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Pre-Feasibility Study Prime Ministers Small Business Loan Scheme

(Gemstone Lapidary)

Small and Medium Enterprises Development Authority Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan e Iqbal, Egerton Road, Lahore Tel 92 42 111 111 456, Fax 92 42 36304926-7 helpdesk@smeda.org.pk REGIONAL OFFICE PUNJAB 3rd Floor, Building No. 3, Aiwan e Iqbal, Egerton Road Lahore, Tel: (042) 111-111-456 Fax: (042)6304926-7 helpdesk.punjab@smeda.org.pk REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE KPK Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

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Table of Contents
1. DISCLAIMER .......................................................................................................................................... 2 2. PURPOSE OF THE DOCUMENT ......................................................................................................... 3 3. INTRODUCTION TO SMEDA .............................................................................................................. 3 4. INTRODUCTION TO SCHEME ........................................................................................................... 4 5. EXECUTIVE SUMMARY ...................................................................................................................... 4 6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 4 7. CRITICAL FACTORS ............................................................................................................................ 5 8. INSTALLED & OPERATIONAL CAPACITY .................................................................................... 5 9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT/SUITABLE LOCATIONS........................ 5 10. 11. 12. 12.1. 12.2. 12.3. 12.4. 12.5. 12.6. 12.7. 12.8. 12.9. 12.10. 12.11. 13. 14. 14.1. 14.2. 14.3. 14.4. 14.5. 15. POTENTIAL TARGET MARKETS/CITIES ................................................................................. 6 PRODUCTION PROCESS FLOW .................................................................................................. 7 PROJECT COST SUMMARY ......................................................................................................... 7 PROJECT ECONOMICS ..................................................................................................................................7 PROJECT FINANCING ...................................................................................................................................8 PROJECT COST.............................................................................................................................................8 SPACE REQUIREMENT..................................................................................................................................8 MACHINERY AND EQUIPMENT .....................................................................................................................9 RAW MATERIAL REQUIREMENTS .............................................................................................................. 10 ROUGH GEMSTONES .................................................................................................................................. 10 LAPIDARY CONSUMABLES INVENTORY ..................................................................................................... 10 HUMAN RESOURCE REQUIREMENT ........................................................................................................... 11 REVENUE GENERATION ............................................................................................................................. 11 OTHER COSTS............................................................................................................................................ 11 CONTACTS ...................................................................................................................................... 12 ANNEXURE ..................................................................................................................................... 13 INCOME STATEMENT ................................................................................................................................. 13 STATEMENT OF CASH FLOW ............................................................................................................. 14 BALANCE SHEET .................................................................................................................................. 15 USEFUL PROJECT MANAGEMENT TIPS ........................................................................................... 16 USEFUL LINKS ...................................................................................................................................... 17 KEY ASSUMPTIONS ..................................................................................................................... 19

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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and information on the said matter. Although, the material included in this document is based on data/information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision, including taking professional advice from a qualified consultant/technical expert before taking any decision to act upon the information. For more information on services offered by SMEDA, please contact our website: www.smeda.org.pk

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2. PURPOSE OF THE DOCUMENT


The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, marketing, finance and business management. The purpose of this document is to facilitate potential investors in Gemstone Lapidary by providing them with a general understanding of the business with the intention of supporting potential investors in crucial investment decisions. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules; best practices developed by existing enterprises by trial and error, and certain industrial norms that become a guiding source regarding various aspects of business set-up and its successful management. Apart from carefully studying the whole document one must consider critical aspects provided later on, which form basis of any Investment Decision.

3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). With a mission "to assist in employment generation and value addition to the national income, through development of the SME sector, by helping increase the number, scale and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify policy, access to finance, business development services, strategic initiatives and institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a successful hallmark of SME facilitation by SMEDA. Concurrent to the prefeasibility studies, a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services.

