall get restored the water supply available at plot from SITE Authority, Nooriabad. PERSONNEL: On production side 100 personnel would be required in various categories including shift engineers, boiler attendant, plant operators and chemist etc. on administrative side 24 personnel including required whereas on sales side 6 personnel would be needed. TRANSPORTATION: Hired transport would be used for raw material as will finished product. However, Rs.1.500 million has been earmarked for purchase of one small tanker and othervehicles to be used for day to day business. ENVIRONMENTAL POLLUTION HAZARDS: Excess carbon di-oxide released from the plant would be observed in water pose bi environmental pollution hazard.

CONSTRUCTIO SCHEDULE: The proposed project is expected to commence commercial production by February, 1994 as detailed in Annex-III - 14 BAS MARGARINE

IV- COST OF THE PROJECT & FINANCIAL PLAN I. COST OF THE PROJECT

Total fixed cost of the proposed project has been estimated at Rs. 39.066 million as per detail given in Annex-IV. The initial working capital to be contributed by the sponsors has been estimated at Rs. 8.534 million (annex-V). The summary of the total cost is given below: S. NO. PARTICULARS 1. 2. 3. 4. 5. 6. 7. Land Building Machinery (Installed Cost) Vehicles Furniture / Fixture Pre-Operating Expenses Total Fixed Cost: Net Initial Working Capital Total Cost II. FINANCING PLAN COST ALREADY MET 60 3522 (Rs. In 000) COST OF BE TOTAL MET APPRAISED COST 600 2116 5638 30276 30276 1500 1500 500 500 552 552 34944 8534 43478 39066 8534 47600

4122 4211

The above cost has been proposed to be financed as under: (Rs. In 000) Total Cost Debts: IDBP L/C Assistance (LMM) IDBP L/C Assistance (BOR) Directors Loan Paid Up Capital Sponsors Contribution Total 24150 380 650 19000 47600

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BAS MARGARINE

The debt equity ratio in the fixed cost of the proposed scheme is estimated at 73:27 The debt equity ratio in the overall cost of the project will be 60:40 which is considered satisfactory. The sponsors stake in the total cost of the project in Rs. 19.650 million i.e. 41%. IV. SECURITY

The proposed IDBP local currency loan of Rs. 27.950 million (Rs. 24.150 million under SBP Scheme for LMM and Rs. 3.800 million from Banks Own Resources) will be secured by a first charge on the fixed assets of the company value estimated at s. 39.066 million on completion of the project. Project assets will provide security coverage of 1.37 times. The sponsors will provide outside collateral in shape of urban property to the extent of 25% of financial assistance worth Rs. 6.990 million. The directors of the company will also provides their personal guarantees. These security arrangements are considered satisfactory.

- 16 V- MARKET PROSPECTS COST OF THE PROJECT

BAS MARGARINE

Margarine was developed by French Chemist H. Mege-Mouries in the late 1860s. In Pakistan margarine (Industrial and Table) was introduced by M/s. Lever Brothers in 1985 under the brand name of Blue Band Margarine. Now, industrial margarine is also being manufactured by M/s. Agro Processor (Pvt.) LTd., Karachi. Another two new units in Karachi namely M/s. N.Y. Oil Mills (Pvt.) Ltd. and M/s. Saigal Ghee Mills (Pvt.) Ltd. would likely to commence production of margarine in mid of 1993. Product Definition Margarine and shortening are diversified edible fat products and can be classified under the category of less cholesterol caloric contained food products obtained from various types of vegetable fats of saturated categories. Types There are mainly two types of margarine i.e. Table Margarine and Industrial Margarine, whereas shortening is also a type of industrial margarine which is without water. Uses of Margarine / Shortening Table margarine is a partial substitution of butter used by house holds whereas industrial margarine / shortening is used a s fat in bakeries items (patties, cream roll, ties, baker khani pillar sticks etc.) and other industrial end-users like confectionaries, ice cream and biscuits manufactures. RAW MATERIALS The basic raw materials are BD palm oil and soya bean oil, besides, other additives namely citric acid (food grade), phosphoric acid (for soya bean oil) and vitamin A&D

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The import of palm oil and soya bean oil during last five years are given in the following table: Table I Import of Oil (Qty: Tons) Year 1987-88 1988-89 1989-90 1990-91 1991-92 Source : Palm Oil 458256 475007 594131 687957 886000 Soyabean Oil 500313 383744 63219 271665 N.A.

Foreign Trade Statistics

These edible oil are being imported mainly from Argentina, Malaysia and the USA DOMESTIC PRODUCTION CAPACITY At present four units in organized sector-three units in Sindh and one in Punjab (R.Y. Khan) are engaged in the production of margarine with a combined installed capacity of 22800 tons, details of which are given below: S.No. 1. 2. 3. 4. 5. Name M/s. Lever Brothers Pakistan Ltd. Rahim Yar Khan M/s. Agro Processors & Atmospheric Gases (Pvt). Ltd, Karachi M/s. Nutri Pak Food Industries (Pvt) Ltd. Karachi M/s. H.M. Oil Mills Ltd, Karachi M/s. Saigal Ghee Mills (Pvt) Ltd. Total Installed Capacity by 1992-93 Capacity (M.Ton) 7500 900(22800) 5400 9000 (under implementation) 24000 46800

NOTE: * National Bank of Pakistan Sanctioned financial assistance to M/s. Saigol Ghee Mills (Pvt) Ltd. in 1990 for expansion of their existing ghee unit for making industrial margarine with an installed capacity of 24000 tons. The unit is expected to commence production in July, 1993.

- 18 -

BAS MARGARINE

As can be seen from above table that industrial margarine is being produced by ghee/cooking oil mills and there is no sales tax/excise duty on production of these items whereas production of margarine in subject of sales tax (12.5%). Therefore, they hide the production of margarine and market their product in the name of Industrial Fat Thus authentic production figures of margarine are not available however, it was reliable learnt that M/s. Lever Bothers, Agro Processes and Nutri Pak are working at 80% capacity while the remaining unit namely H.M. Oil Mills has just started production and expected to utilize 50% of its installed capacity in 1992-393 on the basis of capacity utilization, the estimated production therefore was around 11040 tone during 1991-92 DEMAND FOR INDUSTRIAL MARGARINE The demand for industrial margarine / shortening stems for bakeries, biscuit, confectionary and ice cream manufacturers and to the some extent from Desi Sweet producers like Ahmed Food Industries (Pvt) Ltd. and by hotels / restaurants for frying purposes. The demand for industrial margarine / shortening can be worked out by considering the following factors of industrial end-users and bakeries: i. ii. 1. Installed capacity, capacity utilization and percentage of use by end users (biscuit, confectionary and ice cream manufacturers); Total number of bakeries and their average annual consumption of industrial margarine Installed Capacity of Biscuit, Confectionary and Ice Cream Manufactures

The installed capacities of industrial end users of industrial margarine / shortening is given below: Table II Installed Capacities of Biscuit, Confectionary and Ice Cream Manufacturers in Pakistan (Qty: in Tons) Province Sindh Punjab Balochistan NWFP/Islamabad Misc. Total Biscuit / Wafers 24572 10344 4800 3328 43066 Confectionary (Toffees etc.) 19600 19510 1180 1457 53754 Ice Cream 3252 3616 448 1604 8920

Source: Market Enquiries - 19 BAS MARGARINE

2.

