Pre-Feasibility Study

DENIM JEANS STITCHING UNIT

Small and Medium Enterprises Development Authority
Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
th
6 Floor LDA Plaza Egerton Road, Lahore
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REGIONAL OFFICE
PUNJAB
th

8 Floor LDA Plaza,
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Lahore.
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REGIONAL OFFICE
SINDH

REGIONAL OFFICE
KHYBER PAKTUNKHWA

REGIONAL OFFICE
BALOCHISTAN

5TH Floor, Bahria Complex II,
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Karachi.
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Ground Floor
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Peshawar.
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Fax: (081) 2831922
helpdesk.balochistan@smeda.org.pk

June, 2010

Pre-Feasibility Study

Garments Stitching Unit (Denim Jeans)
................. ............ ............ ............ ............ ............

1.

EXECUTIVE SUMMARY

4

2.

INTRODUCTION TO SMEDA.....................................................................

5

3.

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

5

4.

CRUCIAL FACTORS AND STEPS IN DECISION MAKING

................. 6

4.1.

STRENGTHS..................................................................................................

6

4.2.

WEAKNESSES...............................................................................................

6

4.3.

OPPORTUNITIES ...........................................................................................

6

4.4.

THREATS......................................................................................................

6

PROJECT PROFILE......................................................................................

6

5.1.

OPPORTUNITY RATIONALE ..........................................................................

6

5.2.

PROJECT BRIEF ............................................................................................

7

5.3.

PROPOSED CAPACITY...................................................................................

7

5.4.

TOTAL PROJECT COST .................................................................................

7

5.5.

PROPOSED BUSINESS LEGAL STATUS ..........................................................

7

5.6.

PROPOSED LOCATION ..................................................................................

8

5.7.

KEY SUCCESS FACTORS...............................................................................

8

CURRENT INDUSTRY ANALYSIS ............................................................

8

EXPORT MARKET.........................................................................................

8

MARKET ANALYSIS..................................................................................

11

7.1.

DOMESTIC MARKET...................................................................................

11

7.2.

TARGET CUSTOMERS .................................................................................

11

PRODUCTION PROCESS FLOW .............................................................

11

RAW MATERIAL.........................................................................................

12

Packing Cost..........................................................................................

12

HUMAN RESOURCE REQUIREMENTS ................................................

13

5.

6.
6.1.
7.

8.
8.1.

8.1.1.
9.
10.

MACHINERY AND EQUIPMENT DETAILS..........................................

14

10.1.

MACHINERY LIST ......................................................................................

14

10.2.

FURNITURE AND EQUIPMENT LIST .............................................................

14

LAND & BUILDING ....................................................................................

15

11.

1
PREF-01/June, 2010/Rev 3

....... PROJECTED INCOME STATEMENT........................................ 16 11.................................................... PROJECT ECONOMICS ......................... RECOMMENDED MODE .............. ....................... ................... 19 KEY ASSUMPTIONS ........................................ 17 13.......................................... 11...4............................. 22 ANNEXURE 2: INCOME TAX DEDUCTION SLABS............................. SUITABLE LOCATIONS ................. FINANCIAL ANALYSIS ........................2............... PROJECTED BALANCE SHEET ........ 16 12............................................1.............. 15 11......................... 20 14...................................3............. ..... 2010/Rev 3 ................... 18 13. LAND/BUILDING REQUIREMENT 15 11........Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) ......................... UTILITIES REQUIREMENTS ................................................ 17 13................................................ 24 2 PREF-01/June.......................... 16 13......................... ANNEXURE 1: RAW MATERIAL & MACHINERY SUPPLIERS ...........1........ ........2...3.............. PROJECTED CASH FLOW STATEMENT .......................

2010 Issued by Library Officer 3 PREF-01/June. 2001 Revised in June.org.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 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. due care and diligence has been taken to compile this document.pk DOCUMENT CONTROL Document No. the contained information may vary due to any change in any of the concerned factors. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information he/she feels necessary for making an informed decision. please contact our website: www. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. 2010/Rev 3 . PREF-01 Revision 3 Prepared by SMEDA-Punjab Issue Date July. Although. For more information on services offered by SMEDA. and the actual results may differ substantially from the presented information. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions.smeda.

