Pre-Feasibility Study

LAUNDRY & DRY CLEANING

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6 Floor LDA Plaza Egerton Road, Lahore Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk Helpdesk@smeda.org.pk
th

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 Helpdesk-khi@smeda.org.pk

REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk

REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

8th Floor LDA Plaza Egerton Road, Lahore Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk
helpdesk@smeda.org.pk

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DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information he/she feels necessary for making an informed decision. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk

DOCUMENT CONTROL
Document No. Prepared by Approved by Revision Date Issued by PREF-78 SMEDA-Punjab Provincial Chief Punjab March, 2008 Library Officer

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1. 2. 3. 4.

INTRODUCTION TO SMEDA.................................................................................................... 4 PURPOSE OF THE DOCUMENT ............................................................................................... 4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 5 PROJECT PROFILE.................................................................................................................... 5 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 PROJECT BRIEF ....................................................................................................................... 5 OPPORTUNITY RATIONALE ...................................................................................................... 5 MARKET ENTRY TIMING ......................................................................................................... 5 PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 6 PROJECT CAPACITY AND RATIONALE ....................................................................................... 6 PROJECT INVESTMENT ............................................................................................................. 6 PROPOSED PRODUCT MIX ........................................................................................................ 6 RECOMMENDED PROJECT PARAMETERS ................................................................................... 7 PROPOSED LOCATION .............................................................................................................. 7

5.

SECTOR & INDUSTRY ANALYSIS........................................................................................... 7 5.1 SECTOR CHARACTERISTICS ..................................................................................................... 7

6.

MARKET INFORMATION ......................................................................................................... 8 6.1 6.2 MARKET POTENTIAL ............................................................................................................... 8 TARGET CUSTOMERS .............................................................................................................. 8

7.

PRODUCTION PROCESS........................................................................................................... 9 7.1 7.2 7.3 7.4 7.5 7.6 PRODUCTION PROCESS FLOW .................................................................................................. 9 RAW MATERIAL REQUIREMENT ............................................................................................. 10 REVENUES ............................................................................................................................ 10 TECHNOLOGY AND PROCESSES .............................................................................................. 11 MACHINERY REQUIREMENT .................................................................................................. 11 TOTAL MACHINE MAINTENANCE ........................................................................................... 12

8.

LAND & BUILDING REQUIREMENT .................................................................................... 13 8.1 8.2 8.3 8.4 LAND REQUIREMENT ............................................................................................................ 13 COVERED AREA REQUIREMENT ............................................................................................. 13 RECOMMENDED MODE .......................................................................................................... 13 SUITABLE LOCATION............................................................................................................. 13

9.

HUMAN RESOURCE REQUIREMENT................................................................................... 14 9.1 ESTIMATED TIME FOR PROJECT COMPLETION ........................................................................ 14 PROJECT COST.................................................................................................................... 15 FINANCIAL ANALYSIS ....................................................................................................... 16 PROJECTED INCOME STATEMENT ........................................................................................... 16 PROJECTED BALANCE SHEET ................................................................................................. 17 PROJECTED CASH FLOW STATEMENT ..................................................................................... 18 FINANCIAL ASSUMPTIONS ............................................................................................... 19

10. 11. 11.1 11.2 11.3 12.

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1. INTRODUCTION TO SMEDA Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program. Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved overhauling of the regulatory environment by taking into consideration other important aspects including finance, marketing, technology and human resource development. SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDAs areas of operation. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides help desk services as well as development of project specific documents. These documents consist of information required to make well researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in an effective way. 2. PURPOSE OF THE DOCUMENT The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, production, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself. This particular pre-feasibility is regarding Laundry & dry cleaning which comes under service sector. Before studying the whole document one must consider following critical aspects, which forms the basis of any investment decision.

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3. CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. These may include availability of resources, academic knowledge, past experience and specific managerial and technical skill set. Following are some of the key success factors for a Laundry and Dry Cleaning business: There should be warranty of clothes from damages and any type of color fading. Prime business location for proposed dry cleaning. Reasonable and competitive charges, positioned against competitors. On time delivery of clothes can leave good impression on the customers. Technical and efficient labor. There should be advertisement on local cable and banners. Existing dry cleaners are not advertising for their services.