BAKERIES

In order to ascertain the demand for industrial margarine by bakeries a sample survey of bakeries located in five cities namely Lahore, Faisalabad, Rawalpindi/Islamabad and Peshawar was undertaken. The details of daily consumption pattern of industrial margarine used by bakeries are summarized below: Table III Name of City Lahore Faisalabad Rawalpindi/Islamabad Peshawar Karachi Total Bakeries Surveyed 27 20 32 11 10 100 Bakeries Not Using Margarine 9 8 3 1 2 23 Table IV Daily Consumption No. of Bakeries Margarine Usage Kgs/Daily Av: (Kgs. Day) Lahore 27 373 13.82 Faisalabad 20 129 6.45 Pindi/ Islamabad 32 410 12.81 Peshawar 11 132 12.00 Karachi 10 142 14.2 Total 100 1186 11.86 Ice Cream 33% 40% 9% 9% 20% 23%

Margarine consumption of a bakery per annum = 4.2 tons No. of Operating days = 360

Number of Bakeries: The total number of bakeries in Pakistan as informed by various bakery owners / association are around 17000 to 18000. It is pertinent to mention that total number of bakeries as listed by Federal Bureau of Statistics (FBS) were 6281 in 1983-84 in the country as per PSIC Survey in 1987. The survey conducted by Punjab Small Industries Corporation (PSIC) in 1987-88 have taken a growth rate of 6% to 25% for bakeries during the period 1983-88. Assuming a conservative growth of 10% per annum, the bakery units in the country would number between 17000 to 18000 and the same seems to be justified

ANNEX VIII (Page-5) M/S. MARGARINE (PVT) LTD. B-Furnace Oil Quantity / Ann @ Rs. / Ton Furnace Oil = Rs. C-Water Quantity / Ann @ Rs. Total Cost = Rs. 2000 2400 4800 5000 100 500

Power, Water, Fuel & Other (Year wise) Year of Operation Fixed Cost Variable Cost (1) Depreciation Yr 1 1740 5806 7546 Yr2 1740 6387 8127 (Rs. In 000) Cost 30276 5638 Rate % 0.1 0.05 Amount 3028 282 3309 Yr 3 1740 6968 8708 Yr4 1740 7548 9288

Machinery Building

(2)

Depreciation

(Rs. In 000) Cost 500 1500 Rate % 0.15 0.2 Amount 75 300 375

Furniture / Fixture Building

ANNEX-IX M/S. MARGARINE (PVT) LTD. Estimate of General & Admin Expenses & Selling Expenses Years of Operation General & Admin Expenses Salaries Office Salaries Printing & Stationery Postage, Telephone, Telegram, Elect Rent Rates, Taxes & Insurance Traveling Expense Legal & Entertainment Depreciation Pre-Operating Expenses Written off Sub-Total (A) Total Packing & Selling Expenses Year of Operation Commission & Distribution 100% Yr. 1 1557 200 300 100 500 100 375 110 3242 Yr. 1 2228 5470 Yr. 2 1635 250 350 125 600 125 375 110 3570 Yr. 2 2576 6146 Yr. 3 1713 300 400 150 700 15 375 110 3898 Yr. 3 2811 6709 Yr. 4 1794 350 450 175 800 175 375 110 4230 Yr. 4 3047 7276

(2)

Office Sales Staff Salaries No. 1 1 2 2 1 1 1 4 3 4 4 Salary Rs. Per Month 15000 8000 4000 3000 3000 3000 2500 1500 1500 1000 1000 Salary Rs. Per Annum 180000 96000 96000 72000 36000 36000 30000 72000 54000 48000 48000 768000

(Aamir) Office Salaries) General Manager C. Accountant Accountant Accountant Asstt. Labour Officer Security Officer Store Keeper Typist / Clerks Driver Peon Chowkidar Sub-Total (A) Total

ANNEX IX (Page-2) M/S. MARGARINE (PVT) LTD. 2. (B) Sales Staff Sales Manager Sales Officer Sales Assistant Sub-Total 2 (B) TOTAL 2 (A+B) No. 1 2 3 Salary Rs. Per Month 8000 3500 2500 Salary Rs. Per Annum 96000 84000 90000 270000 1038

(Rs. In 000) Year of Operation Basic Salary Increment 5.00% Total Basic Salary Fringe Benefits Total Office Salaries 50.00% Yr. 1 Yr. 2 Yr. 3 Yr. 4 1038 1038 1090 142 52 52 54 1038 1090 1142 1196 519 1557 545 1635 571 1713 598 1794

ANNEX-X M/S. BSA MARGARINE (PVT) LTD. (PROPOSED) Financial Expenses Year IDBP L/C Assistance Cash Back Finance Total Financial Expenses Yr. 1 Yr. 2 Yr. 3 Yr. 4 1034 2069 2069 2069 5649 6302 6879 7151 6683 8371 8947 9520

ANNEX-X-A M/S. BSA MARGARINE (PVT) LTD. COMPUTATION OF RESALE PRICE COMPUTATION OF RESALE PRICE 1. 2. 2. 4. 5. 6. 7. Bank Finance Resale Date Date of Com Production Mode of Repayment ( Year) Date of Repayment of 1st Rate of Markup % Rate of Markup % 24150 1 Feb, 93 1 March, 93 16 1 Sept, 94 8 22 20 1 Sept, 94 18.5 22 3800 1 Feb, 93 1 March, 93

Calculation of Mark up During Construction and Grace Period L.M.M. Date of Disbursement 0.25 1 Mar, 93 0.60 1 Sept, 93 0.15 1 Feb, 94 Amount Disbursed 6038 14490 3623 Debt Balance 6037.5 20527.5 24150 2322 37146 12996 Pd of Mark-up 6 5 19 3958 63322 39172 Mark-up @ 8 Ps 22 Ps 242 664 684 1882 3059 8412 3985 10958

Amount of Installment @ 8 Paisa Rs = Resale Price @ 8 Paisa Rs. = Profit of the Bank Rs. = B.O.R. Date of Disbursement 0.25 1 Mar, 93 0.60 1 Sept, 93 0.15 1 Feb, 94 Amount Disbursed 950 2280 570

Debt Balance 950 3230 3800 368 7356 3556 404 8084 4284

Pd of Mark-up 6 5 19

Mark-up @ 8 Ps 22 Ps 88 105 249 296 1113 1324 1450 1724

Amount of Installment @ 16 Paisa Rs = Resale Price @ 16 Paisa Rs. = Profit of the Bank Rs. = Amount of Installment @ 22 Paisa Rs = Resale Price @ 22 Paisa Rs. = Profit of the Bank Rs. =

ANNEX- XI

M/S. MARGARINE (PVT) LIMITED TAX COMPUTATION TAX HOLIDAY

ANNEX-XII M/S BSA MARGARINE (PVT) LTD. CASH FLOW FORECAST STATEMENT Year Sources of Funds: Operating Profit Add Depreciation & Amortization Total Funds from Operation Paid-up Capital : Sponsors IDBP L/C Assistance (LMM&BOR) Directors Loan (P.B) Increase in Short Tem Borrowings Increase in Creditors Including Capital Expenditure Interest / Profit on: Shot Term Borrowings Amortization of: IDBP L/C Loan Dividend Workers Participation Inch. in Current Assets Total Cash Surplus During the Year Cash at the Beginning of the Year Cash at the End of the Year 19000 27950 650 0 47600 39066 30951 16629 663921 3581 1663 26632 3158 1663 27775 3139 1663 29811 End of Const. Yr 1 Pd 15517 3795 19312 Yr 2 17592 3795 21387 Yr 3 19159 3795 22954 Yr 4 21214 3795 25009

5649

6302

6879

7451

39066 8534 8534

2781 0 0 55356 63785 3107 8534 11641

5563 2850 442 6854 22010 4622 11651 16263

5563 2850 461 5690 21442 6333 16263 22596

5563 2850 511 5661 22035 7776 22596 30372

ANNEX XIII M/S. MARGARINE (PVT) LTD. Forecast Balance Sheet Year Current Assets Cash Stocks: Stores & Spares Debtors Total Fixed Assets Net. Total Assets Current Liabilities Short Term Borrowings Workers Participation Fund Dividend Income Tax Creditors Total Long Term Liabilities IDBP L/C Assistance Less: Markup on L/C Assistance Directors Loan (NBP) Total Liabilities Owners Equity Paid up Capital Sponsors Retained Earnings Total Equity Total Liabilities & Equity End of Const. Pd 8534 Yr 1 11654 44044 172 11140 66997 35271 102268 Yr 2 16263 49074 258 12878 78472 31476 109948 Yr 3 22596 53543 301 14056 90495 27681 118176 Yr 4 30372 57984 344 15233 103932 23886 127818

8534 39066 47600

30951 442 2850 0 16629 50872

34532 461 2850 0 18292 56135

37690 511 2850 0 19955 61006

40829 585 2850 0 21618 65882

44502 16552 650 28600 28600

41720 15517 650 26853 77725

36158 13448 650 23359 79495

30595 11380 650 19866 80872

25033 9311 650 16372 82254

19000 0 19000 47600

19000 5543 24543 102268

19000 11453 30453 109948

19000 18305 37305 118176

19000 26564 45564 127818

ANNEX XIV M/S. MARGARINE (PVT) LTD. BREAK EVEN ANALYSIS Operational Total 216181 4553 3795 9288 718 573 38081 585 4626 9520 3047 3744 294712 = = = = 304654 206693 44 21 Yr 4 Fixed 0 2276 3795 4644 359 0 0 0 02313 5712 0 1872 20972 Variable 216181 2276 0 4644 359 573 38081 585 2313 3808 3047 1872 273740

