You are on page 1of 19

Pre-Feasibility Study

GARMENTS STITCHING UNIT
(Denim Jeans)

Small and Medium Enterprise Development Authority
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6 Floor, LDA Plaza, Egerton Raod, Lahore
Tel: (042) 111-111-456, Fax: (042) 6304926-27
helpdesk@smeda.org.pk
th

REGIONAL OFFICE
PUNJAB
8th Floor, LDA Plaza, Egerton
Road, Lahore
Tel: (042) 111-111-456
Fax: (042) 6370474
helpdesk@smeda.org.pk

REGIONAL OFFICE
SINDH
5TH Floor, Bahria
Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
helpdesk-khi@smeda.org.pk

REGIONAL OFFICE
NWFP
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
helpdesk-pew@smeda.org.pk

June, 2005

REGIONAL OFFICE
BALOCHISTAN
Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
helpdesk-qta@smeda.org.pk

............ MACHINERY DETAILS ...............5 4...............................12 9..............................3.........4 3...........................7 5....................... OPPORTUNITY RATIONALE .............. SUITABLE LOCATIONS ............... RAW MATERIAL.......... OPPORTUNITIES FOR THE BUSINESS .........9 7.1........6 5............................. WEAKNESSES OF THE BUSINESS .....................................................3.................................. 11 8....5 4.....12 9..............1.............................................................................................................. FINANCIAL ANALYSIS...................... Existing Split of Industry........................................................................ 3.......................8 6.. PROPOSED LOCATION........................................ 2................8 5........2............................................... MARKETING .. EXPORT MARKET .......................4 3.......................................... LAND & BUILDING ..13 11......................................................6 4..................................................................................16 12..............................................................................1.................2.......................................8 5.............................7........................... MACHINERY LIST......................................4 3..........1....... TOTAL PROJECT COST ....................................................................................................... RECOMMENDED MODE...................................... 11 9.........8 6.. PROJECT ECONOMICS................1......................................................5 4........ 2005/Rev 2 ................... PROJECTED INCOME STATEMENT ................6 4............................6 5.......................................................... 12 9..............Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 1.................................................1............... INTRODUCTION TO SMEDA......4 4...................................................................... STRENGTHS OF THE BUSINESS .................................6... PROJECT PROFILE .................2........................................................... PROJECTED CASH FLOW STATEMENT.4 3.......................1.............. UTILITIES REQUIREMENTS ......................4................................... TARGET CUSTOMERS ................................. CURRENT INDUSTRY STRUCTURE ...... MOTOR VEHICLE .............................................. PROJECTED BALANCE SHEET ..4......................................................... KEY SUCCESS FACTORS ................3..4 4.... DOMESTIC MARKET ..............10 8..................................2......... PRODUCTION PROCESS FLOW .................................................14 11..4.............................1....................................2.......................... Packing Cost.......... PROPOSED BUSINESS LEGAL STATUS .......1.......................... PROJECT BRIEF .....3 PURPOSE OF THE DOCUMENT.............................. PROPOSED CAPACITY ..............3.....................13 10.............................................................................4 4.......4...........2....9 6....................................3...........3 CRUCIAL FACTORS & STEPS IN DECISION MAKING...............17 1 PREF-01/Jun...................................... 14 11.........................................15 11.......................1.................4...6 5.................................. HUMAN RESOURCE REQUIREMENTS .......................................................................................5.......................12 9........11 8............................................................. KEY ASSUMPTIONS. THREATS FOR THE BUSINESS ...................................... LAND/BUILDING REQUIREMENT ............

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. PREF-01 Revision 2 Prepared by SMEDA-Punjab Issue Date July.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 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.smeda. For more information on services offered by SMEDA.pk DOCUMENT CONTROL Document No. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. please contact our website: www. 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. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions.org. 2001 Revised in June. 2005/Rev 2 . 2005 Issued by Library Officer 2 PREF-01/Jun. Although. and the actual results may differ substantially from the presented information.

