Pre-Feasibility Study

(Roof Tiles Manufacturing Unit Light Weight)

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 Complex, 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 Complex, Egerton Road Lahore, Tel: (042) 111-111-456 Fax: (042) 36304926-7 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) 35610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE Khyber Pakhtunkhwa Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 111-111-456 Fax: (091) 5286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE Balochistan Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk-qta@smeda.org.pk

Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost December, 2013

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Table of Content 1 DISCLAIMER ..........................................................................................2

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PURPOSE OF THE DOCUMENT .......................................................3

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INTRODUCTION TO SMEDA ..............................................................3

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INTRODUCTION TO SCHEME ...........................................................4

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EXECUTIVE SUMMARY ......................................................................4

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BRIEF DESCRIPTION OF THE PROJECT ......................................4

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CRITICAL FACTORS ............................................................................5

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INSTALLED AND OPERATIONAL CAPACITY...............................5

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GEOGRAPHIC POTENTIAL FOR INVESTMENT ...........................5

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POTENTIAL TARGET MARKETS / CITIES .....................................6

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PRODUCTION PROCESS FLOW ......................................................7

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PROJECT COST SUMMARY ..............................................................8

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12.1 12.2 12.3 12.4 12.5 12.6 12.7 12.8 12.9 12.10
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Project Economics ............................................................................................... 9 Project Financing ................................................................................................. 9 Project Cost ........................................................................................................ 10 Space Requirement ........................................................................................... 10 Machinery and Equipment ................................................................................ 11 Office Equipment ............................................................................................... 12 Raw Material Requirements ............................................................................. 12 Human Resource Requirement ....................................................................... 13 Revenue Generation ......................................................................................... 13 Other Costs ......................................................................................................... 13
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13 Contact Details of Suppliers, Experts and Government institutions .......................................................................................................14 14

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ANNEXURE ..........................................................................................15
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14.1 14.2 14.3 14.4 14.5

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Income Statement .............................................................................................. 15 Projected Balance Sheet .................................................................................. 16 Cash Flow Statement ........................................................................................ 17 Useful Project Management Tips .................................................................... 18 Useful Links ........................................................................................................ 18
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KEY ASSUMPTIONS ..........................................................................20

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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 subject. 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 exercised 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, production, marketing, finance and business management. The purpose of this document is to facilitate potential investors in Roof Tiles Manufacturing Unit (Light Weight) 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, institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a 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 Youth Business Loan 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 by National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Loans from Rs.0.1 million to Rs.2.0 million with tenure upto 8 years inclusive of grace period of 1 year and a debt : equity of 90 : 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

5 EXECUTIVE SUMMARY
Light Weight Roof Tiles Manufacturing Unit is proposed to be located in adjoining areas and major towns of any of the major cities of Balochistan. Roof tiles used in Balochistan are generally available in the size 12x12 (one Sqft.) However, on demand, roof tiles of different specifications can also be manufactured. Installed capacity of the proposed unit is 288,000 tiles and its initial utilization will be 230,400 tiles at 80% in year 1. Total Cost Estimates is Rs. 2.15 Million with fixed investment Rs. 1.69 Million and working capital Rs. 0.46 Million. Given the cost assumptions, internal rate of return (IRR) and payback are 33% and 3.97 years respectively

6 BRIEF DESCRIPTION OF THE PROJECT

Key parameters pertaining to the proposed project are briefly described as under: Technology: Traditional molds (known as firma by the local industry) and simple masonry equipment would be required to produce light weight roof tiles for the use of construction industry. Location: The unit would be located in urban areas such as Quetta, Mastung, Kalat, Sibi, Pishin, Killa Saifullah, Ziarat and other similar cities and towns of the country, where access of buyers is easy and all facilities are available. Product: The unit would produce light weight roof tiles to fulfil the local housing construction demand of tiles of different sizes and strengths depending upon the individual requirements of the customer.

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Target Market: Main target market for the proposed project is the local industry. However customers from neighbouring country Afghanistan can also be targeted since reconstruction of the country is in progress. Employment Generation: The proposed unit will provide direct employment to 04 people. Financial analysis shows the unit shall be profitable from the very first year of operation.

7 CRITICAL FACTORS
Establishment of the unit in areas where basic facilities including water and electricity are available. Material procurement skills. Training of staff to increase efficiency. Effective distribution networks.

