254 Services Feasibility

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Pre-Feasibility Study

FOOTWER RETAIL OUTLET

Small and Medium Enterprise Development Authority

Government of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th & 8th Floor LDA Plaza, Egerton Road, Lahore.

Tel: (92 042) 111-111-456 Fax: (92 042) [email protected]

REGIONAL OFFICEPUNJAB

REGIONAL OFFICESINDH

REGIONAL OFFICE

NWFP

REGIONAL OFFICE

BALOCHISTAN

8th Floor LDA Plaza,

Egerton Road, Lahore.

Tel: (042) 111-111-456Fax: (042) 6304926-7

[email protected]

5

TH

Floor, BahriaComplex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) 5610572

[email protected]

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47

Fax: (091) 286908

[email protected]

Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (081) 831623, 831702

Fax: (081) 831922

[email protected]

September, 2006


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Pre-feasibility Study Footwear Retail Outlet

PREF-96/September, 2006/ Rev 1 2

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

1 PURPOSE OF THE DOCUMENT.......................................................................................................4

2 CRUCIAL FACTORS AND STEPS IN DECESION MAKING..........................................................4

2.1 SWOT ANALYSIS........................................................................................................................42.1.1 Strengths ...................................................................................................................................4

2.1.2 Weaknesses ...............................................................................................................................42.1.3 Opportunities.............................................................................................................................4

2.1.4 Threats......................................................................................................................................4

3 PROJECT PROFILE............................................................................................................................5

3.1 OPPORTUNITY RATIONAL........................................................................................................5

3.2 PROJECTBRIEF...........................................................................................................................5

3.3 MARKETENTRY TIMINGS........................................................................................................53.4 BUSINESS LEGAL STATUS ........................................................................................................5

3.5 PROJECT CAPACITY & RATIONAL...........................................................................................5

3.6 PROJECT INVESTMENT .............................................................................................................6

3.7 PROPOSED LOCATION...............................................................................................................73.8 KEY SUCCESS FACTORS ...........................................................................................................7

3.9 STRATEGIC RECOMMENDATION ............................................................................................7

3.9.1 Marketing..................................................................................................................................73.9.2 Pricing ......................................................................................................................................7

3.9.3 Store layout and presentation.....................................................................................................8

3.9.4 Use of computer.........................................................................................................................8

3.9.5 Inventory...................................................................................................................................8

4 MACROECONOMIC INDICATORS OF PAKISTAN.......................................................................8

4.1 DEMOGRAPHY OF PAKISTAN ..................................................................................................8

4.2 POPULATION GROWTH.............................................................................................................94.3 DEMAND& SUPPLY...................................................................................................................9

5 SECTOR & INDUSTRY ANALYSIS...................................................................................................9

5.1 SECTOR CHARACTERISTICS ....................................................................................................95.2 SUBSECTOR INFORMATION ....................................................................................................9

5.3 ISSUES REGARDING INDUSTRY ..............................................................................................96 MARKETING.....................................................................................................................................10

6.1 MARKETPOTENTIAL...............................................................................................................10

6.2 COMPETITIVE ENVIRONMENT ..............................................................................................106.3 MAJOR PLAYERS FOOTWEAROUTLET..............................................................................10

6.4 TARGETCUSTOMERS..............................................................................................................106.5 TRADE STATISTICS..................................................................................................................10

7 PROJECT PROFILE..........................................................................................................................11

7.1 LAND REQUIREMENT..............................................................................................................11

7.1.1 Recommended Mode................................................................................................................11

7.2 UTILITIES REQUIREMENTS ....................................................................................................117.3 TIMESCHEDULE ......................................................................................................................11

7.4 SUITABLELOCATION..............................................................................................................11

7.5 FURNITURE, FIXTURES & OFFICEEQUIPMENT...................................................................127.6 HUMAN RESOURCE REQUIREMENT.....................................................................................14

8 FINANCIAL PROJECTIONS............................................................................................................15

8.1 PROJECT SUMMARY ......................................................................................................................15

8.2 INCOME STATEMENT.....................................................................................................................168.3 BALANCE SHEET...........................................................................................................................17

8.4 CASH-FLOW STATEMENT ..............................................................................................................18

9 KEY ASSUMPTIONS.........................................................................................................................19


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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. The prospective user of this memorandum is

encouraged to carry out additional diligence and gather any information he/she feels

necessary for making an informed decision.

