Pre-Feasibility Study

Printing Press

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE

6t Floor, LDA Plaza, Egerton Road, Lahore Tel: (042) 111-111-456, Fax: (042) 6304926-7 [email protected]
REGIONAL OFFICE PUNJAB REGIONAL OFFICE SINDH REGIONAL OFFICE NWFP REGIONAL OFFICE BALOCHISTAN

8th Floor, LDA Plaza, Egerton Road, Lahore. Tel: (042) 111-111-456 Fax: (042) 6370474 [email protected]

5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 [email protected]

Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 [email protected]

Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 [email protected]

December, 2007

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DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No. Revision Prepared by Approved by Issue Date Issued by PREF-69 2 SMEDA-Punjab GM Punjab December, 2007 Library Officer

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1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2 3 3.1 4 4.1 4.2 4.3

INTRODUCTION .............................................................................................................. 3 Project Brief ....................................................................................................................... 3 Opportunity Rational .......................................................................................................... 3 Legal Status........................................................................................................................ 4 Regulations......................................................................................................................... 4 Project Capacity and Rationale ........................................................................................... 4 Project Cost ........................................................................................................................ 4 Product Mix........................................................................................................................ 5 Location ............................................................................................................................. 5 Key Success Factors/Practical Tips ..................................................................................... 5 CURRENT INDUSTRY STRUCTURE ............................................................................. 5 MARKETING.................................................................................................................... 7 Market Size and Future Prospective .................................................................................... 7 PRODUCTION PROCESS................................................................................................. 9 Product Mix........................................................................................................................ 9 Process Flow (Off-Set Printing) .........................................................................................10 Production Process ............................................................................................................11 4.3.1 The Design/Creative Stage ..................................................................... 11 4.3.2 The Prepress Stage ................................................................................. 11 4.3.3 The Printing Stage..................................................................................11 4.3.4 The Bindery Stage..................................................................................12 4.4 Raw Material .....................................................................................................................12 4.5 Technology/Process Options..............................................................................................13 5 HUMAN RESOURCE REQUIREMENT..........................................................................15 6 MACHINERY &EQUIPMENT REQUIREMENT ............................................................16 6.1 Machinery & Equipment Requirement...............................................................................16 6.2 Alternative Machinery Options ..........................................................................................17 6.3 Machinery Suppliers..........................................................................................................18 7 LAND & BUILDING........................................................................................................18 7.1 Total Land Requirement ....................................................................................................18 7.2 Recommended Mode of Acquisition..................................................................................18 7.3 Suitable Location...............................................................................................................19 8 THREATS.........................................................................................................................19 9 PROJECT ECONOMICS ..................................................................................................20 10 FINANCIAL ANALYSIS .................................................................................................21 10.1 Projected Income Statement...............................................................................................21 10.2 Projected Balance Sheet.....................................................................................................22 10.3 Projected Cash flow Statement ..........................................................................................23 11 KEY ASSUMPTIONS ......................................................................................................24

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INTRODUCTION

1.1 Project Brief The basic aim of this pre-feasibility is to provide the basic information for setting up a printing press business. Printing Press is a capital oriented venture. The major cost of the project includes acquisition of printing and related machinery, which is almost 42% of the total project cost. The output of this business is printed material and can be classified in to four broad categories: Promotional material, which includes items like financial reports, brochures, catalogues posters calendars, diaries and visiting cards etc. Office stationery, which includes letterheads, printed files, vouchers, invoices, inward/outward documents etc., and books of account. Publishing material, which includes literature books and text books etc. Packaging material includes packing material of all kinds like boxes, cartons etc. 1.2 Opportunity Rational The importance of the printing and graphic arts sector is often under-estimated. Due to stability in economy in last few years, there has been a positive trend in all major business sectors of the country. Print media is one of the most effective and economical mediums of communication and promotion and is used by all major businesses. Since, the invention of printing press in 1436 by Gutenberg of Germany, it has contributed a lot towards evolution of humanity. Its significance in day to day business promotion and marketing cannot be ignored. In todays competitive environment, businesses require appropriate marketing & promotional tools to build product recognition in the market. From brochures to packaging all are means of effective sales promotion tools and require services of printing press. Major share of customers for printing press are institutional buyers. Institutional buyers in Pakistan for printing press can be divided into following broad categories: 1.2.1 Business Sector Due to stability in economy in past few years, a handsome amount of investment has taken place in the countrys business sectors. In year 2006-07 1, there was a growth of 8.4% in overall manufacturing industry, 8.8% in large-scale manufacturing and 8.0% in service sector. The overall growth in GDP in year 2006-07 was 7%. There are more than 775 public limited companies listed in Pakistan with an immense requirement of printed material for their businesses. According to directorate of industries, more than 61,000 industrial units are operating only in the Punjab province.