The jeans produced will be of export. 165. 14. pressing and packing.680 million and 3.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 1. EXECUTIVE SUMMARY The proposed Denim Jeans Stitching unit is a project of the Textile Sector. stitching.150 million. The unit‟s initial capacity utilization is kept at 70%. The legal business status of this project is proposed as „Sole Proprietorship‟.71 years respectively. Pakistan's denim is second to none. The denim industry is not only fully catering to the needs of the local apparel industry but is also catering to the foreign market and earning valuable foreign exchange for the country. which eventually goes up to 90% in the fifth year. The unit will cater to the local as well as export denim market. washing. This particular stitching unit is proposed to have an installed capacity for producing 1000 denim jeans per day. A Denim Garment Stitching Unit with an installed capacity to produce 1. The project is financed through 50% debt and 50% equity. Rs. Net Present Value and Payback of this project are 71. The denim industry is contributing substantially towards exports creating job opportunities and has invested billions in the denim sector. 2010/Rev 3 . 4 PREF-01/June. high quality fabric. The process flow includes purchase of raw material. cutting. producing standard five pocket jeans trouser.000 pieces per day needs an investment estimated at Rs. finishing.11%. Projected IRR. Pakistan has become denim hub in the region in less than a decade and is considered as one of the leading supplier of quality denim fabric to the world's known brands. Through the use of high-tech equipment and modern techniques the company can produce jeans of latest trends without compromising on quality. There has been a phenomenal increase in the production capacity of denim mills in Pakistan and at present numerous denim mills are in operation. Quality control checks will be taken care of through out the process.

textiles. 2010/Rev 3 . 3. SMEDA has so far successfully formulated strategies for sectors including. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA‟s areas of operation. gems and jewellery. transport and dairy. Since its inception in October 1998. marketing. technology and human resource development. 5 PREF-01/June. marketing. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. PURPOSE OF THE DOCUMENT The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs to facilitate investment and provide an overview about Garment Stitching Unit. This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions. A few priority sectors were selected on the criterion of SME presence. surgical instruments. leather and footwear.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 2. The allencompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including finance. These documents consist of information required to make well-researched investment decisions. This particular pre-feasibility is regarding “Garment Stitching Unit” which comes under “Textile” sector. start-up. These services include identification of viable business opportunities for potential SME investors. marble and granite. fruits and vegetables. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way. marine fisheries. and finance and business management. the document covers various aspects of the business concept development. production. INTRODUCTION TO SMEDA The Small and Medium Enterprises Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program. SMEDA had adopted a sectoral SME development approach. SMEDA provides business guidance through its help desk services as well as development of project specific documents. In order to facilitate these investors.

processing and finishing sectors will be established at Karachi and in one of the industrial cities of Punjab.  5.  Well-situated industrial estate with all major facilities available. This restricts the industry to the basic garments and only limits the entry into the manufacturing of high quality garments.   Manufacturers-cum-exporters are allowed to import samples of each kind or quality having value up to US$ 100 at zero duty rates.2. This has led to a rise in the demand of denim garments.3.   Very small base of available skilled machinists.   Lack of trained technicians and line / middle management.  Threats  Skilled operators in the denim garments are quite unorganized. PROJECT PROFILE 5. Opportunity Rationale During the last decade. has been on a rise in the international as well as the local markets. The competitive edge of Pakistan in this field stems from the ready availability of cotton yarn required to weave denim fabric i. 2010/Rev 3 . wages and mark up rates may rise. Stitching expertise is not available at the best possible level.   Uncertain investment climate  Opportunities  WAPDA/KESC will provide “off peak hour rates” and “bulk rates” for industrial consumers to lower the electricity cost of manufacturing.    4.   4.   Cost of doing business may increase as the energy. raw material prices. CRUCIAL FACTORS AND STEPS IN DECISION MAKING 4.4.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 4.   Two special export zones focusing on textile sector particularly in dyeing.  There is a “ready made” market for this product. especially denim jeans. the usage of denim garments.    4.e.  Relatively low labour costs  Ample available work force.1. 6 PREF-01/June.   Strengths     Weaknesses  The requirement of credit and/or delay of payments from customer side might cause disturbance in the cash cycles.1.

5. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a Sole Proprietorship. the denim fabric manufacturing capacity has also been enhanced that has provided the opportunity to industry to strengthen. Table 5-2 Project Returns Internal rate of return (project) 71. 5.150 million including machinery and office equipment. The project seems to be viable with the following returns on investment.4.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 1 NE 7/1 to NE 14/1 . Project Brief The proposed project presents an investment opportunity in manufacturing of denim jeans.981.3. During the past few years. The proposed stitching unit will be having the potential for its own manufacturing and supply for the local market as well as for the export market. 5. Rs. However washing will be outsourced. 1 yarn count 7 PREF-01/June. 8.111 Total Investment Rs.71 years Proposed Business Legal Status The proposed legal structure of the business entity is either sole proprietorship or partnership.220 Working Capital Rs. Proposed Capacity The proposed capacity of the unit is 1000 garments per day. Total Project Cost The cost of project has been estimated as Rs. 14. 165.680. 5.150.11% Net Present Value @ 20% Payback period – based on cash inflows 5. 5.2.169. However this composition of debt and equity can be changed as per the requirement of the investor. The export of denim garments from Pakistan has also been on a rise.331 The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.748 3.14. Table 5-1 Project Investment Capital Investment Rs. The project profile has been prepared for a standard five pocket jeans trouser. 2010/Rev 3 .

