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BAHRIA CEMENT LIMITED

PROJECT APPRAISAL REPORT

SUBMITTED BY: (Group 6)
Sunny Maghnani (16146)
Aatif Iqbal (15912)
Zulfiqar Mirani (12797)
Muhammad Raza (12252)

DATE:
10th April 2016

FACULTY:
Mr. Siddiq Khatri

Contents
INTRODUCTION:................................................................................................................................................2
SPONSORS OF THE PROJECT:.......................................................................................................................2
CORPORATE SETUP AND MANAGEMENT.................................................................................................3
PROJECT BRIEF:................................................................................................................................................3
MARKET PROSPECTS:.....................................................................................................................................4
OVERVIEW OF THE LOCAL MARKET:................................................................................................................4
EMERGING TRENDS IN THIS SECTOR:.................................................................................................................5
DEMAND SUPPLY ANALYSIS:...............................................................................................................................6
TECHNICAL PROSPECTS................................................................................................................................9
MANUFACTURING PROCESS:...............................................................................................................................9
TECHNOLOGY CHOSEN:....................................................................................................................................10
LOCATION AND SITE:.........................................................................................................................................11
PRINCIPLE INPUTS:............................................................................................................................................11
PRODUCT MIX AND LATEST DEVELOPMENTS:................................................................................................12
PLANT CAPACITY:.............................................................................................................................................12
APPROPRIATENESS AND ARRANGEMENT OF TECHNOLOGY:...........................................................................12
STRUCTURE AND CIVIL WORK:........................................................................................................................12
ENVIRONMENTAL ASPECTS...............................................................................................................................13
PROPOSED IMPLEMENTATION SCHEDULE:.......................................................................................................14
FINANCIAL PROSPECTS:..............................................................................................................................14
INCOME STATEMENT.........................................................................................................................................14
CASH FLOW STATEMENTS.................................................................................................................................16
BALANCE SHEET................................................................................................................................................17
SENSITIVITY ANALYSIS......................................................................................................................................18
DEBT SERVICE COVERAGE RATIO.........................................................................................................18
BREAK EVEN..................................................................................................................................................19
ANNEXURE: (DEMAND AND SUPPLY).......................................................................................................19
ANNEXURE: (TECHNICAL)..........................................................................................................................22
ANNEXURE: (FINANCIAL)............................................................................................................................24

INTRODUCTION:
The primary objective of this report is to assess the viability of the cement manufacturing project
Bahria plans to install. Bahria plans to examine all the necessary aspects, which Bahria thinks are
important to be considered before moving to such a hefty project. Bahria firstly plans on to cover
the market analysis. This would include the demand for the product, past and projected market
demarcations in order to assess the maximum share that can be made out of the market in
Pakistan. An extensive survey of the cement industry has been performed and all the relevant
secondary information that is required for the proper planning of the project is also included. The
future demand for the product is also forecasted and the uncertainties within are also considered.
Thereafter, a full-fledged marketing plan is also presented.
The appraisal also contains the technical analysis of the project. Bahria feels that a
comprehensive analysis of the technical part not only saves time for the project, but also proves
useful once the project is in the development phase. Bahria, therefore, takes into account the
appropriate process that is to be used during the project along with the necessary technical
arrangements that are to be catered. Bahria has carefully perused the product mix (White and
Black cement) and detailed work is carried out on the plant capacity. Discussions on the location
and its importance, along with all the intricacies that should be catered are also presented.
Bahria has then discussed and formulated a complete financial viability of the project. It presents
the projected statements for the next ten years along with complete capital budgeting in the shape
of NPV and IRR etc... Sensitivity analysis is also performed and best and worst case scenarios
are taken well into the consideration. The project seems technically and financially quite sound.

CORPORATE SETUP AND MANAGEMENT
Organizational Chart

CHAIRMAN

BOARD OF DIRECTORS

CHIEF
OPERATION
S OFFICER

CHIEF
FINANCIAL
OFFICER

CHIEF
EXECUTIVE
OFFICER

CHIEF
TECHNICAL
OFFICER

CHIEF
MARKETING
OFFICER

RECRUITMENT CRITERIA
1. Chief Executive Officer: An educational qualification of an Equivalent Master’s Degree
in Corporate Finance from Pakistani or foreign Institute recognized by the Higher
Education Commission of Pakistan, with at least 15 years of experience out of which 7
years as a Key Officer in the Manufacturing Industry.
2. Chief Financial Officer: An educational qualification of Chartered Accountant from the
ICAP, with at least 15 years of experience out of which 7 years as a Key Officer in the
Relevant Industry.
3. Chief Technical Officer: A Bachelor’s degree in Computer Science or related technical

field with 10+ years hands-on software development experience. 7 years strategic
information technology management experience and 5 years experience managing
technical groups. Product management experience that includes leading, launching, and
supporting multi-release, complex software products. Experience managing large- scale,
application analysis, and design, development, and integration projects.

4. Chief Operations Officer: Business or Accounting degree mandatory, a master’s in

business administration is preferred, CPA preferred. Minimum 10 years experience in a
senior management role ideally with both external audit and in-house financial
management experience gained in a high-growth organization. Experience either as an
employee or board member of a nonprofit organization; must be familiar with nonprofit
finance and accounting regulation. Proven track record of success facilitating progressive
organizational change and development within a growing organization. Excellent
judgment and creative problem solving skills including negotiation and conflict
resolution skill. Strong mentoring, coaching experience to a team with diverse levels of
expertise. Entrepreneurial team player who can multitask. Superior management skills;
ability to influence and engage direct and indirect reports and peers. Self reliant, good
problem solver, results oriented
5. Chief Marketing Officer:

5 – 8 years experience in the consumer goods industry. Experience in the outdoor
goods area preferred. At least 10 years in a leadership role.
• A college degree or advanced degree in business, marketing or related disciplines.
• A love for the outdoors.
• The ability to create or influence innovative, non-traditional marketing, branding, and
sales concepts and strategies.
• The ability to forge strategic partnerships with customers who have the ability to grow
market share with multiple retail channels and wide geographical distribution.
• Successful experience developing, implementing, and evaluating media, public
relations, public policy, and investor relations strategies and programs.
• Proven experience as a self-starter working collaboratively and respectfully with a
variety of constituencies and multiple interests to identify communications issues and
opportunities.
• Proven success in commercializing new products.
• Strong leadership skills and ability to be diplomatically persuasive/assertive.
• Strong communication skills including written and oral.
• The ability to communicate conceptual ideas and establish team expectations.
• The ability to lead and manage multiple projects simultaneously, set priorities, provide
direction and focus while delegating to ensure rapid follow through.

PROJECT BRIEF:
Name of the Company: BAHRIA CEMENT LIMITED
Product: Cement
Operating Capacity: 2 million tons per annum
Location: Hub, Karachi

MEANS OF FINANCING
AMOUNT (Rs. IN MILLION)

SOURCE

DEBT

2,594.28

HBL

SPONSOR

1,945.71

Malik Riaz Hussain

1,945.71

IPO

SHARE CAPITAL
Estimated Total Cost: Rs. 6,485.7 million

Proposed Implementation Schedule:
The activities related to the overall establishment of the project are expected to take maximum
about 4 years the breakup of the activities is as under:
Design phase
Construction phase
Procurement & Installation ( Machinery) phase
Total time frame (approx)

12 months
24 months
12months
48 months

MARKET PROSPECTS:
Overview of the Local Market:
Cement Industry in Pakistan
Cement Industry’s latest overview:
 The superlative performance of the cement industry was issued by “The Pakistan Credit
Rating Agency Limited” in February 2014.
 The overview done by them indicates that this sector remains one of the hottest in terms of
returns for the investors.
 There are a total of 24 cement companies that are operating in Pakistan with combine
production of about 46 million tons per annum. Following is the chart with names and
capacities of these firms:
As on October 2015

Sr.
No.