Source: Economic Survey of Pakistan (2006-07) 3

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1.2.2

Educational Sector

Another sector, which requires extensive services of printing press, is the educational sector in the form of books and other printed material. Government of Pakistan has realized the importance of increasing the literacy rate to jump start economic growth and alleviate poverty in the country. In year 2007-08, the Government has allocated $ 24.5 billion up by 23.1% for education, which is 50% higher than the previous year. There were 156,732 primary, 39,370 middle, 22,909 secondary and 2,996 higher secondary educational institutes operating in Pakistan in year 2005-062. 1.3 Legal Status The legal status for a printing press is recommended to be a sole proprietorship or partnership as the business has low capital investment. The benefits of registering the business as a partnership are: 1. Less legal requirements for registration. 2. Lower tax rates as compared to private or public limited company. 1.4 Regulations A printing press will require: 1 Approval from Audit Bureau of circulation is required before starting of operations. 2 Registration with income tax department and sales tax department. The rate of general sales tax applicable on printing supplies is 15 %, if supplies are to registered counterparts and 18 % if supplies are to non registered businesses. The press may opt for turnover tax enrolment instead of GST, if its annual turnover does not exceed Rs. 2.5 million. The rate of turnover tax on supplies is 2% without deducting/adjusting any input tax (sales tax paid on purchase of raw material). Income tax rate for the business will depend on the legal status of the firm, the prevailing rate of income tax for sole proprietor and partnership is in various slabs with maximum of 25%. 1.5 Project Capacity and Rationale The proposed unit has a capacity of printing 14,000 impressions per hour with two (2)printing machines. The proposed machines have ability to print sheets of 140x180mm to 483x640mm dimensions. The attainment of the project capacity will depend upon the factors like involvement of the management to facilitate production, marketing, quality and design of the product, and the skills and motivation of the labour force involved in the production of products. 1.6 Project Cost The total project cost for setting up a printing press is calculated to be Rs 3.176 million. This also includes working capital requirement of Rs 0.980 million.

Ministry of Education, Pakistan. 4

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1.7 Product Mix The proposed project with installed machinery has the capability to produce all the products of offset printing industry except newspapers. For the purpose of this feasibility following products will be printed. Books Financial reports & prospectus Office stationery & visiting cards Invitation cards Catalogues & pamphlets Brochures & handbills Posters

1.8 Location As the major customers of printing press are industrial buyers, so the unit can be established in any city with a large business cluster. So, cities like Karachi, Lahore, Faisalabad, Multan, Islamabad can be suitable locations for setting up printing press. 1.9 Key Success Factors/Practical Tips 1 2 3 To obtain higher profits, it is really important to acquire order of all different printing jobs of a company. Relations in business sector are really important in success of a printing press as it is a order based business. Technical skills are really important for effectively operating the business, as skilled workers can reduce wastage, insure lower machine maintenance cost, in time delivery and quality finish of the product. Order size is of a great importance for profitability of the business, as major cost of printing is the designing, image setting and plate making i.e. fixed costs. So, if the order size is large the cost per unit will be lower. CURRENT INDUSTRY STRUCTURE

Lahore and Karachi are the two major centers of printing and publishing business in the country. There are approximately 167 printing presses in organized printing sector of Karachi3. In Punjab, total no. of presses are approximately 987 (out of which 690 are located in Lahore only) with installed capacity of 763,940,460 impressions per hour and employment absorption of around 4,800 people4. According to some estimates total investment in this printing and publishing in the Punjab only stands at Rs. 275 million. Currently, printing industry in the country is segmented and unorganized. There is an association in Lahore named All Pakistan Small Printing Press Association but it is not fully operational and does not encompass the entire industry. However, printing business in Karachi is comparatively more organized and better documented. One major trade
3 4

Source: Pakistan Association of Printing and Graphic Arts Industry (PAPGAI) Source: Directorate of Industries, Punjab 5

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association in Karachi relevant to the business is PAPGAI, which is trying to organize the sector in association with Govt. of Sindh. In a recent development, Sindh Information Department has advised all the owners of printing presses throughout the province to get their establishments registered under the existing rules. District wise break up of number of units of printing press in Punjab are as following: Table 2-1 District wise Details of Printing Presses in Punjab5 No. of Units 3 5 100 15 13 12 690 2 10 14 35 48 25 15 Investment ( 000 ) 1,150 3,500 20,335 7,763 1,430 3,140 201,969 90 4,145 3,590 6,265 13,821 3,317 4,450 District Bhakkar D.G. Khan Faisalabad Gujranwala Jhang Jhelum Lahore Ludhran Mianwali Multan Rawalpindi Sargodha Sialkot Toba Tek Singh Print i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii.

industry is currently producing following products: Books (text books and others) Newspapers & magazines Financial reports & prospectus Office stationery & visiting cards Books of account Packaging material Calendars & diaries Invitation & ceremonial card Catalogues & pamphlets Brochures & handbills Posters Tags & stickers etc.

Source: Directorate of Industries, Punjab 6

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Some of the major industry players in Lahore in the organized sector are as under: Table 2-2 Major Industry Players in Lahore Address 74-Main Industrial Area Kot Lakhpat, Lahore 112, The Mall Road, Lahore 54000 9, Industrial Area, Gulberg-III, Lahore Nuqoosh Building, 7-Kabir St.Urdu Bazar, Lahore Kothalia Mansion, 2-Mcleod Road, Lahore Name Friends Sons (Pvt.) Ltd. Lion Art Press (Pvt.) Ltd. Nisar Art Press (Pvt.) Ltd. Nuqoosh Press Balance Ad 3 MARKETING

3.1 Market Size and Future Prospective The market for printing products can be divided into following segments: Table 3-1 Categories of Printing Products Description Products Cultural & Educational Items Books, brochures, newspapers and magazines Industrial & Promotional Items Stationery & Other Items Sales Promotional Printings, annual reports, Securities, blueprints, printed wrappings and labels Pictures, colour and drawing books for children, art prints, calendars, engraving, school and office supplies,

The market for printed material in Pakistan has been developing steadily over the last decade. Books have the largest share in local printing industry. Almost 100% of the local demand is met by local industry, with the exception of some highly professional books (medical, business and engineering books). Major portion of this category consists of textbooks used by students from a variety of academic background. The details of educational institutes and enrollment in Pakistan are given in the table below: Table 3-2 Educational Institutions in Pakistan Year 2005-066 Institutions 794 156,732 39,370 29,909 2,996 3,059 1,135 116 10,185 Enrollment 7,135,447 16,834,417 5,262,323 2,133,008 853,535 238,687 325,993 424,012 361,747 Description Pre-Primary Primary Middle Secondary Higher Secondary Secondary Vocational/(Technical) Colleges Universities Non-Formal Basic Education
6

