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Pre-Feasibility Study

CHILDREN SHOES MANUFACTURING UNIT

Small and Medium Enterprises Development Authority
Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel (92 42) 111 111 456, Fax: (92 42) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE
PUNJAB
3rd Floor, Building No. 3,
Aiwan-e-Iqbal Complex,
Egerton Road,
Lahore.
Tel: (042) 111 111 456,
Fax: (042) 36304926-7
helpdesk.punjab@smeda.org.pk

REGIONAL OFFICE
SINDH

REGIONAL OFFICE
KHYBER PAKTUNKHWA

REGIONAL OFFICE
BALOCHISTAN

5th Floor, Bahria Complex II,
M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 35610572
helpdesk-khi@smeda.org.pk

Ground Floor
State Life Building The Mall,
Peshawar.
Tel: (091) 111 111 456,9213046-7
Fax: (091) 5286908
helpdesk-pew@smeda.org.pk

Bungalow No. 15-A Chamn
Housing Scheme Airport Road,
Quetta.
Tel: (081) 2831623, 2831702
Fax: (081) 2831922
helpdesk-qta@smeda.org.pk

September 2014

Pre-Feasibility Study

Children Shoes Manufacturing Unit

TABLE OF CONTENTS
1

DISCLAIMER ............................................................................................................ 3

2

EXECUTIVE SUMMARY .......................................................................................... 4

3

INTRODUCTION TO SMEDA................................................................................... 4

4

PURPOSE OF THE DOCUMENT ............................................................................ 5

5

BRIEF DESCRIPTON OF PROJECT ....................................................................... 5
5.1

Production Process Flow.................................................................................... 6

5.2

Installed & Operational Capacities ..................................................................... 7

6

CRITICAL FACTORS ............................................................................................... 8

7

GEOGRAPHICAL POTENTIAL FOR INVESTMENT................................................ 8

8

POTENTIAL TARGET CUSTOMERS / MARKETS .................................................. 8

9

PROJECT COST SUMMARY ................................................................................... 9
9.1

Project Economics ............................................................................................. 9

9.2

Project Financing ............................................................................................. 10

9.3

Project Cost...................................................................................................... 10

9.4

Space Requirement ......................................................................................... 11

9.5

Machinery and Equipment Requirement .......................................................... 11

9.6

Furniture and Fixture Requirements ................................................................. 12

9.7

Office Equipment Requirement ........................................................................ 12

9.8

Human Resource Requirement ........................................................................ 13

9.9

Raw Material Requirement ............................................................................... 13

9.10 Other Costs ...................................................................................................... 14
9.11 Revenue Generation ........................................................................................ 14
10 CONTACT DETAILS .............................................................................................. 15
10.1 Machinery Suppliers ......................................................................................... 15
10.2 Raw Material Suppliers .................................................................................... 15
10.3 Technical Experts / Consultants ....................................................................... 15
11 USEFUL LINKS ...................................................................................................... 16
12 ANNEXURES ......................................................................................................... 17
12.1 Income Statement ............................................................................................ 17

September 2014

1

........................................................................................2 Balance Sheet ......................................4 Financial Assumptions .......................................................... 21 13...............3 Revenue Assumptions .........1 Operating Cost Assumptions............................................... 20 13................... 21 September 2014 2 ...............................2 Production Cost Assumptions ........ 20 13........................................................... 20 13................................................................................................................Pre-Feasibility Study Children Shoes Manufacturing Unit 12....... 18 12......................... 19 13 KEY ASSUMPTIONS .............3 Cash Flow Statement ............................................................................

pk DOCUMENT CONTROL September 2014 Document No. For more information on services offered by SMEDA. Although. however. 42 Revision No. its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. the material included in this document is based on data/information gathered from various reliable sources.org.smeda. due care and diligence has been taken to compile this document.org. the contained information may vary due to any change in any of the concerned factors. The contained information does not preclude any further professional advice. PREF-NO. which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. Although. 2 Prepared by SMEDA-Punjab Revision Date September 2014 For Information Provincial Chief Punjab janjua@smeda. it is based upon certain assumptions. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision. SMEDA. and the actual results may differ substantially from the presented information.Pre-Feasibility Study Children Shoes Manufacturing Unit 1 DISCLAIMER This information memorandum is to introduce the subject matter and provide a general idea and information on the said matter. please contact our website: www.pk 3 . including taking professional advice from a qualified consultant/technical expert before taking any decision to act upon the information.