Operational
Capacity

Name Of Unit

Cement
1

Askari Cement Limited - Wah

2

Al-Abbas Cement Limited - Nooriabad, Dadu

3

Askari Cement - Nizampur

4

Attock Cement Pakistan - Hub Chowki, Lasbela

5

Bestway Cement Limited - Hattar

1,228,500

6

Bestway Cement Limited - Chakwal

3,600,000

7

Bestway - Mustehkum
Cement Limited - Hattar
|----------------Cherat Cement Company
Limited-Nowshera
Cement----Dandot Cement
Limited - Jehlum
------------|

1,086,750

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Total

 The

1,102,500
945,000
1,575,000
1,795,500

1,102,500
504,000

Afghanist
India
Dewan Hattar
Cement Limited
- Hattar Other
Financial
an
Via Sea &
Countries
Years Hattar Cement Limited - Dhabeji
Dewan
Via Land
Land
Via Sea

1,134,000%age
Total
Exports
Incr/(Decr)
1,764,000

|-------------------------------Quantity
in Metric Tons-------------------------------|
D.G.Khan Cement
Limited - D.G.Khan
2,110,500
2001- Cement Limited - Chakwal
D.G.Khan
2,110,500 100.00%
106,620
106,620
2002
Fauji
Cement Company Limited - Fateh Jang
3,433,500
2002430,322
471,822
342.53%
2003
Fecto
Cement Limited - Sangjani
819,000

2003-Cement Limited - Lilla
Flying
1,118,293
2004
GharibWal Cement Limited - Jehlum
2004Kohat
Company Limited - Kohat
2005Cement
1,407,900

-

1,197,000 137.02%
1,118,293

157,270

2,110,500
1,565,170
2,677,500 39.96%

Lafarge
2005- Pakistan Cement Company Limited 91,165
Chakwal
2006
1,413,994
Lucky Cement Limited - Pezu
20061,111,405
2007Cement
1,725,476
Lucky
Limited - Indus Highway, Karachi

2,047,500
1,505,159

-3.83%

3,786,000
3,227,854
114.45%
3,600,000

2007-Leaf Cement Factory Limited - Daudkhel
Maple
3,370,500 139.06%
786,672
3,045,995 7,716,620
2008
2,777,826
Pioneer Cement Limited - Khushab
2,030,250
2008634,455
6,061,035
39.34%
2009Cement
3,148,306
10,752,486
Thatta
Limited - Thatta
488,250
45,618,750
20094,017,361
722,968
5,625,391 10,649,156
-0.96%
2010
20104,726,996
2011over the years have
exports
2011-

4,715,109
Export of
Cement:
2012

590,104

3,910,675

9,427,943

-11.47%

605,453

3,247,268

8,567,830

-9.12%

also improved phenomenally:

20122013

4,404,633

482,214

3,487,255

8,374,103

-2.26%

20132014

3,655,201

677,305

3,804,021

8,136,528

-3.37%

20142015

2,872,951

696,337

3,625,781

7,195,069

-11.57%

869,399

242,755

915,748

2,027,902

-27.31%

20152016
(4 Month)

 The exports are decreasing in the later years primarily because the demand within the country
is increasing. This can also be taken as a prospect for the Bahria cement.
 The number of the new comers in the market is constantly increasing. With only a handful of
registered companies in the late 90s, today the cement industry has 24 registered companies,
which are also members of APCMA. (Non-members are separate). Recently, Lucky cement
is planning to install a new plant in a few months which has been considered.
 The Government of Pakistan has imposed a restriction on producing more than a certain
percentage. ( normally between 60-70% is allowed)
 With a positive future outlook, the return is good, and there are no alarming risk factors
currently in the industry.
 Most of the firms in this sector are listed. Many of these firms are very well established, and
hence, they are also listed on either or all of the three stock exchanges in the country.
 Bahria cement will cover the geographical area of Sindh and mainly Karachi along with its
outskirts as its major market prospect.
 On the whole, this is a comprehensive report for all the direct and indirect stakeholders of the
cement sector in Pakistan.

Demand Supply Analysis:
Past Supply and Demand of Cement
The demand and supply of cement is shown in the table below.
Per year production of cement in Pakistan during last twenty five years (1990-2015):
Year

Demand
(Mn. Tonnes)

Supply
(Mn. Tonnes)

Gap
(Mn. Tonnes)

1990-1991

8.89

7.29

1.60

1991-1992

8.89

7.71

1.18

1992-1993

8.89

8.32

0.57

1993-1994

9.05

8.14

0.91

1994-1995

10.17

8.38

1.79

1995-1996

10.17

9.43

0.74

1996-1997

12.50

9.65

2.85

1997-1998

15.53

9.19

6.34

1998-1999

16.41

9.62

6.79

1999-2000

16.38

9.94

6.44

2000-2001

15.53

9.93

5.60

2001-2002

16.10

9.94

6.16

2002-2003

16.32

11.45

4.87

2003-2004

17.28

13.66

3.62

2004-2005

17.91

16.35

1.56

2005-2006

20.83

18.55

2.28

2006-2007

30.50

24.26

6.23

2007-2008

37.68

30.29

7.38

2008-2009

42.28

31.31

10.97

2009-2010

45.34

34.22

11.13

2010-2011

42.37

31.43

10.97

2011-2012

44.64

32.51

12.13

2012-2013

44.64

33.43

11.21

2013-2014

44.64

34.28

10.36

2014-2015

45.62

35.40

10.22

Source: APCMA
How this gap was met in the past:
Considering the impositions of the Government, The APCMA has created cartels and they are
allotted to all the companies in different proportions. The companies are supposed to produce
according to these cartels. This data shows that there has always been a gap between demand and
supply of cement, that is, both the upward and downward trends can be found. Demand is on the
rise every year due to the increase in the construction activities, but what’s important to note is
that, the supply is also increasing primarily because of the new entrants in the market every year.
Other reasons behind the demand and supply shifts can be that at times gap has been reduced due
to exports of cement to countries like Afghanistan, India and other countries; at times the gap
increases as the supply curtails because the supplier in local or foreign market faces any one time
event such as flood earth quake etc..