Source: Ministry of Education, Pakistan. 7

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Market demand of other cultural items can be judged from the following table: Table 3-3 Item/Year Dailies Weeklies / Bi-weeklies Fortnightly Monthlies Quarterlies Annually Average circulation of Newspapers and Periodicals (Magazines)7 2003 6,245,775 588,058 96,562 1,312,635 6,875 730 2004 7,817,958 699,688 92,942 1,364,652 8,050 730 2005 7,889,639 588,387 98,296 1,487,707 21,050 855 2006 8,208,874 672,024 109,887 1,630,569 24,673 855 Growth (%) 4% 14% 12% 10% 17% 0%

As far as demand for industrial and promotional items is concerned, it can safely be assumed that every industrial unit whether it is large or small, requires services of printing press. There are 702 public listed companies in Pakistan and printing of quarterly and annual reports is mandatory for them. Current growth rate in manufacturing industries is 7.7% in large scale manufacturing 8.7%and in services sector 5.3%. Industrial units mostly require services of printing press for their packaging material i.e. (labels, wrappings, boxes). The table below shows some of the industries acquiring the services of printing press for packaging purposes. Table 3-4 Item/Year Dailies Weeklies / Bi-weeklies Fortnightly Monthlies Quarterlies Annually Average circulation of Newspapers and Periodicals (Magazines)8 2003 6,245,775 588,058 96,562 1,312,635 6,875 730 2004 7,817,958 699,688 92,942 1,364,652 8,050 730 2005 7,889,639 588,387 98,296 1,487,707 21,050 855 2006 Growth (%) 8,208,874 4% 672,024 109,887 1,630,569 24,673 855 14% 12% 10% 17% 0%

The annual turnover in the printing industries is strongly influenced by the state of the economy in general. About 25% of the total demand comes from the individual Consumer, while remaining 75% from the institutional buyers.

7 8

Source: Federal Bureau of Statistics 2002-03 Source: Federal Bureau of Statistics 2002-03 8

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PRODUCTION PROCESS

4.1 Product Mix Proposed product mix with utilization of capacity on the basis of 8 hours shift is given in the following table. The maximum attainable capacity of machines is assumed at 80% because of the wastage of time during cleaning & trial runs of the machine. Table 4-1 Product Solna 125 Machine Financial Report Brochure Book Pamphlet Letterhead Rota Machine Vouchers Visiting Cards Packing Material Invitation card Product Mix and Capacity Utilization Details Production Proportion 25% 15% 50% 5% 5% 40% 5% 35% 20% 100% Capacity Units 46,601 233,009 71,301 470,588 1,882,352 Units 11,349,753 1,391,304 1,241,379 945,812 Maximum Attainable Capacity (80%) Units 37,280 186,407 57,040 376,470 1,505,881 Units 9,079,802 1,113,043 993,103 756,649

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4.2 Process Flow (Off-Set Printing)

Getting Order

Conceiving Idea

Sketching

Approval of Sample

Image Setting

Plate Making

Ink & Water

Press Run

Paper

Ink & Water

Binding

Packing

Delivery

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4.3 Production Process 4.3.1 The Design/Creative Stage In the Design Stage the designer prepares the design of the product taking into account the overall look and feel of the paper. Text to be printed is typed and graphics to be shown are created. Designing of graphics is of two types, halftone and line art. Halftone is the reproduction of continuous-tone artwork (such as a photograph) through the application of a screen that converts the image into dots of various sizes. Line art is the art that is made up of continuous lines such as pen & ink drawings or typefaces. There is no tonal difference from one area to another. After designing the designer sets page layout and the design is sent to the pre-press department. 4.3.2 The Prepress Stage In the Pre-press Stage the artwork is taken from its delivered state (either reflective art or digital file) all the way to the press plates. In pre-press stage: 1. 2. 3. The artwork is transformed to negative film either by imaging a digital file through an image setter, or by shooting reflective artwork with a copy camera. The pages are stripped together into a flat9 that reflects how the pages will be printed on the press sheet. The flat is burned onto a metal plate.

After the flat is burned onto the plate, the plate washed in the developing chemical. This developed plate is wrapped around the press cylinder. For the purpose of this feasibility, this process will be outsourced because of the high capital cost of machinery and equipment used in the process and the infrequent use of machinery. The outsourcing rates for pre-press activities are as follows: Cost of image setting Development cost of plate making 4.3.3 The Printing Stage The Printing Stage covers the transfer of an image to paper. Offset lithography is based upon the principle: The ink and water do not mix. The paper is fed through the press from a pile of paper already cut to the size of the machine. Offset printing presses print at a high speed. The speed can reach 6,000 impressions per hour in case of Rota and 8,000 impressions per hour in case of Solna. When a printing plate is made, the printing image is rendered ink-receptive and waterrepellent, while the non-printing areas are rendered water-receptive and ink-repellent. The ink is distributed to the plates through a series of rollers.
9

Rs. 3.0 per square inch per color. Rs. 50 per plate.