2. 6.e. by helping increase the number. fleets and boots in all sizes of (i. 3. entrepreneur’s knowledge of footwear industry. competitive pricing and strong linkages with wholesale / retail networks are important factors for the success of this project. Although. development of quality shoes. The project will provide employment opportunities to 12 people including Owner / Manager.e. 480 pair of shoes) per day. chapals. 240 pair of shoes) whereas maximum operational capacity utilization is considered as 80% (i. through development of the SME sector. The unit will have an installed production capacity of producing 600 pairs of shoes per day on single shift basis. The project NPV is around Rs. initial operational capacity is assumed at 40% (i. 19.Pre-Feasibility Study Children Shoes Manufacturing Unit 2 EXECUTIVE SUMMARY The demand for children shoes is continuously rising due to urbanized population and changing life styles. belonging to the lower middle and middle-income groups. This production capacity is estimated to be economically viable and justifies the capital as well as operational costs of the project. attractive designs. The legal business status of this project is proposed as ‘Sole Proprietorship’. The shoes manufactured by the unit will be directly sold to wholesalers and retail outlets operating in major cities of Pakistan.79 years. The project is to be financed through 50% debt and 50% equity. to reduce initial capital investment. there are a number of local manufacturers producing good quality shoes but still a huge demand exists for potential investment in the footwear sector in Pakistan. SMEDA has carried out ‘sectoral research’ to identify September 2014 4 .13 million. The proposed Children Shoe Manufacturing Unit would cater to the demand for children footwear. scale and competitiveness of SMEs" . The focus of the business would be to provide quality children footwear.e. No. 3 INTRODUCTION TO SMEDA The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). 3 to 5) at affordable prices.79 million is the capital cost and Rs. However.61 million is for working capital. The proposed business venture should preferably be located in any of the major urban and peri-urban cities of Pakistan. with an IRR of 54% and Payback Period of 2. However. particularly sandals. The estimated total cost of the proposed children shoe manufacturing unit is Rs. With a mission "to assist in employment generation and value addition to the national income. the unit is proposed to be established at rented premises.40 million out of which Rs. This particular pre-feasibility study is for setting up of a semi-mechanized shoemanufacturing unit exclusively for children shoes.

. business development services. Hush Puppies. start-up. However. etc. Apart from carefully studying the whole document. 4 PURPOSE OF THE DOCUMENT The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. Organized Sector (mainly includes big brands e. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services.Pre-Feasibility Study Children Shoes Manufacturing Unit policy. the document / study covers various aspects of project concept development. Footlib. Borjan. marketing. and production. September 2014 5 . This particular pre-feasibility provides the basic details for setting up a semi-mechanized Children Shoes Manufacturing Unit. finance and business management. best practices developed by existing enterprises by trial and error and certain industrial norms that become a guiding source regarding various aspects of business set-up and it’s successful management. strategic initiatives and institutional collaboration and networking initiatives. Concurrent to the prefeasibility studies. access to finance. Bata. which form basis of any Investment Decision. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules. The purpose of this document is to facilitate potential investors in Children Shoes Manufacturing Unit by providing them a general understanding of the business with the intention of supporting potential investors in crucial investment decisions. chapals. sandals. a broad spectrum of business development services is also offered to the SMEs by SMEDA. Service. starting from number 03 (European 21) and up to number 05 (European 38). Preparation and dissemination of prefeasibility studies in key areas of investment has been a successful hallmark of SME facilitation by SMEDA. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective.) and Unorganized Sector (mainly comprising of labor intensive units having semi-mechanized manufacturing facilities).g. one must consider critical aspects provided later on. 5 BRIEF DESCRIPTON OF PROJECT Footwear manufacturing industry in Pakistan can be broadly categorized into two main segments i. fleets and boots in all sizes for children.e. The major product line of the venture includes different varieties of sleepers.

