pre feasibility study - sanitary ware

5/21/2018 Pre Feasibility Study - Sanitary Ware

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Pre-Feasibility Study

SSAANNIITTAARRYYWWAARREEMMAANNUUFFAACCTTUURRIINNGG

Small and Medium Enterprise Development Authority

Government of Pakistan


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Government of Pakistan

Pre-feasibility Study Sanitary Ware Manufacturing

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

2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 4

2.1 SWOT ANALYSIS ...................................................................................................................42.1.1 STRENGTHS..................................................................................................................... 4

2.1.2 WEAKNESSES................................................................................................................... 5

2.1.3 OPPORTUNITIES............................................................................................................. 52.1.4 THREATS.......................................................................................................................... 5

2.2 K EY SUCCESS FACTORS / PRACTICAL TIPS FOR SUCCESS .......................................................... 5

3 PROJECT PROFILE.................................................................................................................... 7

3.1 OPPORTUNITY RATIONALE ...................................................................................................... 73.2 PROJECT BRIEF ..................................................................................................................... 10

3.3 MARKET ENTRY TIMING ....................................................................................................... 10

3.4 PROPOSED BUSINESS LEGAL STATUS ..................................................................................... 11

3.5 PROJECT CAPACITY AND RATIONALE ..................................................................................... 11

3.6 PROJECT INVESTMENT........................................................................................................... 11

3.7 PROPOSED LOCATION............................................................................................................ 12

4 SECTOR AND INDUSTRY ANALYSIS.................................................................................... 12

4.1 EVOLUTION OF SANITARY WARE INDUSTRYIN PAKISTAN..................................... 124.2 SANITARY WARE MANUFACTURING UNITS CURRENTLY IN OPERATION IN PAKISTAN.............. 13

4.3 SECTOR CHARACTERISTICS ................................................................................................... 13

5 EU MARKET INFORMATION & MARKET ACCESS REQUIREMENTS........................... 14

5.1 EU MARKET INFORMATION................................................................................................... 14

5.2 CUSTOMS /STATISTICAL PRODUCT CLASSIFICATION ............................................................... 15

5.2.1 Sanitary ware made of plastics such as baths, showers, washbasins, bidets, lavatory pans,

seats and covers, flushing cisterns of plastics................................................................................. 15

5.2.2 Ceramic sanitary ware such as sinks, wash basins, wash basin pedestals, baths, bidets,lavatory pans, flushing cisterns, urinals and similar sanitary fixtures.............. .............. .............. ... 16

5.3 SANITARY-WARE MADE OF IRON OR STEEL SUCH AS BATHS SHOWER BASINS AND WASH BASINS17

6 PRODUCTION PROCESS......................................................................................................... 20


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8.3 UTILITY REQUIREMENTS ....................................................................................................... 26

9 HUMAN RESOURCE REQUIREMENT................................................................................... 26

9.1 HUMAN RESOURCE REQUIREMENTS....................................................................................... 26

10 KEY ASSUMPTIONS................................................................................................................. 28

10.1 PROJECT ASSUMPTIONS......................................................................................................... 28

10.2 OPERATING ASSUMPTIONS .................................................................................................... 2810.3 DEPRECIATION RATE ASSUMPTIONS....................................................................................... 28

10.4 LONG TERM SECURITY DEPOSITS .......................................................................................... 28

10.5 WORKING CAPITAL TURNOVER ASSUMPTIONS....................................................................... 29

10.6 ADVANCES & PREPAYMENTS ................................................................................................ 29

10.7 LONG TERM LOAN ................................................................................................................ 2910.8 SALES TAX PAYABLE ............................................................................................................ 29

10.9 R EVENUE ASSUMPTIONSSALES PRICE & PRODUCTION MIX ................................................. 30

10.10 COST OF SALES ..................................................................................................................... 30

10.11 PACKING MATERIAL AND STORES & SPARES.......................................................................... 3110.12 SALARIES WAGES AND OTHER BENEFITS ............................................................................... 31

10.13 R ESEARCH & DEVELOPMENT COST........................................................................................ 31

10.14 OTHER OVERHEAD CHARGES ................................................................................................ 3110.15 ADMINISTRATIVEEXPENSES ASSUMPTIONS ........................................................................... 31

10.16 MARKETING EXPENSES ASSUMPTIONS................................................................................... 32

11 FINANCIAL ANALYSIS............................................................................................................ 33

11.1 PROJECT COST ...................................................................................................................... 3311.2 INCOME STATEMENT ............................................................................................................. 34

11.3 BALANCE SHEET ................................................................................................................... 35

11.4 CASH-FLOW STATEMENT....................................................................................................... 36


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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


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11 PPUURRPPOOSSEEOOFFTTHHEEDDOOCCUUMMEENNTT

The objective of this proposed Pre-feasibility study is primarily to facilitate potential

entrepreneurs with the Investment information and provide an overview about the"Sanitary Ware Manufacturing Business". The proposed Pre-feasibility may form the

basis of an important investment decision and in order to serve this objective, thedocument covers various aspects of Sanitary Ware Manufacturing Business Concept

Development, Start-up, Production, Marketing, Finance and Business Management.

This document also provides Sectoral Information, brief on Government Policies andInternational Scenario, which have some bearing on the Project itself.

This particular Pre-feasibility is regarding "Sanitary Ware Manufacturing Unit ". Before

studying the whole document one must consider following critical aspects, which formsbasis of any Investment Decision.

22 CCRRUUCCIIAALL FFAACCTTOORRSS&&SSTTEEPPSSIINNDDEECCIISSIIOONNMMAAKKIINNGGFFOORRIINNVVEESSTTMMEENNTT

Before making the decision, whether to invest in the Sanitary Ware Manufacturing or not,one should carefully analyze the associated risk factors. A SWOT analysis can help in

analyzing these factors, which can play important role in making the decision.

22..11 SSWWOOTTAAnnaallyyssiiss

Before making the decision, whether to invest in the Potato Chips Manufacturing or not,

one should carefully analyze the associated risk factors. A SWOT analysis can help inanalyzing these factors, which can play important role in making the decision.