Negative placed on metal plate. 11

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On the press, the plates are dampened, first by water rollers, and then ink rollers. The rollers distribute the ink from the ink fountain onto the plates. The image area of the plates picks up ink from the ink rollers. The water rollers keep the ink off of the nonimage areas of the plate. Each plate then transfers its image to a rubber blanket that in turn transfers the image to paper. The plate itself does not actually touch the paper. All of this occurs at a high speed. During the process the machine man checks the blending of inks to maintain the colour control. Print quality is checked frequently by the press operator. 4.3.4 The Bindery Stage The Bindery Stage is when any trimming, folding, perforating, collating, stitching, or gluing is performed as required. Mostly, Printing Press performs the trimming and folding in-house, and works closely with an outside bindery on the collating, stitching and gluing. A typical job such as an 8.5 x 11 newsletter may include: 1 A post press cut 2 A half fold 3 A double parallel fold For the purpose of this feasibility, this process will be outsourced because the process is labor intensive and to perform the process in-house the business requires steady orders of binding. 4.4 Raw Material Imported as well as local paper and board is being used by the industry. Imported paper is normally used in annual reports, brochures, catalogues, prospectus and visiting cards etc. Imported paper is readily available in local markets. Mostly, the business is done on just in time (JIT) concept due to readily availability of the raw material, but it is recommended that some amount of raw material inventory is maintained if the project is located at a distance from suppliers. From the following table it is evident that increase in production of paper is being consumed by the printing industry. Table 4-1 Availability of Raw Material (Paper) Local10 Units Paper & Board Table 4-2 Tons(000) 2005-06 394.9 July to April 2006-07 388.8

List of Raw and Processing Material Price (Rs.) 3,200 2,750 1,350 2,400
12

Description Mat Art Paper 135 gm (per rim) Mat Art Paper 115 gm (per rim) Mat Art Card 260 gm (per pack) Offset Paper 100 gm (per rim)
10

Availability Imported Imported Imported Imported

Source: Economic Survey of Pakistan

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Offset Paper 90 gm (per rim) Offset Paper 80 gm (per rim) Flying Paper 68 gm (per rim) Plate 645 x 510 x 0.20 mm Plate 645 x 510 x 0.24 mm Plate 510 x 400 x 0.24 mm Ink Yellow (per kg) Ink Magenta (per kg) Ink Cyan (per kg) Ink Black (per kg) 4.4.1 Suppliers of Paper, Plates & Ink

2,200 1,950 1,125 125 154 100 410 425 425 400

Imported

Imported Local Imported Imported Imported Imported/local Imported/local Imported/local Imported/local

AKBARI PAPER STORE 15-Shahrah-e-Millat, (Ganpat Rd.) Lahore Ph # 92-42-7232599

Fax # 92-42-7236484

JAVED COMMERCIAL CORPORATION 4-Ahtesham Chambers, Paper Market, Shahrah-e-Millat, Lahore Ph # 92-42-7248509, 7357635 Fax # 92-42-7244671. GRAPHO SCAN SUPPLIES (PVT.) LIMITED Kashif Centre, 2nd Floor, 55-A, Chamberlaine Road, Lahore. Ph # 92-42-7232582, 7351200. Fax # 92-42-7351100. MALIK PAPER MART Ganpat Road, Lahore. Ph # 92-42-7353482, 7311553, 7224255. ROYAL PAPER HOUSE 10 Royal Park, Lahore. Ph # 92-42-6313265, 6363266. ZAP TRADERS Paper Market, 473 Shahrah-e-Liaquat, Karachi Ph # 92-21-2621423, 2628387. 4.5 Technology/Process Options Following different technology/process options are available for printing: 1. 2. 3. 4. 5. 6. 7. 8. Offset Lithography Web Printing Letter Press Flexo Gravure Screen Printing Waterless Lithography Digital Printing
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Fax # 92-42-7248115, 5837408.

Fax # 92-42-6363266.

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4.5.1

Off Set Lithography

The basic principle of offset printingthe dominant printing processis simple: ink and water don't mix. Early lithographers etched images onto flat stone. These images would accept ink, while the porous stone accepted water. When ink was applied, it stayed on the greasy image area and avoided the rest of the stone. Modern lithography uses the same concept but adds one important element. In modern presses, the image is transferred from the printing plate to a rubber blanket and then to the paper. This process is called offset printing. Although there are many different kinds, sizes and qualities of offset presses, the basic configuration remains the same. When the printing plate is exposed, an ink-receptive coating is activated at the image area. On the press, water rollers dampen the plate, first, then by ink rollers. Ink adheres to the image area and water to the non-image area. As the cylinders rotate, the image is transferred to the blanket. Paper passes between the blanket cylinder and the image is transferred to the paper. The major types of offset presses are sheet fed and web. In a sheet fed press, cut paper is delivered into the machine. In a web press, paper comes on a large roll and is cut after printing. 4.5.2 Web Printing Web printing is offset lithography printing on large continuous rolls of paper known as webs. Expensive at shorter runs, it is most commonly used for the production of newspapers, magazines and catalogues due to its speed and economy at runs over 250,000 per hour. 4.5.3 Letter Press Formerly the standard printing process, letterpress is now largely used for specialty work such as fine art prints, books and posters. In the process, the image area is actually raised above the rest of the plate, so the image makes a physical impression on the paper. Modern letterpress uses a photo-etching technique to remove the non-image area from the plate. 4.5.4 Flexo Modern flexography, often called flexo, is a versatile process that uses photo-etched plates. The non-image areas on these plates are etched away, leaving only the printing surface that carries the ink directly to the printing material (referred to as the substrate). Flexo is best suited for printing on a rolled substrate other than paper such as box boards, foils, plastics, newsprint and more. Common applications for flexo include labels, tabs, corrugated boxes, cartons and newspapers. 4.5.5 Gravure Basically, gravure turns everything in the image into halftone dots. The plate cylinder consists of tiny cells, varying in depth and width, which hold the ink. As the press runs, a blade scrapes excess ink off the surface of the plate, leaving ink only in cells. As the paper contacts the plate, the ink is transferred, reproducing type, rules, graphics, and
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photographs as composites of very fine dots. Gravure is used only in very long runs, usually for publications and packaging printing. 4.5.6 Screen-Printing In screen-printing, ink is expressed through a stretched fabric mesh by a squeegee blade to reproduce the original image onto the substrate below. A variety of materials such as paper, plastic, metal, fabric and glass can be screen-printed. 4.5.7 Waterless Lithography Print buyers are hearing more and more about waterless offset as the process becomes more commonly used in the United States. Almost any offset printing press can be converted to run waterless if it is retrofitted with a cooling system that, among other things, helps maintain the ink's temperature. Newer presses are available with the conventional dampening system and a cooling system so that they can run waterless. Special plates must be used so that the non-image area still repels the ink. 4.5.8 Digital Printing Unlike traditional (offset) printing presses, digital presses are made to produce short-run (1 to 5000 copies) quick-turnaround, full color jobs. In traditional printing, your job goes from your desktop to a digital proof, to an image setter (for making film), to another proof, to a plate maker, to the printing press. But in digital printing your job goes from your desktop to a proof to plates to the press - or even directly from desktop to press. Limitations of digital printing include limited paper size and quality of 4-color reproduction. In addition, not every printer offers digital printing options. 5 HUMAN RESOURCE REQUIREMENT The project is machine oriented but skilled labour is important for success of the business. Skilled machine man is required to operate the machine efficiently and effectively. Skill of machine man will result in lower wastage of paper and ink, lower maintenance cost of machines and also longer life of machines. This will enhance quality of product and timely delivery of order and hence, help in creating a good image among customers. In Lahore, there is an institution named Poly Technique Institute for Printing and Graphic Arts affiliated with Punjab Board of Technical Education engaged solely in providing education and training in the field of printing, which is producing qualified diploma holders with sound theoretical as well as practical knowledge.

