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Table of Contents

Page
Contents
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Executive Summary 02
Name & Location of Project 04
Products, Installed Capacity, Means Of Finance 05
Introduction 06
Implementation Schedule 08
Financial Ratios 09
Market Analysis 11
Technical analysis 16
Machinery Description 18
Financial Analysis 22
Projected Financial Statements 27
SWOT Analysis 30
Recommendation 32
Conclusion 34
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Executive Summary

Title: “TEXTILE SPINNING MILL”

Project Assignment:

Each student of M.COM (Finance) 4th semester required preparing a


Project Assignment. The Project assignment is given to increase our
knowledge about “Project Management”.

Objectives:

1. SWTO analysis of Textile Spinning Mill.


2. Identify and list down the all aspects and important points of Textile
Spinning Mill.
3. What is a Production Process.
4. What is Cost of unit, Means of finance, Estimated income statement,
Estimated Balance sheet, etc.

Approach to Project:

The Team of project have analyze, summarize, and interpret the data,
which are collected different primary and secondary sources.

Data Collection:

Both primary and secondary means of data will be used to collect the
Data. Like Books, Internet, personal visits, teacher guidance etc.
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Primary Sources:

The Team of Project personally visited the SPINNING MILL for


practical view: Unit selected is;
‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’

Questionnaire:

Project Team has prepared a Questionnaire that contains 50


Questions and exists on 10 pages for Management of
‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’

Data Preparation & Analysis:

After collection of all the data through both primary & secondary
means, team will used MS. Word, MS. Excel, MS. Power point etc.

Time Frame:

Time period is allowed is one month 03/05/2010 to 15/06/2010.

Limitation:

Team has visited the various people but the information given by them
is just based of approximation.
4

Name of Project

“KSZ SPINNING MILL”

Location of Project

Head office: “P.O. BOX. 1245 Small-Industries Bahawalpur”

Tel: 062-2750337

Fax: +92-62-277653, 277652

Contact Person: ZOHAIB SALEEM ( G.M)

E-mail: kashifnazeer01@yahoo.com
Kashif Nazeer
Branch: 7- BC HASILPUR ROAD BAHAWALPUR.

CITY

“ Pakistan- Bahawalpur”

LOCATION

7- BC HASILPUR ROAD BAHAWALPUR.


5

PRODUCTS

Cotton Yarn(22 single)

Installed Capacity

The capacity of projected plant produces161000 Bags at 100% Efficiency per Year.

Cost of Project
RS. In (000)

Fixed Cost 611,215

Initial Working Capital + 1 07,276

718,491

Means of Finance

Debt 53%
Equity 47%
6

Names of Lender

United Bank Ltd. Bahawalpur.

Names of Sponsors

A- Kashif Nazeer
B- Salman Khalid
C- Zohaib saleem

Name of Civil
Contractor
Mr. Dilshad Abbasi
Civil Engineer
Shahzad & co. Bahawalpur
Contact # 0313-6800085
7

Name of
MachinerySupplier
Trützschler Group(China)

