Pre-Feasibility Study

WOVEN POLYPROPYLENE SACKS

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6 Floor , LDA Plaza, Egerton Road, Lahore
Tel: (042) 111-111-456, Fax: (042) 6304926, 6370474
Helpdesk@smeda.org.pk
th

REGIONAL OFFICE
PUNJAB
8st Floor, LDA Plaza,
Egerton Road Lahore.
Tel: (042) 111-111-456
Fax: (042) 6304926, 6370474
helpdesk@smeda.org.pk

REGIONAL OFFICE
SINDH

REGIONAL OFFICE
NWFP

REGIONAL OFFICE
BALOCHISTAN

5TH Floor, Bahria

Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
Helpdesk-khi@smeda.org.pk

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

Bungalow No. 15-A

Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
helpdesk-qta@smeda.org.pk

May 2005

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. Therefore,
the content of this memorandum should not be relied upon for making any decision,
investment or otherwise. The prospective user of this memorandum is encouraged to
carry out his / her own due diligence and gather any information he/she considers
necessary for making an informed decision.

The content of the information memorandum does not bind SMEDA in any legal or other
form.

DOCUMENT CONTROL
Document No.

PREF-10

Revision

Prepared by

SMEDA-Sindh

Approved by

Provincial Chief - Sindh

Issue Date

May, 2005

Issued by

Library Officer

PURPOSE OF THE DOCUMENT ............................................................................................... 1

CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 1

PROJECT PROFILE.................................................................................................................... 1
3.1

OP
PORTUNITY RATIONALE ........................................................................................................................ 1
3.2
PROJECT BRIEF ....................................................................................................................... 2
3.3
MARKET ENTRY TIMING ......................................................................................................... 2
3.4
PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 2
3.5
PROJECT CAPACITY AND RATIONALE ....................................................................................... 2
3.6
PROJECT INVESTMENT ............................................................................................................. 2
3.7
PROPOSED PRODUCT MIX ........................................................................................................ 2
3.8
RECOMMENDED PROJECT PARAMETERS ................................................................................... 3
3.9
PROPOSED LOCATION .............................................................................................................. 3
3.10
KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ............................................................ 3
3.11
STRATEGIC RECOMMENDATIONS ............................................................................................. 3

SECTOR & INDUSTRY ANALYSIS........................................................................................... 3

4.1
SECTOR CHARACTERISTIC ....................................................................................................... 3
4.2
SUB SECTOR INFORMATION ..................................................................................................... 4
4.2.1
Sub sector Performance ..................................................................................................... 4
4.3
LEGAL ISSUES REGARDING INDUSTRY ..................................................................................... 5

MARKET INFORMATION ......................................................................................................... 5

5.1
5.2
5.3

PRODUCTION PROCESS........................................................................................................... 6
6.1
6.2
6.3
6.4
6.4.1
6.4.2
6.4.3
6.5
6.6
6.7
6.8

MARKET POTENTIAL ............................................................................................................... 5

TARGET CUSTOMERS .............................................................................................................. 6
TRADE STATISTICS .................................................................................................................. 6

RAW MATERIAL REQUIRED ..................................................................................................... 6

PRODUCT MIX OFFERED .......................................................................................................... 6
PRODUCTION PROCESS FLOW .................................................................................................. 7
TECHNOLOGY AND PROCESSES ................................................................................................ 8
The Polypropylene Tape Making Process ........................................................................... 8
The Polypropylene Fabric Weaving Process....................................................................... 8
Technology/Process Options.............................................................................................. 8
MACHINERY REQUIREMENT .................................................................................................... 8
MACHINE MAINTENANCE ........................................................................................................ 9
MACHINERY SUPPLIER ............................................................................................................ 9
PRODUCT/PROJECT STANDARDS AND COMPLIANCE ISSUES ...................................................... 9

LAND & BUILDING REQUIREMENT ...................................................................................... 9

7.1
7.2
7.3
7.4
7.5
7.6

LAND REQUIREMENT .............................................................................................................. 9

COVERED AREA REQUIREMENT ............................................................................................... 9
CONSTRUCTION COST ............................................................................................................. 9
RECOMMENDED MODE ............................................................................................................ 9
UTILITIES REQUIREMENT ........................................................................................................ 9
SUITABLE LOCATION............................................................................................................. 10

HUMAN RESOURCE REQUIREMENT................................................................................... 10

FINANCIAL ANALYSIS............................................................................................................ 10
9.1
9.2

CAPITAL COSTS .................................................................................................................... 10

WORKING CAPITAL ............................................................................................................... 11

10

KEY ASSUMPTIONS................................................................................................................. 11
10.1
10.2
10.3

11

REVENUE ASSUMPTIONS ....................................................................................................... 11

RAW MATERIAL EXPENSE ..................................................................................................... 11
INVENTORY ASSUMPTIONS .................................................................................................... 11

PROJECTED FINANCIAL STATEMENTS ................. ERROR! BOOKMARK NOT DEFINED.