Projected performance of the key players (Attock, Dewan, Thatta, Lucky Etc.) in
this Industry:

The forecasts of the key performing players have been made by one of the credible names in
Journalism, namely, Bloomberg. Bloomberg has always kept an eye on this sector of the country,
most specifically.
Bloomberg’s sources have concluded that gross profit margins of the major companies may be
curtailed over the coming three years. The only unaffected firm will be Kohat cement, as its line
depicts a steady increase, whilst all its other competitors will have to go through a lean patch.
The primary reason for this trend is high production cost, citing increasing taxes/duties on this
sector. Moreover, the heavy dependence on coal and its rising prices in the coming years, have
also led to this graph (refer to annexure: demand and supply) showing a negative trend at large.
But, the comforting sign is that all the players are trying to reduce coal/furnace oil usage and
moving towards other forms of energy such as Biomass energy.
Emerging trends in this sector:
Over the years, the Demand-Supply gap has kept on increasing. One cannot come to a
conclusion that the steep rise in demand is primarily due to a healthy and fast economic pace of
the country. Experts have termed this rise in demand mainly due to the increasing rate of
population growth in Pakistan, thereby leading to more and more cement being needed for
residential and commercial construction. Recently, the smuggling of cement from across the
border has also increased, especially in Baluchistan province, where the demands are met by
Iranian cement, which is apparently cheaper than the local cement. However, this has not
deterred the local cement industry any which way, but checks need to be put in place to curb this
act and ensure local demands is being met fully. Projected figures (refer to Demand and Supply
Analysis) also indicate a steep rise in the cement demand. The graphs (annexure, demand and
supply) are reminiscent of the fact that Pakistan’s cement exports can enjoy a huge off-take, if
taken seriously. Many of our major players in the industry are looking towards increasing the
local dispatches, which are showing an increasing trend. The first graph (refer annexure Demand
and Supply) illustrates that from FY08-FY12; the exports were steady and looked a good
proportion of the total cement dispatches. However, beyond FY12 and projections about the
future shows worrying signs in terms of the export of cement.
Although the total dispatches are increasing, which is a positive thing, the exports are relatively
declining each passing year. This implies, the lost foreign exchange reserves that might have
been possible, if the exports were steady (like in previous years), let alone increasing. The most
relevant and appropriate explanation to this is the rising local cement prices. Our cement in the
international market is becoming all the more expensive, and this has a lot to do with all the
operational charges/taxes levied on this industry. It is one of the most heavily taxed and heavily
regulated industries in Pakistan. The second graph (refer to annexure Demand and Supply) is
taken from the official website of State Bank of Pakistan, it reveals facts most of which are
alarming for the industry at large. Despite the overall increasing numbers of Pakistan’s total
exports, cement sectors’ contribution to the total exports has hovered around a mere 2%-3%,
which can be improved easily by increasing the production. Furthermore, future projections in a

previous graph do not depict a good situation for cement sector’s exports in the coming years.
Having such vast information enables the cement sectors’ key players to attend to this problem
and try to improve the situation. Summarizing the SBP’s graph, we see that of the total exports,
most of it is exported from the North Zone. The most logical conclusion to this is the fact that
North Zone also accounts for the most production, hence contributing more to the overall
exports.
To conclude it all, it is imperative for the cement industry to look for opportunities beyond the
local market. Because that is another way, which will benefit Pakistan at large, and also allow
room for growth to the firms involved in this sector.

Future Demand and Supply of Cement
The Trend Projection Method is used to calculate future demand of cement. This method
involves determining the trend of consumption by analysing past consumption statistics of
cement consumption and projecting future consumption by extrapolating the trend. Bahria
Cement’s projections are readily supported by those made by the APCMA (An association
supported all the major cement companies in Pakistan. Chairman is Mr Tabba). The table below
projects the five year demand of the cement in Pakistan using the trend projection method.
Future Demand and Supply Gap:
Year

Projected Demand Projected
Supply Projected Gap
(Million Tons)
(Million Tons)
(Million Tons)

2016

46.24

36.18

10.06

2017

46.87

36.97

9.9

2018

47.51

37.78

9.73

2019

48.16

38.61

9.55

2020

48.81

39.46

9.35

Source: APCMA

Reasons for increase in Demand/ Supply:

Firstly, the augmenting population and the economic boom in the infrastructure and
construction industries.
Secondly, demand of cement would increase in Pakistan and other countries after the
completion of Economic Corridor between Pakistan and China (CPEC) because the
development will start in that premises and cement demand will increase.
Thirdly, the calamity of earthquake brings increase in cement demand.

Forecasted demand for cement that is showing increasing trend. Forecasting is performed on the
basis of trend projection method. Past rates of increase are (1.37% for demand) and (2.21% for
supply). Following the past trend, demand will further increase.

CONCLUSION
Demand for cement is fairly high in the country, and as the formerly mentioned information
suggests, there is room for a lot more production. Holistically, the Demand Supply Analysis
show there is an excellent prospect market for Bahria cement ltd. Bahria Cement Ltd. aims to be
a principal producer of cement in Pakistan and plans to achieve this landmark within a decade.

TECHNICAL PROSPECTS
Manufacturing Process:
The quarry is the starting point of manufacturing cement
Cement plants are usually located closely either to hot spots in the market or to areas with
sufficient quantities of raw materials. The aim is to keep transportation costs low. Basic
constituents for cement (limestone and clay) are taken from quarries in these areas.
A two-step process
Basically, cement is produced in two steps: first, clinker is produced from raw materials. In the
second step cement is produced from cement clinker. The first step can be a dry, wet, semi-dry or
semi-wet process according to the state of the raw material.
Making clinker

In the manufacture of cement, clinker occurs as lumps or nodules, usually 3 millimetres (0.12 in) to 25
millimetres (0.98 in) in diameter, produced by sintering (fused together without melting to the point of
liquefaction) limestone and alumina-silicate materials such as clay during the cement kiln stage. The raw

materials are delivered in bulk, crushed and homogenised into a mixture which is fed into a
rotary kiln. This is an enormous rotating pipe of 60 to 90 m long and up to 6 m in diameter. This
huge kiln is heated by a 2000°C flame inside of it. The kiln is slightly inclined to allow for the
materials to slowly reach the other end, where it is quickly cooled to 100-200°C.
Four basic oxides in the correct proportions make cement clinker: calcium oxide (65%), silicon
oxide (20%), alumina oxide (10%) and iron oxide (5%). These elements mixed homogeneously
(called “raw meal” or slurry) will combine when heated by the flame at a temperature of
approximately 1450°C. New compounds are formed: silicates, aluminates and ferrites of
calcium. Hydraulic hardening of cement is due to the hydration of these compounds.
The final product of this phase is called “clinker”. These solid grains are then stored in huge
silos. This is the end of phase one.

From clinker to cement
The second phase is handled in a cement grinding mill, which may be located in a different place
to the clinker plant. Gypsum (calcium sulphates) and possibly additional cementitious (such as
blast furnace slag, coal fly ash, natural pozzolanas, etc.) or inert materials (limestone) are added
to the clinker. All constituents are ground leading to a fine and homogenous powder. End of
phase two. The cement is then stored in silos before being dispatched either in bulk or bagged.
Technology Chosen:
a) Sources of technology and supplier:
The technology, named HXJQ Cement Plant, will be imported from China. “Xinxiang Great
Wall Machinery” will provide “Bahria Cement Company Ltd”, a turnkey contract of cement
plant of 2 Million tons of cement per annum. The cement plant will be based on dry process.
Our supplier has supplied their technologies and machineries to various countries including
Pakistan, Australia, Japan, Russia, Iran, Brazil, India, and South Korea.
b) Machineries and Equipment:
For the information related to machineries and equipment used refer to annexures (technical).

Location and Site:
The project is proposed to locate at Hub, Karachi .Proximity to raw materials and markets are
the important factors that we have examined in order to determine the location of the cement

plant. “Bahria Cement” would be situated at Hub, Karachi. The location has been chosen after
considering the following factors:
1. Labor availability and considerations.
2. Infrastructure and transportation facilities.
3. General living conditions.
Proximity to raw material

This area is close to the limestone, which is the basic ingredient to manufacture cement
The other inputs will also be available at lower costs

Labour situation

As the literacy rate is low so we can easily get labor at cheap rates.
All the types of labor unskilled, semi-skilled and skilled, required for the project are
easily available within the vicinity of the project site.

