Laundry & Dry Cleaning

Pre-Feasibility Study
LAUNDRY & DRY CLEANING
Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
Waheed Trade Complex, 1 Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore
Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756
Helpdesk@smeda.org.pk
st
REGIONAL OFFICE
PUNJAB
Waheed Trade Complex,
1st Floor, 36-Commercial Zone,
Phase III, Sector XX,
Khayaban-e-Iqbal, DHA Lahore.
Tel: (042) 111-111-456
Fax: (042) 5896619, 5899756
helpdesk@smeda.org.pk
REGIONAL OFFICE
SINDH
REGIONAL OFFICE
NWFP
REGIONAL OFFICE
BALOCHISTAN
5TH Floor, Bahria

Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
Helpdesk-khi@smeda.org.pk
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
Helpdesk-pew@smeda.org.pk
Bungalow No. 15-A

Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
helpdesk-qta@smeda.org.pk
October, 2004
Laundry & Dry Cleaning
DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources and
is based on certain assumptions. Although, due care and diligence has been taken to
compile this document, the contained information may vary due to any change in any of
the concerned factors, and the actual results may differ substantially from the presented
information. SMEDA does not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No.
PREF-78
Prepared by
SMEDA-Punjab
Approved by
Provincial Chief Punjab
Issue Date
October, 2004
Issued by
Library Officer
1
PREF-78/ Oct, 2004/Rev1
1.
INTRODUCTION TO SMEDA.................................................................................................... 3
2.
PURPOSE OF THE DOCUMENT ............................................................................................... 3
3.
CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 4
4.
PROJECT PROFILE.................................................................................................................... 4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
5.
PROJECT BRIEF ....................................................................................................................... 4

OPPORTUNITY RATIONALE ...................................................................................................... 4
MARKET ENTRY TIMING ......................................................................................................... 4
PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 5
PROJECT CAPACITY AND RATIONALE ....................................................................................... 5
PROJECT INVESTMENT ............................................................................................................. 5
PROPOSED PRODUCT MIX ........................................................................................................ 5
RECOMMENDED PROJECT PARAMETERS ................................................................................... 6
PROPOSED LOCATION .............................................................................................................. 7
SECTOR & INDUSTRY ANALYSIS........................................................................................... 7

5.1
6.
SECTOR CHARACTERISTICS ..................................................................................................... 7
MARKET INFORMATION ......................................................................................................... 7

6.1
6.2
7.
MARKET POTENTIAL ............................................................................................................... 7

TARGET CUSTOMERS .............................................................................................................. 7
PRODUCTION PROCESS........................................................................................................... 7
7.1
7.2
7.3
7.4
7.5
7.6
8.
PRODUCTION PROCESS FLOW .................................................................................................. 7

RAW MATERIAL REQUIREMENT ............................................................................................... 9
REVENUES .............................................................................................................................. 9
TECHNOLOGY AND PROCESSES ................................................................................................ 9
MACHINERY REQUIREMENT .................................................................................................. 10
MACHINE MAINTENANCE ...................................................................................................... 11
LAND & BUILDING REQUIREMENT .................................................................................... 12

8.1
8.2
8.3
8.4
8.5
9.
LAND REQUIREMENT ............................................................................................................ 12

COVERED AREA REQUIREMENT ............................................................................................. 12
RECOMMENDED MODE .......................................................................................................... 12
UTILITIES REQUIREMENT ...................................................................................................... 12
SUITABLE LOCATION............................................................................................................. 12
HUMAN RESOURCE REQUIREMENT................................................................................... 14

9.1
ESTIMATED TIME FOR PROJECT COMPLETION ........................................................................ 14
10.
PROJECT COST.................................................................................................................... 14
11.
FINANCIAL ANALYSIS ....................................................................................................... 15
11.1
11.2
11.3
11.4
12.
PROJECT COSTS .................................................................................................................... 15