After the completion of designs.e. The production of different varieties of footwear will be planned according to the seasonal trend to keep the project operational throughout the year. For instance.000 pairs annually). Shoe Last for the proposed unit will be outsourced from the markets. It is assumed that unit should be established nearby to any major city in a rented premise to reduce the initial capital expenditures. The proposed unit will have the services of full time designer to produce new and creative designs. The final stage of shoe manufacturing is the finishing. fleets and boots) is higher in winters and similarly. Last is a plastic shape that simulates the foot shape. each pair of shoe will be packed in polythene bags and then finally into boxes. it is recommended to have a full time designer for maintaining the uniqueness of designs in the market. The proposed venture will provide direct employment opportunity to 12 individuals including the Owner / Manager. The designs are developed either in-house by employing a full time designer or can be outsourced. After stitching. Overall installed capacity of the unit will be to produce 600 pairs of shoe per day (198. demand for closed shoes (i. sleeper. September 2014 6 .1 Production Process Flow The production process flow of shoe manufacturing starts with the development of designs. China made machinery is easily available in the local market and will be installed in the proposed unit. 5. demand for open shoes (i. completed Uppers are molded into a foot shape with the help of developed Last and Sole will be joined / attached with the Upper. It is later removed from the finished shoe to be used further in making other shoes. Then stitchers will perform various stitching operations to stitch together various components of the Upper. chapel and sandals) is higher in summer. cutting dyes will be prepared for Uppers cutting and the synthetic material will be cut with the help of these press cutting dies. Afterwards. The product mix of open and closed shoes will mainly comprises of “A Grade” and “B Grade” pair of shoes. Generally 10 to 12 different designs (including both summer and winter season designs) are required for the whole year production cycle. However.e. and once the finishing has been done. shoe “Last” is prepared.Pre-Feasibility Study Children Shoes Manufacturing Unit production of different varieties of shoes will vary according to seasonal requirements.

80%) will be achieved during the 9th year of operation.000 pair of shoes annually with 330 operational days. Out of total production. This production capacity is estimated to be economically viable and justifies the capital as well as operational costs of the project. This pre-feasibility study is based on an installed capacity of manufacturing 600 pairs of shoe per day on one shift basis (i.100 pairs) will be “A Grade” and while rest of 5% (i. 188. While maximum capacity utilization of the unit is assumed at 80% i. for 8 hours) and will be able to produce 198.e.900 pairs) will be “B Grade”.2 Installed & Operational Capacities The installed and operational capacity of Children Shoes Manufacturing business venture mainly depends on the installed machinery.e. 95% (i.e. The details of operational and installed capacity according to product mix are provided September 2014 7 . all the manufactured shoes would not meet the quality standards and therefore will be categorized as “A Grade” and “B Grade” pairs.Pre-Feasibility Study Children Shoes Manufacturing Unit Figure 1: Production Process Flow Shoe Design Sole Attatchment Shoe Lasting Shoe Last Making Upper Cleaning Finishing & Quality Check Press Cutting Dyes Upper Cutting Packing 5. 9.200 pair of shoes per day and during the year.400 pairs annually.e. during first year of operation unit will operate at 40% capacity producing 240 and 79.e. respectively. 480 pairs per day and 158. The “B Grade” pair of shoes will be sold at half the price of “A Grade” pair in the market. However. while maximum capacity utilization (i. Capacity utilization growth rate of 5% is considered for subsequent years. It is pertinent to mention that.

 Increasing competition from Chinese products and strong competition with similar type of manufacturers. Faisalabad. Each year around 3.  Knowledge about the latest market trends.  Develop strong linkages with suppliers for sourcing good quality products at competitive prices.200 7.960 79.  Networking with footwear wholesalers / retailers for sale of product.400 % Of Total Production 6 CRITICAL FACTORS Following are the factors critical for the success of this business venture.2 million children are born.000 Operational Capacity 40 % (Year 1) Maximum Operational Capacity 80 % (Year 9) 95% 75. 7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT Lahore is the footwear center of the country.920 158. 8 POTENTIAL TARGET CUSTOMERS / MARKETS The target customer for the proposed project would be children of one to fourteen years of age belonging to middle and lower middle-income family group. Therefore. Sahiwal. Hyderabad.Pre-Feasibility Study Children Shoes Manufacturing Unit in the table below: Table 1: Installed and Operational Capacity Description A-Pairs Production B-Pairs Production Total Total Production Capacity (Annually) 198.  Induction of trained sales personnel for efficient customer handling. Raw material and labor are also easily accessible in these cities. any of the above cities would be suitable for setting up a children shoe manufacturing unit. All the shoe manufacturing units are established in these cities.480 5% 100% 3.240 150. Pakistan is the 7th largest populated country in the world.  Efficient management of stock to keep inventory cost at the minimum. September 2014 8 .  Development of attractive designs and good quality shoes at competitive prices. followed by Karachi. Peshawar and Rawalpindi.

