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Pre-Feasibility Study
Prime Ministers Small Business Loan
Scheme
(Salt Products 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, Egerton Road,
Lahore
Tel 92 42 111 111 456, Fax 92 42 36304926-7
REGIONAL OFFICEPUNJAB
REGIONAL OFFICESINDH
REGIONAL OFFICEKPK
REGIONAL OFFICEBALOCHISTAN
3rd Floor, Building No. 3,
Aiwan e Iqbal, Egerton Road
Lahore,
Tel: (042) 111-111-456Fax: (042)6304926-7
5TH Floor, Bahria
Complex II, M.T. Khan Road,
Karachi.Tel: (021) 111-111-456
Fax: (021) 5610572
Ground Floor
State Life Building
The Mall, Peshawar.Tel: (091) 9213046-47
Fax: (091) 286908
Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.Tel: (081) 831623, 831702
Fax: (081) 831922
September 2013
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected] -
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Table of Contents
1.DISCLAIMER .......................................................................................................................................... 22.PURPOSE OF THE DOCUMENT ......................................................................................................... 33.INTRODUCTION TO SMEDA .............................................................................................................. 34.INTRODUCTION TO SCHEME ........................................................................................................... 45.EXECUTIVE SUMMARY ...................................................................................................................... 46.BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 57.CRITICAL FACTORS ............................................................................................................................ 58.INSTALLED & OPERATIONAL CAPACITIES ................................................................................. 6 9.GEOGRAPHICAL POTENTIAL FOR INVESTMENT ..................................................................... 610. POTENTIAL TARGET MARKETS ............................................................................................... 611.
PROJECT COST SUMMARY ......................................................................................................... 6
11.1. PROJECT ECONOMICS ................................................................................................................... 611.2. PROJECT FINANCING .................................................................................................................... 711.3. PROJECT COST ............................................................................................................................. 711.4. SPACE REQUIREMENT .................................................................................................................. 811.5. MACHINERY AND EQUIPMENT...................................................................................................... 811.6. OFFICE EQUIPMENT...................................................................................................................... 911.7. RAW MATERIAL REQUIREMENTS ................................................................................................. 911.8. HUMAN RESOURCE REQUIREMENT .............................................................................................1011.9. REVENUE GENERATION...............................................................................................................1011.10. OTHERCOSTS .............................................................................................................................1012. ANNEXURE ..................................................................................................................................... 1112.1. INCOME STATEMENT...................................................................................................................1112.2. STATEMENT OF CASH FLOW........................................................................................................1212.3. BALANCE SHEET .........................................................................................................................1313. USEFUL PROJECT MANAGEMENT TIPS................................................................................ 1414. USEFUL LINKS............................................................................................................................... 1515. KEY ASSUMPTIONS ..................................................................................................................... 16
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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the said matter. Although, the material included
in this document is based on data/information gathered from various reliable
sources; however, it is based upon certain assumptions which may differ fromcase 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, 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, 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 contained information does not preclude any further
professional advice. 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, including taking professional advice from a
qualified consultant/technical expert before taking any decision to act upon the
information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
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2. PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential
entrepreneurs in project identification for investment. 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 conceptdevelopment, start-up, and production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in Salt Products
Manufacturing Unit by providing them with a general understanding of the
business with the intention of supporting potential investors in crucial investment
decisions.
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 existingenterprises by trial and error, and certain industrial norms that become a guiding
source regarding various aspects of business set-up and its successful
management.
Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form basis of any Investment Decision.
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 theeconomy through development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the
national income, through development of the SME sector, by helping increase
the number, scale and competitiveness of SMEs" , SMEDA has carried out
sectoral research to identify policy, access to finance, business development
services, strategic initiatives and institutional collaboration and networking
initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment
has been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business
development services is also offered to the SMEs by SMEDA. 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.
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4. INTRODUCTION TO SCHEME
Prime Ministers Small Business Loans Scheme, for young entrepreneurs, with
an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand
(100,000) beneficiaries, through designated financial institutions, initially throughNational Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL).
Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will
be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh,
Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and
Federally Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
This particular pre feasibility is regarding Salt Products Manufacturing Unit. The
salt products manufacturing project entails producing salt rock crystal products
ranging from lamps, tiles, candle stands, salt soups and various decorative
shapes/pieces. Salt products are known for their therapeutic/healing affects on
body and mind. There is an increasing trend and preference for organic quality
products for their natural curative properties. Salt products are equally sought for
decorative purposes due to their distinctive colors and composition. There is
growing demand of salt products in the Western countries due to its healing
properties for a number of ailments.
Pakistani salt products are well known all over the world for their distinctive
composition and craftsmanship. The country holds one of the largest reserves of
salt deposit in the world. Growing international demand for salt products,
availability of cheap and skilled labor coupled with abundant raw material offer
new startups a very promising opportunity to venture into salt products
manufacturing.
Salt Products manufacturing business venture entails a total investment of about
Rs. 1.55 million. This includes a capital investment of Rs.0.99 million and a sum
of Rs.0.55 million as initial working capital. The project is financed through 90%
debt and 10% equity. The Net Present Value (NPV) of the project is around Rs.
5.96 million with an Internal Rate of Return (IRR) of 64% and a payback period of
2.35 years. The project will generate employment opportunity for 11 personsincluding owner manager.
Higher return on investment and a steady growth of business is closely
associated with the entrepreneur having some prior experience or education in
the related field of business. This pre feasibility encompasses essential
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information regarding various aspects of starting a salt products manufacturing
unit business in Pakistan.
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT
The proposed project provides information on salt product manufacturing in
Pakistan. As defined in the executive summary, there are a number of factors for
which salt products are sought worldwide however, therapeutic and decorative
are two distinct reasons salt products are bought all over the world
The proposed project provides information on key aspects of starting salt product
manufacturing.
This prefeasibility details information about investment opportunities in the area
of salt products i.e. salt lamps, candle stand and salt soap. The unit is also
capable of manufacturing other salt products like salt spa products, salt inhalers,
salt bricks, tiles and blocks etc. Salt product manufacturing unit will primarily
focus on indirect export (middleman / traders).
Salt product manufacturing unit requires an investment estimated at Rs.1.55
million. This pre-feasibility is based on a unit with 2 lathe machines (5ft capacity),
1 cutter (24 length), grinder, drill and blowers with a capacity of manufacturing
400 salt products per 8 hours shift. Total employment required for this unit would
be 11 persons including owner manager. Total area required for salt products
manufacturing would be approximately 1.5 kanals that would be acquired on rent.
Estimated rent for such an area is Rs. 30,000/- per month.
7. CRITICAL FACTORS Awareness/knowledge of international markets and their demand trends
for salt products.
High return on investment and a steady growth of business is closely
associated with continuous training and capacity building of the
entrepreneur. Prior experience/education in the related field of business
can be a big advantage.
Strict management/supervision controls to minimize wastage.
Ensuring availability of skilled labor and quality raw material.
Ventilation and adequate safety measures are to be ensured during theproduction process. Workers must be provided with safety masks to
protect them from salt dust. Salt raw material and products should be
protected from water.
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8. INSTALLED & OPERATIONAL CAPACITIES
This pre-feasibility is based on 2 lathe and 1 cutting machines with a capacity of
manufacturing 400 salt products per 8 hours shift. The total employment required
for this unit would be 11 persons. Total number of salt products produced in year
1 would be 60,000 reaching 50% of the total installed capacity, while maximumcapacity (95%) will be achieved with production reaching at 114,000 pieces in
year 10 of the project.
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT
The said project can be started in any adjoining industrial areas of Khewra,
district Jhelum, Warcha, District Mianwali, Kalabagh, District Mianwali. These
areas are preferred because of their proximity to raw material and availability of
skilled labor.
10. POTENTIAL TARGET MARKETSSalt products manufactured in this unit will be primarily exported to European
countries such as UK, Germany, France, Italy, Spain. In addition to these
countries, Korea, Japan and Australia are also potential markets of salt products.
11. PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial
viability of Salt Products Manufacturing Unit under the Prime Ministers Small
Business Loan Scheme. Various cost 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
attached as appendix
11.1. Project Economics
The installed production capacity of the project is 120,000 salt products per year.
However during the first year of operations it will operate at 50% of the installed
capacity producing 60,000 salt products.
