Bed Linen Stitching Unit

Pre-Feasibility Study
BED LINEN STITCHING UNIT
Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
Waheed Trade Complex, 1s t Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore
Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756
helpdesk@smeda.org.pk
REGIONAL OFFICE
PUNJAB
Waheed Trade Complex,
1 st Floor, 36-Commercial Zone,
Phase III, Sector XX,
Khayaban-e-Iqbal, DHA Lahore.
Tel: (042) 111-111-456
Fax: (042) 5896619, 5899756
helpdesk@smeda.org.pk
REGIONAL OFFICE
SINDH
REGIONAL OFFICE
NWFP
REGIONAL OFFICE
BALOCHISTAN
5 TH 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
August, 2002
Bed Linen Stitching Unit
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-52
Revision
Prepared by
SMEDA-Punjab
Approved by
GM Punjab
Issue Date
August 10, 2002
Issued by
Library Officer
1
PREF-52/August, 2002/1
1 INTRODUCTION
1.1
Pro je ct B rie f
The objective of this document is to provide information regarding investment opportunity

in Bed Linen sector. Bed Linen is an important value added sub-sector of Textile sector.
The products include bed sheets, pillow covers, quilts, etc. This project provides
information about stitching unit of Bed Linen.
1.2
Oppo rt unity Rat io nale
Bed Linen is among the largest sector in terms of production and exports amongst all the
made ups in Pakistan. Pakistan is a major exporter of Bed Linen in the world and the basic
reason for the development of this industry in Pakistan is the existence of a huge
infrastructure of weaving in formal & informal sectors. The informal sector is also known
as Power Loom sector. Most of the products in Bed Linen are made from low-density
fabrics of wider widths. This fabric can be easily manufactured on Power & Auto Looms,
which forms the major chunk of weaving industry of Pakistan. The competitive edge in
cotton has also played an important role in development of Power Loom industry, as the
staple length of cotton produced in Pakistan is suitable for medium count yarn, which is
used to produce low-density fabrics. The cost of a low-density fabric is low compared to a
fabric meant for garments. Processing of the fabric meant for Bed Linen is done through
printing and dyeing, and Pakistan has an exceptional infrastructure of such printing and
dyeing in Faisalabad, Karachi and Lahore.
All these factors have led to a competitive advantage for Pakistan over other countries in
the Bed Linen industry, resulting in extra-ordinary growth during the past few years. The
projected growth rates in the said sector are also very high and promise good growth
opportunities to new entrants in the industry.
1.3
Pro pos e d Ca pacity
The proposed capacity of the project is based on 8-hour single shift and will produce 1,000
Bed Linen sets per day with 20 stitching machines.
1.4
Total Pro je ct Cos t
Total cost of the proposed project is about Rs. 3.5 Million.
2 CURRENT INDUSTRY STRUCTURE

A major chunk of the Pakistani Bed Linen industry is in the informal sector. According to
industry sources, there are 150 units producing Bed Linen in the organized sector and the
rest of the units are in the unorganized sector. There is no data available on these units. The
Bed Linen industry may be large or small depending upon the number of operations
carried out by a unit itself. It involves weaving/knitting, processing and stitching. A Bed
Linen manufacturer may be buying fabric from outside and converting it into final product
after processing it in- house. Or the processing is subcontracted and manufacturers are just
cutting, stitching and packing in their own premises. Vertically integrated units are smaller
2
in number and they operate in relatively upper market segments since it is easy to control
the quality in a vertically integrated operation.
Another reason for non-availability of data about Bed Linen industry is the nature of data
reporting. The classification of the industry is based on the operations rather than the
products. Moreover, manufacturers also keep on changing products. Major clusters of Bed
Linen are in Karachi, Faisalabad, Lahore, Multan and Hyderabad.
3 PRODUCTION PROCESS FLOW

The major raw material used in the Bed Linen is printed woven fabric, which is
manufactured on Power/Auto Looms or Shuttle- less Looms. Majority of the Bed Linen
manufacturers procures yarn and converts it into woven grey fabric by paying conversion
charges to the looms units.
Figure 3-1
Process flow Diagram
Procurment of
Grey Fabric
Inspection of
Printed
Fabric
Printing of
Fabric
Cutting
Packaging
Threading &
Final
Inspection
Stitching
The grey fabric is provided to printing & processing unit and printing charges are paid to
get printing according to the given designs and colors. The other possible option used in
the market is to directly buy printed fabric from the market and convert it into Bed Linen.
Once the bed sheet is stitched, final inspection is done. All the sheets are checked for any
defective stitching or loose threads and then they are packed in polyethylene bags along
with insert, which is the printed material with brand name etc and card called stiffener.
4 RAW MATERIAL
4.1
?
?
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Lis t of Ra w M ate ria l

