SAMAJ PORTFOLIO

INVESTMENT
Investing for a Better Tomorrow

12/11/2009
Ali Jibran (6565)
Saman Maqsood (7484)
Opening the Account

We opened a Daily Munafa Plus Account in HBL.

 Feasibility Report

SAMAJ CNG FILLING STATION

 Introduction to CNG and its Industry

Compressed Natural Gas (CNG) is a substitute for gasoline (petrol) or

diesel fuel. It is considered to be an environmentally “clean”
alternative to those fuels. It is made by compressing methane (CH4)
extracted from natural gas. Argentina and Brazil are the two countries
with the largest fleets of CNG vehicles. As of 2005, Pakistan is the
largest user of CNG in Asia, and third largest in the world.
The Compressed Natural Gas (CNG) sector of Pakistan by end of 2007
has attracted over Rs 70 billion investments during the last few years
as a result of liberal and encouraging policies of the government.
Presently, more than 2,700 CNG stations are operating in the country
in 85 cities and towns, and 1000 more would be setup in the next three
years. It has provided employment to above 30,000 people in Pakistan.
Over 2 million vehicles were converted to CNG as of march 2009,
showing an increase of 35 percent yearly. On average 29,167 vehicles
are being converted to CNG every month. All Pakistan CNG Association
(APA) Sana-ur-Rehman confirms that CNG stakeholders have invested
Rs.90 billion in this sector and another Rs 20 billion investment is in
pipeline. The CNG consumers had invested around Rs 60 billion in
converting their vehicles to CNG.
The CNG was replacing at least 6.12 billion liters of petrol every year
and saving foreign exchange to the tune of billions of dollars. The CNG
sector pays 24 percent sales tax and 4 percent withholding tax to the
government.
Moreover, the CNG is contributing tremendously towards maintaining
the air pollution level lower since it emits almost 85 percent less
harmful gasses, zero lead and zero particulate matter.
Key Success Factors

Following factors are the key in making this project profitable:

• Location of the project will play a pivotal role in the successful
running of the CNG station. The daily turnover of the cars largely
depends on this important factor.
• Selection of proper equipment is another key for carrying out the
successful operations of the proposed project.

Opportunities

The proposed project would have a number of competitive advantages:

• The project will provide cheaper fuel to its customers compared
to the petroleum products which are already on the higher side.
• Government has exempted the imposition of sales tax and
custom duties on the import of CNG kits and CNG plant and
equipment,
• The CNG industry’s efforts to reduce government’s burden of
foreign exchange payments and huge savings of Forex reserves
resulted from shift to CNG use in vehicles. He claimed CNG has
resulted in savings of more than $250 million per annum of
foreign exchange for Pakistan.

Threats

The proposed project will be facing the following threat:

• Market saturation over a longer period of time due to a large
number of entrants
• Threat of increase in the prices of the natural gas by the
government
PROJECT PROFILE
Opportunity Rationale
Due to the environment friendly nature and low cost of natural gas,
Hydrocarbon
Development Institute of Pakistan (HDIP) has recognized the need and
necessity to promote the use of CNG as a fuel in automobiles. HDIP has
pioneered the use of environment friendly CNG in road transport as an
economically viable fuel, which can substitute the imported petroleum
products.

Project Brief
The business of CNG filling station has marked its place in the country
through growth during the last few years. This growth has opened up
new opportunities and more CNG filling stations are being setup all
over Pakistan. The prime reason for this is the low cost of the fuel.
Along with that, CNG fuel is less hazardous to the environment as
compared to the traditional petroleum fuel.

Project Investments
Fixed Investment: Rs. 38,488,000
Working Capital: Rs. 1,000,000

Total Investment Rs. 39,488,000

The proposed pre-feasibility is based on the assumption 100% equity.
The project seems to be viable with the following returns on
investment.
Internal rate of return (project) 23.1%
Internal rate of return (equity) 45.1%
Net Present Value @ 20% Rs. 3,401,246
Payback period – based on cash inflows 4 years
MARKET ANALYSIS
The commercial application of CNG technology now forms an important
element of
Government’s petroleum policy, which is reflected in the efforts made
by the government for installing 2700 CNG stations in the country and
over 2 million vehicles were converted to CNG as of march 2009,
showing an increase of 35 percent yearly. On average 29,167 vehicles
are being converted to CNG every month.
Target Customers
The target customers for the proposed project would be the vehicles
running on CNG fuel.

Market Demand
At present there are more than 2 million vehicles, which have been
converted to CNG fuel, and a large number of vehicles are further
being converted.
Due to the increasing prices of petroleum products, the trend of
converting cars to CNG fueling system has been on a rise. However,
there exist a large number of people who were reluctant to convert
their vehicles from petrol to gas due to safety concerns. Recently,
many car manufacturers have started manufacturing the cars with
built-in CNG fueling system.
Industry Growth
There has been a tremendous growth in the CNG sector over the yeas.
The total number of vehicles on CNG was 100,000 and CNG filling
stations was 150 at the end of year 2000.
The number of CNG vehicles and CNG filling stations has increased to
210,000 vehicles and 220 stations respectively and by the year 2009
they have tremendously grown up to
2700 CNG Stations and 2,000,000 CNG fitted vehicles. The growth in
terms of percentage is given in the following table:

Year 2004 Year 2005 Growth Percentage

of Vehicles

No. Of Vehicles 1,350,000 2,000,000 33%

CNG Filling 2100 2700 22%
Stations

The above growth rates present an opportunity for the new entrants to
earn profits by
setting up new CNG filling stations to meet the growing demand.