22..11..11 SSTTRREENNGGTTHHSS


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22..11..22 WWEEAAKKNNEESSSSEESS

Strict controls over the Labor efficiency need to be observed to reduce the Waste

Production at the minimum level.

The production process is highly manual and requires high involvement of manpower thus strong controls over the man power is required.

Expected loss at the initial stages of the project as the operations are partlyautomated.

22..11..33 OOPPPPOORRTTUUNNIITTIIEESS

Increasing preference for the high quality products

Easier access to markets in accession countries.

Increasing share of developing countries in sanitary ware imports of France, Belgium& UK and other countries of European Union.

Demand for Sanitary ware is influenced by the General economic conditions as wellas number of new houses built and old houses renovated.

22..11..44 TTHHRREEAATTSS

Low saving and low holding capacity of General Public as a result of which there isincreasing level of poverty.

Quality of the Sanitary Ware products need to be considered very closely as thelifestyle of people is improving.

High Promotional activity by the Competitors and increased competition.

Chances of price cut from the existing players of the Sanitary ware manufacturers to

keep the new product out of market.

22..22 KKeeyySSuucccceessssFFaaccttoorrss//PPrraaccttiiccaallTTiippssffoorrSSuucccceessss


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Another critical success factor of this proposed feasibility is the Marketing andPromotion of the Sanitary Ware Products in the local as well as Foreign Market. This

involves the dedication and hard work from the marketing personals to supervise thework of Wall Pasting, Banner affixing and a detailed advertising on the Media along with

the use of other marketing techniques such as Display Stands, Posters and use of Mobiles.Following are some of the distributing Channels that are available for the promotion of

the products having distinct characteristics.

TTaabbllee11::PPrroommoottiioonnaallCChhaannnneellss

1- More players involved in the sales channel2- Higher costs

3- Require (national) quality standards

4- Require strong brands

WholesaleMarkets

5- Tend to limit suppliers

1- Less emphasis on (national) quality standards

2- Generally lower prices to consumers

3- Increasing importance in several EU markets

Do-It-yourself

markets

4- Can be targeted through importers, manufacturers or trade associations

1- Buys smaller product range to complement its own delivery program,

products need to fit this program.

2- May buy specialty items to offer under own brand

3- Can promote items under own brand name.

European

Producersof sanitary

ware

4- May open "protective" markets

1- Able to "reach" the larger number of installers with showroom/shop

2- Will give feed back on price level needed to enter this segment.

Importers


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Use of New Technology and international standard machines

Temperature & Pressure maintenance.

High quality of raw material. Advance Orders for sale can ensure the success of the Business.

Technical Quality & competence.

Responsiveness to Customers' demands and requirements.

Available for enquiries, designated and known contact persons.

Low Prices

Reliability in delivery

Provision of Customer training. Give Guarantees.

Quality Certifications.

Conscious of environment.

33 PPRROOJJEECCTTPPRROOFFIILLEE

33..11 OOppppoorrttuunniittyyRRaattiioonnaallee

The Sanitary wares available in the local market are produced mainly in the Province of

Punjab & Sindh. In addition some niches of the market are also served by imports assmall quantity of some multinational brands is also available in the local market imported

mainly from Spain, Itly UK and USA.

Demand for sanitary ware is influenced by general economic conditions as well as the

number of new houses built and old houses renovated. New housing also presentsopportunities for new kitchens, bath rooms and latrine facilities1.

TTaabbllee22::HHoouussiinngguunniittssbbyykkiittcchheenn,,bbaatthhrroooomm&&llaattrriinneeffaacciilliittiieess


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Rural 26.48 8.49 65.03 24.41 11.57 64.00 15.08 7.91 77.01

Urban 42.94 16.95 40.10 49.67 32.16 18.17 52.75 33.75 13.50

Sindh 34.69 32.46 32.85 33.94 31.12 34.94 35.36 30.57 34.08

Rural 24.63 28.50 46.87 22.98 21.92 55.11 24.23 20.08 55.69

Urban 47.90 37.65 14.44 48.34 43.21 8.46 49.97 44.33 5.70

Balochistan 22.72 46.11 31.16 26.56 41.74 31.70 18.58 29.25 52.16

Rural 19.89 44.25 35.86 24.12 38.70 37.19 14.46 23.61 61.92

Urban 34.01 53.49 12.50 36.26 53.81 9.93 34.93 51.70 13.36

Islamabad 62.80 16.46 20.74 58.50 17.11 24.30 55.47 16.92 27.61

Rural 55.76 11.01 33.21 44.09 13.01 42.89 37.37 11.65 50.98

Urban 66.23 19.10 14.66 65.64 19.11 15.24 64.28 19.48 16.23

The housing2situation in Pakistan has steadily deteriorated over the past many years for a

variety of reasons including ineffective policies, resulting in huge housing backlog.According to 1998 census, the total number of housing units throughout the country was

19.3 million. The housing backlog, as estimated according to the 1998 census, was 4.30million units, which is now projected to 6.0 million units. The annual additionalrequirement is estimated around 570,000 housing units whereas the annual production is

estimated around 300,000 housing units, resulting in a recurring shortfall of 270,000housing units annually. It is estimated that in order to address the backlog and to meet the

housing shortfall in the next 20 years the overall housing production will have to beincreased to 820,000 housing units annually.

Recognizing the gravity of the situation and realizing the potentials of housing andconstruction as productive sector of the economy, the present Government has declaredHousing and Construction as a priority industry and also formulated a pragmatic and

workable National Housing Policy with a view to (a) Accelerate housing activity and


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been raised from Rs.100,000/- to Rs.200,000/-, (c) The rate of withholding tax onproperty income has been reduced from 7.5% to 5%, (d) CED on wires and cables has

been withdrawn and excise duty on cement has been reduced by 25% to lessen cost ofconstruction, (e) Stamp duties and registration fees, which were exceptionally high as

compared to other countries, have been rationalized to enhance registration, improvedocumentation and increase revenue receipts and (f) All new construction of housing on

plots, measuring up to 150 sq. yds and flats/apartments having an area of 1000 sq. ft,have been exempted from all types of taxes for the period of 5 years.