These services include identification of viable business opportunities for potential SME investors. marketing. 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. SMEDA had adopted a sectoral SME development approach. marketing. Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. and finance and business management. This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions. fruits and vegetables. 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. SMEDA provides business guidance through its help desk services as well as development of project specific documents. Since its inception in October 1998. 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. SMEDA has so far successfully formulated strategies for sectors including. The allencompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including finance. marine fisheries. These documents consist of information required to make well-researched investment decisions. INTRODUCTION TO SMEDA The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program. This particular pre-feasibility is regarding “Garment Stitching Unit” which comes under “Textile” sector. technology and human resource development. surgical instruments. leather and footwear. start-up. transport and dairy.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 1. 2. the document covers various aspects of the business concept development. In order to facilitate these investors. marble and granite. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective. gems and jewelry. production. 2005/Rev 2 . textiles. A few priority sectors were selected on the criterion of SME presence. 3 PREF-01/Jun.

Stitching expertise is not available at the best possible level. Opportunity Rationale During the last decade. 2005/Rev 2 . This restricts the industry to the basic garments and only limits the entry into the manufacturing of high quality garments. This has led to a rise in the demand of denim garments. Relatively low labour costs Ample available work force. processing and finishing sectors will be established at Karachi and in one of the industrial cities of Punjab. the usage of denim garments. CRUCIAL FACTORS & STEPS IN DECISION MAKING 3. Vietnam. Weaknesses of the business The requirement of credit and/or delay of payments from customer side might cause disturbance in the cash cycles. 4. 3.     3. Very small base of available skilled machinists. has been on a rise in the international as well as the local markets. 1. Hong Kong.e. NAFTA is also one of the threats.  Asia pacific markets are emerging as new players in the world knitwear trade. Competition from China.  Two special export zones focusing on textile sector particularly in dyeing. Uncertain investment climate Opportunities for the business  WAPDA/KESC will provide “off peak hour rates” and “bulk rates” for industrial consumers to lower the electricity cost of manufacturing. Well-situated industrial estate with all main facilities available. Lack of trained technicians and line / middle management. The competitive edge of Pakistan in this field stems from the ready availability of cotton yarn required to weave denim fabric i. especially denim jeans. PROJECT PROFILE 4. 2. 4.  Manufacturers-cum-exporters are allowed to import samples of each kind or quality having value up to US$ 100 at zero duty rate.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 3. Threats for the business  Skilled operators in the denim garments are quite unorganized.     3. Strengths of the business There is a “ready made” market for this product. 1. and Korea is likely to increase in the coming years. 4 PREF-01/Jun. 3.

4. Table 4-1 Project Investment Fixed Investment Working Capital Total Investment Rs.751 Rs.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) NE 7/1 to NE 14/11. The project seems to be viable with the following returns on investment.78 years 1 yarn count 2 The project profile has been prepared for a standard five pocket jeans trouser 5 PREF-01/Jun.571 million including machinery and office equipment. 3. However washing will be outsourced. Proposed Capacity 1000 garments/day 2 4. 2.571. denim shirts.469 The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity. 2005/Rev 2 . Project Brief The proposed project presents an investment opportunity in manufacturing of denim garments i. denim skirts. denim padded shirts. During the past few years. Total Project Cost The cost of project has been estimated as Rs.941. 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. 133. 3.718 Rs. The export of denim garments from Pakistan has also been increasing in the past. 4. jackets and work clothes.39% Rs.943. 4. 4.8. Denim Jeans trousers constitute about 80% of total denim products manufactured with the remaining 20% including other denim products. Bermuda shorts.e. However this composition of debt and equity can be changed as per the requirement of the investor. 8. Table 4-2 Project Returns Internal rate of return (project) Net Present Value @ 20% Payback period – based on cash inflows 65. etc.269 4. the denim fabric manufacturing capacity has also been enhanced that has provided the opportunity to the downstream industry to get strengthened.629. denim jeans.