8 INSTALLED AND OPERATIONAL CAPACITY

The financial statements for this project are based on the production of 900 tiles/ day. However, the project can be initiated with the production of 300 tiles / day in smaller towns and other areas where the demand is comparatively lower. Initial production capacity of unit is assumed to be 80% which will increase @ 10% annually and attain maximum capacity of 95 %. Table 1: Production Capacity Average No. of Total Daily Annual Capacity Finished Tiles Daily Labour Production Production Utilization Tiles available Production (320 in Year-1 Inventory for Sale / person days/Yr) 80% (Year-1)* @ 100% capacity 300 3 900 288,000 230,400 9,600 220,800

9 GEOGRAPHIC POTENTIAL FOR INVESTMENT

Construction activities and its output is an integral part of a countrys economy and industrial development. The construction industry is often seen as a driver of economic growth especially in developing countries. This industry can mobilize and effectively utilize local human and material resources in the development and maintenance of housing and infrastructure to promote local employment and improve economic efficiency. There are different types of roof options including reinforced concrete structure, clay bricks, metal roof etc. Due to the soaring construction costs, low cost roof options

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are in high demand in most of the rural and peri urban areas of the country. The tiles are used in a large number of construction projects including non-traditional / traditional housing, community centers, warehouses and factories etc. It is also suitable for schools and other public buildings especially in the rural areas. Demand for such type mainly exists for housing projects in towns and smaller cities. Additionally, in larger cities the low cost roofs are used in suburban housing schemes, warehouses and factories. The production unit can be established in cities and towns where access to basic raw materials including cement, sand and water is easily available.

10 POTENTIAL TARGET MARKETS / CITIES

Market for the light weight roof tiles exists in all major cities where construction activities are advancing day by day. Besides the housing sector, tiles can be marketed to corporate customers for construction of warehouses, factories, schools and hospitals etc. District Quetta, Mastung, Kalat, Sibi, Pishin, Killa Saifullah, Ziarat and other cities and towns of the country including Lahore, Karachi, Multan, Faisalabad, Peshawar, Rawalpindi etc. are the potential localities. The tiles can also be sold to customers from Afghanistan where construction industry is in boom.

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11 PRODUCTION PROCESS FLOW

Major raw materials used in the manufacturing of roof tiles include cement, sand and gravel mixture which is reinforced with steel wires. Steps required for the manufacturing of these tiles comprise of mixing, moulding, demoulding & curing, storage and distribution. Production flow diagram is given below:

Ordering & Stockpiling of Raw Materials

Mixing (1 Day)

Molding (1 Day)

De-molding and Curing (2 -10 Days)

Storage / Sale & Distribution

Following steps describe the process flow for the production of light weight roof tiles in detail: Step 1: Ordering & Stockpiling of Raw Materials Raw materials required for the production of light weight roof tiles include sand, cement, iron wires and crushed gravel and are ordered and stored as per the production requirement. It is recommended to store raw materials for at least one weeks production requirements for efficient running of project and orders fulfillment on time.

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Step 2: Mixing Cement aggregates while mixing in the foremost step. Sand is pre-washed to remove dirt contaminants. When the aggregate are mixed thoroughly, water is added to the mixture. In the local roof tile industry, mixing is performed manually, however, for higher production requirements aggregate mixer machine may also be used when producing large quantity of tiles.

Step 3: Molding The mold is lubricated with a thin layer of used motor oil and kerosene mixture. It prevents sticking and allows the tile to be easily removed from the mold after setting. The lubrication is applied by using a paint brush. After lubrication the mold is half filled with aggregate mixture. At this point metal wires are placed on the aggregate in a crisscross manner. Six to twelve wires are used depending upon the requirement of the customer. The diameter of wire also varies. After adding the wires the mold is completely filled with the cement aggregate. When the molds are full, the concrete is compacted and the upper surface is made smooth by using masonry tools. The size and design of the mold determines the size and design of the finished tile.

Step 4: De-molding, Setting & Curing The mold containing the wet concrete tile is moved to the setting area. Initially, small amount of water is applied to keep the tiles wet. After about one day the tiles are removed from the mold and moved to a water tank where they are kept immersed in water for further two days. After being removed from the water tank the tiles are kept in ambient temperature for another seven days to become firm.

Step 5: Storage and distribution The tiles do not require specific storage requirements; they are normally stored in open air. The tiles are inspected for defects before shipment.

12 PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of Roof Tiles Manufacturing Unit (Light Weight). Various cost and revenue related assumptions along with results of the analysis are outlined in this section.