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Number of workers required for each department is given below: Table 5-1 Description Production Section Supervisor Machine Man Cutting Master Helper Total Design Section Graphic Designer Composer Total Administration Section Director Accounts officers
Peon Security Guard Total

Human Resource Requirement Details Number Salary/month (Rs.) 10,000 8,000 6,000 4,500 Annual salary (Rs) 120,000 192,000 72,000 216,000 600,000 288,000 192,000 480,000 300,000 120,000 54,000 72,000 546,000 1,626,000

1
2

1 4

2 2

12,000 8,000

1 1 1 1

25,000 10,000 4,500 6,000

MACHINERY &EQUIPMENT REQUIREMENT

6.1 Machinery & Equipment Requirement The project is machine oriented and nature of jobs to be undertaken mostly depends upon the availability of machinery. So, selection of machinery is the most important aspect of this project. Following is the detail of machinery required for this project. Table 6-1 Description Offset Printing Machine (Rota Reconditioned) Offset Printing Machine (Solna 125, Sweden Reconditioned) Cutting Machine (920mm) Die Cutting Machine(660x930 mm) Total List of Machinery & Other Equipment Qty 1 1 1 1
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Cost per unit 400,000 1,000,00 100,000 125,000

Total Availability Cost 400,000 Imported but Locally available 1,000,000 Imported but Locally available 100,000 Locally manufactured 125,000 Same as above 1,625,000

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Table 6-2

Other Equipment Details Qty 4 1 1 1 4 1 1 2 12 7 Per Unit Cost 40,000 15,000 7,000 7,500 6,000 100,000 10,000 25,000 550 1,500 Total Amount (Rs) 160,000 15,000 7,000 7,500 24,000 100,000 10,000 50,000 6,600 10,500 390,600

Description Pentium 4 Computers Printer-colour (DeskJet HP) Printer-mono Laser Jet (HP) Scanner- flat bed (BEN Q) UPS Furniture Fax Machine
Air Conditioner

Tube Lights Fans Total

Technical specifications of these machines are given in the following table: Table 6-3 Machine
Rota

Technical Specifications of Machines Max. sheet size(mm) 345x454 483x640 Max. Capacity(imp/hr) 6,000 8,000 Installation Area (LxW) (mm) 1840x1030 1960x1304 Power (KW) 1.15 3.70 Expected Useful life 20 20

Solna 125

6.2 Alternative Machinery Options Many substitutes in these sizes are available like Hamada and Printmaster GTO 52 for (345x454mm) and Roland and Hamada Impulse for (483x640mm). Said machines are suggested due to their durability and easy availability of spare parts in the market. Moreover new machinery of said brands is also available in the market at comparatively very low prices. Details of new machinery for printing available with local dealers are given below: Table 6-4 Machinery
Offset Printing Machine (345x454mm) (Hamada E-47, Japan ) Offset Printing Machine (508x660mm)

Alternative New Machines Qty 1 1 Price (C&F Karachi.) 3,000,000 13,500,000 Availability Imported but Locally available Imported but Locally available

(Hamada Impulse-66, Japan)

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6.3 Machinery Suppliers In Pakistan some suppliers of machines are: PAKISTAN MACHINERY AND EQUIPMENT CO. (PVT.) LTD. 303, Aamir Trade centre, 233-1/A, PECHS, Block II Shahrah-e-Quaideen, Karachi Phone# 92-21-4551798, 4522776 Fax# 92-21-4522786 E-mail: [email protected] PAKISTAN PRINTING EQUIPMENT CO. (PVT.) LTD C-11/3, Sidco Avenue Centre, 264 R.A.Lines, Stretchen Road, Karachi Phone# 92-21-5656981, 5656982. Fax #: 92-21-5653620 E-mail: [email protected] 7 LAND & BUILDING