11.1
11.2
11.3
11.4

PROJECTED INCOME STATEMENT ......................................................................................... 122

PROJECTED BALANCE SHEET ................................................................................................. 13
PROJECTED CASH FLOW STATEMENT ..................................................................................... 14
RATIO ANALYSIS .................................................................................................................. 15

Pre-Feasibility Study

Woven Polypropylene Sacks

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 polypropylene sacks which come under
plastics sector. Before studying the whole document one must consider following critical
aspects, which forms the basis of any investment decision.

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 include availability of
resources, academic knowledge, past experience and specific managerial and technical
skill set. At times evaluation and analysis of strengths, weaknesses, opportunities and
threats (SWOT) for a particular project serves the purpose of a basic tool in investment
decision making. The most critical factor in this project would be to generate sufficient
demand. The polypropylene sacks market is based on high volumes and low prices. If an
agreement or a contract with a few high volume buyers can be arranged the business is
most likely to succeed.
This pre-feasibility study tries to capture all the important factors that can play an
instrumental role in the success of a project but all factors should be evaluated by the
investor for their own specific project design with its unique parameters.

3
3. 1

PROJECT PROFILE
Opportunity Rationale

Older packaging methods like multi-ply paper sacks, cotton bags, jute bags, etc had been
used to cart away agricultural produce and industrial products. Due to the inadequacy of
these packaging methods to withstand various atmospheric conditions, much of the
produce spoils to the financial loss and frustration of the farmers and producers. A heavy
loss occurs to the economy through the non-utilization of the available agro-based raw
materials inputs, great fluctuation in prices of food stuff and industrial products etc is the
result.
Polypropylene sacks are suitable for almost all the products that have used paper sacks,
cotton bags, jute bags for packaging. These sacks are better suited for storage due to their
strength, durability and ability to withstand water and pests.
The use of polypropylene sacks is steadily increasing in the agricultural sector, with
increasing agricultural yields and related industries, the scope of the industry is
increasing.
The industry has a high employment to capital ratio i.e. 5 person per 10 ton of
production. The inputs required are also low, with one significant advantage being the

PREF-10/May, 2005/Rev1

Pre-Feasibility Study

Woven Polypropylene Sacks

lower cost of energy i.e. 1 unit of energy per unit of production as compared to 3.4 for
steel, 3.9 for zinc and 4.9 for aluminum.
3. 2

Project Brief

Polypropylene woven sacks manufacturing units import polypropylene granules, convert

it into tape yarn and this tape yarn is woven on an automatic loom to produce
polypropylene cloth. The average weight of a bag is 100 grams. Polypropylene sacks are
used to store and transport industrial and agricultural products like animal feeds,
fertilizers, salt, cement, sugar, millet, dyes, pigments, maize, sorghum, plastic granules,
rice, flours, pulses, polymers etc. Polypropylene sacks are usually suitable for packing
most of the goods that have been traditionally packed in jute bags
3. 3

Market Entry Timing

Various products and services have high dependence on their commercialization timing
and delivery to the customers. Example can be a school setup, sweater production, ice
cream production etc. The suitable timings for starting services of a school would be the
month of March. Similarly production of cold drinks should be starting in spring or end
of winter.
In this case the project should be started in the time of the products that will be targeted,
for instance, if main customers are to be sugar mills or the producers of other seasonal
goods, then the project should be started in a time that coincides with the requirement of
the sacks so that the business starts off in an efficient manner
3. 4

Proposed Business Legal Status

Selection of the business status is totally dependent on the choice of the entrepreneur.
Since the scope of this project is relatively small, the business can be launched as a sole
proprietorship or as a partnership with relative ease.
3. 5

Project Capacity and Rationale

The plant under consideration can produce 6,000,000 bags per annum. One can buy the
plant and machinery to meet the planned level of operation.
Different sizes of sacks can be made to meet the demands of particular customers. For
instance sacks of 2 kg, 10 kg, 50 kg, 100 kg etc. are possible by carrying out the required
adjustment of the equipment.
3. 6

Project Investment

Initial Financing
Debt
Equity
Total Investment
3. 7

Rs. in Actual
17,351,030
17,351,030
34,702,060

Proposed Product Mix

The product will be polypropylene sacks but the colors and printing will be according to
the requirement of the clients. The dimensions of the sacks can also be changed within