THE PROJECT CONCEPT

Project Cost
The details of the cost of project are as follows:

Item Costs (in PKR)

Land (4000 sq. yards) 20,000,000
Building 1,520,000
CNG Equipment 12,400,000
Stores and Spares 720,000
Office Equipment 250,000
Furniture and Fixtures 200,000
Gas Security 2,000,000
Preliminary Expenses 962,000
Working Capital 1,000,000
HR Requirement 948,000
TOTAL 40,000,000

Project Financing
The total cost of the project is Rs. 40 million including the working
capital of Rs. 0.95 million.

Project Details

Location
For setting up a CNG filling station, location is the prime factor. As per
the requirements of the Government of Pakistan, the filling station
must be situated in a commercial area. CNG filling stations are not
allowed to be installed in the residential areas.

Land
A minimum of nine thousand (9000) square yards of land with at least
55 feet front opening is required for installing CNG filling station. An
amount of Rs.20 million has been allocated for the acquisition of
commercial land in Karachi. Half acre commercial plot is available for
sale. It is located in best place nearest Pir Gul Hasan Town, Form-2,
Super Highway, Karachi and it is best for petrol pump.

Building
There are certain civil works required to be carried out at the proposed
location. The civil works would be carried out on an area of 2250
square feet. The rest of the area will be floored with tuff tiles. Civil
work includes the following:
• Office
• Control Room
• Compressor and Cascade/Cylinder Storage Room
• Shed for Dispenser
 • Toilet/washroom
• Underground Gas Piping and Power Cables
• Flooring
Description Cost per Sq. Yard Total Cost (PKR)
Office, Compressor, 650 650,000
and cylinder storage
room
(1000 sq. yd)
Underground Gas 510,000
Piping
Flooring (3000 sq. yd) 90 270,000
Contingencies 90,000
Total 1,520,000

Material Inputs
There are two main inputs required for the CNG filling station, one is
the natural gas and the other is electricity. The sponsor of the project
is required to obtain both the connections from the relevant authorities
i.e. WAPDA and Sui Northern Gas Pipelines Limited (SNGPL) or Sui
Southern Gas Pipelines Limited (SSGPL). The cost associated with
obtaining the gas connection is Rs.75, 000/-. In addition to this, a
minimum security deposit of Rs.2 million is also required to be
deposited with the concerned authority.
Bank guarantee is also acceptable in case of gas security. An amount
of Rs.0.35 million is required for obtaining electricity connection. There
is no security deposit required for the electricity connection.
CNG Equipment
The following equipment is required for a CNG filling station:
• Gas Compressor
The purpose of compressor is to compress the gas enabling it to
discharge the gas for refueling. This compressor requires an input
pressure of 8 or 15 PSIG5 from the main gas supply with the outlet
pressure of 3,625 PSIG. With this discharge pressure, the equipment
can refuel 50 vehicles per hour.
 • Electric Control Panel
Electric control panel is required to operate the gas compressor. This
panel will be mounted in the control room.
• Storage Cascade
Storage cascades/cylinders are used to store the natural gas.
• Priority Panel for Vehicle Priority
During rush hours, the compressor is directly connected to the
dispenser, bypassing the storage cascades/cylinders with the help of
priority panel, facilitating the refueling of vehicles at a faster rate.
• CNG Dispenser high flow dual hose
Gas is filled into the vehicles with the help of dispenser. This dual hose
dispenser is capable of handling two vehicles at a time.
There are various foreign manufacturers providing the CNG filling
station equipment. In this pre-feasibility report, a British origin
compressor has been selected. This equipment is selected because of
its low electricity consumption, higher outlet pressure, low
maintenance, durable working, longer periods between overhauls and
good market repute and presence.
Stores & Spares
The whole equipment required for setting up a CNG filling station is
imported. Therefore, it is required to build an inventory of necessary
spare parts to meet the unforeseen circumstances such as breakdown
or any other fault in any part or equipment. For this purpose, a stock of
necessary spare parts worth $8,000 will be imported along with other
equipment to maintain a minimum level of spare parts.
Furniture and Fixtures
Furniture and fixtures mainly include tables, chairs, sofas, fans &
lights, carpet, curtains and fire extinguishers. It is estimated that the
furniture and fixtures of Rs.100,000 would be purchased.
Office Equipment
Some office equipment is also required for the proposed project. A
provision of Rs.250, 000 had been made for acquiring the required
office equipment.
HR Requirement
Manpower requirement for the CNG filling station includes manager,
dispenser, operators, accountant, and a watchman. The total staff
strength would be 8 persons. The staff salaries for year one are as
follows:
Designation No. of Salary per Total salary
Employees Month (Rupees)
Manager 1 20,000 240,000