1. 5. 7. 6. Export Market Pakistan’s export of denim jeans is increasing over the years.       Surety of high consistent quality Surety of on time delivery Competitive rates Cost efficiency Better services to the customer. Proposed Location The proposed locations for a garment manufacturing unit will be       4. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a Sole Proprietorship. MARKETING 5. This requires very aggressive marketing efforts at the entrepreneur's end.Pre-Feasibility Study 4. Garments Stitching Unit (Denim Jeans) Proposed Business Legal Status The proposed legal structure of the business entity is either sole proprietorship or partnership. Better communication development with customers 5. 6 PREF-01/Jun. 4. 2005/Rev 2 . Following are other key points that are important for the successful operation of the proposed stitching unit. Pakistan’s export trend for the last five years is shown in figure 5-1. There is approximately a 100% increase in its exports in the year 2003. It still has potential to grow. 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.

2. Greece and United Kingdom etc.051 667 1.624 719 1. Other major export markets are Bangladesh. 2005/Rev 2 .000 jean trousers per month. Major partners are given in the table below. The size of the manufacturers.417 1. whose primary market is domestic.000 jean trousers per month. 5.Pre-Feasibility Study Export Trend of Pakistan Value in Us$ 1000 Figure 5-1 Garments Stitching Unit (Denim Jeans) 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 1999 2000 2001 2002 2003 Years Turkey and Italy are the major countries importing Pakistani denim products. Domestic Market Almost all the established manufacturers are catering solely to the export market. 2 Source: PC TAS 2003 7 PREF-01/Jun.285 1. But the big manufacturers are exporting as much as 500. Only the B-Class products are sold in the domestic market.3 million.620 4.384 911 Most of the manufacturers catering to the export market are exporting in the range of 10.191 4.000 to 30. Table 5-1 Pakistan’s Exports in the year 20032 Country Turkey Italy Greece United Kingdom Spain USA Tunisia Jordan Netherlands Iran Export Value (US$ 1000) 17. is quite small. Total Export of Pakistan in the year 2003 was US $ 43.

M/s Mr. Washing of the fabric will be outsourced as washing in house requires a plant which is expensive and will take the project cost too high. Talon Sports Pvt. Ltd. 8 PREF-01/Jun. 4. Ltd. 5. M/s Al Karam Textile Mills Pvt. Other important hubs are Sialkot.000 jeans per day.1. direct distributors and wholesalers. The average production capacity of majority of small and medium sized jeans manufacturing units is about 1. Ltd. Ltd. The export can either be through buying houses and/or through direct customers. the customers are retail chain stores. RAJBY Industries Ali Murtaza Associates Pvt. Abdullah Apparels Pvt.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) Target Customers 5. jean cloth which will be put into the process. Faisalabad and Gujranwala. large size manufacturers are producing as much as 30. S.e. 15.000 jean trousers per day. However. Existing Split of Industry Major concentration of the denim garment stitching industry is in Karachi and Lahore. Table 5-2 Major Players U. Apparel and Textile Pvt. Ltd. Denim Pvt. M/s Azgard Nine Ltd.4. Lahore Karachi Karachi Lahore Sialkot Karachi Lahore Karachi Karachi Karachi 6. Ltd. M/s Digital Apparel Pvt. 2005/Rev 2 . M/s Joe’s Fashion Export Pvt. So it is recommended that the proposed project should outsource washing and later on it can have its own plant for in house washing. In case of direct exports. Washing cost per piece is taken as Rs. Proposed production process flow for the said business is shown in figure 5-1. CURRENT INDUSTRY STRUCTURE 5. Ltd. Ltd. It will be purchasing raw material from the market i. PRODUCTION PROCESS FLOW The proposed business will be stitching jeans garments. 3.

1.00 1. 9 PREF-01/Jun.75 0.1. Table 6-1 Raw Material Raw Material Fabric cost Pocket Lining per meter Stitching thread Imported buttons 4.00/piece 6.30 m 0.50 7.5 YG Zip Main label Care and size label Rewet per unit Packing cost Consumption/ Piece 1.00/.) 125/m 28.03/ 1.Pre-Feasibility Study Figure 6-1 Garments Stitching Unit (Denim Jeans) 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 Raw Material 6.17m 260m 1 1 1 1 6 1 Rate (Rs. Packing Cost Packing cost includes one poly bag and one small carton for the packing of each finished garment. 2005/Rev 2 . 0. Total cost of packing for one piece is taken as Rs.25 9.50 4. The proposed business will be using raw material listed in the table 5-1. 7.1.