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Pre-Feasibility Study

Woven Polypropylene Sacks

the operating range of the looms. The operating range is the minimum and maximum
widths between which the loom can operate.
The width of the sacks will depend on the operating range of the loom while the length
can be changed at will since the sacks can be cut and stitched according to requirements.
Recommended Project Parameters

3. 8

Capacity
6,000,000

Project Cost
34,702,060

Human Resource
50

IRR
24%

Machinery
Taiwan

Financial Summary
NPV
Payback Period
17,261,650
4.78

Location
Sind

Cost of Capital(WACC)
16%

Proposed Location

3. 9

The plant can be located anywhere where there is a supply of water and electricity is
available. It is suggested however that the plant is located near the region where demand
is generated. This would be in near factories producing fertilizers, chemicals, or near
agricultural locales where grains are harvested and processed.
3. 10

Key Success Factors/Practical Tips for Success

Critical success factors would be the maintenance of product quality and standards since
the core issue in packaging material is that it should be effective in protecting the
contents from the environment.
Strict quality control and following of the product specifications are key points for any
product. Securing a regular source of polypropylene granules will also be of advantage.
3. 11

Strategic Recommendations

1. Marketing.
Marketing of the project would be required as there are a number of manufacturers
already in the industry. The entrepreneur will have to position the project in terms of
price and quality.
2. Pricing.
Pricing would be based on the market rates and would be dependent on the world price of
polypropylene which is in turn linked with the world oil prices. Pricing would have to be
competitive and if possible kept below market averages in order to attract a steady
clientele. The other alternative is to get long term purchase agreements with some buyers
which will be useful in utilizing capacity.

4
4. 1

SECTOR & INDUSTRY ANALYSIS

Sector Characteristic

Plastic industry in Pakistan is expanding at an average annual growth of 15%. The

significant growth rate, in addition to entrepreneurial efforts, is also due to simplified tax
PREF-10/May, 2005/Rev1

Pre-Feasibility Study

Woven Polypropylene Sacks

policy on local production and reduction in import tariff on plastic raw material. Plastic
industry is contributing more than Rs 7.5 billion annually to the national exchequer in
shape of custom duty, sales tax and income tax.
Plastic is a mother industry to hundreds of manufactured components and products like
automobiles parts, televisions, refrigerators, other electrical goods, furniture, house-ware,
defense products, agricultural pipes, woven sacks, packages, sanitary ware, etc.
Plastic consumption has traditionally been the highest in USA, Europe and Japan
amounting to 75% of global consumption. This however, decreased to 70% in 1985,
50% in 1998 and is expected to decrease to 40% by 2010. This is primarily due to a
spread-out effect as consumption in other parts of the world has increased. Consumption
in China, Taiwan, Korea, Thailand, Malaysia and India has increased manifold during the
last few years. In addition to domestic consumption, these countries have become
leading exporters of plastic products to USA Europe, Japan and other regions. The
reason for this shift is the comparatively low cost of production in these countries.
Comparative per capita consumption of plastics is given below:
Country

Pakistan
India
China
World
4. 2

Unit

Kg.
Kg.
Kg.
Kg.

1999-2000

19992000
3.1
3.3
7
17

Pakistan
10%

India
11%
Pakistan

World
56%

India
China
23%

China
World

Sub sector Information

There are about 600 - 700 medium sized plastic processing units scattered all over
Pakistan. There are over 5000 small scale plastic processing units providing employment
to approx. 600,000 people.
The organized sector is capable of producing quality products whereas the unorganized
sector produces low quality cheap products through excessive use of plastic scrap. During
the last decade, the un-organized sector has grown much more rapidly than the organized
sector.
4.2.1 Sub sector Performance
The industry is presently fragmented into organized and un-organized sectors. About
60% of the units are located in and around Lahore and the remaining at Karachi, Hattar,
Gadoon, Faisalabad, Multan and Quetta. Percentage-wise units in different locations are
shown in the graph below.

PREF-10/May, 2005/Rev1

Pre-Feasibility Study

Name Of
City

Woven Polypropylene Sacks

% units

Lahore

40

Karachi

25

Gujranwala

12

Faisalabad

Multan

Hattar

Gadoon

Quetta

Others

There are about 600 700 medium sized plastic processing units scattered all over
Pakistan. Besides these units, there are over 5000 small scale plastic processing units
providing employment to approx. 600,000 people. Plastic industry in the un-organized
sector is totally self-financed
4. 3

Legal Issues Regarding Industry

Legal environment plays a crucial role in the workings of any sector. In Pakistan
awareness about regulations and policy framework is very minimal and limited access to
information effects negatively on the business operations.
The government is encouraging the setting up of manufacturing facilities and has reduced
import duties on machinery as well as on the imported polypropylene granules. This
encouragement is expected to continue. The custom duty on the import of the
polypropylene granules is 10% and on machinery imported is 5 %. Sales taxes is 15 %.

