ABSTRACT

M/S Pellica Manufacturers Pvt. Ltd., is in business

FEASIBILITY STUDY
Pellica Manufacturers Pvt. Ltd.
of manufacturing cleaning products and looking to
expand its business to capture more market. This
feasibility has prepared to avail bank loan for
business expansion.
M. Ayyaz & Co.
Cost & Management Accountants
Office No. 23, 2nd Floor, GDA Commercial Plaza
Civil Line, Gujranwala
Ph: 055-3859009
Mob: 0321-509006
Email: info@ayyazco.com

0
 TABLE OF CONTENTS

1. DECLAIMER ........................................................................................................................................... 2
2. EXECUTIVE SUMMARY ......................................................................................................................... 2
3. CURRENT FINANCIALS AND PRODUCT DETAIL .................................................................................... 2
3.1 Current Product Mix ..................................................................................................................... 2
3.2 Current Profit & Loss .................................................................................................................... 3
3.3 Current Balance Sheet .................................................................................................................. 4
3.4 Current Fixed Assets ..................................................................................................................... 5
3.5 Current HR Detail ......................................................................................................................... 5
4. CRITICAL FACTORS FOR BUSINESS EXPANSION................................................................................... 6
5. PROJECT COST SUMMARY FOR BUSINESS EXPANSION ...................................................................... 6
5.1 Project Economics ........................................................................................................................ 6
5.2 Project Financing .......................................................................................................................... 6
5.3 Project Cost................................................................................................................................... 7
5.4 Space Requirement ...................................................................................................................... 7
5.5 Plant and Machinery .................................................................................................................... 7
5.6 Office Equipment Requirement ................................................................................................... 7
5.7 Human Resource Requirement .................................................................................................... 8
5.8 Utilities and Other Costs .............................................................................................................. 8
5.9 Product Mix after expansion........................................................................................................ 8
6. KEY ASSUMPTIONS ............................................................................................................................... 9
6.1 Operating Cost Assumptions ....................................................................................................... 9
6.2 Revenue Assumptions .................................................................................................................. 9
6.3 Financial Assumptions.................................................................................................................. 9
7. LOAN SUMMARY ................................................................................................................................ 10
8. FINANCIAL STATEMENTS.................................................................................................................... 11
8.1. Balance Sheet ............................................................................................................................. 11
8.2. Income Statement ...................................................................................................................... 12
8.3. Cash flow statement .................................................................................................................. 13

1
1. DECLAIMER
This feasibility study has prepared after having information from client and data also gathered from
different reliable sources. The information has been provided on as is where is basis without any
warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence
has been exercised 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. M. Ayyaz & Co. (Cost and Management Accountants), its employees do not assume any
liability for any financial or other loss resulting from this feasibility study in consequence of undertaking
this activity.

2. EXECUTIVE SUMMARY
M/S Pellica Manufacturers Pvt. Ltd. (hereafter called company) was established on 20 April 2020
with vision to supply material in Pakistan and export. Company has started its operations from 1 st
day of August 2020 with 07 cleaning products in two types of packing for each product. The
company is in a process to expand its existing business after having loan from bank, the current
market of the company is limited till Hafizabad, Gujranwala and surrounding areas of these cities
and in first phase looking to expand in whole Punjab. The total expansion cost estimated at Rs.
1.86 million out of which capital cost is Rs. 1.06 million along with working capital of Rs. 0.8 million.
The project will be financed through 80% debt and 20% equity. The NPV is projected around Rs.
6.85 million, with an IRR of 63% and payback period of 2.9 years.

3. CURRENT FINANCIALS AND PRODUCT DETAIL

The Pellica Manufacturers (Private) Ltd. was stabled on 20 th April 2020 and start its operations
on 01st day of August 2020 with total capital of Rs. 792,094/- (Rs. 100,000/- paid up and Rs.
692,094 addition paid up capital)
3.1 Current Product Mix
The range offered in cleaning material is a blend of below mentioned products with pc

Product Category Percentage in Total Sale

Toilet Cleaner 275ml 4.64%
Toilet Cleaner 500ml 8.70%
Dish Wash Liquid 275ml 5.22%
Dish Wash Liquid 500ml 6.96%
Liquid Blue 100ml 2.32%
Liquid Blue 200ml 2.61%
White Phenyl 1 Liter 2.32%
White Phenyl 3 Liter 9.28%
Sweep & Drain Opener 500ml 5.80%
Sweep & Drain Opener 1 Liter 6.95%
Sweep 600ml 5.80%
Sweep 1200ml 4.63%
Phenyl 1 litre 5.79%
Phenyl 3 litre 28.98%
Total 100%

2
3.2 Current Profit & Loss

Apr-20
to
Dec-20
Rs.