7.1 Total Land Requirement For printing unit with installation of above said machines approximately 1,300 sq. ft. area is required. The details of covered area requirement for the project is given in below table: Table 7-1 Covered Area Details Covered Area in (Sq. ft.) 120 120 120 600 150 150 1,260 Description Owners Office Accounts & Admin. Office Design Section Printing Hall Cutting Hall Store Total 7.2 Recommended Mode of Acquisition It is recommended that this project should be started in a rented building, as this will reduce the initial capital cost. The details of monthly rent assumed for the project is given below and further it is assumed that six (6) months rent will be paid advanced: Table 7-1 Rental Cost Details Monthly Rent (Rs) Annual Rent (Rs) 30,000 360,000 Description Approximate Rent

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7.3 Suitable Location Availability of skilled labor, raw material and proximity from the customers is important for such a project. Karachi, Lahore and Faisalabad are comparatively better locations for printing project because necessary technical and skilled manpower is easily available. Secondly, good quality and sufficient quantity of raw material at competitive prices is easily available in these areas and finally, these areas have large business clusters. THREATS 8 Capital requirement for composite unit of printing press having all the facilities in house is very high with comparatively low expectation of return. Thats why this industry is fragmented and most of the units are small having little in house facilities, resulting in over dependence on outsourcing. This may decrease the likelihood of timely completion and delivery of order/job. Paperless environment is becoming a serious threat to printing industry. Use of networked computers for communication, promotion and data transmission is increasing rapidly. Government is also promoting this culture. For example Securities and Exchange Commission of Pakistan has made it mandatory for listed companies to maintain their web sites. A proposal is also under consideration of the Commission to allow the listed companies to place their quarterly accounts on their website instead of transmitting the same to its shareholders by post11.

11

Circular no. 13 with reference no.EMD/D-II/7/2002 dated 26th May, 2003 19

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PROJECT ECONOMICS Project Cost/Capital Requirements 1,625,000 390,600 2,015,600 180,000 800,336 180,000 3,175,936 Ratio 50 % 50 % Project Returns Details 47% 11,131,000 3.91 Amount in (Rs) 1,587,968 1,587,968 3,175,936

Table 9-1

Project Costs Machinery & Equipment Office Equipment Total Fixed Cost Pre-Operating Costs12 Cash in Bank Working Capital Total Investment Table 9-2 Description Equity Debt Total Table 9-3 Description Internal Rate of Return Net Present Value (NPV) (Rs) Payback Period (Years) Financing Plan

12

These expenses are incurred before the unit is operational, e.g. salaries of key personal stationery, company formation expenses, legal and registration charge, etc. 20

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10

FINANCIAL ANALYSIS

10.1 Projected Income Statement

Projected Income Statement
Year 1 Revenue COST OF GOOD SOLD Raw Material Cost Other Overhead (Ink) Direct Labor Direct Electricity Carriage and Freight (Inward) Repair & Maintenance Total Gross Profit GENERAL ADMINISTRATION & SELLING EXPENSE Administration Staff Building Rent Communication Expense (Telephone,fax, Postal etc.) Fixed Electricity Expense Entertainment Expense Professional Fee (Legal, Audits, etc.) Depreciation expense Amortization of pre-operating costs Total Operating Expenses Earning Before Interest & Taxes Interest expense on long term debt Sub Total Earning Before Taxes Taxes Net Profit After Taxes Balance brought forward Total profit available for appropriation Balance carried forward 546,000 360,000 80,094 67,392 48,056 25,000 201,560 18,000 1,346,102 485,883 211,200 211,200 274,684 13,734 260,950 600,600 396,000 105,123 74,131 63,074 27,500 181,404 18,000 1,465,832 1,165,489 166,737 166,737 998,752 174,782 823,971 260,950 1,084,920 1,084,920 660,660 435,600 132,455 81,544 79,473 30,250 163,264 18,000 1,601,246 2,916,964 122,274 122,274 2,794,691 698,673 2,096,018 1,084,920 3,180,938 3,180,938 726,726 479,160 162,257 89,699 97,354 33,275 146,937 18,000 1,753,408 5,125,783 77,810 77,810 5,047,973 1,261,993 3,785,979 3,180,938 6,966,918 6,966,918 799,399 527,076 194,708 98,669 116,825 36,603 132,244 18,000 1,923,523 7,824,493 33,347 33,347 7,791,146 1,947,786 5,843,359 6,966,918 12,810,277 12,810,277 879,338 579,784 204,444 108,535 122,666 40,263 119,019 18,000 2,072,050 9,432,976 9,432,976 2,358,244 7,074,732 12,810,277 19,885,009 19,885,009 967,272 637,762 214,666 119,389 128,800 44,289 107,117 18,000 2,237,295 11,104,061 11,104,061 2,776,015 8,328,046 19,885,009 28,213,055 28,213,055 1,064,000 701,538 225,399 131,328 135,240 48,718 96,406 18,000 2,420,628 12,839,492 12,839,492 3,209,873 9,629,619 28,213,055 37,842,674 37,842,674 1,170,399 771,692 236,669 144,461 142,002 53,590 86,765 18,000 2,623,578 14,640,923 14,640,923 3,660,231 10,980,692 37,842,674 48,823,366 48,823,366 1,287,439 848,861 248,503 158,907 149,102 58,949 78,088 18,000 2,847,849 16,509,897 16,509,897 4,127,474 12,382,423 48,823,366 61,205,788 61,205,788 16,018,702 Year 2 21,024,565 Year 3 26,490,948 Year 4 32,451,413 Year 5 38,941,698 Year 6 40,888,783 Year 7 42,933,222 Year 8 45,079,883

