Pre-Feasibility Study Tea Company

Pre-Feasibility Study

TEA COMPANY

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
[email protected]

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KPK BALOCHISTAN

3rd Floor, Building No. 3, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan-e-Iqbal Complex, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Egerton Road Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042) 36304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
[email protected] [email protected] [email protected] [email protected]

September, 2019

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Table of Contents
1 DISCLAIMER ................................................................................................................................... 3
2 EXECUTIVE SUMMARY ................................................................................................................. 4
3 INTRODUCTION TO SMEDA ........................................................................................................ 5
4 PURPOSE OF THE DOCUMENT ................................................................................................... 5
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT .................................................................... 6
5.1 PRODUTION PROCESS FLOW ......................................................................................................................... 7
5.2 INSTALLED AND OPERATIONAL CAPACITIES ............................................................................................ 8
6 CRITICAL FACTORS ...................................................................................................................... 8
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT .................................................................. 9
8 POTENTIAL TARGET CUSTOMERS / MARKETS .................................................................... 9
9 PROJECT COST SUMMARY .......................................................................................................... 9
9.1 PROJECT ECONOMICS ..................................................................................................................................... 9
9.2 PROJECT FINANCING ..................................................................................................................................... 10
9.3 PROJECT COST ................................................................................................................................................ 10
9.4 SPACE REQUIREMENT................................................................................................................................... 11
9.5 MACHINERY/EQUIPMENT REQUIREMENT & CAPACITY ................................................................. 11
9.6 RAW MATERIAL SUPPLIER .......................................................................................................................... 12
9.7 FURNITURE & FIXTURES REQUIREMENT .............................................................................................. 12
9.8 OFFICE EQUIPMENT REQUIREMENT ....................................................................................................... 12
9.9 HUMAN RESOURCE REQUIREMENT ...................................................................................................... 133
9.10 UTILITIES AND OTHER COSTS................................................................................................................... 133
9.11 REVENUE GENERATION .............................................................................................................................. 133
10 CONTACT DETAILS ...................................................................................................................144
10.1 MACHINERY SUPPLIERS .......................................................................................................................... 144

11 USEFUL WEB LINKS ..................................................................................................................155
12 ANNEXURES ................................................................................................................................166
12.1 INCOME STATEMENT ................................................................................................................................. 166
12.2 BALANCE SHEET ......................................................................................................................................... 177
12.3 CASH FLOW STATEMENT ........................................................................................................................ 188
13 KEY ASSUMPTIONS ..................................................................................................................... 19
13.1 ECONOMY RELATED ASSUMPTIONS .................................................................................................... 19
13.2 PRODUCTION ASSUMPTIONS .................................................................................................................. 19
13.3 REVENUE ASSUMPTIONS .......................................................................................................................... 19
13.4 FINANCIAL 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 visit our website:
www.smeda.org.pk

Document Control

Document No. PREF-NO: 01

Revision No. 01

Prepared by SMEDA-Balochistan

Revision Date September, 2019

For information [email protected]

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2 EXECUTIVE SUMMARY

Tea Company is proposed to be located at Qandhari Bazar, Quetta. Product(s)

include: mixture of loose tea in 7gms, 60gms, 125gms and 250gms sachet packs.
The total installed capacity is 21,116 units and initial utilization would be at 70%.
Total cost estimates is Rs. 3,781,199/- with fixed investment of Rs. 1,215,540/-
and working capital Rs. 1,593,739/-
Given the cost assumptions IRR and payback are 40% and 4.44 years
respectively.
Recently, an accelerated sales growth has been experienced in the category of
sachet packs with high demand of such blended tea in general. The product would
be targeted to the price conscious segment of the market like small kiosks in the
urban & rural areas by providing similar and better quality branded products at
lesser price while emphasizing on excellent service to the other retailers as well.
By adapting to the rapid social and economic changes, improving the packaging
will increase the life of tea and hence would secure the overall distribution and
selling techniques.

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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.

4 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 Tea Company 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 it’s successful
management.
Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form basis of any Investment Decision.

