Pre-Feasibility Study

UPVC PIPES MANUFACTURING UNIT

Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor LDA Plaza Egerton Road, Lahore
Tel (042)111 111 456,
Fax: 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE

REGIONAL OFFICE

REGIONAL OFFICE

REGIONAL OFFICE

PUNJAB

SINDH

KHYBER PAKTUNKHWA

BALOCHISTAN

8th Floor LDA Plaza,

Egerton Road,
Lahore.
Tel: (042) 111 111 456,
Fax: (042) 36370474
helpdesk.punjab@smeda.org.pk

5TH Floor, Bahria Complex II,

M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
helpdesk.sindh@smeda.org.pk

Ground Floor
State Life Building The Mall,
Peshawar.
Tel: (091)111 111 456, 9213046-7
Fax: (091) 286908
helpdesk.NWFP@smeda.org.pk

Bungalow No. 15-A Chamn

Housing Scheme Airport Road,
Quetta.
Tel: (081) 2831623, 2831702
Fax: (081) 2831922
helpdesk.balochistan@smeda.org.pk

June, 2010

Pre-Feasibility Study

UPVC pipes manufacturing unit

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter
and provide a general idea and information on the said area. All the material included in
this document is based on data/information gathered from various sources and is based on
certain assumptions. Although, due care and diligence has been taken to compile this
document, the contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented information.
SMEDA does not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. Therefore, the content of this
memorandum should not be relied upon for making any decision, investment or otherwise.
The prospective user of this memorandum is encouraged to carry out his/her own due
diligence and gather any information he/she considers necessary for making an informed
decision.
The content of the information memorandum does not bind SMEDA in any legal or other
form.

DOCUMENT CONTROL
Document No.

PREF-113

Prepared by

SMEDA-Punjab

Issue Date

May, 2010

Issued by

Library Officer

PREF-113/June, 2010

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UPVC pipes manufacturing unit

Table of Contents
1
2

EXECUTIVE SUMMARY............................................................................................ 2
INTRODUCTION ......................................................................................................... 3
2.1
Project Brief ...........................................................................................................3
2.2
Opportunity Rationale............................................................................................3
2.3
Installed Capacity...................................................................................................3
2.4
Project Cost ............................................................................................................3
3 CRUCIAL FACTORS AND STEPS IN DECISION MAKING FOR INVESTMENT 4
3.1
Strengths.................................................................................................................4
3.2
Weaknesses ............................................................................................................4
3.3
Opportunities..........................................................................................................4
3.4
Threats....................................................................................................................5
3.5
Properties of UPVC Pipes......................................................................................5
3.6
Application of UPVC Pipes ...................................................................................5
4
INDUSTRY STRUCTURE ........................................................................................... 6
4.1
Pakistan UPVC Pipes Manufacturing Industry......................................................6
4.2
Pakistan UPVC Market Outlook............................................................................7
4.3
Market of Pipe Industry in Pakistan.......................................................................7
4.4
Products and Uses ..................................................................................................8
4.5
UPVC Growth potential in Pakistan ......................................................................9
5 GLOBAL MARKET OF UPVC.................................................................................... 9
5.1
UPVC pipes manufacturing Industry, Global scenario........................................10
6 MARKETING.............................................................................................................. 11
7
PRODUCTS OFFERED .............................................................................................. 11
7.1
Production Mix ....................................................................................................11
8 PROJECT INPUTS...................................................................................................... 12
8.1
Land & Building Requirement.............................................................................12
8.2
Recommended mode............................................................................................12
8.3
Machinery & Equipment......................................................................................12
8.4
Office Furniture & Fixture and Equipments ........................................................13
8.5
Office Vehicles.....................................................................................................14
8.6
Human Resource Requirement ............................................................................14
9
PROJECT ECONOMICS ............................................................................................ 16
10 FINANCIAL ANALYSIS ........................................................................................... 17
10.1 Projected Income Statement.................................................................................17
10.2 Projected Balance Sheet.......................................................................................18
10.3 Projected Cash Flow Statement ...........................................................................19
11 KEY ASSUMPTION ................................................................................................... 20
12 ANNEXTURE ............................................................................................................. 22
12.1 Machinery Supplier..............................................................................................22
12.2 Raw Material Supplier .........................................................................................22

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EXECUTIVE SUMMARY

The manufacturing of UPVC pipes through extrusion process is a viable business provided
that it is operated with a good business acumen that involves having a thorough knowledge
and experience of the product range, technical requirements, operational procedures and
also managing the jobs with the right type of technical manpower. When these factors
combine with good and effective business development skills, the business is expected to
give considerable profits which are expected to grow over the years.
Piping systems are the most indispensable elements to civilized living from individual life
to industry activities i.e., they are a basic infrastructure for urban environments. In
Pakistan per capita PVC consumption in Pakistan was only 0.28 Kg compared to 7.75 Kg
in USA and 5.11 Kg in Japan. This highlights the growth potential of the PVC Pipe
manufacturing sector in Pakistan. According to Industry sources the PVC pipe
manufacturing industry has presence in all major industrial cities of Pakistan (i.e. Karachi,
Multan, Burewala, Lahore, Sialkot, Narrowal, Faisalabad, Gujranwala, Gujrat, Jhelum,
Rawalpindi & Peshawar) which consists of around 400 manufacturing units and production
of 180,000 tons per annum.
A UPVC pipes manufacturing unit needs a capital investment estimated at Rs. 20.503
million for construction and purchasing machinery & equipment. In addition to this, a sum
of Rs. 4.208 million is required as working capital, which should be used for purchasing
raw material and other inputs. The total project cost is estimated at Rs. 24.712 million. The
project has an IRR, Payback and NPV of 46%, 3.78 years and Rs. 90.074 million.
In this pre-feasibility study, all the calculations have been based on a unit with 2 Extruder
Machines with a capacity of manufacturing 3,680 kgs per day.