which shows approximately a 100% increase as compared to the export of USD 25. allowing progressive denim apparel production and direct denim fabric exports to other Asian countries and to Turkey. cotton fibre and yarn availability. CURRENT INDUSTRY ANALYSIS 6. Other major export markets are Italy.  Better communication development with customers  6.       Lahore  Karachi  Faisalabad  Hyderabad  Sialkot  Gujranwala  Key Success Factors The total commercial viability of this proposed stitching unit depends on the regular orders for the purchase of the finished product. Total Export of Pakistan in the year 2009 was USD 55. due to a series of advantages including a falling currency. modern equipment and strong incentives from the government.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 5.776 million in 2008 Major partners are given in the table below: 8 PREF-01/June. Syria and Egypt. Turkey and Bangladesh are the major countries importing Pakistani denim products. This requires aggressive marketing efforts at the entrepreneur's end. The country has progressively built a wealthy denim industry. Pakistan‟s denim exports increased rapidly in the last years.          Surety of high consistent quality  Surety of on time delivery  Competitive rates  Cost efficiency  Better services to the customer. 2010/Rev 3 .748 million. Following are other key points that are important for the successful operation of the proposed stitching unit. Export Market Pakistan‟s export of denim jeans is increasing over the years.8. Proposed Location The proposed locations for a garment manufacturing unit will be     5.6.1.

470.928 2.421.393 235.009 314.008 400.932 386.099 1. 2010/Rev 3 Others .696 738.708 2. Hong Kong SAR Colombia Mexico 11% 8% 2 10% http://comtrade.748.un.org 9 PREF-01/June.776.513 711.943 2.849 A comparative picture of the world‟s top importers and exporters and their trade value is given in the figures below.377 17.007.551 32.Pre-Feasibility Study Table 6-1: Garments Stitching Unit (Denim Jeans) 2 Pakistan’s Exports in the year 2008 and 2009 2008 2009 Export Partners World Turkey Bangladesh Syria UAE Belgium Iran Italy Sri Lanka Lebanon Mexico Export Value (USD) 25. Figure 6-1 Top Importers World's Top Importers 17% Turkey China 43% 11% China.120.672 3.244 662.112.019 196.727 881.199 Export Partners World Turkey Bangladesh Italy Syria Egypt Colombia UAE Sri Lanka Peru Greece Export Value (USD) 55.589 8.119 586.298.261.115 269.848.473 597.

828 117.067.928 64. Hong Kong SAR Turkey Pakistan Italy Others Total Export 10 PREF-01/June.592.457.077.755.128 211.524.606 102.320 126.217.434.624.006 1. Hong Kong SAR 4% 47% 6% Turkey Pakistan Italy 9% Others 14% Table 6-3: Trade Value for Top Exporters Country Trade Value (USD) 683.153 449.011.111 115. 2010/Rev 3 . Hong Kong SAR Colombia Mexico Others Total Import Figure 6-1 Top Exporters World's Top Importers 20% China China.049.109 87.232 Turkey China China.373.584 China China.990.156.277 290.425 1.304.100.Pre-Feasibility Study Table 6-2: Garments Stitching Unit (Denim Jeans) Trade Value for Top Importers Country Trade Value (USD) 179.925 81.

2010/Rev 3 . Digital Apparel Pvt. Lahore Karachi Karachi Karachi Karachi Karachi Lahore Sialkot Karachi Lahore Karachi Karachi Karachi 8.000 jeans per day. which will be put through the process. direct distributors and wholesalers. Target Customers In case of direct exports. PRODUCTION PROCESS FLOW The proposed business is stitching denim jeans.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 7. is quite small. Only the B-Class products are sold in the domestic market. Al Karam Textile Mills Pvt. denim fabric.1. Ltd. Mr. Faisalabad and Gujranwala. Washing of the fabric will be outsourced as washing in house requires a plant which is expensive and will greatly increase the project cost. Other important hubs are Sialkot. Ltd. whose primary market is domestic. it is 11 PREF-01/June. large size manufacturers are producing as much as 30. Apparel and Textile Pvt. Domestic Market Almost all the established manufacturers are catering solely to the export market. Ltd. The average production capacity of majority of small and medium sized jeans manufacturing units is about 1. Abdullah Apparels Pvt.000 jean trousers per day. Ltd. Artistic Milliners Ltd Siddiqsons Denim Mills Ltd Pak Denim Ltd RAJBY Industries Ali Murtaza Associates Pvt. Ltd. The process will involve purchasing of raw material from the market i. Denim Pvt. Ltd. The export can either be through buying houses and/or through direct customers. MARKET ANALYSIS Major concentration of the denim garment stitching industry is in Karachi and Lahore.2. Joe‟s Fashion Export Pvt. the customers are retail chain stores. 7. Azgard Nine Ltd. Therefore. S. 7.e. The size of the manufacturers. Talon Sports Pvt. Table 7-1 Major Players U. However. Ltd. Ltd.