The Prime Minister has also announced HOUSING FOR ALL program which

includes:-

Housing schemes for Government employees will be launched in all the districts ofthe country for which provincial governments and ICT will provide (100) acres ofState Land immediately at affordable price.

Housing schemes for Government employees will be developed on public privatepartnership basis in which Banks will participate through appropriate collaborationwith the private sector developers. Such partnership will be secured on competitive

basis through a transparent selection process. Federal/Provincial/District Governments should facilitate and provide all necessary

support to Banks/developers with a view to creating an enabling environment.

Federal Government will ensure provision of trunk infrastructure at project sites fromNational Utilities regarding electricity, gas and telephone. If required Banks may

finance extra cost of such infrastructure.

Provincial/Federal Governments will ensure provision of trunk infrastructure forhousing schemes.

To facilitate this process, Governments of Sindh, NWFP and Balochistan mayemulate the housing development model recently formulated and adopted by theGovernment of Punjab for its employees.


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allottee will contribute 40% cost in installments and National Bank of Pakistan willprovide the remaining 60% as loan. Flats will be handed over to the allottees in two years

time. 90% apartments are earmarked for Federal Government employees of theMinistries/Divisions, Attached Departments and Sub-ordinate offices and the remaining

10% apartments for the Employees of Autonomous Bodies/Corporations and otherFederal Government Organizations. Details of the scheme are given in Table below.

Table 3: Scheme Details

Type BPS Accommodation Area Flats Cost

C 14-

16

Two bedrooms with attached bath,

Drawing, TV Lounge, kitchen.

1100

SQF

240 1,800,000

D 7-13 Two bedrooms, 2 baths, living Room,kitchen.

900 SQF 312 1,450,000

D 1-6 Two rooms, living room, one

bath/w.c., Kitchen

700 SQF 448 1,200,000

The demand for sanitary ware is influenced by general economic conditions as well as

number of new houses built and old houses renovated. New housing also presentsopportunities for consumption of sanitary ware. Since the life style of the people are

improving and they are getting more quality conscious, it is recommended to start up the projectat any time during the year.

33..22 PPrroojjeeccttBBrriieeff

This particular Pre-feasibility is regarding Sanitary Ware Manufacturing Unit. The

objective of the Pre-feasibility study is primarily to provide an overview about theSanitary Ware Manufacturing business. The proposed Pre-feasibility defines the criteriaon which the investment decision is based. This document covers various aspects of

Sanitary Ware Manufacturing business concept development Start up Production


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time during the year due to the availability of Raw Material (Fresh Potatoes) throughoutthe year.

33..44 PPrrooppoosseeddBBuussiinneessssLLeeggaallSSttaattuuss

The said project can be a sole proprietorship or a partnership and even it can be registeredunder the Companies Ordinance, 1984 with the Securities & Exchange Commission of

Pakistan. The selection totally depends upon the choice of the entrepreneur. This pre-feasibility assumes the legal status of a sole proprietorship.

33..55 PPrroojjeeccttCCaappaacciittyyaannddRRaattiioonnaallee

Selection of Project Size is really critical. After doing thorough Market Research, it isdecided that the proposed Pre-feasibility will be based upon the Production Capacity of

400 Pieces per day. As it is evident that the standard of living is rising steadily and thesociety is getting increasingly brand loving and design conscious, high grade producers

will have heyday in the Sanitary market in future. As a result of high constructionactivities carried out all over the world, there is huge demand of high quality sanitary

ware products in and outside Pakistan, thus a sizeable production is required. Theproposed project can always be started with Kiln having Production Capacity of more

than 400 Pieces per day. This particular Pre-feasibility study is however based on thecapacity of 400 Pieces per day which is the minimum viable size for a Sanitary ware

Manufacturing Unit. The project will be working on a single shift basis in all except theKiln which will be working on three shift basis.

Table 4: Project CapacityHours utilized one day 8

Production Capacity in pieces per day 400


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TTaabbllee66TToottaallpprroojjeeccttccoossttiisswwoorrkkeeddoouuttiinntthheettaabblleebbeellooww::--

Capital Investment 58,011,000

Working Capital Requirement 23,841,082

Total Investment 81,852,082

Table 7: Project Viability

IRR % - age 24 %

NPV @ 20 % Rs. 17,031,714Pay Back Period 4.5 -Years

33..77 PPrrooppoosseeddLLooccaattiioonn

The said project can be started in any Industrial Area. It is recommended to establish the

Project in an area where Raw Material is easily available. It may have any Industrial Areaof Lahore, Gujranwala, Karachi or Islamabad. The location of this proposed Pre-

feasibility is recommended at Gujranwala. The availability of main raw material in the

region considerably increases the scope for establishment of the proposed project in thesaid region.

44 SSEECCTTOORR AANNDDIINNDDUUSSTTRRYY AANNAALLYYSSIISS

44..11 EEVVOOLLUUTTIIOONNOOFFSSAANNIITTAARRYYWWAARREEIINNDDUUSSTTRRYYIINNPPAAKKIISSTTAANN

This is a story of how the manufacture of sanitary fittings [taps, showers, pipes] started ina small town called Gujranwala (now in Pakistan), way back in 1934. Situated along thecontours of the old Grand Trunk Road, Gujranwala is famous for its Sanitary Fittings and

S it d El t i F & M t


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old city. In 1947 at the time of the partition, Mr. Ram Gopal Arora turned over theownership of "Prabhat Engineering" to the name of Mr. Anwar. Mr. Anwar was to settle

all accounts in an orderly manner so that eventual payment of the factory value wassettled in a completely honorable manner. "Prabhat Engineering "was to be renamed as

"Battala Foundry" under the ownership of a Mr. Mohammed Yakub, who was a Muslimrefugee from India.

It was from these few industrious and ethical families of Charan Singh, Banarsi Shah and

Rafiq Anwar that the modern industries of Gujranwala arose and have taken their place inmodern day Pakistans industry.