4. PROJECT PROFILE 4.1 Project Brief The proposed project entails setting up a dry cleaning unit. It provides a range of services relating to domestic and commercial sector. These services range from washing, drying and pressing to more complex services like cleaning sensitive fabric, blankets, shirwanis and suits etc. 4.2 Opportunity Rationale There is an important factor for the entrepreneurs to set up a dry cleaning business in big cities of Pakistan due to the fact that it has become difficult for the people to wash all types of clothes in their houses i.e. Jackets, Sherwanis and other sensitive clothes. In Pakistan dry clean industry has grown over the years in small set-ups, with low quality services, and there is a need for better service oriented dry clean units. There is a lot of unfilled demand as can be judged from excessive rush at the existing dry clean setups. The business is service-oriented and carries large potential for profits due to its unique nature and uncontrolled spending of people, especially on marriages. The life style of the people in Pakistan has changed over the years. Now days, people are more conscious about their clothes and the need for dry cleaning has increased. 4.3 Market Entry Timing The suitable timings for starting this business would be in October because this type of business has a busy schedule in winters. In winter season, people normally wear worm clothes that are sweaters, jackets, suits etc. and it is also season of weddings. Due to these activities and wearing pattern the demand for dry cleaning increases compared to other seasons.

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4.4 Proposed Business Legal Status There are three main forms of business: Sole Proprietorship, Partnership and Company. An enterprise can be a proprietorship or a partnership and even it can be registered under company law with corporate law authority. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a private limited company. For getting information on the formation of type of firm/company, please refer to the website: www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html It is recommended that the proposed project be started as a sole proprietorship or a partnership because it requires less legal requirement. Similarly a lower income tax rate of tax is applicable to sole proprietorship than that of companies. 4.5 Project Capacity and Rationale The proposed dry clean will handle 60 kg of clothes per bath. Details of the project capacity are as follow: Table 4-1: Project Capacity Project Working hours per day Operating shift per day Working days per annum Maximum clothes dry clean per day Maximum weight of clothes per day Maximum weight of clothes per batch Hours utilized per batch (Laundry & Dry cleaning) 4.6 Project Investment Total project cost of the proposed laundry and dry cleaning unit is Rs. 4.603 million. This includes a fixed cost of Rs. 3.845 million and a working capital of Rs. 0.758 million. 4.7 Proposed Product Mix Following is the product mix of the proposed laundry & dry cleaning shop: Table 4-2: Proposed Product Mix Average Weight Average Number Average Weight per unit (kg) of units per day per day (kg) 0.35 80.00 28.00 2.00 15.00 30.00 0.18 60.00 10.80 2.25 15.00 33.75 0.05 25.00 1.25 0.45 40.00 18.00 2.25 10.00 22.50 Dry Cleaning 8 hours 1 300 days 395 units of clothes 320 Kg 60Kg 1.5 hours

Trousers Coats (all Kinds)(winter) Shirts Jackets/sweater Dupata Shalwar Qameez Blankets

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Bed sheets 0.35 80.00 28.00 Curtain 1.25 10.00 12.50 Others(avg.) 2.25 60.00 135.00 Total 11.38 395.00 320 The proposed business is affected through seasonal variations. Following table shows the seasonal distribution of different clothes/ fabric: Table 4-3 Seasonal Variations (100% Capacity) Spring 6,000 0 4,500 0 1,875 3,000 0 6,000 750 4,500 26,630 Summer 6,000 0 4,500 0 1,875 3,000 0 6,000 750 4,500 26,630 Autumn 6,000 0 4,500 0 1,875 3,000 0 6,000 750 4,500 26,630 Winter 6,000 4,500 4,500 4,500 1,875 3,000 3,000 Total 24,000 4,500 18,000 4,500 7,500 12,000 3,000 Description Trousers Coats (all Kinds)(winter) Shirts Jackets/sweater Dupta Shalwar Qameez Blankets Bed sheets Curtain Others(avg.) Total

6,000 24,000 750 3,000 4,500 18,000 38,630 118,500

4.8 Recommended Project Parameters Capacity 320 kgs per day Human Resource 9 Technology/Machinery Location Local Manufacturing See Table 8-3 Machinery Financial Summary IRR NPV Payback Period 43.50% Rs. 5.25 Million 2.72 years