Raw Material Factory Wages & Salary Depreciation & Amortization Water, Power & Fuel Repair & Maintenance Stores & Spares Excise Duty W.P.P. Fund M. Overhead Financial Expenses Selling Expenses G.& Admn Expenses Total Sales Value of Production Break Even Analysis Capacity Utilization Required Margin Safety

ANNEX XV M/S. MARGARINE (PVT) LTD. Internal Financial Rate of Return Year 0 1 2 3 4 5 6 7 8 9 10 Capital Qutlay 47600 15517 17592 19159 21214 20738 20738 20738 20738 20738 3795 = = = 3795 3795 3795 3795 3795 3795 3795 3795 3795 3795 43 -153 43 442 461 511 585 560 560 560 560 560 560 0 0 0 0 0 6600 6720 6818 6897 6897 -476010 18870 20926 22443 24424 23972 22472 16872 17155 29029 Operation Income Depreciation Amortization Expense Workers Income Participation Tax Funds Net Cash Inflow

1500 500 --11953

Rate (Enter Rate upto NPV=0) Internal Financial Rate of Return Salvage Value 600 2819 0 0 8534 11953

Lend Building Furniture / Fixture Vehicles W. Capital

ANNEX XVI M/S. MARGARINE (PVT) LTD. Internal Economic Rate of Year 0 1 2 3 4 5 6 7 8 9 10 Capital Qutlay 39066 144794 167379 182694 197987 198800 198800 198800 198800 198800 198800 120209 132230 144251 156272 156272 156272 156272 156272 156272 156272 = = = 4118 4323 4537 4761 4995 4995 4995 4995 4995 4995 31.68 121 31.68 11760 13019 14112 15206 15211 15211 15211 15211 15211 15211 3428 4026 4511 4997 5159 5159 5159 5159 5159 5159 -39066 5279 13781 15283 16752 17163 15663 16663 17163 17163 Sales Board Price Raw Material Labour at Border Cost Price Overhead Exp Gen. Admn & Selling Exp Total Cash

1500 500 -11953

Rate (Enter Rate upto WPV=0) Internal Economical Rate of Return Salvage Value Lend Building Furniture / Fixture Vehicles W. Capital

600 2819 0 0 8534 11953

ANNEX-VIII (PAGE-3) M/S. BSA MARGARINE (PVT) LTD. Factory Wages & Salaries (a) Fixed No. 1 4 1 27 50 4 4 1 4 2 2 Salary R Per Month 12000 6000 4000 2500 1500 2000 2000 4000 2000 2000 2000 (Rs. In 000) Salary Rs. Per Annum 144000 288000 48000 810000 900000 96000 96000 48000 96000 48000 48000 2622000

Types of Staff Production Manager Shift Manager Boiler supervisor Plant Operator Skilled Worker Boiler Attendant Technician Chemist Lab. Assistant Store Keeper Security Men Sub Total (a)

Year of Operation Basic Salary Increment of % Total Basic Salary Fringe Benefits @

0.05 0.5

Yr. 1 Yr. 2 Yr. 3 Yr. 4 2622 2622 2753 2894 131 139 145 2622 2753 2891 3035 1311 1377 1445 4336 1518 4553

Total factory Wages Salaries

3933 4130

ANNEX-VIII M/S. BSA MARGARINE (PVT) LTD. Domestic Cost per Dollar Earned (For the 4th Year of Operation 19961-1997 a) Charge on Domestic Capital i. Markup on IDBP local car assistant ii. Markup on shot term borrowings iii. Markup on long term Ptcs iv. Differential Amount of interest on IDBP L/C Loan @ 5% b) i. ii. iii. iv. v. c) i. ii. iii. iv. v. vi. vii. Depreciation on Domestic Capital : Machinery & Equipment @ 10% p.a Building @ 5% p.a. Furniture / Fixture @ 15% p.a. Vehicles @ 20p.a Pre-Operating Expenses @ 20% p.a Current Domestic Cost: Raw Materials Water, Power & Fuel Repairs & Maintenance Overheads Stores & Spares Other Manufacturing O/H Factory Wages & Salaries Admin and Selling Expenses 2069 7451 0 0 9520 2865 282 75 300 110 3632 156272 9288 718 573 4626 4553 6791 195974 182822 195974 (Rs. In 000)

Total Domestic Cost (A+B+C)

ANNEX-XVIII (Page 2) M/S. BSA MARGARINE (PVT) LTD. 2. a. b. c. d. Foreign Exchange Cost Charge on DBP Foreign Currency Loan @ 9% Depreciation on Imported Machinery @ 10% Stores & Spares Repatriation of Profit / Royalty / Equity 0 0 0

Total Foreign Cost (Aamir+B+C) 3. 4. Foreign Exchange Saved / Earned Manufacturing this product Mix Net Foreign Exchange / Earned Manufacturing this product mix at home (3-2) Net Foreign Exchange / Earned in terms of USA Dollar @ Rs. 26/US 197987

5.

7615 25.74

Foreign Exchange rate of the prod.

ANNEX-XVIII M/S BSA MARGARINE (PVT) LTD. SENSITIVITY ANALYSIS As per Project report (4th Year 304651 Cost of Sales: Raw Material Excise Duty Water, Power & Fuel Labour Cost Stores & Spares Repairs & Maint. Other Mfg Overheads Admin. & Selling Exp. (Less: Dep/Amt) Dep. & Amt. of Prela. Exp. Financial Exp. Stock Adjustment Total Profit after Financial Exp. Workers Participation Fund Net Profit B/T Less: Income Tax Net Profit Add: Depreciation Financial Exp. Cash Generated from Operations Applications: Financial Exp. Liquidation of Longer Loan Total Applications: Debt Servi Coverage (Times) 9520 3494 13014 1.88 9520 3494 13014 0.30 11424 4193 15617 1.50 11424 4193 15617 0.19 9520 3494 13014 -0.24 216181 38081 9288 4553 573 718 4626 6791 3795 9520 -1170 292957 11694 585 11109 0 11109 3795 9520 24424 237799 38081 9288 4553 573 718 4626 6791 3795 9520 -1170 314575 -9924 -496 -9428 0 -9428 3795 9520 3887 216181 38081 9288 4553 573 718 4626 6791 4554 11424 -1170 296804 7848 392 7455 0 7455 4554 11424 23433 237799 3801 9288 4553 688 862 5552 6791 4554 11424 -1170 318422 -13771 -689 -13082 0 -13082 4554 11424 2896 216181 38081 9288 4553 573 718 4626 5336 3795 9520 -1170 291502 -17316 -866 -16450 0 -16450 3795 9520 -3135 Cost of Raw Materials Higher by 304651 Cost of Project Higher by 304651 Cost of Project & raw materials higher by 10% & 20% 304651 Sales price lower by 10% 274186

ANNEX-XIX M/S. MARGARINE (PVT) LTD. EFFECTIVE ATE OF PROTECTION (4th YEAR) (Rs. In 000) A. i. ii. VALUE ADDED (DOMESTIC PRICES): Value of Production: Less: Cost of Production Raw Material Stores & Spares Utilities Repairs & Maintenance Other Overheads 304266 209065 573 988 714 4626 224266 80385

Total (ii) : Value Added at Domestic Prices ; B. i. ii. VALUE ADDED (WORLD PRICES) : Value of Production: Less: Cost of Production Raw Material Stores & Spares Utilities Repairs & Maintenance Other Overheads

197987 152715 573 9288 714 4626 167616 30071

Total (ii) : Value Added at Domestic Prices ; ERP = Value Added at Domestic Prices Value added at Would at World Prices Value Added at World Prices ERP = ERP = EXPLANATORY REMARKS; ERP has been worked out on the following basis: 1. Imported aw Material at C&F and Local Raw Material at 50% 2. Sales at Border and Domestic Prices 3. Other Inputs at Project Cost 80385 30071 30071 67%

- 20 -

BAS MARGARINE

The survey of bakeries reveal that out of 100 bakeries (sample) 21 (233%) bakeries donot use margarine; eithr tehey own margarine by crude method or use butter. The bakeries using butter are fewer in number. The summary of installed capacities of major end users, their percentage of capacity utilization and usage are of industrial margarine by each end user in summarized in below table: TABLE V SUMMARY OF INSTALLED CAPACITY OF END USER AND USAGE RATE OF MARGARINE / SHORTENING The installed capacities of major end users alongwith usage are of margarine / shortening is given below: Sub-Group Installed Capacity (M.Ton)* 43044 53747 8920 17800 ** Capacity Utilization (Estimated %) 38740 (90% 48372 (90%) 8028 (90%) 13700 *** 4.2 tons/yr/bakery.**** Usage rate of Margarine/ shortening by weight ******

A. B. C. D.

Biscuits Manufacturing Confectionery Manufacturing Ice Cream Manufacturing Bakery Products Manufacturing (No.)