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2.1

UPVC pipes manufacturing unit

INTRODUCTION
Project Brief

Un Plasticized Polyvinyl Chloride (abbreviated as UPVC) was first developed in the

1930's and came to be used in pressure pipelines from the 1950's, firstly in Europe,
followed by the United States and then Australia in the 1960's. The product has now
developed to a mature status with known and respected performance history in pipeline
applications.
UPVC is a low maintenance material. It is used in the agriculture, chemical and
construction industry. It is available in a variety of colors and finishes. The photo-effect
wood finish of unplasticised polyvinylchloride is also used in window frames and window
sills as a substitute for painted wood.
2.2

Opportunity Rationale

UPVC is a versatile material for piping and has replaced conventional pipes made from
conventional materials such as Galvanized Iron (GI), Cast Iron, Asbestos Cement and
Concrete Cement. Its compatibility with most fluids, lower cost of material handling and
installation, unique combination of properties and availability of highly reliable jointing
system makes it an excellent competitor in the piping world, resulting in a product that is a
viable competitor to pipes made from other materials in dimensions up to 20 inches.
The most common use of UPVC is to make pipes. The pipes are most commonly used for
the purposes of drainage and for protecting or containing the cables in the buildings.
2.3

Installed Capacity

This feasibility is based on a unit with 2 Twin Extruder Machines with a capacity of
approximately manufacturing 3,680 kgs/day.
2.4

Project Cost

A UPVC pipes manufacturing unit needs a capital investment estimated at Rs. 20.503
million for constructing factory and purchasing machinery & equipment. In addition to
this, a sum of Rs. 4.208 million is required as working capital, which will be used for
purchasing raw material and other inputs. The total project cost is estimated at Rs. 24.712
million.

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CRUCIAL FACTORS AND STEPS IN DECISION MAKING FOR

INVESTMENT

3.1

Strengths

3.2

Weaknesses

3.3

Opportunities

Presence of pipes manufacturing cluster in Pakistan.

The raw material supplier (Engro Asahi) assists in different issues relating to pipe
production.
The local machine manufacturers are present , and also assist the manufacturing units
in setting up new lines
Cooperation exists between the local machinery suppliers and the small manufacturing
units
Existence of basic knowledge and technology involved in manufacturing of UPVC
pipes.
Availability of basic infrastructure/network
Presence of few recognized brands from top-end manufacturers

Volatility of raw material prices

Constants break down in local made machines or obsolete machines and irregular
supplies of electricity and water etc leading to high level of wastage
Unchecked use of scrap material in pipes production which leads to inferior and
hazardous pipes
Extreme price pressures and low margins at all levels of market leading to continuous
price wars among stakeholders to catch new customers.
Lack of design guides and standards
Products only manufactured by large and medium units are according to safety and
quality standards
There is no pressure or demand from consumers to uplift and maintain quality of
products
Unskilled labor and machine operators
No technical expert in the field of PVC extrusion to help with machine fabrication
No research and development in areas of development of competitive technologies.
Understanding of new technology is low.
Supply of products is limited to small local market with limited purchasing power,
leading to manufacturing below full capacity
Diversified product range
Strong future domestic market demand for quality products
Scope of increased penetration in other sectors as a result of awareness about its
advantages and different uses
Possibility of market penetration (export) to neighboring countries
Increasing interest of foreign and local investors
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Benchmarking of market leaders for small units to up-grade their technology base
Establishment of an information sharing/dissemination mechanism among UPVC
industry to keep them updated on international trends
3.4

Threats

The market of UPVC remains under pressure from high energy and feed stock costs
Irregular availability of high quality raw materials especially before a price hike
Pakistan products do not have a good quality image
Increasing availability of international brands in local market aggressive competition
especially from China, Malaysia, Iran, Indonesia and India.
Environmental legislation and other restrictions concerning the proper way to recycle
and dispose PVC products
No training institutes at national level to guide the industry towards new technology
and product line
3.5

3.6

Properties of UPVC Pipes

Application of UPVC Pipes

Chemical resistance
Lightness
Resistance to corrosion
Moisture resistance
Temperature resistance
Non toxic
Non flammable
Easy to be bend