For more information on services offered by SMEDA, please contact our website:

www.smeda.org.pk

DOCUMENT CONTROL

Document No. PREF-96

Prepared by SMEDA-Punjab

Issue Date September 2006

Issued by Library Officer


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1 PURPOSE OF THE DOCUMENT

This document provides details of setting up a retail outlet of shoes. The objective of this pre

feasibility study is to provide information and overview about outlet of footwear and to

evaluate its viability under present circumstances. This document may form the basis to make

important investment decisions and in order serve the objective; this study covers various

aspects of project development, start up, marketing, finance and management.

2 CRUCIAL FACTORS AND STEPS IN DECESION MAKING

2.1 SWOT ANALYSIS

Before making any investment decision it is advisable to evaluate associated risk factors bytaking into consideration certain key elements.

SWOT analysis is a strategic planning tool used to evaluate Strengths, Weaknesses,Opportunities and Threats involved in a project or a business venture. Strengths and

weaknesses are internal to company. Opportunities and threats originate outside the company.A SWOT analysis usually performed early in the project development process, and helps

organization to evaluates internal factors and

2.1.1 Strengths

Availability of popular brands

Effective marketing/promotion schemes

Handsome market for consumption

Growing population

Status symbol to shop from big stores

2.1.2 Weaknesses

Operating at very low rather negligible profit margin in initial years.

Difficulty in building confidence among target customers.

Credibility factor in the initial phase, as suppliers do not give credit to newlyEntrants

2.1.3 Opportunities

Changing fashion style.

Spending is high and is expected to result in sales growth industry-wide.

2.1.4 Threats

Tough Competition

New entrants can easily share the business.

Footwear export is very exacting and competitive and demands high quality.

Consumers are becoming savvier and may lean towards discounted items.

Heavy taxes in the form of sales tax and income tax on retail business


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3 PROJECT PROFILE

3.1 OPPORTUNITY RATIONAL

Footwear is a consumer product and relates to the basic human needs. It is difficult to specify

grade/type or model. However, it can be treated as product, which can be made by picking up

one from each of the following areas/class. For example a ladies shoes can be of leather in a

sandal form or it may be a canvass shoe. Manufacturer can produce mens formal shoe byusing synthetic materials and do on. So, it is very difficult to specify the product by grade,

type or model. We can treat it only as an essential consumer product.

In all countries of the world, the demand for footwear is high and in most developing

countries it is averagely growing. It is also estimated that about 60% of the worlds total

consumption consists of simple footwear made entirely of no-leather materials and that for

the remaining 40% only the upper part of the shoe is made of leather.

The business is of trading nature and carries larger potential for profit. Unfulfilled demand,

change in fashion and good profit margins are few incentives for a new entrants in thisbusiness, especially for those who are committed to quality product.

3.2 PROJECT BRIEFFootwear is a product use to cover feet as boot or shoe. This can be categorized on materials,

style and usage. The generally used materials are leather, man-made materials,rubber/canvas/synthetic and textile along accessories. Further classification is Mens,

Ladies, and children. This can be further subdivided on the basis of style closed or open,formal or casual, sandal or slipper or fancy shoes relates to fashion. The local industry also

caters the special users like army, sportsman, disabled persons, fire brigades and motorcyclist

etc. Domestic industry is also producing safety shoes for work force.

3.3 MARKET ENTRY TIMINGS

There is no time specification for starting such a business because there is no seasonal

impact. Product sold not only in summer, winter but also on occasions like Eid, after

summer vocation. So, business can be start at any time.

3.4 BUSINESS LEGAL STATUS

This Legal status is recommended to be a sole proprietorship/partnership because it requires

less legal requirement to start with than a company. Also the small and medium stores in

existing industry are sole proprietorships or partnerships. Similarly a lower income tax rate oftax is applicable to sole proprietorship than that of companies.