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5 BRIEF DESCRIPTION OF PROJECT & PRODUCT

The project involves buying loose tea, mixing, packing and marketing the product
through a brand. The branded tea will be positioned in competition with other
branded and unbranded tea dealers. The brand standardization will be done
through the combination of different types of unbranded tea available in the
market. It is suggested that the company introduces its products in the rural or
small town markets where brand awareness is easy to make and heavy
advertisement budgets are not required.
Following key parameters must be addressed as per pre-feasibility study under
preparation

• Technology: On the technology front, local machines have dominated the

Pakistani packaging industry since long. These machines are time tested. Easy
availability of machine parts and abundant technicians makes Pakistani
machinery the first choice for the entrepreneurs. New Pakistani machines are
easily available in the local market.
• Location: Since the centre of the unbranded tea market is located at the
business hub of Quetta that is Qandhari Bazar, therefore, the vicinity of the
production and distribution facility should be near that area.
• Product: The machine for sachet will initially mix and pack loose tea sachet
packs of 7gms, 60gms, 125gms, and 250gms.
• Target Market: In rural areas and small towns new brands of tea are relatively
easy to introduce. The tea sachet packets, with retail price of Rs. 5 and Rs. 10,
have seen high sales growth throughout the country and especially in these
areas. This pre-feasibility report focuses Quetta for such a business but
opportunity exists in other provinces for similar business - targeting markets in
the rural areas and in small towns.
• Employment Generation: The proposed project will provide direct
employment to 11 people.

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5.1 Production Process Flow

Sorting of different blends

Mixing different blends

Mixture of blends
separated for sachet
packing

Weighing for different

units

Tea sachet packing of

different units

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5.2 Installed And Operational Capacities

The project consists of two weighing machines and two machines for tea blending
having production capacity of 21,116 kg/year.
The sachet packing would be of four different sizes i.e. 7gms, 60gms, 125gms and
250gms. The project is assumed to start with 70% capacity utilization. At 95%
capacity utilization, the production breakdown of the four different categories of
products is shown in the table below:

Table 5.2: Production Breakdown (At 95% Capacity Utilization)

7gms 60gms 125gms 250gms

Production 33% 25% 21% 21%
Units 6,968.33 5,279.04 4,434.39 4,434.39
Total 21,116 kg/year

6 CRITICAL FACTORS
Being one of the oldest beverages, Tea is a highly and widely consumed beverage
in the world but the whole of tea business depends on the magical plant. Anybody
who aspires to set foot in the business needs to study about the plant. By realizing
one's core competencies, company needs to create tea blends that set them apart
from their competitors.
Naturally, thanks to the ever growing tea culture, numerous brands are cropping
up. A key step is to identify how your tea brand is different from the others.
The most critical considerations or factors for success of the project are:
§ Background knowledge and experience of different types of Tea available in
the market.
§ Induction of trained human resource.
§ The product would be targeted to the price conscious segment of the
market.
§ Provide similar and better quality while emphasizing on excellent service to
the other retailers as well.
§ Improving the packaging will increase the life of tea and hence would
secure the overall distribution and selling techniques.
§ Location considerations for easy access of the customers.

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7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

It is recommended that the company should be located in the center of business
hub of Quetta that is Qandhari Bazaar. This enables the business to be aware of
all the major competitors in the markets, as well as the respond of its product.

8 POTENTIAL TARGET CUSTOMERS / MARKETS

In rural areas and small towns new brands of tea are relatively easy to introduce.
The tea sachet packets with retail price of Rs. 5 to Rs. 10 have seen high sales
growth throughout the country and especially in these areas. This pre-feasibility
report focuses Quetta for such a business but opportunity exists in other provinces
for similar business - targeting markets in the rural areas and in small towns.

9 PROJECT COST SUMMARY

9.1 Project Economics

All the figures in this financial model have been calculated for estimated sales of
14,781.31 units in the year one. The capacity utilization during year one is worked
out at 70 % with 5 % increase in subsequent years up to the maximum capacity
utilization of 95%
The following table shows internal rate of return, payback period and net present
value of the proposed venture.

Table 1: Project Economics

Description Details

Internal Rate of Return (IRR) 40%

Payback Period (yrs.) 4.44

Net Present Value (Rs.) 9,693,396

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9.2 Project Financing

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

Table 2: Project Financing

Description Details
Total Equity (50%) Rs. 1,890,600
Bank Loan (50%) Rs. 1,890,600
Markup to the Borrower (%age / annum) 16 %
Tenure of the Loan (Years) 4.44

9.3 Project Cost

Following fixed and working capital requirements have been identified for
operations of the proposed business.