Underground Water Supply

Chemical Industries
Ventilation
Sewerage Systems
Cable Conduits
Agriculture

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4.1

UPVC pipes manufacturing unit

INDUSTRY STRUCTURE
Pakistan UPVC Pipes Manufacturing Industry

The UPVC pipes manufacturing industry has presence in all major industrial cities of
Pakistan (i.e. Karachi, Multan, Burewala, Lahore, Sialkot, Narrowal, Faisalabad,
Gujranwala, Gujrat, Jhelum, Rawalpindi & Peshawar) which consists of around 400
manufacturing units manufacturing 45,000 metric tones annually.
Major characteristics of this industry are:
There are in around 350-400 units in Pakistan scattered all over the country.
Major cluster of PVC Pipes manufacturing industry is in Lahore (250 units).
Second largest cluster is in Gujrat (around 25 units).
UPVC pipes industry has an obsolete technology base having 75% units quipped
with local single screw-extrusion machines. Rest 25% units are sing twin-screw
type refurbished old machinery of 80s imported Western Europe.
Few top line units are also using modern machines imported from China, Korea
and Germany.
Total number of people directly employed in this sector is 5,000. Most of these
individuals are uneducated and acquire hands on training in the factory.
o Large Units: 25+ people
o Medium Units: 10-15 people
o Small Units: 5-7 people
The educational level of most of the workers is under matriculation.
Plastic pipes are the main products produced by this industry used for Water
supply, drainage, conduits and ventilation.
The installed capacity of these units is 75,000 metric tons per year.
Estimated production of these units is 45,000 metric tons per year.
Total production capacity of this industry is 89.11 million kilo grams per year.
The capacity being utilized by this industry is only 68%.
There still exists a huge potential of more than 41,000 Metric tons usage of UPVC
pipes to serve as replacement of other products over the next five years.
These top level manufacturers account for only 25% of the industry capacity.
Machinery used by these processors is mainly of European origin (Refurbished).
Unorganized sector accounts for the rest of industry capacity which are
manufacturing pipe from recycled UPVC and those who are even making pipe
from virgin UPVC resin are using exorbitant amount of filler (Calcium Carbonate)
which makes a very low quality pipe. The pipes produced by this unorganized
sector adhere to no specific standards and compete on price, sacrificing heavily on
quality.
Industry is playing an important role in the construction, agriculture sector and
especially for transport of portable drinking water. By a large the industry is
catering to the upcoming needs of agricultural sector for irrigation.
It has 95% penetration in the conduit sector, 65% in tube well sector and 15% and
20% in drainage and water supply sector.
Current per capita UPVC consumption in Pakistan is only 0.28 Kg.
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The consumption-production gap is currently around 50% of the current rate of

production. The potential major players in the public sector are the Public Health
Engineering Departments (PHED), WASA, Military Engineering Supplies and
various Housing Societies. The estimated total incremented potential for the next
five years in these sectors is approximately 12,000 metric tons (statistics 2000).
The major reasons for the slow growth of the UPVC industry are the unawareness
of consumer about quality consciousness, and not being able to introduce
innovation in their production lines. Due to the lack of quality awareness on part of
consumer, cottage sector has really flourished in last decade or so.
Lack of awareness of modern technology among the industry stakeholders.
There are low levels of operational and managerial skills within the industry.
Some manufacturers are also using international standards like ASTM, DIN & ISO
certification. There is a need to introduce ISO 9000 in the industry.
Manufacturers supplying to the Public Sector are required to get them-selves
approved and registered with respective departments. Compared to 7.75 Kg in USA
and 5.11 Kg in Japan, current per capita UPVC consumption in Pakistan was only
0.28 Kg. This highlights the growth potential of the UPVC Pipe manufacturing
sector in Pakistan. However due to unawareness in Pakistan the use of UPVC pipes
is limited to the water supply, drainage, conduits, and tube wells. The current rate
of utilization of these pipes in Pakistan is quiet low.

Table 4-1: Per Capita Consumption of UPVC pipes (Kgs)1

USA
China
Japan
India
Pakistan
4.2

7.75
0.66
5.11
0.42
0.28

Pakistan UPVC Market Outlook

The UPVC pipes manufacturing industry has presence in all major industrial cities of
Pakistan (i.e. Karachi, Multan, Burewala, Lahore, Sialkot, Narrowal, Faisalabad,
Gujranwala, Gujrat, Jehlum, Rawalpindi & Peshawar) which consists of around 400
manufacturing units and manufactures 45,000 metric tones annually.
4.3

Market of Pipe Industry in Pakistan

There are different types of materials used for piping in Pakistan such as Asbestos Cement
(AC), Mild Steel (MS), Galvanized Iron (GI), Poly Vinyl Chloride (PVC), Cast Iron (CI),

EAPCL (Engro Asahi Polymer and Chemical Ltd)

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Reinforced Concrete Cement (RCC) and Ductile Iron (DI). Majority of piping applications
used in Pakistan range from 0.5" to 60" dia sizes.
Table 4-2: Usage of Pipes in different Services
Water
HDPE, Concrete, Copper, PEX
Sewer
Concrete, HDPE
Conduit & Ducting
HDPE, Steel, Aluminum
Drain Waste and Vent (DVM)
Cast Iron, Copper, ABS, PEX
Agriculture & Drainage
HDPE, Concrete
ABS Acrylonitrile butadiene styrene
HDPE High Density Polyethylene
4.4

Products and Uses2

In Pakistan, the UPVC Pipes are being used in four major areas: Water supply, drainage,
conduits and tube wells. The main products produced in Pakistan constitute of Polyvinyl
Chloride and UPVC Un-plasticized Polyvinyl Chloride. UPVC is used in the drinking
water supply system. PVC is used in agriculture, drainage and sanitation. These pipes
usually fall in four categories as per their composition are:
Scrap based
Resin based
Scrap resin mix
Compact type
Their sizes vary from range to 16 inch diameter and PS. 3051 Standard. However, pipes
can also be divided in two categories as following:
a) Pressure pipes (Used for Water Distribution & in Tube wells)
b) Non Pressure pipes (Used for drainage/sewerage and as Conduits)
Water Distribution
Water supply can be for the purpose of household or for municipal sector. Water supply
segment can be divided into internal and external applications. The size of pipes used for
water distribution range from 0.5" to more than 60". These pipelines are commonly
known as External Water Supply lines, and are usually of AC (60%), PVC (20%), and MS
(20%). PVC has a lot of growth potential in this segment as AC pipes are now becoming
extinct in international arena and MS pipes are much expensive than PVC pipes. Usually
inside the house GI pipe are used and these lines are called Internal Water Supply lines.