Sales 3,040,000
Cost of Sales
Opening Inventory -
Purchases 1,267,460
Less: Closing Inventory (496,500)
Cost of material consumed 1,763,960
Direct labour 180,000
Direct electricity 92,840
Total cost of sales 2,036,800
Gross Profit 1,003,200
Administartion & General Expenses
Salaries, wages and benefits 350,000
Rent expense 80,000
Water expense 40,000
Travelling expenses 18,240
Communication expenses @ 1.0% of Sales 15,200
Printing & stationery 5,880
Meal & entertainment 25,690
Marketing & promotional expenses @ 10% of sale 91,200
Fees & dues 25,000
Office expenses @ 1.5% of Sales 13,680
Depreciation expense 13,176

678,066
Operating income 325,134
Less: Interest on loan -
Earning before tax 325,134
Less: Provision for Tax 74,781
Net Profit after tax 250,353

Gross Profit / Sales 33%

Operating Profit / Sales 11%
Pre- tax Profit / Sales 11%

3
3.3 Current Balance Sheet

Apr-20
to
Dec-20
Rs.
ASSETS
Non-Current Assets
Operating fixed assets at WDV 258,124

Current Assets
Debtors & Receivables 304,000
Inventory - Finished goods 245,900
Inventory - Raw material 250,600
Prepaid rent 30,000
Security deposit 10,000
Cash / Bank Balance 265,000
1,105,500

TOTAL ASSETS 1,363,624

CAPITAL & LIABILITIES

Share Capital & Reserves

Authorized Capital 100,000

Issued, Subscribed and paid up capital 100,000

(1000 share @ Rs. 100 each)
Additional paid in capital 692,094
Accumulated profit 250,353
1,042,447

Long Term Liabilities

Long term Liabilities -
Less: current portion -
-
Current Liabilities
Current portion of long term Loan -
Accruals & other liabilities 246,396
Provision for Taxation 74,781
321,177

TOTAL CAPITAL & LIABILITIES 1,363,624

4
3.4 Current Fixed Assets

3.5 Current HR Detail

Office Staff
Salary
Qty.
Sl. No. Description Monthly Annual
No. Rs. Rs.
1 Managing Director / CEO 1 30,000 150,000
2 Marketing Assistant 1 15,000 75,000
3 Accountant cum admin assistant 1 15,000 75,000
4 Office Boy 1 10,000 50,000
Total 4 350,000

Direct Labour
Salary
Qty.
Sl. No. Description Monthly Annual
No. Rs. Rs.
1 Production supervisor 1 12,000 60,000
2 Direct Labour 2 12,000 120,000
Total 1 180,000

5
4. CRITICAL FACTORS FOR BUSINESS EXPANSION
Some of the Key factors for operating a successful business are:
i. Background, experience and technical qualification of the directors and/or key staff.
ii. Selection of appropriate location, preferably close to distribution / marketing area.
iii. Availability of complete product range and uninterrupted supply of merchandise.
iv. Inventory control to avoid any pilferage.
v. Reasonable and competitive prices.

5. PROJECT COST SUMMARY FOR BUSINESS EXPANSION

A detailed financial model has been developed to analyze the commercial viability of business
expansion. Various costs and revenue related assumptions along with results of the analysis are
outlined in this section. The projected Income Statement, Cash Flow Statement and Balance Sheet
are also attached.

5.1 Project Economics

All the figures in this financial model have been calculated. The following table shows Internal Rate
of Return, Payback Period and Net Present Value of the project:

Description Details
Internal Rate of Return (IRR) 63%
Payback Period (Year) 2.9
Net Present Value (Rs.) 6,851,046

5.2 Project Financing

Following table provides details of the equity required and variables related to bank loan:

Description Details
Total Equity (20%) PKR 372,000
Bank Loan (80%) PKR 1,488,000
Tenure of the Loan including one year grace period (Years) 8
Grace Period (Years) 1

6
5.3 Project Cost
Following fixed cost and working capital requirements have been identified for operations of the
proposed business:

Description Rs.
Additional Capital Cost
Office equipment 160,000
Marketing expenses 200,000
Plant & Machinery 700,000
Additional Total Capital Cost 1,060,000
Additional Working Capital
Material cost 600,000
Cash requirement 200,000
Total Working Capital 800,000
Total Project Cost 1,860,000

5.4 Space Requirement

Approximately 12,500 sq. ft. will be required for expansion. Rent for the proposed area will be Rs.
10,000 per month.