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4. INTRODUCTION TO SCHEME
Prime Ministers Small Business Loans Scheme, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu &Kashmir and Federally Administered Tribal Areas (FATA).

5. EXECUTIVE SUMMARY
While, Lahore & Karachi with its large Gold and Gem studded jewellery making industry are suitable locations,Gems Lapidaryis proposed to be located at Peshawar since major trade/export is taking place in this city. Within Peshawar, Namak Mandi area is preferable as large Gem Cluster exists here. These jewelry markets are the main customers of the cut and polished gemstones. The proposed unit will process rough Gemstones, initially semi precious gems stones like Aquamarine, Peridot, Tourmaline etc. TheseGemstones mainly come from mines in Chitral, Mardan and Gilgit Baltistan in addition to gems from Afghanistan and other nearby locations. Proposed unit will have the capacity to process 3,000 units (Cut & Polished Gemstones, (average 3carat weight per stone). In the first year of operation, the unit would run on 60% of the total production capacity which is processing 1,800 pieces. The total cost of the project is Rs. 2.08 million, with capital cost of Rs. 1.19 million and operation cost of Rs. 0.89 million. Given the cost assumptions, IRR and payback are 37% and three yearsrespectively, thus making the project a profitable venture. The most critical considerations or factors for success of the project are: 1. Awareness about current market trends i.e the type of stone & type of cut required by the customers, which in this case are jewellers. 2. Availability of skilled labour.

6. BRIEF DESCRIPTION OF PROJECT & PRODUCT


Technology: This proposed unit with modern processing machines includ faceting, cutting and polishing will produce cut and polished precious and semiprecious gem stones of both calibrated and non-calibrated types.

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Location:The unit will be located in or near gems trading clusters such as Namak Mandi in Peshawar or Lahore and Karachi also where access to raw gemstones is easy. Product:The unit would initially process semi precious gem stones like Aquamarine, Tourmaline, Peridot etc which comes from Chitral and Northern areas. Target Market: An enormous export market for the Pakistani gemstones exists in Europe, USA, Middle East, Hong Kong, Taiwan, etc. It is of significance that the Gem industry and the Government of Pakistan are recognizing the potential for the local value addition and consequently import duty on lapidary equipment has been waived off. Employment:The proposed project will provide direct employment to 9 people. Profitability: Financial analysis shows the unit shall be profitable from the very first year of operation.

7. CRITICAL FACTORS
The commercial viability of the Gemstone Lapidary depends primarily on the regular orders from the customers. Following are some other points that have to be ensured to make the business successful: 1. Awareness about current market trends i.e the type of stone & type of cuts required by the customers, which in this case are the jewellers. 2. Availability of skilled labour. 3. Timely delivery of orders 4. Availability of raw material (rough, uncut and unpolished gemstones).

8. INSTALLED & OPERATIONAL CAPACITY


The installed capacity shall be 3,000 pieces per year. The project will run with approximately 60% capacity in first year of its operations with annual increase of 3% in production, constraint being skill levels.

9. GEOGRAPHICAL LOCATIONS

POTENTIAL

FOR

INVESTMENT/SUITABLE

The most appropriate location for setting up a Gem lapidary would be Peshawar since major trade/export is taking place in this city. Within Peshawar, Namak Mandi area is preferable as large Gem Cluster exists here. Similarly, Lahore & Karachi with its large Gold and Gem studded jewellery making industry are other suitable locations. Chitral and Mingora as well as Gilgit and Skardu are also suitable locations for establishment of Gems Lapidary due to proximity of raw material sources.
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10.

POTENTIAL TARGET MARKETS/CITIES

Initially the products, mainly semi-precious nature gemstones will be processed by focusing on demand of the jewellery manufactures of Karachi, Lahore and Peshawar. After having reasonable domestic customers base, export market can be targeted provided exports standards are met. The main export markets for Pakistani Gemstone are U.A.E, United Kingdom, Thailand, Canada, Italy, China, Netherlands, Saudi Arabia, USA, Hong Kong and Germany

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11.