Source : * ** *** ****

Table II, III & IV.

The details regarding break-up of capacities has already been worked out separately in Table IV. The estimated total number of bakeries in Pakistan based on survey / enquiries. Bakeries using industrial margarine (i.e. 77% of 17800) he usage ate of industrial margarine as revealed by the sample survey is 4.2 tons/bakery/annum (Page I)

***** Based on enquiries from manufacturers / end users

- 21 -

BAS MARGARINE

One the basis of the foregoing analysis and Table-V the projected demand has been worked out the following assumptions. Assumptions: i. ii. iii. No. of Bakeries using margarine :13700 Conservative usage rate: 4.0 tons/bakery/annually on the basis of survey. Growth rate in demand has been taken conservatively at 55 per compatible with change in dietary habits 1% increase in disposable in come 1% and 3% increase in population. TABLE-VI Projected Demand Year 1992-93 1993-94 1994-95 1995-96 1996-97 Source: Bakery Demand 54800 57540 60417 63438 66610 Industrial Demand 7638 8020 8421 8842 9284 Total Demand 62438 65560 68838 72280 75894

IDBP Estimates

Estimates of Supply: It is been assumed that during 1990-91 three units namely M/s. Lever Brothers, M/s. Agro Processor and M/s. Nutri Pak have utilized optimum level of efficiency at 80% of their installed capacity and supplied produced 11040 tons of industrial margarine. TABLE-VII Future Supply Schedule Year 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 Total Supply (Tons) 11040 18540 32040 53940 61440 67440

11040 + 4500a + 3000b 11040 + 5400 + 12000c 11040 + 6300 + 14400 + 9000d + 9000 11040 + 4800 + 16800 + 10800 + 10800 11040 + 4800 + 19200 + 12600 + 12600

Source:IDBP Estimates Assumptions: Capacity Utilization at 50%, 60% 70% and 80% a. M/s. H.M. Oil Mills, Karachi b. M/s. N.Y. Oil Mils, Karachi c. M/s. Saigal Ghee Mills, Karachi d. M/s. Pan Asia Food Products, Nooribad e. M/S. MARGARINE (Pvt) Ltd. Nooriabad

(9000 tons) (6000 tons) (24000 tons) (19000 tons) (19000 tons)

- 22 TABLE-VII Demand / Supply Gap

BAS MARGARINE

(Tons) Year 1992-93 1993-94 1994-95 1995-96 1996-97 Source: * Total Demand 62438 65560 68838 72280 75894 Total Supply 18540 32040 53940 61440 97440 Gap 43898* 33520 14898 10840 8454

Table VI & VII

Presently the gap is being bridged by using margarine / fats made by crude method and / or slightly by butter.

THE PROPOSED SCHEME The proposed scheme envisages to producing industrial margarine / shortening and by products. THE PROPOSED PRODUCT MIX: i. ii. Main Products: By-Products: Industrial Margarine/Shortening 18000 tons/annum Liquid Soap Chain Lubricants Carbon Di-Oxide 1800 tons/annum 3500 150

THE PROPOSED MARKETING MIX: The intended marketing mix of M/S. MARGARINE would be as follows: 1. The Product:

The proposed product is industrial margarine/shortening which is used with different melting points by bakeries, confectioners, ice cream makers where as shortening is used by biscuit manufacturers. M/s. Lever Brothers are marketing their product in the brand name of Uni Puff/Master Puff. The brand name of Agro Processors product is Taqat, whereas Maza Industrial Fat is being marketed by M/s. M.H. Oil Mills.

- 23 2. PRICE:

BAS MARGARINE

The intended ex-factory price of 16 kgs. Carton would be Rs. 380/3. BY-PRODUCTS 1. 2. 3. 4. Liquid Soap Cain LubricantRs. Carbon Di-oxide Rs. 12000/- ton 14000/- ton Rs. 45000/- ton

PROMOTION

The samples of products shall be provided to the bakeries to the bakeries and other industrial endusers for test / use. 5. PLACE

M/S. MARGARINE proposed to appoint distributors in main cities of Pakistan especially in Karachi and other parts of Sindh. Manufacturer

Distributor

Direct Purchases CONCLUSION

Door to Door Delivery

From the foregoing analysis, the conclusion drawn that proposal of M/S. MARGARINE (*Pvt) Ltd., Nooriabad to setup an industrial margarine / shortening manufacturing unit would not face difficulty in marketing their product if they could produce good quality product and execute an efficient marketing / sales promotion strategy.

- 24 VI- FINANCIAL PROJECTIONS 1. PROFITABILITY

BAS MARGARINE

The projections of financial operation of he proposed project are given in Annex-VI. A summary is given below: Sales Revenue Gross Profit Operating Profit Net Profit before Tax Net Profit after Tax Ratios (%) Gross Profit to Sales Operating to Sales Pre-Tax Profit to Sales Return on Owners Equity Return on Capitalization 1st Yr. 222802 20988 15517 8393 8393 9.42 6.96 3.77 38.55 19.05 2nd Yr. 257553 23738 17592 8761 8761 9.22 6.86 3.40 31.86 20.58 3rd Yr. 281120 25868 19159 9701 9701 9.20 6.82 3.45 28.64 21.21 4th Yr. 304561 28491 21214 11109 11109 9.35 6.96 3.65 26.81 22.13

The ratios of gross profit to sales, operating profit to sales and pre-tax profit to sales expected to be achieved are considered satisfactory from profitability point of view. 2. DEBT SERVICE COVERAGE

The debt servicing capabilities o the project for the first four years would be as follows: 1st Yr. SOURCES Net Profit after Tax Add: Depreciation and Amortization Financial Charges Total Liquidation of: IDBP L/C Assistance Financial Expenses Total Debt Service Coverage (Times) 8393 3795 6683 18870 1747 6683 8430 2.24 2nd Yr. 8761 3795 8371 20926 3494 8371 11865 1.76 3rd Yr. 89701 3795 8947 22443 3494 8947 12441 1.80 4th Yr. 11109 3795 9520 24424 3494 9520 13014 1.88

Debt service coverage as indicated above reflects availability of a satisfactory safety margin.

- 25 3. BREAK EVEN ANALYSIS

BAS MARGARINE

The project will be break even at a sales value of Rs. 206.693 million requiring capacity utilization of 44 per cent (Annex-XIV). This can be achieved with the normal production efficiency. 4. CASH FLOW

Internally generated funds are expected to be sufficient enough to service IDBPs loan and pay 15% dividend from the first year of operation to be share holders. The company would be maintaining satisfactory liquidity level after paying the above mentioned dividend (Annex-XII) 5. INTERNAL FINANCIAL RATE OF RETURN (IFRR)

The IFRR of the proposed project works out to be 43% (Please refer to Annex-XV). IFRR is high due to high turn over as compared to capital cost of the project. 6. SENSITIVITY ANALYSIS

Sensitivity analysis at Annex-XVIII of the project under different assumptions has been carried out. The project is highly sensitive to decrease in selling prices and increase in raw material cost. At present circumstances, the prices are not likely to decline. Increase in raw material prices is reflected in the end products price. The recent increase of Rs. 0.50 Kg and Rs. 1 kg in the prices of palm oil and soyabean oil has resulted in increase of margarine price from Rs. 21.50 kg to 24.60 kg.