5 YG Zip Main label Care and size label Rewet per unit Packing cost 8.1. Raw Material The proposed business will be using the raw material listed in the Table 8-1. Figure 8-1 Process Flow Chart for Denim Garments Stitching Unit: Denim Fabric Raw Material Inspection Cutting Threading Buttoning/ Riveting Pressing Stitching Stone Washing (To be outsourced) Final Inspection/ Packing 8.1.30 0. Washing cost per piece is taken as Rs. 12 PREF-01/June. The production process flow is given in figure 8-1. Consumption/ Piece 1.1. Total cost of packing for one piece is taken as Rs. 30.2 350 1 1 1 1 6 1 Rate (Rs. 2010/Rev 3 .) 200 / m 100 / m 10 / piece 3 / unit 15 / unit 5 / unit 2 / unit 9 / unit 15 / piece Packing Cost Packing cost includes one poly bag and one small carton for the packing of each finished garment. Table 8-1: Raw Material Raw Material Fabric (Metre) Pocket Lining (Metre) Stitching thread (Metre) Imported buttons 4.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study recommended that the proposed project should outsource washing. 15.

000 15.000 40.000 15. Manager Accounts officer Marketing Manager Merchandiser Export Officer Purchase Officer Technician/Electrician Security Guards Total Number 1 1 2 1 1 1 1 1 2 11 Salary/Month 75.000 7.000 7.000 180.000 180.000 180.500 12.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 9.000 120.000 360.000 15. following manpower is required: Table 9-1: Manpower Required Production Staff Production Manager Production Planning Officer Pattern Master Cutting Master Cutting Helper Final Table inspector Finishing Supervisor Rowing Inspector Machine Operator Helper (machine operator) Clippers Iron Presser Packing Staff Store keeper Total Number 1 1 1 1 2 2 1 1 40 2 2 1 2 1 58 Salary/Month 50.320.000 15. 2010/Rev 3 .000 12.000 300.500 10.000 20.000 240.000 144.000 480.000 Administration Staff Chief executive Finance & Admin.000 8.500 10.000 25.000 50.500 7.500 Annual Salary 900.000 9.000 120.000 7.000 300.000 25.000 13 PREF-01/June.000 204.000 300.000 25.000 25.296.000 Annual Salary 600.000 600.000 300.000 180. HUMAN RESOURCE REQUIREMENTS For a garment-stitching unit of 32 stitching machines.000 3.000 288.000 180.000 204.000 180.564.000 4.000 8.

000 1.000 320.) 217.000 4.Pre-Feasibility Study 10.400 .000 40.000 156.000 427.500 50.000 136.000 10.500 50.500 133.000 10.000 46.000 54.000 136.000 60. Furniture and Equipment List Furniture and Equipment requirement for the Administration and Factory building is given in the table below: Table 10-2: Furniture and Office Equipment Furniture Table Chairs Shelves Stools Quantity 9 18 6 13 Cost/Unit (Rs.183.) 10.000 denim jeans per day.000 320.000 800 14 PREF-01/June.000 3.500 399.2.000 954. Garments Stitching Unit (Denim Jeans) MACHINERY AND EQUIPMENT DETAILS 10.320 25.820 10.500 50.000 1.000 291.000 128.500 318.320 4.000 138.500 50.500 1 Lumpsum 32 138.000 46. Approximate prices for Japanese origin machinery are given below: Table 10-1: Stitching Machinery and Equipment Machinery Cutting Machine Lock Stitch (Single Needle) Lock Stitch (Double Needle) Safety Stitching Over lock Safety Stitching Over lock Feed Off Arm Bar Tracking Waist Belt Machine Eyelet Machine Button Stitching Machine Loop Making Machine Snap Fastener Total machinery cost Other Equipment Steam Boiler Other tools Machine Installation and wiring Total other equipment cost Total Cost Quantity 2 15 3 1 1 2 3 1 1 1 1 1 32 Unit cost (Rs.500 28.055.) 108.055. 2010/Rev 3 Total Cost (Rs.000 Total cost (Rs.000 156. Machinery List Following combination of stitching machines is required for manufacturing 1.) 90.1.320 25.000 3.000 81.892.