PROJECTED INCOME STATEMENT ........................................................................................... 16
PROJECTED BALANCE SHEET ................................................................................................. 17
PROJECTED CASH FLOW STATEMENT ..................................................................................... 18
FINANCIAL ASSUMPTIONS ............................................................................................... 19
2
1. INTRODUCTION TO SMEDA
Small and Medium Enterprise 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 overhauling of 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 jewelry, 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 SMEDAs
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 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 an
effective way.
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 concept development, start-up, production, marketing,
finance and business management. The document also provides sectoral information,
brief on government policies and international scenario, which have some bearing on the
project itself.
This particular pre-feasibility is regarding Laundry & dry cleaning which comes under
service sector. Before studying the whole document one must consider following
critical aspects, which forms the basis of any investment decision.
3
3. CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Before making any investment decision, it is advisable to evaluate the associated risk
factors by taking into consideration certain key elements. These may include availability
of resources, academic knowledge, past experience and specific managerial and technical
skill set. Following are some of the key success factors for a Laundry and Dry Cleaning
business:
There should be warranty of clothes from damages and any type of color fading.
Prime business location for proposed dry cleaning.
Reasonable and competitive charges, positioned against competitors.
On time delivery of clothes can leave good impression on the customers.
Technical and efficient labor.
There should be advertisement on local cable and banners. Existing dry cleaners are
not advertising for their services.
4. PROJECT PROFILE
4.1 Project Brief
The proposed project entails setting up a dry cleaning unit. It provides a range of services
relating to domestic and commercial sector. These services range from washing, drying
and pressing to more complex services like cleaning sensitive fabric, blankets, shirwanis
and suits etc.
4.2 Opportunity Rationale
There is an important factor for the entrepreneurs to set up a dry cleaning business in big
cities of Pakistan due to the fact that it has become difficult for the people to wash all
types of clothes in their houses i.e. Jackets, Sherwanis and other sensitive clothes.
In Pakistan dry clean industry has grown over the years in small set-ups, with low quality
services, and there is a need for better service oriented dry clean units. There is a lot of
unfilled demand as can be judged from excessive rush at the existing dry clean setups.
The business is service-oriented and carries large potential for profits due to its unique
nature and uncontrolled spending of people, especially on marriages. The life style of the
people in Pakistan has changed over the years. Now days, people are more conscious
about their clothes and the need for dry cleaning has increased.
4.3 Market Entry Timing
The suitable timings for starting this business would be in October because this type of
business has a busy schedule in winters. In winter season, people normally wear worm
clothes that are sweaters, jackets, suits etc. and it is also season of weddings. Due to these
activities and wearing pattern the demand for dry cleaning increases compared to other
seasons.
4
4.4 Proposed Business Legal Status

There are three main forms of business: Sole Proprietorship, Partnership and Company.
An enterprise can be a proprietorship or a partnership and even it can be registered under
company law with corporate law authority. Although selection totally depends upon the
choice of the entrepreneur but this financial feasibility is based on a private limited
company.
For getting information on the formation of type of firm/company, please refer to the
website: www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html
It is recommended that the proposed project be started as a sole proprietorship or a
partnership because it requires less legal requirement. Similarly a lower income tax rate
of tax is applicable to sole proprietorship than that of companies.
4.5 Project Capacity and Rationale
The proposed dry clean will handle 60 kg of clothes per bath. Details of the project
capacity are as follow:
Table 4-1: Project Capacity
Project
Working hours per day
Operating shift per day
Working days per annum
Maximum clothes dry clean per day
Maximum weight of clothes per day
Maximum weight of clothes per batch
Hours utilized per batch (Laundry & Dry cleaning)
Dry Cleaning
8 hours
1
300 days
395 units of clothes
320 Kg
60Kg
1.5 hours
4.6 Project Investment

Total project cost of the proposed laundry and dry cleaning unit is Rs. 2.6 million. This
includes a fixed cost of Rs. 2.22 million and a working capital of Rs. 0.35 million.
4.7 Proposed Product Mix
Following is the product mix of the proposed laundry & dry cleaning shop:
5
Table 4-2: Proposed Product Mix