Printed Woven Fabric
Stitching Thread & Other Accessories
Packaging Material
Stitching thread and packaging material are easily available in the local market. Packaging
material consists of stiffener, which is of cardboard material, an insert, which is a printed
material with companys name and design and polyetnene bag, which is the plastic cover.
3
5 PRODUCTION
5.1
Pro duct ion Ca pac ity
The proposed project with 20 machines will produce 1,000 sets of Bed Linen per day on
the basis of 8- hour single shift. In the first year, the capacity utilization of the project will
be 75%, with annual growth rate of 5 %. The maximum capacity utilization of the project
is 95%. The details regarding the capacity of the project are given below:
Table 5-1: -Capacity Details
Description
Maximum Production per Day
Production Capacity Per Year
Capacity Utilization first Year (75%)
5.2
1,000 Sets
300,000 Sets
225,000 Sets
Pro duct M ix
The proposed stitching unit has been defined to manufacture bed sets. The general product
mix and sizes are defined as follows:
Table 5-2
Product mix
Description
No
Items
Measurement
1
1
1
Flat
Fitted
Pillow
168x244 cm
178x230 + 20 cm
51x76 + 15 cm
1
1
2
Flat
Fitted
Pillows
206x244 cm
178x230 + 20 cm
51x76 + 15 cm
1
1
2
Flat
Fitted
Pillows
229x257 cm
196x241 + 20 cm
51x76 + 15 cm
1
1
2
Flat
Fitted
Pillows
274x257cm
244x244 + 20cm
51x76 + 15 cm
Twin Set
Full Set
Queen Set
King Set
4
5.3
Pro duct ion M ix
The proposed project will produce the products on the basis of following proportion:
Table 5-3
Production Mix Production Details
Description
Twin Set
Full Set
Queen
King
Production Percentage
12.5%
50%
25%
12.5%
6 MARKETING
Textile made-ups are one of the most valuable and important commodities being traded
internationally. In 1999, the international textile made-ups trade value was above US$ 11
billion, which can be divided into six major categories i.e. towels & cleaning cloths, bed
wear & bed linen, blankets, curtains and furnishings, canvas products and table linen.
Major exporters of textile made-ups include China, Pakistan, Turkey and Portugal
exporting nearly 47% of the total international market of textile made- ups. The textile
made-ups industry has been on a slow growth, for the last five years 1 with an average
annual growth rate of 3%, and 1999 was the worst year for textile made- ups products (3%
decline in international exports) which is the only year with negative growth in last five
years.
Pakistan being the second largest exporter of textile made-ups, has increased its share in
the internationa l market from 6.6% to 10.1% in previous five years by earning a foreign
exchange of US$ 1.18 billion in 1999 and an average growth of 15% per annum.
According to Federal Bureau of Statistics data, Pakistan exports for the year 2000-01 were
about US$ 1.3 billion.
6.1
Glo bal Tra de of Be d Li ne n
Bed Linen is an important value-added sub-sector of textile sector. Bed Linen products
include bed sheets, pillow covers, quilts, etc. In made ups, Bed Linens sub-sector is the
second largest in terms of production and exports, and shares 28% of total textile made- ups
market. Its share has increased from 26.3% as a sub category and has grown by 4% per
annum if total exports are analyzed. 2
Table 6-1
World Trade of Bed Linen
World
Growth % age
1995
2,753
1996
2,822
3%
1997
3,028
7%
(Value in $ Million)
1998
1999
3,154
3,260
4%
3%
Here data for the years 1995-99 has been used for international comparison, which is the latest available
data.
2
World trade of Bed Linen is reported under different SITC codes. For the purpose of analysis, all these
codes have been summed together to get the overall picture of the worlds trade of bed wear & linen.
5
The total exports of Bed Linen in 1999 were $ 3,260 million. Within different products of
Bed Linen, non-knit Bed Linen of cotton was the largest product in terms of international
exports. In 1999, total exports of this product were $2.09 billion, which constituted 64% of
the total exports of Bed Linen. Knit Bed Linen is the smallest category with only 10%
share. The rest of the 26% was accounted by Bed Linen of textile materials other than
cotton. The export market size of this product was $844 million.
Table 6-2
World Exports Category-wise
Commodity
SITC Code 3
(Aggregate)
Bed linen, cotton
Bed linen, other textiles
Bed linen, knit, crochet
65842
65843
65841
6.2
1995
1996
2,753
1,842
607
305
2,822
1,807
715
301
1997
3,028
1,902
835
291
%
1998 1999 Share
3,154
1,992
858
303
3,260
2,097
844
319
100%
64.32%
25.89%
9.78%
M ajo r Ex po rte rs of Be d Li ne n
China is the main exporter of bed Linen as a whole and exported 21.34% of the Bed Linen
market in 1999. Pakistan which had the second largest share i.e. 20.89% in 1999 had a
phenomenal growth of 16% per annum in last five years and then was Portugal, capturing
11.67% of Bed Linen market.
Table 6-3
Major Exporters of Bed Linen