5
5. 1

MARKET INFORMATION
Market Potential

The market for plastic materials is growing rapidly due to varied and rising use of plastic
goods over recent years, substituting wood, tin, aluminum, glass, china clay, etc. Import
of polyethylene, polyester, polypropylene, polyvinyl chloride, acrylic polymer,
polystyrene and poly ether forms three fourths of the total imports. Polyethylene, the
largest item, is mainly imported as raw material in granular form, which is then converted
into films, liners, bottles, drums, household articles, toys and sporting goods. Imports of
PREF-10/May, 2005/Rev1

Pre-Feasibility Study

Woven Polypropylene Sacks

low density and high density polyethylene and derivatives account for 23 percent of total
imports.
In the early 1990s, imports from the U.S. averaged around 8 percent of the total but have
gradually fallen in percentage. Imports from the United States include a wide spectrum
of products namely polyethylene, polyvinyl chloride, polyester, polypropylene,
polyurethane, polyvinyl chloride, polyvinyl alcohol, silicone, and polymerization
products in primary form. Importers prefer cheaper goods and therefore procure
substantially from Far Eastern countries where the freight cost is lower and transportation
time is less.
Other supplier countries are South Korea, Saudi Arabia, Thailand, Japan, Germany,
Hungary, China and Belgium, which dominate the import market because of lower
prices, transport costs and shipment time. Nevertheless, the respective share of each
country has varied widely between 1994 and 1996. For example, Market share of
Hungary has fallen from 11.4 percent to 3.2 percent. Similarly, share of Thailand has
jumped from less than 1 percent to over 7 percent during this period.
5. 2

Target Customers

The target customers will be any producers, distributors and manufacturers of agricultural
goods, industrial goods that can be packed in polypropylene sacks. Major target
customers can be the sugar, rice, wheat, cotton, fertilizer, chemicals and other industries.
The production line can be expanded further to cater to the cement industry as well but
this will require some expansion in the production line and additional machinery will be
needed.
5. 3

Trade Statistics

This section of the report will provide trends and statistics of Pakistan as well as
international imports, exports and consumption level. It will also compare price levels of
Pakistans exports with international average and top exporting countries.

6
6. 1

PRODUCTION PROCESS
Raw Material Required

The raw materials required are ;

1. The polypropylene granules that are made into the tape yarn and then woven into the
sacks
2. Colors or dyes for giving the polypropylene sacks the required colors.
6. 2

Product Mix Offered

The products offered will be the sacks of various sizes, fabric can also be made by slitting
one side of the woven fabric which is in the form of a tube. This fabric is used for
packing purposes in the textile industry and specially for export products. There is also a
market for polypropylene bags like shopping bags and luggage bags made from
polypropylene which are often used.

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Pre-Feasibility Study

6. 3

Woven Polypropylene Sacks

Production Process Flow

PP RESIN

MIXER

FLAT YARN
MAKING M/C

CIRCULAR LOOM

CUTTING &
SEWING MACHINE

PRINTING
MACHINE

BALING PRESS
MACHINE

PREF-10/May, 2005/Rev1

PIGMENT

Pre-Feasibility Study

6. 4

Woven Polypropylene Sacks

Technology and Processes

6.4.1 The Polypropylene Tape Making Process

The polypropylene tapes are manufactured by slitting films of PP or HDPE which are
produced by blown extrusion technique. In this process, the granules of plastic are fed to
the extruder through the hopper. Molten plastics are extruded through circular die and the
tube is inflated by blowing with air to a desired diameter, and pulling it away with a pair
of nip rolls.
The extruded PP film is then coded and the bubble is collapsed. The film thus formed is
then slit to desired width. These tapes are stretched in orientation water bath which is at
its boiling point. Alternatively orientation can be carried out by using hot plate. The
HDPE/PP tape, after orientation, is stabilized and then wound on bobbins.
6.4.2 The Polypropylene Fabric Weaving Process
From bobbins carrying polypropylene yarn, fabric is made using warping and yarn
winding machine. The fabric is then woven on looms and finally cut to size and stitched
to sacks of required dimensions.
Whenever required, the sacks are screen-printed using specially prepared ink. In some
cases, laminated sacks are required and as such before stitching and printing the fabric
has to be laminated by extrusion coating of LDPE. Lamination should be done from
outside.
6.4.3 Technology/Process Options
The technology is relatively uniform amongst suppliers of machinery. The granules are
fed into the extruder with the color granules and extruded into tape yarn which is then
woven into the fabric with circular looms which produces the fabric in the form of a tube.
6. 5