Average Weight Average Number Average Weight
per unit (kg)
of units per day
per day (kg)
Trousers
0.35
80.00
28.00
Coats (all Kinds)(winter)
2.00
15.00
30.00
Shirts
0.18
60.00
10.80
Jackets/sweater
2.25
15.00
33.75
Dupata
0.05
25.00
1.25
Shalwar Qameez
0.45
40.00
18.00
Blankets
2.25
10.00
22.50
Bed sheets
0.35
80.00
28.00
Curtain
1.25
10.00
12.50
Others(avg.)
2.25
60.00
135.00
Total
11.38
395.00
320
The proposed business is affected through seasonal variations. Following table shows the
seasonal distribution of different clothes/ fabric:
Table 4-3
Seasonal Variations
Description
Trousers
Shirts
Jackets/sweater
Dupta
Shalwar Qameez
Blankets
Bed sheets
Curtain
Others(avg.)
Total
Spring
6,000
Summer
6,000
Autumn
6,000
4,500
4,500
4,500
1,875
3,000
1,875
3,000
1,875
3,000
6,000
750
4,500
26,625
6,000
750
4,500
26,625
6,000
750
4,500
26,625
Winter
Total
6,000 24,000
1,125
1,125
4,500 18,000
1,125
1,125
1,875
7,500
3,000 12,000
750
750
6,000 24,000
750
3,000
4,500 18,000
29,625 109,500
4.8 Recommended Project Parameters

Capacity
320 kgs per day
Project Cost
Rs. 2.6 Million
Human Resource
7
Technology/Machinery
Location
Local Manufacturing
See Table 8-3
Machinery
Financial Summary
IRR
NPV
Payback Period
33.39%
Rs. 1.59 Million
3.5 years
6
4.9 Proposed Location

Large public sector dry cleaners are concentrated in major cities of the country.
Therefore, it is suggested that new dry cleaner should be opened up in areas mentioned in
table 8-3, where there is little presence of existing dry cleaning facilities.
5. SECTOR & INDUSTRY ANALYSIS
5.1 Sector Characteristics
The numbers of Dry Cleaners in Pakistan has increased at a slow pace over the last few
years. The size of this sector is still growing. There are few large dry cleaners operating
in commercial areas of Lahore like Mall Road, Defence and Main Market Gulberg. They
have a created a monopolized situation with less competition. They are currently four to
five large-scale dry cleaners in Lahore such as Pearl dry cleaners at Barkat Market and
Mall Road, British Kwick dry cleaners at Mall Road, National dry cleaners at Wahdat
Road and Faisal Town and PC dry cleaners. These dry cleaners are using machines of
60kg capacity in general. Similarly, few large Dry cleaners have also been operating in
prime business locations in Rawalpindi, Multan, Karachi and Quetta.
6. MARKET INFORMATION
6.1 Market Potential
From 1981 to 2004 the estimated population of Pakistan has grown from 85 million to
150 million making Pakistan the seventh most populous country in the world. This
growth rate has increased the demand for various products and services, and one of the
services is the proposed business. People in big cities are now inclined to use more
sophisticated measures to cleaning their clothes. These people range from middle class to
upper class.
6.2 Target Customers
The major target market for the dry cleaning services will depend on the location where
dry cleaning business is situated. The target customers for proposed business will not
only be general public but also the commercial sector i.e. hostels, catering companies,
film industry and hospitals.
7. PRODUCTION PROCESS
7.1 Production Process Flow
Liquid solvent and small amount of water are added to the machine. The machine then
agitates clothes in a manner similar to a domestic washing machine to remove dirt, oil,
and stains. Once clean, the clothes are then manually transferred to a dryer (laundry
procedure), then pressed and shaped.
7
a) Tagging
Detergent
(Washing
Soap
Simple)
Perclon
(Chemical
used)
b) Washing
Bleach on
white
clothes
c) Dry Clean
d) Drying
e) Steam
Pressing
The above chart shows two processes separately that are laundry and dry cleaning. Each
process is explained as below:
a) Tagging :- The clothes are firstly tagged with a specific number, mentioned in the
invoice given to customers. This procedure is used for identification of clothes once
ready for collection by the customers
b) Washing :- The clothes are washed in a washing machine using detergent i.e. Surf,
washing powder etc. This procedure is only followed when laundry service is
required by the customers.
c) Dry Cleaning: - In this process, the sensitive, expensive and only dry clean
recommended clothes are cleaned. The chemical used to clean the clothes in this
process is called Perclon (see raw material section for details).
d) Drying :- The clothes washed in a laundry procedure are dried using dryers.
e) Steam Pressing :- In this process both the clothes either washed or dry cleaned are
pressed and shaped using steam press equipments.
f) Packing :- Once pressed, the clothes are properly hanged and covered in the plastic
wrap and then tagged so that it can be easily identified.
8
7.2 Raw Material Requirement