The following table shows internal rate of return, payback period and net present
value;
Table 1: Project Economics
Description Details
Internal Rate of Return (IRR) 64%
Payback Period (yrs) 2.35
Net Present Value (NPV) 5,958,870
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Returns on the project and its profitability are highly dependent on acquiring and
maintaining regular orders, procurement of salt and timely deliveries. Skilled
labor constitutes an important part of the whole operations.
11.2. Project Financing
Following table provides details of the equity required and variables related to
bank loan;
Table 2: Project Financing
Description Details
Total Equity (10%) Rs.155,290
Bank Loan (90%) Rs.1,397,610
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 7
11.3. Project Cost
Following requirements have been identified for operations of the proposed
business. Rented premises for the unit has been recommended.
Table 3: Capital Investment for the Project
Capital Investment Amount (Rs.)
Machinery 849,000
Furniture & Office equipment 117,000
Pre operational expenses 32,000
Total Capital Costs 998,000
Initial Working Capital 554,900
Total Project Cost 1,552,900
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11.4. Space Requirement
The area has been calculated on the basis of space requirement for production,
management and storage. However, the units operating in the industry do not
follow any set pattern. Following table shows calculations for project space
requirement.Table 4: Space Requirement
Space Requirement Sqft
Management building 150
Production area 1,200
Store 4,500
Open area 900
Total Area 6,750
Premises will be obtained on rent @ Rs 30,000 per month.
11.5. Machinery and Equipment
Following table provides list of machinery and equipment required for an average
salt product manufacturing unit.
Table 5: Machinery & Equipment
Description Quantity Cost
Rs/unit
Total
Rs.
Cutter 24 1 60,000 60,000Lathe machine 5 2 300,000 600,000
Grinder 4 10,000 40,000
Drill machine 5 with special bit 1 20,000 20,000
Hand drill 4 3,000 3,000
Blower 2 8,500 8,500
Electrification, installation, tools, etc 1 100,000 100,000
Total 15 849,000
Following is a brief description of the process flow; blocks of salt are cut into
small pieces by cutters. Lathe machines are used to shape and size salt pieces
into lamps and candle stands etc. Finishing operations are carried out on a
grinder and drill machine. Natural profile products (natural shape) are made on
grinders and hand drills.
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11.6. Office Equipment
Following are details of necessary office equipment.
Table 6: Office Equipment Details
Quantity Cost Amount
Computer desktop (used) 1 20,000 20,000
UPS 1 7,500 7,500
Computer printer 1 10,000 10,000
Telephone set 1 1,000 1,000
Total 38,500
11.7. Raw Material Requirements
Salt mined from Khewra, Kalabagh and Warcha mines will be primarily used.
Raw materials requirements have been calculated on the basis of 4 product
categories which the unit will be producing.
Table 7: Cost of Materials
Unit Rate
(Rs)
Quantity
(Kg)
Cost
Rs./Unit
Salt lamp (24 kg)
Salt Kg 5 3.90 19.50
Candle stand (12 kg)
Salt Kg 5 1.95 9.75
Salt soap (0.40.6 kg)Salt Kg 5 0.65 3.25
Natural profile (34 kg)
Salt Kg 5 4.55 22.75
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11.8. Human Resource Requirement
Following table provides details of human resource required for this project:
Table 8: Human Resource Requirement
Description No. of
Employees
Salary per
month
Owner Manager 1 20,000
Accountant 1 12,000
Machinist 3 12,000
Helper 6 10,000
Total Staff 11
The owner will focus on acquiring orders, purchase of salt and overall
management of the unit. The unit is capable of producing approximately 400
products in a 8 hour shift. Salaries of all employees are estimated to increase at
10% annually.
11.9. Revenue Generation
Following table provides details of the revenue generated by the project in the
first year;
Product Unit
Sales
Price
(Rs./Unit)
First Year
Production
First Year
Sales
Revenue
(Rs)
Salt lamp (24 kg) No. 78.00 12,000 936,000
Candle stand (12 kg) No. 39.00 12,000 468,000
Salt Soap (0.40.6 kg) No 13.00 12,000 156,000
Natural Profile (34 kg) No 91.00 24,000 2,184,000
Total Sales Revenue 3,744,000
11.10. Other Costs
Other essential costs to be borne by the company are electricity and
communication expenses.