APPMA (All Pakistan PVC Pipes Manufacturers Association)

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Tube Well
Pakistan being an agricultural country needs the use of PVC Pipes in large quantities for
the irrigation purposes, due to their inherent characteristics. Tube wells are used for water
supply or to drop the sub soil water level. Material used for this application is PVC and
MS ranging from 4" to 12" dia. PVC enjoying 65% market share due to its longer life
span in sub soil conditions dominates this segment. MS has 25% market share followed
by Fiberglas with 10% share.
4.5

UPVC Growth potential in Pakistan

At present only the most basic UPVC applications are being made in Pakistan and
that also of low quality. Reasons being:
- Lack of exposure in international markets
- Lack of information about UPVC processing and its versatility
If Pakistans per capita consumption (presently around 0.5 kg/person) becomes at
par with world average UPVC per capital consumption of around 4.5 kg/person,
then Pakistan would need 585,000 tons of UPVC per annum at present population
level.
Promoting UPVC in agriculture sector would help:
- In utilizing far flung areas for cultivation through drip irrigation In salinity
control and land reclamation

GLOBAL MARKET OF UPVC

Vinyls low cost, versatility, unique set of properties and performance makes it the
material of choice for dozens of industries such as health care, communications, aerospace,
automotive, retailing, textiles and construction. In the product form it can be as rigid as a
pipe or as pliable as a plastic wrap. Over the past few years the market for UPVC is on a
steady rise. The major driver for the growth is the increased penetration of UPVC in
insulation cables and pipes. However, the building and construction industries are the basic
marketplaces for pipes and the pipes industry usually finds itself firmly ensconced among
those boom and bust industries which ride the coattails of our nation's economic fortunes.
Another factor of growth in UPVC pipes is innovations in pipe resins, pipe structures and
pipe processing technology.
In the global market UPVC pipes and fittings constitute the largest volume application at
36% of the marketplace. Worldwide demand for these pipes is forecasted to increase more
than four percent per year through 2007. In the European pipe market, plastic pipes rank
first among other materials and globally plastic pipes are used at about 54% of the total
pipes used. Polyvinyl chloride (PVC) takes the lion's share at around 62% of the global
market. Polyethylene (PE) has 33.5%, while polypropylene (PP) takes about 4.5%. In
Europe, 1.5 million tons of UPVC was used in 2002 to make pipes. Similarly in case of
USA pipe demand is projected to grow 2.5% annually to 15.5 billion feet in 2007.
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5.1

UPVC pipes manufacturing unit

UPVC pipes manufacturing Industry, Global scenario

Table 5-1: Major Importing Countries of UPVC Pipe3

Value in US $ "000"
Top Importers
France
USA
Mexico
Ireland
Canada
UK
Belgium
Spain
Germany
Austria

2004

2005

120,662
83,360
76,411
44,415
38,370
38,043
37,127
34,699
24,991
22,296

120,663
92,950
82,760
49,911
41,831
37,533
33,181
38,432
20,395
19,261

France, USA and Mexico have been the top importers of UPVC pipes over the past few
years, contributing to approximately 35% of world imports.
Table 5-2: Major Exporting Countries of UPVC Pipe4
Value in US $ "000"
Top Exporters
USA
Germany
Canada
UK
Italy
Netherlands
Spain
China
Ireland
Denmark

2004

2005

136,505
88,082
72,313
76,687
79,173
31,505
53,684
25,992
25,782
23,744

139,214
85,168
79,031
76,446
72,891
70,086
51,461
50,720
29,277
26,195

USA, Germany and Canada are the top three exporters of UPVC pipes, contributing to
32% of world exports.

3
4

Source PCTAS, HS Code 391723

Source PCTAS, HS Code 391723

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MARKETING

Almost 40-50% of the total industry production was purchased by institutional buyers
including government departments and remaining 50-55% was sold through conventional
market channels. Manufacturers generally distribute pipes using a network of wholesalers
who then sell to retailers and large customers. The higher quality manufacturers usually
appoint two or three well-reputed entities with past experience and sound financial position
as their wholesalers in larger cities, who also serve adjacent rural areas. However, these top
tier manufacturers service large volume orders from the public sector directly. The
unorganized sector manufacturers on the other hand appoint a host of relatively small
dealers. Wholesalers generally operate on a manufacturer margin calculated as a
percentage of gross prices. Margins are pegged to the off take volumes and larger orders
attract higher margins.
Most of the small units tend to be established close to the market to reduce freight costs. In
an endeavor to boost sales in a non-differentiation market, manufacturers generally resort
to credit sale. This phenomenon is especially very common in the unorganized sector. The
organized sector manufacturers are more selective while forwarding credit and limit this
facility for larger orders and selective customers. Due to restricted quality product being
available in the market, higher quality producers can place their pipes without offering
significant credit terms and cash on delivery basis. 40% of all sales are on payment on
delivery basis while 60% on some form of credit basis ranging from 7 30 days. Some
producers may also move product on order basis, where product is pre sold at the time of
being manufactured, but these types of sales exists in high turnover periods only.
Pricing of UPVC pipes is on the basis of resin content and a distinct pattern emerges when
higher quality product prices are studied closely - across all dia ranges, the price per
kilogram will remain constant for any one producer. As the cost of resin increases or
decreases, the price per kilogram of pipe also moves accordingly, showing that
manufacturers are content with such pricing basis and are not sensitive to actual production
processes.

PRODUCTS OFFERED

The proposed project will be capable of making UPVC pipes of different sizes. Commonly
manufactured sizes shall be 3", 4"and 6".
7.1

Production Mix

Keeping in view the demand of the product mix the production is divided into the below
proportion.