Raw material used for the purpose of dry cleaning of clothes is Perclon chemical by ICI
Pakistan. Perchloroethylene, or perclon, is the dominant chemical solvent used in dry
cleaning. Perclon (Perchloroethylene) is a liquid chemical that consists of 40% alcohol,
50% kerosene oil and 10% liquid used to save the color fading of clothes. Perclon
(Perchloroethylene) is a clear, colorless liquid and evaporates quickly.
Bleach is also used especially for white clothes. Detergent is used for simple washing i.e.
washing soap and surf. Following table shows the raw material costing:
Table 7-1
Raw Material Costing
Chemicals
Perc Lon
Bleach
Tar pine Oil
Cost of chemicals per day
Packing Cost
Total raw material cost
Quantity
Required per
day (Liter)
20
2
20
Rate per
Liter
285
55
30
Total
Cost per
day
5,700
110
600
Total Cost
Per Annum
(Rs.)
1,710,000
33,000
180,000
1,923,000
548,000
2,471,000
7.3 Revenues
The proposed product mix has been given in table 4-2. Sale prices and the number of
clothes processed are listed in the table below:
Table 7-2
Sale Price
Items
Trousers
Shirts
Jackets/sweater
Dupatta
Shalwar Qameez
Blankets
Bed sheets
Curtain
Others(avg.)
Total
Number of units
per year
24,000
1,125
18,000
1,125
7,500
12,000
750
24,000
3,000
18,000
109,500
Rate (Rs.)
55
100
25
120
15
45
190
60
140
70
Total sale
price (Rs.)
1,320,000
112,500
450,000
135,000
112,500
540,000
142,500
1,440,000
420,000
1,260,000
5,932,500
7.4 Technology and Processes

There are several manufacturers of dry cleaning machines in Pakistan. In Lahore, there
are approximately 5 to 6 manufactures of such machines i.e. Abdul Waheed at Canal Park
9
Gulberg, Mushtaq Engineering Works at Township, some others are in Bund Road,
Qainchi and Model Town. These machines can also be imported from the following
countries:
Italy
Germany
China
Japan
However, the prices of imported machinery are 2 to 3 times higher than local machinery.
In terms of quality of cleaning and capacity, there is no major difference between local
and imported machinery. Therefore, it is advisable to acquire locally manufactured
machinery rather than the imported machinery.
7.5 Machinery Requirement
Total number of different machines required for the proposed project is as follows:
Table 7-3: Machinery Requirement
Description
Washing Machine (60Kg)
Hydro Extractor(25Kg)1
Dryer (60Kg)
Dry Clean Machine (10Kg)
Steam Press with compressor and Boiler
Form Finisher (Recondition )
Total
No.
1
1
1
1
1
1
6
Cost Per Unit in Rs.

165,000
38,000
135,000
550,000
310,000
185,000
Total in Rs.
165,000
38,000
135,000
550,000
310,000
185,000
1,383,000
Table 7-4: Customer Dealing Office Equipment Requirement

Description
Split Unit
Telephone Sets
Fire Extinguish
Total
No.
1
2
1
Hydro Extractor spins the clothes before these are passed on to dryer
10
Cost Per Unit(Rs.)

40,000
400
4,000
Total(Rs.)
40,000
800
4,000
44,800
Table 7-5: Other Equipment Requirement

Description
Fan(56)
Exhaust Fan
Water Cooler
Lighting Appliances
Total
No.
4
1
1
1
Cost Per Unit(Rs.)

1,400
500
8,500
6,000
Total(Rs.)
5,600
500
8,500
6,000
20,600
Table 7-6: Furniture, Fixture and vehicle Requirement

Description
Wardrobes
Sofa set 2 seater
Counter Table
Chairs
Stole
Suzuki Loader2
Total
No.
2( 10ftx3ft)
1
1
3
3
1
Cost Per Unit(Rs.)