1995
China
Pakistan
Portugal
Turkey
USA
France
Mexico
Other
6.3
658
376
321
117
103
108
85
986
1996
1997
1998
1999
% Share in 99
597
708
603
696 21.34%
469
487
567
681 20.89%
325
355
384
380 11.67%
131
174
210
214 6.55%
106
122
144
111 3.39%
103
108
122
127 3.89%
115
121
133
77 2.38%
975
953
990
974 29.88%
M ajo r I mpo rte rs of Be d Li ne n
USA. has been the biggest importer of Bed Linen for the last five years and shared 22.5 %
of total imports with a value of US$ 688 million in 1999. Germany was second with
approximately 14.46 % of world imports.
Standard International Trade Classification.

6
Table 6-4
Major Importers of Bed Linen

1995
1996
1997
1998
375
373
470
614
482
500
459
462
156
177
215
244
206
184
194
229
264
241
238
204
113
113
104
106
160
168
168
107
USA
Germany
Untd. Kingdom
France
Japan
Netherlands
Honk Kong
6.4
1999 % Share in 99
688 22.49%
442 14.46%
273 8.94%
241 7.87%
221 7.24%
106 3.46%
85 2.80%
Pakis ta ns Ex po rts i n Be d Line n
In 1999, Bed Linen accounted for $681 million in foreign exchange earnings, which was
approximately 57.4% of total textile made-ups exports of Pakistan. The share has increased
from 54.4% which shows that Pakistan exports of textile made-ups as a whole has
increased at a much lower rate than this sub category. In Pakistan, the Bed Linen market
has increased by an annual average of 16% in last five years with a high growth in 1996
and 1999, i.e. by 25% and 20% respectively. Looking at the international perspective,
Pakistans share of the Bed Linen market has increased from 13.65% in 1995 to 21% in
1999.
Table 6-5
Pakistan Exports of Bed Linen

