denim jeans stitching unit new
TRANSCRIPT
Pre-Feasibility Study
DENIM JEANS STITCHING UNIT
Small and Medium Enterprises Development Authority
Government of Pakistanwww.smeda.org.pk
HEAD OFFICE6th Floor LDA Plaza Egerton Road, Lahore
Tel (042)111 111 456,Fax: (042) 36304926-7
REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICEPUNJAB SINDH KHYBER PAKTUNKHWA BALOCHISTAN
8th Floor LDA Plaza, 5TH Floor, Bahria Complex II, Ground Floor Bungalow No. 15-A ChamnEgerton Road, M.T. Khan Road, State Life Building The Mall, Housing Scheme Airport Road,
Lahore. Karachi. Peshawar. Quetta.Tel: (042) 111 111 456, Tel: (021) 111-111-456 Tel: (091)111 111 456, 9213046-7 Tel: (081) 2831623, 2831702
Fax: (042) 36370474 Fax: (021) 35610572 Fax: (091) 286908 Fax: (081) [email protected] [email protected] [email protected] [email protected]
June, 2010
Pre-Feasibility Study Garments Stitching Unit (Denim Jeans).............................................................................
1. EXECUTIVE SUMMARY 4
2. INTRODUCTION TO SMEDA..................................................................... 5
3. PURPOSE OF THE DOCUMENT................................................................ 5
4. CRUCIAL FACTORS AND STEPS IN DECISION MAKING ................. 6
4.1. STRENGTHS.................................................................................................. 6
4.2. WEAKNESSES............................................................................................... 6
4.3. OPPORTUNITIES ........................................................................................... 6
4.4. THREATS...................................................................................................... 6
5. PROJECT PROFILE...................................................................................... 6
5.1. OPPORTUNITY RATIONALE .......................................................................... 6
5.2. PROJECT BRIEF ............................................................................................ 7
5.3. PROPOSED CAPACITY................................................................................... 7
5.4. TOTAL PROJECT COST ................................................................................. 7
5.5. PROPOSED BUSINESS LEGAL STATUS .......................................................... 7
5.6. PROPOSED LOCATION .................................................................................. 8
5.7. KEY SUCCESS FACTORS............................................................................... 8
6. CURRENT INDUSTRY ANALYSIS ............................................................ 8
6.1. EXPORT MARKET......................................................................................... 8
7. MARKET ANALYSIS.................................................................................. 11
7.1. DOMESTIC MARKET................................................................................... 11
7.2. TARGET CUSTOMERS ................................................................................. 11
8. PRODUCTION PROCESS FLOW ............................................................. 11
8.1. RAW MATERIAL......................................................................................... 12
8.1.1. Packing Cost.......................................................................................... 12
9. HUMAN RESOURCE REQUIREMENTS ................................................ 13
10. MACHINERY AND EQUIPMENT DETAILS.......................................... 14
10.1. MACHINERY LIST ...................................................................................... 14
10.2. FURNITURE AND EQUIPMENT LIST ............................................................. 14
11. LAND & BUILDING .................................................................................... 151
Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)................................................................
11.1. LAND/BUILDING REQUIREMENT 15
11.2. RECOMMENDED MODE .............................................................................. 15
11.3. SUITABLE LOCATIONS ............................................................................... 16
11.4. UTILITIES REQUIREMENTS ......................................................................... 16
12. PROJECT ECONOMICS ............................................................................ 16
13. FINANCIAL ANALYSIS ............................................................................. 17
13.1. PROJECTED INCOME STATEMENT............................................................... 17
13.2. PROJECTED BALANCE SHEET ..................................................................... 18
13.3. PROJECTED CASH FLOW STATEMENT ........................................................ 19
14. KEY ASSUMPTIONS .................................................................................. 20
ANNEXURE 1: RAW MATERIAL & MACHINERY SUPPLIERS ................ 22
ANNEXURE 2: INCOME TAX DEDUCTION SLABS...................................... 24
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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.p k
DOCUMENT CONTROL
Document No. PREF-01
Revision 3
Prepared by SMEDA-Punjab
Issue Date July, 2001
Revised in June, 2010
Issued by Library Officer
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1. EXECUTIVE SUMMARY
The proposed Denim Jeans Stitching unit is a project of the Textile Sector, producing standard five pocket jeans trouser. The unit will cater to the local as well as export denim market. The jeans produced will be of export, high quality fabric. Through the use of high-tech equipment and modern techniques the company can produce jeans of latest trends without compromising on quality. The process flow includes purchase of raw material, cutting, stitching, washing, finishing, pressing and packing. Quality control checks will be taken care of through out the process.