12,000
2,000
3,500
500
150
450,000
Total(Rs.)
24,000
2,000
3,500
1,500
450
450,000
481,450
Table 7-7: Total Cost of Infrastructure

Description
Machinery Cost
Customer dealing Office Equipments
Other Equipments
Furniture, Fixture and vehicle
Total
Cost (Rs.)
1,383,000
44,800
20,600
481,450
1,929,850
7.6 Machine Maintenance

Routine inspection of machinery is essential for long life of the machinery. One lubricant
is used twice in a year before peak season.
Suzuki Loader is used to provide pick and drop service to commercial sectors i.e. hotels, hospitals etc.
11
8. LAND & BUILDING REQUIREMENT

8.1 Land Requirement
For the recommended machinery, office, furniture & fixture and other equipments,
approximately 1,125 square feet area is required.
8.2 Covered Area Requirement
Following is the covered area requirement split into various sections. It is recommended
that customer dealing office area should be separate from the machine and working area.
Table 8-1
Covered Area
Sections
Customer Dealing Office Area
Working & Machine Area
Total Covered Area
Table 8-2
Area
22.50 x 20
27 x 25
Total Area (sq. ft.)

450
675
1,125
Construction Cost
Cost
Area is Sq ft.
Customer Dealing Office Area

Working and Machinery Area
Total
450
675
Cost per Sq ft.

(Rs.)
600
300
Total Cost
(Rs.)
270,000
202,500
472,500
8.3 Recommended Mode

It is suggested that for proposed dry cleaning business, area should be rented. The rent
cost for the business depends on the area where the business is situated. Starting the dry
cleaning in a rented area would significantly reduce the initial capital cost of the project.
A shop having 1,125 square feet area can be rented for approximately Rs. 20,000 per
month in commercial areas of large cities of the country.
8.4 Utilities Requirement
Electricity
Telephone
Gas
Water
8.5 Suitable Location

The dry cleaner is supposed to be in a location that is easily accessible and has
considerable population concentration. Considering the spread of new residential area
some of the suitable areas are:
12
Table 8-3: Suitable Locations

City
Lahore
Islamabad
Karachi
Quetta
Faisalabad
Multan
13
Location
Main Road Johar Town
PCSIR Canal Area
Valencia
Wapda Town
Punjab Co-operative Society
Sabza Zar
Eden City
Aabpara Market
Super Market
Blue Area
Karachi Company
Gulshan Iqbal
Defence Phase 1 to 111
Tariq Road
Sadar
Federal B Area
Cantonment Area
Liaqat Bazar
Saryab Road
Satelite Town
Jinnah Road
Satelite Town
Madina Town
Railway Road
Peoples Colony(D Ground)
Satiana Road
Cantonment Area
New Multan
9. HUMAN RESOURCE REQUIREMENT

For the proposed size of dry cleaning, following manpower is required:
Table 9-1: HR Requirement
Position
Required
Supervisor
Machine Operators
Semi Skilled Workers
Total
1
3
3
7
Salary Per
Month(Rs.)
8,000
5,000
3,000
32,000
Salary Per
Annum(Rs.)
96,000
180,000
108,000
384,000
9.1 Estimated Time For Project Completion

1. 20 days for completion of initial formalities, i.e., selection of suitable location and
renting of building etc.
2. 1 month for sanction of loan (in case, if financing has to be arranged through bank).
3. 1.5 month for purchase of machinery and equipments.
4. 1 month for furnishing and staff appointments.
5. This project can take-off within 2 months, as some of the activities will be in progress
simultaneously.
10. PROJECT COST
Table 10-1: Project Cost
Description
Plant & Machinery (Local)
Pre-production expenses
Furniture, fixture, equipment and vehicle
Erection and Installation (5% of machinery cost)
Contingencies
Total fixed cost
Initial working capital
Project cost
Total Cost (in 000Rs.)

1,383
145
547
69
75
2,219
373
2,592
Table 10-2: Financing Plan

Description
Debt
Equity
Total
%
50
50
14
Amount (in 000Rs.)