3.5 PROJECT CAPACITY & RATIONAL

Pakistan is the 7th largest populated country in the world. Each year, 3.2 million new children

are born. The population growth rate has been reported as 2.25% during the year 2005-06.

This high population growth rate provides an opportunity for the investor to set up a retail

outlet meet the demands of this sector and earn substantial profits.

The proposed project is to provide footwear for men, ladies and children simultaneously. Thiswill provide the minimum feasible size for the project and minimum capital outlay for project

instigation.


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Table 1 First years capacity

Imported shoes

Branded

Men 945

Ladies 1,215

Children 540

Non-Branded

Men 945

Ladies 1,215

Children 540

Local Shoes

Branded

Men 756

Ladies 972

Children 432

Non-Branded

Men 504

Ladies 648

Children 288

Total 9,000

3.6 PROJECT INVESTMENT

Cost of the project will consist of the following.

Table 2: Project Investment

Lahore Branch Head Office Warehouse

Furniture & Fixture 1,500,000

Office Equipment 700,000

Vehicles 1,400,000

Security deposit 960,000

Pre-operating Expenses 110,000

Total Fixed Cost 4,670,000

Initial Working Capital 1,338,688

Total Project Cost 6,008,688


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3.7 PROPOSED LOCATION

Location of outlet is of primary concern with any retail organization. Spending time and

money wisely in the process of site selection is of primary importance. Keeping in viewproducts offered it is recommended that outlet must be in area like Defence, Gulberg and

Fortress stadium etc. The expansion is planned in various big cities with a single branchopened every year.

3.8 KEY SUCCESS FACTORS

The most important factor for the success of a project is quality of product provided to the

customer. Customer satisfaction will be the key success factor.

Retail store is full of opportunities for success, but that success is reserved for those whoare prepared to commit themselves to everlasting change.

To obtain a good average of profits it is necessary to provide state of art facilities tocustomers.

There should be regular and sustained marketing through fliers distribution and CableTV.

Frequent discount policies used to enhance customer motivation.

The store should have an ample space for customer car parking. It is advisable tomaintain a parking space whereby around 10-15 cars can be parked

The staff hired should be well mannered and well trained in dealing with the customers.

3.9 STRATEGIC RECOMMENDATION

3.9.1 Marketing

Regular and sustained marketing is required for a successful business of retail shop. Theimportant marketing channels would be flyer distribution, Cable TV, etc. Regular

advertisement expense should be at least 1% to 2% of sales in such business. Some marketing

and promotional tips are as under:

Existing customers are best referrals.

Know customers needs.

Frequent clearance sales

3.9.2 Pricing

Retailers have a basic philosophy towards pricing their product. What is important is that

they create and stick to a strategy for pricing so as to convey a clear message to the

consumer. The market has certainly created the need for all retailers, even those at the higher

end, to become more value oriented. That is not to suggest that you necessarily need to

compete on price, only that you be aware of providing consumer perceived value.

Some value pricing strategies are as follows:

Provides the consumer with an incentive to become a repeat customer by offering a futurediscount.

Frequent clearance sales

Include a gift with purchase


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Feature your discounted prices predominantly.

3.9.3 Store layout and presentation

Todays successful retailer is the one making the most profitable use of every square foot of

space in the store and in the warehouse. Because space is costly, retailers need to take a

strategic approach to its use. Floor patterns, location of merchandise, amounts of merchandise

and the appropriate displays are all key factors in determining space. Misuse of space can beas detrimental to success as poor Buying. It is very important for every store to create a

suitable atmosphere and appealing presentations in order to trigger the consumers buying

decision. In a world where one can find identical merchandise in more than one store, layout

and presentation becomes a key-differentiating factor. The proposed store should be air-

conditioned. There should be proper arrangement of lightening.