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12. ANNEXURE
12.1. Income Statement
Income StatementRs. in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 3,744,000 4,530,240 5,436,288 6,478,243 7,674,227 9,044,624 10,612,359 12,403,195 14,446,074 16,773,497
Cost of goods sold 2,419,361 2,789,697 3,212,016 3,693,370 4,241,761 4,866,275 5,577,221 6,386,309 7,306,837 8,353,908Gross Profit 1,324,639 1,740,543 2,224,272 2,784,873 3,432,465 4,178,350 5,035,138 6,016,885 7,139,237 8,419,589
General administration & selling expenses
Administration expense 240,000 263,367 289,008 317,147 348,025 381,909 419,092 459,895 504,671 553,807
Rental expense 360,000 396,000 435,600 479,160 527,076 579,784 637,762 701,538 771,692 848,861
Utilities expense 22,882 25,170 27,687 30,456 33,502 36,852 40,537 44,591 49,050 53,955
Travelling & Comm. expense (phone, fax, etc. ) 93, 600 91,922 110,171 131,151 155,225 182,802 214,343 250,363 291,445 338,239
Office expenses (stationary, etc.) 2,400 2,634 2,890 3,171 3,480 3,819 4,191 4,599 5,047 5,538
Promotional expense 37,440 45,302 54,363 64,782 76,742 90,446 106,124 124,032 144,461 167,735
Depreciation expense 100,450 100,450 100,450 100,450 100,450 102,577 102,577 102,577 102,577 102,577
Amortization expense 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Subtotal 859,972 928,045 1,023,370 1,129,517 1,247,700 1,381,389 1,527,826 1,690,796 1,872,143 2,073,913
Operating Income 464,667 812,498 1,200,902 1,655,356 2,184,765 2,796,960 3,507,312 4,326,089 5,267,094 6,345,676
Earnings Before Interest & Taxes 464,667 812,498 1,200,902 1,655,356 2,200,165 2,796,960 3,507,312 4,326,089 5,267,094 6,345,676
Interest expense 106,200 93,318 79,368 64,259 47,896 30,175 10,984 - - -
Earnings Before Tax 358,467 719,179 1,121,535 1,591,097 2,152,269 2,766,785 3,496,329 4,326,089 5,267,094 6,345,676
Tax - 31,918 90,730 165,719 277,954 414,196 596,582 820,326 1,102,628 1,443,486
NET PROFIT/(LOSS) AFTER TAX 358,467 687,262 1,030,805 1,425,378 1,874,316 2,352,589 2,899,747 3,505,763 4,164,466 4,902,190
Balance brought forward 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791
Total profit available for appropriation 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791 23,200,981
Balance carried forward 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791 23,200,981
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12.2. Statement of Cash Flow
Cash Flow Statement
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit - 358,467 687,262 1,030,805 1,425,378 1,874,316 2,352,589 2,899,747 3,505,763 4,164,466 4,902,190
Add: depreciation expense - 100,450 100,450 100,450 100,450 100,450 102,577 102,577 102,577 102,577 102,577
amortization expense - 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200 3,200
Deferred income tax - - 31,918 90,730 165,719 277,954 414,196 596,582 820,326 1,102,628 1,443,486Accounts receivable - (307,726) (32,311) (69,546) (80,055) (91,970) (105,468) (120,745) (138,023) (157,550) (179,601)
Equipment inventory (12,500) (4,103) (5,268) (6,739) (8,594) (10,929) (13,862) (17,542) (22,153) (27,922) 129,613
Raw material inventory (62,400) (24,430) (32,995) (44,385) (59,495) (79,495) (105,918) (140,762) (186,635) (246,937) 983,451
Pre-paid building rent (180,000) (18,000) (19,800) (21,780) (23,958) (26,354) (28,989) (31,888) (35,077) (38,585) 424,431
Accounts payable - 82,375 19,337 23,066 27,534 32,905 39,380 47,213 56,723 68,307 (38,706)
Cash provided by operations (254,900) 190,233 751,792 1,105,800 1,550,180 2,080,077 2,657,706 3,338,382 4,106,700 4,970,184 7,770,641
Financing activities
Change in long term debt 1,397,610 (155,201) (168,083) (182,034) (197,143) (213,505) (231,226) (250,418) - - -