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Table 7-1: Product Mix

Description

UPVC pipes manufacturing unit

No. of Pipes
Manufactured Annually

Production Line 1
3" pipe
Production Line 2
4" pipe
6" pipe
Total Production (Nos.)

Production Ratio

164,904

100%

89,407
16,602
270,913

70%
30%

PROJECT INPUTS

Following inputs are required:

8.1

Land & Building Requirement

The land requirement is around 8,200 Sq. feet in any area where all utilities and facilities
are properly available. The plot will easily allow the accommodation of the recommended
machines and also allow space for material and finished goods storage. The detailed
allocation of space and approximate construction cost estimations have been provided in
the following table:
Table 8-1: Detail of Civil Works
Size
Details
(Sq. feet)
Production Hall
3,700

(Cost in Rs/square
feet)
800

Total construction
cost (Rs)
2,960,000

Management Building

1,000

1,100

1,100,000

Warehouse

2,000

800

1,600,000

500

400

200,000

Loading/Unloading Area
Total
8.2

7,200

5,860,000

Recommended mode

Land for the proposed production facility will be purchased as relocation of installed
machinery will be difficult in case of rental premises.
8.3

Machinery & Equipment

Based on the number and type of UPVC pipes to be produced by the proposed setup, the
following machinery will be required:

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Table 8-2: Detail of Machinery

Items

UPVC pipes manufacturing unit

Number

UPVC Pipe Production Line:

1) Powder auto-loader
2) Twin screw extruder
3) Mould
4) Calibration tank
5) Haul-Off machine
6) Automatic cutting machine
7) Stacker
Oil- Ink Printer

Rate (Rs)
Per Unit
2,600,000

45,000

Compressor
Chiller unit
Generator (300 KVA)

2
1
1

40,000
90,000
3,500,000

Total Machinery & Equipments

Contingencies @ 5% of Total
Machinery & Equipments
Total Cost of Machinery

Estimated Cost
(Rs)
5,200,000

45,000
80,000
90,000
3,500,000
8,915,000
445,750
9,360,750

The above table gives the details of the machinery required along with their cost for each
commodity to be produced. For machinery purchase, following supplier can be contacted.
8.4

Office Furniture & Fixture and Equipments

A total of Rs. 381,500 is estimated for purchase of office furniture and related equipments.
The following tables give the assumed breakup:
Table 8-3: Furniture & Fixture
Items
Furniture Set
Curtains Set
Air Conditioner (1.5 ton split)
Total

Number
1
1
2

Table 8-4: Office Equipment

Items
Computers + UPS
Computer Printer
Telephone set
Fax Machine
Total

Qty
5
1
2
1

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Estimated Cost (Rs)

100,000
20,000
70,000
190,000

Cost
32,500
15,000
1,000
12,000

Total Cost (Rs.)

162,500
15,000
2,000
12,000
191,500

Pre-Feasibility Study

8.5

UPVC pipes manufacturing unit

Office Vehicles

One small (second hand) trucks acting as light carrier vehicle would also be needed for
transporting raw materials and finished goods. For this purpose Rs. 400,000/- has been
assumed. The vehicle will depreciate at a rate of 20% annually.
8.6

Human Resource Requirement

The human resource requirement for the general and management staff would be as
follows:
Table 8-5: Human Resource Requirement
Designation/Type
Number
CEO
Accountant
Purchaser
Office Assistant
Store/ Warehouse keeper
Driver
Guard (24 Hour)
Total

1
1
1
1
1
1
2
8

Monthly
Salary (Rs)
50,000
12,000
12,000
10,000
10,000
8,500
8,000
118,500

Total Annual
Salary (Rs)
600,000
144,000
144,000
120,000
120,000
102,000
192,000
1,422,000

Considering the size of the proposed establishment it is assumed that the owner would be
managing the overall affairs of the pipes manufacturing setup. An accountant is required to
process and check bills, invoices, receivables management, maintain accounts, etc. for
external and internal reporting. The accountant is required to update records and ensure
safe custody of store keys.
The purchaser would be primarily responsible for making daily purchases; raw material
purchases and other purchases as and when required. The purchaser would also assist the
accountant in the safe custody of all inventories in the storeroom. The office assistant
would be responsible for handling customers & complaints, follow-up on bills and
managing all day to day activities. Two round the clock security guards would be required
for ensuring security for the overall premises.

14
PREF-113/June, 2010

Pre-Feasibility Study

UPVC pipes manufacturing unit

The following table gives the details for the proposed technical labor that forms the
integral part of the total employee payroll:
Table 8-6: Technical Manpower Requirement
Designation/Type
Number
Production Manager
Shift supervisor
Color Operator
Electrician
Hydraulic Technician
Machine Operators
Helpers
Total

1
1
1
1
1
6
10
21

15
PREF-113/June, 2010

Monthly
Salary (Rs)
30,000
15,000
8,000
8,000
10,000
8,000
7,500
194,000

Total Annual
Salary (Rs)
360,000
180,000
96,000
96,000
120,000
576,000
900,000
2,328,000

Pre-Feasibility Study

UPVC pipes manufacturing unit

PROJECT ECONOMICS

Capital Investment
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office vehicles
Office equipment
Pre-operating costs
Total Capital Costs

Rs. in actuals
3,280,000
5,860,000
9,360,750
190,000
400,000
191,500
1,221,286
20,503,536

Working Capital
Equipment spare part inventory
Raw material inventory
Upfront insurance payment
Cash
Total Working Capital

