Professional Documents
Culture Documents
PRE-FESIBILITY STUDY
(Sheep Fattening)
Government of Pakistan
www.parc.gov.pk
January 2014
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CONTENTS
1. DISCLAIMER.......................................................................................................................................1
2. PURPOSE OF THE DOCUMENT.......................................................................................................2
3. INTRODUCTION TO SCHEME..........................................................................................................2
4. EXECUTIVE SUMMARY..................................................................................................................2
5. BRIEF DESCRIPTION OF PROJECT.................................................................................................2
Selection of Suitable Breed……………………………………………………………………….3
Location…………………………………………………………………………………………..3
Target Markets……………………………………………………………………………………3
Employment Generation…………………………………………………………………………3
6. CRITICAL FACTORS.....................................................................................................................….3
7. OPERATIONAL CAPACITIES............................................................................................................4
8. POTENTIAL TARGET MARKET.......................................................................................................4
9. PRODUCTION PROCESS FLOW.......................................................................................................4
10. BREED SELECTION.........................................................................................................................4
11. PROJECT COST SUMMARY............................................................................................................4
12. PROJECT ECONOMICS……..………………………………………………………………………4
13. PROJECT FINANCING……..………………………………………………………………………..5
a. Project Cost………………………………………………………………………….……5
b. Space Requirement……………………………………………………………………….5
c. Machinery and Equipment……..……………………………………………………..….6
d. Human Resource Requirement……………………..…………………………………....6
e. Revenue Generation………………………………………………………………………6
14. CONTACTS-SUPPLIERS, EXPERTS/CONSULTANTS……………………………………………6
15. ANNEXURES.....................................................................................................................................7
16. KEY ASSUMPTIONS.....................................................................................................................…9
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LIST OF TABLES
LIST OF ANNEXURES
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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. Although, the material included in this document is based on data / information
generated from experiments and field testing by a team of relevant scientists; however, it is based upon
certain assumptions which may differ from case to case. The contained information may vary due to any
change in any of the concerned factors, and the actual results may differ accordingly from the presented
information. The PARC and its employees do not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The prospective user of this
memorandum is encouraged to contact qualified consultant/technical expert, especially designated focal
person(s) of this enterprise for reaching to an informed decision.
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2. PURPOSE OF DOCUMENT
The purpose of this document is to facilitate potential investors in Sheep Fattening by providing them
with a general understanding of the business, with the intention of supporting potential investors in crucial
investment decisions. The project pre-feasibility may form the basis of an important investment decision
and in order to serve this objective, the document/study covers various aspects of project concept
development, start-up, production, finance, and business management. 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; best practices developed by existing
enterprises by trial and error, certain industrial norms and well established research findings that become a
guiding source regarding various aspects of business set-up and it’s successful management. Apart from
carefully studying the whole document, one must consider critical aspects provided later on, which form
the basis of investment decisions.
3. INTRODUCTION TO SCHEME
Prime Minister’s Youth Business Loan Program, for young entrepreneurs, with an allocated budget of Rs.
5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8% mark-up per annum for
one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through
National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Loans from Rs. 0.1 million to Rs.
2.0 million with tenure up to 8 years inclusive of 1 year grace period, and a debt: equity of 90: 10 will be
disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa,
Balochistan, Gilgit-Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
4. EXECUTIVE SUMMARY
Sheep Fattening Farm is proposed to be located at any suitable areas of Pakistan. The project is related to
sheep fattening purposes, the total capacity is 50 sheep. Project Cost Estimate is Rs. 0.66 Million with
fixed investment of Rs. 0.07 Million. Given the cost assumptions, IRR and payback are 15% and 7.56
years for sheep.
6. CRITICAL FACTORS
Establishment of the farm in areas where cheap land is available, but it should not be far away
from the market.
The farming should be done on scientific grounds taking care of Vaccination, Medicine etc.
Healthy and quality male stock should be selected for fattening.
New feeding techniques including concentrate feeding and preparation of urea molasses blocks etc
should be used for better results.
Well-trained / experienced staff adding to the efficiency of the farm.
Strict vaccination and deworming program for successful operation may be followed.
Good feeding and management practice will give the success in the business. Fresh water will be
available all the time. In the concentrate; minerals may also be included.