1. Employees and labor:
 Unskilled labour: Rs. 12000-14000 per month
 Skilled labour:
POSITION
Managerial Officers

SALARIES AND REMUNERATIONS
(Range in PKR/month)
30,000- 200,000

Executive Officers

800,000- 1,500,000

Directors

2,000,000- 3,500,000

Principle Inputs:
2. Raw material
Limestone is the major raw material used in the manufacturing of cement. For further
details of the raw materials used refer to Annexures (Technical).
3. Energy

a) Coal: No coal will be required for cement manufacturing
b) Electricity would be needed 5 Mega Watts which we are acquiring from K-Electric
but it has load shedding issue therefore at the same time we have bought generator
and transformer for operations to carry on. 12 quarts of water is required on daily
basis which will be acquired from KMC Karachi Municipal Corporation.
c) Diesel: diesel would be used in generator
d) Furnace oil: No oil is required
Plant Capacity:
The proposed plant capacity is 2,000,000 tons per annum .The Company would work for 300
days per year on a 2 shift basis.
Appropriateness and Arrangement of Technology:
The post of the raw material (cement) are available in Karachi so





Technologies which can easily be installed in the tough lands of the province are selected.
The machinery can easily be operated by the labors available in Karachi.
The capacity level that the project requires is fulfilled by this technology.
The technology utilizes the local raw materials.
The cost of acquiring this technology is in our budget.
The technology that we choose does not affect our environment.

Structure and Civil Work:
Land, Building and Civil works
Cement production relatively requires wider space than any construction materials production
plants. Site area of 10,000 m2 is required for the plant under consideration. The area will consist
of plant, production buildings and auxiliary buildings.
Building and structures
Office Equipment
Computer
Printer
Telephone
Fax Machine
Furniture & Fixture
Furniture
Air conditioners
Infrastructure Requirements

The following important infrastructure resources would be required for the successful plant
operations.

Water

Phone Lines

Electricity

Road network

Natural Gas

Security Support

Hub is selected because it has nearly all the resources available to some extent.
Environmental Aspects
The cement plant generates dust which contains heavy metals like nickel, cobalt, lead, and
chromium, pollutants hazardous to the biotic environment with adverse impact for vegetation,
human and animal health and ecosystems. Nitrogen oxide (NOX) emissions are generated in the
high temperature combustion process of the cement kiln. Sulfur dioxide (SO2) emissions in
cement manufacturing are primarily associated with the content of volatile or reactive sulfur in
the raw materials and in fuels. Combustion of fuel and de-carbonation of limestone produces
greenhouse gas emissions especially CO2. Air emissions, solid wastes are also generated.

Some treatment to reduce the environmental hazards:
1.
2.
3.
4.
5.

Maintaining secondary air flow as low as possible (e.g. oxygen reduction).
Using low NOX burners to avoid localized emission hot spots.
Use of wet or dry scrubbers.
Selection of fuel source and quarried materials with lower sulfur content.
Economical fuel consumption cement production like blended cement, as less fuel emits
less gas per ton of final product.
6. Energy efficient process selection and operation like dry or pre-heater or pre-calciner.

CONCLUSION
Considering all the technical aspects of the projects, the experts have concluded that the project
is technically sound and all the key areas that are to be considered are taken in to consideration.

Financial Prospects:
COST OF PROJECT (RS in millions)
Land
Building
Plant and Machiney
Misc Fixed Assets
Pre operative expenses
Preliminary expenses
Contigency margin
Margin for Working
Capital

300
650
4,000
200
300
150
560
325.7
6,485.7

Project Financing
Sponsor
Share Capital

1,945.71
1,945.71

Term Loan

2594.28
6,485.7

Summary of Income Statement

PARTICULARS
SALES
REVENUE
OPERATING
PROFIT
NET PROFIT
RETAINED
EARNINGS

1

2

3

4

5

6

7

PKR IN MILLIONS
8
9
10

8320
3351.
8
1810.
03
1810.
03

10400
4399
.7
2444
.6
2200
.1

12480
5447
.5
3083
.3
2713
.3

12480
5444
.7
3098
.8

12480
5441.
8
3114.
2
2584.
8

12480
5438.
8
3129.
5
2597.
5

12480
5435.
6
3144.
8
2610.
2

12480
5432
.3
3159
.9
2622
.7

2634

12480
5428.
7
3174.
9
2635.
2

12480
5425
3189
.9
2647
.6

RATIOS
Gross profit Margin
(%)
1.00
2.00
3.00
54.40 54.50 54.56

4.00
54.54

5.00
54.51

6.00
54.49

7.00
54.46

8.00
54.44

9.00
54.41

10.00
54.38

Operating Profit
Margin (%)
1.00
2.00
3.00
40.29 42.30 43.65

4.00
43.63

5.00
43.60

6.00
43.58

7.00
43.55

8.00
43.53

9.00
43.50

10.00
43.47

Net profit Margin (%)
1.00
2.00
3.00
21.76 23.51 24.71

4.00
24.83

5.00
24.95

6.00
25.08

7.00
25.20

8.00
25.32

9.00
25.44

10.00
25.56

Return on Equity(%)
1.00
2.00
3.00
46.51 62.82 79.23

4.00
79.63

5.00
80.03

6.00
80.42

7.00
80.81

8.00
81.20

9.00
81.59

10.00
81.97

Time Interest Earned
(In Times)
1.00
2.00
3.00
9.82
13.18 17.06

4.00
18.72

5.00
20.75

6.00
23.27

7.00
26.49

8.00
30.75

9.00
36.64

10.00
45.34

Summary of Cash Flow Statements
For the Year Ended, June 30.

PKR IN
MILLIONS
PARTICULARS
NET SURPLUS
CLOSING
CASH
BALANCE

CONS.P

1

2

3

4

5

325.7

2154.1 2660.
19
09

3172.
08

3174.3 3125.1
2
4

325.7

2479.8 5139.
19
91

8311.
99

11486. 14611.
31
45

Summary of Balance sheet
As of June 30

PKR IN
MILLIONS
PARTICULARS
TOTAL ASSETS
TOTAL
LIABILITIES
AND EQUITIES

CONS.P

1

2

3

4

5

6485.7

8865.7
19

10980.
61

13608.
6

15983
.1

18309.
45

6485.7

8865.7
19

10980.
61

13608.
6

15983
.1

18309.
45

Sensitivity Analysis
Sensitivity Analysis

1. Base case (WACC at 14%)

2. If COGS increase by 10% (WACC at 14%)

3. If Sales revenue decreases by 10% (WACC at 14%)

4. If COGS increases by 10% and sales decreases by 10%

NPV
13731.6
2

11007.3
4

7746.87
1

5022.57

IRR

35%

29%

21%

15%

(WACC at 14%)

The project is safe if there is change in the Sales and COGS considering the buffer.