ft.000 7.400 9 1 9 1 4 1 24 25.000 Lay Table Total Equipment Computers Printer UPS Networking Air conditioner Tele/Fax Total Total Cost 12 98 10.500 1.000 160.2.000 200.250 850 750 850 5. Land/Building Requirement Approximately.) 1.000 15.1.000 15.500 25.100 650 5.000 400 1.900 square feet of total covered area is required to establish the proposed stitching unit with a management building. ft) Fabric & Accessories inventory Store Cutting Room Stitching Room Inspection Room Packing Room Finished Garment Store Total factory area Management Building Total Area Required (sq. An appropriate premise is normally available in many commercial/industrial areas of under mentioned clusters.000 40.900 11.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) Machine Table 40 5. LAND & BUILDING 11.000 534.000 120.000 67.041.750 11.000 15. 2010/Rev 3 . 15 PREF-01/June.000 15. The allocation of the space requirement is as follows: Table 11-1: Space Requirements Space Requirement Required area (sq. 4.000 225.500 25.000 507. Recommended Mode It is recommended that this project should be started in a rented building. As the initial capital cost of the project will be less.

075.) 4.500 5. is also conveniently available in these cities. 11.092 1. Basic raw material i.150. 2010/Rev 3 .981.111 14.000 261.000 Annual rent (Rs.330 16 PREF-01/June.154. denim cloth.820 1.800.951.169.Pre-Feasibility Study Table 11-2: Garments Stitching Unit (Denim Jeans) Building Rent Rent cost Estimated Building rent Monthly rent (Rs.220 Stocks.e. Suitable Locations The clusters of stitching industry exist predominantly in Lahore.) 150.075.800.041. so it is recommended that such unit should be started in these cities.) 1.165 Debt Total 50% 7. Utilities Requirements It is assumed that the following utilities will already be available at the proposed building to be rented out:      Electricity Water Gas Telephone Fax 12. Karachi.4.360 2. Faisalabad and Sialkot.Raw Material Equipment spare part inventory Upfront for building rental Upfront insurance payment Cash Total Working Capital Total Investment in the Project 3.000 11.331 Table 12-2: Financing Plan Equity 50% 7.3.183.373 8.900 755.165 14. Most of the garment manufactures are based in these major cities.286 2. PROJECT ECONOMICS Table 12-1: Project Costs Project Costs Machinery & equipment Furniture & fixtures/Equipment Pre-operating costs Total Capital Costs Total (Rs.150.

146 14.188.744.046 52.110.834 16.871.710.488 182.296.625 173.169.956.272 111.766 12.135.529 189.040.843 29.647.123 10.120.148 2.419 776.813.721 2.336 1. Projected Income Statement PROJECTED INCOME STATEMENT Sales Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 107.679 11.306 Profit Before Tax Tax 2.293 Operating Profit 4.979 298.751 20.217.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 13.572 522.313.666.550 12.322.226 32.132.020 12.354 119.956 59.273 1.600 219.812.675.160 230.894.778 48.524 Raw Material Payroll (Production Staff) Machine Maintenance 1.925.572 72.203.274 506.853. FINANCIAL ANALYSIS 13.475 9.706.535.765 20.147.336 1.555.793 3.105 14.750.093 3.022.226 72.459 Cost of goods sold 79.890 6.847 3.835 30.728.418.819 7.565.308 47.750 7.520.440 4.etc) 261.239 58.100 522.403.461.631 106.715 9.244.714 Gross Profit 11.037 Profit After Tax 1.637.291.056 8.272 7.000 209.000 151.524.745 Payroll (Admin) 3.257 1.171.932.171.222 34.953.687 4.244.475 554.965 18.672 Total 95.818.505 11.384.386 1.961.378.562.680.026 967.206 106.935 Other expenses 60.171 153.641.574.176.139 2.219 46.763.000 1.945.218.718.395.000 3.067.839.646.214 8.100 522.639.015.452 Direct Electricity Operating Expenses Amortization (Pre-operational Expenses) Depreciation Non-operating Expenses Financial Charges on Long-term Loan 1.743 8.901.691 0 3.893 2.945.722.416 3.374.027.191 889.747 17.624 309.572 522.335 1.174.519 295.178.403.941 53.470 1.380 0 2.200 1.286 712.572 87.790 8.648.745 Administrative & Factory Overheads 802.293 222.800 0 2.988.795.134.457 57.427 244.100 522.423.171 125.223.900 948.1.267 2.858.890.637.228 11.920.898.214 42.445 80.240 8.768 1.000 970.870.643.520.026 3.029 862.743.138.027.216.000 0 2.100 522.794.075 43.672.228 7.400 4.651 995.156.372 3.980.333 36.965 28.950.440.933.858 6.718.581 168.351.200 88.000 6.025.382.908.385.074 254.527.572 96.739.456 5.918 3.648 13.828.188.823 13.083.507.027 172.906 972.306 Total 2.075.572 79.640 10.260.510.477 522.779.027.162 16.691 3.705 1.563 11.056.220 1.726 Fixed electricity 882.860 151.610 130.129 1.627.942 1.752 156.110 17 PREF-01/June.547 129.976 242.521.041 12.770 14.293.394.751 8.898.959.824 40.633.282 63.779 2.643 1.572 Total 6.316 15.843 10.480 201.390.470.633 1.100 522.353 1.719 53.948 39.572 66.997 1.299.607.310 40.875 2.678.054.044 0 0 0 0 0 Financial Charges on Short-Term Loan Building Rentel 0 1.791.859.538.689 10.783.858.079.810 0 3.564.600 151.684 5.389.705.550.902 3.697 1.460 0 4.986.157 784.312.198.936.507.569 65.460 4.424 2.262.045.572 522.972 104.635.805.007.315 133.808.013.669 37.165 1.991.600 99.188.994 202.871 324.769 78.645 2.847.922 27.846 151.703.586 324.845 1.131.664 7.087.875 9.385.737 156.173.741 Washing Cost (OUTSOURCED) 6.483.517 1.918 0 3.810 3.622.301 11.184.420.216 2.000.772 1.243.111 10.431.043.091 184.920 51.582 208. 2010/Rev 3 .443 Freight Charges 790.572 522.905.745.301 9.Entertainment.501 12.673 2.080 209.330 243.052 5.026 1.383 2.309 280.843 6.987 1.210.000 151.362.059.563 268.543 1.319 148.096.639.000 678.514 1.281 266.320 142.615 141.300 221.923 128.800 235.070 2.800.682.314.410.840 294.710 Insurance expense Office Expense (Stationary.967.950 26.915.518.294 116.867 44.667 26.