1995
375.90
Years
Value
Growth % (Value)
1996
469.03
25%
1997
486.78
4%
1998
567.37
17%
1999
681.01
20%
2000
709
4%
2001
752
6%
For international comparisons, the data used is for the year 1999. However, data is also
available for Pakistan for the year 2000-2001, which shows that there has been an increase
in exports from $681.01 million to nearly $752.53 million by more than 11% in the last
two years.
6.5
Pakis ta ns Tra di ng Pa rt ne rs
Some of the leading importers from Pakistan include USA., which imported 24.9% of
Pakistans Bed Linen, UK, which imported nearly 12.1% and Germany, which shared
11.39% of the Pakistan exports of Bed Linen in 1999.
Table 6-6
Pakistan Trading Partners
Country
USA
United Kingdom
Germany
France
Netherlands
1998
% Share
133.4
23.50%
65.3
11.51%
72.3
12.74%
52.1
9.19%
61.7
10.88%
7
1999
% Share
169.6
24.90%
82.4
12.10%
77.6
11.39%
65.6
9.63%
53.4
7.85%
Looking at the break-up of Pakistani Bed Linen exports, it has been found that about two
third of the total value exported is accounted by just one category which is non-knit Bed
Linen of cotton i.e. 70% of the total Bed Linen exports. This is in line with the world
trend since this category is the largest category in the global exports with 64% share. A
table showing Pakistani exports to 7-digit SITC codes is given below:
Table 6-7
Pakistan Ex ports Details for Bed Linen
Description
Knit Bed Linen
Bed Sheets
Pillow Covers
Bed Linen nes.
Non-Knit Bed Linen of Cotton
Bed Sheet Mill made
Bed Sheet Hand loom
Bed Cover Mill made
Bed Cover Hand loom
Fitted Sheet Mill made
Fitted Sheet Hand loom
Pillow Cover Mill made
Pillow Cover Hand loom
Khes Hand loom
Quilts
Ghilaf with Embroidery
Bed Linen nes.
Non-Knit Bed Linen of Other Textiles
Bed Sheet Mill made
Bed Sheet Hand loom
Bed Cover Mill made
Bed Cover Hand loom
Fitted Sheet Mill Made
Fitted Sheet Hand loom
Pillow Cover Mill made
Pillow Cover Hand loom
Khes Hand loom
Quilt Cover
Bed Linen nes
SITC Code
65841
6584101
6584102
6584109
1999-2000
2000-2001
2.87
0.29
0.40
3.32
1.41
0.34
6584201
6584202
6584203
6584204
6584205
6584206
6584207
6584208
6584211
6584212
658213
6584219
306.1
1.13
3.23
0.51
50.72
0.02
23.41
0.36
0.26
117.55
0.11
0.53
319.05
1.11
4.03
0.19
61.1
0.01
27.62
0.32
0.28
107.42
6584301
6584302
6584303
6584304
6584305
6584306
6584307
6584308
6584311
6584312
6584319
121.12
0.16
0.25
0.22
11.90
133.96
0.23
0.54
0.08
13.93
0.46
18.14
0.05
Total
13.72
0.19
0.05
53.46
0.31
709.59
8
0.92
56.77
1.26
752.53
7 MACHINERY REQUIREMENT
Table 7-1
Machinery Details 4
Description
Cutting Machine
Lock Stitch (Single Needle)
Safety Stitching Over Lock (5 Thread)
Other Equipment
Electric Wiring (per machine)
Machine Base Tool
Machines
Required
1
18
2
Cost/Machine
(Rs)
85,000
32,500
85,000
18
18
1,000
1,500
Total Cost
(Rs)
85,000
585,000
170,000
18,000
27,000
Total (Rs)
885,000
All the required stitching machinery is easily available in the market. The stitching
machinery is available in quite a diversified range of suppliers & origins, i.e. Japanese,
Italian, Chinese, Korean and Taiwanese origin. There is a substantial difference between
their prices. European and Japanese machinery is 2 to 3 times more expensive as compared
to Chinese or Far Eastern machinery. Second hand machinery of different origins is also
available in the local market.
Table 7-2
Other Equipment Details
Description
Furniture & Fixture
Office Equipment
Telephone Set
Fax
Computer
Printer
Air conditioner
Carpeting
Total Cost
Number
Rate (Rs)
90,000
Cost (Rs)
90,000
2
1
1
1
1
300 Sq ft
1,500
7,000
35,000
7,000
45,000
20
3,000
7,000
35,000
7,000
45,000
6,000
193,000
8 HUMAN RESOURCE REQUIREMENT

The stitching operators will be paid on piece rate basis. The rates given in the below table:
Table 8-1: -Stitching Charges
Description
Stitching Operators
Rate
Rs. 8.00 Per Set
The machines used in the proposed project is Juki brand, which are assembled in China
9
Table 8-2: -Human Resource Requirement

Description
Required
Salary/Month
(Rs)
1
1
1
2
30,000
12,000
7,000
3,000
360,000
144,000
84,000
72,000
660,000
1
1
1
1
2
3
3
2
1
10,000
10,000
8,000
5,000
4,000
2,500
2,500
2,500
1,500
120,000
120,000
96,000
60,000
96,000
90,000
90,000
60,000
18,000
750,000
Administrative Staff
CEO/Owner
Marketing Manager
Accounts
Security Guards
Total
Direct Labor
Production In charge
Stitching Supervisor
Cutting Master
Finishing Supervisor
Rowing Inspector
Clippers
Packaging Staff
Final Table Inspector
Technician/Electrician (part time)
Total Direct Labor
Salary/Yearly
(Rs)
9 LAND & BUILDING

9.1
Total La nd Re qui re me nt
The detail regarding the area required for a Bed Linen unit of 20 stitching machines is
given below:
Table 9-1
Covered Area Requirement
Description
Production Area
Cutting Area
Inspection Room
Raw Material Store
Finished Goods Store
Management Building
Free Space
Total
9.2
Required Area (sq. ft)

