Spices Processing, Packing and Marketing2

Pre-Feasibility Study
(Spices Processing, Packing & Marketing)
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 Khyber Pakhtunkhwa 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) 111-111-456 Tel: (081) 2831623, 2831702
Fax: (042) 36304926-7 Fax: (021) 35610572 Fax: (091) 5286908 Fax: (081) 2831922
[email protected] [email protected] [email protected] [email protected]
Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost
December, 2013
Pre-Feasibility Study Spices Processing, Packing & Marketing
Table of Contents
1. DISCLAIMER .......................................................................................................................................... 2
2. PURPOSE OF THE DOCUMENT ......................................................................................................... 3
3. INTRODUCTION TO SMEDA .............................................................................................................. 3
4. INTRODUCTION TO SCHEME ........................................................................................................... 4
5. EXECUTIVE SUMMARY ...................................................................................................................... 4
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 5
7. CRITICAL FACTORS ............................................................................................................................ 6
8. INSTALLED AND OPERATIONAL CAPACITIES ........................................................................... 6
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ..................................................................... 6
10. POTENTIAL TARGET MARKETS/CITIES ...................................................................................... 6
11. PRODUCTION PROCESS FLOW ....................................................................................................... 6
12. PROJECT COST SUMMARY .............................................................................................................. 7
12.1 PROJECT ECONOMICS .................................................................................................................... 7
12.2 PROJECT FINANCING ...................................................................................................................... 8
12.3 PROJECT COST............................................................................................................................... 8
12.4 SPACE REQUIREMENT .................................................................................................................... 8
12.5 MACHINERY AND EQUIPMENT......................................................................................................... 9
12.6 OFFICE EQUIPMENT & FURNITURE ................................................................................................ 9
12.7 RAW MATERIAL REQUIREMENTS .................................................................................................. 10
12.8 HUMAN RESOURCE REQUIREMENT.............................................................................................. 11
12.9 REVENUE GENERATION ................................................................................................................ 12
12.10 OTHER COSTS .............................................................................................................................. 13
13. CONTACTS - SUPPLIERS, EXPERTS/CONSULTANTS............................................................... 14
14. ANNEXURE .......................................................................................................................................... 15
14.1 INCOME STATEMENT .............................................................................................................. 15
14.2 STATEMENT OF CASH FLOW ................................................................................................. 16
14.3 BALANCE SHEET ...................................................................................................................... 17
14.4 USEFUL PROJECT MANAGEMENT TIPS ............................................................................... 18
14.5 USEFUL LINKS .......................................................................................................................... 19
15. KEY ASSUMPTIONS........................................................................................................................... 20
1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the 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 taken to compile this document, the
contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented
information. SMEDA, its employees or agents do not assume any liability for any
financial or other loss resulting from this memorandum in consequence of
undertaking this activity. The contained information does not preclude any further
professional advice. The prospective user of this memorandum is encouraged to
carry out additional diligence and gather any information which is necessary for
making an informed decision, including taking professional advice from a
qualified consultant / technical expert before taking any decision to act upon the
information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST - 2
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 Spices
Processing, Packing & Marketing unit 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.
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.
4. INTRODUCTION TO SCHEME
Prime Minister’s ‘Youth Business Loans’ Programme, for young entrepreneurs,
with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to
provide subsidised financing at 8% mark-up per annum for one hundred
thousand (100,000) beneficiaries, through designated financial institutions,
initially through the National Bank of Pakistan (NBP) and the First Women Bank
Ltd. (FWBL).
Loans from Rs. 0.1million to Rs. 2.0 million with tenure up to 8 year (1 year grace
period inclusive), and a debt : equity of 90 : 10 will be disbursed to SME
beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkwa,
Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered
Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
Spices Processing, Packing & Marketing unit can be established in all major
cities however, preferred locations are Karachi, Lahore, Rawalpindi, Faisalabad,
Multan, Hyderabad, Peshawar, Sukkur, Quetta and Mirpurkhas. Currently packed
spices are commonly used in urban and semi-urban centers of Pakistan.
Products include Biryani Masala, Karhai Masala and Qeema Masala in
packets (50 grams).
Installed capacity of the Spices Processing Unit is 200 kg per day. Initial
utilization will be 60 %. Total Cost Estimates is Rs. 2,051,716/- with fixed
*
investment of Rs. 681,000/- and working capital of Rs. 1,370, 716/-
Given the cost assumptions IRR and payback are 47% and 2.5 years
respectively.
The most critical considerations or factors for success of the project are:
1. Quality & Pricing
2. Recipe & Processing
3. Credit Recovery
*Working capital includes 3-month utilities, 3-month staff salaries, 3-month rent
and 1-month raw material & miscellaneous expenses.
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT