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The projected Income Statement, Balance Sheet and Cash Flow Statement are attached as Appendices. 12.1 Project Economics

The total project investment is Rs. 2.15 Million which includes Capital Cost of Rs. 1.69 Million and Working Capital of Rs. 0.46 Million. The project is assumed to be financed through 10% equity and 90% debt basis. All the figures in this financial model have been calculated for an estimated area of around 10,000 Sqft. The manufacturing unit is expected to produce 900 tiles / day. Whereby production covered by proposed unit at 100% capacity in year one will be 288,000 tiles. The following table shows internal rate of return and payback period. Table 3 - Project Economics Description Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV) Details 33% 3.97 Rs.2,599,480

Major portion of the cost of tile is attributed to the quantity of cement and number / diameter of reinforcement wire used in a single tile. There are variations in quantity of cement and the number of reinforcement wires used, additionally; the diameter of reinforcement wire is also reduced by some manufactures. This results in great variation in the production cost of a single tile. Therefore, it is difficult to compete solely on the basis of price in this sector. The entrepreneur can, however, attain competitive edge in this industry by standardizing the production process. Higher strengths can be produced with the addition of supplementary cement and using good quality of reinforcement wires. Price is normally determined by the amount of cement used and the number of reinforcement wires used in the tile. Owing to the nature of supply and demand, short-term price fluctuations may also occur. 12.2 Project Financing

Following table provides details of the equity required and variables related to bank loan:

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Table 4: Project Financing Description Total Equity (10%) Bank Loan (90%) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Grace period (Year) 12.3 Project Cost Details Rs.215,059 Rs.1,935,527 8% 08 01

Following requirements have been identified for operations of the proposed business: Table 5: Capital Investment for the Project Capital Investment Building/Infrastructure Machinery & equipment Furniture & fixtures Office equipment Pre-operating costs Total Capital Costs Working Capital Upfront Land lease Equipment spare part inventory Raw material inventory Cash Total Working Capital Total Investment 12.4 Space Requirement Rs. 843,400 750,000 25,000 20,000 51,681 1,690,081 Rs. 100,000 13,800 96,704 250,000 460,504 2,150,585

Considering the various facilities required including production, storage of raw materials and finished tiles, total land requirement for the project is estimated at 10,000 Sft. The finished product and raw materials (with the exception of cement) does not require covered area, therefore, they can be stored in open air. However, a storage room for cement is required and a small office should also be constructed at the production facility. A detail of covered area required for different facilities is given below:

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Table 6: Building Requirement Total Cost (Rs.) Office 291,200 Store 291,200 Production Shed 216,000 Water Tank 45,000 Total 843,400 Total cost for construction of building and infrastructure is worked out to be approximately Rs. 0.84 million. 12.5 Machinery and Equipment Description Area (Sft) 224 224 360 Unit Cost (Rs.) 1,300 1300 600 -

Major cost of the equipment is attributed to the molds (known as firma by the local industry), in addition to the molds the project requires very simple masonry equipment. (Cement mixer is only feasible to be used if the production capacity is in excess of 1,000 tiles / day). Following table provides a list of equipment required for the establishment of a Light Weight Roof Tiles Manufacturing Unit: Table 7: List of Equipment Items Tile Molds (450 molds)* Misc. Equipment (Shovels, Wheel barrow, Brushes and other masonry tools) Total * One mold produces 2 tiles 1 2 Total Cost (Rs.) 720,000 30,000 750,000

The unit does not require high tech equipments or machinery. The molds can be made of wood or metal, for this project it is proposed that metallic molds are used since they are much more durable and long lasting as compared to wooden molds. One mold consists of two tiles placed side by side. Other miscellaneous equipments include items such as shovels, wheel barrow, brushes and other masonry tools.

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12.6

Office Equipment

These costs are based on the assumption that a setup will be required to monitor the unit and manage the production of roof tiles. The office is also proposed to be located at site. Table 8: Office Equipment Costs Furniture / Office equipment Furniture Office Equipment Total Cost per unit Total Cost (Rs.) Lumpsum 25,000 Lumpsum 20,000 45,000