1,600
400
700
400
400
300
700
4,500
Re ntal De tails
It is recommended that this project should be started in a rented building, as this will
reduce the initial capital cost of the project. An appropriate premises is generally available
in many commercial/industrial areas of the main clusters of Bed Linen. One year rent will
be paid in advance.
10
Table 9-2
Rent Cost
Rent Cost
Building rent cost (@ Rs. 15,000 per 4,500 sq. ft)
9.3
Monthly Rent
(Rs)
15,000
Annual Rent
(Rs)
180,000
Sui table Locat io ns
The clusters of Bed Linen stitching industry exist predominantly in Karachi, Faisalabad,
Lahore and Multan. Most of the Bed Linen manufacturers are based in these major cities,
so it is recommended that such unit should be started in these areas. The basic criteria for
the selection of location within these clusters should be the accessibility of skilled
manpower and easy accessibility of raw material. Also, basic utilities like electricity, water
and public transport are a must for the establishment of such sort of unit.
9.4
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Uti li tie s Re qui re me nts

Electricity
Telephone
Water
11
10 PROJECT ECONOMICS
Table 10-1
Project Cost/Capital Requirements
Project Costs
Plant & Machinery
Furniture & Fixtures
Office Equipment
Pre-Operating Costs 5
Total Fixed Cost
885,000
90,000
103,000
137,000
1,215,000
Raw Material Inventory

Advance Building rent
Pre paid Insurance
Working Capital
2,170,680
180,000
32,340
2,383,019
Total Investment in Project
3,598,019
Table 10-2
Financing Plan
Equity
Debt
Long Term Loan
Short Term (Running Finance)
Total Debt
50 %
50 %
1,799,009
1,799,009
1,799,009
1,799,009
Major portion of investment is required for working capital, due to which the debt
recommended for the project is in form of short term because majority of investment will
be in raw material etc.
Table 10-3
Project Returns
Internal Rate of Return

Net Present Value (NPV) (Rs)
Payback Period (Years)
69.07%
12,049,513
5.33
These expenses are incurred before the unit is operational, e.g. salaries of key personal for 1 month,
stationery, company formation expenses, legal and registration charge, etc.
12
11 KEY SUCCESS FACTORS

The commercial viability of this Bed Linen stitching unit depends on the regular export
orders, which means a very effective marketing of the product in the international market.
One of the important factors in success of this business is procurement of raw material,
especially the grey woven fabric which is manufactured in a huge quantity. Due to which,
there is a huge fluctuation in the price of grey fabric. With better information regarding
quality manufactures and lower prices, a high profit margin can be attained.
Another aspect, which is mostly over- looked in this sector, is R&D. If the company has an
effective R&D department, it can come up with new designs, color schemes or innovative
packaging. This will increase the sales and also help in building high quality image of the
product, hence moving the product to upper tiers & quality conscious market segment,
resulting in higher profit margins.
Following are some of the points that have to be ensured to make this business successful:
?
?
?
?
?
Assurance of high consistent quality

Surety of products delivery on time
Competitive Rates
Cost efficiency through better managerial techniques
Better services to customers, i.e. claim settlement, etc.
12 THREATS FOR THE BUSINESS

Due to the low capital requirement of the business there has been an increase in the number
of commercial Bed Linen stitching units, which has resulted in an increase in competition
Internationally.
The elimination of quotas in 2004 will make it harder to compete. This might decrease the
profit margins in international market. Competition will be based on product quality and
competitive prices.
13
13 FINANCIAL ANALYSIS
13.1 Pro je cte d I nco me State me nt
Project Income Statement
SMEDA
In Rs
Year-1
Year-2
Year-3
Year-4
Year-5
Year-6
Year-7
Year-8
Year-9
Year-10
Sales
95,184,281
104,575,797
86,976,920
94,856,006
103,129,558
106,223,444
109,410,148
112,692,452
116,073,226
119,555,423
COST OF GOODS SOLD