576 4.397 102.456 6.631.075.263.898.576 3.691 3.389 66.837.381.395.871.445.058.316 21.852.075.900 156.154.668 0 0 0 0 0 0 0 0 8.075.612.643 104.000 2.225.569 3.225.756 10.122 26.722 40.094 Stocks and Inventory 3.135.742 231.066.165 7.090.165 7.075.386 52.720 5.540.232 95.757 14.687.046.720 5.182.373 2.348 Long-term Loan 7.342.165 6.833 4.299 11.148 4.458 128.354 14.831.860 2.716 1.620 1.944 3.165 6.469.106 19.288 1.664.278 18.714 5.560.595.850 36.969 36.720 5.031.225.668.827.091 3.075.408 Receivable Equipment and spare part inventory 225.135.348 0 15.520.512 151.075.845 40.879.720 5.400 453.197 2.150.225.244.631.680 32.288 2.300 302.886 232.286 235.837.216 7.967 3.348.341.827 172.082.875.305.716 2.635.165 7.178.316 21.720 5.500 604.810 3.602 57.280 4.829.967 3.438.548 22.075.150.182.225.889 16.689 14.710 43.612.567.075.438.460 4.370 4.154.670 2.890.886 232.517.154.370 4.250.180.847.075.148 5.720 5.092 2.541.879.980.543 2.180.845 40.455.856 9.488.881 48.956 171.165 7.377 6.141.192 13.188.572 0 Pre-operational Expenses 755.526 9.126 18.993 84.567.372 30.373 2.157 209.045.468.474.132 28.592 Pre-paid insurnace payment Less: Accumulated depreciation Net Fixed Assets Intangible Assets Total Assets Current Liabilities Running Finance Accounts payable Total Long-term liabilities Equity Paid-up Capital Retained Earnings Total Total Liabilities And Equity 7.004 3.887 47.806 60.862.664.105 0 7.234 189.585.620 1.890.780 212.200 151.772 130.166.982.116.890.165 7.165 7.202.934 40.737 0 0 16.306 2.720 5.804.751 117.703.804.105 Gross Fixed Assets 5.947.278 18.165 7.000 2.777 0 0 0 0 0 0 Total 7.306 4.572 1.245 261.225.658.299 11.951.165 7.518 188.331 30.829.579 10.901.525 86.720 5.242.468.225.585.751 117. Projected Balance Sheet PROJECTED BALANCE SHEET Const.257 26.094 25.432 2.169.852.173.300 302.075.200 151.575.658.331 30.090.144 1.075.335.031.400 453.100 0 0 0 0 0 0 14.234 189.918 3.703.417. 2010/Rev 3 .612.233.277.831.874.953.512 151.957 19.720 5.2.392.045.392 2.075.680.165 7.680 32.751 8.555 73.225.277. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Current Assets Cash 2.129 0 Pre-paid building rent 1.514 78.720 5.623 135.360 4.165 7.225.380 2.829.615 205.943.800 2.720 4.182.256.500 604.507.317.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 13.009 22.455.982.803 2.300.891 115.228.037 135.224 150.230.432 3.755.082.509.777 0 0 0 0 0 0 7.341.621 13.496 101.206.791 164.800.100 0 Total 755.029 182.736 Total 8.890.943.964 278.192 13.682.860 3.528 44.138 7.720 0 522.165 8.792.225.889 16.075.978.720 5.525 86.046.225.482 249.225.000 1.106 19.477 71.647 256.144 522.418.858.225.826.806 60.004 4.354 14.165 0 1.373 6.105 18 PREF-01/June.075.949.471.964 278.392 278.045 33.554.862.111 24.088 10.610.422 2.297.040.