000 84. 2005/Rev 2 Annual Salary 180.000 84.500 3.000 3.000 3.000 2.000 4.000 1.000 72.000 42.000 2 2 2 2 1 2.232.000 120.000 96.000 240.000 96.500 5.000 60.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 7. following manpower is required: Table 7-1 Manpower Required Designation Production Manager Cutting Master Accounts officer Security Guards Technician/Electrician 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 2 1 2 2 1 1 31 Salary/ Month 15.000 36.000 .500 5.000 8000 7.000 60.000 3000 10 PREF-01/Jun.000 18.000 10. HUMAN RESOURCE REQUIREMENTS For a garment-stitching unit of 32 stitching machines.000 96.000 4.500 6.516.000 3.

483 411. prices for Japanese origin machinery are given below: Table: 8-1 Stitching Machinery Required Machinery Number Cutting Machine Lock Stitch (Single Needle) Lock Stitch (Double Needle) Safety Stitching Over lock (3Thread) Safety Stitching Over lock (5Thread) Feed Off Arm Bar Tracking Waist Belt Machine Eyelet Machine Button Stitching Machine Loop Making Machine Snap Fastener 2 15 3 Cost/machine3 (US $) 1250 330 1675 1 965 57.061 Motor Vehicle The proposed business will be using one Suzuki Mehran for transportation purposes.000 293.975 512.639 1 2 3 1 1 1 1 1 1205 4290 2296 2240 12840 2250 2600 4500 71. boxes etc) Machine Installation & Electric wiring cost Total 8.601 100. Approx.393 155.257. The cost is taken as Rs. MACHINERY DETAILS Machinery List 8. stools. 11 PREF-01/Jun.420 133. Following combination of stitching machines is required for manufacturing 1000 denim jeans per day.) Cost (Rs) 97.000.853 Other Equipment Required Other Equipment Steam Boiler with 2 irons Factory fixture (wooden tables.298 268.59.325 295. 2.664 300.143 3.785 Total 32 Table: 8-2 149.000 96.73 for US $ 1. 1. Rate of conversion is taken as Rs. 2005/Rev 2 . Total cost in (Rs.795 766. 375. 3 Machine prices are converted from US $ to Rupees.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 8.933 134.

Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 9.800 Recommended Mode 9.800 180. It is recommended that this project should be started in a rented building.) Table: 9-2 3. The allocation of the space requirement is as follows: Table: 9-1 Space Requirements Space Requirement Fabric & Accessories inventory Store Cutting Room Stitching Room Inspection Room Packing Room Finished Garment Store Total factory area Required area (sq.774. Faisalabad and Sialkot.) Factory area Management building Total 450 600 Construction cost (Rs. An appropriate premises is normally available in many commercial/industrial areas of under mentioned clusters. Approximately. As the initial capital cost of the project will be less. Karachi.544 Management Building 300 Total Area Required (sq. Table: 9-3 Rent Cost Rent cost Monthly rent (Rs.) 480. so it 12 PREF-01/Jun. 2. 1. ft) 938 312 650 397 397 850 3.000 1./sq. ft. 40.000 Annual rent (Rs. L A N D & B U I L D I N G Land/Building Requirement 9.594. 3. 2005/Rev 2 .) 1.844 Building Construction Cost Building Construction Cost Cost (Rs.844 square feet of total covered area is required to establish the proposed stitching unit. Most of the garment manufactures are based in these major cities.) Estimated Building rent 9.000 Suitable Locations The clusters of stitching industry exist predominantly in Lahore. 3. ft.