- 26 VII- ECONOMIC EVALUATIONS 1. CONTRIBUTION TO GNP

BAS MARGARINE

The project after implementation would contribute to the GNP of the country as under Value of Production Less: Intermediate Inputs Raw Material Stores and Spares Water, Power and Fuel Repairs & Maintenance Other Mfg. Overheads Rent, Rates, Taxes & Ins. Postage, Teleph, Telgm, Elec Stationary & Printing Traveling & Conveyance Sales Tax / Excise Duty Advertising & Selling Exp. Legal & Entertainment Total Intermediate Inputs: Value Added 1st Yr. 222802 166293 287 7546 359 3568 100 300 200 500 27830 2228 100 209332 13470 2nd Yr. 257553 182922 430 8127 539 3923 125 350 250 600 32194 2576 125 232161 25393 3rd Yr. 281120 199552 501 8708 628 4275 150 400 300 700 35140 2811 150 253315 27804 4th Yr. 304651 126181 573 288 718 4626 175 450 350 800 38081 3047 175 274465 30186

2. VALUE ADDED FOR WORKER: The value added per worker amounts to Rs. 130620 in the firs year, Rs. 195330 in the second year, Rs. 213884 in the third year, Rs. 232200 in the fourth year and subsequent years of operations. 3. EMPLOYMENT OPPORTUNITIES The project would create new employment opportunities for the 1230 persons in different fields and categories. 4. CAPITAL EMPLOYMENT RATIO The fixed capital cost per person to be employed works out of Rs. 0.300 million. 5. INTERNAL ECONOMIC RATE OF RETURN (IERR) The IERR of the project works out to 31.68% as calculated in Annex-XVI. The IERR is quite satisfactory. 6. DOMESTIC SOT PER DOLLAR SAVED (BRUNOS RATIO) Burnos ratio comes to Rs. 25.74 US$ saved as calculate din Annex-XVII. 7. EFFECTIVE RATE OF PROTECTION The effective rate of protection for the project works out to 67% in the forth year of operation i.e. 1997 (Annex-XIX). The ERP is on higher side because government has recently enhanced regularity duty on edible oil whereas prices of these products in international market has slightly increased.

- 27 VIII- CONCUSSION AND RECOMMENDATION

BAS MARGARINE

Having appraised and evaluated, the project is considered technically, economically and financially viable and suitable for IDBP financing. It is, therefore, recommended that a local currency assistances of Rs. 27.950 million Rs. 24.150 million under SBP Scheme for locally manufactured machinery (LMM) and Rs. 3.800 million from Banks own recourses) may be sanctioned to M/S. MARGARINE (Pvt) Ltd., at resale price of Rs. 71.406 million (Net rebate Rs. 44.502 million) on the Banks standard terms and the following conditions: 1. SCHEDULE OF PAYMENTS OF RESALE PRICE Rs. 24.150 million under SBP Scheme for LMM

Resale price of Rs. 63.322 million to be paid by the customer in 16 equal half yearly installments of Rs. 6.958 million each (rebated installment of Rs. 2.322 million each will be accepted if paid within due date): The resale price and schedule of payments are subject to change as may be determined by IDBP as soon as practicable or when purchase price has been paid by IDBP. Rs. 3.800 million from banks Own Resources Resale price of Rs. 8.804 million to be paid by the customer in 20 equal quarterly installments of Rs. 0.404 million each. In case if payment is made on or before due date the amount of installment shall stand reduced to Rs. 0.368 million. The resale price and schedule of payments are subject to change as may be determined by IDBP as soon as practicable or when purchase price has been paid by IDBP. 2. i. ii. iii. iv. v. BANKS CHARGES Commitment charges @ percent of the 1st quarter and @ percent per quarter for the subsequent quarters on the undisguised portion of financial assistance. Charges for IDBPs interim finance as per rates in fore, presently @ 22 paisas per rupee per annum (without rebate). Documentation charges @ % of financial assistance. Monitoring fee @ 0.125% per annum on the outstanding liability amount. Other charges as per rates inforce.

- 28 3. DISBURSEMENT SCHEDULE

BAS MARGARINE

Local currency assistance of Rs. 27.950 million (Rs. 24.150 million under SBP schema for LMM and Rs. 3.800 million form banks Own Resources) shall be disbursed in installment or in full to the local machinery supplier for purchase of locally manufactured machinery in accordance with the Banks procurement procedure for purchase of locally manufactured machinery. The disbursement will be made keeping in view security coverage of 1.5 times. 4. a. DURATION AND REPAYMENT For LMM scheme Financial assistance under SBP scheme for LMM to be repaid in 10 years including a grace period of 2 years in 16 biannual installments. First installment of resale price shall be payable by the company on March 31 or September, 30 whichever date falls first after 2 years from the date of disbursement of 1st installment of IDBPs financial assistance. For Banks Own Resources Financial assistance from Banks Own Resources to be repaid in 7 years including a grace period of 2 years in 20 quarterly installments. First installment of resale price shall e payable installments. First installment of resale price shall be payable by the company on March 31, June, 30, September 30 and December 31 whichever date falls first after 2 years from the date of disbursement of 1st installment of IDBPs financial assistance SECURITY

b.

5.

Before signing the financing agreement / disbursement of letter of funds the company shall: i. Transfer the title deeds of land measuring 4 acres located at Nooriabld Industrial Estate, District Dadu, Sindh in the name of the company and the same will be mortgaged with the Bank. The cost of land including development charges is estimated at Rs. 0.600 million. Execute an agreement to mortgage / hypothecate the existing and future fixed assets of the company value estimated as under:

ii.

- 29 -

BAS MARGARINE

At the time of Future Total on Signing of the Assts complete financing Agre ion ement (existing assets) A. i. ii. iii. B. i. ii. IMMOVEABLE ASSETS Land Building Machinery (installed cost) MOVEABLE ASSETS (Hypothecation) Furniture & Fixture Vehicles Total 0.600 3.522 2.116 0.600 5.6983

4.122

0.500 1.500 34.392

0.500 1.500 38.514

(Valid mortgage / hypothecation on the above assets would be created on completion of the project). iii. Personal guarantee of the sponsoring directors of the company covering the entire loan liability. (in case of local currency financial assistance amount of financial assistance plus mark up thereon) till its repayment in full: Provide outside collateral security comprising of urban property to the extend of 25% of financial assistance. CAPITAL STRUCTURE Before signing of financing agreement / disbursement of local currency assistance, the company shall: incorporate a private limited company under the name ad style of M/S. MARGARINE (Pvt) Ltd., and submit certificate of incorporation for approval of the bank: Raise its paid up capital to Rs. 5.000 million and undertake to raise it to Rs. 19.000 million by completion of he project: Advance interest free directors loan amounting to Rs. 0.650 million which will not be repaid ring the currency of IDBP assistance. Submit an undertaking from the directors of the company to the effect hat they shall provide any additional amount that may be required for implementation of the project in case of over run in expenditure in order to complete the project

iv. 6.

i. ii. iii. iv.

- 30 7. SPECIAL CONDITION

BAS MARGARINE

The financial assistance shall further be governed as under: 1. a. b. c. ii. Effectiveness of the sanction will subject to: Satisfactory credit repot in respect of the sponsors of the captioned concern: Deposit of 10% sponsors equity. NC from NDFC for creation of IDBP first share on plot and existing building of the project. The sponsors will submit an irrevocable stamped undertaking acceptable to IDBP to restrict to the production of designated items only. In case of default the Bank may withdraw the financial assistance / loan sanctioned to them by the Bank together with all dues / over dues under Section 38 of the IDBP Ordinance; The sponsors will enter into technical know-how agreement with machinery suppliers to the satisfaction of IDBP regarding margarine plant to ensure desired operating result: Financial assistance to be provided / sanctioned by the Bank under SBP Schemed for LMM shall automatically be reduced if the prices of machinery finally selected by the bank are found on lower side. Also funds under the scheme shall be provided only for the machinery / equipments eligible. Disbursement of local currency assistance of Rs. 24.150 million under SBP Scheme for LMM will be made only after funds from Banks Own Resources to the turn of Rs. 3.800 million have been allocated by IDBP for this specific project; The financial assistance of local currency assistance to the extent of Rs. 27.950 million (Rs. 24.150 million under SBP Scheme for LMM and Rs. 3.800 million from Banks Own Resources) is subject to availability of funds with IDBP. The local currency assistance of Rs. 27.950 million )(Rs. 24.150 million under SBP scheme for LMM and Rs. 3.800 million from Banks Own Resources) will be subject to such additional terms and conditions which the SBP have specified or may specify from time to time in respect of their scheme.

iii. iv.

v.

vi.

vii.