PRODUCTION PROCESS FLOW


DeliverytoC ustomers

RawStones of Customers

Grading

Cutting

Polishing

Purchaseof RawStones

SaletoMark et

The process of Lapidary includes grading, cutting and polishing of Gemstones. Raw stones are either purchased from the market or provided by the customers (Jewellers). Individual stone is then examined (graded) and cut into smaller stones along its major line of fracture and inclusions. The smaller pieces are then mounted on cutting tools, which are then faceted on faceting machines. The final operation involves polishing of the faceted stones. Polished stones are then delivered to the customers or sold in the market.

12.

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of Gemstone Lapidary under the Prime Ministers Small Business Loan Scheme. Various cost and revenue related assumptions along with results of the analysis are outlined in this section.

12.1.

PROJECT ECONOMICS

A target processing and production of 3000 units (cut & polished gemstones) whereby units processed and produced by Gemstone lapidary in year one will be around 1800 units (cut & polished Gemstones) running at 60% production capacity. The following table shows internal rates of return and payback period.
Table 1 - Project Economics Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV) Details

37% 3 years 4,671,546

Some of the critical factors influencing the commercial viability of this Gemstone Lapidary depend primarily on the regular orders from the customers and supply of rough Gems from mines. Apart from this awareness about current market trends i.e. the type
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of stone & type of cut required by the consumers, delivering orders on time, availability of raw material (gemstones), reliability and contacts with the traders proximity to the Gem cluster for easy availability of raw material must be taken care off for smooth running of the project A return on the investment and profitability of the project is highly dependent on the above mentioned factors.

12.2.

PROJECT FINANCING

Following table provides details of the equity required and variables related to bank loan;
Table 2 - Project Financing Description Total Equity (10%) Bank Loan (90 %.) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Details Rs 208,200 Rs. 1,873,800 8% 7

12.3.

PROJECT COST

Following requirements have been identified for operations of the proposed business.
Table 3: Capital Investment for the Project

Cost description Plant and Machinery Furniture/ Fixture Pre-operational Expenses Total Fixed Cost Lapidary Consumables Inventory Raw material inventory Upfront Building Rent (12 Months) Working Capital Total Project Cost

Total Cost (Rs.) 990,000 150,000 50,000 1,190,000 90,000 300,000 252,000 250,000 2,082,000

12.4.

SPACE REQUIREMENT

The project is proposed to setup in a rented building. In this way, the initial capital cost of the project will be far less. The area has been calculated on the basis of space requirement for processing area and office. The Units operating in the industry do not follow any set pattern. Following table shows calculations for project space requirement.

Table 4: Space Requirement

Space Requirement (in ft.) Cutting & Polishing Room Offices & Strong Room

Rs/Sqft 26 28
8

Sqft 500 250

Amount (Rs.) 13,000 7,000

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Total Area

27

750

21,000

12.5.

MACHINERY AND EQUIPMENT

Following combination of machinery is required for cutting and polishing of approximately 3000 units (cut & polished gemstone, with average weight of 3 carats) per year. Approximate prices for machinery of different origins are given below:
Table 5: List of Machinery and Equipment

Machinery Description Trim Saw Faceting unit Calibrating machines with wheels Dual Grinder Wet belt sander Horizontal Vertical Faceting Accessories Faceting Table Total

Replacement Year

Capacity Units/Hr

Quantity 2 2 1 2 1 1 1 1

Cost Rs/unit 60,000 60,000 350,000 40,000 70,000 80,000 150,000 20,000

Total Rs. 120,000 120,000 350,000 80,000 70,000 80,000 150,000 20,000 990,000

Main equipments for Gemstone Lapidary is the Trim saw for initial trimming of rough Gemstone. After the initial trimming the faceting takes place followed by polishing.

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12.6.