Machinery Requirement

The types and number of different machines required for the proposed project are listed
below:
Type of Machinery
Tape making machine
Circular Loom Machine
Auto Conversion Line
2 color printing machine
Baling Press
Total Cost of machinery

PREF-10/May, 2005/Rev1

Quantity
1
9
1
1
1

$ Price per unit

114,950
9,570
26,000
21,000
11,000

$ Price
114,950
86,130
26,000
21,000
11,000
259,080

Value in Rs
6,834,927
5,121,290
1,545,960
1,248,660
654,060
15,404,897

Pre-Feasibility Study

6. 6

Woven Polypropylene Sacks

Machine Maintenance

Machinery will be set up and initial training conducted by technicians that the machinery
manufacturer will send to start off the plant. A machinery maintenance schedule will
have to be maintained by the maintenance and technical staff on a regular basis.
6. 7

Machinery Supplier

Machinery suppliers are numerous and are located in Austria, US, Taiwan, China, some
manufacturers are also available in India. Agents of some machinery manufacturers are
located in Pakistan. The machinery that we have considered is supplied by the For Dah
Industry Co. Ltd, Taiwan.
6. 8

Product/Project Standards And Compliance Issues

As the time progresses compliance with quality, environment and social standards is
becoming integral factor for a business survival. These standards also effect choice of
supplier and contractor for any business inputs.
Most large buyers have specifications regarding the type of sacks that they need, the
weight, color and density of the sacks weave are usually key issues. The coloring has to
be used after determining the end use of the sacks because certain types of dyes are
unsuitable for use with chemical compounds, and some types of dyes are unsuitable for
exposure to sunlight

7
7. 1

LAND & BUILDING REQUIREMENT

Land Requirement

Land of approximately 7200 square feet is required for the machinery alone and the
whole project would require about 8240 square feet of space in total. Land in the form of
Grounds has been allocated for possible future extension in the project.
7. 2

Covered Area Requirement

Covered area of the plant would have 840 sq. feet for office space and storing raw
material and finished goods.
7. 3

Construction Cost

The construction cost of the plant would be Rs. 3,530,000. This includes the construction
of the plant area as well as the office and warehouse.
7. 4

Recommended Mode

The preferable mode of acquisition for the land and building would be to purchase the
land because rented premises would be insecure and could led to problems in the long
run.
7. 5

Utilities Requirement

The major utility required is electricity as the machinery is run on electric motors. Water
is also required in a few stages of the production process but in small quantities.

PREF-10/May, 2005/Rev1

Pre-Feasibility Study

7. 6

Woven Polypropylene Sacks

Suitable Location

The most suitable location will be where there is adequate infrastructure and preferably
near the source of demand.

HUMAN RESOURCE REQUIREMENT

The plant would require 50 people in total out of which 6 people would be the
administrative and managerial staff and 44 would be the plant workers. The number of
plant workers is higher due to the 24 hour working of the plant.
Personnel
General Manager
Production Manager
Engineers/Fitters
Extruder Operators
Winder Operators
Weavers
Cutting Machine Operator
Printing Supervisor
Stitcher
Baling press worker
Helpers
Marketing Executives
Accounts Officer
Electrician
Office Boy
Driver
Guards
Total

9
9. 1

# of personnel
1
1
2
2
4
6
4
2
2
2
16
1
1
2
1
1
2
50

Salary
Ann. Salary Costs
50,000
600,000
25,000
300,000
12,000
288,000
8,000
192,000
5,000
240,000
6,000
432,000
6,000
288,000
6,000
144,000
6,000
144,000
5,000
120,000
4,000
768,000
8,000
96,000
10,000
120,000
12,000
288,000
3,000
36,000
4,500
54,000
4,000
96,000
4,206,000

FINANCIAL ANALYSIS
Capital Costs
Capital Investment

Land
Building/Infrastructure/Modification
Machinery & equipment
Furniture & fixtures
Office equipment
Pre-operating costs & project promotion cost
Total Capital Costs

PREF-10/May, 2005/Rev1

10

Rs. in actual
975,203
3,530,000
23,653,188
155,640
101,500
628,266
29,043,797

Pre-Feasibility Study

9. 2

Woven Polypropylene Sacks

Working Capital

Working Capital
Equipment spare part inventory
Raw material inventory
Upfront insurance payment
Cash
Total Working Capital

Rs. in actual
20,507
4,607,775
118,266
1,000,000
5,746,547

10 KEY ASSUMPTIONS
10. 1

Revenue Assumptions
Revenue Assumptions

Sale Price per unit

Sale price growth rate
Production capacity utilization
Production capacity utilization growth rate
Maximum capacity utilization
10. 2

Rs.