Table 3: Project Cost

Description Amount Rs.
Capital Cost
Plant and Machinery 6,90,000
Furniture & Fixture 1,36,840
Building/Infrastructure (Rental) 84,600
Office Equipment 55,000
Motor Vehicle (01) 859,020
Pre-operating Cost 3,781,199
Total Capital Cost 2,187,460
Working Capital
Equipment spare part inventory 72,059
Raw Material Inventory 1,089,783
Up-front Building Rent 1,015,200
Upfront insurance payment 77,451

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Cash 5,00,000
Total Working Capital 1,593,739
Total Project Cost 3,781,199

9.4 Space Requirement

The space requirement for the proposed Tea Company is estimated considering
various facilities including management cabin, workshop area, storage, etc. Details
of space requirement and cost related to land & building is given below;

Table 4: Space Requirment (Rental)

Estimated Area Unit Cost Total Cost
Description
(Sq ft) (Rs.) (Rs.)
Management Cabin 64 - -
Workshop Area 300 - -
Store 200 - -
Total 564 - Rs. 84,600

9.5 Machinery/Equipment Requirement and Capacity

The project will purchase two tea blending machines having production capacity of
blending 30 to 50 sachets per hour, two weighing machines with the capacity of
weighing up-to 50 kg. These machines are locally fabricated. The machineries are
available in Karachi and Lahore and are designed for carrying out assembly line
operations. These machineries are semi-automatic. The assembly line would
involve direct labor placed on either sides of the manufacturing table. Inputs would
be introduced from one end of the table and would be worked upon as they pass
down various manufacturing levels towards the other end of the table.
Plant, machinery and equipment for the proposed project are stated below.

Table 5: Machinery & Equipment

Description Quantity Unit Cost Total Cost
(Rs.) (Rs.)

Tea Blending Machine 2 260,000 520,000

Weighing Machine 2 85,000 170,000
Total 4 34,5000 690,000

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9.6 Raw Material Requirement

The raw material required for the production process is unblended tea imported
from areas like Indonesia, Turkey, Russia, Africa, South America and Kenya. The
project will not import raw material, as it is already available in the local wholesale
market.

9.7 Furniture & Fixtures Requirement

Details of the furniture and fixture required for the project are given below;

Table 6: Furniture & Fixture

Description Quantity Unit Cost Total Cost
(Rs.) (Rs.)

Tables 1 10,000 10,000

Chairs 17 19,000 19,000
Air Conditioners (2 ton) 1 90,000 90,000
Electrical Fans 4 3,000 12,000
Lights 7 120 840
Wiring 1 5,000 5,000
Total - - 1,36,840

9.8 Office Equipment Requirement

Following office equipment will be required for a Tea Company;

Table 7: Office Equipment

Description Quantity Unit Cost Total Cost
(Rs.) (Rs.)

Desktop Computers 1 30,000 30,000

Printer 1 20,000 20,000
Telephone Sets 1 5,000 5,000
Total 3 55,000 55,000

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9.9 Human Resource Requirement

In order to run operations of a Tea Company smoothly, details of human resources
required along with number of employees and monthly salary are recommended
as under;

Table 8: Human Resource Requirment

Description No. of Employees Monthly Salary
per person (Rs.)
CEO/Owner 1 35,000
Finance Officer 1 25,000
Marketing Manager 1 20,000
Sales Officers 2 18,000
Operators for Sachet Machine 5 18,000
Office Boy 1 18,000
Total 11 224,000

9.10 Utilities and Other Costs

An essential cost to be borne by the project is the cost of electricity and gas. The
electricity expenses are estimated to be around Rs. 637,215/- per year, whereas,
gas expenses are estimated to be Rs. 323,400/year (including both natural gas
and LPG). Furthermore, promotional expense being essential for marketing of Tea
Company is estimated as 1% of administrative costs.