Raw Material
Quota Cost
Payroll (Production Staff)
Machine Maintenance
Direct Electricity
Stationery
Clearing Cost
Sea Freight
Total
63,086,880
24,986,250
750,000
112,500
164,448
237,961
562,500
3,375,000
93,275,538
68,602,525
26,652,000
968,000
121,200
180,893
261,439
600,000
3,600,000
100,986,057
74,309,354
1,244,485
128,775
198,982
217,442
637,500
3,825,000
80,561,538
80,212,788
1,594,405
136,350
218,880
237,140
675,000
4,050,000
87,124,563
86,318,390
2,036,409
143,925
240,768
257,824
712,500
4,275,000
93,984,817
88,000,272
2,464,055
143,925
264,845
265,559
712,500
4,275,000
96,126,156
89,715,347
2,981,507
143,925
291,329
273,525
712,500
4,275,000
98,393,134
91,464,274
3,607,623
143,925
320,462
281,731
712,500
4,275,000
100,805,516
93,247,726
4,365,224
143,925
352,509
290,183
712,500
4,275,000
103,387,067
95,066,388
5,281,921
143,925
387,760
298,889
712,500
4,275,000
106,166,382
Gross Profit
1,908,743
3,589,740
6,415,382
7,731,443
9,144,741
10,097,288
11,017,014
11,886,936
12,686,159
13,389,040
OPERATING EXPENSE
Payroll (Admin)
Payroll (Marketing and Sale)
Fixed electricity
Insurance Expense
Administrative & Factory Overheads
Amortization (Pre-operational Expenses)
Depreciation
Total
516,000
144,000
298,966
32,340
485,440
13,700
107,800
1,598,246
567,600
158,400
328,862
29,106
543,794
13,700
107,800
1,749,263
624,360
174,240
361,749
25,872
461,152
13,700
107,800
1,768,872
686,796
191,664
397,923
22,638
512,795
13,700
107,800
1,933,317
755,476
210,830
437,716
19,404
568,467
13,700
107,800
2,113,393
831,023
231,913
481,487
16,170
597,019
13,700
107,800
2,279,113
914,125
255,105
529,636
12,936
627,009
13,700
107,800
2,460,311
1,005,538
280,615
582,600
9,702
658,510
13,700
107,800
2,658,465
1,106,092
308,677
640,860
6,468
691,599
13,700
107,800
2,875,195
1,216,701
339,544
704,946
3,234
726,355
13,700
107,800
3,112,280
Operating Profit
310,497
1,840,477
4,646,510
5,798,126
7,031,349
7,818,176
8,556,703
9,228,471
9,810,964
10,276,760
NON-OPERATING EXPENSE
Financial Charges on Running Finance
Building Rental
Total
287,842
179,998
467,840
686,965
197,998
884,963
703,883
217,798
921,681
40,512
239,578
280,090
0
263,536
263,536
0
289,889
289,889
0
318,878
318,878
0
350,766
350,766
0
385,843
385,843
0
424,427
424,427
(157,343)
713,882
(871,225)
0
(871,225)
955,514
784,318
171,195
(871,225)
(700,029)
3,724,828
652,327
3,072,501
(700,029)
2,372,472
5,518,036
711,420
4,806,616
2,372,472
7,179,088
6,767,813
773,472
5,994,341
7,179,088
13,173,429
7,528,286
796,676
6,731,611
13,173,429
19,905,040
8,237,825
820,576
7,417,248
19,905,040
27,322,288
8,877,705
845,193
8,032,512
27,322,288
35,354,800
9,425,122
870,549
8,554,572
35,354,800
43,909,372
9,852,334
896,666
8,955,668
43,909,372
52,865,040
PROFIT BEFORE TAX

Tax
PROFIT AFTER TAX
Retained Earnings beginning of year
Retained Earnings end of year
14
13.2 Pro je cte d Bala nce She e t
Project Balance Sheet
SMEDA
In Rs
Const Year
Year-1
Year-2
Year-3
Year-4
Year-5
Year-6
Year-7
Year-8
Year-9
Year-10
Current Assets
Cash
Equipment Spare Parts Inventory
Up-Front Insurance payment
Stocks and Inventory
Receivable
Pre-paid building rent
Total
32,340
2,170,680
179,998
2,383,019
50,000
2,344
29,106
2,361,700
4,759,214
197,998
7,400,362
50,000
2,525
25,872
2,559,493
5,228,790
217,798
8,084,478
50,000
2,683
22,638
2,764,252
4,348,846
239,578
7,427,997
4,403,929
2,841
19,404
2,976,178
4,742,800
263,536
12,408,688
10,331,556
2,998
16,170
3,035,702
5,156,478
289,889
18,832,793
17,030,633
2,998
12,936
3,096,416
5,311,172
318,878
25,773,033
24,408,314
2,998
9,702
3,158,344
5,470,507
350,766
33,400,632
32,393,806
2,998
6,468
3,221,511
5,634,623
385,843
41,645,248
40,893,453
2,998
3,234
3,285,941
5,803,661
424,427
50,413,715
52,969,880
2,998
5,977,771
466,869
59,417,519
Gross Fixed Assets