Rs. in actuals
19,502
3,200,493
488,038
500,000
4,208,032

Total Investment

24,711,568

Initial Financing
Debt
Equity

Equity
59%
3.40
52,979,229

Internal Rate of Return (IRR)

Payback Period (yrs)
Net Present Value (NPV)

16
PREF-113/June, 2010

Rs. in actuals
12,355,784
12,355,784

50%
50%

Project
46%
3.78
90,074,431

Pre-Feasibility Study

UPVC pipes manufacturing unit

10 FINANCIAL ANALYSIS
10.1 Projected Income Statement
Calculations

SMEDA

Income Statement

Revenue

Year 1
99,632,403

Year 2
125,320,235

Year 3
150,431,933

Year 4
179,312,767

Year 5
212,465,449

Year 6
250,455,540

Year 7
293,918,995

Year 8
343,570,584

Year 9
400,213,302

Rs. in actuals
Year 10
464,748,858

Cost of sales
Cost of goods sold 1
Operation costs 1 (direct labor)
Operating costs 2 (machinery maintenance)
Operating costs 3 (direct electricity Generator & Indutrial)
Total cost of sales
Gross Profit

76,811,822
2,328,000
468,038
5,067,821
84,675,681
14,956,722

94,420,098
2,554,657
959,477
6,132,063
104,066,295
21,253,940

110,764,109
2,803,382
1,475,488
7,358,476
122,401,455
28,030,478

129,028,609
3,076,324
2,017,300
8,768,850
142,891,083
36,421,685

149,409,735
3,375,839
2,586,203
10,387,715
165,759,492
46,705,957

172,122,245
3,704,515
3,183,550
12,242,664
191,252,975
59,202,565

197,401,201
4,065,192
3,810,765
14,364,726
219,641,885
74,277,110

225,503,814
4,460,985
4,469,341
16,788,773
251,222,913
92,347,671

256,711,436
4,895,313
5,160,846
19,553,983
286,321,578
113,891,725

291,331,743
5,371,927
5,886,925
22,704,347
325,294,943
139,453,915

General administration & selling expenses

Administration expense
Administration benefits expense
Electricity expense
Travelling expense
Communications expense (phone, fax, mail, internet, etc.)
Office vehicles running expense
Office expenses (stationary, entertainment, janitorial services, etc.)
Promotional expense
Insurance expense
Professional fees (legal, audit, consultants, etc.)
Depreciation expense
Amortization of pre-operating costs
Bad debt expense
Subtotal
Operating Income

1,422,000
71,100
356,419
71,100
71,100
80,000
71,100
996,324
488,038
498,162
1,347,225
244,257
2,988,972
8,705,797
6,250,925

1,560,448
78,022
431,267
78,022
78,022
88,000
78,022
1,253,202
437,234
626,601
1,347,225
244,257
3,759,607
10,059,931
11,194,009

1,712,375
85,619
517,521
85,619
85,619
96,800
85,619
1,504,319
386,430
752,160
1,347,225
244,257
4,512,958
11,416,520
16,613,957

1,879,095
93,955
616,712
93,955
93,955
106,480
93,955
1,793,128
335,626
896,564
1,347,225
244,257
5,379,383
12,974,289
23,447,396

2,062,046
103,102
730,567
103,102
103,102
117,128
103,102
2,124,654
284,823
1,062,327
1,347,225
244,257
6,373,963
14,759,400
31,946,558

2,262,810
113,140
861,025
113,140
113,140
128,841
113,140
2,504,555
266,229
1,252,278
1,396,066
7,513,666
16,638,031
42,564,534

2,483,120
124,156
1,010,269
124,156
124,156
141,725
124,156
2,939,190
212,983
1,469,595
1,396,066
8,817,570
18,967,142
55,309,968

2,724,880
136,244
1,180,752
136,244
136,244
155,897
136,244
3,435,706
159,737
1,717,853
1,396,066
10,307,118
21,622,985
70,724,686

2,990,178
149,509
1,375,229
149,509
149,509
171,487
149,509
4,002,133
106,492
2,001,067
1,396,066
12,006,399
24,647,086
89,244,639

3,281,306
164,065
1,596,794
164,065
164,065
188,636
164,065
4,647,489
53,246
2,323,744
1,396,066
13,942,466
28,086,007
111,367,908

Other income (interest on cash)

Gain / (loss) on sale of office vehicles
Earnings Before Interest & Taxes

25,000
6,275,925

70,463
11,264,472

470,989
17,084,946

1,338,436
24,785,831

2,640,949
160,000
34,747,507

4,661,160
47,225,694

7,602,127
62,912,095

11,507,051
82,231,737

16,599,385
105,844,023

24,222,474
135,590,382

Interest on short term debt

Interest expense on long term debt (Project Loan)
Interest expense on long term debt (Working Capital Loan)
Subtotal
Earnings Before Tax

282,088
1,536,644
186,774
2,005,506
4,270,419

282,088
1,285,991
1,568,079
9,696,393

992,158
992,158
16,092,787

647,707
647,707
24,138,125

243,916
243,916
34,503,591

47,225,694

62,912,095

82,231,737

105,844,023

135,590,382

Tax
NET PROFIT/(LOSS) AFTER TAX

1,067,605
3,202,814

2,424,098
7,272,295

4,023,197
12,069,591

6,034,531
18,103,593

8,625,898
25,877,693

11,806,423
35,419,270

15,728,024
47,184,071

20,557,934
61,673,803

26,461,006
79,383,018

33,897,596
101,692,787

17
PREF-113/June, 2010

Pre-Feasibility Study

UPVC pipes manufacturing unit

10.2 Projected Balance Sheet

Calculations

SMEDA

Balance Sheet
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Rs. in actuals
Year 10