44..22 SSaanniittaarryyWWaarreeMMaannuuffaaccttuurriinnggUUnniittssCCuurrrreennttllyyiinnOOppeerraattiioonniinnPPaakkiissttaann

The main sanitary ware units currently in operation in Pakistan are reproduced below:

TTaabbllee88::MMaajjoorrppllaayyeerrssoofftthheemmaarrkkeett

No. COMPANY NAME ADDRESS

1- A.M Industries Mohallah Chah talianwala, Jinnah Road, LinkNowshera Road, Gujranwala Tel # (0431)

220497

2- Anwar Mechanical Works G.T Road, Gujranwala Tel # (0431) 220497

3- Faisal Sanitary Fittings Ind.

(Pvt.) ltd.

G.T. Road, PO Box 93, Gujranwala. Twl #

(0431) 271243/271245, Fax (0431) 271650

4- Master Industries G.T.Road, Gujranwala Tel # (0431)272770/272779, Fax (0431) 272127

5- Sonex Industries 6 Shamasabad, Gujranwala Tel # (0431) 219537.

Fax (0431) 219535

6- Pak Sanitary Engineering 97 Ferozepur Road, Ichhra, Lahore Tel # (042)


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Providing employment to about 30,000 people, majority of the items produced here are

exported. Last year the total sanitary ware exports were of Rs .800/- million of whichitems worth Rs. 550/- million were from Thangadh alone to UAE, Africa and other

middle east countries.

One of the main reasons why ceramic and sanitary ware units have developed here isbecause of easy excess to raw material. About 60 percent of the raw material that mainly

comprises of clay is available in excess in the surrounding area.

However, unlike other industry, this industry too has a tough competition with China.Currently, the units make use of fuel to bake the wares on high fire. This fuel itself

accounts for about 40 percent of the total cost. Units are now demanding supply of gas,which is low in cost. Though the state government has made promise for Gas grid

pipeline within a year, the manufacturers are left with no option but to wait for the Gassupply. Again in terms of policy matters and Government support, China has far more

transparent and liberal policy for exporters.

The industry has huge potential for both domestic and international market, provided itgets proper government support, believes Suresh Sompura, the President of Federation of

Ceramic Industries in Thangadh.

Apart from exports, the domestic market for sanitary ware itself is very large. Currentlyonly 10 percent population of the country makes use of sanitary ware items. According to

the manufacturers, if proper policy are designed and implemented by the government forimproving public sanitation, the industry could grow in leaps and bound providing

employment to lakhs of people.

The recommendation of setting up the project in Gujranwala is also supported by the fact


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It Yourself (DIY) segment of the market. These countries, therefore, appear to present thebest market opportunities for exporters from developing countries.

According to Eurostat data, the total value of EU consumption in 2002 of sanitary ware

amounted to 4,852 million. The largest markets for sanitary ware in the EU are Italy,Spain, Germany, the United Kingdom and France.

In 2002, total EU imports of sanitary ware and ceramic tiles reached a volume of 5,960

thousand tonnes, which represented a value of 5,134 million. Germany is the largest EUimporter of sanitary ware and ceramic tiles, with imports valued at 1,090 million. The

most important developing countries in supplying EU imports, after Turkey, are China,Egypt, South Africa, Morocco, Thailand, Tunisia and Croatia.

In the period 2000 - 2002, imports of sanitary ware have increased by 25 percent in value

and by six percent in volume. Approximately one-third of imports came from outside theEU, with developing countries accounting for approximately 20 percent of total EU

imports of sanitary ware. The segment of ceramic sanitary products constituted thelargest share of EU imports of sanitary articles, followed by the group of plastic sanitary.

55..22 CCuussttoommss//ssttaattiissttiiccaallpprroodduuccttccllaassssiiffiiccaattiioonn

On January 1, 1988 a unified coding system was introduced to harmonise the trading

classification systems used worldwide and to allow for improved internationalcomparability of foreign trade statistics. This system, the Harmonised System (HS), is

based on a ten digit product classification.

A six-digit list of the product groups is presented below. These product groups can befurther divided into sub-groups on a ten digits basis.


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55..22..22 CCeerraammiiccssaanniittaarryywwaarreessuucchhaassssiinnkkss,, wwaasshhbbaassiinnss,, wwaasshhbbaassiinnppeeddeessttaallss,,bbaatthhss,,

bbiiddeettss,,llaavvaattoorryyppaannss,,fflluusshhiinnggcciisstteerrnnss,,uurriinnaallssaannddssiimmiillaarrssaanniittaarryyffiixxttuurreess

Ceramic sinks, wash basins, wash basin pedestals, baths, bidets, lavatory pans, flushing

cisterns, urinals and similar sanitary fixtures of porcelain or china (excl. soap dishes,sponge holders, tooth-brush holders, towel hooks and toilet paper holders) 691010

Ceramic sinks, wash basins, wash basin pedestals, baths, bidets, lavatory pans, flushingcisterns, urinals and similar sanitary fixtures (excl. of porcelain or china, soap dishes,sponge holders, ooth-brush holders, towel hooks and toilet paper holders) 691090


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IMPORTS

In 2002, total EU imports of sanitary ware and ceramic tiles reached a volume of 5,960thousand tonnes, which represented a value of 5,134 million. An overview of EU

imports of sanitary ware and ceramic tiles is presented in figure.

Overview of EU imports in million , 2000 2002


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As shown in figure 5.2, Germany is the largest EU importer of sanitary ware and ceramictiles, with imports valued at 1,090 million in 2002. Since 2000, its share in total EU

imports declined by 13 percent. France, the second largest EU importer ( 1,046 million),slightly increased its share of imports between 2000 and 2002. The United Kingdom is

Europes third largest importer followed by Belgium, Austria, the Netherlands, Italy and

Spain.