285.39% 133. 2005/Rev 2 .734 4. Basic raw material i.111 2.    Utilities Requirements Electricity Telephone Fax 10.000 187. 4.629.Raw Material Cash Total Working Capital 1.e.500 4.469 Table: 10-3 Project’s Economics Internal Rate of Return Net Present Value (NPV@ 20%) (Rs) Payback Period (Years) 65.269 4. denim cloth. PROJECT ECONOMICS Table: 10-1 Project Costs Project Costs Machinery & equipment Furniture & fixtures/Equipment Office vehicles Pre-operating costs Total Capital Costs Total (Rs. 9.943.285.339 795.718 Equipment spare part inventory Upfront for building rental Upfront insurance payment Stocks.571.325 3.000 222. is also conveniently available in these cities.781 13 PREF-01/Jun.000 375.442.976 480.469 Table: 10-2 Financing Plan Equity Debt Total 50% 50% 4.734 8.941.) 3.952.571.218 115.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) is recommended that such unit should be started in these cities.751 Total Investment in the Project 8.

7 80 5.80 0.31 6 21 8.81 0.54 3.1 57 59 .8 22 .638 9 8.94 3.7 50 O ffice exp en ses A d ministrative O verheads A mo rtizatio n (Pre-op eratio nal E xp enses) D epreciation T o tal O pera ting Pro fit 44 4.8 05 10 8.6 37 .2 15.0 13 .97 1 2.1 74 .8 66 T o tal G ross P rofit 2.4 88 .01 2 70 8.79 3 2 .8 64 .29 9.8 54 7 1.571 3 2.009 19 2.7 54 28 7.76 0) -1 4% (61 3.55 4.24 3 3.6 90 53 8.26 4 1 31 .01 0.0 74 1 96 .90 0 1 77 .91 0 36 .775 10.2 38 4 7.75 0 1 8.472 1.33 4 23 .6 32 2.8 89 4 6.31 1.85 7 20 .1 61 .2 09 9 7.87 6 1 12 .74 9 1 .21 5 2 .0 08 .54 2 89 .05 6 4 .35 3.00 0 52 8.07 0 56 .8 22 7 1.3 20 M achine M aintenance 11 5.7 91 D irect Electricity 40 4.09 5.56 7 1 .004 16 1.2 67 .77 8 7 16 .2 91 .9 86 1 97 .11 1 19 9.2 06 57 .04 5 8 50 .55 1 40 .9 62 26 3.8 92 14 1.95 2.1 56 9 6.16 2 2 .9 06 .8 52 58 5.8 44 6 6.00 7 10 .70 3 44 5.3 49 93 5.65 9 5 92 .6 15 9 77 .7 50 1 8.8 52 8 30 .0 82 .8 69 1 39 .8 86 9 .0 08.8 68.28 8 27 .7 60 60 6.1 79 6 8.2 68 5 7. cc P R O JEC T ED IN C O M E STA TE M EN T R s.00 0 3.070 5 6.00 3 50 9.22 2 44 4.48 0 3.5 87 0 0 0 1 8.6 18 Insurance exp ense 22 2.4 43 .88 0.85 5.4 93 1 3.0 78 8.1 67 1 4.98 0 92 .22 2 4 44 .25 9 1 44 .50 8.267 11 1.81 3.75 0 18 .8 84 18 4.0 75.2 07.69 3.91 8.35 0 6 .05 5 88 .20 0 12 3.34 4 8 .750 1 8.3 90 .47 8 1 33 .2 22 4 44 .02 9.60 0 5 51 .86 0 4 .40 9.7 99 1 6.99 1.2 94.9 23 1.4 26.4 44 O pera ting Expenses P ayro ll (Ad min ) 45 6.2 22 44 4.44 3.72 2.75 0 18 .8 15 1.308 10 6.3 52 4.2 94.076 77 3.6 74 1.9 23 1. 