DEBT SERVICE COVERAGE RATIO
DSCR( In
Times)

Years
1
2
3
4
5
6
7
8
9
10

9.8
9.8
12.5
13.2
14.1
15
16
17
18.9
20.8

The Bahria Cement would generate at least 9.8 times cash to pay its debt obligations.
BREAK EVEN
3rd year, maximum
capacity 60%
Commercial Break even
Cash Break even

16.90%
11.56%

ANNEXURE: (DEMAND AND SUPPLY)
Huge potential in untapped export markets:

Emerging trends in this sector:

Market Shares:

Technical Annexure:
1. Raw material
Calcium

Silicon

Aluminium

Iron

Limestone

Clay

Clay

Clay

Marl

Marl

Shale

Iron ore

Calcite

Sand

Fly ash

Mill scale

Aragonite

Shale

Aluminium ore refuse

Shale

Shale

Fly ash

Sea Shells

Rice hull ash

Cement kiln dust

Slag

2. Energy
e)
f)
g)
h)

Coal
Electricity
Diesel
Furnace oil

3. Employees and labor:
a) General Manager
b) Secretary
c) Administrative & Finance

Blast furnace dust

d)
e)
f)
g)
h)
i)
j)
k)
l)
m)
n)
o)
p)
q)

Accountant
Marketing & sales persons
Production & Technical Head
Supervisors
Instrumentation Engineer
Mechanical Engineer
Electrical Engineer
Technicians
Laboratory Technicians
Unskilled workers
Purchaser
Store keeper
clerks
Guards

c) Machineries and Equipments:
I. Drilling Rig
II. Loaders
III. Crusher
IV. Bucket Elevator
V. Silos
VI. Grinding Mill
VII. Dust collector
VIII. Pumps
IX. Roller mill
X. Dump truck
XI. Fan
XII. Pre heater
XIII. Vertical shaft kiln
XIV. Grate cooler
XV. Bucket elevator
XVI. Storage tanks
XVII. Clinker Grinding
XVIII. Air separators
XIX. Power supply system
XX. Fuel storage tanks
XXI. Water supply unit
XXII. Compressed air system

ANNEXURE: (FINANCIAL)
ASSUMPTIONS UNDERLYING FINANCIAL PROJECTIONS
Basic assumptions underlying financial projections:
1. The construction period will last for 4 years.
2. The installed capacity is 2 million tons per annum.
3. The expected capacity utilization will be 40% in the first year, 50% in the second year,
60% in the year and beyond.
4. The sales realization per 1 ton of cement is Rs 10400 (Rs 520 per bag having 50kilo gram
cement).
5. The cost of raw material is 20% of sales.
6. The cost of utilities is 15% of sales.
7. Factory overhead is Rs 50 million per year. It will increase by 5% subsequently in each
year.
8. Salaries/wages are 5% of sales and other costs are also 5 % of sales.
9. Administrative expense are 2.5% of sales.
10. Selling expenses are 2% of sales.
11. Depreciation rate is 5% on building, 15% on plant & machinery and 20% on Misc. fixed
assets the basis on straight line method.
12. The term loan will be paid in 20 equal half yearly installments, with the first installment
falling due at the end of third year. The interest rate on outstanding loan is 11%.
13. The bank finance for working capital is also 8%.
14. The current assets requirements are expected to be as follows:
Raw material
2
months
Stock in process
0.05 months
Finished goods
1
month
Book debt
1
month
15. Trade credit for raw materials is 2 month.
16. Preliminary expenses are written off in 10 equal annual installments.
17. Workers fund is 7.5%

18. Dividend is paid from the second year @ 10%, third year @ 12%, fourth year @ 15%,
and @ 17% for fifth and the following years.
19. Tax rate @35%

Bahria Cement
Income Statement
For theYear Ended, June,30, ( In Rs Millions)
Years
Installed Capacity
Capacity Utilization
Production (Qty)

1
2
40%
0.8
*1040
0

8320

2
2
50%
1
*104
00
1040
0
1040
0

3
2
60%
1.2
*104
00
1248
0
1248
0

4
2
60%
1.2
*104
00
1248
0
1248
0

5
2
60%
1.2
*104
00
1248
0
1248
0

6
2
60%
1.2
*104
00
1248
0
1248
0

7
2
60%
1.2
*104
00
1248
0
1248
0

8
2
60%
1.2
*104
00
1248
0
1248
0

9
2
60%
1.2
*104
00
1248
0
1248
0

10
2
60%
1.2
*104
0
1248
0
124
0

Net production for sale

8320

Sales Revenue
Less: COGS
Rawmaterial
Utilities
Labor
Factory overhead
Others

1664
1248
416
50
416

2080
1560
520
52.5
520

2496
1872
624
55.13
624

2496
1872
624
57.88
624

2496
1872
624
60.77
624

2496
1872
624
63.81
624

2496
1872
624
67
624

2496
1872
624
70.35
624

2496
1872
624
73.87
624

2496
1872
624
77.5
624

Total COGS

3794

4732
.5

5671
.1

5673
.9

5676
.8

5679
.8

5683

5686
.4

5689
.9

569
.6

Gross profit

4526

5667
.5

6808
.9

6806
.1

6803
.2

6800
.2

6797

6793
.7

6790
.1

678
.4

Less: Operating
cost
Amin..expense
Selling Expense
Depreciation Expense
Amortization Expense

208
166.4
784.8
15

260
208
784.8
15

312
249.6
784.8
15

312
249.6
784.8
15

312
249.6
784.8
15

312
249.6
784.8
15

312
249.6
784.8
15

312
249.6
784.8
15

312
249.6
784.8
15

312
249.
784.
15

T. Operating expenses

1174.
2

1267
.8

1361
.4

1361
.4

1361
.4

1361
.4

1361
.4

1361
.4

1361
.4

136
.4

EBIT / Operatin profit

3351.
8

4399
.7

5447
.5

5444
.7

5441
.8

5438
.8

5435
.6

5432
.3

5428
.7

542

285.3
8

263.9
7

235.4
3

206.8
9

178.3
6

149.8
2

121.2
8

92.75

64.21

35.6

Total interest

55.97
341.3
5

69.91
333.
88

83.85
319.
28

83.9
290.
79

83.88
262.
24

83.9
233.
72

83.92
205.
2

83.93
176.
68

83.95
148.
16

83.9
119
64

EBT

3010.
45

4065.
8

5128.
2

5153.
9

5179.
6

5205.
1

5230.
4

5255.
6

5280.
6

5305
4

225.7
84
2784.
67

304.9
4
3760.
9

384.6
1
4743.
6

386.5
4
4767.
4

388.4
7
4791.
1

390.3
8
4814.
7

392.2
8
4838.
1

394.1
7
4861.
4

396.0
4
4884.
5

397.
1
4907
5

less tax (35%)

974.6
33

1316.
3

1660.
3

1668.
6

1676.
9

1685.
1

1693.
3

1701.
5

1709.
6

1717
6

EAT / Net profit

1810.
03

3083.
3

Less: dividend

0

2444.
6
244.4
6

370

3098.
8
464.8
2

3114.
2
529.4
2

3129.
5
532.0
2

3144.
8
534.6
1

3159.
9
537.1
8

3174.
9
539.7
4

3189
9
542.
8

Retained Earnings

1810.
03

2200.
1

2713.
3

2634

2584.
8

2597.
5

2610.
2

2622.
7

2635.
2

2647
6

Interest on term
loan
Interest on bank
borrow

Less: Workers
Funds

Bahria Cement
Cash Flow Statement
For theYear Ended, June,30, (In Rs Million)

Years

Constru
ction
period

1

2

3

4

5

3351.
8
784.8
15

4399.
7
784.8
15

5447.
5
784.8
15

5444.
7
784.8
15

5441.
8
784.8
15

699.7

174.2

174.1

0

1

Sourses of funds

EBIT
Depreciation
Amortization
Sponsers
Share Capital (IPO)
Inc in term loan
Inc in Bank borrowing