19. during first year production capacity utilization is targeted at 40%. 79.79 Net Present Value (NPV) Rs. This phenomenon provides an ample opportunity for the investment in this sector. The middle and lower-middle family income groups dominate the overall population in Pakistan.Pre-Feasibility Study Children Shoes Manufacturing Unit With a population in excess of 180 million people.900 pairs (72. quality assurance and customer services. Table 2: Project Economics Description Details Internal Rate of Return (IRR) Pay Back Period (Years) 54% 2. September 2014 9 . payback period and Net Present Value.297 Returns on the project and its profitability are highly dependent on the efficiency of the entrepreneur in hiring skilled personnel and maintaining good quality in terms of shoes design.131. Whereas. The following table shows internal rate of return.000 pairs annually. Various costs and revenue related assumptions along with results of the analysis are outlined in this section.e. children under the age of 15 years constitute approximately more than 43% of our total population.795 B-Grade pairs) will be sold. The projected Income Statement. 9.135 A-Grade pairs and 165 B-Grade pairs) will be the finished goods inventory for next year. 9 PROJECT COST SUMMARY A detailed financial model has been developed to analyze the commercial viability of Children Shoes Manufacturing Unit.300 pairs (3. Cash Flow Statement and Balance Sheet are also attached as annexure.200 pairs to be produced while 75. i.1 Project Economics All the assumptions in this financial model are based upon total installed capacity of 198. The remaining 3.105 A-Grade pairs and 3.

610.000 Pre-Operational Cost Training Cost Total Capital Cost Working Capital 139.000 3.Pre-Feasibility Study 9.3 Project Cost Following fixed and working capital requirements have been identified for operations of the proposed business.2 Children Shoes Manufacturing Unit Project Financing Following table provides the details of required equity and variables related to bank loan.199. Table 4: Project Cost Capital Investment Amount Rs. Machinery & Equipment 2.395 Annual Markup to the Borrower– Long Term Loan Tenure of the Loan (Years) 16% 5 Annual Markup to the Borrower – Short Term Debt 16% 9.018 1.853.800 Total Working Capital Total Project Cost September 2014 2.788.398.248 Equipment Spare Parts inventory Raw Material Inventory 12.791 10 .000 Office Equipment 268. Table 3: Project Financing Description Details Total Equity (50%) 3.147.199.395 Bank Loan (50%) 3.748 14.000 550.543 6.725 Upfront Building Rent Cash 900.500 Furniture & Fixture 513.

200 Production area 2.000 10.). The rent of the building will depend on the area and geographical location of the unit.Pre-Feasibility Study 9. Therefore. Table 6: Machinery and Equipment Requirement Description Quantity Unit Cost (Rs.) Total Cost (Rs.500 45.500 69.100 Store 700 Open area Total Area 500 4. 150. Management Building 1.000 590.) will be required for the proposed business venture. An estimated area of 1 Kanal (4. the units operating in the industry do not follow any set pattern.000 Cylindrical Bed Tools for Shoe Uppers 2 1 57.000 34.000 Upper Stitching Flat Bed Machine Upper Stitching Post Bed Machine 3 4 23. The area requirement has been calculated on the basis of space required for production.4 Children Shoes Manufacturing Unit Space Requirement In order to reduce the initial capital expenditure.500 75. 34 per sq. Table 5: Space Requirement Space Requirement Area in Sq. Following table shows calculations for project space requirement. However.5 Machinery and Equipment Requirement Following table provides list of machinery and equipment required for an average sized Children Shoes Manufacturing Unit.) Cutting Clicking Press 2 295.000 32.000 Cutting Board Skiving machine 3 2 11. ft.500 For this particular pre-feasibility the rent amount has been determined at Rs.000 115.500 sq. space may be acquired in the industrial state or in outskirts of big cities where skilled workers are available. 9. ft. the proposed Children Shoes Manufacturing unit will be established in a rental premises.500 90.000 Tools for Shoe Bottom 1 10.000 130.000 September 2014 11 . Ft.000 75. management and storage.000 per month (calculated at the rate of Rs.

000 500.6 Furniture and Fixture Requirements Details of furniture and fixture required for the proposed unit are provided in the following table: Table 7: Furniture and Fixture Requirements Description Quantity Unit Cost (Rs.000 180.500 Lasts Generator (50 KVA) Inland Freight and other Misc. Compressor (5 HP motor) Total 9.000 Sole Attaching Press 1 75.000 Sole Activator Zigzag Machine 1 1 180.000 Lump sum Lump sum Renovation of Building Fans & Lights Carpeting.000 200.000 75.000 550.000 3.000 75.000 76.000 200.000 25.000 25.000 Grinder 1 150.000 Lump sum 15.000 150.000 513. Curtains and etc.800 75.000 Computer Tables 2 10.000 5. Exp.000 Store Racks / Shelves Chairs 1 20 75..853.000 1 1 550.) Total Cost (Rs.000 2.Pre-Feasibility Study Children Shoes Manufacturing Unit Finishing Tools 1 5.000 180.000 25.000 70.000 20.) Executive Table and Chair (Owner / Manager) 1 25.000 240 1 750 500.000 18.000 5 2.000 15.800 14.000 70. Fire Extinguisher Total 9.000 Visitors Sofa Set 1 18.000 75.7 Office Equipment Requirement Following office equipment will be required for the proposed business venture: September 2014 12 .