Accountant 1 9,000 108,000

Dispenser 4 8,000 384,000

Operator 2 6,500 156,000

Watchmen 1 5,000 60,000

TOTAL 948,000

BASIS FOR FINANCIAL PROJECTIONS

Inflation Rate
10% inflation rate has been considered while making the projections
for cost of sales, operational expenses and salaries. The prices for gas,
electricity, operational expenses and staff salaries are increased by
10% every year as a result of inflation.
The selling price of gas has been increased by 5% every year.
Revenue Assumptions

No. of Cars
Based on the survey of some CNG stations in Lahore, the number of
cars assumed for
revenue projections is as follows:

Years No. of Cars per day

1 202
2 303
3 363
4 435
5 522

The average number of cars in the first years is estimated at 202 cars
per day, starting from 120 cars per day in the first month and going up
to 290 cars per day in the 12th month. In the second year, it has
increased to 303 cars per day. After second year, number of cars is
increasing at a rate of 20% till fifth year because the project would be
in its growth stage.
Working Capital

Working capital is calculated on the basis of following assumptions:

Accounts Receivables
Mostly, the sale of CNG is on cash basis. However, some CNG stations
do offer a credit facility to reputable companies on agreed terms and
conditions. Therefore, receivables are estimated at 6% of the total
sales amount.
Advances to Employees
Advances to employees are calculated on the basis of 30 days of both
payroll and staff benefits.
Accrued Utilities and Power Expenses
Normally, it would take 20 days to deposit the utilities (electricity,
water and telephone) bills. Therefore, utility expenses for 20 days have
been taken as the basis for working capital computation.
Accounts Payable
Cost of gas and electricity for 20 days has been considered in
calculating accounts payable.

Ratio Analysis
Year ROI ROE
1 5.01% 9.21%
2 10.16% 15.89%
3 11.5% 15.58%
4 15.15% 18.07%
5 17.84% 19.25%

INVESTMENT BREAKUP

Business Amount (in Rs.) Interest

CNG station 40,000,000

Foreign Deposit ($ and 30,000,000 1-2%
euro)
PKR Deposit 30,000,000 7%
TOTAL 100,000,000
NAME OF THE BANK: HABIB BANK LIMITED

ACCOUNT TYPE: DAILY MUNAFA PLUS ACCOUNT

RATE @ 7%

ACCOUNT DETAILS:
• PROFIT IS CALCULATED ON A DAILY BASIS, PAID
MONTHLY/QRTRLY/SEMI ANNUALLY.

• IF WE BREAK THE DEAL IN B/W WE ARE NOT IN A

LOSS.

• AMOUNT NOT FIXED

DAILY MUNAFA PLUS ACCOUNT

AMOUNT PROFIT PER ANNUM

Deposits of less than Rs. 50 (M) 5.00

Actual Deposits of Rs. 50(M) but less than Rs.100 (M) 6.00

Actual Deposits of Rs. 100(M) but < Rs.250 (M) 6.50

Actual Deposits of Rs. 250(M) but < Rs.500 (M) 7.00

Actual Deposits of Rs. 500(M) but < Rs.1 Billion 7.50

Actual Deposits of Rs.1 Billion and > 8.50

INVESTMENT IN FOREIGN CURRENCY

It is a good thing to have some amount in foreign currency deposited

in your bank accounts, keeping in view the current Value of our
currency which is declining due to which demand for foreign currency
has increased.

• 30,000,000 in foreign currency as…

20,000,000 Dollars and 10,000,000 Euro

• Since dollar appreciated other currencies are also
appreciated

1. There is a possibility that Demand for Dollar will rise

in the future as Commercial banks have been asked
to pay for the importing of Oil, ultimately a demand
will occur for Dollar and thus dollar’s value will
appreciate against PKR.
Currency Rate:

Currency Buy Sell Date

United Arab Emirates (AED) 22.87 22.92 Dec 09, 2009

United Arab Emirates (AED) 22.87 22.92 Dec 09, 2009

Hong Kong (CAD) 10.84 10.86 Dec 09, 2009

Europe (EUR) 123.73 124.02 Dec 09, 2009

United Kingdom (GBP) 136.62 136.94 Dec 09, 2009

Saudi Arabia (SR) 22.40 22.45 Dec 09, 2009

United States (USD) 84.00 84.20 Dec 09, 2009

Japan (Yen) 0.95 0.95 Dec 09, 2009

We opened a foreign currency account in HBL after purchasing 3 crores

worth of dollars and pounds. HBL offered us with the following:

• Savings Account offered in 3 currencies, USD (US dollar), EUR

(Euros) and GBP (UK pound)

• Tiered product, with rates depending on choice of currency

• To earn profit, minimum balance in USD, EUR and GBP is 1,000

• Interest is payable on a quarterly basis