Pakistan has become denim hub in the region in less than a decade and is considered as one of the leading supplier of quality denim fabric to the world's known brands. Pakistan's denim is second to none. There has been a phenomenal increase in the production capacity of denim mills in Pakistan and at present numerous denim mills are in operation. The denim industry is contributing substantially towards exports creating job opportunities and has invested billions in the denim sector. The denim industry is not only fully catering to the needs of the local apparel industry but is also catering to the foreign market and earning valuable foreign exchange for the country.
This particular stitching unit is proposed to have an installed capacity for producing 1000 denim jeans per day. The unit’s initial capacity utilization is kept at 70%, which eventually goes up to 90% in the fifth year. A Denim Garment Stitching Unit with an installed capacity to produce 1,000 pieces per day needs an investment estimated at Rs. 14.150 million. The project is financed through 50% debt and 50% equity. Projected IRR, Net Present Value and Payback of this project are 71.11%, Rs. 165.680 million and 3.71 years respectively. The legal business status of this project is proposed as ‘Sole Proprietorship’.
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2. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including finance, marketing, technology and human resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewellery, marine fisheries, leather and footwear, textiles, surgical instruments, transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s areas of operation.
Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way.
This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions.
3. PURPOSE OF THE DOCUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs to facilitate investment and provide an overview about Garment Stitching Unit. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document covers various aspects of the business concept development, start-up, production, marketing, and finance and business management.
This particular pre-feasibility is regarding “Garment Stitching Unit” which comes under “Textile” sector.
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4. CRUCIAL FACTORS AND STEPS IN DECISION MAKING
4.1. Strengths
• There is a “ready made” market for this product. • Relatively low labour costs • Ample available work force. • Well-situated industrial estate with all major facilities available.
4.2. Weaknesses
• The requirement of credit and/or delay of payments from customer side might cause disturbance in the cash cycles.
• Very small base of available skilled machinists. • Lack of trained technicians and line / middle management. • Uncertain investment climate
4.3. Opportunities
• WAPDA/KESC will provide “off peak hour rates” and “bulk rates” for industrial consumers to lower the electricity cost of manufacturing.
• Manufacturers-cum-exporters are allowed to import samples of each kind or quality having value up to US$ 100 at zero duty rates.
• Two special export zones focusing on textile sector particularly in dyeing, processing and finishing sectors will be established at Karachi and in one of the industrial cities of Punjab.
4.4. Threats
• Skilled operators in the denim garments are quite unorganized. Stitching expertise is not available at the best possible level. This restricts the industry to the basic garments and only limits the entry into the manufacturing of high quality garments.
• Cost of doing business may increase as the energy, raw material prices, wages and mark up rates may rise.
5. PROJECT PROFILE
5.1. Opportunity Rationale
During the last decade, the usage of denim garments, especially denim jeans, has been on a rise in the international as well as the local markets. This has led to a rise in the demand of denim garments. The competitive edge of Pakistan in this field stems from the ready availability of cotton yarn required to weave denim fabric i.e.
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NE 7/1 to NE 14/11. During the past few years, the denim fabric manufacturing capacity has also been enhanced that has provided the opportunity to industry to strengthen. The export of denim garments from Pakistan has also been on a rise.
5.2. Project Brief
The proposed project presents an investment opportunity in manufacturing of denim jeans. The project profile has been prepared for a standard five pocket jeans trouser. The proposed stitching unit will be having the potential for its own manufacturing and supply for the local market as well as for the export market. However washing will be outsourced.
5.3. Proposed Capacity
The proposed capacity of the unit is 1000 garments per day.
5.4. Total Project Cost
The cost of project has been estimated as Rs.14.150 million including machinery and office equipment.
Table 5-1 Project Investment
Capital Investment Rs. 5,981,220Working Capital Rs. 8,169,111Total Investment Rs. 14,150,331
The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity. However this composition of debt and equity can be changed as per the requirement of the investor.
The project seems to be viable with the following returns on investment.