Mr. Jorg Hellwig

CEO
8

Implementation Schedule

Implementation Schedule

Sr.No. Activities Month Year


Engineering studies and designing
1 of civil works: 2010

Start January 2010

Complete February 2010


Construction of Building and Civil
2 works: 2010

Start February 2010

Complete September 2010

3 Order for foreign machinery March 2010


Arrival of foreign machinery at
4 sea port September 2010

5 Arrival of foreign machinery a site October 2010

6 Installation of Machinery October 2010

7 Arrival of local machinery at site September 2010


8 Trial Run Operation November 2010

9 Start Commercial production December 2010


9

Financial Ratios

Current Ratio

Current Ratio 1.42 1.26 1.31


10

Gross Profit Ratio


GROSS PROFIT 34.3% 33.8% 33.6%

Operating Profit Ratio

OPERATING 28.3
28.9% 28.4%
PROFIT %
Net Profit Ratio

Net Profit 11% 14.7% 21%

Internal Rate of Return


IRR= 39%

Payback Period
2 YEARS.
11
Sponsor’s Stake

47%
12

Market Analysis

INTERNATIONAL MARKET ANALYSIS

Of the total 163 million spindles in the world, 113 million spindles are
installed in Asia. China has the largest number of installed spindles in the world and accounts
for25% of the world and 39% of the Asia. There has been no change in China’s spinning
capacity during the period 1992-96. China is followed by India, which has 32 million spindles
and contributes 20% to the world and 30% to Asian installed spindles. India has increased its
spinning capacity at a growth rate of 3%.Yarn is a $27 billion global market. Two third of the
total global spinning capacity is installed in Asia and as a result Asian exporters account for 40%
of total world exports. Major Asian yarn producing countries are China, India and Pakistan.
Major markets for Cotton Yarn are Hong Kong, China, Japan, Italy, Germany, Korea, UK and
the USA. Cotton yarn is the largest product category within yarn and accounts for around 25%
of total global exports. However 92% of yarn exports from Pakistan are concentrated just in this
one category.
13

National market analysis

Pakistan is the third largest player in Asia. Pakistan’s spinning capacity is 5% of the total
world and 7.6% of the capacity in Asia. Pakistan’s growth rate has been 6.2% and is second only
to Iran amongst the major players

No. of Installed Capacity Operative Capacity


Year Looms
Units Spindles Rotors Spindles Rotors

1994-95 277 5568 75 15 4827 67

1995-96 307 6216 81 15 5333 67


1996-97 334 6860 95 14 5520 79
1997-98 471 8419 138 14 6105 82
1998-99 494 8610 132 14 6262 74
1999-00 503 8717 143 13 6458 80
2000-01 440 8230 143 10 6538 87
2001-02 442 8368 149 10 6631 80
2002-03 442 8392 166 10 6671 66
2003-04 443 8477 150 10 6825 66
2004-05 444 8600 145 10 6913 70
2005-06 446 8736 155 08 7011 75
2006-07 449 8922 167 11 7231 69
2007-08 453 9568 171 10 7315 80
2008-09 521 9768 182 15 7454 85

(Source:
APTMA)
14

PRODUCTION OF YARN
Cotton is required for spinning of yarn. There are about 440 spinning units in the
county and the production of yarn is detailed as under:

Year Yarn Produced (000) KGS

1994-95 1,055,228

1995-96 1,118,270

1996-97 1,234,539

1997-98 1,498,948

1998-99 1,413,648

1999-00 1,505,244

2000-01 1,530,855

2001-02 1,540,720

2002-03 1,547,632

2003-04 1,678,532

2004-05 1,720,580

2005-06 1,780,582

2006-07 1,865,680

2007-08 1,921,585

2008-09 1,985,654

(Source:
APTMA)
15

ESTIMATED DEMAND AND SUPPLY

Demand of yarn is increasing @ 10% per annum while the supply is


increasing @ 5% per annum.

Cotton yarn is gaining popularity on healthy grounds and also for rapid
increase in population

Estimated demand and supply is detailed as under considering 5%


increase in production and 10% increase in demand
.
Year Supply Demand Gap

1994-95 2320 2547 227

1995-96 2436 2801 365


1996-97 2558 3081 523

1997-98 2686 3390 704


1998-99 2820 3729 909
1999-00 2961 4102 1141
2000-01 3109 4512 1403
2001-02 3264 4963 1699
2002-03 3428 5460 2032
2003-04 3599 6006 2407
2004-05 3779 6606 2827
2005-06 3858 6761 2903
2006-07 3945 6822 2877
2007-08 4051 6921 2870
2008-09 4175 7055 2880
Local market analysis

The area in which we will locate our unit is the cotton belt area and
we have lot of access to raw material market like ginned cotton is available
from the whole of the country in four province particularly.

Punjab
Sindh
The cotton belt areas in both the provinces are
 Multan
 Kehrore paka
 Lodhran
 Vehari
 Khan pur
 Sahiwal
 Bahawal pur

Present Demand

The Demand of Yarn in last few years is increasing because the agriculture sector is now
growing and the demand of Yarn in Textile sector also increasing.

Distribution Channel

We sale our product directly to weaving sector there is no middle man include but
some time middle man may include.
Technical Analysis
THE PROJECT
The project envisages the establishment of a Textile Spinning Unit
consisting of 15000 spindles using cotton and as a raw material for the production
of yarn.