11.50
7%
85%
2%
95%

Raw Material Expense

Polypropylene is the key variable in the expenses as it is imported and can fluctuate
widely in connection with the world oil prices. Currently the international market prices
are $1150-1200 per ton.
Expense Assumptions
Cost /ton
Cost /ton
Cost per Kg
Cost per Kg
10. 3

1440
85800
1.44
85.8

$
Rs.
$
Rs.

Inventory Assumptions
Inventory Assumptions

Equipment spare part inventory

Raw material inventory
Finished goods inventory

PREF-10/May, 2005/Rev1

0.5
1.0
0.5

11

Months
Months
Months

Pre-Feasibility Study

Woven Polypropylene Sacks

11.1 Projected Income Statement

Statement Summaries

SMEDA

Income Statement
Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Rs. in actuals
Year 10

71,785,156
62,529,912
9,255,245

80,251,672
68,745,693
11,505,979

87,844,241
74,006,647
13,837,595

96,106,537
79,635,106
16,471,432

105,095,118
85,655,842
19,439,277

114,871,178
92,095,289
22,775,889

122,966,093
97,090,473
25,875,620

131,573,720
102,323,531
29,250,189

140,783,880
107,851,528
32,932,352

150,638,752
113,692,201
36,946,550

General administration & selling expenses

Administration expense
Rental expense
Utilities expense
Travelling & Comm. expense (phone, fax, etc.)
Office vehicles running expense
Office expenses (stationary, etc.)
Promotional expense
Insurance expense
Professional fees (legal, audit, etc.)
Depreciation expense
Amortization expense
Property tax expense
Miscellaneous expense
Subtotal
Operating Income

1,242,180
854,938
48,240
12,060
71,785
118,266
71,785
2,567,533
111,296
717,852
5,815,935
3,439,310

1,363,120
914,784
52,937
13,234
80,252
106,439
80,252
2,567,533
111,296
802,517
6,092,364
5,413,615

1,495,836
978,819
58,091
14,523
87,844
94,613
87,844
2,567,533
111,296
878,442
6,374,840
7,462,754

1,641,472
1,047,336
63,747
15,937
96,107
82,786
96,107
2,567,533
111,296
961,065
6,683,385
9,788,047

1,801,288
1,120,650
69,953
17,488
105,095
70,960
105,095
2,567,533
111,296
1,050,951
7,020,309
12,418,967

1,976,664
1,199,095
76,764
19,191
114,871
59,133
114,871
2,567,533
1,148,712
7,276,834
15,499,055

2,169,115
1,283,032
84,237
21,059
122,966
47,306
122,966
2,567,533
1,229,661
7,647,876
18,227,744

2,380,303
1,372,844
92,439
23,110
131,574
35,480
131,574
2,567,533
1,315,737
8,050,593
21,199,595

2,612,053
1,468,943
101,439
25,360
140,784
23,653
140,784
2,567,533
1,407,839
8,488,387
24,443,965

2,866,366
1,571,769
111,315
27,829
150,639
11,827
150,639
2,567,533
1,506,388
8,964,304
27,982,247

Other income
Gain / (loss) on sale of assets
Earnings Before Interest & Taxes

38,758
3,478,068

76,928
5,490,543

187,315
7,650,069

255,647
10,043,694

266,092
12,685,060

467,609
15,966,664

907,465
19,135,209

1,315,673
22,515,268

1,927,504
26,371,468

3,224,070
31,206,316

Interest expense
Earnings Before Tax

1,714,943
1,763,125

1,513,431
3,977,113

1,291,538
6,358,532

1,047,201
8,996,493

778,149
11,906,910

516,410
15,450,254

270,500
18,864,709

22,515,268

26,371,468

31,206,316

Tax
NET PROFIT/(LOSS) AFTER TAX

617,094
1,146,031

1,391,989
2,585,123

2,225,486
4,133,045

3,148,773
5,847,720

4,167,419
7,739,492

5,407,612
10,042,642

6,531,818
12,332,891

7,812,839
14,702,429

9,238,569
17,132,899

11,000,381
20,205,936

Balance brought forward

Total profit available for appropriation
Dividend
Balance carried forward

1,146,031
1,146,031

1,146,031
3,731,155
1,865,577
1,865,577

1,865,577
5,998,623
2,999,311
2,999,311

2,999,311
8,847,032
4,423,516
4,423,516

4,423,516
12,163,008
6,081,504
6,081,504

6,081,504
16,124,146
8,062,073
8,062,073

16,194,502
28,527,393
28,527,393

28,191,490
42,893,919
42,893,919

42,500,619
59,633,518
59,633,518

51,426,378
71,632,314
71,632,314

Revenue
Cost of goods sold
Gross Profit

PREF-10/May, 2005/Rev1

12

Pre-Feasibility Study

Woven Polypropylene Sacks

11.2 Projected Balance Sheet

Statement Summaries

SMEDA

Balance Sheet
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Rs. in actuals
Year 10