Less: Accumulated depreciation
Net Fixed Assets
1,078,000
1,078,000
1,078,000
107,800
970,200
1,078,000
215,600
862,400
1,078,000
323,400
754,600
1,078,000
431,200
646,800
1,078,000
539,000
539,000
1,078,000
646,800
431,200
1,078,000
754,600
323,400
1,078,000
862,400
215,600
1,078,000
970,200
107,800
1,078,000
1,078,000
-
137,000
137,000
123,300
123,300
109,600
109,600
95,900
95,900
82,200
82,200
68,500
68,500
54,800
54,800
41,100
41,100
27,400
27,400
13,700
13,700
Total Assets
3,598,019
8,493,862
9,056,478
8,278,497
13,137,688
19,440,293
26,259,033
33,765,132
41,888,248
50,535,215
59,417,519
Current Liabilities
Running Finance
Accounts payable
Total
1,799,009
1,799,009
4,293,532
3,272,546
7,566,078
4,399,270
3,558,227
7,957,498
253,201
3,853,814
4,107,015
4,159,590
4,159,590
4,467,855
4,467,855
4,554,984
4,554,984
4,643,834
4,643,834
4,734,439
4,734,439
4,826,833
4,826,833
4,753,469
4,753,469
Equity
Paid-up Capital
Retained Earnings
Total
1,799,009
1,799,009
1,799,009
(871,225)
927,785
1,799,009
(700,029)
1,098,980
1,799,009
2,372,472
4,171,482
1,799,009
7,179,088
8,978,097
1,799,009
13,173,429
14,972,438
1,799,009
19,905,040
21,704,049
1,799,009
27,322,288
29,121,298
1,799,009
35,354,800
37,153,809
1,799,009
43,909,372
45,708,382
1,799,009
52,865,040
54,664,049
Total Liabilities And Equity
3,598,019
8,493,862
9,056,478
8,278,497
13,137,688
19,440,293
26,259,033
33,765,132
41,888,248
50,535,215
59,417,519
Intangible Assets
Pre-operational Expenses
Total
Long-term liabilities
Total
15
13.3 Pro je cte d Cas h flo w State me nt

Project Cash Flow Statement
SMEDA
In Rs
Const Year
Operating activities
Net profit
Amortization (Pre-operational Expenses)
Depreciation
Accounts receivable
Equipment Spare Parts Inventory
Up-Front Insurance payment
Stocks-RM
Accounts payable
Cash provided by operations
Financing activities
Add: building rent expense
Building rent payment
Running Finance Repayment
Issuance of share
Cash provided by/ (used for) financing activities
Total
Investing activities
Capital expenditure
Cash (used for)/ provided by investing activities
Net Cash
Cash balance brought forward
Cash Balance
Running Finance
Cash carried forward
Year-1
Year-2
Year-3
Year-5
Year-6
Year-7
Year-8
Year-9
Year-10
(871,225)
13,700
107,800
(4,759,214)
(2,344)
3,234
(191,020)
3,272,546
(2,426,522)
171,195
13,700
107,800
(469,576)
(181)
3,234
(197,792)
285,681
(85,939)
3,072,501
13,700
107,800
879,944
(158)
3,234
(204,759)
295,587
4,167,849
4,806,616
13,700
107,800
(393,954)
(158)
3,234
(211,926)
305,776
4,631,087
5,994,341
13,700
107,800
(413,678)
(158)
3,234
(59,524)
308,264
5,953,980
6,731,611
13,700
107,800
(154,694)
3,234
(60,714)
87,130
6,728,066
7,417,248
13,700
107,800
(159,335)
3,234
(61,928)
88,850
7,409,569
8,032,512
13,700
107,800
(164,115)
3,234
(63,167)
90,605
8,020,568
8,554,572
13,700
107,800
(169,039)
3,234
(64,430)
92,394
8,538,232
8,955,668
13,700
107,800
(174,110)
3,234
3,285,941
(73,364)
12,118,869
179,998
(197,998)
(1,799,009)
197,998
(217,798)
(4,293,532)
217,798
(239,578)
(4,399,270)
239,578
(263,536)
(253,201)
263,536
(289,889)
-
289,889
(318,878)
-
318,878
(350,766)
-
350,766
(385,843)
-
385,843
(424,427)
-
424,427
(466,869)
-
(1,817,009)
(4,313,331)
(4,421,050)
(277,159)
(26,354)
(28,989)
(31,888)
(35,077)
(38,584)
(42,443)
(584,009)
(4,243,532)
(4,399,270)
(253,201)
4,353,929
7,985,492
8,499,647
12,076,427
(1,215,000)
(1,215,000)
(1,799,009)
(1,799,009)
1,799,009
-
(4,243,532)
(4,243,532)
4,293,532
50,000
(4,399,270)
50,000
(4,349,270)
4,399,270
50,000
(253,201)
50,000
(203,201)
253,201
50,000
4,353,929
5,927,627
6,699,077
7,377,681
7,985,492
50,000
4,403,929 10,331,556 17,030,633 24,408,314
4,403,929 10,331,556 17,030,633 24,408,314 32,393,806
4,403,929 10,331,556 17,030,633 24,408,314 32,393,806
8,499,647
32,393,806
40,893,453
40,893,453
12,076,427
40,893,453
52,969,880
52,969,880
(32,340)
(2,170,680)
(2,203,020)
(179,998)
1,799,009
1,619,011
16
Year-4
5,927,627
6,699,077
7,377,681
13.4 Ratio Analys is
Ratio Analysis
SMEDA
Year 1
Profitability ratios
Gross profit margin on sales
Operating Profit on Sales
Net profit margin on sales
ROA
ROE
Liquidity ratios
Current ratio
Quick ratio (Acid Test)
Year 2
2.0%
0.33%
-0.92%
-10.26%
-63.90%
3.4%
1.76%
0.16%
1.89%
16.89%
Year 3
Year 4
7.4%
5.34%
3.53%
37.11%
116.59%
Year 5
8.2%
6.11%
5.07%
36.59%
73.11%
Year 6
8.9%
6.82%
5.81%
30.83%
50.06%
Year 7
9.5%
7.36%
6.34%
25.64%
36.71%
0.99
0.68
1.03
0.71
1.83
1.16
3.00
2.29
4.23
3.55
5.67
4.99
Asset management ratios