1 2 12.7

Raw Material Requirements

The raw material required for making roof tiles includes cement, sand, crushed stone, stone powder, iron wire and water. Cost of goods sold for cement tiles is determined for by adding cement, sand, gravel, sand powder, iron wires, water and direct labour costs. This cost varies owing to the different ratios of raw materials used by different manufacturers. For this project an average cost of goods sold is assumed to be Rs. 13.14 per tile. Table 9: Cost of Material Description Unit Required to produce 115 tiles Cement (1 bag) Sand (1-1.5 bag) Gravel (zero size-0.5 bag) Crush powder (khaka-1.5 bag) Iron wire Used Motor Oil (1-1.5 liters) Water Cost per Unit 1 4.05 1.5 4.5 4.6 1.5 135 Unit Cost (Rs.) Cost (Rs.) Cost / Tile (12x12) (Rs.) 510 40 40 50 65 80 1 510 162 60 225 299 120 135 4.43 1.41 0.52 1.96 2.60 1.04 1.17 13.14

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12.8

Human Resource Requirement

Roof tiles manufacturing is a simple process hence unskilled workers with proper training / instructions can easily start the production. The personal needed for the project are as under: Table 10: Human Resource Requirement
Description No. of Employees Salary per month (Rs.)

Labor (Semi/Unskilled) Security Guard

Total Staff

3
1 4

30,000 10,000 40,000

The above table provides details of human resource required to run the proposed manufacturing unit. Semi / unskilled workers are required to make the roof tiles. The owner will be responsible to oversee the raw material, finished goods and take orders and manage the marketing / sales of the roof tiles. 12.9 Revenue Generation

Sales price ranges from Rs. 16 to Rs. 20 per tile depending upon the quality of tile. Sale price for this project has been calculated as Rs. 18 per tile. The sales price growth rate is assumed to increase at 10% per annum. Table 11: Revenue Assumptions Product Sales First Year Price Production (Rs./Unit) @ 80% (less inventory) 288,000 18 220,800 Unit First Year Sales Revenue (Rs) 3,974,400 3,974,400

Roof tiles Total Sales Revenue

12.10

Other Costs Table 12: Operating Expenses

Description Administration expense Land lease rental expense Travelling expense Communications expense (phone, fax, mail, internet, etc.) Office expenses (stationary, entertainment, janitorial

Rs. 120,000 100,000 48,000 12,000 12,000

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services, etc.) Professional fees (legal, audit, consultants, etc.) Depreciation expense Amortization of pre-operating costs Subtotal

9,936 121,670 10,336 433,942

13 CONTACT DETAILS OF SUPPLIERS, EXPERTS AND GOVERNMENT

INSTITUTIONS

1. Institute of Ceramics, Small Industrial Estate (SIE) G.T Road, Gujrat Ph: 053 3520883 2. Muhmammad Iqbal Khan M/s Khan & Brothers RCC Pipe and tough Tile, Zarghoon Road, Quetta. Cell: 0333-7817500. 3. Kasi RRC Pipes and Tiles, Airport Road, Quetta. Cell: 0300-3887682, 0333-7875901. 4. Haji Abdullah M/s haji Abdullah RCC Pipes & Pillar Factory, Almo Choke,Airport Road,Near Ganj Quetta. Cell: 0321-8114680 (Haji Abdullah) Cell:0336-6719161 (Nasar Ullah)

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ANNEXURE

14.1 Income Statement

Statement Summaries
Income Statement
Year 1 Revenue Cost of goods sold Gross Profit General administration & selling expenses Administration expense Travelling & Comm. expense (phone, fax, etc.) Office expenses (stationary, etc.) Professional fees (legal, audit, etc.) Depreciation expense Amortization expense Subtotal Operating Income Other income Gain / (loss) on sale of assets Earnings Before Interest & Taxes Interest expense Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX Balance brought forward Total profit available for appropriation Owner's Withdrawals Balance carried forward 3,974,400 3,290,280 684,120 Year 2 5,108,400 4,110,810 997,590 Year 3 5,945,940 4,681,889 1,264,051 Year 4 6,554,909 5,076,073 1,478,836 Year 5 7,210,400 5,491,511 1,718,889 Year 6 7,931,440 5,941,097 1,990,343 Year 7 8,724,584 6,427,652 2,296,932 Year 8 9,597,042 6,954,232 2,642,810 Year 9 10,556,746 7,524,147 3,032,599 Rs. in actuals Year 10 11,612,421 8,140,981 3,471,440

SMEDA

120,000 60,000 12,000 9,936 121,670 10,336 433,942 250,178 250,178 160,648 89,530 17,906 71,624

131,683 65,842 13,168 12,771 121,670 10,336 455,471 542,119 542,119 147,075 395,044 79,009 316,035 71,624 387,659 387,659

144,504 72,252 14,450 14,865 121,670 10,336 478,078 785,973 785,973 129,235 656,738 131,348 525,390 387,659 913,050 913,050