Table 5-2 Project Returns
Internal rate of return (project) 71.11%
Net Present Value @ 20% Rs. 165,680,748Payback period – based on cash inflows 3.71 years
5.5. Proposed Business Legal Status
The proposed legal structure of the business entity is either sole proprietorship or partnership. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a Sole Proprietorship.
1 yarn count
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5.6. Proposed Location
The proposed locations for a garment manufacturing unit will be
• Lahore • Karachi • Faisalabad • Hyderabad • Sialkot • Gujranwala
5.8. Key Success Factors
The total commercial viability of this proposed stitching unit depends on the regular orders for the purchase of the finished product. This requires aggressive marketing efforts at the entrepreneur's end.
Following are other key points that are important for the successful operation of the proposed stitching unit.
• Surety of high consistent quality • Surety of on time delivery • Competitive rates • Cost efficiency • Better services to the customer. • Better communication development with customers
6. CURRENT INDUSTRY ANALYSIS
6.1. Export Market
Pakistan’s export of denim jeans is increasing over the years. Pakistan’s denim exports increased rapidly in the last years, due to a series of advantages including a falling currency, cotton fibre and yarn availability, modern equipment and strong incentives from the government. The country has progressively built a wealthy denim industry, allowing progressive denim apparel production and direct denim fabric exports to other Asian countries and to Turkey.
Turkey and Bangladesh are the major countries importing Pakistani denim products. Other major export markets are Italy, Syria and Egypt. Total Export of Pakistan in the year 2009 was USD 55.748 million, which shows approximately a 100% increase as compared to the export of USD 25.776 million in 2008
Major partners are given in the table below:
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Table 6-1: Pakistan’s Exports in the year 2008 and 20092
2008 2009
Export Partners Export Value (USD) Export Partners Export Value (USD)World 25,776,377 World 55,748,551Turkey 17,298,943 Turkey 32,421,589Bangladesh 2,470,708 Bangladesh 8,007,672Syria 2,261,119 Italy 3,120,928UAE 586,008 Syria 2,112,099Belgium 400,932 Egypt 1,848,727Iran 386,009 Colombia 881,696Italy 314,115 UAE 738,513Sri Lanka 269,393 Sri Lanka 711,244Lebanon 235,019 Peru 662,473Mexico 196,199 Greece 597,849
A comparative picture of the world’s top importers and exporters and their trade value is given in the figures below.
Figure 6-1 Top Importers
World's Top Importers
17%
Turkey
43%China
11% China, Hong Kong SAR
Colombia
11%Mexico
Others
8% 10%
2 http://comtrade.un.org
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Table 6-2: Trade Value for Top Importers
Country Trade Value (USD)
Turkey 179,156,828China 117,011,111China, Hong Kong SAR 115,373,606Colombia 102,077,109Mexico 87,067,153Others 449,304,425Total Import 1,049,990,232
Figure 6-1 Top Exporters
World's Top Importers
20%China
China, Hong Kong SAR
4% 47% Turkey
6% Pakistan
9%Italy
Others
14%
Table 6-3: Trade Value for Top Exporters
Country Trade Value (USD)
China 683,592,128China, Hong Kong SAR 211,100,320Turkey 126,434,925Pakistan 81,524,928Italy 64,217,277Others 290,755,006Total Export 1,457,624,584
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7. MARKET ANALYSIS
Major concentration of the denim garment stitching industry is in Karachi and Lahore. Other important hubs are Sialkot, Faisalabad and Gujranwala.
The average production capacity of majority of small and medium sized jeans manufacturing units is about 1,000 jeans per day. However, large size manufacturers are producing as much as 30,000 jean trousers per day.
7.1. Domestic Market
Almost all the established manufacturers are catering solely to the export market. Only the B-Class products are sold in the domestic market. The size of the manufacturers, whose primary market is domestic, is quite small.
7.2. Target Customers
In case of direct exports, the customers are retail chain stores, direct distributors and wholesalers. The export can either be through buying houses and/or through direct customers.