500,000

19,502
3,200,493
488,038
4,208,032

8,188,965
3,681,551
41,977
4,130,879
437,234
16,480,606

1,409,265
9,244,629
4,352,583
67,780
5,088,226
386,430
20,548,913

8,010,507
11,332,281
5,117,831
97,303
6,223,614
335,626
31,117,163

18,758,203
13,551,152
5,972,939
130,981
7,567,019
284,823
46,265,118

34,060,785
16,100,475
6,927,262
169,296
9,153,185
266,229
66,677,233

59,162,409
19,024,150
7,991,071
212,783
11,022,354
212,983
97,625,750

92,880,131
22,371,556
9,175,640
262,034
13,221,105
159,737
138,070,203

137,260,889
26,198,202
10,493,340
317,705
15,803,321
106,492
190,179,949

194,726,808
30,566,461
11,957,746
380,523
18,831,298
53,246
256,516,082

289,722,676
35,546,390
13,583,745
338,852,811

Fixed assets
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office vehicles
Office equipment
Total Fixed Assets

3,280,000
5,860,000
9,360,750
190,000
400,000
191,500
19,282,250

3,280,000
5,567,000
8,424,675
171,000
320,000
172,350
17,935,025

3,280,000
5,274,000
7,488,600
152,000
240,000
153,200
16,587,800

3,280,000
4,981,000
6,552,525
133,000
160,000
134,050
15,240,575

3,280,000
4,688,000
5,616,450
114,000
80,000
114,900
13,893,350

3,280,000
4,395,000
4,680,375
95,000
644,204
95,750
13,190,329

3,280,000
4,102,000
3,744,300
76,000
515,363
76,600
11,794,263

3,280,000
3,809,000
2,808,225
57,000
386,522
57,450
10,398,197

3,280,000
3,516,000
1,872,150
38,000
257,682
38,300
9,002,131

3,280,000
3,223,000
936,075
19,000
128,841
19,150
7,606,065

3,280,000
2,930,000
6,210,000

Intangible assets
Pre-operation costs
Total Intangible Assets
TOTAL ASSETS

1,221,286
1,221,286
24,711,568

977,029
977,029
35,392,660

732,772
732,772
37,869,484

488,514
488,514
46,846,252

244,257
244,257
60,402,724

79,867,561

109,420,013

148,468,400

199,182,080

264,122,147

345,062,810

6,694,744
3,274,938
9,969,682

8,263,198
8,263,198

9,744,700
9,744,700

11,403,609
11,403,609

13,259,048
13,259,048

15,332,131
15,332,131

17,646,173
17,646,173

20,226,919
20,226,919

23,102,803
23,102,803

24,428,932
24,428,932

1,067,605
8,796,775
9,864,380

(315,736)
7,091,130
6,775,393

(2,890,582)
5,091,651
2,201,069

(6,752,682)
2,747,721
(4,004,961)

(12,273,257)
(12,273,257)

(20,213,158)
(20,213,158)

(30,662,884)
(30,662,884)

(44,203,753)
(44,203,753)

(61,522,587)
(61,522,587)

(83,600,839)
(83,600,839)

12,355,784
22,544,699
34,900,483
46,846,252

12,355,784
40,648,293
53,004,077
60,402,724

12,355,784
66,525,986
78,881,770
79,867,561

12,355,784
101,945,256
114,301,040
109,420,013

12,355,784
149,129,327
161,485,111
148,468,400

12,355,784
210,803,130
223,158,914
199,182,080

12,355,784
290,186,148
302,541,931
264,122,147

12,355,784
391,878,934
404,234,718
345,062,810

Assets
Current assets
Cash & Bank
Accounts receivable
Finished goods inventory
Equipment spare part inventory
Raw material inventory
Pre-paid insurance
Total Current Assets

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable
Short term debt
Total Current Liabilities
Other liabilities
Deferred tax
Long term debt (Project Loan)
Long term debt (Working Capital Loan)
Total Long Term Liabilities
Shareholders' equity
Paid-up capital
Retained earnings
Total Equity
TOTAL CAPITAL AND LIABILITIES

10,251,768
2,104,016
12,355,784
12,355,784
12,355,784
24,711,568

12,355,784
3,202,814
15,558,598
35,392,660

12,355,784
10,475,109
22,830,893
37,869,484

18
PREF-113/June, 2010

Pre-Feasibility Study

UPVC pipes manufacturing unit

10.3 Projected Cash Flow Statement

Calculations

SMEDA

Cash Flow Statement

Year 0
Operating activities
Net profit
Add: depreciation expense
amortization of pre-operating costs
amortization of training costs
Deferred income tax
Accounts receivable
Finished goods inventory
Equipment inventory
Raw material inventory
Advance insurance premium
Accounts payable
Cash provided by operations

Year 1

(3,708,032)

3,202,814
1,347,225
244,257
1,067,605
(8,188,965)
(3,681,551)
(22,476)
(930,387)
50,804
6,694,744
(215,930)

Financing activities
Project Loan - principal repayment
Working Capital Loan - principal repayment
Short term debt principal repayment
Additions to Project Loan
Additions to Working Capital Loan
Issuance of shares
Cash provided by / (used for) financing activities

10,251,768
2,104,016
12,355,784
24,711,568

(1,454,993)
(2,104,016)
(3,559,009)

Investing activities
Capital expenditure
Cash (used for) / provided by investing activities