There has been an immense progression in the Spices industry in the last
decade. Technological changes have had a great impact on spices processing,
packing and distribution with main emphases revolving around quality, pricing,
and distribution network. Spices processing industry is catering not only the
domestic market but also international market. The industry is shifting to new
levels with introduction of recipe packs.
Spices processing is a lucrative business and is in high demand. It can offer high
profitability provided that quality, hygiene and competitive prices are offered.
Compared to other businesses, spices are relatively in constant demand. There
is a substantial potential in this business; however growth largely depends on:
− Population growth
− Ratio of younger people in the population
− Urbanization
− Conversion from popular home-made curries to ready to use curries
Technology: This proposed Unit would consist of grinding, mixing and
packing machinery. Used machinery would be procured from the market.
Location: The Unit can be established in Karachi, Lahore, Rawalpindi,
Faisalabad, Multan, Hyderabad, Peshawar, Sukkur, Quetta and Mirpurkhas.
Product: The unit would process common and widely used spices (masalas)
i.e. Biryanai Masala, Karhai Masala and Qeema Masala.
Target Market: All urban and semi-urban areas across the country are
potential target markets however initially products would be sold in the same
city where spices processing unit is being established. A huge local market of
more than 180 million consumers carries enormous potential for the
investment in this business.
Employment Generation: The proposed project will provide direct
employment to 8 people.
7. CRITICAL FACTORS
Following factors should be considered before entering into the spices business.
• Quality Control
• Pricing
• Recipe & Processing
• Credit Recovery
8. INSTALLED AND OPERATIONAL CAPACITIES

The daily spices processing capacity of the proposed Spices Processing Unit
would be 200 kg. Initially operational capacity would be at 60% of installed
capacity and would gradually increase by 5% annually for the first five years and
then to 8% annually.
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

This study proposes setting up the business in an industrial/commercial area
where basic infrastructure and utilities are easily available. The Unit is proposed
to be located in Karachi, Lahore, Rawalpindi, Faisalabad, Multan, Hyderabad,
Peshawar, Sukkur, Quetta and Mirpurkhas etc.
10. POTENTIAL TARGET MARKETS/CITIES

The target customers would be middle and lower-middle income groups living in
urban areas including Karachi, Lahore, Rawalpindi, Faisalabad, Multan,
Hyderabad, Peshawar, Sukkur, Quetta and Mirpurkhas etc. and semi-urban
areas. The products would be 15-20 percent cheaper compared with top brands
(National, Shan, Mehran etc.).
11. PRODUCTION PROCESS FLOW

Process flow consists of four steps:
i. Cleaning Procured raw materials are manually sorted and cleaned.