In 2002, intra-EU imports accounted for most of total EU imports (80 percent in value

d i l i i d f i hi h ) l i i


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66 PPRROODDUUCCTTIIOONNPPRROOCCEESSSS

66..11 PPrroodduuccttiioonnPPrroocceessssFFllooww

The following figure shows the production process flow of Sanitary Ware:

66..11..11 MMiilllliinnggSSeeccttiioonn

Material in Raw shape is mixed in a standard composition and put in Ball millingmachines for grinding. The composition of raw material mix is stated below along withthe usage requirement of these material based on the production capacity of 400 pieces

per day that requires the per day slip consumption of 12 tons:

Table 9: Raw Material Composition

Qty In Tons %age

Pottery Clay 35 5Quartz Natural Silicon 17.5 2.5

Grinding Stone 3.5 0.5

Feldspar Stone 14 2

Milling & Slip

preparationSection

Casting

Section

Green ware

Section

Glazing

SectionKiln Section

Final Inspection

& PackingSection


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66..11..22 CCaassttiinnggSSeeccttiioonn

The slip is then put in the moulds and then left for 2 to 3 hours for dryness. In the casting

section there should be a heating system to keep the temperature a bit higher to facilitatethe drying process. This requires the use of Gas heaters, extra heat of Kiln scetion can

also be utilised through the use of piping system. After 2 to 3 hours the unfinishedproduct ( Green ware ) is taken out from the moulds and kept in the open areas for further

2 to 3 days for hardness. About 20% of the Production is wasted which is recycled.

The moulds of required design and dimensions are prepared from the mother moulds.These mould are made from Plaster of Paris for final reshaping of the required product.

Plaster of paris is mixed in water to prepare a slury mixture which is then put in themother moulds for 1 to 2 hours. The heating system helps to facilitate the drying process.

These sample moulds are taken out from the mother moulds and then sent to the Castingdepartment.

66..11..33 GGrreeeennwwaarreeSSeeccttiioonn

The Green ware is then stored in the green ware section ( the storage section )

temporarily with the heating system for continuous dryness. These pieces are theninspected, the defected pieces if any are rejected for recycling while the approved pieces

are then forwarded to the Glazing Section.

66..11..44 GGllaazziinnggSSeeccttiioonn

The green ware pieces after being successful inspection are transferred to Glazing sectionwhere the glaze of required color is sprayed on the green ware pieces for color & painting

through pump machines in the glaze booths. The glaze is manufactured for the purpose ofshining the sanitary ware products. This is manufactured using different chemicals, some

of which are listed in section 8.10, and required coloring schemes.


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packaging into cartons while the defected pieces, about 15% of total production, arescrapped out.

66..22 PPrrooppoosseeddPPrroodduuccttMMiixx

The proposed project will be producing the Branded Ceramic Sanitary ware items in

different Packing sizes as have been mentioned in section 6.2.2 of this pre-feasibilityreport.

Table 10: Product Mix

Sanitary Ware Production Mix %age

Bath Tub including legs 5 %

Shower Tray 5 %

Wash Basin 25 %

Wash Stand 25 %

Toilet combination 20 %

Wall Toilets 5 %

Bidet 4 %One piece Toilet 7 %

Urinal 4 %

100 %

66..33 RRaawwMMaatteerriiaallRReeqquuiirreemmeenntt

The Raw Material involved in the manufacturing process is detailed below:

Table 11: Raw Material Requirements

Sr. No. Description


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77 TTEECCHHNNOOLLOOGGYY AANNDDPPRROOCCEESSSSEESS

77..11 MMaacchhiinneerryyRReeqquuiirreemmeenntt

Following table shows the plant & machinery requirement for setting up a Sanitary ware

Manufacturing Unit.

TTaabbllee1122::MMaacchhiinneerryyDDeettaaiill

Machine Description Make No. of

Units

Cost

per unit

Total

Cost

Rupees Rupees

Slip Section Machine

- Ball Mill Machines Capacity 10 Tons Local 2 450,000 900,000

- Stirrers Local 2 200,000 400,000

- Slip Pumps 7.5 H.P Local 2 70,000 140,000

- Compressor for slip storage Local 2 58,000 116,000

Glazing Section Machine Local 4 100,000 400,000

Kiln Local 1 2,500,000 2,500,000

Accessories Local 1,000,000

TOTAL 5,456,000

77..22 FFiittttiinnggss&&IInnssttaallllaattiioonnssRReeqquuiirreemmeenntt

Following fittings & installations are required for factory and management offices.

TTaabbllee1133::FFiittttiinnggss&&IInnssttaallllaattiioonnss

Cost per

unit

Total

Cost

Items No.

of


25/37


77..33 OOffffiicceeEEqquuiippmmeennttssRReeqquuiirreemmeenntt

Following office equipments are required for factory and management offices.

TTaabbllee1144::OOffffiicceeEEqquuiippmmeenntt

Items Cost per

unit

Total CostNo. of

Items

Rupees Rupees

Computers 10 30,000 300,000

Printers 3 25,000 75,000

Photocopy Machine 2 100,000 200,000Fax Machine 2 10,000 20,000

Telephone Sets 15 500 7,500

TOTAL 602,500

77..44 FFuurrnniittuurree&&FFiixxttuurreessRReeqquuiirreemmeenntt

Following furniture & fixtures are required for factory and management offices.

TTaabbllee1155::FFuurrnniittuurree&&FFiixxttuurree

Cost Total

Cost

Items

Rupees Rupees

Office Furniture - including tables, chairs, cabinets, almarahs

etc.

800,000 800,000

77..55 VVeehhiicclleessRReeqquuiirreemmeenntt

The proposed project will also be using two cars costing Rs. 1,000,000/-, two Loader


26/37


88 LLAANNDD&&BBUUIILLDDIINNGGRREEQQUUIIRREEMMEENNTT

88..11 LLaannddRReeqquuiirreemmeennttLand for the proposed business can be acquired on rent but it is recommended that itshould be purchased or built as machinery will be installed. Total land required for the

Sanitary Ware Manufacturing Unit is approximately 21 Kannals. Land price per kanal istaken to be Rs. 250,000 per Kannal (Gujranwala).

TTaabbllee1177::LLaannddDDeettaaiillss

Total Kanals Cost per Kanal Rs. Total Land cost in Rs.

Total Land Cost 21 250,000 5,250,000

- including acquisition & documentation charges

88..22 BBUUIILLDDIINNGGRREEQQUUIIRREEMMEENNTT

TTaabbllee1188::BBuuiillddiinngg&&CCiivviillWWoorrkkss

Building & Civil works SpaceRequire

d in Sq.

ft

ConstructionCost Per Sq.