(20,503,536)
(20,503,536)

NET CASH

(19,502)
(3,200,493)
(488,038)

500,000

(3,774,938)

Year 2

Year 3

Year 4

Year 6

(1,705,646)
(3,274,938)
(4,980,584)

(1,999,478)
(1,999,478)

(2,343,930)
(2,343,930)

(2,747,721)
(2,747,721)

(644,204)
(644,204)

1,409,265

6,601,242

10,747,696

15,302,582

25,101,623

33,717,722

44,380,758

79,383,018
1,396,066
(17,318,834)
(4,368,259)
(1,464,405)
(62,818)
(3,027,977)
53,246
2,875,884
57,465,919

Rs. in actuals
Year 10

25,877,693
1,347,225
244,257
(5,520,575)
(2,549,323)
(954,323)
(38,315)
(1,586,166)
18,594
1,855,439
18,694,507

61,673,803
1,396,066
(13,540,869)
(3,826,646)
(1,317,700)
(55,671)
(2,582,217)
53,246
2,580,746
44,380,758

Year 9

18,103,593
1,347,225
244,257
(3,862,100)
(2,218,871)
(855,108)
(33,678)
(1,343,405)
50,804
1,658,909
13,091,626

47,184,071
1,396,066
(10,449,726)
(3,347,406)
(1,184,569)
(49,251)
(2,198,751)
53,246
2,314,042
33,717,722

Year 8

12,069,591
1,347,225
244,257
(2,574,846)
(2,087,652)
(765,248)
(29,523)
(1,135,388)
50,804
1,481,501
8,600,721

35,419,270
1,396,066
(7,939,902)
(2,923,676)
(1,063,809)
(43,487)
(1,869,168)
53,246
2,073,083
25,101,623

Year 7

7,272,295
1,347,225
244,257
(1,383,341)
(1,055,664)
(671,031)
(25,803)
(957,347)
50,804
1,568,455
6,389,849

19
PREF-113/June, 2010

Year 5

57,465,919

101,692,787
1,396,066
(22,078,252)
(4,979,929)
(1,625,999)
380,523
18,831,298
53,246
1,326,129
94,995,868

94,995,868

Pre-Feasibility Study

UPVC pipes manufacturing unit

11 KEY ASSUMPTION
Table 11-1: Operating Assumptions
Hours operational per day
Days operational per month
Days operational per year

8
25
300

Table 11-2: Production Assumptions

Production Line 1
Production Line 2
Maximum Capacity of Machine
Annual Production Capacity (Kgs)
Capacity Utilization (1st Year)
Capacity Growth Rate (Yearly)
Maximum Capacity Utilization
Production Wastage

3" pipe
4" & 6" pipe
230 Kg / Hour
1,104,000
50%
10%
95%
5%

Table 11-3: Economy-Related Assumptions

Electricity & Diesel Price growth rate
Wages growth rate
Machine Maintenance Growth Rate
Table 11-4: Cash Flow Assumptions
Accounts Receivable cycle (in days)
Accounts payable cycle (in days)
Finished Goods Inventory (in days)
Raw Material Inventory (in days)

30
30
15
15

Table 11-5: Expense Assumptions

Traveling, Administration & Office Expense
(%age of Administration expense)
Professional Fee (%age of revenue)

20
PREF-113/June, 2010

10%
10%
5%

5%
0.5%

Pre-Feasibility Study

UPVC pipes manufacturing unit

Table 11-6: Depreciation Assumptions

Depreciation Method
Building & Infrastructure
Machinery & Equipment
Furniture & Fixture
Vehicle

Straight Line
5%
10%
10%
20%

Table 11-7: Revenue Assumptions

Production capacity of the unit (Nos.)
Weighted Avg. Sale price per unit in year 1 (in
Rs.)
Sale price growth rate

270,913
768
10%

Avg. Sale Price (in Rs.)

3" Pipe
4" Pipe
6" Pipe
Weighted Avg. Price

636
810
1,847
768

Table 11-8: Financial Assumptions

Debt : Equity
Interest rate on long & Short term debt
Debt tenure
Debt payments per year
Cash in Hand

50 : 50
16%
5
12
Rs. 500,000

Table 11-9: Raw Material Consumption per Pipe

Size (4 Meter Pipe)
Weight (Kg)
Rate
3" Pipe
4" Pipe
6" Pipe
Weighted Avg. Cost

3.35
4.32
9.98

145
145
145

21
PREF-113/June, 2010

Total Cost
(Rs.)
486
628
1,448
592

Pre-Feasibility Study

UPVC pipes manufacturing unit

12 ANNEXTURE
12.1 Machinery Supplier
Company Name

Address/contact Details

Speedup Engineering

Shahdra Lahore
Tel: 042-7940812, 041-7933110
Mobile: 0321-4439282, 0321-4455668 (Hafiz
Nadeem)
Email: speedup313@gmail.com

Blowmatic corporation

Azfar & Company

10 / 3 Modern H S Shahed E Millat Road,

Karachi
Tel: 021-4548132, 5416167
Fax: 021-4557925
Mobile: 0300 2014380
6-Rana Chambers, Lake Road, Lahore
Tel: 042-37323798
Fax: 042-37235352

12.2 Raw Material Supplier

Company Name

Engro Asahi Polymer & Chemical Ltd

Address/contact Details
RB-1, Ground Floor,
Awami Complex, Usman Block,
New Garden Town
Lahore
Tel: (+92-42) - 5834722, 5834733, 5840736,
5840727
Fax: 0092-42-5883111

22
PREF-113/June, 2010