ii. Drying The quality of dried spices depends upon the humidity level in
spices therefore drying needs to be undertaken. Various types of
drying processes are used, ranging from simple sun drying to gas or
kerosene-fired dryers.
iii. Grinding and Mixing Spices are grinded and mixed using stone mill.
iv. Packing Grinded spices are packed into desired sizes using
automatic machines.
v. Storage Finished packets are put in cartons and stored in warehouse.
vi. Distribution from warehouse. Packed products are sent to distributors.
Production Process
Finish
Cleaning Drying Grinding Packing Storage Distribution
12. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial
viability of this project. Various cost and revenue related assumptions along with
results of the analysis are outlined in this section.
The projected Income Statement, Cash Flow Statement and Balance Sheet are
attached as appendices.
12.1 Project Economics
The following table shows internal rates of return and payback period for Spices
Processing Packing and Marketing Unit.
Table 1 - Project Economics
Description Details
IRR 47%
NPV (Rs.) 5,964,184
Payback Period (Years) 2.5 Years
Returns on the scheme and its profitability are highly dependent on prices of the
raw material, achieving production targets and most important payment recovery.
12.2 Project Financing
Following table provides details of the equity required and variables related to
bank loan;
Table 2 - Project Financing
Description Details
Total Equity (10%) Rs. 205,172
Bank Loan (90 %.) Rs. 1,846,544
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 8
Grace Period (Year) 1
12.3 Project Cost
Total project cost of the Spices Processing, Packing & Marketing Unit would be
approximately Rs. 2.05 million. Out of this, fixed capital cost of the project is
around Rs. 0.68 million and remaining 1.37 million will be the working capital.
Table 3: Capital Investment for the Project

Fixed Capital Amount (Rs.)
1 Plant & Machinery 275,000
2 Office Equipment & Furniture 141,000
3 Vehicles (Motor Cycle) 60,000
4 Rent in Advance (6-month) 180,000
5 Preliminary Expenses 25,000
Total Capital Cost 681,000
12.4 Space Requirement
The area has been calculated on the basis of space requirement for raw material
storage, processing, finished goods storage and office. The table below shows
the space requirements:
Table 4: Space Requirement

Size/Area
S. No. Details Area %
(Sq. Ft.)
1 Raw Material Storage 45 400

2 Processing Area 30 800
3 Packaging Area 20 400
4 Finished Goods Storage Area 5 300
5 Admin Area 300
Total Area
2,200
12.5 Machinery and Equipment
Following table provides list of machinery and equipment
Table5: Machinery & Equipment