000 Printer (HP Laser Black 1102) 1 10.000 12. EVA sheet. sole..000 Watchman 1 12.000 Designer Mechanic 1 1 35.000 268.000 7.000 Telephone set Total 5 1. Matrix) 1 17. chemicals. Of Employees Salary per Employee Per Month (Rs) CEO / Owner Manager Foreman 1 1 50.000 5.Pre-Feasibility Study Children Shoes Manufacturing Unit Table 8: Office Equipoment Required Unit Cost (Rs. details of recommended human resource required along with their proposed monthly salaries are as follows: Table 9: Human Resource Requirement Description No.000 Printer (Dot.000 Store Keeper 1 14.000 Computer UPS 2 2 13.000 It is assumed that the owner would have prior experience or knowledge about the proposed business.9 Raw Material Requirement Synthetic material.000 Description Quantity Fax Machine 9.000 Accountant 1 20.000 Air Conditioner File cabinet 2 10 50.000 35.8 Human Resource Requirement In order to smoothly run operations of the proposed unit. are the major components of raw material September 2014 13 .000 Calculator 5 1. cement solution. etc.000 17. Salaries of all employees are estimated to increase at 10% annually.000 25.000 10.000 10.000 100. rubber solution.) 1 10.000 80.) Total Cost (Rs. packing material and accessories.000 15.000 8.500 26.000 Helper Office Boy 4 1 12.000 5. 9.

however.000 and 129.585 24. This project also requires heavy marketing and promotional activities.572. The annual electricity expenses are estimated as Rs. The cost of maintenance of machinery and equipment is assumed as Rs.600 respectively.052. Rs.240 3. local suppliers are easily available in the market.434.10 Other Costs An essential cost to be borne by the business is the cost of electricity.105 3. / Pair) 265 163 Finished Goods Inventory 3. during 1 st year of operation communication and office expenses are estimated at Rs. Majority of these items are imported. 2 per unit of production.710 . 966. a 30 days stock has been recommended and included in the working capital requirements for the proposed unit. 9.11 Revenue Generation Following table provides revenue and cost assumptions of the proposed Children Shoe Manufacturing Unit during first year of operation: Table 10: Revenue Generation in First Year Description / Product Range A-Pair Shoes B-Pair Shoes Total No of Pairs Produced (@ 40% Capacity) No of Pairs Sold 75.135 165 * The difference in Sales Revenue of Income Statement is due to rounding off. 9.541) will be spent on marketing and promotion expenses annually.e. Similarly.795 Average Sale Price (Rs. for which approximately 5% of total revenues (i. September 2014 14 * Sales Revenue Rs. a three-phase commercial electricity connection is required. 120.Pre-Feasibility Study Children Shoes Manufacturing Unit required for manufacturing of shoes.960 72. In order to maintain efficient stock of raw material. 23. 1.125 618.202.

com. Rex Market.) Ltd.unitedmachinery.kamhank.1 Machinery Suppliers Name of Supplier Phone / Fax E-mail / Website United Apparel Machinery 25 United Arcade. Lahore.O Anwar Industry. Peshawer Ph: +92-91-921 7244 +92-300-457 5118 Muhammad Ashraf September 2014 15 E-mail / Website www. Ph: +92-42363 75525.pk www. Rex Market. Road. Phase 5. Nicolson Road.com 10.Pre-Feasibility Study Children Shoes Manufacturing Unit 10 CONTACT DETAILS In order to facilitate potential investors. Gujranwala Ph: +92-055-923 00562 Footwear Training Institute Plot no.com.pk REX Machinery (Pvt.T. Fax: +92-42363 05130 rexmachinery@hotmail. Lahore 10.2 Address Raw Material Suppliers Raw Material Supplier Moti Bazar. Hayatabad. Shahalam Market.com . 24. G. Lahore Ph: +92-42362 91680 lhr@unitedmachinery. contact details of private sector Service Providers relevant to the proposed project are given as under: 10.3 Technical Experts / Consultants Name Address Phone / Fax Government Institute of Leather Technology P. 6 Allama Iqbal Road.