7. OPERATIONAL CAPACITY
The farm will start production with 50 sheep. The limit of 50 sheep has been imposed on the farm because
a very large flock would be difficult to manage. The farm would focus on rearing of young stock for
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fattening and marketing. Sheep from aged less than 1 year of age will be purchased and resold in the
market after a fattening period of 120 days.
8. POTENTIAL MARKETS
Target market would be the areas where breeding is being undertaken as well as major cities like Karachi,
Quetta, Lahore, Rawalpindi, Islamabad, Peshawar etc. In addition to local markets there is an enormous
export potential to Middle Eastern countries.
9. PRODUCTION PROCESS FLOW
Animals selected for fattening should be of about of age of 6 months. During this age the daily weight-
gain capacity is also better particularly in sheep.
10. BREED SELECTION
The farmers should not only select good quality breed which can bring better results for fattening but also
select most suitable animals from the selected breeds. Through better management, the weight gain of
these selected breeds would be higher.
11. PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability of Sheep Fattening
Farm. Various cost and revenue related assumptions along with results of the analysis are outlined in this
section.
12. PROJECT ECONOMICS
All the figures in this financial model have been calculated for 50 sheep for total area of around 21,00
sq.ft, that would be used for different functions of the farm. The following table shows internal rates of
return and payback period.
Table 1. Project Economics
Description Sheep
Internal Rate of Return (IRR) 15%
Payback Period (yrs) 7.56
Net Present Value (NPV) 311,704
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Description Sheep
Total Equity (@ 10%) Rs. 73,848
Bank Loan (@ 90%) Rs. 664,636
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 8
Grace Period (Year) 1
a. Project cost
Following requirements have been identified for operations of the proposed business.
Building 330000
Machinery & Equipment 90000
Total Capital Cost 420000
b. Space Requirement
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equipment
Total cost 90000
Worker 1 10,000
e. Revenue Generation
Table 7 Revenue Generation
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15. ANNEXURES
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15.2 CASHFLOW STATEMENT
Operating activities Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Net profit - (41,681) (16,180) 13,047 45,186 80,536 129,083 171,679 218,303 264,677 309,774
Add: depreciation
expense - 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000 42,000
amortization
expense - 9,717 9,717 9,717 9,717 9,717 - - - - -
Equipment
inventory (1,633) (167) (185) (203) (224) (247) (273) (301) (331) (365) 3,931
Raw material
inventory (234,167) (24,002) (26,458) (29,184) (32,170) (35,461) (39,089) (43,111) (47,522) (52,384) 563,547
Accounts payable - 39,755 2,548 2,733 2,935 3,151 3,384 3,638 3,915 4,213 (21,174)
Cash provided by
operations (235,800) 25,621 11,443 38,110 67,444 99,696 135,105 173,906 216,365 258,141 898,078
Financing activities
- Change in long
term debt 664,636 - (73,806) (79,932) (86,567) (93,751) (101,533) (109,960) (119,087) - -
Issuance of shares 73,848 - - - - - - - - - -
Cash provided by /
(used for) financing
activities 738,484 - (71,164) (38,110) (67,444) (99,696) (135,105) (134,032) (119,087) - -
Investing activities -
Capital expenditure (468,584) - - - - - - - - - -
Cash (used for) /
provided by investing
activities (468,584) - - - - - - - - - -
NET CASH 34,100 25,621 (59,721) - - - - 39,874 97,278 258,141 898,078
Cash balance
brought forward 34,100 59,721 - - - - - 39,874 137,153 395,293
Cash available for
appropriation 34,100 59,721 - - - - - 39,874 137,153 395,293 1,293,371
Cash carried forward 34,100 59,721 - - - - - 39,874 137,153 395,293 1,293,371
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16. Key Assumptions
Particulars Assumption
Sales Price Growth Rate 5 % per year
Capacity Utilization Growth Rate 5 % per year
Increase in Cost of Raw Materials 10 % per year
Increase in Staff Salaries 10 % per year
Increase in Utilities (Electricity / Water / Gas) 10 % per year
Debt / Equity Ratio 90 : 10
Depreciation
Plant Building 10 % per annum
Machinery 10 % per annum
Office Furniture & Equipment 10 % per annum
Loan Period 8 Years (inclusive of 1 year grace
Loan Installments period)
Financial Charges (Loan Rate) Quarterly