Inventory turnover ratio
Days sales outstanding
Fixed assets turnover ratio
Total assets turnover ratio
40
8
98
11
41
14
121
12
31
17
115
11
32
14
147
7
34
14
191
5
34
15
246
4
Debt management ratios

Debt ratio
Times interest earned
Debt service coverage ratio
51%
1.08
0.15
49%
2.68
0.37
3%
6.60
0.91
143.12
19.74
17
Year 8
10.1%
7.82%
6.78%
21.97%
29.19%
Year 9
Year 10
10.5%
8.19%
7.13%
19.18%
24.24%
10.9%
8.45%
7.37%
16.93%
20.65%
11.2%
8.60%
7.49%
15.07%
17.84%
7.20
6.52
8.80
8.12
10.45
9.77
12.50
12.50
35
15
338
3
35
15
523
3
35
15
1,077
2
15
2
14 KEY ASSUMPTIONS
Table 14-1
Operating Related Assumptions
Hours operational per day

Days operational per month
Days operational per year
Table 14-2
Production Related Assumptions
Annual production capacity

Capacity utilization (1st Year)
Capacity growth rate (yearly)
Maximum Capacity utilization
First Year production utilization
Table 14-3
7.27
3%
$1= Rs 60/-
Raw Material Related Assumptions
Grey fabric 35 x 35/76 x 56 112(Rs)

Weighted average consumption Fabric per set
Printing cost per Meter (Rs)
Stitching & cutting cost per set (Rs)
Packaging cost (Rs)
Cutting Wastage
Printing Wastage
Quota charges per set (2 year) 6 (Rs)
Raw material price growth rate
6
15
15
15
1
Revenue Related Assumptions
Weighted average sale price ($)

Sale price growth rate
Dollar conversation rate
Table 14-6
10%
10%
5%
5%
Cash Flow Related Assumptions
Accounts Receivable cycle (in days)

Accounts Payable cycle (in days)
Raw material inventory (in days)
Equipment spare part inventory (in months)
Table 14-5
300,000 Sets
75%
5%
95%
225,000 Sets
Economic Related Assumptions
Electricity growth rate

Wages growth rate
Office equipment growth
Machine maintenance growth rate
Table 14-4
8
25
300
Quota charges will not be applicable after Dec. 2004.

18
34.75/meter
5.55 meter
10
8.5
15
3%
3%
111.05
2%
Table 14-7
Expense Related Assumptions
Administrative overhead (% of sales)

Office Expenses (stationery, entertainment, etc.)
Sea freight cost of export per set ($)
Forwarding/ Clearing cost per set (Rs)
Insurance rate (Annual)
Rent growth rate
Pre-paid building rent (months)
Growth rate in spare part inventory
Tax treatment
Table 14-8
Depreciation Related Assumptions
Machinery & Equipment depreciation rate

Furniture & Fixtures
Table 14-9
1%
2%
0.25
2.50
3%
5%
12
10%
0.75% of Sales Revenue
10%
10%
Financial Related Assumptions
Project life (Years)

Equity
Debt
Interest rate on short term debt
Discount rate for calculation of NPV
10
50%
50%
14%
20%
19

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Pre-Feasibility Study