The IDBP loan / financial assistance shall further be governed by the all other general terms and conditions of sanction.

ANNEX-I M/S. BSA MARGARINE (PVT) LTD. DERAILS OF EXISTING & PROPOSED BUILDING S.# Description Covered Area (Sq.mt)
Existing 1. Refinery section (2 floor) including R.M. Godown & Operational Staff Room at 1st Floor Machinery Hall (Margarine lant & Filling Section) Liquid Soap & Chain Lubricant Gas Cracking & Chain Machinery Workshop / Laboratory Finished Goods Godown Boiler House Labour Dornantry Sub-Station / H.T. Panel Office Building Pump Room Under Ground Water Tank Overhead Water Tank Misc. Civil work including internal Road, Boundary Wall, Lime Water pond etc. 371 (G.F.) 297 148 167 223 78 48 74 18 225000 45000 L/S Proposed 371 (F.F) 186 250 Total 742

Rate/agm (Rs.)
Existing 1800 Proposed 2500

Appraised cost (Rs. In 000)

Existing 668 Proposed 927 Total 1595

2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

297 148 167 223 78 186 250 48 78 18

1800 1800 1800 1800 1800 1800 1800 1800 Rs. 3/Lt Rs. 3/Lt

2000 2200 -

535 266 301 140 401 86 133 32 675 135 150

372 550 -

535 266 301 140 401 372 550 86 133 32 675 135 225

L/S

L/S

75

Total Contingencies @ 10% Grand Total :

3522 3522

1924 1925 2116

5446 192 5638

Note: 1. Construction of Existing building RCC with Pre-fabricated roof slabs of approx. 6 ft open. 2. Covered area of Existing Building AS per Drawing. 3. Proposed refinery section to be constructed on Existing Ground Floor Section having covered area of 371 sq. m. roof slabe to be removed and with the additional 4/5 new columns, two floors refinery section would be constructed to accommodate refinery machinery. Height of Ground floor would be 22 feet and first floor 40 feet. 4. Height of existing building as per drawing is 14 feet. 5. Estimation of existing factory building reportedly constructed running 1996-97 has been worked out keeping in view the type and quality of construction. 6. construction of boiler house would be asbestos sheets over steel trusses. 7. Ground Floor, First Floor ANNEX-I

M/S. BSA MARGARINE (PVT) LTD. LIST OF LOCALLY MANUFACTURED MACHINERY S.No. Description Capacity 500000 Lit 10800 Lit Qty. 4 Nos. 1 No. Unit Price 350 100 Total Cost 1400 100

OIL STORAGE & HANDLING 1. Crude Oil Storage Tanks (26D x 35H), Wt. Approx. 24.5 T. 2. Decanting Tank (16 x 6 x 6) rectangular with 3 chamber, Wt. 2.9 T Crude oil pumps, Centrifugal type with 15 Hp Motor, starters etc.

3.

30 ft 3/min

3 Nos.

100

300

PRE-REFEINING SECTION (PRE-NEUTRALIZATION & BLEACHING) 1. Neutralizing Vessel (8Dx12H) wt. 8.95 T 15000 Lit 2 Nos. 300 Complete with 10 Hp motor, M.S. Construction with top open & conial bottom, speed reducing gear box, agitation system, chemical spraying system etc. 2. 3. Soap Lye Tank (5Dx5H) Wt. 0.5 T Soap ye Pumps (Centrifugal type with 2 Hp motors etc. )( Bleaching *& Drying vessles (8D x 12H) Wt. 10.5 T Complete with 10 Hp motor, M.S. Cylinderical Construction with dished top and bottom ends, speed traducing gears, steam ejector vacuum system etc. Preparation Vessel (chemical spraying system (5Dx5H). Filter Press Pumps with 15 Hp Motor 200 Lt 5 ft 3/min 15000 Lit 1 No. 1 No. 1 No. 25 25 380

600

25 25 380

4.

5. 6.

2250 lit 7 ft 3/min

1 N. 2 Nos.

25 50

25 100

7.

Filter (Press)

1 N.

150

150

(800mm x 800 mm x 32 plates) cast steel consecution of plates & M.S. Construction of frame with trays, cock, valves etc. 8. Intermediate Oil Storage Tanks Size: (8 x 8 x 8 x 6 mm) Wt. 1 T (M.S. Welded Construction with steam coils & fittings) Bleached Oil Pumps, Centrifugal, Complete with 7.5 Hp Motor, Starter etc. Lye Preparation Vessel Size: (8x4x4), Wt. 0.5 T Caustic Lye Pump, Compete with 2 Hp Motor, Starter etc. Measuring Vessel for caustic lye (5Dx5Hx6mm) WT. 450 Kg. Measuring vessel for Hot Water 5Dx5Hx6mm) WT. 450 kg Vacuum system ejector, M.S. welded concoction with nozzle, top dished end, bottom cone equipped with steam trap, pressure reducing valve and catch pot. Vacuum Receiver Size: (325mmx400mmx3mm) Barometric Condenser Size : (325mmx1500mm) Tube bundle in shell with fittings etc. Automatic Air Compressor plant, 450 Psi piston type complete with 7.5 H motor and receiver etc. (to blow off spent fullers eath in filter press) Oil, Soap, Water separation Tank, Size: (13x4x4x5mm) M.S. Construction with 3 chamber at different level to decant oil, soap and water 12000 Lt 3 Nos. 50 150

9.

20 fit 3/min

2 No.s

50

100

10. 11. 12. 13. 14.

3500 Lit 5 ft 3 / min 2500 Lit 2500 Lit 2.5 kg/sec.

1 No. 1 No. 1 No. 1 No. 1 No.

25 25 25 25 25

25 25 25 25 25

15. 16.

2 Nos. 2 Nos.

12.50 12.50

25 25

17.

87.3 ft 3 per min

2 Nos.

100

200

18.

5500 Lit

1 No.

50

50

19.

Piping, valves and fittings Sub Total

1 Lot

200 2180

HYDROGENATION SECTION 1. Hydrogenation Autoclave (6-10Dx16-5H), Wt. 9.5 T complete with 10 Hp motor M.S. Consecution with top and bottom dished ends having light and sight glasses etc. speed reducing gear box, hydrogen spraying system, pressure reducing system, heating and cooling coil and agitation system 2. 3. Filter press pump complete with 15 Hp motor Filter press (800mmx800mmx32 plates) cast steel construction of plates and M.S. construction of frame with trays, cock, valves etc. Oil cooler / heat exchanger Size: (30000x2250mm) with 10 Hp motor, gears etc. M.S. construction with top and bottom dished ends design based on 1:1 ratio equipped with 10 HP motor, gears etc. Hydro generated Oil pump compete with 120 Hp motor Hydro generated oil storage tanks (M.S. tanks with steam coil and fittings). Catalyst Mixing Tanks Size : (1200Dx1100mmH) complete with 3 Hp motor M.S. Cylindrical construction top open with flat bottom, gears, steam coils, agitation system etc. Pressure reducing system M.S. construction cylinder cal shape with for reducing valves and gauges (to be used in autoclave)

15000 lit

350

700

7 ft 3/min

1 No. 1 No.

50 150

50 150

4.

1 No.

350

350

5. 6.

70 ft 3/min 12000 lit

1 No. 2 Nos.

50 50

50 100

7.

1500 Lit

2 Nos.

25

50

8.

2 Nos.

12.5

25

9.

Steam ejector system M.S. welded construction cylindrical shape with nozzle, top dished end, bottom core equipped with steam trap, pressure reducing valve and catch pot Vacuum recover M.S. consecution with top and bottom dished end equipped with 4 half chamber inversely located. Fatty acid separators Size (400Dx750mmH) M.S. Cylindrical Construction with plates and tubes arrangements. Hydrogen Gas drying towers (700Dx2500mmH) M.S. Cylindrical Construction with tubes bundles to remove moisture Return gas scrubbers (600x3500mm) M.S. Cylindrical construction with plates and retaining valves, fittings. Sub Total

2 Nos.

25

50

10.