3.9.4 Use of computer

The computer is an invaluable aid in processing the large number of transactions and vast

amounts of information involved in managing a retail operation. The amount of data needed

for merchandise planning for example would require hundreds of man-hours to produce,

whereas a well-designed computer system can perform the task in seconds. Software for

inventory and sales recording and management should be used to have updated data at all the

times. This software not only records each and every sales transaction but also update stock

and cash position after every transaction.

3.9.5 Inventory

Stock of finished goods kept must be for 180 days by farseeing major occasions, holidays,

weather and Islamic events like Eid. Supply source would be outsourcing from leading

manufacturers with own developed brands. There must be well-known imported brand

category and other footwear accessories like socks polishes, laces and gifts for children.

4 MACROECONOMIC INDICATORS OF PAKISTAN

4.1 DEMOGRAPHY OF PAKISTAN

The population of Pakistan was 32.5 million in 1947. Over the last fifty-five years, it has

increased by four folds reaching to a figure of 156 Million approximately. It is expected to

172 million marks in the year 2010. The demographic details of Pakistans population are

given below:

Table 3: Demography of Pakistan 20061

Total Estimated Population 156 Million

Population Density: 185/sq. km

Population Growth 2.25%

Population Doubling Time: 32 Years

Birth Rate: 27.3 per 1000 population


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4.2 POPULATION GROWTH

Achieving a world of population in balance with its environmental resources is crucial to the

future of our planet and the welfare of its people. Population growth is a complex issue that

directly or indirectly impacts all aspects of our lives and the conditions under which we live.

During the past 25 years, cultivable land has increased by 27 percent compared to 98 percentincrease in population.1 Due to high birth rate urban population will double in the next 20

years causing more and more opportunity for the promotion of furniture business.

At present year 2005-6 the annual population growth rate is around 2.25 in country.Pakistans population will be twice over in less than 32 years. Punjab is the most thickly

populated area and Karachi is the most densely populated city. Keeping in view the growthrate of population of the country it is likely that housing requirements will enhance and

automatically demand for home and office furniture will be increase.

4.3 DEMAND & SUPPLY

On the basis of present population and assuming the per capita consumption of one pair, the

present estimated domestic consumption is 160 million pairs as there are no imports offootwear in the country2.

To match the annual growth in population projected future requirement of footwear must be8% for local consumption and 20 %growth for export.

5 SECTOR & INDUSTRY ANALYSIS

5.1 SECTOR CHARACTERISTICS

The footwear industry has been growing since 1996. There has been a continuous increase in

both production and consumption of footwear in Pakistan till the year 1999. During the year

2000, a nominal growth of 0.2% and 0.6% has been recorded in the production and

consumption of shoes respectively. Children shoes being a necessity product, is directlylinked with the population growth rate, and keeping into consideration the per capita

consumption of footwear in Pakistan, estimates can be

5.2 SUB SECTOR INFORMATION

Focal points of footwear outlets are big cities including Karachi, Lahore, and Rawalpindi.

5.3 ISSUES REGARDING INDUSTRY

Departmental stores business like any other business activity must be registered with incometax department and sales tax department. Prevailing rate of income tax for sole proprietorship

is in various slabs max 35%. There are two types of registration available to retailers in Salestax3. Either it can be enrolled for turnover tax if sales are up to Rs. 20M per annum or if sales

exceed Rs. 20 M it must be registered under Retail Tax. Prevailing turnover tax rate is 2% ofall taxable sales without deducting/adjusting any input tax (sales tax paid on purchase of raw

material). The rate of prevailing retail tax is 15% of taxable sales subject to adjustment of

input tax (sales tax paid on purchases).

1 Economic survey of Pakistan 2005-062

www.pakboi.org.pk3

Sales Tax Act 1990


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6 MARKETING

6.1 MARKET POTENTIAL

Paper marketing is essential for attracting clients towards newly established business. Once a

reasonable clientele is established the stress on marketing can be decreased, as it will be

automatically done through word on mouth.

Major marketing is done through advertisement. This includes giving advertisement innewspapers and magazines. An effective marketing campaign plays a vital role in the success

of business.