9.11 Revenue Generation

Based on the capacity utilization of 70%, sales revenue during the first year of
operations is estimated as under;

Table 9: Revenue Generation – Year 1

# of Units produced Units available for Sales price/unit Sales Revenue
Sale
14,781 14,412 660 9,511,920/-

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10 CONTACT DETAILS
In order to facilitate potential investors, contact details of private sector Service
Providers relevant to the proposed project is given as below;

10.1 Machinery Suppliers

Name of Suppliers Address Phone E-mail Website
1. Abdullah Packing Cooperation 0322- - https://web.facebook.co
Machinery Chowk Main 7172497 m/abdullahpackingmachi
Outfall Road nery/
Near Masjid
Noor-ul-
Islam, Lahore
2. SAMA Sama 021- info@samaengine www.samaengineering
Engineering House, 2-A 36602467 ering.com .com
1/32 36603311
Nazimabad
#2,Karachi

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11 USEFUL WEB LINKS

Small & Medium Enterprises Development Authority www.smeda.org.pk

(SMEDA)
Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Government of Punjab www.punjab.gov.pk
Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security Commission of Pakistan (SECP) www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and www.fpcci.com.pk
Industry (FPCCI)
Punjab Small Industries Corporation www.psic.gop.pk
Sindh Small Industries Corporation www.ssic.gos.pk

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12 ANNEXURES

12.1 Income Statement

Calculations SMEDA
Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 9,511,774 11,478,586 13,469,613 15,744,059 18,338,699 21,294,826 23,455,171 25,800,688 28,380,756 31,218,832

Cost of sales
Cost of goods sold 1 1,089,783 1,255,346 1,406,134 1,568,863 1,744,349 1,933,462 2,032,809 2,134,450 2,241,172 2,353,231
Cost of goods sold 2 - - - - - - - - - -
Operation costs 1 (direct labor) 1,474,200 1,656,445 1,817,909 1,995,086 2,189,510 2,402,860 2,640,279 2,897,341 3,179,430 3,488,984
Operating costs 2 (machinery maintenance) 72,059 83,006 92,977 103,737 115,340 127,845 134,414 141,135 148,191 155,601
Operating costs 3 (direct electricity) 2,546 3,073 3,606 4,215 4,909 5,701 6,279 6,907 7,598 8,358
Operating costs 4 (direct water) 1,257 1,517 1,780 2,080 2,423 2,814 3,099 3,409 3,750 4,125
Operating costs 5 (direct gas) 1,232 1,486 1,744 2,039 2,375 2,758 3,037 3,341 3,675 4,043
Total cost of sales 2,641,077 3,000,873 3,324,150 3,676,020 4,058,907 4,475,439 4,819,919 5,186,583 5,583,817 6,014,342
Gross Profit 6,870,698 8,477,713 10,145,463 12,068,039 14,279,792 16,819,387 18,635,252 20,614,105 22,796,939 25,204,491

General administration & selling expenses

Administration expense 1,140,000 1,250,992 1,372,790 1,506,447 1,653,117 1,814,067 1,990,687 2,184,503 2,397,189 2,630,583
Administration benefits expense 34,200 37,530 41,184 45,193 49,594 54,422 59,721 65,535 71,916 78,917
Land lease rental expense - - - - - - - - - -
Building rental expense 1,015,200 1,116,720 1,228,392 1,351,231 1,486,354 1,634,990 1,798,489 1,978,338 2,176,171 2,393,788
Electricity expense 637,215 700,937 771,031 848,134 932,947 1,026,242 1,128,866 1,241,753 1,365,928 1,502,521
Water expense 330,000 363,000 399,300 439,230 483,153 531,468 584,615 643,077 707,384 778,123
Gas expense 323,400 355,740 391,314 430,445 473,490 520,839 572,923 630,215 693,237 762,560
Travelling expense 11,400 12,510 13,728 15,064 16,531 18,141 19,907 21,845 23,972 26,306
Communications expense (phone, fax, mail, internet, etc.) 11,400 12,510 13,728 15,064 16,531 18,141 19,907 21,845 23,972 26,306
Office vehicles running expense 25,771 28,348 34,301 45,620 66,605 107,234 117,958 129,753 142,729 157,001
Office expenses (stationary, entertainment, janitorial services, etc.) 11,400 12,510 13,728 15,064 16,531 18,141 19,907 21,845 23,972 26,306
Promotional expense 11,400 12,510 13,728 15,064 16,531 18,141 19,907 21,845 23,972 26,306
Insurance expense 77,451 148,882 220,785 302,511 409,553 572,258 546,409 559,994 636,837 819,716
Professional fees (legal, audit, consultants, etc.) 47,559 57,393 67,348 78,720 91,693 106,474 117,276 129,003 141,904 156,094
Depreciation expense 264,218 536,080 855,917 1,265,495 1,837,496 2,543,270 2,570,647 2,644,722 2,785,521 3,027,052
Amortization of pre-operating costs 72,400 72,400 72,400 72,400 72,400 - - - - -
Amortization of legal, licensing, and training costs - - - - - - - - - -
Property tax expense
Bad debt expense 285,353 344,358 404,088 472,322 550,161 638,845 703,655 774,021 851,423 936,565
Miscellaneous expense 1
Subtotal 4,298,367 5,062,419 5,913,762 6,918,007 8,172,688 9,622,672 10,270,872 11,068,293 12,066,126 13,348,145
Operating Income 2,572,330 3,415,294 4,231,701 5,150,032 6,107,104 7,196,716 8,364,379 9,545,811 10,730,813 11,856,346