RAW MATERIAL REQUIREMENTS

Details of Lapidary Consumables and rough (uncut and unpolished) Gemstones are given below:

12.7.

ROUGH GEMSTONES
Table 6 Raw material (Rough Gemstones)

Raw Material Rough Aquamarine Rough Tourmaline Total

Weight (grams) 1,500 1,500 3,000

Carat Weight 7,500 7,500 15,000

Rate/carat 20 20 20

Total Cost (Rs.) 150,000 150,000 300,000

In the first stage the rough gemstone are graded on the basis of quality for further processing. According to industry sources, when 3000 grams of rough Gemstones are processed almost 30% i.e. 900 grams turns out which are not suitable for cutting and polishing and around 70% i.e. 2100 grams are process able.

12.8.

LAPIDARY CONSUMABLES INVENTORY

Basic raw material required for cutting and polishing gemstones is Silicon Carbide Paper, which comes in three sizes of 220, 400 and 1000 meshes. Raw material required for grinding and polishing of precious stones includes Diamond Powder, Cerium Oxide and Crome Oxide, Expandable Drum and Grinding Wheels etc.
Table 7: Lapidary Consumables Inventory

Raw Material Silicon Carbide Paper 220 mesh 600 mesh 1000 mesh Diamond Powder 0.5 micron (Rs.25/carat) 1 micron (Rs.30/carat) 15 micron (Rs.30/carat) Sanding belt 6 X 0.5 220 (75/piece) 600 (75/piece) Sanding disk 220 (75/pc) 600 (75/pc) Cerium Oxide (500/lbs) Crome Oxide (500/lbs)
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Qty 200 Carats 300 Carats 300 Carats 200 Carats 300 Carats 300 Carats 50pc 50pc 50pc 50pc 5 lbs. 10 Kg

Cost (Rs.) 5,000 9,000 9,000 5,000 9,000 9,000 3,750 3,750 3,750 3,750 2,500 5,000

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Grinding Wheels (1200/piece) Expandable Drum 6 X 0.5 (3000/drum) Leather Belt for polishing (1000/belt) MISC/Contingencies Total

12 2 5 -

14,400 6,000 5,000 8,300 Rs. 90,000

12.9.

HUMAN RESOURCE REQUIREMENT


Table 8: Human Resource Requirement No. of Employees Salary per month

Description

Manager/Supervisor Cutters @10000 Accounts/Administration Incharge Helper/Peons Security Services Fees Total

1 5 1 1 1 9

35,000 50,000 12,000 10,000 10,000 117,000

12.10.

REVENUE GENERATION

In the first year of production, the unit will process 1800 units @60% production capacity with 3% annual production increase, and process the finished product with an average weight of 3 carats. Initially semi- precious stones i.e Aquamarine, tourmaline etc will be processed and later on cutting and polishing of precious stone like emerald and ruby will be undertaken.
Table 8: Revenue

Product Category A(Cut & polished Aquamarine&Tourmaline) Category B(Cut & polished Aquamarine&Tourmaline) Category C(Cut & polished Aquamarine&Tourmaline) Total Sales Revenue

Unit 3 carat 3 carat 3 carat

Sales Price (Rs./Unit) 5000 1800 700

First Year Production Units 306 630 864


1800

First Year Sales Revenue (Rs) 1,530,000 1,134,000 604,800 3,268,800

12.11.

OTHER COSTS

An essential cost to be borne is the monthly rent @ 20,000/month and utilities charges @ 10,000/ which are projected to increase at the rate of 10% per year. In year one the total rent cost amounts to Rs. 240,000. Similarly, electricity expense is estimated to be about 10,000 per month which comes to Rs.120,000 per annum.
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13.

CONTACTS
M/S Malik Gems International Namak Mandi Peshawar Ph# 0321-8592517 091-5252517

1. Mr. Pervez Ellahi Malik

2. Mr. Afzal Khan Lapidary Instructor GJTMC, Peshawar Ph# 091-5269253 3. Mr. Naveed Masood Director GGIP, Peshawar Ph# 091-9213197 0333-9155097

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14.