com.gov.sbp.pk Ministry of Education.org.gov.pk Government of Gilgit Baltistan Government of Azad Jamu Kashmir www. Training & Standards in Higher http://moptt.pk Punjab Vocational Training Council (PVTC) Technical Education and Vocational Training Authority (TEVTA) Punjab Industrial Estates (PIE) Faisalabad Industrial Estate Development and Management Company (FIEDMC) www.pk Punjab Small Industries Corporation www.pk Education Government of Punjab Government of Sindh www.moip.pie.punjab.gov.pk www.gilgitbaltistan.gov.pk Federation of Pakistan Chambers of Commerce and Industry (FPCCI) State Bank of Pakistan (SBP) www.gov.ajk.com.pk www.khyberpakhtunkhwa.gop.tdap.pk www.pk Sindh Small Industries Corporation www.secp.pk Government of Khyber Pakhtunkhwa Government of Balochistan www.tevta.pvtc.pk September 2014 16 www.ssic.pk www.gos.gov.gov.pk www.gov.psic.com.balochistan.sindh.pk .pk Trade Development Authority of Pakistan (TDAP) Security Commission of Pakistan (SECP) www.gov.smeda.fpcci.org.gop.pk www.gov.Pre-Feasibility Study Children Shoes Manufacturing Unit 11 USEFUL LINKS Small & Medium Enterprises Development Authority (SMEDA) Government of Pakistan www.gov.pakistan.fiedmc.org www.pk Ministry of Industries & Production www.pk www.

456 5.118.782.288.454 1.709 11.310.062 3.423 407.827 140.188.303 1.996.383 198.130 119.746.762 13.296.739 General administration & selling expenses Administration expense Administration benefits expense Building rental expense Electricity expense Office refreshment expense Communications expense (phone.583 28.573.913.549 2.858.816 73.468 4.758 3.895 8.200 156.730.990.305 Year 6 65.572.115.487.206.353 1.445.282.468 11.150 1.816.800 9.878.821 44.040 485.406.917.609 193.680 7.842.343 3.337 2.180 142.883. audit.000 348.790 2.041. internet.) Office expenses (stationary.977.050.827 10.129.963 Year 10 118.541 240.980.130 5.206. etc.343 4.409 33.215 549.545.329 1.954 299.226 272.448 57.936 107.443.310 3.623 16.399.011 241.786 Revenue Cost of sales Raw Material Cost Wages Operation costs 1 (direct labor) Operating costs 2 (machinery maintenance) Operating costs 3 (direct electricity) Total cost of sales Gross Profit Tax NET PROFIT/(LOSS) AFTER TAX September 2014 17 .999 26. licensing.593 171.261 206.937 2.218 1.087.600 132.926 2.525 119.) Promotional expense Professional fees (legal.404 Year 8 91.) Depreciation expense Amortization of pre-operating costs Amortization of legal.000 142.132 14.918 510.128.644.670 775.800.068.516.054.900 27.129 10.056 5.000 129.800.800.959 5.418.160 145.000.991 Year 9 107.692 187.857 8.070 212.959 1.651.039 86.730 44.623 41.065.939.612.771.950 2.263.767.354 187.523 3.707 67.145 25.800 8.357 750.583 35.701.709 16.296 Year 4 45.065 1.436 317.556 1.766 23.488.983 19.800 96.259 2.560.411 226.236 125.690 119.900 27.554 175.950 2.099.657 309.974.922.583 51.967.322 31.558 104.056 4.929.502 166.517.000 316.480 105.062. fax.422.003 104.206.170 4.546 87.259 2. etc.263.756 Year 5 54.145 25.900 27.163.562 2.950 2.210 649.487.943.600 1.875.065 2.571.311 2.437 20.817 3.757 16.140.593 Gain / (loss) on sale of office equipment Gain / (loss) on sale of Furniture & Fixtures Earnings Before Interest & Taxes 2.Pre-Feasibility Study Children Shoes Manufacturing Unit 12 ANNEXURES 12.691 617.273.131 104.492 5.800 5.066.631 22.843.936 1. janitorial services.391.016 2.548 3.720 171.400 9.434 1.508 104.623 1.200 914.623 2.309 652.959.200 10.334 20.334 40.128.602.148.146 28.101.034 187.239 37. consultants.712.063 8.307 28.1 Income Statement Calculations SMEDA Income Statement Year 1 24.247.145 2.134 4.365.352.829.287.137 Year 3 37.512.725 4.000 120.956 9.665 13.440 119.587 226.294 2.648 1.397 6.776 159. and training costs Subtotal Operating Income 1.659.768 29.653.205 20.333 187.788 457.363 282.931.095.890.593 210.926 3.178.073.354 915.950 2.868 6.065 1.360.633 13.879.307 2.709 14.310 3.501 1.721.206.097 226.000 144.648 392.054.324.835.401 643.060.813 Year 2 30.616 13.931.807 19.720 709.526 16.800 6.418.649.846 248.805 5.312.924.646 156.551.460 679.028. entertainment.933 2.435 248.719 3.072 185.328 116.466.086.466 11.933 2.900 27.628 57.521.658.523 5.166 211.231 3.089 205.224.306 746.829 129.094 18.077 233.800 7.907 17.183.709 13.900 27.376 329.094.056 2.544.599 274.709 10.276 1.768.267.593 Interest expense on long term debt (Project Loan) Interest expense on long term debt (Working Capital Loan) Subtotal Earnings Before Tax 287.501 8.872 35. etc.469.210 154.512.111.842.176.380 463.132.716.334 20.508 465.450 654.307 28.231 272.734 41.260 24.635.608.469.922.006 Year 7 77.000 383.528 49.950 2.725.698 2.167 9.605.734 119.600 1.218 1.231 2.246.250 14.755.043 10.888.483.558 299.205 7.040 16.279.267.321 25.780.661 127.998 226.622.842. mail.800 421.202.244.000 129.653 832.418.308 206.571 7.423 1.648 1.392.772 16.702 1.243 104.810 561.732 51.301.270.299.301.785 257.507.231 170.898.609.760 10.252 548.929.487.434 4.890.265 5.134 1.551 3.015 378.395.