FACILITIES FOR THE PROJECT


PARTICULARS OF LAND

The location of the project is selected after taking into consideration the
following factors.
AVAILABILITY OF RAW MATERIAL

Bahawalpur is cotton growing area; therefore, plenty of raw material is


available.
AVAILABILITY OF MANPOWER

There is no dearth of manpower because there are quite a good number of


industries and the skilled labor is attracted to this region.

Grid Station:
Because there is grid station so we selected this land.

LABOUR:
Both skilled and unskilled labour is abundantly in this area and no difficulty is
foreseen in hiring and retaining experienced and efficient workers.
List of Machinery

Blow Room

Card
Drawing

Simplex
Ring Frame

Coning
Cost of Machinery

RS in(000)

item unit cost Qty price


Blowroom 8,000,000 3 24,000
Card 7,250,000 15 108,750
Drawing 8,500,000 5 42,500
Simplex 7,500,000 8 60,000
Ring Frame 1,500,000 15 22,500
Autocone 8,500,000 9 76,500
COST OF MACHINARY 334,250
Import Duty 15% 50,138

COST OF MACHINARY 384,388


Personnel Analysis

Salary Annual
per
Month Cost
a) Administrative
Salaries Nos (Rs.) (000)

Chairman 1 40,000 480


Chief Executive 1 20,000 240
President 1 10,000 120
Financial Controller 1 10,000 120
Purchase Manager 1 8,000 96
Computer Manager 1 8,000 96
Personal Manager 1 7,000 84
Assistants 3 5,000 180
Clerks and Typists 3 4,500 162
Driver and Peons 6 4,500 324
Sweepers 5 4,000 240
TOTAL 2,142
Add: Fringe Benefits @ 10% 214
TOTAL 2,356
Financial
Analysis
Brief Description of Finance
In Financial Analysis we see the sources of finance and calculate the ratios
of our project that how much it is profitable for us and also we make financial statements
to know that how much it is feasible for us.

Cost of Project
The total cost of project is Rs. 718,4 91,000

Means of Finance
In the sources of finance we take Loan from UBL and the remaining is from the
Sponsors.

Initial Working Capital


CURRENT ASSETS (Rs. in 000 )
Cash 27,533
Accounts Receivable @2% of
sales 2% 24,151
Raw materials 66,354
Imported components 0
Imported raw material 0
Packaging materials
Finished Goods Inventory 5% of
production 60,378
Stores & Spares 20,000
Advances & deposits 20,000
Total 218,417
CURRENT LIABILITIES
inventor
Accounts Payable 3% y 23,888
inventor
Accrued Expenses 3% y 23,888
Bank Borrowings 50% of
inventories 50% 63,366
Total 111,141

INITIAL NET WORKING


CAPITAL 107,276
Estimated Production

Operating Years : YAER 1 YEAR 2 YEAR 3

Production Effeciency
Assumed :
65% 70% 75%
b) Porduction of yarn
22 single 104,650 112,700 120,750
Add : Begining
Inventory - 5,233 5,897
Available for
sale 104,650 117,933 126,647

Less : End. Inventory 5% 5,233 5,897 6,332

SALE 99,418 112,036 120,314


60% 65% 70%
b) Porduction of
WASTE 108,000 117,000 126,000
Add : Begining
Inventory 0 5,400 6,120
Available for
sale 108,000 122,400 132,120
Less : End. Inventory 5% 5,400 6,120 6,606
SALE 102,600 116,280 125,514
102,600 116,280 125,514
sale in amount
price per bag

12,10 1,202,9 1,355,6


22 Single 0 52 34 1,455,803

sale of waste 45 4,617 5,233 5,648


1,20 1,36 1,46
Total Sales 7,569 0,867 1,451
sale increase with 15%
1,20 1,56 1,68
Total Net Sales 7,569 4,997 0,669
ending inventory of
finished goods 5%
yarn 6 6 7
0,148 7,782 2,790

waste 231 262 282


Raw Material Requirement

a) Cotton bails 49,000


Rs. In
(000)
65% 70% 75%
I II III
a) Cotton bails 31,850 34,300 36,750
31,850 39,445 42,263
raw material inc. by 15%
Rs. In
1- COST OF RAW MATERIALS (000)
per 1,056,56
a) cotton @ Rs.25000 bail 796,250 986,125 3
1,056,56
TOTAL 796,250 986,125 3
Beginning inventory of raw
material 0 23887.5 29583.75
ending inventory of raw
material 3% 23888 29584 31697
794,81 980,42 1,054,4
material used 7 9 49
Cost of Project