2 No.s

25

50

11.

2 Nos.

25

50

12.

2 Nos.

25

50

13.

2 Nos.

20

40

1715

POST REFINING SECTION (POST NEUTRALIZATION AND BLEACHING 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Post Neutralizer Post Bleacher Soap lye tank Soap lye pump Preparation vessel Filter press Filter press pump Intermediate storage tanks Measuring vessel for Lye Measuring tank for hot water 7 ft 3/min 12000 lit 2500 lit 2500 lit 15000 lit 15000 lit 2500 lit 5 ft 3/min 2250 lit 1 No. 1 No. 1 No 1 No 1 No. 1 No 1 No 1 No. 1 No 2 Nos. 300 380 25 25 25 150 50 50 25 12.5 300 380 25 25 25 150 50 50 2 25

11. 12. 13. 14. 15. 16. 17. 18.

Vacuum receiver Barometric condenser Vacuum steam ejector Deodorizer vessel Size: (3200mmx3200mm) Deodorizer Vessel Size: (3200mmx3200mm) Height vacuum equipment, high booseter/3 steam jet Condensate receiver Catch pot (1250mmDx1800mmH) M.S. cylindrical construction with top dished ends and conical bottom Oil Cooler / Heat Exchanger (10Dx10H) Filter press pump complete with motor etc Filter press for polishing (final filter) Finished oil tanks Size : (8x8x8) Sub Total 7 ft 12000 lit 12000 lit 2.5 kg/sec 15 ft 3/min 15000 lit 760 mm Hg. 50 ft 3/min

1 No 1 No. 1 No. 2 Nos. 2 Nos. 2 Nos. 2 NOs. 2 Nos.

12.5 12.5 25 50 400 200 50 12.5

12.5 12.5 25 100 800 400 100 25

19. 20. 21. 22.

1 No. 1 No. 2 Nos. 2 Nos.

350 50 100 50

350 50 100 100 3130

BLENDING SECTION 1. 2. Blending tank charging pump complete with 2 Hp motor etc. Blending tanks M.S. Cylindrical construction complete with agitation system Filling tanks M.S. Cylindrical construction Hot Water circulating pump (2x1-1/2) 2 Nos. 2 Nos. 25 12.5 50 25

3.

2 Nos.

50

100

4.

1 No.

25

25

5.

Temperature indicator (Blending/filling tanks) Sub Total

1 No.

5 205

MARGARINE PLANT 1. Service tanks, clinderical construction with agitation system, steam coil. (All stainless steel material) Votator mixer, three shell combined structure with high speed blades driven by 5 Hp motor, valves, fittings and mountings etc. (al stainless steel material). Pinners / polisher two shell structure with shaft and pins. Driven by 5 Hp motor, valves, fittings and mountings etc. all stainless steel material Chilling / cooling sysem R-22 system), complete with 30 HP motor, condenser filter, etc. 15 tons 1 No. 800 800 2000 lit 2 Nos. 150 300

2.

1200 kg/her

1 No.

1000

1000

3.

4.

LIQUID SOAP AND CHAIN LUBRICANT SECTION 1. Evaoporaors, M.S. construction with top and bottom dished ends with tube bundles and separating plates. Emulsion converter reactor compete with 10 HP motor, agitator, steam coil, vacuum system etc. M.S. cylindrical construction, top dished ends and bottom cone. Vacuum system (main), three stage vacuum system. M.S. construction with vacuum venture nozzle system, water drain column, catch pot etc. Installation pipes, valves and fittings 10000 lit 2 Nos. 300 600

2.

2 Nos.

50

900

3.

760 mm Hg/ 30 Hg

2 Nos.

350

700

4.

1 Lot

300

Sub Total HYDROGEN GAS GENERATION SYSTEM 1. Natural gas cracking plant, comprised of 1 No. reformer / cracker & 2 shift convertor, mono ethanol amine (MEA) tower, reboiler, pressure balancer etc. to crack and reform the methane and steam molecule to produce hydrogen and carbon dioxide gas as final product, M.S. construction is involved with electronic control process equipment, pumps pipelines fittings and gauges etc. Gas analyzing Kit Hydrogen and Oxygen gas flow meter (imported). Low pressure Hydrogen Gas holder Outer shell dia 18 Inner shell dia 15 and height 12ft M.S. Construction with double shell structure. High pressure hydrogen gas holder Outer shell dia 18 Inner shell dia 15 and Height 12 ft. Special steel alloy Cylindrical structure with pressure control devices. Hydrogen Gas compressors Two stage, three cylinder oil free, driven by 25 HP motor water cooled (imported) 5250 ft 3/hr 2 Nos. 150 5250 ft3 150m 3/hr 800 kg. of CO2 as byproduct (98% pure H2) 1 No. 4235

2500

4235

2. 3. 4.

1 set 1 set 1 No.

10 40 200

10 40 200

5.

6.

150

Sub Total UTILITIES: 1. Pacakge type (dual fired) Boiler, HMC make, 250 Psi, fire tube, compete in all respect with necessary mounting and fitting. 12000 lbs/hr 1 No. 3500

5258

3500

2. 3. 4.

Feed water tank (1200mmxDx5000mmH) Condencate tank Size: (1100x2200x1800mm) Softening (water) plant Size: (2500Dx500mmH) and (350Dx1500mH) salt dissolving tank and ion exchange vessel etc. Sub Total

2700 lit 4000 lit 800 lit and 150 lit twin towers tanks

1 No. 1 No. 1 No.

30 25 100

30 25 100

3655

ELECTRICAL EQUIPMENT 1. 2. 3. 4. 5. H.T. Switch Board Electric taransfomer L.T. Panel (10 circuits) Distribution Boards Cables and joints 1000 KVA 1000 KVA 1 No. 1 No. 1 No. 15 Nos. L.S. 430 640 450 16 16 430 640 450 240 175

WORKSHOP EQUIPMENTS
1. 2. 3. 4. 5. 6. 7. Lathe Drill machine Bench grinder Welding transformer Gas Welding Set Hard Grinder (Hitachi) Workshop Tools 450 A,mp. 6-6 (bench type) 1` No. 1 N. 1 No. 1 No. 1 set 1 No. 1 Lot 55 20 8 19 14 23 55 20 8 19 14 23 12 151

Sub Total ELECTRICAL GENERATOR 1. Stand by Diesel generating set with Auto Main failure panel, with necessary mounting and fittings, Sub Total 320 KVA 1 No. 1594

1594

1594

Grand Total BASIS 1. 2. 3. 4. Quotation from M/s. Technegg., 345 Bhayani Shopping Centre Block M, Nazimabad, Karachi

28650

Quotation from Johnson and Phillip for H.T. Switch Board and Electrical Transformer. Quotation from Sindh Engineering for workshop equipment and L.T. Panel etc. Cost of Diesel Generating set is IDBPs Estimates

NOTE: Bank shall finance Rs. 24.150 million under LMM and 3.800 million under BOR. Items (Marked as*) such as crude oil storage tanks, temperature indicators, gas analyzing kit, gas flow meters, hydrogen gas compressors and workshop equipment wroth Rs. 1.906 million are not eligible under LMM financing. Moreover, items such as chilling system of margarine plant, boiler and air compressor containing imported components to the extent of Rs. 1.000 million shall not be considered under LMM. All these and other items including standby diesel generating sets shall be financed from BOR. The balance cost of machinery worth Rs. 0.700 million shall be financed by sponsors from their own resources.

ANNEX-III M/S. BSA MARGARINE (PVT) LTD. CONSTRUCTION SCHEDULE S.No. 1. 2. 3. 4. 5. 6. 7. 8. Land Placement of Plant /Machinery Order Modification / Expansion of Existing Factory Building Started Modification / Expansion of Existing Factor Building Completed Fabrication / Arrival of Complete Machinery at SITE Machinery Installation Completed Unforeseen Delays Commercial Production Started PARTICULARS MONTH AND YEAR Already March, March, June, September December February March Existed 1993 1993 1993 1993 1993 1994 1994

ANNEX-IV M/S. BSA MARGARINE (PVT) LTD. APPRAISED COST OF THE PROJECT S. No. 1. 2. 3. PARTICULARS COST ALREADY METD 600 522 COST TO BE MET TOTAL APPRAISED COST 3600 5638 28650 287 1146 40 143 30276 1500 500 552 39066 8534 47600

4. 5. 6. 7.