837.534.883.050.247.853.853.199.849 8.920 3.094 35.624.079.068.900 11.085.536 Fixed assets Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets 2.255 56.909 348.279.845 46.500 256.500 51.400 92.585 7.398.690 17.673 1.400 160.085 1.894.199.247 2.459 23.835 1.395 32.098 2.628.222 2.998 8.145 1.594.409 2.899 5.000 268.247.407 938.500 2.395 75.011.332.045 14.500 359.929.800 3.853.461 27.627 37.018 1.328.281 639.853.209 2.154.906.593 1.031.939.164 64.604.375 4.461 3.182.147.149.423.577 18.986 - 3.858.020 20.962 47.281 825.638 25.828.593 1.931.920 1.972 20.395 94.867.883.853.212.044 97.622.824 2.613 100.358 Assets Current assets Cash & Bank Accounts receivable Finished goods inventory Equipment spare part inventory Raw material inventory Pre-paid building rent Total Current Assets 12.102.412 1.613 1.100 107.743.960 2.047 2.585.973.405 33.214.853.583 21.716.135 2.395 1.363 646.197.226 3.000 2.741 13.228 2.Pre-Feasibility Study 12.390 707.036.900 205.449.2 Children Shoes Manufacturing Unit 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 Year 10 2.055 55.176.132.651 30.119.500 410.114.200 3.500 461. licensing.751 5.500 102.223 10.452.122.514.471 26.800.472.743.496 2.439 100.474.256.019.124 1.092.419 2.800 53.942.908.199.986 49.681.961 3.199.500 153.089.804.164 - 3.780 1.468.542 707.844.704 8.309 4.960 2.853.076.256.800 30.007 13.242 1.626 2.043 3. & training costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities 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 September 2014 550.500 139.500 2.500 205.790 111.102.391.600 61.944 6.628.721 990.529.853.219 1.885.755.199.905 1.000 7.085.318.920 2.923.395 14.395 3.800 2.403 2.653 81.401.196.725 900.173 81.806 2.293 64.748 6.522 33.828.800 - 3.917 2.199.500 513.135 83.161 1.753.853.398.033 27.131.335 2.539 3.768 1.489 97.467 2.000 4.157 3.908 4.636.187.200 122.634.308.153 78.456.317.395 58.673.641 1.318.992.199.193 1.473.496 1.106 4.256.858 .503.395 6.200 273.600 3.600 2.668.489 37.748 14.500 342.358 3.196.866.858.750 20.400 3.456 1.700 214.003 505.804.199.015 1.980 10.026 901.865.396 859.63 209.700 2.456 1.395 1.685 91.161 51.149 1.173 - 3.500 307.681.745 41.412 1.814.271 3.405 90.853.381 2.801.199.019.650 12.558.230 60.630 854.668 1.395 22.817 3.305.043 2.319.977.960 3.853.556.798 11.395 43.317.900 2.499 14.943 16.252 64.656 27.199.635 3.613 - 3.395 4.828.176.000 3.950 2.814.075 1.199.806 2.538 42.600 136.955.502.357 49.328.240.857 61.908.265 988.610.000 153.424.145 1.411.853.419 1.209.199.258 78.229 79.627 - 3.110.656 Intangible assets Pre-operation costs Legal.293 8.135 3.055 3.084.199.249 10.300 68.872.858 639.187.790 18 - 3.115.605.514.804.162 8.348.129.668 825.395 9.