Unit Price Qty Total Price(Rs.)
Grinding Machine 65,000 1 65,000
Mixing Machine 60,000 1 60,000
Packing Machine 150,000 1 150,000
Total 275,000
12.6 Office Equipment & Furniture
A provision of Rs. 141,000/- for procurement of office / factory furniture and office
equipment is assumed.
The breakup of Office / Factory Furniture & Fixtures is as follows:
Table 6: Furniture & Office Equipment Cost
Cost Total
S. No. Item Quantity
(Rs.) Cost (Rs.)
Table & Chair for Owner 8,000 1 8,000
1
Tables & Chairs for Staff 4,000 4 16,000
2
Carpet for Office 10,000 1 10,000
3
Air Conditioner (Used) 20,000 1 20,000
4
Waiting Chairs (Used) 2,000 6 12,000
5
Curtains & Interior Decoration 5,000 1 5,000
6
Electrical Fittings & Lights 15,000 1 15,000
7
Computer & Printer 40,000 1 40,000
8
Fax Machine
9 15,000 1 15,000
Total
141,000
Table 7: Office Vehicle Cost
Required Unit
Total Cost
S. No. Vehicle Type No. of Cost
(Rs)
Units (Rs.)
1 Motor Cycle 1 60,000 60,000
Total 60,000
12.7 Raw Material Requirements
Following raw material would be required for making Biryani Masala, Karhai
Masala and Qeema Masala:
Table 8: Raw Material & Prices
Estimated Ingredient
Whole sale Ratio in
price per Kg gms/kg
Item (Rs)
1. Red Chilli (Surkh Mirch) 150 225
2. Salt (Namak) 10 185
3. Coriander (Dhanya) 120 300
4. Turmeric (Haldi) 180 90
5. Cumin Seed (Sufed Zeera) 280 20
6. Black Pepper (Kali Mirch) 760 40
7. Clove (Long) 1, 600 30
8. Cinnamon (Dar Cheeni) 200 30
9. Cardamom (Alaichi) 2, 000 10
10. Mace (Jautri) 2, 500 5
11. Nutmeg (Jaifal) 1, 500 5
12. Bay Leaf (Tez Pat) 220 20
13. Mango Powder (Aam Chur) 120 3
14. Plum (Aalo Bokhara) 220 5
15. Preservatives & Citric Acid 140 32
Different quality of above material is available in the market so prices may vary
accordingly. Also prices of these items vary from season to season and also
depend on local / international production. This price will also be different from
city to city in Pakistan.
12.8 Human Resource Requirement
Table 9: Human Resource Requirement
No of Salary Per
Title/Designation Employees Month (Rs.)
Owner 1 25,000
Grinding Mill Operator 1 14,500
Trained packing machine operator 1 15,000
Packers 2 20,000
Helper / Loader 1 10,000
Production In charge 1 20,000
Security Guard 1 10,000
Total Staff 8 114,500
12.9 Revenue Generation
Table 10: Cost & Revenue Sheet
REVENUE CALCULATIONS
Production
Rated capacity 25 Kg / Hr
Estimated No. of Operating Hours 8 Hrs / Day
Estimated Production Capacity 200 Kg / Day
Expected Capacity Utilization (At the beginning of the
project) 60%
Annual Capacity Utilization Growth Rate 5%
Expected Production at the beginning of the project 120 Kg / Day
Provision for Wastage 2%
Total Realized Production 118 Kg / Day
Approximate Net weight of a Spice packet 50 grams / pack
Total packets Produced 2,352 packets / day
Total packets Produced 56,448 packets / month
Total packets Produced 677,376 packets / year
Sales Price / Packet 29 Rs.
Daily Revenue from Spice Packets Produced per Day 68,208 Rs.
Total Price of packets Produced per Month 1,636,992 Rs.
Total Price of packets Produced per Year 19,643,904 Rs
Provision for Finished Goods Inventory 10 Days Inventory
Estimated Finished Goods Inventory - end of the Year 682,080 Rs
Gross Annual Sales 18,961,824 Rs.
Packing Machine
Rated capacity 600 Packets / Hour
No. of hours worked 4 Hrs / Day
Estimated packets per day 2,400 Packets / Day
Number of Machines Proposed 1
Total Estimated Wrappings per day 2,400 Packets / Day
COST CALCULATION
Ingredients
Total Quantity 118 kg./day
BIRYANI MASALA 40% 941 15,439 Rs.
KARAHI MASALA 30% 706 11,579 Rs.
NEHARI MASALA 30% 706 11,579 Rs.
Rs /
Total Ingredient Cost 2352 38,596 day
Packing Material
Cost of Packing per packet 5.0 Rs / Packet
Total Packing Cost per packet 5.00 Rs
Total Cost per packet 16.41 Rs.
12.10 Other Costs
• Considering the industry norms, it has been assumed that 50% of the total
sales will be on cash while remaining 50% sales will be on credit to local
distributors. A collection period of 30 days has been assumed.
• A provision for bad debts has been assumed equivalent to 5% of the annual
credit sales.
• The cost of the utilities including electricity, fuel for motor cycle, telephone,
and water is estimated to be around Rs. 55,000/- per month.
• For the purpose of this pre-feasibility, it has been assumed that Spice
Processing, Packing & Marketing Unit will be engaged in local sales for
which demand can be created through retailers and directly selling to
distributor. As advertising would be difficult for a new setup because of
shortage of funds, therefore it has been assumed that relationship building
will be adopted in order to create consistent demand for the product. For this
purpose, an amount equivalent to 20% of the annual sales has been
assumed. This amount will be utilized for schemes for distributors, whole
sellers and retailers to penetrate in the market in the presence of strong
brands.
• It has been assumed that long-term financing for 8 years will be obtained in
order to finance the project investment cost. This facility would be required at
a rate of 8% per annum with 96 monthly installments over a period of eight
years. The installments are assumed to be paid at the end of every month.
• Miscellaneous expenses of running the business are assumed to be Rs.
25,000 per month. These expenses include various items like office
stationery, daily consumables etc. and are assumed to increase at a nominal
rate of 10% per annum.
• The business is assumed to be run as a sole proprietorship; therefore, tax
rates applicable on the income of a non- salaried individual taxpayer are
used for income tax calculation of the business.
• The cost of capital is explained in the following table:
Particulars Rate
Required return on equity 20%
Cost of finance 8%
Weighted Average Cost of Capital 9.2%
The weighted average cost of capital is based on the debt/equity ratio of 90:10.
13. CONTACTS - SUPPLIERS, EXPERTS/CONSULTANTS

