Hamza Irfan Awais Younas Usman Bukhari Asim Khalid Mudassar Nawaz Shazib Qamar

Project Manager CFO Marketing Manager Operations Manager Chief Accounts Officer Legal Advisor

 National
Non Industrial
Conventional Technology
Medium in Scope

A Grass Root Project

Normal in nature

Owner

Construction

Project Management Company

Supply

Technical

2008-09
51.8% contribution of total agricultural sector 11.3% contribution to national GDP Value of livestock is 6.1% more than combined

major and minor crops Focal point of government policies

 Strategic agreements between

ZTBL & M/S Nestle Pakistan limited
ZTBL & M/S Pakistan Dairy development company Increase milk supply, Mitigate poverty and Improve the living standard of the rural population.

Wheat straw(from land owners) Green fodder(grow themselves on leased

land) Mineral mixture(available from factories or outlets)

Pakistan: 175 million people, high milk consuming tradition Some facts about agri-sector Irrigable land in Pakistan 20 million hectares Fodder cultivated in 2.8 million hectares, i.e. only 14% Fodder yield very low -24 Tones/hectare (Australia approx 70 Tones/hectare) Largest irrigation network in the world Cheap farm labor, though unskilled (Still demand is high and supply is low)

The feasibility study suggests an initial herd size of 200 Cows, which is economical to justify the overhead cost. The farm size will increase to approximately 1,000 cows within 10 years. Herd mix of 100% cows is recommended to get the maximum milk production round the year.

Cost-based strategy In this feasibility study, it is assumed that all the milk will be sold to milk processing companies, dairies & milk shops etc. @ Rs. 40/liter.

Following are some of the target clients for a dairy farmer.

1. Milk outlets in local markets 2. Dairy Companies 3. Milk collection companies The cost of production per liter of raw milk should be lower than its sale price so that farmer could feel it economical.

SWOT Analysis

 Back bone and main stay of economy. Provides raw material for food & Leather industry. Major source of food, i.e. Milk & Meat Source of Farmyard Manure (FYM). Sizeable foreign exchanges earning through exports. Wide scope of Milk Production, ranking 5th in the world. Ample human resource employment sector. Stationed, Permanently located secured loaning sector. Huge demand and supply gap in dairy sector.

 Lack of appropriate knowledge, research extension

Lack of commercially viable breeds of animal Lack of education and initiative in farmer, traditional approach due to lack of skills and management. Unorganized sector, unaware of basic farm management practices. Remote area, lack of farm to market approach & transportation. Non-availability of communication services. Lack of farm/ market infra structures & marketing information. Lack of record keeping on farm.

 Govt. of Pakistan & Sate Bank of Pakistan priority

sector. Dairy products needs are 30% higher than supply. Ample opportunities are available in the Banking Sector. Commercially viable sector with great credit potential and absorption capacity. Vast range of area of operation, more needs and scope of development. Value added dairy products are in demand.

 Implementation of WTO will result in open & competitive

commodity pricing. Due to fear of default, banker community has reluctance for lending loans. High risks of diseases in live stock. Defective and unorganized markets. Imbalance between prices of inputs & outputs. Rising trend of cost of production with higher rate of interest as compared to profit ratio. Lack of media projection, non-recognition of problems and monopoly of multinationals. Lack of community organizations and out dated farm practices.

Noon Pakistan Nestle Milkpak Prime Dairies Idara-e-Kisan (Halla) Chaudhry Dairy Millack foods Dairy Land Engro foods Limited ShakarGunj Foods Alturhem Milk JK Dairies Doctor Dairies Gourmet Foods

 Proposed capacity: for 200 cows with an upper limit

of 1000 cows at most. Herd mix: 100% cows. Business status: Sole Proprietorship/Partnership/Company Pvt Ltd. Total Project Cost: 84,000,000.

Location of our dairy farm is Darajke, Sadhoke 20 km off G.T road Lahore District.

Availability of land is easy because of the links of the project director over there. We need 3 acres of land for our dairy farm and it cost Rs. 3, 000, 000.

Approach to site
Approach to the dairy farm is convenient. While coming from Ravi bridge G.T road it is 40 km and coming from Thokar Niaz baig it is 56 km approxiamately. The road is also doubled well carpeted from ravi bridge to Sadhoke. From Sadhoke to Darajke is single road but well built. Any vehicle from car to 24 wheeler truck could approach there easily.

 As raw material here mostly, consists of feed and feed will be

purchased from all over the Pakistan like magnesium, calcium, rice straw, fodder etc. But the most consumable feed is fodder for which the priority will be to purchase it from surrounding villages.

Transportation and marketing of finished product

Our finished product has to reach to two targets 1. Milk outlets in local markets 2. Dairy companies 3. Collection companies Milk outlets and dairy companies are easily accessible in the areas of Lahore, Gujranwala, Sheikhupura and Sialkot. Gujranwala is further 60km through G.T road, Sialkot through Pasrur road is further 50km.