Other income (interest on cash) - - - - - - - - - -

Other income 2
Gain / (loss) on sale of machinery & equipment - - - - - - - - -
Gain / (loss) on sale of office equipment - - - - - - - - -
Gain / (loss) on sale of office vehicles - - - - 343,608 377,969 457,342 608,265 888,067
Earnings Before Interest & Taxes 2,572,330 3,415,294 4,231,701 5,150,032 6,450,712 7,574,685 8,821,722 10,154,076 11,618,880 11,856,346

Interest on short term debt - - - - - - - - - -

Interest on export refinancing - - - - - - - - - -
Interest expense on machinery & equipment lease - - - - - - - - - -
Interest expense on office equipment lease - - - - - - - - - -
Interest expense on office vehicles lease - - - - - - - - - -
Interest expense on long term debt (Project Loan) 174,997 191,518 314,295 315,049 354,284 464,473 384,394 283,707 215,966 140,028
Interest expense on long term debt (Working Capital Loan) 70,738 - - - - - - - - -
Subtotal 245,735 191,518 314,295 315,049 354,284 464,473 384,394 283,707 215,966 140,028
Earnings Before Tax 2,326,595 3,223,775 3,917,407 4,834,983 6,096,428 7,110,212 8,437,328 9,870,369 11,402,914 11,716,317

Tax 721,245 999,370 1,214,396 1,498,845 1,889,893 2,204,166 2,615,572 3,059,814 3,534,903 3,632,058
NET PROFIT/(LOSS) AFTER TAX 1,605,351 2,224,405 2,703,011 3,336,139 4,206,536 4,906,046 5,821,756 6,810,555 7,868,011 8,084,259

Balance brought forward 1,605,351 3,351,036 5,297,291 7,554,251 10,290,688 13,297,143 16,729,036 20,597,142 28,465,153
Total profit available for appropriation 1,605,351 3,829,756 6,054,047 8,633,430 11,760,786 15,196,735 19,118,899 23,539,591 28,465,153 36,549,412
Dividend - 478,719 756,756 1,079,179 1,470,098 1,899,592 2,389,862 2,942,449 - -
Balance carried forward 1,605,351 3,351,036 5,297,291 7,554,251 10,290,688 13,297,143 16,729,036 20,597,142 28,465,153 36,549,412

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12.2 Balance Sheet

Calculations SMEDA
Balance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 1,430,600 326,467 2,188,781 2,531,764 3,179,942 4,095,374 6,898,461 9,227,681 10,860,992 14,248,350 15,470,692
Accounts receivable 781,790 862,618 1,025,268 1,200,562 1,400,661 1,628,775 1,839,041 2,024,213 2,226,635 2,449,298
Finished goods inventory 67,720 75,147 83,234 92,036 101,614 112,033 120,498 129,665 139,595 150,359
Equipment spare part inventory 180 218 256 300 350 408 450 496 547 603 -
Raw material inventory 908 1,098 1,292 1,513 1,767 2,056 2,270 2,503 2,759 3,042 -
Pre-paid annual land lease - - - - - - - - - - -
Pre-paid building rent 84,600 93,060 102,366 112,603 123,863 136,249 149,874 164,861 181,348 199,482 -
Pre-paid machinery & equipment lease interest - - - - - - - - - - -
Pre-paid office equipment lease interest - - - - - - - - - - -
Pre-paid office vehicles lease interest - - - - - - - - - - -
Pre-paid insurance 77,451 148,882 220,785 302,511 409,553 572,258 546,409 559,994 636,837 819,716 -
Total Current Assets 1,593,739 1,419,235 3,451,245 4,057,193 5,008,073 6,308,621 9,338,273 11,915,075 13,836,361 17,637,424 18,070,349