6.2 COMPETITIVE ENVIRONMENT

For a newly established outlet it is imperative to face a competitive environment in themarket as competition enhances a ability to strive for continuous improvement. Some big

manufacturer of footwear have outlet chain world wide, some of which are listed below:

6.3 MAJOR PLAYERS FOOTWEAR OUTLET

Table 2: Key Footwear Outlet

Key Players Areas of Operations

Bata Pakistan Limited International

Service (Pvt.) Ltd Nation wide

Hush Puppies Nation wide

English Shoes Nation wide

Starlet (Pvt.) Ltd Nation wide

Borjan (Pvt.) Ltd Lahore & Surroundings

Stylo Shoes Lahore & Surroundings

Elegant Shoes Lahore & Surroundings

Milli Shoes National wide

Reboc Lahore

Ehsan Chappal Store Lahore & Surroundings

Dulhosie Shoes Lahore

6.4 TARGET CUSTOMERSThe target customer for the proposed project would be the Men, Women and children of

upper middle class and upper class.

6.5 TRADE STATISTICS

Outlet for footwear falls under retail sector. This sector has shown a significant growth over

the last few years. In 2002-2003 this sector showed a growth of 7.30%. This sectors


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contribution towards GDP in the year 2002-2003 is 15.50%. The following table shows the

contribution of retail and wholesale sector towards GDP for the last 5 years at constant factor

cost.

Table 3: Contribution of Retail and Wholesale sector towards GDP

Year Total GDP Wholesale &

Retail trade

Share % age Growth %age

1998-1999 625,233 94,891 15.18 2.97

1999-2000 649,656 96,713 14.89 1.92

2000-2001 663,206 101,911 15.30 5.40

2001-2002 686,382 104,237 15.20 2.30

2002-2003 721,251 111,870 15.50 7.30

2003-2004

2004-2005

7 PROJECT PROFILE

7.1 LAND REQUIREMENT

For the Purpose of this study it is recommended to start project in a rented shop. The

approximately area required is 30*30 feet. This space should be available in Lahore at around

Rs.60, 000 per month.

7.1.1 Recommended ModeOne recommendation is to acquire shop on rent.

7.2 UTILITIES REQUIREMENTS

Telephone-2 lines, one for fax, one for telephone usage

Electricity 3-phase commercial connection

Internet facility

7.3 TIME SCHEDULE

Time required for establishing a set up is six to eight weeks.

7.4 SUITABLE LOCATION

Big cities are suitable location for such type of outlets. It is assumed in this pre-feasibility

that a single new outlet will be opened every year in a new city.


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7.5 FURNITURE, FIXTURES & OFFICE EQUIPMENT

Furniture & Fixtures sq/ft Rate PKR

Lahore Branch

Shoe Racks 1000 500 500,000

Sofa and other sitting arrangements 500 250 125,000

Table & Chair 3 10,000 30,000

Interior Designing 1000 350 350,000

Store & office on roof

Head Office

Table & Chair 7 15,000 105,000

Interior Designing 1000 350 350,000

Warehouse

Table & Chair 4 10,000 40,000

1,500,000

Office Equipment Qty Rate PKR

Main Branch Lahore

Air-conditioning 4 25,000 100,000

Telephone Exchange(Including

Telephone Sets)

1 40,000 40,000

Fax Machines 1 18,000 18,000

Computers

Standard 1 25,000 25,000

Printers

Laser Printer 1 18,000 18,000

Dot Matrix 1 6,000 6,000

Head Office


Branches Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10

Lahore 1

Gujranwala - 1 - - - - - - - -

Rawalpindi - - 1 - - - - - - -

Islamabad - - - 1 - - - - - -

Faisalabad - - - - 1 - - - - -

Sialkot - - - - - 1 - - - -Multan - - - - - - 1 - - -

NWFP - - - - - - - 1 - -

Karachi - - - - - - - - 1 -

Balochistan - - - - - - - - - 1


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Fax Machines 1 18,000 18,000

Computers

Standard Computer 6 25,000 150,000

Printers

Laser Printer 2 18,000 36,000

Networking 1 50,000 50,000Telephone Exchange(Including

Telephone Sets)

1 40,000 40,000

Warehouse


Fax Machines 1 18,000 18,000

Computers

Standard 1 25,000 25,000

Printers

Laser Printer - 18,000 -Dot Matrix 1 6,000 6,000

700,000

Other Branches (Year 2 onwards)

Description Rs.