Rs. in ( 000 )
COST OF THE PROJECT LOCAL FOREIGN TOTAL

30,40 30,40
- Project Land & Its Development 0 0
113,77 113,77
- Building & Civil Works 5 5
-Foreign Machinery
384,38 384,38
(UBL) 8 8
10 10
-Insurance & clearance 7 7
2,00 2,00
- Engineering /Technical Fees 0 0
3,84 3,84
- Erection & Installation 4 4
1,23 1,23
- Furniture & Fixture 9 9
2,50 2,50
- Vehicles 0 0
61,33 61,33
- Mark-up during Construction 4 4
11,43 11,43
- Pre-production Expenses 0 0
20 20
- Contingencies 0 0
226,82 384,38 611,21
TOTAL FIXED COST: 8 8 5
107,27 107,27
- Initial Net Working Capital 6 - 6
TOATL COST OF THE 334,1 384, 718,
PROJECT: 04 388 491
MEANS OF FINANCE
Debt
384,38 384,38
UBL GUARANTEE 0 8 8
384, 384,38
TOTAL DEBT: 388 8
Equity -
334,10 334,10
- Paid-up Capital (Sponsors) 4 - 4
334,10
TOTAL EQUITY 4
334,1 384, 718,49
TOTAL DEBT & EQUITY 04 388 1
Income
Statements
( Rs. in
000 )
For the year ending Sept. 30, I II III
Efficiency Assumed : 65% 70% 75%

1,207,5 1,564,9 1,680,66


SALES 69 97 9
COST OF GOODS
SOLD :
- Raw Materials 794,817 980,429 1,054,449
- Labour 18,720 20,592 22,651
- Manufacturing Expenses 6,457 6,699 6,941
- Excise Duty \ Sales tax
-Royalty fee
- Depreciation 37,002 37,002 37,002
Cost of Goods 856,99 1,044,7 1,121,0
Manufactured 5 21 43
Add: Beginning Inventory 0 63,313 71,349
Less: Ending Inv. 5% 63,313 71,349 76,621
793,68 1,036,6 1,115,7
Cost of Goods Sold : 2 85 71

413,88 528,31
GROSS PROFIT 7 1 564,898
OPERATING EXPENSES
- Admin & General Expenses 4,791 5,031 5,282
- Selling Expenses 60,378 78,250 84,033
Total Operating
Expenses 65,170 83,281 89,316
348,71 445,03
OPERATING PROFIT 7 1 475,582
OTHER INCOME 10,761 74,129 246,803
NON OPERATING
EXPENSES
- Financial Expenses 59,952 53,953 47,651
Amortization 1,143 1,143 1,143
workers welfare fund 9% 31,385 40,053 42,802
workers participation fund 9% 31,385 40,053 42,802
Sub-Total 123,864 135,202 134,399
PRE-TAX PROFI
T 235,614 383,958 587,986
Provision for Taxes 40% 94,246 153,583 235,194
NET PROFIT 141,368 230,375 352,792
RETAINED EARNINGS 141,368 230,375 352,792
Balance Sheet
(Rs. in
000)
As on Sept. 30, Construction. I II III
ASSETS
Cash 27,533 248,607 1,046,299 1,284,657
Marketable Securities 0 117,922 5,560 6,050
Accounts Receivables 24,151 277,741 359,949 386,554
Finished Goods Inventory 60,378 63,313 71,349 76,621
Raw Material Inventory 66,354 23,888 29,584 31,697
Stores & Spares 20,000 132,969 150,433 160,000
Advances & Deposits 20,000 44,323 50,144 60,000
1,713,3 2,005,5
Total Current Assets 218,417 908,762 18 79
Fixed Assets at cost 599,785 599,785 599,785 599,785
Less: Accumulated
Depreciation. 37,002 74,003 111,005
Net Fixed Assets: 599,785 562,783 525,782 488,780
Preliminary Expenses: 11,430 10,287 9,144 8,001
1,481,8 2,248,2 2,502,3
Total Assets: 829,632 33 44 60
LIABILITIES & EQUITY
Current Liabilities
- Accounts Payable 23,888 35,910 547,749 588,234
- Accrued Expenses 23,888 277,741 359,949 386,554
- Workers Participation. Fund 0 31,385 40,053 42,802
-Workers Welfare Fund 0 31,385 40,053 42,802
- Dividends Payable
- Taxes Payable 94,246 153,583 235,194
- Bank Borrowings 63,366 170,527 215,649 231,588
- Cur. Mat. of L T Debt
1,357,0 1,527,1
Total Current Liabilities: 111,141 641,192 36 75
Long-term Liabilities 384,388 365,168 326,729 288,291
Total Long-term
Liabilities 384,388 365,168 326,729 288,291
EQUITY
sponsor’s 334,104 334,104 334,104 334,104
- Un-appropriated Profit 0 141,368 230,375 352,792
Total Equity: 334,104 475,472 564,478 686,895
Total Liabilities & 1,481,8 2,248,2 2,502,3
Equity: 829,632 33 44 60
Cash Flows