Table 7-1 Major Players
U. S. Apparel and Textile Pvt. Ltd. LahoreArtistic Milliners Ltd KarachiSiddiqsons Denim Mills Ltd KarachiPak Denim Ltd KarachiRAJBY Industries KarachiAli Murtaza Associates Pvt. Ltd. KarachiAzgard Nine Ltd. LahoreTalon Sports Pvt. Ltd. SialkotAl Karam Textile Mills Pvt. Ltd. KarachiMr. Denim Pvt. Ltd. LahoreAbdullah Apparels Pvt. Ltd. KarachiDigital Apparel Pvt. Ltd. KarachiJoe’s Fashion Export Pvt. Ltd. Karachi
8. PRODUCTION PROCESS FLOW
The proposed business is stitching denim jeans. The process will involve purchasing of raw material from the market i.e. denim fabric, which will be put through the process. Washing of the fabric will be outsourced as washing in house requires a plant which is expensive and will greatly increase the project cost. Therefore, it is
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recommended that the proposed project should outsource washing. Washing cost per piece is taken as Rs. 30. The production process flow is given in figure 8-1.
Figure 8-1 Process Flow Chart for Denim Garments Stitching Unit:
Denim Fabric Inspection Cutting StitchingRaw Material
Pressing Buttoning/ Riveting Threading Stone Washing (Tobe outsourced)
Final Inspection/Packing
8.1. Raw Material
The proposed business will be using the raw material listed in the Table 8-1.
Table 8-1: Raw Material
Raw Material Consumption/ Piece Rate (Rs.)Fabric (Metre) 1.30 200 / mPocket Lining (Metre) 0.2 100 / mStitching thread (Metre) 350 10 / pieceImported buttons 1 3 / unit4.5 YG Zip 1 15 / unitMain label 1 5 / unitCare and size label 1 2 / unitRewet per unit 6 9 / unitPacking cost 1 15 / piece
8.1.1. Packing Cost
Packing cost includes one poly bag and one small carton for the packing of each finished garment. Total cost of packing for one piece is taken as Rs. 15.
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9. HUMAN RESOURCE REQUIREMENTS
For a garment-stitching unit of 32 stitching machines, following manpower is required:
Table 9-1: Manpower Required
Production Staff Number Salary/Month Annual Salary
Production Manager 1 50,000 600,000Production Planning Officer 1 25,000 300,000Pattern Master 1 25,000 300,000Cutting Master 1 15,000 180,000Cutting Helper 2 8,500 204,000Final Table inspector 2 12,000 288,000Finishing Supervisor 1 15,000 180,000Rowing Inspector 1 12,000 144,000Machine Operator 40 9,000 4,320,000Helper (machine operator) 2 7,500 180,000Clippers 2 7,500 180,000Iron Presser 1 10,000 120,000Packing Staff 2 7,500 180,000Store keeper 1 10,000 120,000Total 58 7,296,000
Administration Staff Number Salary/Month Annual Salary
Chief executive 1 75,000 900,000Finance & Admin. Manager 1 50,000 600,000Accounts officer 2 15,000 360,000Marketing Manager 1 40,000 480,000Merchandiser 1 25,000 300,000Export Officer 1 25,000 300,000Purchase Officer 1 20,000 240,000Technician/Electrician 1 15,000 180,000Security Guards 2 8,500 204,000Total 11 3,564,000
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10. MACHINERY AND EQUIPMENT DETAILS
10.1. Machinery List
Following combination of stitching machines is required for manufacturing 1,000 denim jeans per day. Approximate prices for Japanese origin machinery are given below:
Table 10-1: Stitching Machinery and Equipment
Machinery Quantity Unit cost (Rs.) Total cost (Rs.)
Cutting Machine 2 108,500 217,000Lock Stitch (Single Needle) 15 28,500 427,500Lock Stitch (Double Needle) 3 133,000 399,000Safety Stitching Over lock 1 46,500 46,500Safety Stitching Over lock 1 50,000 50,000Feed Off Arm 2 40,500 81,000Bar Tracking 3 318,000 954,000Waist Belt Machine 1 136,000 136,000Eyelet Machine 1 1,055,000 1,055,000Button Stitching Machine 1 320,000 320,000Loop Making Machine 1 156,500 156,500Snap Fastener 1 50,000 50,000Total machinery cost 32 3,892,500
Other EquipmentSteam Boiler 1 138,320 138,320Other tools Lumpsum 25,000 25,000Machine Installation and wiring 32 4,000 128,000Total other equipment cost 291,320Total Cost 4,183,820
10.2. Furniture and Equipment List
Furniture and Equipment requirement for the Administration and Factory building is given in the table below:
Table 10-2: Furniture and Office Equipment
Furniture Quantity Cost/Unit (Rs.) Total Cost (Rs.)