ANNEXURE INCOME STATEMENT


YEAR- 1 YEAR- 2 YEAR- 3 YEAR- 4 YEAR- 5 YEAR- 6 YEAR- 7 YEAR- 8 YEAR- 9 YEAR- 10

14.1.
Projected Income Statement

ALES Gem Stone (Cut & Polished) 1,530,000 1,134,000 604,800 272400 OST OF SALES Gem Stone (Cut & Polished) 390,000 390,000 120,000 1,404,000 57,000 22,800 252,000 471,900 471,900 132,000 1,544,400 54,150 21,660 264,600 570,999 570,999 145,200 1,698,840 51,443 20,577 277,830 690,909 690,909 159,720 1,868,724 48,870 19,548 291,722 836,000 836,000 175,692 2,055,596 46,427 18,571 306,308 1,011,560 1,011,560 193,261 2,261,156 44,106 17,642 321,623 1,223,987 1,223,987 212,587 2,487,272 41,900 16,760 337,704 1,481,024 1,481,024 233,846 2,735,999 39,805 15,922 354,589 1,792,039 1,792,039 257,231 3,009,599 37,815 15,126 372,319 2,168,368 2,168,368 282,954 3,310,559 35,924 14,370 390,935 3,268,800 1,767,150 1,309,770 698,544 3,775,464 2,041,058 1,512,784 806,818 4,360,661 2,357,422 1,747,266 931,875 5,036,563 2,722,823 2,018,092 1,076,316 5,817,231 3,144,860 2,330,896 1,243,145 6,718,901 3,632,314 2,692,185 1,435,832 7,760,331 4,195,322 3,109,474 1,658,386 8,963,182 4,845,597 3,591,443 1,915,436 10,352,476 5,596,665 4,148,116 2,212,329 11,957,110

OST OF GOODS SOLD ectricity Expanse ayroll Expanse (All Staff) eprecition Expanse achine Maintenance Expanse ent Expanse

mortization of Preliminary Expanses OTAL OPERATING EXPANSES ARNINGS BEFORE INTEREST & TAXES

10,000 1,865,800 1,013,000

10,000 2,026,810 1,276,754

10,000 2,203,890 1,585,772

10,000 2,398,584 1,947,071

10,000 2,612,594 2,368,637

2,837,788 2,869,554

3,096,223 3,440,121

3,380,161 4,101,997

3,692,089 4,868,347

4,034,741 5,754,001

INANCIAL EXPENSES nancial Charges on Long term loan OTAL FINANCIAL EXPENSES ROFIT BEFORE TAX INCOME TAX ROFIT AFTER TAX etained Earnings at the beginning of year ividend etained Earnings at the end of year

149,904 149,904 863,096 51,964 811,132 -

133,104 133,104 1,143,650 94,048 1,049,603 811,132 405,566

114,960 114,960 1,470,813 143,122 1,327,691 1,455,168 524,801 2,258,058

95,364 95,364 1,851,706 217,841 1,633,865 2,258,058 663,845 3,228,078

74,201 74,201 2,294,437 306,387 1,988,049 3,228,078 816,933 4,399,194

51,345 51,345 2,818,209 427,052 2,391,157 4,399,194 994,025 5,796,327

26,660 26,660 3,413,461 575,865 2,837,596 5,796,327 1,195,579 7,438,344

4,101,997 753,099 3,348,898 7,438,344 1,418,798 9,368,444

4,868,347 983,004 3,885,343 9,368,444 1,674,449 11,579,338

5,754,001 1,248,700 4,505,301 11,579,338 1,942,672 14,141,967

811,132

1,455,168

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14.2.