Project Cost Rs. 4.603 Million 4.9 Proposed Location

Large public sector dry cleaners are concentrated in major cities of the country. Therefore, it is suggested that new dry cleaner should be opened up in areas mentioned in table 8-3, where there is little presence of existing dry cleaning facilities. 5. SECTOR & INDUSTRY ANALYSIS 5.1 Sector Characteristics The numbers of Dry Cleaners in Pakistan has increased at a slow pace over the last few years. The size of this sector is still growing. There are few large dry cleaners operating in commercial areas of Lahore like Mall Road, Defence and Main Market Gulberg. They have a created a monopolized situation with less competition. They are currently four to five large-scale dry cleaners in Lahore such as Pearl dry cleaners at Barkat Market and

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Mall Road, British Kwick dry cleaners at Mall Road, National dry cleaners at Wahdat Road and Faisal Town and PC dry cleaners. These dry cleaners are using machines of 60kg capacity in general. Similarly, few large Dry cleaners have also been operating in prime business locations in Rawalpindi, Multan, Karachi and Quetta. 6. MARKET INFORMATION 6.1 Market Potential From 1981 to 2008 the estimated population of Pakistan has grown from 85 million to 165 million making Pakistan the seventh most populous country in the world. This growth rate has increased the demand for various products and services, and one of the services is the proposed business. People in big cities are now inclined to use more sophisticated measures to cleaning their clothes. These people range from middle class to upper class. 6.2 Target Customers The major target market for the dry cleaning services will depend on the location where dry cleaning business is situated. The target customers for proposed business will not only be general public but also the commercial sector i.e. hostels, catering companies, film industry and hospitals.

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7. PRODUCTION PROCESS 7.1 Production Process Flow Liquid solvent and small amount of water are added to the machine. The machine then agitates clothes in a manner similar to a domestic washing machine to remove dirt, oil, and stains. Once clean, the clothes are then manually transferred to a dryer (laundry procedure), then pressed and shaped. Tagging

Sorting

Detergent Washing soap (Simple)

Washing

Bleach on white

Perclon cleaning

Dry Cleaning

Drying

Steam Pressing

Sorting & Pressing

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The above chart shows two processes separately that are laundry and dry cleaning. Each process is explained as below: a) Tagging :- The clothes are firstly tagged with a specific number, mentioned in the invoice given to customers. This procedure is used for identification of clothes once ready for collection by the customers. b) Sorting: - After tagging the clothes are arranged in different sets. Some people sort by color. Others sort by fabric type c) Washing: - The clothes are washed in a washing machine using detergent i.e. Surf, washing powder etc. This procedure is only followed when laundry service is required by the customers. d) Dry Cleaning: - In this process, the sensitive, expensive and only dry clean recommended clothes are cleaned. The chemical used to clean the clothes in this process is called Perclon (see raw material section for details). e) Drying :- The clothes washed in a laundry procedure are dried using dryers. f) Steam Pressing :- In this process both the clothes either washed or dry cleaned are pressed and shaped using steam press equipments. g) Packing :- Once pressed, the clothes are properly hanged and covered in the plastic wrap and then tagged so that it can be easily identified. 7.2 Raw Material Requirement Raw material used for the purpose of dry cleaning of clothes is Perclon chemical by ICI Pakistan. Perchloroethylene, or perclon, is the dominant chemical solvent used in dry cleaning. Perclon (Perchloroethylene) is a liquid chemical that consists of 40% alcohol, 50% kerosene oil and 10% liquid used to save the color fading of clothes. Perclon (Perchloroethylene) is a clear, colorless liquid and evaporates quickly. Bleach is also used especially for white clothes. Detergent is used for simple washing i.e. washing soap and surf. Following table shows the raw material costing: Table 7-1 Chemicals Raw Material Costing Quantity Required per day (Liter) 20 2 20 Rate per Liter 285 55 30 Total Cost per day 5,700 110 600 Total Cost Per Annum (Rs.) 1,689,000 31,000 178,000 1,898,000

Perc Lon Bleach Tar pine Oil Cost of chemicals 7.3 Revenues

The proposed product mix has been given in table 4-2. Sale prices and the number of clothes processed are listed in the table below: Table 7-2 Items Sale Price Number of units per year Rate (Rs.) Total sale (Rs.)