Darajke is in the center of city Kamoke and Muridke and these both cities are the hub for rice cultivation, so the availability of water is in too much excess over here. Upper Chenab canal also passes through these areas. So, the water will be attained by the canal and through boring.

Availability of power and source

Electricity and sui gas is needed in terms of power for the dairy farm. WAPDA is present over here at Darajke but during summer season load shedding leads to 10-12 hours. So, for this reason we have purchased a 25KVA generator to overcome the load shedding. Sui gas commercial connection is installed in the dairy farm.

Farm has its own well-designed system for drainage of liquid effluents. As far as cow-dung is concerned, it is used as farmyard manure (FYM). Therefore, it would be sold to fertilizer companies as well as the local farmers. It is also used for household fuel requirements by the villagers.

Description

Area (acres)

Shed for cows

Cage for calves Shed for calves

1.57
0.08 0.51

Stores for fodder

Utensils and milk storage Servant premises

0.01
0.01 0.01

Bunker silage
Total

0.77
3 (appx)

Equipment

Cost (Rs)

Maize cutter (1)

Milking machine (1) Milk chillers (2)

450,000
4,000,000 1,400,000

Generator (25 KVA)

Pump (1) Ventilating fans (4)

500,000
350,000 300,000

Trolley (1)
Tractor (1) Total

150,000
600,000 9,000,000

Description Farm Manager Technician Workers Tractor driver Total

No. 1 1 8 1 11

Annual Salary (Rs) 420,000 180,000 672,000 84,000 1,356,000

Minerals (magnesium, calcium, potassium, sodium, iron) Fodder crop (wheat straw, grasses, cotton seed hull, sugarcane grass, rice straw, oats, oat straw, maize, millets, corn cobs etc). Daily consumption/animal: Approximately 50kg fodder per day.

 Artificial Insemination charges: Almost 5000 Rs per

animal per year.

Medical Charges (vaccination etc): 2000 Rs per

animal per year.

Holstein

Australian Freisian Sahiwal

Jersey

Capital Investment Animal Cost (200) Building/Infrastructure Land (3 Acre) Machinery & equipment Pre-operating cost Office Vehicle Office equipment Total Capital Costs

Rs. in actual 40,000,000 20,000,000 3,000,000 9,000,000 900,000 1,000,000 100,000 73,500,000

Working Capital Rs. in actual Raw material Inventory 1,000,000 Cash in hand 500,000 Total Working Capital 1,500,000 ____________________________________________________
Total Capital Cost Total Working Capital

Total Project cost

73,500,000 1,500,000 84,000,000

Investment Personal Investment (50%) Bank Financing (50%) Total Investment

Rs. in actual 42,000,000 42,000,000 84,000,000

No. of Cows * Milk per Cow (Liters) * No. of Days = Total Consumption

200

20

365

1,460,000

Total Milk Production (Liters) * Sales Price (per liters) = Total Revenue

1,460,000

40

58,400,000

Fodder per Cow (Kg) * No. of Cows * Days in Year = Total Annual Consumption 20* 200* 365 = 1,460,000 Price of Fodder (per Kg) * Total Consumption = Total cost of Fodder 12* 1,460,000 = 17,520,000

_______________________________________________________________ Rs. In Actual Total Revenue 58,400,000 Raw Material Cost 17,520,000 Gross Profit 40,880,000 Operating Cost 10,500,000 Net Profit 30,380,000

Pay Back Period (PBP): Pay Back period (PBP) = Original Investment / Annual Income = No. of Years

84,000,000 / 30,380,000 = 2.75 years

Return on Investment (ROI):
Return on Investment (ROI) = Average Annual Earning / Average book Investment

(30,380,000 * 10) / 10 84,000,000 + 26,000,00

= 55%
Salvage Value Land Animals (30,000*200) Plant & Machinery Rs. In Actual 25,000,000 6,000,000 4,000,000

Net Present Value (NPV): NPV = Discounted Inflows Original Investment NPV = 164,849,271 84,000,000 = 80,849,271

Benefit Cost Ratio (BCR):

BCR = Discounted inflows / Original Investment BCR = 164,849,271 / 84,000,000 = 1.962

Purchase of land

Construction

Electrical and wiring

Water and gas piping

Installment of equipment

Purchase of cattle

Housing of cattle

Milking process

Sale of dairy products

 Construction: The construction contract is done with

Izhar construction Pvt Ltd. Electrical works, gas and water piping is to subcontracted by the construction company itself. The total contract has been undertaken at an amount of Rs 20 million.

 Guestimating Approach

te = (to + 4tm + tp) / 6

to = 5 months tm = 7 months tp = 9 months

te = 7 Months
* This method is used on the based on previous industry information

Zero date 1st Feb 2011

Feb March April May June
15 1 15 1 15 1 15

Ending date 31st august 2011

July
1 15 1

Aug
15 1

Sept
15 1

Oct
15 1

Nov
15 1

Dec
15 1

Jan
15 1

Feb March
15 1 15

15

Purchase of land

Construction Electrical Water & gas Equipment installation Purchase of cattle Housing of cattle Milking process Sale