1.0 28 .59 6 3 .3 74 W ashing C o st (O U T SO U RCE D ) R aw M aterial 3.23 2 4 05 .02 1.78 1 14 .5 90 58 .6 37 .3 28 38 6.354 31 9.13 7.3 58 8 0.5 18 6.6 89 15 5.9 77 5.3 31 .50 7 13 .7 52 2.36 6.6 49 .57 7.75 0 18 .943 8 7.00 3.95 8 2 90 .68 4.3 49 93 5.5 91 .7 81 1 4.3 84 1 .67 5.6 13 .7 77 46 6.4 80 .Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 11.79 4 72 .2 22 4 44.125 2 8.2 33 .0 42 .65 3 57 .3 97 1 14 .3 53 .9 47 .3 18 .5 59 .78 8 1 53 .38 9 3 51 .0 14 5.9 86 .44 3.9 23 4.00 0 3 .39 3 8 07 .79 7 6 63 .76 0) 83 0.21 1 3 4% 1 08 % 20 0% 14 PREF-01/June.07 2.0 28 .00 0 5 80 .8 80 4 9.2 58 .6 00 4.9 55 78 8.3 84 1 .5 42.88 0 7 02 .1 14 P ayro ll (Pro duction Staff) 3.630 73 4.8 32 88 8.1 29 .1 05 .6 08 .0 13 .155 12 0.525 65 1.17 2 21 .9 54.5 16 9 54.14 7 2 39 .00 0 50 1.8 00 63 8.8 68 .7 70 1 01 .3 10 Y ear 10 C o st of g oo ds sold 5 0.9 80 9 2. 2005/Rev 2 3 11 % 67 4% 8 55 % 109 6% 13 30 % 15 94% .01 6 5 .91 5 5 .12 5 1 51 .209 13 1.2 06 57 .18 5 6 .1 50 .73 2.42 6.99 7.6 90 .0 38.76 0) 0 (61 3.4 61 4 25 .70 9 1 03 .4 42 .4 65.17 3 4 89 .9 19 .76 0) 0 (61 3.768 77 3.98 3.07 4 6 .9 35 2 11.65 3.63 3 44 .00 1.60 0.2 22 1.4 76 1.253 26 5.57 4 1 72 .7 50 1 8.8 71 .201 2 9.8 15 2.22 2 4 44 .31 6 8 56 .03 5 64 .92 8.00 3 1.3 82 7.6 67 60 0.8 69 13 9.4 22 22.5 54 1 74 .6 41 1.59 6 3 .87 1.2 53 5 .93 6 6 67 .16 1 5 .95 5 37 .4 68 .96 3.288 2 7.80 1 82 .7 32 96 9.97 0 4 .98 3.14 4.676 7.7 02 .2 11 5.6 51 8 67 .8 17 .75 0 18 .81 8.2 11 4.3 91 .22 2 4 44 .6 85 15 8.9 73 .56 8 4 .00 4.7 50 18.15 8 8 29 .02 9 1 .6 49 .5 53 .1 20 27 9.88 0.08 0.21 0.1 31.8 55 .1 79 6 8.94 6.06 9 6 .781 2 8.222 44 4.2 24 Fixed electricity 19 8.074 19 6.8 89 4 6.1 05 (61 3.21 4 8 .21 0.0 21 .97 4.76 1 64 .1 07 4 67.5 55 .41 0.56 0 5. 100 0 Sa les Y ea r 1 Y ear 2 Y ea r 3 Y ear 4 Y ea r 5 Y ear 6 Y ear 7 Y ear 8 Y ea r 9 6 0.5 71 8.04 5 8 50 .24 9 70 .146 4.4 20 .44 3 1 .9 61 .1 02 6 9.1 63.84 3 79 .8 61 .81 5.06 0. FINANCIAL ANALYSIS Projected Income Statement 11.64 7 0 0 0 0 0 0 N o n-o perating Expenses Finan cial C harges on Lo ng-term L oan Finan cial C harges on Sho rt-T erm L oan B uilding Rentel T o tal P rofit B efo re Ta x T ax P rofit A fter Tax R etained Earnings b eginning of year R etained Earnings end o f year ROE 48 0.1 31.308 0 0 0 0 0 0 65 5.23 3.7 52 60 0.91 0 36 .46 5.20 6.370 2.020 4.21 4 5.9 05 .2 22 44 4.59 1.62 8 92 .344 0 0 0 0 0 1.