158,573 79,287 15,857 16,387 121,670 10,336 502,111 976,725 976,725 109,915 866,810 173,362 693,448 913,050 1,606,497 1,606,497

174,012 87,006 17,401 18,026 121,670 10,336 528,452 1,190,437 1,190,437 88,991 1,101,446 220,289 881,157 1,606,497 2,487,654 2,487,654

190,954 95,477 19,095 19,829 121,670 547,026 1,443,317 1,443,317 66,331 1,376,987 275,397 1,101,590 2,487,654 3,589,244 3,589,244

209,546 104,773 20,955 21,811 121,670 578,755 1,718,177 1,718,177 41,789 1,676,387 335,277 1,341,110 3,589,244 4,930,354 4,930,354

229,948 114,974 22,995 23,993 121,670 613,579 2,029,231 2,029,231 15,211 2,014,020 402,804 1,611,216 4,930,354 6,541,569 6,541,569

252,336 126,168 25,234 26,392 121,670 651,799 2,380,800 2,380,800 2,380,800 476,160 1,904,640 6,541,569 8,446,210 8,446,210

276,903 138,452 27,690 29,031 121,670 693,747 2,777,693 2,777,693 2,777,693 555,539 2,222,155 8,446,210 10,668,364 10,668,364

71,624 71,624

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14.2

Projected Balance Sheet

SMEDA
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

Statement Summaries
Balance Sheet

Assets Current assets Cash & Bank Accounts receivable Finished goods inventory Equipment spare part inventory Raw material inventory Pre-paid annual land lease Total Current Assets Fixed assets Building/Infrastructure Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets Intangible assets Pre-operation costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities Deferred tax Long term debt Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITI

250,000 13,800 96,704 100,000 460,504

213,928 326,663 143,056 18,286 131,799 100,000 933,732

459,514 373,266 172,080 21,942 162,668 100,000 1,289,470

794,842 454,288 195,507 24,936 190,153 100,000 1,759,727

1,289,086 513,734 211,503 28,278 221,795 100,000 2,364,395

1,952,494 565,698 228,813 32,067 258,702 100,000 3,137,773

2,778,598 622,267 247,546 36,364 301,749 100,000 4,086,525

3,807,964 684,494 267,819 41,237 351,961 100,000 5,253,475

5,067,489 752,944 289,760 46,763 410,527 100,000 6,667,481

6,951,974 828,238 313,506 53,029 478,838 100,000 8,725,586

9,804,344 911,062 339,208 11,054,613

843,400 750,000 25,000 20,000 1,638,400

801,230 675,000 22,500 18,000 1,516,730

759,060 600,000 20,000 16,000 1,395,060

716,890 525,000 17,500 14,000 1,273,390

674,720 450,000 15,000 12,000 1,151,720

632,550 375,000 12,500 10,000 1,030,050

590,380 300,000 10,000 8,000 908,380

548,210 225,000 7,500 6,000 786,710

506,040 150,000 5,000 4,000 665,040

463,870 75,000 2,500 2,000 543,370

421,700 421,700

51,681 51,681 2,150,585

41,345 41,345 2,491,807

31,009 31,009 2,715,539

20,673 20,673 3,053,789

10,336 10,336 3,526,451

4,167,823

4,994,905

6,040,185

7,332,521

9,268,956

11,476,313

251,691 251,691

317,230 317,230

362,866 362,866

394,175 394,175

427,410 427,410

463,582 463,582

502,973 502,973

545,893 545,893

592,688 592,688

592,890 592,890

1,935,527 1,935,527

17,906 1,935,527 1,953,433

75,000 1,720,591 1,795,591

75,000 1,487,816 1,562,816

75,000 1,235,720 1,310,720

75,000 962,701 1,037,701

60,000 667,021 727,021

45,000 346,799 391,799

30,000 30,000

15,000 15,000

215,059 215,059 2,150,585

215,059 71,624 286,683 2,491,807

215,059 387,659 602,718 2,715,539

215,059 913,050 1,128,108 3,053,789

215,059 1,606,497 1,821,556 3,526,451

215,059 2,487,654 2,702,713 4,167,823

215,059 3,589,244 3,804,302 4,994,905

215,059 4,930,354 5,145,412 6,040,185

215,059 6,541,569 6,756,628 7,332,521

215,059 8,446,210 8,661,268 9,268,956

215,059 10,668,364 10,883,423 11,476,313

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14.3

Cash Flow Statement

SMEDA
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Rs. in actuals Year 10