SMEDA
Year 9 47,333,877 Year 10 49,700,571

12,528,064 250,561 1,080,000 42,624 125,281 160,187 14,186,716 1,831,985

16,443,098 328,862 1,188,000 58,608 164,431 210,246 18,393,244 2,631,321

19,731,715 394,634 1,306,800 77,363 197,317 264,909 21,972,738 4,518,210

23,020,336 460,407 1,437,480 99,282 230,203 324,514 25,572,222 6,879,191

26,308,957 526,179 1,581,228 124,812 263,090 389,417 29,193,682 9,748,016

26,308,957 526,179 1,739,351 137,293 263,090 408,888 29,383,757 11,505,026

26,308,957 526,179 1,913,286 151,022 263,090 429,332 29,591,866 13,341,356

26,308,957 526,179 2,104,614 166,124 263,090 450,799 29,819,763 15,260,120

26,308,957 526,179 2,315,076 182,737 263,090 473,339 30,069,377 17,264,500

26,308,957 526,179 2,546,584 201,010 263,090 497,006 30,342,825 19,357,746

260,950 260,950

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10.2 Projected Balance Sheet

Project Balance Sheet
Const. Year CURRENT ASSETS Cash in Bank Accounts Receivable Pre-paid Building Rent Total Current Asset FIXED ASSETS Machinery & Equipment Office Equipment Total Fixed Assets INTANGIBLE ASSETS Pre-Operational Costs 800,336 180,000 980,336 Year 1 (17,687) 1,601,870 198,000 1,782,183 Year 2 367,374 2,102,457 217,800 2,687,631 Year 3 1,926,363 2,649,095 239,580 4,815,038 Year 4 5,107,402 3,245,141 263,538 8,616,081 Year 5 10,275,748 3,894,170 289,892 14,459,810 Year 6 17,263,802 4,088,878 318,881 21,671,561 Year 7 25,480,633 4,293,322 350,769 30,124,724 Year 8 34,974,914 4,507,988 385,846 39,868,749

SMEDA
Year 9 45,796,387 4,733,388 424,431 50,954,206 Year 10 58,462,660 4,970,057 63,432,717

1,625,000 390,600 2,015,600

1,462,500 351,540 1,814,040

1,316,250 316,386 1,632,636

1,184,625 284,747 1,469,372

1,066,163 256,273 1,322,435

959,546 230,645 1,190,192

863,592 207,581 1,071,172

777,232 186,823 964,055

699,509 168,140 867,650

629,558 151,326 780,885

566,602 136,194 702,796

180,000

162,000

144,000

126,000

108,000

90,000

72,000

54,000

36,000

18,000

Total Intangible Assets TOTAL ASSETS

180,000 3,175,936

162,000 3,758,223

144,000 4,464,267

126,000 6,410,411

108,000 10,046,516

90,000 15,740,002

72,000 22,814,734

54,000 31,142,779

36,000 40,772,398

18,000 51,753,090

64,135,513

CURRENT LIABILITIES Accounts Payable Total Current Liabilities OTHER LIABILITIES Long Term Debt Total Long Term Liabilities SHAREHOLDER'S EQUITY Paid-up Capital Retained Earnings Total Equity TOTAL CAPITAL & LIABILITIES -

638,931 638,931

838,598 838,598

1,006,317 1,006,317

1,174,037 1,174,037

1,341,757 1,341,757

1,341,757 1,341,757

1,341,757 1,341,757

1,341,757 1,341,757

1,341,757 1,341,757

1,341,757 1,341,757

1,587,968 1,587,968

1,270,374 1,270,374

952,781 952,781

635,187 635,187

317,594 317,594

1,587,968

1,587,968 260,950 1,848,917 3,758,223 -

1,587,968 1,084,920 2,672,888 4,464,267 -

1,587,968 3,180,938 4,768,906 6,410,411 -

1,587,968 6,966,918 8,554,885 10,046,516 -

1,587,968 12,810,277 14,398,245 15,740,002 -

1,587,968 19,885,009 21,472,977 22,814,734 -

1,587,968 28,213,055 29,801,023 31,142,779 -

1,587,968 37,842,674 39,430,642 40,772,398 -

1,587,968 48,823,366 50,411,333 51,753,090 -

1,587,968 61,205,788 62,793,756 64,135,513 -

1,587,968 3,175,936 -

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10.3 Projected Cash flow Statement

Projected Cash Flows

SMEDA
Year-0 Operating activities Net profit Add: depreciation expense amortization of pre-operating costs amortization of training costs Accounts receivable Finished goods inventory Pre-paid building rent Accounts payable Cash provided by operations Financing activities Long Term Debt Repayment Additions of New Long Term Debt Issuance of shares Cash provided by / (used for) financing activities Investing activities Capital expenditure Minimum Cash Balance Cash (used for) / provided by investing activities NET CASH Cash balance brought forward Cash available for appropriation Cash balance Short term loan requirement Cash carried forward (317,594) 1,587,968 1,587,968 3,175,936 (317,594) (317,594) (317,594) (317,594) (317,594) (317,594) (317,594) (317,594) (317,594) Year 1 260,950 201,560 18,000 (1,601,870) (18,000) 638,931 (500,429) Year 2 823,971 181,404 18,000 (500,586) (19,800) 199,667 702,655 Year 3 2,096,018 163,264 18,000 (546,638) (21,780) 167,719 1,876,583 Year 4 3,785,979 146,937 18,000 (596,047) (23,958) 167,720 3,498,632 Year 5 5,843,359 132,244 18,000 (649,028) (26,354) 167,720 5,485,940 Year 6 7,074,732 119,019 18,000 (194,708) (28,989) 6,988,054 Year 7 8,328,046 107,117 18,000 (204,444) (31,888) 8,216,831 Year 8 9,629,619 96,406 18,000 (214,666) (35,077) 9,494,281 Year 9 10,980,692 86,765 18,000 (225,399) (38,585) 10,821,473 Year 10 12,382,423 78,088 18,000 (236,669) 424,431 12,666,272