227 211.195 25.442.887 2.153.665.648 2.077.Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) Projected Balance Sheet 11.332.803.218 4.261 4.915.220 26.341 15 PREF-01/June.443 8.979 4.227.349 935.213.253 265.619 Current Assets Cash Stocks and Inventory Receivable Equipment and spare part inventory 795.847.806.109 2.056 1.499 9.781 2.402 2.729.956.632 1.109.037 20.693.778.212 2.734 4.751 8.734 4.178 5.481.663.382 14.095.556 69.991.157 16.522 39.768 773.218 0 444.175.817 11.552 2.776.373 2.227 211.898.214 106.341 Gross Fixed Assets 4.218 4.997.897.218 4.750 18.230.373 3.142.468.874 9.196.418 10.767.285.325 5.734 4.285.221.809 201.433.037 0 0 8.079.516 18.945 9.285.441.887 1.242 2.997.550.760) Total 4.603 144.992.218 4.285.867.442.469 17.130.227 280.448.250 37.598.218 4.671.556 69.331 2.869 139.442.518 5. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 251.166 3.500 168.444 1.285.109 1.478 133.844 66.541 22.221.744 8.444 444.684.055 88.128 18.593 7.500 37.734 4.774 3.284 210.800 638.665 1.179 2.776.734 830.285.026 10.066 Pre-paid insurnace payment 222.267 111.552 3.341 0 4.750 150.917.442.750 168.988 269.946.622 15.000 131.522 2.285.506 3.872 4.140.419.285.220 26.218 4.550.637.448.478 153.219 1. 2.157.571.734 4.500 93.255 280.070 56.501 0 9.750 0 0 8.639.815 1.000 580.734 4.900 177.800.218 4.820.163.285.778.324.734 4.996 4.780 10.227.021.665 888.923 1.000.442.419.000 528.236.310.519.222 0 187.691 37.307.227 280.880 702.113.000.128 18.111 199.646 179.637.734 3.105 Less: Accumulated depreciation Net Fixed Assets Intangible Assets Pre-operational Expenses Total Total Assets Current Liabilities Running Finance Accounts payable Total Long-term liabilities Retained Earnings 0 (613.443.714 97.781 14.478 153.353.855.500 112.196.986.250 131.874 9.285.570 1.980 92.535.442.244.113.442.282 13.387.055.500 187.442.469 17.285.332.941.774 3.218 3.553.218 4.500 18.632 2.598.931 20.571.536.250 56.776.442.996 Total 3.996 3.384 1.290.265.751 8.442.442.109.075 2.175 6.931 20.233.562 78.442.689 155.178.920 3.245 43.131.250 112.563 152.222 888.325 795.214 106.310.665.422 22.751 12.045 850.522 39.339 2.028.917.463 18.095.073 7.604.285.776. 2005/Rev 2 .442.325 795.840 Total Liabilities And Equity 8.868.227.654.736.639.115. PROJECTED BALANCE SHEET Rs `000' Const.804 60.218 4.887.501 Long-term Loan Total 4.327 105.633 44.480 0 0 0 0 0 0 0 5.000 150.211 5.347 3.239 10.023 31.056 3.915 27.242 2.218 4.331 3.418 23.761 16.553.734 4.734 3.734 4.000 56.871.816.285.750 93.233.211 0 Pre-paid building rent 480.265.917.750 75.734 4.976 2.975 5.499 9.119.997.239 10.325 795.074 196.288 2.418 10.285.244 124.734 4.056 0 0 0 0 0 0 0 0 0 0 0 0 Equity Paid-up Capital 4.055.233.218 4.442.387.288 27.697 67.000 75.885 4.285.898.638.967.450.468.867.443 8.367 4.