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Trousers Coats (all Kinds)(winter) Shirts Jackets/sweater Dupatta Shalwar Qameez Blankets Bed sheets Curtain Others(avg.) Total 7.4 Technology and Processes

24,000 4,500 18,000 4,500 7,500 12,000 3,000 24,000 3,000 18,000 118,500

80 170 40 150 40 75 230 100 170 80

1,920,000 765,000 720,000 675,000 300,000 900,000 690,000 2,400,000 510,000 1,440,000 10,320,000

There are several manufacturers of dry cleaning machines in Pakistan. In Lahore, there are approximately 5 to 6 manufactures of such machines i.e. Abdul Waheed at Canal Park Gulberg, Nirwana (Pvt) Ltd at Gulberg Arcade, Mushtaq Engineering Works at Township,786 Washing Lab & research Centre in Nishtar Colony Ferozpur road. Some others are in Bund Road, Qainchi and Model Town. These machines can also be imported from the following countries: Italy Germany China Japan However, the prices of imported machinery are 2 to 3 times higher than local machinery. In terms of quality of cleaning and capacity, there is no major difference between local and imported machinery. Therefore, it is advisable to acquire locally manufactured machinery rather than the imported machinery. 7.5 Machinery Requirement Total number of different machines required for the proposed project is as follows: Table 7-3: Machinery Requirement1 Description Washing Machine 42"*60" (60kg) Hydro Extractor 24*12 (25 kg) Dryer Machine 48*42 (60 kg) Dry Clean Machine 30*18 (10 kg) Steam Press (pangenetic) Form Finisher Recondition Cotton Press
1

No. 1 1 1 1 1 1 1

Cost Per Unit in Rs. 160,000 75,000 175,000 350,000 200,000 170,000 205,000

Total in Rs. 160,000 75,000 175,000 350,000 200,000 170,000 205,000

Bismillah Washing Lab.&Research Centre,347-262Ammar Block Nashtar Colony,Ferozpur Road Lahore.Tel : 042-5820669, Mob:0300-4251156

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Sleeves, Collar& Cuff Press Boiler Steam Ironing Vacuums Table Boiler With Compressor Sub Total Tax Others Generator Total Description Spilt unit Telephone sets Fire extinguish Total Description Fan Exhaust fan Water cooler Lighting appliances Total Description Wardrobes Sofa set 2 seater Counter Table Chairs Stole Suzuki Loader Total 7.6 Total Machine Maintenance No. 1 2 1

1 1 1

270,000 260,000 60,000

270,000 260,000 60,000 1,925,000 96,000

5% 1 11 480,000

480,000 2,501,000 Total(Rs.) 40,000 5,000 10,000 55,000 Total(Rs.) 7,400 1,200 8,500 6,000 23,100 Total(Rs.) 44,000 7,500 8,000 2,400 1,050 650,000 712,950

Table 7-4: Customer Dealing Office Equipment Requirement Cost Per Unit(Rs.) 40,000 2,500 10,000

Table 7-5: Other Equipment Requirement No. 4 1 1 1 Cost Per Unit(Rs.) 1,850 1,200 8,500 6,000

Table 7-6: Furniture, Fixture and vehicle Requirement No. 2(10ft*3ft) 1 1 3 3 1 Cost Per Unit(Rs.) 22,000 7,500 8,000 800 350 650,000

Routine inspection of machinery is essential for long life of the machinery. One lubricant is used twice in a year before peak season.

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8. LAND & BUILDING REQUIREMENT 8.1 Land Requirement For the recommended machinery, office, furniture & fixture and other equipments, approximately 1,125 square feet area is required. 8.2 Covered Area Requirement Following is the covered area requirement split into various sections. It is recommended that customer dealing office area should be separate from the machine and working area. Table 8-1 Covered Area Area 22.50 x 20 27 x 25 Total Area (sq. ft.) 450 675 1,125 Total Cost (Rs.) 405,000 405,000 810,000 Sections Customer Dealing Office Area Working & Machine Area Total Covered Area Table 8-2 Construction Cost Cost Customer Dealing Office Area Working and Machinery Area Total 8.3 Recommended Mode It is suggested that for proposed dry cleaning business, area should be rented. The rent cost for the business depends on the area where the business is situated. Starting the dry cleaning in a rented area would significantly reduce the initial capital cost of the project. A shop having 1,125 square feet area can be rented for approximately Rs. 50,000 per month in commercial areas of large cities of the country. 8.4 Suitable Location The dry cleaner is supposed to be in a location that is easily accessible and has considerable population concentration. Considering the spread of new residential area some of the suitable areas are: Table 8-3: Suitable Locations City Lahore Location Main Road Johar Town PCSIR Canal Area Valencia Wapda Town Punjab Co-operative Society Sabza Zar Area is Sq ft. 450 675 Cost per Sq ft. (Rs.) 900 6002