Table 9 10,000 90,000Chairs 18 3,000 54,000Shelves 6 10,000 60,000Stools 13 800 10,400
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Machine Table 40 5,000 200,000
Lay Table 12 10,000 120,000Total 98 534,400EquipmentComputers 9 25,000 225,000Printer 1 15,000 15,000UPS 9 7,500 67,500Networking 1 25,000 25,000Air conditioner 4 40,000 160,000Tele/Fax 1 15,000 15,000Total 24 507,500Total Cost 1,041,900
11. LAND & BUILDING
11.1. Land/Building Requirement
Approximately, 4,900 square feet of total covered area is required to establish the proposed stitching unit with a management building. The allocation of the space requirement is as follows:
Table 11-1: Space Requirements
Space Requirement Required area (sq. ft)
Fabric & Accessories inventory Store 1,000Cutting Room 400Stitching Room 1,250Inspection Room 850Packing Room 750Finished Garment Store 850Total factory area 5,100Management Building 650Total Area Required (sq. ft.) 5,750
11.2. Recommended Mode
It is recommended that this project should be started in a rented building. As the initial capital cost of the project will be less. An appropriate premise is normally available in many commercial/industrial areas of under mentioned clusters.
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Table 11-2: Building Rent
Rent cost Monthly rent (Rs.) Annual rent (Rs.)
Estimated Building rent 150,000 1,800,000
11.3. Suitable Locations
The clusters of stitching industry exist predominantly in Lahore, Karachi, Faisalabad and Sialkot. Most of the garment manufactures are based in these major cities, so it is recommended that such unit should be started in these cities. Basic raw material i.e. denim cloth, is also conveniently available in these cities.
11.4. Utilities Requirements
It is assumed that the following utilities will already be available at the proposed building to be rented out:
Electricity Water Gas Telephone Fax
12. PROJECT ECONOMICS
Table 12-1: Project Costs
Project Costs Total (Rs.)
Machinery & equipment 4,183,820Furniture & fixtures/Equipment 1,041,900Pre-operating costs 755,500Total Capital Costs 5,981,220
Stocks- Raw Material 3,951,360Equipment spare part inventory 2,092Upfront for building rental 1,800,000Upfront insurance payment 261,286Cash 2,154,373Total Working Capital 8,169,111Total Investment in the Project 14,150,331
Table 12-2: Financing Plan
Equity 50% 7,075,165
Debt 50% 7,075,165Total 14,150,330
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13. FINANCIAL ANALYSIS
13.1. Projected Income Statement
PROJECTED INCOME STATEMENT
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales 107,054,171 125,510,319 148,040,625 173,022,480 201,520,300 221,672,330 243,839,563 268,223,519 295,045,871 324,550,459
Cost of goods sold
79,027,200 88,905,600 99,574,272 111,087,547 129,384,320 142,322,752 156,555,027 172,210,529 189,431,582 208,374,741Raw Material
Washing Cost (OUTSOURCED) 6,174,000 6,945,750 7,779,240 8,678,715 9,648,689 10,131,123 10,637,679 11,169,563 11,728,041 12,314,443
Freight Charges 790,272 889,056 995,743 1,110,875 1,293,843 1,423,228 1,565,550 1,722,105 1,894,316 2,083,747
Payroll (Production Staff) 7,296,000 8,025,600 8,828,160 9,710,976 10,682,074 11,750,281 12,925,309 14,217,840 15,639,624 17,203,586
Machine Maintenance 209,191 219,651 230,633 242,165 254,273 266,987 280,336 294,353 309,070 324,524
Direct Electricity 1,641,543 1,805,697 1,986,267 2,184,893 2,403,383 2,643,721 2,908,093 3,198,902 3,518,793 3,870,672
Total 95,138,206 106,791,354 119,394,315 133,015,171 153,666,581 168,538,091 184,871,994 202,813,293 222,521,427 244,171,714
Gross Profit 11,915,965 18,718,965 28,646,310 40,007,308 47,853,719 53,134,239 58,967,569 65,410,226 72,524,445 80,378,745