1945.71
1945.71
2594.28

Total

6485.7

4851.
3

5373.
7

6421.
4

6244.
5

6242.
6

1025.
7
285.3
8

254.6
263.9
7

255.7
235.4
3

0
206.8
9

1
178.3
6

83.85
259.4
3
384.6
1
1660.
3
370

83.9
259.4
3
386.5
4
1668.
6
464.8
2

83.88
259.4
3
388.4
7
1676.
9
529.4
2

Uses of funds
Capital Expenditure
Preliminary Expenses

6010
150

Inc in Working capital
Interest paid on term
loan
Interest paid on bank
borrowing

Tax paid

55.97
129.7
14
225.7
84
974.6
33

Dividend paid

0

69.91
259.4
3
304.9
4
1316.
3
244.4
6

2697.
181

2713.
61

3249.
32

3070.
18

3117.
46

325.7
2154.
119
2479.
819

2479.
82
2660.
09
5139
.91

5139.
91
3172.
08
8311
.99

8311.
99
3174.
32
11486
.31

11486
.31
3125.
14
14611
.45

Term loan repayment
workers funds paid

Total

6160

Opening Cash balance

0

Net Cash surplus

325.7

Ending Cash balance

325.7

Bahria
Cement
Balance Sheets
As on June,30 (In Rs
Millions)

Years
Assets

Constru
ction
Period

1

2

3

4

5

Fixed Assets
Gross block
less: Accumulated
dep.
Net fixed Assets

6010

6010

6010

0

784.8

1569.6

6010

5225.2

4440.4

6010
2354.
4
3655.
6

6010
3139.
2
2870.
8

6010
3924
2086

Current Assets
Working capital
Cash balance

0
325.7

preliminary exp.

Total

1025.7 1280.3 1536 1536
1537
2479. 5139. 8311 1148
819
91
.99
6.3
14611.45

150

135

120

105

90

75

6485.7

8865.
719

10980
.61

1360
8.6

1598
3.1

18309.45

1945.7
1
1945.7
1
4010.1
5
2205.1
42
873.9

1945.
71
1945.
71
6723.
43
1945.
71
1048

1945.
71
1945.
71
9357.
39
1686.
29
1048

10980
.61

1360
8.6

1598
3.1

Liabilities and
Equities

Sponsers

1945.71

Share capital (IPO)
Reserves and
Surplus

1945.71

Term loan
Bank borrowing

2594.28
0

1945.7
1
1945.7
1
1810.0
3
2464.5
7
699.7

Total

6485.7

8865.
72

0

1945.71
1945.71
11942.17
1426.858
1049

18309.45

PLANT AND MACHINERY COST
Amount In Rs (000’s)
Machinery Cost
Plant Cost
Transportation cost
Installation cost
Generator 10 KVA

1,450,000
200,000
1,000,000
350,000

Transformer 50 KV

1,000,000
Total Cost RS 4,000,000

MISCELLANEOUS FIXED ASSETS

Office Equipment
Description
Computer
Printer
Telephone
Fax Machine

Qty
3
2
7
2

Cost / unit
50,000
6,000
2000
12,000

Total Amount
150,000
12,000
14,000
24,000
Total 200,000

LAND COST (Amount in Rs)
Description
Land

Cost/Acre
10,000,000

Total acre
30

Total Cost
300,000,000

BUILDING AND CONSTRUCTION COST
Description
Office Building
Warehouse
Processing Hall

Cost
900
400
400

Area in sq.ft
5000
2500
2500

Total

Total Cost
4,500,000
1,000,000
1,000,000
6,500,000

Pre-operative and Preliminary Costs
Description
Drafting Memorandum of association, article of
association, Brokerage fees, advertisements,
publicity expenses, stamp duty.

150,000

Travelling expenses, Establishment expenses,
interest, insurance and miscellaneous expenses.

300,000

Total

450,000

Working Capital Requirement
(In Rs
Millions)
Item

Raw material
Stock in process

Norms
(mont
hs)

1

2

3

277
.3
15.
81
316
.2
693
.3
13
03

346
.7
19.
72
394
.4
866
.7
16
27

416
23.
63
472
.6
104
0
19
52

416
23.
6
472
.8
104
0
19
52

25%

325
.7

406
.9

488
.1

2

277
.3

346
.7

69
9.7

55.
97

2
0.05

Finished goods

1

Book debts
Total current
assets

1

Less: Margin for
W.C
from long term
debt
Less: Trade credit
for R.M
Bank Finance
for W.C

Interst on bank
finance

Years
4
5

8%

6

7

8

9

10

416
23.
65
473
.1
104
0
19
53

416
23.
67
473
.3
104
0
19
53

416
23.
68
473
.6
104
0
19
53

416
23.
69
473
.9
104
0
19
54

416
23.
71
474
.2
104
0
19
54

416
23.
72
474
.5
104
0
19
54

488
.1

488
.2

488
.2

488
.3

488
.4

488
.5

488
.5

416

416

416

416

416

416

416

416

87
3.9

10
48

10
48

10
49

10
49

10
49

10
49

10
49

10
50

69.
91

83.
85

83.
87

83.
88

83.
9

83.
92

83.
93

83.
95

83.
97

Depreciation schedule

(In Rs Millions)

Description
Land
Building
Plant & M.
Misc. FA
Capital Exp.

Cost
300
650
4000
200
5150

Pre.Op.
exp.
17.48
37.86
233.01
11.65
300

C.M
32.62
70.68
434.95
21.75
560

Total
350.1
758.54
4667.96
233.4
6010

Dep.
rate
0%
5%
15%
20%

Dep
0
37.93
700.19
46.68
784.8

Interest Schedule on Term Loan
(In Rs Millions)
yea
r

1
2
3
4
5
6
7
8
9

Principal at
beg.

Prin. at
1st

Principal
at

Interest
2nd
half

Total

Pricipal Outstanding

2nd half

Inters
t
1st
half

half

Interest

paid

Principal

2594.28

2594.2
8

2464.57

142.6
9

142.6
9

285.3
8

129.7
14

2464.57

2464.57

2334.8
56

2205.142

135.5
5

128.4
2

263.9
7

259.4
3

2205.142

2205.142

2075.4
28

1945.714

121.2
8

114.1
5

235.4
3

259.4
3

1945.714

99.88

206.8
9

259.4
3

1686.286

85.61

178.3
6

259.4
3

1426.858

259.4
3

1167.43

1945.714

1816

1686.286

107.0
1

1686.286

1556.5
72

1426.858

92.75

1426.858

1297.1
44

1167.43

78.48

71.34

149.8
2

1167.43

1037.7
16

908.002

64.21

57.07

121.2
8

259.4
3

908.002

908.002

778.28
8

648.574

49.94

42.81

92.75

259.4
3

648.574

648.574

518.86

389.146

35.67

28.54

64.21

259.4

389.146

3

10

389.146

259.43
2

129.718

WACC Calculations
Cost of debt= 11%
Tax rate = 35 %
Weight age of debt = 40% or 0.4
Wight age of equity= 60 % or 0.6
Cost of equity =?

Cost of equity= Rf + (Rm-Rf)*beta
= 0.06 + (0.18-0.06)*1
Cost of Equity = 18%

WACC = 0.11 * (1-0.35) * 0.4 +
0.18*0.6
= 0.0286 + 0.108

WACC = 13.66%
Rounded off to 14%

21.4

14.27

35.67

259.4
3

129.718

Relevant Cash flows,
NPV AND IRR
COMPUTATIONS
Bahria Cement
Relevant Cash Flows
(In Rs Millions)
Bahria cement have assumed that there won't be any loss on contribution.