STATEMENT OF CASH FLOW

Projected Cash Flow Statement YEAR- 0 OPERATING ACTIVITIES Net Profit Add: Depreciation YEAR- 1 586,077 YEAR- 2 1,118,677 YEAR- 3 1,724,100 YEAR- 4 2,400,777 YEAR- 5 3,161,409 YEAR- 6 4,015,038 YEAR- 7 4,971,636 YEAR- 8 6,042,197 YEAR- 9 7,208,850 YEAR- 10 8,512,545

9,125

8,669

8,235

7,824

7,432

7,061

6,708

6,372

6,054

5,751

Amortization (Pre-operational Expenses)

(9,000)

4,500

4,500

Net profit before working capital changes Working Capital changes Raw materials stock W.I.P Finished goods stock Accounts payable Accounts receivable Working capital changes

(9,000)

599,702

1,131,846

1,732,335

2,408,601

3,168,841

4,022,099

4,978,344

6,048,569

7,214,904

8,518,296

(1,590,840) (1,590,840) -

960,797 (20,635) (141,277) 524,744 (660,201) 663,428 (58,608) 1,204,522

(24,842) (825) (5,651) 20,990 (66,020) (76,349) (90,302) 965,196

(25,835) (858) (5,877) 21,829 (72,622) (83,364) (192,320) 1,456,651

(26,869) (893) (6,112) 22,703 (79,884) (91,056) (327,655) 1,989,890

(27,944) (928) (6,357) 23,611 (87,873) (99,491) (512,852) 2,556,498

(29,061) (966) (6,611) 24,555 (96,660) (108,743) (727,011) 3,186,345

(30,224) (1,004) (6,875) 25,537 (106,326) (118,892) (1,013,991) 3,845,461

(31,433) (1,044) (7,150) 26,559 (116,959) (130,027) (1,337,269) 4,581,273

(32,690) (1,086) (7,436) 27,621 (128,655) (142,246) (1,745,598) 5,327,060

(33,998) (1,130) (7,734) 28,726 (141,520) (155,655) (2,201,891) 6,160,750

Cash provided by/ used in operations FINANCING ACTIVITIES Long term loan Owner equity Dividend paid Cash provided by/ used in Financing activities INVESTING ACTIVITIES Capital Expenditure Cash provided by/ used in Investing activities Net Cash Flow Cash balance B/ F Cash balance C/ F Cash Balance from BS

(1,599,840)

1,951,664 216,852 2,168,516

(218,728)

(236,226)

(255,124)

(275,534)

(297,577)

(321,383)

(347,093)

(263,735) (218,728) (499,961)

(514,188) (769,312)

(765,890) (1,041,424)

(1,036,561) (1,334,137)

(1,324,278) (1,645,661)

(1,644,013) (1,991,107)

(1,978,823) (1,978,823)

(2,352,464) (2,352,464)

(2,731,626) (2,731,626)

(182,500) (182,500) 386,176 386,176 215,176 215,176 985,794 386,176 1,371,970 1,380,970 1,380,970

465,235 1,371,970 1,837,206 1,846,206 1,846,206

687,339 1,837,206 2,524,545 2,533,545 2,533,545

948,466 2,524,545 3,473,011 3,482,011 3,482,011

1,222,361 3,473,011 4,695,372 4,704,372 4,704,372

1,540,684 4,695,372 6,236,056 6,245,055 6,245,055

1,854,354 6,236,056 8,090,410 8,099,409 8,099,409

2,602,450 8,090,410 10,692,860 10,701,859 10,701,859

2,974,596 10,692,860 13,667,456 13,676,455 13,676,455

3,429,124 13,667,456 17,096,580 17,105,579 17,105,579

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14.3.
PROJECTIONS
Projected Balance Sheet

BALANCE SHEET

YEAR-0 ASSETS Current Assets Cash & Bank Balance Raw materials stock W.I.P Finished goods stock 250,000 390,000 -