Operating Expenses
3,564,000 3,920,400 4,312,440 4,743,684 5,218,052 5,739,858 6,313,843 6,945,228 7,639,751 8,403,726Payroll (Admin)
Fixed electricity 882,000 970,200 1,067,220 1,173,942 1,291,336 1,420,470 1,562,517 1,718,768 1,890,645 2,079,710
Insurance expense 261,286 235,157 209,029 182,900 156,772 130,643 104,514 78,386 52,257 26,129
Office Expense (Stationary,Entertainment,etc) 712,800 784,080 862,488 948,737 1,043,610 1,147,972 1,262,769 1,389,046 1,527,950 1,680,745
Administrative & Factory Overheads 802,906 972,705 1,188,026 1,440,845 1,745,216 2,000,875 2,299,139 2,647,847 3,056,372 3,535,935
Other expenses 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477
Amortization (Pre-operational Expenses) 151,100 151,100 151,100 151,100 151,100
Depreciation 522,572 522,572 522,572 522,572 522,572 522,572 522,572 522,572 522,572 522,572
Total 6,956,664 7,622,214 8,385,475 9,243,640 10,216,505 11,059,020 12,171,648 13,418,770 14,818,162 16,390,293
Operating Profit 4,959,301 11,096,751 20,260,835 30,763,669 37,637,214 42,075,219 46,795,920 51,991,457 57,706,282 63,988,452
Non-operating Expenses
Financial Charges on Long-term Loan 1,132,026 967,419 776,475 554,979 298,044 0 0 0 0 0
Financial Charges on Short-Term Loan 0 1,013,997 678,673 0 0 0 0 0 0 0
Building Rentel 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306
Total 2,932,026 3,961,416 3,633,148 2,950,779 2,933,424 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306
Profit Before Tax 2,027,274 7,135,335 16,627,687 27,812,890 34,703,790 39,176,301 43,607,111 48,483,766 53,847,823 59,744,146
Tax 506,819 1,783,834 4,156,922 6,953,222 8,675,948 9,794,075 10,901,778 12,120,941 13,461,956 14,936,037
Profit After Tax 1,520,456 5,351,501 12,470,765 20,859,667 26,027,843 29,382,226 32,705,333 36,362,824 40,385,867 44,808,110
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
13.2. Projected Balance Sheet
PROJECTED BALANCE SHEET
Const. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Current Assets
Cash 2,154,373 2,154,373 2,154,373 6,040,009 22,300,710 43,901,477 71,166,496 101,488,037 135,173,827 172,560,094 225,474,392
Stocks and Inventory 3,951,360 4,445,280 4,978,714 5,554,377 6,469,216 7,116,138 7,827,751 8,610,526 9,471,579 10,418,737 0
Receivable 0 16,058,126 18,826,548 22,206,094 25,953,372 30,228,045 33,250,850 36,575,934 40,233,528 44,256,881 48,682,569
Equipment and spare part inventory 2,092 2,197 2,306 2,422 2,543 2,670 2,803 2,944 3,091 3,245 3,408
Pre-paid insurnace payment 261,286 235,157 209,029 182,900 156,772 130,643 104,514 78,386 52,257 26,129 0
Pre-paid building rent 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306 4,668,736
Total 8,169,111 24,875,132 28,348,969 36,381,602 57,517,993 84,277,891 115,541,224 150,263,518 188,792,742 231,509,392 278,829,105
Gross Fixed Assets 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720 5,225,720
Less: Accumulated depreciation 0 522,572 1,045,144 1,567,716 2,090,288 2,612,860 3,135,432 3,658,004 4,180,576 4,703,148 5,225,720
Net Fixed Assets 5,225,720 4,703,148 4,180,576 3,658,004 3,135,432 2,612,860 2,090,288 1,567,716 1,045,144 522,572 0
Intangible Assets
Pre-operational Expenses 755,500 604,400 453,300 302,200 151,100 0
Total 755,500 604,400 453,300 302,200 151,100 0 0 0 0 0 0
Total Assets 14,150,331 30,182,680 32,982,845 40,341,806 60,804,525 86,890,751 117,631,512 151,831,234 189,837,886 232,031,964 278,829,105
Current Liabilities
Running Finance 0 7,242,833 4,847,668 0 0 0 0 0 0 0 0
Accounts payable 8,297,856 9,335,088 10,455,299 11,664,192 13,585,354 14,943,889 16,438,278 18,082,106 19,890,316 21,879,348