Construction rate for 11 feet high roof

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Islamabad

Karachi

Quetta

Faisalabad

Multan

Eden City Aabpara Market Super Market Blue Area Karachi Company Gulshan Iqbal Defence Phase 1 to 111 Tariq Road Sadar Federal B Area Cantonment Area Liaqat Bazar Saryab Road Satelite Town Jinnah Road Satelite Town Madina Town Railway Road Peoples Colony(D Ground) Satiana Road Cantonment Area New Multan

9. HUMAN RESOURCE REQUIREMENT For the proposed size of dry cleaning, following manpower is required: Table 9-1: HR Requirement Position Supervisor Technical staff (Machine operator) Machine Operator ,Helper Semi-skilled Worker Total Required 1 2 2 4 19 Salary Per Month(Rs.) 10,000 7,000 5,000 5,000 Salary Per Annum(Rs.) 120,000 168,000 120,000 240,000 648,000

9.1 Estimated Time For Project Completion 1. 20 days for completion of initial formalities, i.e., selection of suitable location and renting of building etc. 2. 1 month for sanction of loan (in case, if financing has to be arranged through bank). 3. 1.5 month for purchase of machinery and equipments. 4. 1 month for furnishing and staff appointments. 5. This project can take-off within 2 months, as some of the activities will be in progress simultaneously.
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10. PROJECT COST Table 10-1: Project Cost Description Plant & Machinery (Local) Pre-production expenses Furniture, fixture, equipment and vehicle Erection and Installation Mark-up during construction Contingencies Total fixed cost Initial working capital Project cost Table 10-2: Financing Plan Description Debt Equity Total % 50 50 Amount (in 000Rs.) 2,302,000 2,302,000 4,603,000 Total Cost (in 000Rs.) 2,501,000 145,000 791,000 125,000 161,000 122,000 3,845,000 758,000 4,603,000

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11. FINANCIAL ANALYSIS 11.1 Projected Income Statement

Rs.(000) YEAR CAPACITY UTILIZATION (%) Sales Less: cost of sales Gross profit Less: operating expenses Administrative (See Table 7a) 1 50 5,290 2,652 2,638 50 (See Table 8) 1,005 2 55 5,954 2,874 3,080 52 1,076 3 60 6,971 3,114 3,857 55 1,157 4 65 7,951 3,372 4,579 58 1,246 5 70 8,720 3,649 5,071 58 1,346 6 75 9,681 3,946 5,735 59 1,430 7 80 10,941 4,266 6,675 61 1,555 8 85 12,469 4,609 7,860 63 1,692 9 90 13,987 4,974 9,013 64 1,843 10 95 15,155 5,368 9,787 65 2,010

1,005 Operating profit Less: Financial expenses Profit Before Taxation Income Tax Net profit After Taxation 1,633 (See Table 9) 278 1,355 348 1,007

1,076 2,004 222 1,782 498 1,284

1,157 2,700 167 2,533 761 1,772

1,246 3,333 112 3,221 1,001 2,220

1,346 3,725 57 3,668 1,158 2,510

1,430 4,305 4,305 1,381 2,924

1,555 5,120 5,120 1,666 3,454

1,692 6,168 6,168 2,033 4,135

1,843 7,170 7,170 2,384 4,786

2,010 7,777 7,777 2,596 5,181

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11.2 Projected Balance Sheet

Rs.(000) YEAR CAPITAL & RESERVES: Share capital Retained earnings 0 1 2 3 4 5 6 7 8 9 10

2,302 -

2,302 1,007 3,309 1842 1,842 460 37 157 348 1,002 6,153

2,302 2,291 4,593 1382 1,382 460 38 165 498 1,161 7,136

2,302 4,063 6,365 922 922 460 43 174 761 1,438 8,725

2,302 6,283 8,585 464 464 460 48 183 1,001 1,692 10,741 Rs.(000)

2,302 8,793 11,095 4 4 460 54 192 1,158 1,864 12,963

2,302 11,717 14,019 4 4

2,302 15,171 17,473 4 4

2,302 19,306 21,608 4 4

2,302 24,092 26,394 4 4

2,302 29,273 31,575 4 4

2,302 LOANS AND DEFERRED LIABILITIES: Term Loan 2302 2,302 CURRENT LIABILITIES: Maturity (Term Loan) A/C Payable Accrued Exp. Tax Payable 4,604 FIXED ASSETS: Fixed Assets 3,700 3,700 Deffered Cost CURRENT ASSESTS: Securities Advance rent Store & Spares Material Stock A/C Receivable Cash/Bank 145