437.875.172 7.456) (12.246) (533.709 (552.892) (931.518) (2.131.952) (99.863) (234.709 (465.950 2.946) 313.544.900 27.696) (159.914) (274.744 3.996) (90.941.403 2.605.900.753) - (369.903 7.539) - - - - - (12.876 Year 8 14.065 104.790) 227.812.124 1.622.010) - (505.709 (405.380.068.218 Year 10 19.900 27.305.456 119.136) - (315.059 Year 9 17.754 1.281 114.936) (14.895 119.299.199.153 (288.646.248) - - - - (342.114 11.406.935.800 (351.276 104.733 4.630) - - - - - - 6.3 Children Shoes Manufacturing Unit 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 Accounts receivable Finished goods inventory Equipment inventory Raw material inventory Pre-paid building rent Accounts payable Cash provided by operations Financing activities Project Loan .985) (204.078) (4.894.909) (348.950 2.876 11.336.804) 91.416) (10.223) (8.380.193) (1.317.324.733) (350.709 (611.040 14.392) (307.213) (119.605) (559.328.448 6.principal repayment Additions to Project Loan Additions to Working Capital Loan Issuance of shares Purchase of (treasury) shares Cash provided by / (used for) financing activities Investing activities Capital expenditure Acquisitions Cash (used for) / provided by investing activities NET CASH September 2014 Year 1 Year 2 Year 3 Year 4 (2.926 104.709 (533.646.790 (456.Pre-Feasibility Study 12.928 2.945.451) (5.950 2.570) (108.339.393) (1.453) (298.109) (186.782.711 3.051) (6.043) - - - - - (3.800 (282.218 33.147.248) - - - - (342.526.000) 639.336.472) (144.930) (2.969 19 3.122.398.950 2.643) (723.533 .271 3.111.923) 474.400 119.975 Year 7 11.007) (151.533 (3.378 7.390) (707.950 2.201) (474.975 9.372 5.524) (177.671 4.018) (1.434.800 (141.663) (254.947) (192.194.788.157) (131.059.087) (400.473.786 119.000) 186.743) (624.900 27.900 27.309 104.062 104.387 2.328.395 (270.989) (217.542) 33.464) (854.principal repayment Working Capital Loan .349) (1.440) 368.043) - - - - - 550.788.067) (268.404) (730.535) 1.000) Year 5 Year 6 9.769) 267.914 4.868 119.676) (175.800 (304.385) 432.800 (988.725) (900.741 13.742) 1.943) (4.132) (12.672.059 14.310 9.649.741) - (432.622.800 (341.900) 193.900 27.

01 5.00 5.00 Upper Man 10. 161.1 Operating Cost Assumptions Description Details Administration Benefit Expenses Refreshment Expenses 10% of Administration Cost Rs. 10.00 8.00 Desmokol for Sole Desmoder 11.Pre-Feasibility Study Children Shoes Manufacturing Unit 13 KEY ASSUMPTIONS 13.2 Production Cost Assumptions Description Details Upper Material (on average) Sole 27.00 MEK (for cleaning) 8.00 Raw Material Cost per Pair Cutting Man Rs. 8.00 per Pair September 2014 20 .00 Rs.000 per Month 10% of Administration Cost Promotional Expenses Professional Fee 5% of Revenues 1% of Revenue Depreciation Method Straight Line 10% on Furniture & Fixtures 20% on Office Equipment 10% Depreciation Rate Operating Cost Growth Rate 13.00 Miscellaneous 5.00 Finishing Man Wages per Pair 5.00 Bottom Man 10.000 per Month Communication Expenses Office Expenses Rs.01 50. 30.00 Other accessories Packing 10.00 Rubber Solution Cement Solution 5.00 Foam Lining 5.00 EVA sheet 10.00 17.

3 Revenue Assumptions Description Details Growth in Sales Price 10% Days Operational / Year Per Day Production Capacity 330 600 Pairs Production Capacity in First Year Percentage Increase in Production Capacity every Year 40% Maximum Production Capacity 80% 13.4 5% Financial Assumptions Description Details Debt 50% Equity Interest Rate on Debt 50% 16% Debt Tenure 5 Years Debt Payment / Year 4 September 2014 21 .00 Production Cost Growth Rate 10% 13.Pre-Feasibility Study Children Shoes Manufacturing Unit Machinery Maintenance per Pair Rs. 2.