(180,000) (180,000)

(2,195,600) (2,195,600) 800,336 (818,023) 385,061 1,558,989 3,181,038 5,168,347 6,988,054 8,216,831 9,494,281 10,821,473 12,666,272

800,336 800,336

800,336 (17,687) (17,687)

(17,687) 367,374 367,374

367,374 1,926,363 1,926,363

1,926,363 5,107,402 5,107,402

5,107,402 10,275,748 10,275,748

10,275,748 17,263,802 17,263,802

17,263,802 25,480,633 25,480,633

25,480,633 34,974,914 34,974,914

34,974,914 45,796,387 45,796,387

45,796,387 58,462,660 58,462,660

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KEY ASSUMPTIONS Operating Assumptions 8 25 300 14,000 40% 10% 80% 10% 10% 10% 5% 5% 30 15 800,336 Impressions/ Unit 103 12 135 2 0.5 0.5 0.5 4.1 3 Production/Units Year 1 @ 40% 18,640 93,203 28,520 188,235 752,940 4,539,901 556,521 496,551 378,324

Table 11-1

Hours operational per day Days operational per month Days operational per year Table 11-2 Production Assumptions Capacity of printing machines(Impression/Hour) Capacity utilization (1st Year) Capacity growth rate (yearly) Maximum attainable capacity utilization Table 11-3 Economy Assumptions Electricity growth rate Wages growth rate Building rent growth rate Raw material price growth rate Finished product price growth rate Table 11-4 Cash Flow Assumptions Accounts Receivable cycle (in days) Accounts Payable cycle (in days) Cash at the start of Operations (Rs) Table 11-5 Product Mix Assumptions Production percentage 25% 15% 50% 5% 5% 40% 5% 35% 20% Solna 125 Machine Financial reports Brochures Books Pamphlets Letterheads Rota Machine Vouchers Visiting cards Packaging material Invitation cards

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Table 11-6

Order Size Assumptions Order Size 5,000 units 5,000 units 10,000 units 5,000 units 5,000 units 15,000 units 1,000 units 10,000 units 500 units Price Per Unit (Rs) 100.00 13.00 72.00 2.50 1.00 0.30 0.75 1.10 15.00 2 % of Raw Material Cost 1% of Raw Material Cost 1% of Revenue 6 0.5% of Revenue 0.3% of Revenue 25,000 10% Sole proprietorship tax slabs Reducing Balance Method Reducing Balance Method

Product Mix Financial reports Brochures Books Pamphlets Letterheads Vouchers Visiting cards Packaging material Invitation cards Table 11-7 Sale Price Assumptions Product Mix Financial reports Brochures Books Pamphlets Letterheads Vouchers Visiting cards Packaging material Invitation cards Table 11-8 Expense Assumptions Direct overhead (Ink) Carriage and freight (Inward) Machine maintenance cost Pre-paid building rent (months) Communication expense (Telephone, fax, Postal etc.) Entertainment expense Legal & professional fee (1st Year) Growth rate in legal charges Tax Rate Table 11-9 Depreciation Assumptions 10% 10% Machinery Other Equipment

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Table 11-10 Financial Assumptions Project life (Years) Equity Debt Interest rate on Long term Debt Debt repayments (Installment per year) Debt Tenure (Year) Discount rate for calculation of NPV (WACC) Table 11-11 Material Cost Details of Financial Report Description Plates Image setting Plate developing Paper Lamination/Garnishing Binding cost Packing cost Total Cost Per Financial Report Table 11-12 Material Cost Details of B rochure Description Plates Image setting Plate developing Paper Lamination/Garnishing Binding cost Packing cost Total Cost Per Brochure Cost Per Unit 0.51 3.97 0.16 6.17 0.20 0.25 0.04 11.30 Cost Per Unit 3.33 25.83 1.04 43.03 1.15 5.00 0.08 79.46 10 50% 50% 14% 2 5 18.5%

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Table 11-13 Material Cost Details of Book Description Plates Image setting Plate developing Paper Lamination/Garnishing Binding cost Packing cost Total Cost Per Brochure Table 11-14 Material Cost Details of Pamphlet Description Plates Image setting Plate developing Paper Packing cost Total Cost Per Pamphlet Table 11-15 Material Cost Details of Letterhead Description Plates Image setting Plate developing Paper Packing cost Total Cost Per Letter Table 11-16 Material Cost Details of Voucher Description Plates Image setting Plate developing Paper Binding cost Packing cost Total Cost Per Voucher Cost Per Unit 0.002 0.003 0.002 0.590 0.02 0.004 0.62 Cost Per Unit 0.06 0.50 0.02 0.61 0.004 1.19 Cost Per Unit 0.26 1.99 0.08 0.71 0.004 3.04 Cost Per Unit 1.11 8.68 0.35 41.25 0.10 10.00 0.04 61.53

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Table 11-17 Material Cost Details of Visiting Cards Description Plates Image setting Plate developing Paper Packing cost Total Cost Per Visiting Cards Table 11-18 Material Cost Details of Packaging Material Description Plates Image setting Plate developing Paper Binding cost Cutting Dye Packing cost Total Cost Per Packaging Material Table 11-19 Material Cost Details of Invitation Card Description Plates Image setting Plate developing Paper Packing cost Total Cost Per Invitation Card Cost Per Unit (Rs) 0.21 0.30 0.15 7.76 0.02 8.44 Cost Per Unit 0.01 0.02 0.01 0.59 0.05 0.17 0.02 0.87 Cost Per Unit 0.07 0.23 0.05 0.15 0.02 0.52

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