Fixture & Furniture 650,000

Electrical Equipment 68,000

Office Equipment 43,000

TOTAL 761,000


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7.6 HUMAN RESOURCE REQUIREMENT

Table 4: Human Resource Requirement

Lahore (Head Office & Ware House) (1st Year)

Position Reqd. Salary / Month Total

Executive Director 1 25,000 25,000

Accounts Officer 1 10,000 10,000

Accountant 1 7,500 7,500

Purchase Officer 1 8,000 8,000

Store In-charge 1 8,000 8,000

Office Assistant 2 5,000 10,000

Office Boys 1 3,000 3,000

Security Guard 2 3,500 7,000

Sweeper 1 2,000 2,000

11 80,500Other Benefits 10% 8,050

Gross Monthly wages and salaries 88,550

Gross wages and salaries per annum 1,062,600

For Lahore Branch (1st

Year)


Branch Manager 1 15,000 15,000

Salesmen 3 6,000 18,000

Helper 2 4,000 8,0006 41,000

Other Benefits 10% 4,100


Gross wages and salaries per annum 541,200

For Other Branches (2nd year onwards)


Branch Manager 1 10,000 10,000

Salesmen 2 6,000 12,000Helper 1 4,000 4,000

4 26,000

Other Benefits 10% 2,600


Gross wages and salaries per annum 343,200


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8 FINANCIAL PROJECTIONS

8.1 Project Summary

PROJECT COST

Furniture & Fixture 1,500,000Office Equipment 700,000Vehicles 1,400,000

Security deposit 960,000

Pre-operating Expenses 110,000Total Fixed Cost 4,670,000Initial Working Capital 1,338,688

Total Project Cost 6,008,688

FINANCIAL PLAN

Capital 50% 3,004,344Long term loan 1,425,131Short Term loan 1,079,213Other Liabilities/Criditors 500,000

Total Funds 6,008,688


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8.2 Income Statement

FOR THE YEAR 1 2 3 4 5 6 7 8 9 10

Revenue 6,709,500 15,408,846 27,269,363 42,984,548 63,369,811 87,408,113 115,626,210 148,619,677 187,061,407 231,711,119

Less: Cost of Services 4,948,730 12,297,600 19,764,194 29,347,193 41,424,560 55,221,125 71,179,093 89,481,628 110,466,125 134,494,920

Gross Profit / ( Loss ) 1,760,770 3,111,246 7,505,169 13,637,355 21,945,251 32,186,988 44,447,117 59,138,049 76,595,282 97,216,199

Operating Expenses

Administration & SellingExpenses

2,965,570 3,652,327 4,537,000 5,580,304 6,559,118 7,626,113 8,837,536 10,184,981 12,163,541 14,177,963

Financial Charges 423,095 523,508 659,123 827,826 1,025,911 1,284,136 1,617,522 2,022,749 2,481,483 222,300

3,388,665 4,175,835 5,196,123 6,408,130 7,585,030 8,910,249 10,455,057 12,207,730 14,645,024 14,400,263

Profit Before Taxation (1,627,895) (1,064,589) 2,309,046 7,229,225 14,360,221 23,276,739 33,992,059 46,930,319 61,950,258 82,815,937

Income tax 33,548 77,044 461,809 1,445,845 2,872,044 4,655,348 6,798,412 9,386,064 12,390,052 16,563,187

Net Profit After Tax (1,661,443) (1,141,633) 1,847,237 5,783,380 11,488,177 18,621,391 27,193,647 37,544,256 49,560,206 66,252,749

Balance brought forward - (1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218

(1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218 215,487,967

Retained Earning (1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218 215,487,967