075.075.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study 13.461) (2.901.572 522.867 Amortization (Pre-operational Expenses) 151.154.173.126.331 (1.494.456 5.129 26.815) (1.300.668) 3.736) Financing acivities Long term debt principal repayment Add: buliding rent expense Building rent payment (1.572 26.431) 30.244.094 225.635.360) Accounts payable Cash provided by operations (4.232 1.824 40.154.765 20.129 26.129 26.425.300.474.843) (1.100 151.403) (1.847.384.100 151. 2010/Rev 3 .738) 44.673) (3.640.795) (8.768.373 2.124 23.981.859.023.843 29.572 522.898.496 101.470.335.178.833) (4.634.373 6.568 10.605.395.507.710 43.560 37.040.038) 3.922) (711.034.767 27.668.572 522.208.701 21.434) (575.885.572 522.244.839) (646.635.593 (7.593) (4.000 2.306 (1.129 26.980.165 Issuance of share 7.980.037 135.373 (5.338.535 1.554.423) 0 (2.800) (2.395.000 2.772.614) (782.353) (4.914.488.100 0 0 0 0 0 Depreciation 522.729 (1.385.691 3.795) (1.496 101.856 1.173.572 522.362.858.846) (424.053) 8.092) Accounts receivable Stocks-RM (3.321.236) (6.668) 12.488.541 33.165 Running Finance Repayment Cash provided by/ (used for) financin Total (7.3.800 2.113 53.018 (289.178.808.693.129 26.100 151.037 135.572 522.800.892) 0 (318.777) 0 0 0 0 0 1.347) (1.265.901.036.220) Cash (used for)/ provided by invetsin (5.898.040.664) (914.129 Up-front insurance payment Equipment and spare part inventory (261.058.220) Cash balance brought forward Net Cash 0 2.267 52.298 Investing activities Capital expenditure (5.129 26.242.422 34.188.501 12.325.691) (3.161 1.166.028.129 26.380 2.158) 10.037.546) (3.810) (3.769) 0 0 (385.637 16.135.009 22.032 (6.009 22.451 18.088.600.737 (493.727.710 43.278) (4.747.260.881) 0 (350.106.460) (4.094 2.274.572 522.918) (3.477 71.775) (861.833) (4.808.449.022.193.810 3.862.315) 0 0 8.110 (105) (110) (115) (121) (127) (133) (140) (147) (155) (162) (16.827 172.827 172.379.166.560.989.000) (2.460 4.805) (3.560.910 30.705.920) (533.572 522.392 19 PREF-01/June.154. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Operating activities Net profit 1.211 1.894 1.350.951.126) (2.295) 6.085) (3.211 1.208.214.129 26.306) (4.358.828 1.154.688) (947.120.847.520.000) Adition to debt 7.333 36.380) (2.981.188.791 37.386.000) (2.382.921.351.800.226 32.027.418.373 2.000 1.643.572 522.297.389 1.100 151.422) (3.082 27.918 3.242.657.845.858.286) (2.129 26.685.667 26.786.507. Projected Cash Flow Statement PROJECTED CASH FLOW STATEMENT Rs `000' Const.477 71.

30 5% Revenue Assumptions Sales Price per unit Defected garment sales price Sales Price growth rate USD 6.Pre-Feasibility Study 14. 150 10% 20 PREF-01/June. 85 Cash Flow Assumptions Accounts Receivable cycle (in days) Accounts payable cycle (in days) Raw material inventory (in days) Equipment spare part inventory (in days) Table 14-5 45 30 15 30 Raw Material Assumptions Raw material cost growth rate (Year 1-4) Raw material cost growth rate (Year 5-10) Washing cost Washing cost growth rate Table 14-6 32 100% 70% 90% 5% 2% 1000 5% 10% Rs. 2010/Rev 3 .2 Rs. Garments Stitching Unit (Denim Jeans) KEY ASSUMPTIONS Table 14-1 Machinery Assumptions Number of Machines Installed Installed capacity Initial year capacity utilization Maximum capacity utilization Capacity utilization growth rate Defective garment rate (of total finished garments) Total Production per day Table 14-2 Operating Assumptions Shifts operational per day Hours operational per shift Days operational per year Table 14-3 1 8 300 Economy-Related Assumptions Electricity growth rate Wage growth rate USD Conversion rate Table 14-4 10% 10% Rs.