1,000,000
20,507
4,607,775
118,266
5,746,547

550,328
5,900,150
1,330,424
23,622
5,307,689
106,439
13,218,652

2,526,806
6,248,089
1,432,888
26,642
5,986,314
94,613
16,315,352

4,965,782
6,908,051
1,542,527
30,033
6,748,294
82,786
20,277,474

5,260,101
7,559,621
1,659,825
33,839
7,603,585
70,960
22,187,931

5,383,591
8,268,561
1,785,297
38,110
8,563,312
59,133
24,098,004

13,522,501
9,039,711
1,919,494
42,035
9,445,194
47,306
34,016,241

23,172,724
9,774,134
2,022,718
46,344
10,413,327
35,480
45,464,727

37,804,599
10,460,540
2,131,740
51,094
11,480,692
23,653
61,952,319

46,917,803
11,192,778
2,246,907
56,331
12,657,463
11,827
73,083,109

80,716,353
11,976,273
2,368,588
95,061,213

Fixed assets
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office vehicles
Office equipment
Total Fixed Assets

975,203
3,530,000
23,653,188
155,640
101,500
28,415,531

975,203
3,353,500
21,287,869
140,076
91,350
25,847,998

975,203
3,177,000
18,922,550
124,512
81,200
23,280,465

975,203
3,000,500
16,557,232
108,948
71,050
20,712,932

975,203
2,824,000
14,191,913
93,384
60,900
18,145,400

975,203
2,647,500
11,826,594
77,820
50,750
15,577,867

975,203
2,471,000
9,461,275
62,256
40,600
13,010,334

975,203
2,294,500
7,095,956
46,692
30,450
10,442,801

975,203
2,118,000
4,730,638
31,128
20,300
7,875,268

975,203
1,941,500
2,365,319
15,564
10,150
5,307,736

975,203
1,765,000
2,740,203

Intangible assets
Pre-operation costs
Legal, licensing, & training costs
Total Intangible Assets
TOTAL ASSETS

556,481
556,481
34,718,559

445,185
445,185
39,511,835

333,888
333,888
39,929,706

222,592
222,592
41,212,999

111,296
111,296
40,444,626

39,675,871

47,026,575

55,907,528

69,827,588

78,390,844

97,801,415

5,023,296
5,023,296

5,524,289
5,524,289

5,960,174
5,960,174

6,428,484
6,428,484

6,931,680
6,931,680

7,456,342
7,456,342

7,873,174
7,873,174

8,311,966
8,311,966

8,777,325
8,777,325

8,118,974
8,118,974

17,359,279
17,359,279

617,094
15,366,134
15,983,228

2,009,083
13,171,477
15,180,560

4,139,308
10,754,926
14,894,234

4,139,308
8,094,039
12,233,347

4,139,308
5,164,100
9,303,408

3,311,446
2,705,005
6,016,451

2,483,585
2,483,585

1,655,723
1,655,723

827,862
827,862

Shareholders' equity
Paid-up capital
17,359,279
Retained earnings
Total Equity
17,359,279
TOTAL CAPITAL AND LIABILITIES 34,718,559

17,359,279
1,146,031
18,505,311
39,511,835

17,359,279
1,865,577
19,224,857
39,929,706

17,359,279
2,999,311
20,358,591
41,212,999

17,359,279
4,423,516
21,782,795
40,444,626

17,359,279
6,081,504
23,440,783
39,675,871

17,359,279
8,062,073
25,421,353
38,894,146

17,359,279
28,527,393
45,886,673
56,243,431

17,359,279
42,893,919
60,253,199
70,220,888

17,359,279
59,633,518
76,992,798
86,597,984

Assets
Current assets
Cash & Bank
Accounts receivable
Finished goods inventory
Equipment spare part inventory
Raw material inventory
Pre-paid annual land lease
Pre-paid building rent
Pre-paid lease interest
Pre-paid insurance
Total Current Assets

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable
Export re-finance facility
Short term debt
Other liabilities
Total Current Liabilities
Other liabilities
Lease payable
Deferred tax
Long term debt
Total Long Term Liabilities