Ft.

Total Cost

Rupees Rupees

Milling & Slip Section 4,500 800 3,600,000

Basement of the Section 3,000 800 2,400,000

Casting Halls 25,000 450 11,250,000Green ware storage 10,000 450 4,500,000

Kiln Hall 6,000 600 3,600,000


27/37


Boundary wall 12,000 100 1,200,000

Total Infrastructure Cost 36,835,000

88..33 UUttiilliittyyRReeqquuiirreemmeennttss

Utilities required for a Sanitary ware manufacturing unit are; Electricity, Telephone, Gas

and Water.

99 HHUUMMAANNRREESSOOUURRCCEERREEQQUUIIRREEMMEENNTT

99..11 HHuummaannRReessoouurrcceeRReeqquuiirreemmeennttss

Following table shows the requirements of Human Recourses in the Sanitary ware

Manufacturing unit.

TTaabbllee1199::HHuummaannRReessoouurrccee

Description AnnualSalary

Numberof

Employees

Per MonthSalary

Rupees

PRODUCTION STAFF

Production Manager 1 40,000 480,000

Ceramic Engineer 1 20,000 240,000

Sections Incharge 6 9,000 648,000

Quality Incharge 1 12,000 144,000Store Supervisor 1 9,000 108,000

Electric Foreman 1 8,000 96,000


28/37


Total Administrative Salaries 1,566,000

MARKETING COST

Marketing Manager 1 50,000 600,000Senior Sales Officer 3 20,000 720,000

Assistant Sales Officer 2 8,000 192,000

Sales Representatives 6 5,000 360,000

Total Marketing Salaries 1,872,000

Factory Wages 7,308,000

*Other Benefits 1,827,0009,135,000

Administrative Cost 1,566,000

Other Benefits 391,500

1,957,500

Marketing Cost 1,872000

Other Benefits 468,000

2,340,000

Other benefits include EOBI, Social Security, Gratuity, Medical and Other welfare

expenses


29/37


1100 KKEEYY AASSSSUUMMPPTTIIOONNSS

1100..11 PPrroojjeeccttAAssssuummppttiioonnss

Projected life of the Project 10 Years

Sponsors Equity 50%

Debt Finance 50%

Annual Mark up rate 15%

Debt Tenure in Years 5 YearsGeneral Inflation rate 5%

1100..22 OOppeerraattiinnggAAssssuummppttiioonnss

Total no. of days in one Year 365

Total no. of month in one Year 12

Total no. of working days in one Year 300

No. of Shifts

Kiln 3

Milling section 1

Casting section 1

Working Hours per shift 8

Installed production capacity 400 Pieces per day

Initial Year capacity utilization 70%Capacity Growth rate 5%

Maximum capacity utilization 95%


30/37


1100..55 WWoorrkkiinnggCCaappiittaallTTuurrnnoovveerrAAssssuummppttiioonnss

Raw material inventory 30 Days raw material consumption

Work in process (60% completed) 15 days expected production

Finished goods 30 days goods available for sale

Packing material 30 days goods available for sale

Stores & Spares 30 days stores & spares consumptions

Accounts Receivables 45 days

Accounts Payables

Purchases 45 days

Expenses 30 days

1100..66 AAddvvaanncceess&&PPrreeppaayymmeennttss

Advance to Staff 20 % of one month salary

Loans to Staff 10 % of total annual salary

Advances against expenses 5 % of traveling, entertainment, repair,

vehicle running, sale promotion and othergeneral expenses

Advance to suppliers 5 % of raw material purchases

Advance Income Tax

Electricity 2,000 Per month

Telephone (6 telephone sets) 300 Per month

On import of raw material 6 % of raw material imports

Prepaid insurance 90 Days insurance cost

1100..77 LLoonngg TTeerrmm LLooaann


31/37


1100..99 RReevveennuueeAAssssuummppttiioonnssssaalleessPPrriiccee&&PPrroodduuccttiioonnMMiixx

Items Expected ItemWeight

ProductionMix

Ex FactoryPrice Including

Sals Tax

Final rice toRetailer

Rupees Rupees

Bath Tub Including

Legs

80 Kg 5 % 7600 9900

Shower Tray 25 Kg 5 % 3300 4400

Wash Basin 25 Kg 25 % 1250 1650Wash Stand 25 Kg 25 % 650 880

Toilet Combination 60 Kg 20 % 2500 3300

Wall Toilets 25 Kg 5 % 1600 2090

Bidets 15 Kg 4 % 1000 1320

One Piece Toilet 25 Kg 7 % 2000 2640

Urinal 15 Kg 4 % 350 440

Sales Tax Rate pon Supply 15 %

Estimated Margin on Sales Price 25 %

1100..1100 CCoossttooffSSaalleess

Raw Material

Raw Meterial cost during the 1

st

Year of operation & consumption Requirments

Cost Per Kg

Rupees


32/37


Coloring ( 5 % of Totalconsumption)

500

1100..1111 PPaacckkiinnggMMaatteerriiaallaannddSSttoorreess&&SSppaarreess

Items Rupees

Cartons 15 Per carton

Other packing Materials 8 Per item

Stores & Spares 15 % of Raw Material Consumed

1100..1122 SSaallaarriieessWWaaggeessaannddOOtthheerrBBeenneeffiittss

Salaries & Wages Section 10 of this Pre Feasibility

Other Benefits 25 % of the Salaries & Wages

1100..1133 RReesseeaarrcchh&&DDeevveellooppmmeennttCCoosstt

Research Cost 1% of the Turnover

Cost Per Unit No. of Units

Moulds & Dyes 5,000 1,000

Stands 500 1,000

70 % Reduction for Succeeding Year and then constant with impact of inflation.