entertainment etc) Freight expense Machine maintenance (per month) Machine maintenance growth rate Pre-paid building Rent (months) Pre-paid insurance (months) Admin and Factory overhead Insurance rate (% of net fixed assets) Spare part inventory Rent growth rate 1% 20% of admin expense 1% of raw material 5% of machinery cost 5% 12 12 0. cost of capital for NPV) 3 Tax rate is fixed through out the project since the income falls in 25% tax deduction slab 21 PREF-01/June.Pre-Feasibility Study Table 14-7 Garments Stitching Unit (Denim Jeans) Expense Assumptions Administrative overhead (% of Sales) Office expenses (stationery. 2010/Rev 3 10 50% 50% 16% 14% 5 1 20% .75% of revenue 5% 0.05% of machine cost 10% 3 Tax rate Table 14-5 25% Financial Assumptions Project life (years) Debt Equity Interest rate on long-term debt Interest rate on short term debt Debt tenure (years) Debt payments per year Discount rate (weighted avg.

Textile Ave. 021-4310632 iv) Siddiqsons Denim Mills Limited Address: D-53. 2 Islam Nagar.: 021-2577480.: 042-5340034 042-5832528 ii) Azguard Nine Ltd. Label Suppliers i) Kohinoor Labels Address: Street No. Karachi Contact No. Tel: (92-42) 5392344-48 Fax: (92-42) 5392343 3. Address: 26 M Gulberg III. Ltd.T.E. Lahore Tel: +92-42-111-245-245 Fax: +92-42-111-222-245 Email: mailho@crescentbahuman.: 111-786-645 iii) Naveena Denim Address: B21 Block 7/8 Banglore TW PECHS. 2010/Rev 3 . Lahore Contact No. Lahore. Pocket Fabric Suppliers i) Crescent Textile Mills Address: 40-A Off Zafar Ali Road. Karachi Contact No. Gulberg V.Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study ANNEXURE 1: RAW MATERIAL & MACHINERY SUPPLIERS 1. Denim Fabric Suppliers i) US Apparel Pvt. Gulberg III. Lahore Contact No. S. 021-2569591 2.com ii) Master Textile Address: 82-C-1.Rohi Nala Bhoptian Chowk 9 KM Raiwind Rd Lahore 22 PREF-01/June. Address: Ismail Aiwan-e-Sci Ferozpur. Jail Road. Faisalabad Phone: 041-32627544. 32631114 ii) Leather Connection Address: Alam-Porvair City.: 021-4310630.I.

Garments Stitching Unit (Denim Jeans) Pre-Feasibility Study Phone: 042-35321406.Nizam Block.) Ltd. Lahore.pk 23 PREF-01/June. Lahore. Ph: 042. 35321401 Fax: 042-35321407 Email: buckleup@leatherconnections. Coats Pakisan (Pvt. E.73. Allama Iqbal Road Lahore Ph: 042-36375524-36369309 Email: rex@nexlinx. & P. Ltd. UAN: 111-115-115 6. 021-35085677 5.com ii) Rex Machinery Pvt. Mail: amcl-l@almurtaza. Machinery Suppliers i) Almurtaza Garments Machinery Co.net.: 042-5792020-2. Cell: 0334. Ltd.com. Address: Rex Market. Address: 4 .F. 2010/Rev 3 .5316174. Contact no. 6.5316171.4244202. Address: 433. Main Wahdat Road. Johar Town. Thread Suppliers i) Shah Alam market – Lahore ii) J.pk 4. Fax: 042. Zip & Button Suppliers i) YKK Pakistan Pvt.

00% 3.50% 15.00% 5.000 300.000 200.000 – 1.000 125.000 175.000 – 150.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) ANNEXURE 2: INCOME TAX DEDUCTION SLABS Income Slabs Tax Rate 0.50% 21.00% 100.000 600.000 110.50% 10.00% 12.00% 7.000.300.00% 17.000 – 500.000 and above 24 PREF-01/June.000 – 175.00% 4.000 500.000 – 200.000 150.000 – 800.000 1.000 – 600.000 400.000.000 1.00% 2.000 – 1.300. 2010/Rev 3 .000 – 400.000 – 300.000 – 125.00% 0.50% 1.000 800.000 – 110.00% 25.

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