Years

0

1

2

3

4

5

6

1. Capital Investment

6160

2. Level of Net Working Capital
(Ending)

325.
7

406.
9

488.
1

488.
11

488.2

488.2
5

488.3

3. Sales

8320

1040
0

1248
0

12480

12480

12480

4. All costs (COGS + operating
expenses)

4968
.2

6000
.3

7032
.5

7035.
3

7038.
2

7041.2

6. Profit before tax

3351
.8

4399
.7

5447
.5

5444.
7

5441.
8

5438.8

7. Less: Welfare Funds (7.5%)

225.
78

304.
94

384.
61

386.5
4

388.4
7

390.38

including Dep. plus amortization

8.Less tax (35%)

974.
63

1316
.3

1660
.3

1668.
6

1676.
9

1685.1

9. Profit after tax

2151
.4

2778
.5

3402
.6

3389.
56

3376.
43

3363.32

2951
.2

3578
.3

4202
.4

4189.
36

4176.
23

4163.12

325.
7

81.2

81.2

0.01

0.09

0.05

0.05

6485
.7

2870

3497
.1

4202
.4

4189.
27

4176.
18

4163.07

10. Net salvage value
11. Recovery of net working
capital
12. Capital Investment

6160

13. Operating Cash Inflow

14. Net Working Capital
15.Terminal Cash Inflow

16. Relevant Cash flow

Years

7

8

9

10

0

1. Capital Investment
2. Level of Net Working Capital
(Ending)

488.4

488.5

488.5
5

3. Sales

12480

12480

12480

12480

4. All costs (COGS + operating
expenses)

7044.
4

7047.
8

7051.
3

7055

6. Profit before tax

5435.
6

5432.
2

5428.
7

5425

7. Less: Welfare Funds (7.5%)

392.2

394.1

396.0

397.91

including Dep. plus amortization

8

7

4

8.Less tax (35%)

1693.
3

1701.
5

1709.
6

1717.6

9. Profit after tax

3350.
02

3336.
53

3323.
06

3309.49

10. Net salvage value

200

11. Recovery of net working capital

325.7

12. Capital Investment
13. Operating Cash Inflow

4149.
82

4136.
33

4122.
86

4109.29

14. Net Working Capital

0.1

0.1

0.05

0

15.Terminal Cash Inflow

525.7
4149.
72

16. Relevant Cash flow

4136.
23

4122.
81

4634.99

If COGS increases by 10%
Years

0

1. Capital Investment
2. Level of Net Working
Capital (Ending)

6160

3. Sales
4. All costs (COGS +
operating expenses)
Including Dep. plus
amortization

6. Profit before tax
7. Less: Welfare Funds (7.5%)
8.Less tax (35%)
9. Profit after tax
10. Net salvage value

325.7

1

2

3

4

5

6

406.9
8320
5347.
6

488.1
1040
0
6473.
55

488.1
1
1248
0
7599.
61

488.2
1248
0
7602.
69

488.2
5
1248
0
7605.
88

488.3
1248
0
7609.
18

2972.
4
225.7
84
974.6
33
1771.
98

3926.
45
304.9
4
1316.
3
2305.
21

4880.
39
384.6
1
1660.
3
2835.
48

4877.
31
386.5
4
1668.
6
2822.
17

4874.
12
388.4
7
1676.
9
2808.
75

4870.
82
390.3
8
1685.
1
2795.
34

11. Recovery of net working
capital
12. Capital Investment

-6160
2571.
78

3105.
01

3635.
28

3621.
97

3608.
55

3595.
14

325.7

81.2

81.2

0.01

0.09

0.05

0.05

6485.
7

2490.
58

3023.
81

3635.
27

3621.
88

3608.
5

3595.
09

13. Operating Cash Inflow
14. Net Working Capital
15.Terminal Cash Inflow
16. Relevant Cash flow
Years
1. Capital Investment
2. Level of Net Working Capital
(Ending)
3. Sales
4. All costs (COGS + operating
expenses)
Including Dep. plus amortization

6. Profit before tax
7. Less: Welfare Funds (7.5%)
8.Less tax (35%)
9. Profit after tax
10. Net salvage value
11. Recovery of net working
capital
12. Capital Investment
13. Operating Cash Inflow
14. Net Working Capital
15.Terminal Cash Inflow
16. Relevant Cash flow

7

8

9

10

488.4
12480
7612.
7

488.5
12480
7616.
44

488.55
12480
7620.2
9

0
12480

4867.
3
392.2
8
1693.
3
2781.
72

4863.
56
394.1
7
1701.
5
2767.
89

4859.7
1

4855.64

396.04

397.91

1709.6
2754.0
7

1717.6

7624.36

2740.13
200
325.7

3581.
52
0.1

3567.
69
0.1

3553.8
7
0.05

3581.
42

3567.
59

3553.8
2

3539.93
0
525.7
4065.63

If Sales Decreases by
10%
Years

0

1. Capital Investment

616
0

1

2

3

4

5

6

2. Level of Net Working Capital
(Ending)

325.
7

406.
9
748
8
496
8.2

488.
1
936
0
600
0.3

488.
11
112
32
703
2.5

488.2
1123
2
7035.
3

488.
25
112
32
703
8.2

488.
3
1123
2
7041
.2

251
9.8
225.
78
974.
63
131
9.4

335
9.7
304.
94
131
6.3
173
8.5

419
9.5
384.
61
166
0.3
215
4.6

4196.
7
386.5
4
1668.
6
2141.
56

419
3.8
388.
47
167
6.9
212
8.4

4190
.8
390.
38
1685
.1
2115
.3

211
9.2

253
8.3

295
4.4

2941.
36

292
8.2

2915
.1

325.
7

81.2

81.2

0.01

0.09

0.05

0.05

648
5.7

203
8

245
7.1

295
4.4

2941.
27

292
8.2

2915
.1

3. Sales
by 10%
4. All costs (COGS + operating
expenses)
Including Dep. plus amortization
6. Profit before tax
7. Less: Welfare Funds (7.5%)
8.Less tax (35%)
9. Profit after tax
10. Net salvage value
11. Recovery of net working
capital
12. Capital Investment
13. Operating Cash Inflow
(17+dep+amort.)
14. Net Working Capital
15.Terminal Cash Inflow
16. Relevant Cash flow

Years
1. Capital Investment
2. Level of Net Working Capital
(Ending)
3. Sales
by 10%
4. All costs (COGS + operating
expenses)
Including Dep. plus amortization
6. Profit before tax
7. Less: Welfare Funds (7.5%)
8.Less tax (35%)

616
0

7

488.
4
1123
2
7044
.4
4187
.6
392.
28
1693
.3

8

9

10

488.5

488.55

0

11232
7047.
8

11232

11232

7051.3

7055

4180.7

4177

396.04

397.91

1709.6

1717.6

4184.
2
394.1
7
1701.
5

9. Profit after tax
10. Net salvage value
11. Recovery of net working capital
12. Capital Investment
13. Operating Cash Inflow
(17+dep+amort.)
14. Net Working Capital
15.Terminal Cash Inflow
16. Relevant Cash flow
IF Sales decreases by 10% and
COGS increases
By 10%