5.5 Plant and Machinery

The details of furniture & fixtures required for this project are given in the following table:
Equipment Quantity Cost (Rs.) Total (Rs.)
Liquid Agitator 3 50,000 150,000
Liquid Filling Machine 2 150,000 300,000
Capping Machine 1 50,000 50,000
Labelling Machine 1 200,000 200,000
Total 450,000 700,000

5.6 Office Equipment Requirement

The details of office equipment required for this project are given in the following table:
Equipment Quantity Cost (Rs.) Total (Rs.)
Computer 1 40,000 40,000
Software 1 85,000 85,000
Printer 1 15,000 15,000
Telephone 2 4,000 8,000
Scanner 1 12,000 12,000
Total 160,000

7
5.7 Human Resource Requirement

In order to run operations of business smoothly, details of human resources required along with
monthly salary are recommended as under:

Salary / Month Annual Salary

Positions Number
(Rs.) (Rs.)
CEO / Managing Director 1 40,000 480,000
Accountant cum admin 1 15,000 180,000
Marketing Assistant 1 15,000 180,000
Sales coordinator 1 12,000 144,000
Accounts Assistant 1 10,000 120,000
Office Boy 1 10,000 120,000
Security Guards 1 12,000 144,000
Total 114,000 1,368,000

5.8 Utilities and Other Costs

An essential cost to be borne by the project is the cost of electricity. The direct electricity expenses
are estimated to be around Rs. 222,816 annually. Furthermore, promotional expense being
essential for marketing is estimated as Rs. 200,000 during first year.

5.9 Product Mix after expansion

Based on the 40% capacity utilization, product mix the first year of operations is estimated as
under:

Liquid Detergent 500ml 15.95%

Liquid Detergent 1 Liter 16.20%
Fabric Softener 500ml 5.89%
Fabric Softener 1 Liter 4.91%
Liquid Bleach 275ml 4.91%
Liquid Bleach 500ml 3.68%
Hand Wash Liquid 275ml 4.91%
Hand Wash Liquid 500ml 11.04%
Bathroom Cleaner 275ml 3.44%
Bathroom Cleaner 500ml 2.21%
Glass Cleaner 300ml 3.68%
Glass Cleaner 700ml 2.94%
Floor & Surface Cleaner 500ml 6.38%
Floor & Surface Cleaner 1 Liter 3.93%
Antiseptic Disinfectant 100ml 3.44%
Antiseptic Disinfectant 200ml 3.31%
Antiseptic Disinfectant 500ml 3.18%
Total 100%

8
6. KEY ASSUMPTIONS
6.1 Operating Cost Assumptions

Description Details
Travelling expense 40,000
Promotional Expenses (Annually) 50,000
Operating costs growth rate (%) 5%
Communication expenses (Annually) 25,000
Office vehicles insurance rate 5%
Professional fees (legal, audit, consultants, etc.) 35,000
Furniture & fixtures deprecation 10%
Inflation Growth Rate 10%
Electricity Price Growth Rate 10%
Salaries Growth Rate 10%
Building Rent Per Month (Rs.) 10,000
Electricity expenses (Per Annum) 222,816
Dividend percentage of profit 25%
Credit sale vs. total sales 10%
Credit purchase vs. total purchases 10%

6.2 Revenue Assumptions

Description Details
Sales Price Growth Rate 5%
Starting Capacity Utilization 40%
Maximum Capacity Utilization 100%
Per year increase in capacity 10%

6.3 Financial Assumptions

Description Details
Project Life (Years) 8
Debt: Equity 20:80
Interest rate on long term debt 4% 4%

9
7. LOAN SUMMARY

CALCULATION OF LOAN SCHEDULE

Detail of borrowing

Loan Amount 1,488,000 Rupees

Interest R 4%
Installment Quarterly
Grace period 12 Months
Loan Period 8 Years including grace period

PRINCIPAL AMOUNT OUTSTANDING INTEREST

Beginning of Loan payments End of

the year during the year the year QI QII QIII QIV Total
Years

con. Year 1,488,000

1st Year 1,488,000 - 1,488,000 14,880 14,880 14,880 14,880 59,520
2nd Year 1,488,000 187,968 1,300,032 14,726 14,262 13,793 13,319 56,100
3rd Year 1,300,032 195,626 1,104,406 12,840 12,357 11,869 11,376 48,442
4th Year 1,104,406 203,598 900,808 10,877 10,374 9,866 9,353 40,470
5th Year 900,808 211,892 688,916 8,835 8,311 7,782 7,248 32,176
6th Year 688,916 220,524 468,392 6,708 6,164 5,614 5,058 23,544
7th Year 468,392 229,509 238,883 4,496 3,929 3,357 2,777 14,559
8th Year 238,883 238,883 - 2,193 1,602 1,007 383 5,185