Issuance of shares 155,290 - - - - 49,137 - - - - -
Cash provided by / (used for) financing 1,552,900 (155,201) (168,083) (182,034) (197,143) (164,368) (231,226) (250,418) - - -
Investing activities
Capital expenditure (998,000) - - - - (49,137) - - - - -
Cash (used for) / provided by investing a (998,000) - - - - (49,137) - - - - -
NET CASH 300,000 35,032 583,709 923,766 1,353,037 1,866,571 2,426,480 3,087,964 4,106,700 4,970,184 7,770,641
Cash balance brought forward 300,000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444
Cash available for appropriation 300, 000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444 27,424,085
Cash carried forward 300,000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444 27,424,085
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12.3. Balance Sheet
Balance Sheet
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 300,000 335,032 918,741 1,842,507 3,195,544 5,062,116 7,488,595 10,576,560 14,683,260 19,653,444 27,424,085
Accounts receivable - 307,726 340,037 409,583 489,638 581,608 687,076 807,821 945,845 1,103,395 1,282,996
Equipment spare part inventory 12,500 16,603 21,871 28,610 37,204 48,132 61,994 79,537 101,690 129,613 -Raw material inventory 62,400 86,830 119,825 164,210 223,705 303,199 409,117 549,879 736,514 983,451 -
Pre-paid building rent 180,000 198,000 217,800 239,580 263,538 289,892 318,881 350,769 385,846 424,431 -
Total Current Assets 554,900 944,191 1,618,274 2,684,490 4,209,629 6,284,948 8,965,664 12,364,566 16,853,155 22,294,333 28,707,081
Fixed assets
Machinery & equipment 849,000 764,100 679,200 594,300 509,400 424,500 339,600 254,700 169,800 84,900 -
Furniture & fixtures 78,500 70,650 62,800 54,950 47,100 39,250 31,400 23,550 15,700 7,850 -
Office equipment 38,500 30,800 23,100 15,400 7,700 49,137 39,309 29,482 19,655 9,827 -
Total Fixed Assets 966,000 865,550 765,100 664,650 564,200 512,887 410,309 307,732 205,155 102,577 -
Intangible assets
Pre-operation costs 32,000 28,800 25,600 22,400 19,200 16,000 12,800 9,600 6,400 3,200 -
Total Intangible Assets 32,000 28,800 25,600 22,400 19,200 16,000 12,800 9,600 6,400 3,200 -
TOTAL ASSETS 1,552,900 1,838,541 2,408,974 3,371,540 4,793,029 6,813,834 9,388,773 12,681,898 17,064,710 22,400,111 28,707,081
Liabilities & Shareholders' Equity
Current liabilities
Accounts payable - 82,375 101,712 124,778 152,312 185,217 224,597 271,810 328,533 396,840 358,134
Total Current Liabilities - 82,375 101,712 124,778 152,312 185,217 224,597 271,810 328,533 396,840 358,134
Other liabilitiesDeferred tax - - 31,918 122,648 288,367 566,321 980,517 1,577,099 2,397,425 3,500,053 4,943,539
Long term debt 1,397,610 1,242,409 1,074,326 892,292 695,149 481,644 250,418 - - - -
Total Long Term Liabilities 1,397,610 1,242,409 1,106,244 1,014,940 983,516 1,047,965 1,230,935 1,577,099 2,397,425 3,500,053 4,943,539
Shareholders' equity
Paid-up capital 155,290 155,290 155,290 155,290 155,290 204,427 204,427 204,427 204,427 204,427 204,427
Retained earnings - 358,467 1,045,728 2,076,533 3,501,911 5,376,226 7,728,815 10,628,562 14,134,325 18,298,791 23,200,981
Total Equity 155,290 513,757 1,201,018 2,231,823 3,657,201 5,580,653 7,933,242 10,832,989 14,338,752 18,503,218 23,405,408
TOTAL CAPITAL AND LIABILITI 1,552,900 1,838,541 2,408,974 3,371,540 4,793,029 6,813,834 9,388,773 12,681,898 17,064,710 22,400,111 28,707,081
September 2013
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13. USEFUL PROJECT MANAGEMENT TIPS
Technology
Required spare parts & consumables: The preventive maintenance of
machines should be carried out. Availability of the machinery spare parts and
consumables must be ensured.