(Rs. in
000)
Const. Year I II III
SOURCES
Operating Profit 0 348,717 445,031
475,582
Add Back: Depreciation 0 37,002 37,002
37,002
Amortization 1,143 1,143
1,143
513,72
Funds from Operations 0 386,862 483,175 7
paid up capital (sponsor’s) 334,104 0 0 0
UBL GUARANTEE 384,388 0
- Custom Debentures
Accrued Expenses 23,888
account payable 23,888
Increase in Current Liabilities. 0 530,051
715,844 170,139
Increase in Bank Borrowings 63,366 -107,161
45,122 15,938
1,244,14 699,80
TOTAL SOURCES 829,632 809,752 1 4
APPLICATION OF FUNDS
Investment in Fixed Assets: 599,785 0 0 0
-Preliminary Exp 11,430 1,143 1,143 1,143
Financial Expenses 0 59,952 53,953 47,651
Repayment of :
UBL loan 0 19,219 38,43938,439
Workers Participation Fund 0 31,385 40,05342,802
-Workers Welfare Fund 31,385 40,05342,802
Taxes 0 94,246 153,583
235,194
Dividend 0 0 0 0
Increase in current Assets: 190,884 351,350 119,22653,413
461,44
TOTAL 802,099 588,678 446,449 5
Surplus/(Deficit) 27,533 221,074 797,692 238,359
1,046,29
Cash Balance - Opening 0 27,533 248,607 9
1,284,65
Cash Balance - Ending 27,533 248,607 1,046,299 7
SWOT ANALYSIS

STRENGTHS:
• This is high where there a few, large players in a market e.g. the large
grocery chain
• If there are a large number of undifferentiated, small suppliers e.g.
small farming businesses supplying the large grocery chains.
• The cost of switching between suppliers is low e.g. from one fleet
supplier of trucks to another.
• The power of suppliers tends to be a reversal of the power of buyers

WEAKNESSES

• Shortage of Electricity in Pakistan cut down the Business.


• Highly dependent on cotton production.
Opportunities:

• A developing market such as quality yarn production


• Mergers, joint ventures or strategic alliances
• Moving into new market segments that offer improved profits
• A new international market
• A market vacated by an ineffective competitor

Threats

• A new competitor in your home market


• price wars with competitors
• A competitor has a new, innovative product or service
• Firm has opportunity to operate successfully in
emerging markets by using its great strengths.

• Strong competition in current market and also desire to


make rapid growth, Market development has become favorable
strategy for current situation.

• As company is doing good business and there is strong


financial position as mentioned from ratio analysis so there is
chance of innovation and high profits can be earned.

• Company should try to expand its market share by


providing quality products at low price and by attracting
customer’s attention through stylish and improved design and
outlook of packing.
Conclusion

We conclude that on the basis of survey of spinning Mill that the


Yarn is necessary product so its demand increases day by day.
There is no chance to decrease the demand of Yarn. Pakistan is an
agricultural country and it plays a very important role in our
economy. Availability of raw material is very easy. So, conclusion
is that the spinning Mill is a profit motive business because no
chance of decrease of demand.
Our recommendation to new investors is that they must
invest in spinning Mill. So, they take step forward to come
and invest or to start this business, and also contribute in the
economic as well as social growth of Pakistan.