59 203 1,381 1,643 15,666 -

66 213 1,666 1,945 19,422 1,215 1,215

72 225 2,033 2,330 23,942 860 860

79 237 2,384 2,700 29,098 505 505

87 250 2,596 2,933 34,512 150 150

3,345 3,345 116

2,990 2,990 87

2,635 2,635 58

2,280 2,280 29

1,925 1,925 -

1,570 1,570

758 758 4,604

120 300 3 142 123 2,004 2,692 6,153

120 3 162 139 3,635 4,059 7,136

120 3 182 163 5,564 6,032 8,725

120 3 204 186 7,919 8,432 10,741

120 3 227 203 10,485 11,038 12,963

120 3 252 226 13,495 14,096 15,666

120 4 278 255 17,550 18,207 19,422

120 4 307 291 22,360 23,082 23,942

120 4 337 326 27,806 28,593 29,098

120 4 369 354 33,515 34,362 34,512

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11.3 Projected Cash Flow Statement

YEAR SOURCES: Profit before taxation Add: Depreciation Add: Amortization Add: interest OTHER SOURCES: Sponsor contribution as capital Term Loan Increase/(Dec) 2,302 2,302 4,604 1,355 355 29 278 2,017 542 2,559 1,782 355 29 222 2,388 159 2,547 2,533 355 29 167 3,084 277 3,361 3,221 355 29 112 3,717 254 3,971 3,668 355 29 57 4,109 172 4,281 4,305 355 4,660 239 4,899 5,120 355 5,475 302 5,777 6,168 355 6,523 385 6,908 7,170 355 7,525 370 7,895 7,777 355 8,132 233 8,365 0 1 2 3 4 5 6 7 8 9 10

APPLICATIONS: Fixed Assets Deffered Cost REPAYMENT OF: Term Loan Financial Expenses Taxes Paid Inc.c.Assets 3,845 SURPLUS (DEFICIT) BALANCE OPENING BALANCE CLOSING 759 759 278 348 688 1,314 1,245 759 2,004 460 222 498 (264) 916 1,631 2,004 3,635 460 167 761 44 1,432 1,929 3,635 5,564 460 112 1,001 43 1,616 2,355 5,564 7,919 3,700 145 -

460 57 1,158 40 1,715 2,566 7,919 10,485

460 1,381 48 1,889 3,010 10,485 13,495

1,666 56 1,722 4,055 13,495 17,550

2,033 65 2,098 4,810 17,550 22,360

2,384 65 2,449 5,446 22,360 27,806

2,596 60 2,656 5,709 27,806 33,515

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12. FINANCIAL ASSUMPTIONS Table 12-1 Operating Assumptions 118,500 1 8 300 5.33 1.50 50% 95% 5% 10%

Annual production capacity (No. of units) Operating Shift per day Operating hours per shift Days operational per year No. of Batches Hours consumed for one batch Table 12-2 Machinery Assumptions Initial year capacity Maximum capacity Annual capacity growth rate Depreciation rate on machinery (Straight Line Method) Table 12-3 Revenue Assumptions

Sales prices Sales price growth rate Table 12-4 Financial Assumptions Project life (Years) Debt Equity Interest rate on long term debt Debt tenure (Years) No. of installments in a year Amortization (years) Table 12-5 Cost of sales Assumptions Raw Material cost growth rate Wage and salaries growth rate Fringe Benefits Variable Charges growth rate Repair and maintenance (%age of cost of machinery) Repair and maintenance growth rate Insurance of Plant and Machinery Insurance of Vehicle Insurance of Stock Insurance of Stores and Spares Depreciation (straight line method)
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Industry norms 4-5% 10 50% 50% 10% 5 2 5 5% 5% 5% 5% 1% 5% 4.50% 3.00% 2.00% 5.00% 10%

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Table 12-6

Operating Assumptions 10% 35% 5% 3% 1% 5% 5% 7 7 30 30 30 Rs.109,000 6 months

Administrative expense growth rate Income Tax (percentage of Net Profit) Table 12-7 Contingency Expense Assumptions Erection and Installation Machinery Furniture and Fixture Pre-operating Expenses Vehicles Table 12-8 Cash Flow Assumptions Accounts Receivable in days Accounts Payable in days Raw Material Inventory (days) Stores and Spares Inventory (days) Salaries and other expenses payable Minimum Cash Required Advance rent

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