Fixed assets
Land - - - - - - - - - - -
Building/Infrastructure 84,600 173,430 266,913 365,514 469,746 580,170 697,407 822,138 955,112 1,097,153 1,249,168
Machinery & equipment 690,000 1,345,500 2,001,000 2,704,317 3,518,569 4,535,834 5,899,572 7,862,997 10,862,916 15,679,426 23,812,221
Furniture & fixtures 136,840 123,156 109,472 95,788 82,104 68,420 54,736 41,052 27,368 13,684 -
Office vehicles 859,020 1,632,138 2,414,705 3,345,909 4,672,484 6,909,329 5,028,613 3,336,882 1,873,822 714,894 -
Office equipment 55,000 107,250 159,500 215,562 280,466 361,552 470,256 626,761 865,885 1,249,809 1,898,076
Total Fixed Assets 1,825,460 3,381,474 4,951,590 6,727,089 9,023,369 12,455,305 12,150,584 12,689,830 14,585,103 18,754,966 26,959,465

Intangible assets
Pre-operation costs 362,000 289,600 217,200 144,800 72,400 - - - - - -
Legal, licensing, & training costs - - - - - - - - - - -
Total Intangible Assets 362,000 289,600 217,200 144,800 72,400 - - - - - -
TOTAL ASSETS 3,781,199 5,090,309 8,620,036 10,929,083 14,103,842 18,763,926 21,488,857 24,604,905 28,421,464 36,392,390 45,029,814

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 95,602 110,129 123,364 137,648 153,054 169,646 178,374 187,306 196,686 206,205
Export re-finance facility - - - - - - - - - - -
Short term debt - - - - - - - - - - -
Other liabilities
Total Current Liabilities - 95,602 110,129 123,364 137,648 153,054 169,646 178,374 187,306 196,686 206,205

Other liabilities
Machinery & equipment lease payable - - - - - - - - - - -
Office equipment lease payable - - - - - - - - - - -
Office vehicle lease payable - - - - - - - - - - -
Deferred tax 106,950 219,248 342,775 486,066 660,882 863,256 1,119,251 1,473,476 2,001,977 2,839,658
Long term debt (Project Loan) 1,093,730 1,196,990 1,964,343 1,969,056 2,214,273 2,902,954 2,402,463 1,821,894 1,407,191 972,225 678,190
Long term debt (Working Capital Loan) 796,870 - - - - - - - - - -
Total Long Term Liabilities 1,890,600 1,303,940 2,183,590 2,311,830 2,700,340 3,563,836 3,265,719 2,941,145 2,880,667 2,974,202 3,517,848

Shareholders' equity
Paid-up capital 1,890,600 2,085,416 2,975,280 3,196,598 3,711,604 4,756,349 4,756,349 4,756,349 4,756,349 4,756,349 4,756,349
Retained earnings 1,605,351 3,351,036 5,297,291 7,554,251 10,290,688 13,297,143 16,729,036 20,597,142 28,465,153 36,549,412
Total Equity 1,890,600 3,690,766 6,326,317 8,493,889 11,265,855 15,047,037 18,053,491 21,485,385 25,353,491 33,221,502 41,305,761
TOTAL CAPITAL AND LIABILITIES 3,781,199 5,090,309 8,620,036 10,929,083 14,103,842 18,763,926 21,488,857 24,604,905 28,421,464 36,392,390 45,029,814

- - - - - - - - - - -

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12.3 Cash Flow Statement

Calculations SMEDA
Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 1,605,351 2,224,405 2,703,011 3,336,139 4,206,536 4,906,046 5,821,756 6,810,555 7,868,011 8,084,259
Add: depreciation expense 264,218 536,080 855,917 1,265,495 1,837,496 2,543,270 2,570,647 2,644,722 2,785,521 3,027,052
amortization of pre-operating costs 72,400 72,400 72,400 72,400 72,400 - - - - -
amortization of training costs - - - - - - - - - -
Deferred income tax 106,950 112,298 123,527 143,292 174,816 202,374 255,994 354,225 528,501 837,681
Accounts receivable (781,790) (80,828) (162,651) (175,293) (200,099) (228,114) (210,266) (185,172) (202,421) (222,663)
Finished goods inventory (67,720) (7,427) (8,087) (8,802) (9,578) (10,420) (8,465) (9,167) (9,931) (10,763)
Equipment inventory (180) (38) (38) (44) (50) (57) (42) (46) (51) (56) 603
Raw material inventory (908) (190) (193) (222) (253) (289) (214) (233) (257) (283) 3,042
Pre-paid building rent (84,600) (8,460) (9,306) (10,237) (11,260) (12,386) (13,625) (14,987) (16,486) (18,135) 199,482
Pre-paid machinery & equipment lease interest - - - - - - - - - - -
Pre-paid office equipment lease interest - - - - - - - - - - -
Pre-paid office vehicles lease interest - - - - - - - - - - -
Advance insurance premium (77,451) (71,431) (71,903) (81,726) (107,041) (162,705) 25,849 (13,585) (76,843) (182,879) 819,716
Accounts payable 95,602 14,527 13,235 14,284 15,406 16,592 8,728 8,932 9,380 9,520
Other liabilities - - - - - - - - - -
Cash provided by operations (163,139) 1,214,892 2,790,013 3,505,124 4,528,909 5,921,537 7,441,718 8,409,544 9,530,458 10,777,708 12,747,929