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8.3 Balance Sheet

CAPITAL ANDLIABILITIES

0 1 2 3 4 5 6 7 8 9 10

Paid up Capital 3,004,344 3,004,344 3,803,394 4,642,397 5,523,349 6,448,349 7,419,600 8,439,412 9,510,216 10,634,559 11,815,1

Retained Earning (1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218 215,487,9

Total Equity 3,004,344 1,342,901 1,000,318 3,686,557 10,350,890 22,764,067 42,356,708 70,570,169 109,185,228 159,869,777 227,303,0

Long Term Loan 1,425,131 1,213,487 970,234 690,654 369,321 0 - - - -

Current Liabilities

Creditors And OtherLiabilities

500,000 487,000 600,000 746,000 917,000 1,078,000 1,254,000 1,453,000 1,674,000 1,999,000 2,331,0

Short Term Loan 1,079,213 1,821,663 2,837,202 4,159,841 5,778,736 7,671,608 9,877,966 12,442,476 15,559,606 19,088,334 1,710,0

Tax payable 33,548 77,044 4 61,809 1,445,845 2,872,044 4,655,348 6,798,412 9,386,064 12,390,052 16,563,1

Total Current Liabilities 1,579,213 2,342,211 3,514,246 5,367,650 8,141,581 11,621,653 15,787,314 20,693,888 26,619,669 33,477,385 20,604,1

Total Capital AndLiabilities

6,008,688 4,898,599 5,484,799 9,744,862 18,861,792 34,385,719 58,144,022 91,264,056 135,804,897 193,347,163 247,907,2

ASSETS 0 1 2 3 4 5 6 7 8 9 10

Fixed Assets 3,600,000 3,600,000 4,399,050 5,238,053 6,119,005 7,044,005 8,015,256 9,035,068 10,105,872 11,230,215 12,410,7

Less Depreciation 616,400 1,192,940 1,755,572 2,324,753 2,859,721 3,448,923 4,100,442 4,822,085 5,621,705 6,325,8

Net Fixed Assets 3,600,000 2,983,600 3,206,110 3,482,481 3,794,252 4,184,284 4,566,332 4,934,626 5,283,787 5,608,510 6,084,8

Pre-operating Expenses 110,000 88,000 66,000 44,000 22,000 - - - - -

Current Assets

Inventory 838,688 1,926,106 3,408,670 5,373,068 7,921,226 10,926,014 14,453,276 18,577,460 23,382,676 28,963,890

Security deposit 960,000 1,110,000 1,320,000 1,560,000 1,710,000 1,860,000 2,010,000 2,160,000 2,550,000 2,850,000 2,850,0

Cash And Bank Balances 500000 (1,209,107) (2,515,982) (714,687) 5,414,313 17,415,421 37,114,413 65,591,970 104,588,434 155,924,762 238,972,3

Total Current Assets 2,298,688 1,826,998 2,212,689 6,218,381 15,045,539 30,201,435 53,577,689 86,329,430 130,521,109 187,738,652 241,822,3

Total Assets 6,008,688 4,898,598 5,484,799 9,744,862 18,861,791 34,385,719 58,144,022 91,264,056 135,804,897 193,347,162 247,907,2


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8.4 Cash-Flow Statement

FOR THE YEAR 0 1 2 3 4 5 6 7 8 9

Net Profit Before Tax (1,627,895) (1,064,589) 2,309,046 7,229,225 14,360,221 23,276,739 33,992,059 46,930,319 61,950,258 82,8

Add Depreciation 616,400 576,540 562,632 569,181 534,968 589,202 651,519 721,642 799,621 70

Pre-operating Expenses 22,000 22,000 22,000 22,000 22,000 - - - -

(989,495) (466,049) 2,893,678 7,820,406 14,917,190 23,865,941 34,643,578 47,651,962 62,749,878 83,5

(Inc)/Dec in currentassets

Inventor y (838,688) (1,087,418) (1,482,565) (1,964,398) (2,548,158) (3,004,788) (3,527,262) (4,124,183) (4,805,216) (5,581,214) 28,9