Total 0 15,540,689 14,182,756 10,455,299 11,664,192 13,585,354 14,943,889 16,438,278 18,082,106 19,890,316 21,879,348
Long-term liabilities
Long-term Loan 7,075,165 6,046,370 4,852,967 3,468,620 1,862,777 0 0 0 0 0 0
Total 7,075,165 6,046,370 4,852,967 3,468,620 1,862,777 0 0 0 0 0 0
Equity
Paid-up Capital 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165 7,075,165
Retained Earnings 0 1,520,456 6,871,957 19,342,722 40,202,389 66,230,232 95,612,458 128,317,791 164,680,615 205,066,482 249,874,592
Total 7,075,165 8,595,621 13,947,122 26,417,887 47,277,555 73,305,397 102,687,623 135,392,956 171,755,780 212,141,647 256,949,757
Total Liabilities And Equity 14,150,331 30,182,680 32,982,845 40,341,806 60,804,525 86,890,751 117,631,512 151,831,234 189,837,886 232,031,964 278,829,105
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
13.3. Projected Cash Flow Statement
PROJECTED CASH FLOW STATEMENTRs `000'
Const. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 1,520,456 5,351,501 12,470,765 20,859,667 26,027,843 29,382,226 32,705,333 36,362,824 40,385,867 44,808,110
Amortization (Pre-operational Expenses) 151,100 151,100 151,100 151,100 151,100 0 0 0 0 0
Depreciation 522,572 522,572 522,572 522,572 522,572 522,572 522,572 522,572 522,572 522,572
Up-front insurance payment (261,286) 26,129 26,129 26,129 26,129 26,129 26,129 26,129 26,129 26,129 26,129
Equipment and spare part inventory (2,092) (105) (110) (115) (121) (127) (133) (140) (147) (155) (162)
Accounts receivable (16,058,126) (2,768,422) (3,379,546) (3,747,278) (4,274,673) (3,022,805) (3,325,085) (3,657,593) (4,023,353) (4,425,688)
Stocks-RM (3,951,360) (493,920) (533,434) (575,664) (914,839) (646,922) (711,614) (782,775) (861,053) (947,158) 10,418,737
Accounts payable 8,297,856 1,037,232 1,120,211 1,208,894 1,921,161 1,358,535 1,494,389 1,643,828 1,808,211 1,989,032
Cash provided by operations (4,214,738) (6,034,038) 3,786,568 10,335,451 18,106,124 23,727,082 27,554,910 30,640,422 34,036,560 37,772,113 53,338,729
Financing acivities
Long term debt principal repayment (1,028,795) (1,193,403) (1,384,347) (1,605,843) (1,862,777) 0 0 0 0 0
Add: buliding rent expense 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306
Building rent payment (1,800,000) (1,980,000) (2,178,000) (2,395,800) (2,635,380) (2,898,918) (3,188,810) (3,507,691) (3,858,460) (4,244,306) (4,668,736)
Adition to debt 7,075,165
Issuance of share 7,075,165
Running Finance Repayment (7,242,833) (4,847,668) 0 0 0 0 0 0 0
Cash provided by/ (used for) financin 12,350,331 (1,208,795) (8,634,236) (6,449,815) (1,845,423) (2,126,315) (289,892) (318,881) (350,769) (385,846) (424,431)
Total 8,135,593 (7,242,833) (4,847,668) 3,885,637 16,260,701 21,600,767 27,265,018 30,321,541 33,685,791 37,386,267 52,914,298
Investing activities
Capital expenditure (5,981,220)
Cash (used for)/ provided by invetsin (5,981,220)
Cash balance brought forward 0 2,154,373 2,154,373 2,154,373 6,040,009 22,300,710 43,901,477 71,166,496 101,488,037 135,173,827 172,560,094
Net Cash 2,154,373 (5,088,461) (2,693,295) 6,040,009 22,300,710 43,901,477 71,166,496 101,488,037 135,173,827 172,560,094 225,474,392
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
14. KEY ASSUMPTIONS
Table 14-1 Machinery Assumptions
Number of Machines Installed 32Installed capacity 100%Initial year capacity utilization 70%Maximum capacity utilization 90%Capacity utilization growth rate 5%Defective garment rate (of total finished garments) 2%Total Production per day 1000
Table 14-2 Operating Assumptions
Shifts operational per day 1Hours operational per shift 8Days operational per year 300
Table 14-3 Economy-Related Assumptions