1,296
1,296
2,592
11. FINANCIAL ANALYSIS

11.1 Project Costs
Laundry and Dry Cleaning

PROJECT COST
Rs in 1000
Total Cost
DESCRIPTION
Plant & Machinery (Local)

Pre-production expenses
Furniture, fixture, equipment and vehicle
Erection and Installation
Contingencies
Total fixed cost
Initial working captial
Project cost
1,383
145
547
69
75
2,219
354
2,573
Means of Finance
Debt
Equity
50%
50%
1,287
1,287
%
Yrs.
Rs.
33.39%
3.48
1,593
Project Returns
IRR
Pay Back period
NPV
15
11.2 Projected Income Statement

PROJECTED INCOME STATEMENT
YEAR
Sales
Less: cost of sales
Gross profit
Less: operating expenses
Administrative
Rs. in 1,000
1
10
2,966
1,975
3,433
2,170
3,927
2,378
4,458
2,604
5,029
2,848
5,651
3,112
6,359
3,396
7,109
3,699
7,902
4,025
8,742
4,374
991
33
1,263
37
1,549
39
1,854
42
2,181
43
2,539
45
2,963
47
3,410
48
3,877
49
4,368
50
575
614
657
704
757
788
854
926
1,004
1,090
575
614
657
704
757
788
854
926
1,004
1,090
Operating profit
Less:
Financial expenses
Profit Before Taxation
Income Tax
416
649
892
1,150
1,424
1,751
2,109
2,484
2,873
3,278
122
294
(23)
96
553
68
71
821
161
45
1,105
261
19
1,405
366
1,751
487
2,109
612
2,484
743
2,873
880
3,278
1,021
Net profit After Taxation

Retained earnings
Net profit transferred to Balance sheet
Opening balance
Profit for the year
317
317
317
485
317
802
317
485
660
802
1,462
802
660
844
1,462
2,306
1,462
844
1,039
2,306
3,345
2,306
1,039
1,264
3,345
4,609
3,345
1,264
1,497
4,609
6,106
4,609
1,497
1,741
6,106
7,847
6,106
1,741
1,993
7,847
9,840
7,847
1,993
2,257
9,840
12,097
9,840
2,257
Profit for appropriation
317
802
1,462
2,306
3,345
4,609
6,106
7,847
9,840
12,097
802
1,462
2,306
3,345
4,609
6,106
7,847
9,840
12,097
Drawings
Closing balance
317
16
11.3 Projected Balance Sheet

PROJECTED BALANCE SHEET
YEAR
CAPITAL & RESERVES:
Share capital
Retained earnings
Rs. in 1,000
0
10
1,287
1,287
1,287
317
1,604
1,287
802
2,089
1,287
1,462
2,749
1,287
2,306
3,593
1,287
3,345
4,632
1,287
4,609
5,896
1,287
6,106
7,393
1,287
7,847
9,134
1,287
9,840
11,127
1,287
12,097
13,384
771
771
513
513
255
255
LOANS AND DEFERRED LIABILITIES:

Term Loan
1,287
1,287
CURRENT LIABILITIES:
Current portion of long term liability
A/C Payable
Accrued Exp.
Tax Payable
2,574
258
32
50
(23)
317
2,692
258
33
52
68
411
3,013
FIXED ASSETS:
Fixed Assets
2,074
1,874
2,074
145
Pre-Operation Expenses
CURRENT ASSESTS:
Advance rent
Store & Spares Inventory
Raw material inventory
A/C Receivable
Cash/Bank
258
38
55
161
512
3,516
255
42
58
261
616
4,209
47
61
366
474
5,106
53
65
487
605
6,501
59
68
612
739
8,132
65
72
743
880
10,014
72
76
880
1,028
12,155
79
80
1,021
1,180
14,564
1,674
1,474
1,274
1,074
874
674
474
274
74
1,874
116
1,674
87
1,474
58
1,274
29
1,074
-
874
674
474
274
74
120
1
124
110
355
2
141
69
490
702
2
160
80
1,010
1,252
2
180
92
1,710
1,984
2
201
104
2,599
2,906
2
224
117
3,689
4,032
2
249
132
5,244
5,627
2
276
148
7,032
7,458
2
304
166
9,068
9,540
2
334
184
11,361
11,881
204
14,286
14,490
2,574
-
2,692
-
3,013
-
3,516
-
4,209
-
5,106
-
6,501
-
8,132
-
10,014
-
12,155
-
14,564
-
17
11.4 Projected Cash Flow Statement