Security deposit (960,000) (150,000) (210,000) (240,000) (150,000) (150,000) (150,000) (150,000) (390,000) (300,000)

Inc/(Dec) in current

liabilities

Creditors & OtherLiabilities

500,000 (13,000) 113,000 146,000 171,000 161,000 176,000 199,000 221,000 325,000 33

Change in working capital (1,298,688) (1,250,418) (1,579,565) (2,058,398) (2,527,158) (2,993,788) (3,501,262) (4,075,183) (4,974,216) (5,556,214) 29,2

Net Inflow/Outflow from

Operating Activities

(1,298,688) (2,239,914) (2,045,613) 835,280 5,293,248 11,923,402 20,364,679 30,568,395 42,677,745 57,193,664 112,

Capital Expenditure (4,210,000) - - - - - - - - -

Cash-flow from

Financing Activities

Addition to long term loan 1,425,131

Repay long term loans (211,645) (243,252) (279,580) (321,333) (369,321) - - - - Incr in short term Loan 1,079,213 742,451 1,015,539 1,322,639 1,618,895 1,892,873 2,206,357 2,564,510 3,117,130 3,528,728 (17,3

Tax paid - (33,548) (77,044) (461,809) (1,445,845) (2,872,044) (4,655,348) (6,798,412) (9,386,064) (12,3

Owners Investment 3,004,344 - - - - - - - -

Net Inc/(Dec) in Cash (1,709,107) (1,306,874) 1,801,294 6,129,000 12,001,108 19,698,992 28,477,557 38,996,463 51,336,329 83,0

Cash in beginning of year 500,000 500,000 (1,209,107) (2,515,982) (714,687) 5,414,313 17,415,421 37,114,413 65,591,970 104,588,434 155,

Cash balance (end ofyear)

500,000 (1,209,107) (2,515,982) (714,687) 5,414,313 17,415,421 37,114,413 65,591,970 104,588,434 155,924,762 238,


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9 KEY ASSUMPTIONS

Capacity Utilization Assumptions

Starting Capacity Utilization 50%

Annual Growth Rate in Capacity Utilization 10%

Maximum Capacity Utilization for the Project 90%

Financial Projections

Debt 50%

Equity 50%

Interest on Long term Loan 14%

Debt tenure (Years) 5 Years

No. of installments per year 12

Amortization (years) 5

Income tax rate 20%

Operational Assumptions

No. of working days in a month 25

Working days in a year 300

Sales per annum (60 pairs per day) @ 100% 18,000

Product Mix

Ratio

Imported 60.0%

Branded 60 % 50%

Non-Branded 50%

Local 40%

Branded 60%

Non-Branded 40%

Men 35%

Ladies 45%

Children 20%

Cash Flow Related Assumptions

Sales 100% cash based

Creditors 60

Inventory 45

Cash in Bank 45


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Depreciation Assumptions

Depreciation Method WDV

Furniture and Fixture 10%

Vehicle 20%

Office equipment 30%

Price Assumption( Average basis)

Imported

Branded

Men 1,500

Ladies 900

Children 500

Non-Branded

Men 1,000

Ladies 500

Children 300Local

Branded

Men 600

Ladies 650

Children 350

Non-Branded

Men 500

Ladies 400

Children 250

Cost Assumption

Rupees

Imported

Branded

Men 750

Ladies 450

Children 250

Non-Branded

Men 500

Ladies 250

Children 150

Local

Branded

Men 300

Ladies 325


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Children 175

Non-Branded

Men 250

Ladies 200

Children 125

Furniture & Fixtures

Interior Designing of store includes:

Walls

Fall ceiling

Flooring

Lighting

Space Assumptions

Outlets RentWarehouse Rent

Head office Rent

Outlets Rents

Lahore main branch 60,000

Lahore Outlet 35,000

Gujranwala 25,000

Rawalpindi 35,000

Islamabad 40,000

Faisalabad 25,000

Sialkot 25,000

Multan 25,000

NWFP 25,000

Karachi 65,000

Head office 40,000

Warehouse 25,000

254 Services Feasibility

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