2102
.02

2088.
53

2075.0
6

2901
.82
0.1

2888.
33
0.1

2874.8
6
0.05

2901
.72

2888.
23

2874.8
1

Years

0

1

2

3

1. Capital Investment

616
0

2. Level of Net Working Capital
(Ending)

325.
7

375.
5

450.
42

450.4
8

3. Sales
by 10%
4. All costs (COGS
by 10% +
operating exp)

748
8
534
7.6

936
0
647
3.6

11232
7599.
6

6. Profit before tax

214
0.4

288
6.5

3632.
4

225.
78
974.
63
939.
98

304.
94
131
6.3
126
5.2

173
9.8
81.2

7. Less: Welfare Funds (7.5%)
8.Less tax (35%)
9. Profit after tax
10. Net salvage value
11. Recovery of net working
capital (295-52)
12. Capital Investment
13. Operating Cash Inflow
(EAT+dep+amort.)
14. Net Working Capital
15.Terminal Cash Inflow

2061.49
200
325.7

2861.29
0
525.7
3386.99

4

45
0.
5
11
23
2
76
03

5

450.
6
112
32
760
6
362
6

384.6
1
1660.
3
1587.
5

36
29
38
6.
5
16
69
15
74

206
5

2387.
3

23
74

236
1

81.2

0.01

0.
09

0.05

388.
5
167
7
156
1

616
2
325.
7

16. Relevant Cash flow
Years
1. Capital Investment
2. Level of Net Working Capital
(Ending)
3. Sales
by 10%
4. All costs (COGS
operating exp)

by 10% +

6. Profit before tax
7. Less: Welfare Funds (7.5%)
8.Less tax (35%)
9. Profit after tax
10. Net salvage value
11. Recovery of net working capital
(295-52)
12. Capital Investment
13. Operating Cash Inflow
(EAT+dep+amort.)
14. Net Working Capital

648
5.7

165
8.6

198
3.8

2387.
3

23
74

6

7

8

9

10

450.
68
112
32
760
9.2

450.
75
112
32
761
2.7

450.
83
112
32
761
6.4

450.
91
112
32
762
0.3

0
112
32
762
4

362
2.8
390.
38
168
5.1
154
7.3

361
9.3
392.
28
169
3.3
153
3.7

361
5.6
394.
17
170
1.5
151
9.9

361
1.7
396.
04
170
9.6
150
6.1

360
8
397.
9
171
8
149
2
200
325.
7

234
7.1
0.05

233
3.5
0.1

231
9.7
0.1

230
5.9
0.05

234
7.1

233
3.4

231
9.6

230
5.8

229
2
0
525.
7
281
8

15.Terminal Cash Inflow
16. Relevant Cash flow

236
1

At Base Case WACC: 14%
Relevant Cash Flow:

Present Values:

0
6485.7

1
2869.9
83

2
3497.0
6

3
4202.3
8

4
4189.2
7

5
4176.1
8

6485.7

2517.5
29

2690.8
74

2836.4
87

2480.3
84

2168.9
77

6

7

8

9

10

4163.0

4149.7

4136.2

4122.8

4634.99

7

2

3

1

1896.6
39

1658.3
83

1449.9
93

1267.7
97

1250.26

20217.
32
13731
.62

Sum of Present Values:
Net Present Value:
IRR:

35%

If COGS increases by 10%, WACC:
14%
Relevant
Cash Flow:

0

Present
Values:

-6485.7

1
2490.
5

2
3023.
8

3
3635.
2

4
3621.
88

-6485.7

2184.
7

2326.
7

2453.
7

2144.
4

5
3608.
5

6
3595.
09

7
3581.
42

8
3567.
59

9
3553.
82

10
4065.
63

1874.
142

1637.
875

1431.
269

1250.
651

1092.
828

1096.
679

Sum of Present Values:

Net Present Value:
IRR:

14232.
57
7746.
871
21%

Sales decrease by 10%, WACC:
14%

Relevant
Cash Flow:

Present
Values:

0

1

2

-6485.7

2037.
98

2457.
06

2954. 2941.2
38
7

-6485.7

1787.
704

1890.
628

1994. 1741.4
122
78

5
2928.
18

6
2915.
07

7
2901.
72

8
2888.
23

9
2874.
81

10
3386.
99

1520.
805

1328.
067

1159.
636

1012.
495

884.0
269

913.6
196

3

4

14232.
57

Sum of Present Values:

7746.
871

Net Present Value:
IRR:

21%

If Sales revenue decreases by 10 % and COGS
increases by 10%
Relevant
Cash Flow:

Present
Values:

0

1

2

3

-6485.71

1658.583

1983.81

2387.27

4
2373.8
8

-6485.71

1454.897

1526.477

1611.339

1405.5
28

5
6
2360. 2347.0
5
9

7
8
2333.4 2319.5
2
9

9
2305.
82

10
2817.6
3

1225. 1069.3
97
03

932.52 813.15
17
33

709.0
58

760.03
83

11508.
29

Sum of Present Values:

5022.
575

Net Present Value:
IRR:

15%

Debt Service Coverage Ratio (in Times)

Formula

EBT + Depreciation + Amortization + Interest on long term loan + Lease payments(if any) /
Repayment of debt + Interest on term debt + lease rental (if any)
Repayment of debt + Interest on term debt + lease rental ( if any)
Year

Year

1
2

1

2

3

4

5

4095.63/415.
094

5129.57/52
3.4

6163.43/49
4.86

6160.59/46
6.32

6157.76/437.79

9.87

9.8

12.45

13.21

14.07

6

7

8

9

10

6154.72/409.
25

6151.48/38
0.71

6148.15/35
2.18

6144.61/32
3.64

6140.87/295.1

15.04

16.16

17.46

18.99

20.81

EBT

Dep.

Amort.

Interest on
term debt

Repayment on
term debt

3010.45

784.8

15

285.38

129.714

4065.8

784.8

15

263.97

259.43

3
4
5
6
7
8
9
10

5128.2

784.8

15

235.43

259.43

5153.9

784.8

15

206.89

259.43

5179.6

784.8

15

178.36

259.43

5205.1

784.8

15

149.82

259.43

5230.4

784.8

15

121.28

259.43

5255.6

784.8

15

92.75

259.43

5280.6

784.8

15

64.21

259.43

5305.4

784.8

15

35.67

259.43

Break even
Maximum capacity
60%
3rd year

(In Rs Millions)
Fixed
Variable
costs
costs

1

Raw Materials

100% variable

0

2,496

2

Utilities

80% variable, 20% fixed

374

1,498

3

Labor

75% variable, 25% fixed

156

468

4

Factory Overhead

50% variable, 50% fixed

27.56
5

27.56
5

5

Others

80% variable, 20% fixed

74.88

299.5
2

6

Administration
exp.

100% fixed

312

0

7

Selling expense

80% variable, 20% fixed

50

199

8

Depreciation exp.

100% fixed

785

0

9

Amortization exp.

100% fixed

15

0

10

Interest

100% fixed

319

0

11

Total

2113.
45

Principal
Repayment

130

1. Commercial

Fixed costs / (Sales -Variable costs)
*100

break even
2113 / (12480 - 4989) * 100
28.21%
28.21% * 60%
16.93%

2. Cash Break
even

F.costs - Dep - Amortization +
Principal Repayment /
( Sales - Variable costs)

*100

2113 - 785 - 15 + 130 / (12480 - 4988) *100
19.27%
19.27% * 60%
11.56%

4988.
09