PROJECTED CASH FLOW STATEMENT
YEAR
Operating activities
Net profit
Amortization (Pre-operational Expenses)
Depreciation
Raw Material Inventory
Store & Spare Inventory
Accounts receivable
Accounts payable
Tax Payable
Salaries & Other Expense Payable
Building rent prepayments
Prepaid Payments
Cash provided by operations
Financing activities
Long term debt principal repayment
Addition to Long Term Debt
Owner's investment
Cash provided by/ (used for) financing
activities
Investing activities
Capital expenditure
Cash (used for)/ provided by investing
activities
Net Cash
Cash balance brought forward
Cash carried forward
Rs. in 1000
(124)
(1)
(120)
(245)
1,287
1,287
2,574
317
29
200
(17)
(1)
(69)
32
(23)
50
485
29
200
(19)
(11)
1
91
2
660
29
200
(20)
(12)
5
93
3
120
638
778
958
(258)
(258)
(258)
(258)
(258)
1,147
(258)
-
(258)
1,039
29
200
(23)
(13)
5
105
3
1,264
200
(25)
(15)
6
121
4
1,497
200
(27)
(16)
6
125
3
1,741
200
(28)
(18)
6
131
4
1,993
200
(30)
(18)
7
137
4
2,257
200
334
2
(20)
7
141
4
1,345
1,555
1,788
2,036
2,293
2,925
10
(255)
-
(258)
(255)
(2,219)
(2,219)
110
110
380
110
490
520
490
1,010
700
1,010
1,710
889
1,710
2,599
1,090
2,599
3,689
1,555
3,689
5,244
1,788
5,244
7,032
2,036
7,032
9,068
2,293
9,068
11,361
2,925
11,361
14,286
18
844
29
200
(21)
(12)
4
100
3
12. FINANCIAL ASSUMPTIONS

Table 12-1
Operating Assumptions
Annual production capacity (No. of units)

Operating Shift per day
Operating hours per shift
Days operational per year
No. of Batches
Hours consumed for one batch
Table 12-2
118,500
1
8
300
5.33
1.50
Machinery Assumptions
Number of Machines Installed

Initial year capacity
Maximum capacity
Annual capacity growth rate
Depreciation rate on machinery (Straight Line Method)
Table 12-3
Revenue Assumptions
Sales prices
Sales price growth rate
Table 12-4
6
50%
95%
5%
10%
Industry norms
4-5%
Financial Assumptions
Project life (Years)

Debt
Equity
Interest rate on long term debt
Debt tenure (Years)
Principal debt repayments per year
No. of installments in a year
Amortization (years)
Table 12-5 Cost of sales Assumptions
10
50%
50%
10%
5
130,000
2
5
Raw Material cost growth rate

Wage and salaries growth rate
Fringe Benefits
Power, fuel and water per month
Variable Charges growth rate
Repair and maintenance (%age of cost of machinery)
Repair and maintenance growth rate
Insurance of Plant and Machinery
19
5%
5%
5%
Rs. 5,083
5%
1%
5%
4.50%
Insurance of Vehicle
Insurance of Stock
Insurance of Stores and Spares
Depreciation (straight line method)
Table 12-6
3.00%
2.00%
5.00%
10%
Operating Assumptions
Telephone Expense per year

Printing & stationery per year
Legal & professional charges per year
Entertainment per year
Shop rent per year
Advertisement per year3
Traveling & conveyance per year
Repair and maintenance of vehicle per year
Miscellaneous expenses per year
Administrative expense growth rate
Income Tax (percentage of Net Profit)
Table 12-7
Contingency Expense Assumptions
Erection and Installation

Machinery
Furniture and Fixture
Pre-operating Expenses
Vehicles
Table 12-8
5%
3%
1%
5%
5%
Cash Flow Assumptions
Accounts Receivable in days

Accounts Payable in days
Raw Material Inventory (days)
Stores and Spares Inventory (days)
Salaries and other expenses payable
Minimum Cash Required
Advance rent
Table 12-9
7
7
30
30
30
Rs.109,000
6 months
Pre-operational Expenses
Appraisal fee & Legal Documentation

Trial run expenses
Other pre-operating overheads4
Rs. 34,000
Rs. 12,000
Rs. 12,000
Rs. 48,000
Rs.240,000
Rs. 60,000
Rs. 43,000
Rs. 18,000
Rs. 24,000
10%
35%
Rs.25,000
Rs.50,000
Rs.70,000
No growth in advertisement expenditure is assumed

Pre operating expenses include salaries & wages, traveling, and other expenses
20

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Pre-Feasibility Study