YEAR - 1

YEAR - 2

YEAR - 3

YEAR - 4

YEAR - 5

YEAR - 6

YEAR - 7

YEAR - 8

YEAR - 9

YEAR - 10

1,091,738 38,464 1,278 8,750

1,547,543 46,542 1,546 10,588

2,134,100 56,315 1,871 12,811

2,857,207 68,142 2,264 15,501

3,748,040 82,452 2,740 18,756

4,818,379 99,766 3,315 22,695

6,093,555 120,717 4,011 27,461

7,972,682 146,068 4,853 33,228

10,112,863 176,742 5,873 40,206

12,582,265 213,858 7,106 48,649

Receivables 640,000 TOTAL CURRENT ASSETS Fixed Assets At Cost less: Acc. Depreciation Intangible Assets Upfront Insurance 252,000 1,140,000

272,400 1,412,630

314,622 1,920,841

363,388 2,568,485

419,714 3,362,828

484,769 4,336,757

559,908 5,504,064

646,694 6,892,438

746,932 8,903,763

862,706 11,198,390

996,426 13,848,304

1,083,000

1,028,850

977,408

928,537

882,110

838,005

796,105

756,299

718,484

682,560

180,000

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

Pre-operational Expenses Worth TOTAL ASSETS LIABILITIES AND EQUITY Current Liabilities Current maturity of long term loan Accounts Payable TOTAL CURRENT LIABILITIES Non current Liabilities Long term Loan EQUITY Paid up Capital Retained Earnings Total Equity TOTAL LIABILITIES & EQUITY

50,000 2,082,000

40,000 2,715,630

30,000 3,139,691

20,000 3,705,893

10,000 4,421,365 5,318,867 6,422,069 7,748,543 9,700,062 11,936,875 14,530,864

226,801 32,500 259,301

244,945 39,325 284,270

264,541 47,583 312,124

285,704 57,576 343,280

308,561 69,667 378,227

333,246 84,297 417,542

101,999 101,999

123,419 123,419

149,337 149,337

180,697 180,697

1,873,800

1,436,997

1,192,052

927,511

641,806

333,246

208,200 208,200 2,082,000

208,200 811,132 1,019,332 2,715,630

208,200 1,455,168 1,663,368 3,139,691

208,200 2,258,058 2,466,258 3,705,893

208,200 3,228,078 3,436,278 4,421,365

208,200 4,399,194 4,607,394 5,318,867

208,200 5,796,327 6,004,527 6,422,069

208,200 7,438,344 7,646,544 7,748,543

208,200 9,368,444 9,576,644 9,700,062

208,200 11,579,338 11,787,538 11,936,875

208,200 14,141,967 14,350,167 14,530,864

15 September 2013

Pre-Feasibility Study

Gemstone Lapidary

14.4.
Technology

USEFUL PROJECT MANAGEMENT TIPS

Required spare parts & consumables:Suppliers credit agreements and availability as per schedule of maintenance be ensured before start of operations Energy Requirement: Should not be overestimated or installed in excess and alternate source of energy for critical operations be arranged in advance Machinery Suppliers: Should be asked for training and after sales services under the contract with the machinery suppliers. They must be communicated about the timely availability with clear mutual understanding of the required time period. Quality Assurance Equipment & Standards:Whatever means required products quality standards need to be defined on the packaging and a system to check them instituted, this improves credibility

Marketing Product Development & Packaging:Expert's help may be engaged for product/service and packaging design & development Sales & Distribution Network:Strong contacts with the civil works contractors focusing upon house constructions for middle class people and owners of retail shops. Price - Bulk Discounts, Cost plus Introductory Discounts:Price should never be allowed to compromise quality. Price during introductory phase may be lower and used as promotional tool. Product cost estimates should be carefully documented before price setting. Government controlled prices shall be displayed.