PREF-10/May, 2005/Rev1

13

17,359,279
71,632,314
88,991,593
97,110,567

Pre-Feasibility Study

Woven Polypropylene Sacks

11.3 Projected Cash Flow Statement

Statement Summaries

SMEDA

Cash Flow Statement

Year 0
Operating activities
Net profit
Add: depreciation expense
amortization expense
Deferred income tax
Accounts receivable
Finished good inventory
Equipment inventory
Raw material inventory
Pre-paid building rent
Pre-paid lease interest
Advance insurance premium
Accounts payable
Other liabilities
Cash provided by operations

(20,507)
(4,607,775)
(118,266)
(4,746,547)

Financing activities
Change in long term debt
17,359,279
Change in short term debt
Change in export re-finance facility
Add: land lease expense
Land lease payment
Change in lease financing
Issuance of shares
17,359,279
Purchase of (treasury) shares
Cash provided by / (used for) financing activities
34,718,559
Investing activities
Capital expenditure
(28,972,012)
Acquisitions
Cash (used for) / provided by investing activities
(28,972,012)
NET CASH

1,000,000

Cash balance brought forward

Cash available for appropriation
Dividend
Cash carried forward

1,000,000
1,000,000

PREF-10/May, 2005/Rev1

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

1,146,031
2,567,533
111,296
617,094
(5,900,150)
(1,330,424)
(3,115)
(699,915)
11,827
5,023,296
1,543,474

2,585,123
2,567,533
111,296
1,391,989
(347,939)
(102,465)
(3,020)
(678,625)
11,827
500,993
6,036,713

4,133,045
2,567,533
111,296
2,130,225
(659,962)
(109,639)
(3,391)
(761,979)
11,827
435,885
7,854,838

5,847,720
2,567,533
111,296
(651,570)
(117,297)
(3,806)
(855,291)
11,827
468,311
7,378,722

7,739,492
2,567,533
111,296
(708,940)
(125,472)
(4,271)
(959,727)
11,827
503,195
9,134,932

10,042,642
2,567,533
(827,862)
(771,150)
(134,197)
(3,925)
(881,882)
11,827
524,663
10,527,649

12,332,891
2,567,533
(827,862)
(734,424)
(103,224)
(4,309)
(968,132)
11,827
416,831
12,691,131

(1,993,145)
(1,993,145)

(2,194,657)
(2,194,657)

(2,416,551)
(2,416,551)

(2,660,887)
(2,660,887)

(2,929,939)
(2,929,939)

(2,459,095)
(2,459,095)

(2,705,005)
(2,705,005)

(449,672)
1,000,000
550,328
550,328

Year 8

14,702,429
2,567,533
(827,862)
(686,406)
(109,022)
(4,750)
(1,067,366)
11,827
438,793
15,025,176

Year 9

17,132,899
2,567,533
(827,862)
(732,238)
(115,167)
(5,237)
(1,176,771)
11,827
465,359
17,320,343

Rs. in actuals
Year 10

20,205,936
2,567,533
(827,862)
(783,494)
(121,681)
56,331
12,657,463
11,827
(658,352)
33,107,701

3,842,055

5,438,288

4,717,834

6,204,994

8,068,554

9,986,126

15,025,176

17,320,343

33,107,701

550,328
4,392,383
1,865,577
2,526,806

2,526,806
7,965,094
2,999,311
4,965,782

4,965,782
9,683,617
4,423,516
5,260,101

5,260,101
11,465,094
6,081,504
5,383,591

5,383,591
13,452,145
8,062,073
5,390,072

13,522,501
23,508,627
23,508,627

23,172,724
38,197,900
38,197,900

37,804,599
55,124,943
55,124,943

46,917,803
80,025,504
80,025,504

14

Pre-Feasibility Study

Woven Polypropylene Sacks

11.4 Ratio Analysis

Calculations

SMEDA

Ratio Analysis
Year 0
Profitability ratios
Profit margin on sales
ROI (same as ROA)
ROE

2%
3%
6%

Liquidity ratios
Current ratio
Quick ratio
Asset management ratios
Inventory turnover ratio
Days sales outstanding
Fixed assets turnover ratio
Total assets turnover ratio
Debt management ratios
Debt ratio

PREF-10/May, 2005/Rev1

Year 1

50%

Year 2
3%
6%
13%

Year 3
5%
10%
20%

Year 4
6%
14%
27%

Year 5
7%
20%
33%

Year 6
9%
21%
40%

Year 7
10%
22%
27%

Year 8
11%
21%
24%

Year 9
12%
22%
22%

Year 10
13%
21%
23%

3
2

3
2

3
2

3
2

3
2

5
3

6
4

7
6

8
7

12
12

13
30
3
2

13
28
3
2

13
28
4
2

13
28
5
2

12
28
7
3

12
28
9
2

12
29
12
2

11
29
17
2

11
29
27
2

29
55
2

39%

33%

26%

20%

13%

6%

0%

0%

0%

0%

15