1100..1144 OOtthheerrOOvveerrhheeaaddCChhaarrggeess

Carriage & Freight 3 % of cost of raw material consumed


33/37


Policy manual Rs. 300,000

Income & sales tax consultancy Rs. 200,000

Inflation rate of consultancy charges 10 %Entertainment 0.5 % of cost of goods manufactured

Telephone fax & postage 0.75 % of cost of goods manufactured

Utility charges 0.4 % of cost of goods manufactured

Office vehicle insurance rate 4 % of written down value

Insurance rate of raw material Work inprocess & finish goods

3.5 % of cost of stock in trade

Repair & maintenance 10 % of the costRepair & maintenance growth rate afterthree years

10 % of repair & maintenance cost

1100..1166 MMaarrkkeettiinnggEExxppeennsseessAAssssuummppttiioonnss

Salaries & Wages Section 10 of this pre-feasibility

Other benefits 25 % of total salaries & wagesVEHICLE RUNNING EXPENSES

Consumption per

liter

Rate per liter Traveling per

day

Annual

tours

2 loader trucks 5 km per liter Diesel 35 300 km per day 150

2 cars 10 km per liter Diesel 35 50 km per day 250

4 motor cycles 50 km per liter Petrol 57 50 km per day 300

PROMOTIONAL EXPENSESQuantity Per unit

Book lets 2500 150


34/37


1111 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1111..11 PPrroojjeeccttCCoosstt

RUPEE

Fixed Capital Expenditure

Land 5,250,000

Buildings 36,835,000

Plant & Machinery 5,456,000

Fittings & Installations 4,630,000

Office Equipments 602,500

Furnitures & Fixtures 800,000

Vehic les 4,437,500

Total Fixed Assets 58,011,000

Working Capital

Current Assets:

Stock in Trade 15,718,673

Stores & Spares 778,396

Advances, Deposits & Other Receivables 6,711,654

Accounts Receivable 16,079,962

39,288,685

CurrentLiabilities:

- ESTIMATED PROJECT COST & PROPOSED FINANCING


35/37


PREF-90/Mar, 2006/ Rev 1

34

1111..22 IInnccoommeeSSttaatteemmeenntt

-Projected Profit and Loss

Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES

Sales- Net of Sales Tax 1 113,414,222 139,401,587 158,292,079 174,914,162 192,877,137 212,650,002 234,446,882 250,019,094 262,852,298 276,023,586

Cost of Sales 1 91,924,509 104,946,728 113,913,411 123,707,398 134,308,125 145,929,490 158,692,994 173,180,825 182,551,485 192,062,541

Gross Profit 21,489,713 34,454,859 44,378,668 51,206,764 58,569,012 66,720,512 75,753,888 76,838,269 80,300,813 83,961,045

Operating Expenses: 18.95 24.72 28.04 29.28 30.37 31.38 32.31 30.73 30.55 30.42

Ad m in istra t ive Expe nses 1 7,712,026 7,565,524 7,770,672 8,092,200 8,478,410 8,928,484 9,442,490 10,001,811 10,593,327 11,247,526

Ma rke t ing Expenses 1 7,750,900 4,502,408 3,760,011 4,077,999 4,424,884 4,803,413 5,216,596 5,667,740 6,160,472 6,698,776

15,462,926 12,067,931 11,530,683 12,170,199 12,903,294 13,731,896 14,659,086 15,669,551 16,753,799 17,946,301

Operating Profit 6,026,787 22,386,928 32,847,985 39,036,565 45,665,718 52,988,616 61,094,802 61,168,718 63,547,014 66,014,744

Other Income 283,536 348,504 395,730 437,285 482,193 531,625 586,117 625,048 657,131 690,059

6,310,323 22,735,432 33,243,715 39,473,850 46,147,911 53,520,241 61,680,919 61,793,765 64,204,145 66,704,803

Financial & Other Charges

Ma rk up o n Long Te rm Loans - 5,831,961 4,604,180 3,376,398 2,148,617 920,836 - - - -

Ban k Cha rg e s 170,121 209,102 237,438 262,371 289,316 318,975 351,670 375,029 394,278 414,035

O th e r Cha rg e s 307,010 834,718 1,420,105 1,791,754 2,185,499 2,614,021 3,066,462 3,070,937 3,190,493 3,314,538

477,131 6,875,782 6,261,723 5,430,524 4,623,432 3,853,832 3,418,133 3,445,965 3,584,772 3,728,574

Profit before Taxation 5,833,192 15,859,650 26,981,993 34,043,327 41,524,479 49,666,408 58,262,786 58,347,800 60,619,373 62,976,229

Taxation 2,041,617 5,550,877 9,443,697 11,915,164 14,533,568 17,383,243 20,391,975 20,421,730 21,216,781 22,041,680

Profit after Taxation 3,791,575 10,308,772 17,538,295 22,128,162 26,990,911 32,283,165 37,870,811 37,926,070 39,402,593 40,934,549

A cc umula te d Pro fits - bro ug ht fo rwa rd - 3,791,575 14,100,347 31,638,642 53,766,804 80,757,716 113,040,881 150,911,692 188,837,762 228,240,355

Acc umulated Profits - carried forward 3,791,575 14,100,347 31,638,642 53,766,804 80,757,716 113,040,881 150,911,692 188,837,762 228,240,355 269,174,904

10.4


36/37



35

1111..33 BBaallaanncceeSShheeeett

- Projected Balance SheetYear - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X


Tangible Fixed Assets 54,132,900 50,639,273 47,478,525 44,607,543 41,990,145 39,595,834 37,398,779 35,377,003 33,511,708 31,786,740

Long Term Deposits

Elec tric ity 384,000 384,000 384,000 384,000 384,000 384,000 384,000 384,000 384,000 384,000

Sui Gas 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000

2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000

Current Assets:

Stoc k in Tra de 15,718,673 17,892,024 19,863,220 21,854,705 24,024,526 26,413,141 29,044,778 31,372,660 32,973,098 34,636,307

Stores & Spares 778,396 872,020 963,731 1,059,938 1,165,451 1,281,586 1,409,455 1,541,522 1,615,389 1,692,635

Advances, Deposits & Other Receivable 6,711,654 6,805,248 7,332,227 7,980,736 8,693,436 9,476,611 10,337,191 11,277,615 11,892,637 12,546,253

Accounts Receivable 16,079,962 19,764,472 22,442,781 24,799,474 27,346,279 30,149,692 33,240,072 35,447,913 37,267,415 39,134,851