10
8. FINANCIAL STATEMENTS
8.1. Balance Sheet
Years 2020 2021 2022 2023 2024 2025 2026 2027 2028
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
ASSETS
Fixed Assets
Tangible Assets
Operating fixed assets at WDV 258,124 1,006,312 995,681 996,112 1,006,500 1,025,850 1,053,265 1,087,938 1,129,144
Intangible Assets
Pre-expansion marketing - 160,000 120,000 80,000 40,000 - - - -
258,124 1,166,312 1,115,681 1,076,112 1,046,500 1,025,850 1,053,265 1,087,938 1,129,144
Current Assets
Debtors & Receivables 304,000 729,600 839,040 964,896 1,109,630 1,276,075 1,467,486 1,687,609 1,771,990
Inventory 496,500 600,000 690,000 793,500 912,525 1,049,404 1,206,815 1,387,837 1,457,229
Prepaid rent 30,000 30,000 33,000 36,300 39,930 43,923 48,315 53,147 58,462
Security for rented shop 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Cash / Bank Balance 265,000 1,195,499 1,673,503 2,328,715 3,186,569 4,292,873 5,665,149 7,351,030 9,003,528
1,105,500 2,565,099 3,245,543 4,133,411 5,258,654 6,672,275 8,397,765 10,489,623 12,301,209
TOTAL ASSETS 1,363,624 3,731,411 4,361,224 5,209,523 6,305,154 7,698,125 9,451,030 11,577,561 13,430,353

CAPITAL & LIABILITIES

Capital Accounts
Authorised capital 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Paid in capital 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
(1000 shares of Rs. 100 each)
Add: Addition in Capital 692,094 692,094 692,094 692,094 692,094 692,094 692,094 692,094 692,094
Add: Accumulated retained earning - 250,353 813,622 1,526,637 2,444,020 3,602,301 5,026,762 6,784,293 8,899,868
Add: Profit for the year 250,353 751,026 950,687 1,223,178 1,544,375 1,899,281 2,343,375 2,820,767 2,746,467
Less: Dividend - (187,757) (237,672) (305,795) (386,094) (474,820) (585,844) (705,192) (686,617)
1,042,447 1,605,716 2,318,731 3,236,114 4,394,395 5,818,856 7,576,387 9,691,962 11,751,812
Long Term Liabilities
Loan from bank - 1,488,000 1,300,032 1,104,406 900,808 688,916 468,392 238,883 -
- (187,968) (195,626) (203,598) (211,892) (220,524) (229,509) (238,883) -
- 1,300,032 1,104,406 900,808 688,916 468,392 238,883 - -
Current Liabilities
Current portion of long term Loan - 187,968 195,626 203,598 211,892 220,524 229,509 238,883 -
Accruals & other liabilities 246,396 425,867 489,747 563,209 647,690 744,843 856,570 985,055 1,034,308
Provision for Taxation 74,781 211,828 252,714 305,794 362,261 445,510 549,681 661,661 644,233
321,177 825,663 938,087 1,072,601 1,221,843 1,410,877 1,635,760 1,885,599 1,678,541

TOTAL CAPITAL & LIABILITIES 1,363,624 3,731,411 4,361,224 5,209,523 6,305,154 7,698,125 9,451,030 11,577,561 13,430,353

11
11
8.2. Income Statement
Years 2021 2022 2023 2024 2025 2026 2027 2028
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Revenue 7,296,000 8,390,400 9,648,960 11,096,304 12,760,750 14,674,863 16,876,092 17,719,897
Cost of Sales
Opening Stock 496,500 600,000 690,000 793,500 912,525 1,049,404 1,206,815 1,387,837
Add: Purrchases & direct cost 4,258,666 4,897,465 5,632,085 6,476,898 7,448,433 8,565,698 9,850,553 10,343,081
Less: Closing stock (600,000) (690,000) (793,500) (912,525) (1,049,404) (1,206,815) (1,387,837) (1,457,229)
Add; Electricity expenses 222,816 267,379 320,855 385,026 462,031 554,437 665,324 731,856
Total cost of sales 4,377,982 5,074,844 5,849,440 6,742,899 7,773,585 8,962,724 10,334,855 11,005,545