Energy Requirement: The generator has not been recommended for the
project as it will increase the cost of production.
Machinery Suppl iers: Multiple machinery suppliers should be contacted and
purchase should be made after thorough inspection. The availability of spare
parts should also be considered. Such machinery is easily available in local
markets of Lahore, Gurjanwala, Faisalabad & Peshawar.
Quality Assurance Equipment & Standards: The finished products should
be according to the design specifications of buyers. Compliance should beensured for dimensions, weight and especially for the electrical fitting fixtures
as the buyers install accessories before exporting the products.
Marketing
Sales & Distr ibution Network: The owner should establish long term contacts
with the buyers to ensure continuous flow of orders. Moreover he should have
links with the suppliers of salt from major salt mines of the country.
Human Resources
Adequacy & Competencies: Skilled and experienced staff is necessary forthe unit. Staff having requisite shop floor experience should be preferred.
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14. USEFUL LINKS
Prime Ministers Office,www.pmo.gov.pk
Small and Medium Enterprise Development Authority,www.smeda.org.pk
National Bank of Pakistan (NBP),www.nbp.com.pk
First Women Bank Limited (FWBL),www.fwbl.com.pk
Government of Pakistan, www.pakistan.gov.pk
Ministry of Industries & Production, www.moip.gov.pk
Ministry of Education, Training & Standards in Higher Education,
http://moptt.gov.pk
Government of Punjab, www.punjab.gov.pk
Government of Sindh, www.sindh.gov.pk
Government of Khyber Pakhtunkhwa, www.khyberpakhtunkhwa.gov.pk
Government of Balochistan, www.balochistan.gov.pk
Government of Gilgit Baltistan, www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir, www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP), www.tdap.gov.pk
Security Commission of Pakistan (SECP), www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
www.fpcci.com.pk
State Bank of Pakistan (SBP), www.sbp.org.pk
Punjab Mineral Development Corporation (PMDC) www.punjmin.com
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http://www.pmo.gov.pk/http://www.pmo.gov.pk/http://www.pmo.gov.pk/http://www.smeda.org.pk/http://www.smeda.org.pk/http://www.smeda.org.pk/http://www.nbp.com.pk/http://www.nbp.com.pk/http://www.nbp.com.pk/http://www.fwbl.com.pk/http://www.fwbl.com.pk/http://www.fwbl.com.pk/http://www.fwbl.com.pk/http://www.nbp.com.pk/http://www.smeda.org.pk/http://www.pmo.gov.pk/ -
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15. KEY ASSUMPTIONS
Table 14-1 Machinery Assumptions
Number of Machines Installed 6
Capacity Utilization (Year 1) 50%
Maximum capacity utilization 95%
Total Production of the unit per 8 hour shift 300
Table 14-2 Operating Assumpt ions
Annual Production capacity 120,000
Hours operational per day 8
Days operational per month 25
No. of Shifts 1
Days operational per year 300
Table 14-3 Economy-Related Assumptions
Electricity & Fuel growth rate 10%
Wage growth rate 10%
Table 14-4 Cash Flow Assumpt ions
Accounts Receivable cycle (in days) 30
Accounts payable cycle (in days) 30
Raw material inventory (in day) 30
Equipment and spare part inventory (indays) 30
Table 14-5 Revenue Assumpt ions
Production capacity of the unit 120,000
Sale price growth rate 15%
Local sales 100%
Table 14-6 Expense Assumpt ions
Factory & Administrative overhead (% of
Sales)
6%
Machine maintenance (% of Sales) 4%
Machine maintenance growth rate 5%
Pre-paid building Rent (months) 6
Rent growth rate 10%
Raw material price growth rate 10%
Communication Expense (%of Sales) 0.50%
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Promotional Expense (% of Sales) 1.00%
Table 14-7 Financial Assumptions
Project life 10
Debt 90%
Equity 10%
Interest rate on long-term debt 8%
Debt tenure 7
Debt payments per year 12
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