Land Building Equipment & Machinery i. Local Machinery ii. Freight / Transpiration iii. Installation iv. Auxiliary Equipment v. Contingencies Machinery Cost Vehicles Furniture / fixture Pre-operating Expenses Total Fixed Cost Net initial working capital Total Cost

2116 28650 287 1146 50 143 30276 1500 500 552 34944 8534 43478

4122 4122

ANNEX-V M/S. BSA MARGARINE (PVT) LTD. NET INITIAL WORKING CAPITAL Current Assets Raw Material Imported Local Working in Process Finish Gods Stores and Spares Debtors Cash Total Current Liabilities Commercial Bank Borrow Estimated 70.00% Creditors 30 days Total Current Liabilities Net Initial N. Capital Tied-up Period 60 Days 30 Days 1 Day 15 Days 180 Days 15 Days 0 Yr. 1 32164 547 710 10622 172 11140 759 56115 Yr. 2 35380 602 785 12306 258 12878 800 63009 Yr. 3 38597 657 855 13434 301 14056 825 68724 Yr. 4 41813 712 924 14535 344 15233 850 74410

30951 16629 47580 8534

34532 18292 52824 10185

37690 19955 57646 11079

40829 21618 62447 11963

ANNEX-VI M/S. BSA MARGARINE (PVT) LTD. FORECAST INCOME STATEMENT Year of Operations Sales Cost of Goods Sold Gross profit Admin. General and Selling Exp. Operating Profit Financial expenses Profit B/F workers fund Workers participation Funds @ 5.00% Net Profit B/F Tax Income Tax Net Profit A/F Tax Dividend % Dividend Retained Earnings input Yr. 1 222802 201814 20988 5470 15517 6683 8834 442 8393 0 9393 15.00% 2850 5543 Yr. 2 257553 233815 23738 6146 17592 8371 9222 461 8761 0 8761 15.00% 2850 5911 Yr. 3 281120 255252 25868 6709 19159 8947 10212 511 9701 0 9701 15.00% 2850 6851 Yr. 4 304651 27616 286161 7276 21214 9520 11694 585 11109 0 1109 15.00% 2850 8259

Profitability Ratios (%) Gross Profit to Sales Operating to Sales Pre-Tax Profit to Sales Return on Owners Equity Return on capitalization Net Profit to Sales Return on Equity B/T

9.42 6.69 3.77 38.55 19.05 3.77 38.55

9.22 6.83 3.40 31.86 20.59 3.40 31.86

9.20 6.82 3.45 28.64 21.21 3.45 28.64

9.35 6.96 3.65 26.81 22.13 3.65 26.81

ANNEX-VII M/S. BSA MARGARINE (PVT) LTD. SALES ESTIMATE Year of Operations Capicty Utilization Add Opening Stock of Working Process Total work in Process Less: Closing stock of Work in Process Total Production During The year Add Opening Stock of Finish Goods 15 Days Less: Closing stock of Finish Goods 15 Days Quantity Available for Sale Local Net Sales: Local Total Net Sale Yr. 1 50.00% 1 Day 10125 34 1 Day 10091 11134 12147 13159 11138 37 12150 41 13163 44 Yr. 2 5.00% 34 Yr. 3 60.00% 37 Yr. 4 65.00% 41

505 505 9587 9587 222802 222802 557 11082 11082 257553 257553

557 607 12096 12096 281120 281120

607 658 13109 13109 304651 304651

Assumptions and Explanation Remarks Operating Efficiency Op. Eff: 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 60.00% 60.00% 60.00% 60.00% Margarine 3 300 18000 18000 1 15 1 24625 16000 144794 65.00% 65.00% 65.00% 65.00% Liq. Soap 3 300 18000 18000 1 15 1 12500 8000 167379 Ch. Lub. 3 300 300 300 1 15 1 14000 10000 182694 CO2 Gas 3 300 150 150 1 15 1 4500 300 197987

Operation time (shifts/ days) Production period (days / annum) Rated capacity (meters) Net Production (Kgs) Work in Process (Days) Finish Goods Local Selling price (Rs. / Tones) Border Price (Rs / Tonne) Sales at Boarder Price (Year 1 to 5)

ANNEX-VIII M/S. BSA MARGARINE (PVT) LTD. COST OF GOODS SOLD Year of Operations Capacity utilization Raw material consumed Factory wages & salaries Sales Tax Factory Overheads: Water, Power and Fuel Sprees and Stores Repair and Maintenance Depreciation Other manufacturing O/H Total Factor Overheads Total Work in Process Add Open. Stock of W.I.P. 1 Day Less Close. Stock of W.I.P. 1 Day Cost of Goods Manufactured Add Open, stock of Finish Goods 15 Days Total finish goods available for sale Less close. Stock of finish goods 15 days Cost of Goods Sold Yr. 1 50.00% 166293 3933 27850 7546 287 359 3309 3568 15070 213146 Yr. 2 55.00% 182922 4130 32194 8127 430 539 3309 3923 16328 235574 710 710 212436 212436 10622 201814 785 235499 10622 246121 12306 233815 Yr. 3 60.00% 199552 4336 35140 8708 501 628 3309 4275 17422 256449 785 855 256380 12036 268686 13434 25252 Yr. 4 65.00% 216181 4553 38081 9288 573 718 3309 4626 18515 277331 855 924 277261 13434 290695 14535 276161

ANNEX-VIII (Page-4) M/S. BSA MARGARINE (PVT) LTD. Spares & Stores Year of Operations % C&F + local Amount Repairs & Maintenance Year of Operations % Machinery Installed Cost & Building Other Manufacturing O/H Year of Operations @ of 0.02 Excise Duty Year of Operations Sales Tax 0.125 Total Sales Tax Utilities Power, Water Fuel & Others A-Power Connected Load (KW)= 1000 Maximum Demand (KW) = 800 a. Fixed Charges @ Rs. /KW/Month Fixed Charges = Rs. Variable Charges @ Rs. /KWH/ Hours Variable Charges = Rs. 145 1740 1.37 24 6313 Yr. 1 27850 27850 Yr. 2 32194 32194 Yr. 3 35140 35140 Yr. 4 38081 38081 Yr. 1 3568 Yr. 2 3923 Yr. 3 4275 Yr. 4 4626 Yr. 1 0.01 359 Yr. 2 0.015 539 Yr. 3 0.0175 628 Yr. 4 0.02 718 Yr. 1 0.01 287 Yr. 2 Yr. 3 Yr. 4

b.

ANNEX-VIII (Page-2) M/S. BSA MARGARINE (PVT) LTD. RAW MATERIAL REQUIREMENT AT 100% CAPACITY LOCAL RAW MATERIAL Items Caustic Soda Fuller Earth Activated Carbon Citric Acid (Food Grade) Corrugated Carton (16Kg) Polythene Bag Filter Cloth (Meter) Plastic Drum (50 Kg) No Potassium Hydroxide Misc. Chemicals / Additive RAW MATERIAL IMPORTED
Items Soyabean Oil RBD Palm Oil Nicle Catalyst Amnti-Oxidant Vitamin A&D Qty. 2940 12726 45 0.1 0.1 0.05 0.34 2 0.37 C&F 13600 11500 46000 550000 550000 500000 135000 27000 91000 C&F 80784 146349 20700 55 55 25 46 54 34

Ann Requirements Tonne 18 90 6 0.37 1125000 1125000 10000 40000 10 1

United Cost Rs/Ton 22150 25700 27000 90000 3.5 0.5 15 75 39000 50

Total Cost (Rs) 399 2313 162 33 3938 563 150 3000 390 0.05 10947

Custom Surcharge Sales Tax Other (Ex-Factory) Duty paid charges price cost at Ex-Factory
Input 3740 4255 0 0 00 0 0 0 0 Input 0 0 0 0 0 0 0 0 0 Input 0 0 0 0 0 0 0 0 0 Input 952 805 2300 27500 27500 25000 6750 1350 4550 18292 16560 48300 277500 27555 25025 6796 14040 4584 108654 210743 2174 58 3 1 2 3 2

Raw Material Local Raw Material Imported Raw Material Total Raw Material

Yr. 1

Yr. 2

Yr. 3

Yr. 4 7116

5474 5021 6568 160820176902192983209065 166293182922199552216181