Financing activities
Project Loan - principal repayment (91,556) (122,513) (216,605) (269,788) (356,065) (500,490) (580,569) (414,703) (434,966) (294,035)
Working Capital Loan - principal repayment (796,870) - - - - - - - - -
Add: land lease expense - - - - - - - - - -
Land lease payment - - - - - - - - - - -
Machinery & equipment lease principal repayment - - - - - - - - - - -
Office equipment lease principal repayment - - - - - - - - - - -
Office vehicles lease principal repayment - - - - - - - - - - -
Short term debt principal repayment - - - - - - - - - -
Export re-finance principal repayment - - - - - - - - - -
Additions to export refinancing - - - - - - - - - - -
Additions to lease financing - - - - - - - - - - -
Additions to Project Loan 1,093,730 194,816 889,865 221,318 515,006 1,044,745 - - - - -
Additions to Working Capital Loan 796,870 - - - - - - - - - -
Issuance of shares 1,890,600 194,816 889,865 221,318 515,006 1,044,745 - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 3,781,199 (498,793) 1,657,217 226,030 760,224 1,733,425 (500,490) (580,569) (414,703) (434,966) (294,035)

Investing activities
Capital expenditure (2,187,460) (1,820,232) (2,106,197) (2,631,417) (3,561,775) (5,269,432) (2,238,549) (3,109,893) (4,539,994) (6,955,385) (11,231,552)
Acquisitions
Cash (used for) / provided by investing activities (2,187,460) (1,820,232) (2,106,197) (2,631,417) (3,561,775) (5,269,432) (2,238,549) (3,109,893) (4,539,994) (6,955,385) (11,231,552)

NET CASH 1,430,600 (1,104,133) 2,341,034 1,099,738 1,727,357 2,385,530 4,702,678 4,719,082 4,575,760 3,387,357 1,222,343

Cash balance brought forward 1,430,600 326,467 2,188,781 2,531,764 3,179,942 4,095,374 6,898,461 9,227,681 10,860,992 14,248,350
Cash available for appropriation 1,430,600 326,467 2,667,501 3,288,520 4,259,121 5,565,473 8,798,053 11,617,543 13,803,441 14,248,350 15,470,692
Dividend - 478,719 756,756 1,079,179 1,470,098 1,899,592 2,389,862 2,942,449 - -
Cash balance 1,430,600 326,467 2,188,781 2,531,764 3,179,942 4,095,374 6,898,461 9,227,681 10,860,992 14,248,350 15,470,692
Cash carried forward 1,430,600 326,467 2,188,781 2,531,764 3,179,942 4,095,374 6,898,461 9,227,681 10,860,992 14,248,350 15,470,692

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13 KEY ASSUMPTIONS

13.1 Economy Related Assumptions

Description Details
Inflation rate 10%
Wage rate growth 10%
Electricity growth rate 10%
Gas growth rate 10%
Water growth rate 10%

13.2 Production Assumptions

Description Details
Maximum attainable capacity in percentage 95%
Capacity utilization (1st year) in percentage 70%
Production capacity in units (70% in first year) 14,781 kg
Production capacity utilization growth rate 5%
Sales price growth rate in percentage 10%

13.3 Revenue Assumptions

Description Details
Production capacity 95%
Sales price per unit in year 1 660
Maximum capacity utilization 95%

13.4 Financial Assumptions

Description Details
Debt 50%
Equity 50%
Return on Equity 16%

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