Gross Profit 2,918,018 3,315,556 3,799,520 4,353,405 4,987,165 5,712,139 6,541,237 6,714,352
Administartion & General Expenses 40% 40% 39% 39% 39% 39% 39% 38%
Salaries wages & benefits 1,368,000 1,504,800 1,655,280 1,820,808 2,002,889 2,203,178 2,423,496 2,665,846
Rent expense 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846
Water expense 10,000 10,500 11,025 11,576 12,155 12,763 13,401 14,071
Travelling expense 40,000 42,000 44,100 46,305 48,620 51,051 53,604 56,284
Communication expense 25,000 26,250 27,563 28,941 30,388 31,907 33,502 35,177
Printing & stationery 10,000 10,500 11,025 11,576 12,155 12,763 13,401 14,071
Meal & entertainment 63,000 66,150 69,458 72,931 76,578 80,407 84,427 88,648
Promotion expense 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355
Fees & dues 25,000 26,250 27,563 28,941 30,388 31,907 33,502 35,177
Office expenses 32,832 34,474 36,198 38,008 39,908 41,903 43,998 46,198
Depreciation expense 111,812 110,631 99,569 89,612 80,650 72,585 65,327 58,795
Amortization of Marketing exp. 40,000 40,000 40,000 40,000 40,000 - - -
Subtotal 1,895,644 2,056,055 2,222,106 2,406,299 2,610,198 2,795,539 3,044,250 3,318,468
Operating income 1,022,374 1,259,501 1,577,414 1,947,106 2,376,967 2,916,600 3,496,987 3,395,885
Earning before interest & tax 1,022,374 1,259,501 1,577,414 1,947,106 2,376,967 2,916,600 3,496,987 3,395,885

Less: Interest on loan 59,520 56,100 48,442 40,470 32,176 23,544 14,559 5,185
Earning before tax 962,854 1,203,401 1,528,972 1,906,636 2,344,791 2,893,056 3,482,428 3,390,700
Less: Provision for Tax 211,828 252,714 305,794 362,261 445,510 549,681 661,661 644,233
Net Profit after tax 751,026 950,687 1,223,178 1,544,375 1,899,281 2,343,375 2,820,767 2,746,467

12
8.3. Cash flow statement
2021 2022 2023 2024 2025 2026 2027 2028
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Cash flow from operating activities
Profit for the year before tax provision 1,022,374 1,259,501 1,577,414 1,947,106 2,376,967 2,916,600 3,496,987 3,395,885
Adjustment for non-cash income / expenses
Depreciation for property plant & equipment 151,812 150,631 139,569 129,612 120,650 72,585 65,327 58,795
1,174,186 1,410,132 1,716,983 2,076,718 2,497,617 2,989,185 3,562,314 3,454,679
Changes in working capital
Accounts receivables (425,600) (109,440) (125,856) (144,734) (166,445) (191,411) (220,123) (84,381)
Advances deposits and prepayments - (3,000) (3,300) (3,630) (3,993) (4,392) (4,832) (5,315)
Addition in Inventory (103,500) (90,000) (103,500) (119,025) (136,879) (157,411) (181,022) (69,392)
Accounts payables 179,471 63,880 73,462 84,481 97,153 111,727 128,485 49,253
Accruals & Provisions - - - - - - - -
Cash generated from operations 824,557 1,271,572 1,557,789 1,893,810 2,287,453 2,747,698 3,284,822 3,344,844
Taxation (74,781) (211,828) (252,714) (305,794) (362,261) (445,510) (549,681) (661,661)
finance cost (59,520) (56,100) (48,442) (40,470) (32,176) (23,544) (14,559) (5,185)
Net cash inflow from operating activities 690,256 1,003,644 1,256,633 1,547,546 1,893,016 2,278,644 2,720,582 2,677,998

Cash flow from investing activities

Addition in fixed assets (860,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)
Marketing expenses for longterm (200,000)
Net cash inflow/ (outflow) from investing activities (1,060,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000) (100,000)

Cash flows from financing activities

Drawings (187,757) (237,672) (305,795) (386,094) (474,820) (585,844) (705,192) (686,617)
Addition in Capital - - - - - - - -
Long term debt 1,488,000 (187,968) (195,626) (203,598) (211,892) (220,524) (229,509) (238,883)
Net cash flow from financing activities 1,300,243 (425,640) (501,421) (589,692) (686,712) (806,368) (934,701) (925,500)

Increase / (decrease in cash equivalents 930,499 478,004 655,212 857,854 1,106,304 1,372,276 1,685,881 1,652,498
Cash and cash equivalent at the beginning of the year 265,000 1,195,499 1,673,503 2,328,715 3,186,569 4,292,873 5,665,149 7,351,030
cash and cash equivalent at the end of the year 1,195,499 1,673,503 2,328,715 3,186,569 4,292,873 5,665,149 7,351,030 9,003,528

13