Statement Summaries
Cash Flow Statement

Operating activities Net profit Add: depreciation expense amortization expense Deferred income tax Accounts receivable Finished good inventory Equipment inventory Raw material inventory Accounts payable Other liabilities Cash provided by operations Financing activities Change in long term debt Issuance of shares Cash provided by / (used for) financing a

(13,800) (96,704) (110,504)

71,624 121,670 10,336 17,906 (326,663) (143,056) (4,486) (35,095) 251,691 (36,072)

316,035 121,670 10,336 57,094 (46,603) (29,025) (3,656) (30,869) 65,538 460,522

525,390 121,670 10,336 (81,022) (23,427) (2,995) (27,485) 45,636 568,103

693,448 121,670 10,336 (59,446) (15,996) (3,341) (31,642) 31,310 746,340

881,157 121,670 10,336 (51,964) (17,310) (3,789) (36,907) 33,235 936,428

1,101,590 121,670 (15,000) (56,570) (18,733) (4,297) (43,048) 36,172 1,121,784

1,341,110 121,670 (15,000) (62,227) (20,273) (4,873) (50,211) 39,391 1,349,587

1,611,216 121,670 (15,000) (68,449) (21,941) (5,526) (58,566) 42,920 1,606,324

1,904,640 121,670 (15,000) (75,294) (23,746) (6,266) (68,312) 46,794 1,884,486

2,222,155 121,670 (15,000) (82,824) (25,701) 53,029 478,838 203 2,752,370

1,935,527 215,059 2,050,585

(214,936) (214,936)

(232,775) (232,775)

(252,096) (252,096)

(273,019) (273,019)

(295,680) (295,680)

(320,221) (320,221)

(346,799) (346,799)

100,000

Investing activities Capital expenditure (1,690,081) Cash (used for) / provided by investing a (1,690,081) NET CASH Cash balance brought forward Cash available for appropriation Cash carried forward 250,000

(36,072) 250,000 213,928 213,928

245,586 213,928 459,514 459,514

335,328 459,514 794,842 794,842

494,244 794,842 1,289,086 1,289,086

663,408 1,289,086 1,952,494 1,952,494

826,104 1,952,494 2,778,598 2,778,598

1,029,366 2,778,598 3,807,964 3,807,964

1,259,524 3,807,964 5,067,489 5,067,489

1,884,486 5,067,489 6,951,974 6,951,974

2,852,370 6,951,974 9,804,344 9,804,344 s

250,000 250,000

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14.4

Useful Project Management Tips

Technology 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 Ads & P.O.S. Promotion: Business promotion and dissemination through banners and launch events is highly recommended. Product brochures from good quality service providers can be of great help. Sales & Distribution Network: Expert's advice and distribution agreements are required. 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.

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. 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

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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 Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk Securities and 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

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15

KEY ASSUMPTIONS

Production related assumptions Average No. of Total Daily Annual Capacity Finished Tiles Daily Labour Production Production Utilization Tiles available Production (320 in Year-1 Inventory for Sale / person days/Yr) 80% (Year-1)* @ 100% capacity 300 3 900 288,000 230,400 9,600 220,800 Cost assumptions Cost of goods sold for cement tiles is determined by adding cement, sand, gravel, sand powder, iron wires, water and direct labour costs. This cost varies owing to the different ratios of raw materials used by different manufacturers. For this project an average cost of goods sold is assumed to be Rs. 13.14 per tile. Revenue assumptions Sales price ranges from Rs. 16 to Rs. 20 per tile depending upon the quality of tile. Sale price for this project has been calculated as Rs. 18 per tile. The sales price growth rate is assumed to increase at 10% per annum. Table 11: Revenue Assumptions Product Sales First Year Price Production (Rs./Unit) @ 80% (less inventory) 288,000 18 220,800 Unit First Year Sales Revenue (Rs) 3,974,400 3,974,400

Roof tiles Total Sales Revenue Financial Assumptions Debt Equity Required rate of return on equity WACC

90 % 10 % 25 % 16 %

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Depreciation Rates Building and Infrastructure Office Equipment Machinery and Equipment Cash Flow Assumptions Accounts Receivables Cycle (In Days) Accounts Payable Cycle (In Days) Cash in Hand Rs. Economy Related assumptions Inflation rate Electricity growth rate Water price growth rate Wage growth rate 10 % 10 % 10 % 10 % 30 30 250,000 5% 10 % 10 %

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