C ash in Hand / Bank 4,885,674 11,348,641 23,098,647 38,080,916 57,509,979 81,833,355 119,745,152 156,029,626 195,237,261 235,782,46144,174,360 56,682,404 73,700,607 93,775,768 118,739,670 149,154,384 193,776,648 235,669,336 278,985,800 323,792,507

101,091,260 110,105,677 123,963,131 141,167,311 163,513,816 191,534,218 233,959,427 273,830,339 315,281,508 358,363,248

Owners Equity:

C apita l Introduced 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041

Accumula ted Pro fits 3,791,575 14,100,347 31,638,642 53,766,804 80,757,716 113,040,881 150,911,692 188,837,762 228,240,355 269,174,904

44,717,616 55,026,388 72,564,683 94,692,846 121,683,757 153,966,922 191,837,733 229,763,803 269,166,396 310,100,945

Long Term Loan 32,740,833 24,555,625 16,370,416 8,185,208 - - - - - -

Current Liabilities:

C urre nt Po rtio n o f Lo ng Te rm Lo a n 8,185,208 8,185,208 8,185,208 8,185,208 8,185,208 - - - - -

Accounts Payable 7,643,853 8,440,382 9,307,683 10,257,567 11,304,405 12,458,299 13,730,225 15,119,301 15,870,267 16,658,656

Accrued C harges 4,344,455 3,842,169 3,964,175 4,210,163 4,475,078 4,760,683 5,068,907 5,400,266 5,742,411 6,111,672

Mark - up payable - 2,762,508 2,148,617 1,534,727 920,836 306,945

Sales Tax Payable 1,417,678 1,742,520 1,978,651 2,186,427 2,410,964 2,658,125 2,930,586 3,125,239 3,285,654 3,450,295

Provision for Taxation 2,041,617 5,550,877 9,443,697 11,915,164 14,533,568 17,383,243 20,391,975 20,421,730 21,216,781 22,041,680

23,632,811 30,523,664 35,028,032 38,289,257 41,830,059 37,567,295 42,121,694 44,066,535 46,115,113 48,262,303

101,091,260 110,105,677 123,963,131 141,167,311 163,513,816 191,534,218 233,959,427 273,830,339 315,281,508 358,363,248

10.3


37/37



36

1111..44 CCaasshh--fflloowwSSttaatteemmeenntt

Projec ted C ash Flow

Yea r - I Yea r - II Yea r - III Yea r - IV Yea r - V Yea r - VI Yea r - VII Yea r - VIII Yea r - IX Yea r - X


Profit be fore Taxa tion 5,833,192 15,859,650 26,981,993 34,043,327 41,524,479 49,666,408 58,262,786 58,347,800 60,619,373 62,976,229

D e p re c ia tio n 3,878,100 3,493,628 3,160,748 2,870,982 2,617,397 2,394,311 2,197,054 2,021,776 1,865,295 1,724,968

9,711,292 19,353,277 30,142,740 36,914,309 44,141,876 52,060,720 60,459,840 60,369,576 62,484,668 64,701,197

Sto c k in Tra de (15,718,673) (2,173,350) (1,971,196) (1,991,485) (2,169,821) (2,388,615) (2,631,637) (2,327,882) (1,600,438) (1,663,209)

Sto re s & Sp a re s (778,396) (93,624) (91,711) (96,207) (105,513) (116,135) (127,870) (132,067) (73,867) (77,246)

A dva nc es, D ep osits & O the r Re c eiva (6,711,654) (93,594) (526,979) (648,508) (712,700) (783,175) (860,581) (940,424) (615,022) (653,616)

A c co unts Re c eiva ble (16,079,962) (3,684,510) (2,678,310) (2,356,692) (2,546,805) (2,803,413) (3,090,380) (2,207,841) (1,819,502) (1,867,436)

A c c o unts Pa ya b le 7,643,853 796,529 867,301 949,884 1,046,838 1,153,894 1,271,926 1,389,076 750,966 788,389

A c c rue d C ha rg e s 4,344,455 (502,286) 122,006 245,989 264,914 285,606 308,224 331,359 342,145 369,261

M a rk - up p a ya b le - 2,762,508 (613,891) (613,891) (613,891) (613,891) (306,945) 0 0 0

Sa le s Ta x Pa ya b le 1,417,678 324,842 236,131 207,776 224,537 247,161 272,461 194,653 160,415 164,641

(25,8 82,699) (2,663,486) (4,656,648) (4,303,134) (4,612,440) (5,018,568) (5,164,801) (3,693,127) (2,855 ,302) (2,939,217)

C ash form o ther Source s

Sp o nso rs' Eq uity 40,926,041 - - - - - - - - -

D e b t Fina nc ing 40,926,041 - - - - - - - - -

81,852,082 - - - - - - - - -

Tot a l So urc e s 65,68 0,675 16,689 ,792 25,486 ,092 32,611 ,174 39,52 9,436 47,042 ,152 55,295 ,040 56,676 ,449 59,62 9,365 61,761 ,980

App lica tions:

Fixe d A sse ts 58,011,000 - - - - - - - - -

Lo ng Te rm De p o sits 2,784,000

Re -Pa yme nt o f Lo a n - 8,185,208 8,185,208 8,185,208 8,185,208 8,185,208 - - - -

Ta xa tio n - 2,041,617 5,550,877 9,443,697 11,915,164 14,533,568 17,383,243 20,391,975 20,421,730 21,216,781

60,795,000 10,226,825 13,736,086 17,628,906 20,100,373 22,718,776 17,383,243 20,391,975 20,421,730 21,216,781

C ash Inc re ase/ (De crea se ) 4,885,674 6,462,966 11,750,006 14,982,269 19,429,063 24,323,376 37,911,797 36,284,474 39,207,635 40,545,200

Op en ing Ba lance - 4,885,674 11,348,64 1 23,098,647 38,080,916 57,509,979 81,833,355 119,745,152 156,029,626 1 95,237,261

C losing Balanc e 4,885,674 11,348,641 23,098,647 38,080,916 57,509,979 81,833,355 119,745,152 156,029,626 195,237,261 235,782,461

pre feasibility study - sanitary ware

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