Electricity growth rate 10%Wage growth rate 10%USD Conversion rate Rs. 85
Table 14-4 Cash Flow Assumptions
Accounts Receivable cycle (in days) 45Accounts payable cycle (in days) 30Raw material inventory (in days) 15Equipment spare part inventory (in days) 30
Table 14-5 Raw Material Assumptions
Raw material cost growth rate (Year 1-4) 5%Raw material cost growth rate (Year 5-10) 10%Washing cost Rs. 30Washing cost growth rate 5%
Table 14-6 Revenue Assumptions
Sales Price per unit USD 6.2Defected garment sales price Rs. 150Sales Price growth rate 10%
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
Table 14-7 Expense Assumptions
Administrative overhead (% of Sales) 1%Office expenses (stationery, entertainment etc) 20% of admin expenseFreight expense 1% of raw materialMachine maintenance (per month) 5% of machinery costMachine maintenance growth rate 5%Pre-paid building Rent (months) 12Pre-paid insurance (months) 12Admin and Factory overhead 0.75% of revenueInsurance rate (% of net fixed assets) 5%Spare part inventory 0.05% of machine costRent growth rate 10%
Tax rate325%
Table 14-5 Financial Assumptions
Project life (years) 10Debt 50%Equity 50%Interest rate on long-term debt 16%Interest rate on short term debt 14%Debt tenure (years) 5Debt payments per year 1Discount rate (weighted avg. cost of capital for NPV) 20%
3 Tax rate is fixed through out the project since the income falls in 25% tax deduction slab
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
ANNEXURE 1: RAW MATERIAL & MACHINERY SUPPLIERS
1. Denim Fabric Suppliers
i) US Apparel Pvt. Ltd.
Address: 26 M Gulberg III, Lahore
Contact No.: 042-5340034 042-5832528
ii) Azguard Nine Ltd.
Address: Ismail Aiwan-e-Sci Ferozpur, Lahore
Contact No.: 111-786-645
iii) Naveena Denim
Address: B21 Block 7/8 Banglore TW PECHS, Karachi
Contact No.: 021-4310630, 021-4310632
iv) Siddiqsons Denim Mills Limited
Address: D-53, Textile Ave, S.I.T.E, Karachi
Contact No.: 021-2577480, 021-2569591
2. Pocket Fabric Suppliers
i) Crescent Textile Mills
Address: 40-A Off Zafar Ali Road,
Gulberg V, Lahore
Tel: +92-42-111-245-245
Fax: +92-42-111-222-245
Email: [email protected]
ii) Master Textile
Address: 82-C-1, Gulberg III, Lahore.
Tel: (92-42) 5392344-48
Fax: (92-42) 5392343
3. Label Suppliers
i) Kohinoor Labels
Address: Street No. 2 Islam Nagar, Jail Road, Faisalabad
Phone: 041-32627544, 32631114
ii) Leather Connection
Address: Alam-Porvair City,Rohi Nala Bhoptian Chowk
9 KM Raiwind Rd Lahore
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
Phone: 042-35321406,
35321401 Fax: 042-35321407
Email: [email protected]
4. Zip & Button Suppliers
i) YKK Pakistan Pvt. Ltd.
Contact no.: 042-5792020-2, 021-35085677
5. Thread Suppliers
i) Shah Alam market – Lahore
ii) J. & P. Coats Pakisan (Pvt.) Ltd.
Address: 4 - Nizam Block, Main Wahdat Road,
Lahore. UAN: 111-115-115
6. Machinery Suppliers
i) Almurtaza Garments Machinery
Co. Address: 433- F, Johar Town,
Lahore.
Ph: 042- 5316171- 73.
Fax: 042- 5316174.
Cell: 0334- 4244202.
E. Mail: [email protected]
ii) Rex Machinery Pvt. Ltd.
Address: Rex Market, 6, Allama Iqbal Road
Lahore
Ph: 042-36375524-36369309
Email: [email protected]
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Pre-Feasibility Study Garments Stitching Unit (Denim Jeans)
ANNEXURE 2: INCOME TAX DEDUCTION SLABS
Income Slabs Tax Rate
0.00%100,000 –110,000 0.50%110,000 –125,000 1.00%125,000 –150,000 2.00%150,000 –175,000 3.00%175,000 –200,000 4.00%200,000 –300,000 5.00%300,000 –400,000 7.50%400,000 –500,000 10.00%500,000 –600,000 12.50%600,000 –800,000 15.00%800,000 –1,000,000 17.50%1,000,000– 1,300,000 21.00%1,300,000 and above 25.00%
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