Human Resources Adequacy & Competencies: Skilled and experienced staff should be considered an investment even to the extent of offering share in business profit. Performance Based Remuneration:Attempt to manage human resource cost should be focused through performance measurement and performance based compensation. Training & Skill Development:Encouraging training and skill of self & employees through experts and exposure of best practices is route to success.
16 September 2013

Pre-Feasibility Study

Gemstone Lapidary

Least cost options for Training and Skill Development (T&SD) may be linked with compensation benefits and awards.

14.5.

USEFUL LINKS

Prime Ministers Office www.pmo.gov.pk Small & Medium Enterprises Development Authority (SMEDA) www.smeda.org.pk National Bank of Pakistan (NBP) www.nbp.com.pk First Women Bank Limited (FWBL) www.fwbl.com.pk Government of Pakistan www.pakistan.gov.pk Ministry of Industries & Production www.moip.gov.pk Ministry of Education, Training & Standards in Higher Education http://moptt.gov.pk Government of Punjab www.punjab.gov.pk Government of Sindh www.sindh.gov.pk Government of Khyber Pakhtoonkhwa www.khyberpakhtunkhwa.gov.pk Government of Balochistan www.balochistan.gov.pk Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk Government of Azad Jammu &Kashmir www.ajk.gov.pk
17 September 2013

Pre-Feasibility Study

Gemstone Lapidary

Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk Security Exchange Commission of Pakistan (SECP) www.secp.gov.pk Federation of Pakistan Chambers of Commerce and Industry (FPCCI) www.fpcci.com.pk State Bank of Pakistan (SBP) www.sbp.org.pk Pakistan Institute of Fashion Design(PIFD) www.pifd.edu.pk Pakistan Fashion Design Council (PFDC) www.pfdc.org

18 September 2013

Pre-Feasibility Study

Gemstone Lapidary

15.

KEY ASSUMPTIONS

KEY ASSUMPTIONS
PRODUCTION ASSUMPTIONS Maximum Capacity Utilization Maximum Capacity Utilization (Year-1) At 100% capacity, the following will be the per day production break-up; Gem Stone (Cut & Polished) Total production per day Gem Stone (Cut & Polished) 100% 60%

100%

10

10

100%

3,000 3,000 3,000 1,800 1.03 8 26 312 1.1 1.1

Per Annum OPERATING ASSUMPTIONS Annual Production Capacity(Gem Stone (Cut & Polished)) year 1 Total Production Capacity (Year 1) Growth Rate in Production (3%) OR (times) Hours operational per day Days operational per month Days operational per year ECONOMY-RELATED ASSUMPTIONS Electricity growth rate (10%) OR (times) Pay roll growth (10%) OR (times)

CASH FLOW ASSUMPTIONS Accounts receivable cycle (in days) Accounts payable cycle (in days) WIP (Days) Finished Goods (Days) Raw Materials Inventory (Days) Cash on Hand 30 30 1 7 30 260,000

19 September 2013

Pre-Feasibility Study

Gemstone Lapidary

REVENUE ASSUMPTIONS

Sales price per unit in year 1 Gem Stone (Cut & Polished)

1800

Sale price growth rate (5%)

OR (times)

1.05

EXPENSES ASSUMPTIONS Electricity Expenses Per/Year(RS) Machine maintenance Cost /year (% of total machinery cost) Growth in maintenance cost 3 %) OR (times) Pre-paid land rent (12 months) Cost of Rough Gem Stones Raw material cost growth rate Rent growth rate 5% 5% 120,000 2% 1.03 252,000 390,000

COST OF GOODS SOLD ASSUMPTIONS

COGS Year 1

Gem Stone (Cut & Polished)

216.67

COGS Growth Rate (4%)

OR (times)

1.04

20 September 2013

Pre-Feasibility Study

Gemstone Lapidary

FINANCIAL ASSUMPTIONS Project Life (Years) Debt Equity Interest rate on long term loan Debt tenure (years) Debt payments per year 10 90% 10% 8% 7 1

21 September 2013