888.736.800) (638.604.193) (4.021.821 5.361) (739.Pre-Feasibility Study 11.222 444.130.562 78.240 11.294.768 773.325 795.619 (3.000) (580.325 795.367.613.654.750 18.245 43.622 15.291) (355.222 444.419 745.000 580.396.211 22.637.917.910 36.917.575) (1.518) (222.261) (4.119.236.384 1.262 (3.750 18.750 18.750 18.425.750 18.375 465.212 5.518 680.815) (1.639.987.222 444.656 650.013.222 444.562 78.956 27.179 18.684.707) (413.245 43.940 55.943) 0 (1.619 1.212 251.479) (2.720) (2.800 638.211 (99) (104) (8.211 22.325 795.941.304) 0 (85.222 444. 3.131.206 57.211 22.623 3.339) Accounts payable Cash provided by operations (2.996) (696.130.718) Cash (used for)/ provided by invetsing activities (4.629.361) (4.212 251.591) (310.285.178.469 Total Investing activities Capital expenditure 5.111) (1.245) (1.019.325 795. Garments Stitching Unit (Denim Jeans) Projected Cash Flow Statement PROJECTED CASH FLOW STATEMENT Rs `000' Const.222 444.035) 0 (93.481.589 Financing acivities Long term debt principal repayment Add: buliding rent expense Building rent payment (480.222 22.131.045 850.997.753.043 (648.576) 0 0 0 0 0 480.526.976) Accounts receivable Stocks-RM (2.402 55.349) (935.624.178.325 795.889 46.045) (850.095.571 8.736.211 22.426) 1.261) (5. 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 (613.480 0 0 0 0 0 0 0 795.349 935.296 (1.481.211 22.923) (1.285.619.544 488.684.443.768) (773.646 179.244 124.244 124.936) (3.646 179.517.480) 10.480) (5.333) 0 (77.997.325 5.236.750 18.202.000 528.734 Running Finance Repayment Cash provided by/ (used for) financing activities 8.891.738.285.748 443.718) Cash balance brought forward Net Cash Running Finance Cash carried forward 0 795.211 22.781 28.331.629.717) (109) 68.037 513.970 4.178.384) (1.285.211 22.880 702.211 22.903.610) (960.750 18.570) (1.222 444.028.734 Issuance of share 4.623 27.892) 0 (113.702) (2.654) (2.538) 0 (102.559.604.000) Adition to debt 4.408 (4.465) (2.750 444.997.056) 45.091.880.494) (211.852 (114) (120) (126) (132) (139) (146) (153) (1.181) (4.261 4.760) Amortization (Pre-operational Expenses) Depreciation Up-front insurance payment Equipment and spare part inventory (222.350.458 71.303.804.325 16 PREF-01/June.815 (528.923 1.780 7.684.325 5.622 35.917.222 444.570 795.750 18.245 43.260) (3. 2005/Rev 2 .442.562 78.236.026) (1.318 35.850 804.716 45.028.154) 0 4.453.325 795.476.736.199) (244.211 22.308 866.288.405.481.244 124.666.142.900) 739.566 71.080.504) (2.244.570) (1.132) (842.818) (383.577.750 18.917.791) (324.622 15.130.604.319.452.637.880) (702.507 13.983.165.682 4.859) 5.383.646 179.222 444.094) (233.622 15.

Pre-Feasibility Study Garments Stitching Unit (Denim Jeans) 12. 2005/Rev 2 .760 1 8 26 312 Economy-Related Assumptions Electricity growth rate Wage growth rate Office equipment price growth rate Office vehicles price growth rate 10% 10% 5% 10% Table 12—4 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 12-5 45 30 15 30 Revenue Assumptions Sales Price per unit Sales Price growth rate Maximum capacity utilization Rate of defective garments (Rs/garment) US $ 4.25 10% 95% 50 17 PREF-01/June. KEY ASSUMPTIONS Table 12-1 Machinery Assumptions Number of Machines Installed Installed capacity Initial year capacity utilization Capacity utilization growth rate Defective garment rate (of total finished garments) Total Production per day Annual Production Capacity (excluding defective) Table 12-2 Operating Assumptions Shifts operational per day Hours operational per shift Days operational per month Days operational per year Table 12-3 32 100% 70% 5% 2% 1000 305.

Pre-Feasibility Study Table 12-6 Garments Stitching Unit (Denim Jeans) Expense Assumptions Administrative overhead (% of Sales) Office expenses (stationery. cost of capital for NPV) 18 PREF-01/June. 2005/Rev 2 10 50% 50% 14% 14% 5 1 20% . entertainment etc) Machine maintenance (per month) Machine maintenance growth rate Pre-paid building Rent (months) Pre-paid insurance (months) Insurance rate (% of net fixed assets) Spare part inventory Rent growth rate Tax treatment Table 12-7 1% 1% of admin expense Rs 200 per machine 7% 12 12 5% 0.05% of machine cost 5% Treated as sole proprietorship 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.