Proposed Spices Processing, Packing & Marketing Unit does not require
sophisticated machinery and equipment. Grinding, mixing and packing machines
are easily available in many cities of Pakistan. Raw material is also available in
all areas of Pakistan but prices may vary so interested person may work out
his/her costing on the basis of the location where raw material is being procured.
Sama Engineering
Sama House, 2-A, 1/32, Nazimabad # 2
Karachi
Phone +9221-36602467, 36603311
URL: www.samaengineering.com.pk
14. ANNEXURE
14.1 INCOME STATEMENT
Projected Income Statement (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 19,643,904 22,014,720 25,288,704 28,788,480 32,514,048 37,425,024 42,674,688 48,263,040 55,319,040 59,834,880
Beginning Inventory - 682,080 705,600 810,535 922,708 1,042,117 1,199,520 1,367,778 1,546,892 1,773,046
Ending Inventory 682,080 705,600 810,535 922,708 1,042,117 1,199,520 1,367,778 1,546,892 1,773,046 1,917,785
Gross Sales 18,961,824 21,991,200 25,183,769 28,676,308 32,394,639 37,267,621 42,506,430 48,083,926 55,092,886 59,690,142
Sales on Cash 9,480,912 10,995,600 12,591,884 14,338,154 16,197,319 18,633,810 21,253,215 24,041,963 27,546,443 29,845,071
Sales on Credit 9,480,912 10,995,600 12,591,884 14,338,154 16,197,319 18,633,810 21,253,215 24,041,963 27,546,443 29,845,071
Bad Debts 474,046 549,780 629,594 716,908 809,866 931,691 1,062,661 1,202,098 1,377,322 1,492,254
Net (Adjusted Sales) 18,487,778 21,441,420 24,554,174 27,959,400 31,584,773 36,335,930 41,443,769 46,881,828 53,715,564 58,197,888
Cost of Sales 12,734,592 14,740,594 16,976,733 19,466,335 22,234,936 25,310,487 28,841,462 32,778,796 37,167,332 40,244,892
Raw Material 11,342,592 13,209,394 15,292,413 17,613,583 20,196,909 23,068,657 26,257,559 29,795,036 33,715,436 36,244,093
Labor (Production Staff) 732,000 805,200 885,720 974,292 1,071,721 1,178,893 1,414,672 1,697,606 2,037,128 2,444,553
Utilities 660,000 726,000 798,600 878,460 966,306 1,062,937 1,169,230 1,286,153 1,414,769 1,556,245
Gross Profit 5,753,186 6,700,826 7,577,441 8,493,065 9,349,837 11,025,444 12,602,307 14,103,032 16,548,232 17,952,996
Gross Profit Margin 31% 31% 31% 30% 30% 30% 30% 30% 31% 31%
General Administrative & Selling Expenses

Salaries 642,000 706,200 776,820 854,502 939,952 1,033,947 1,137,342 1,251,076 1,376,184 1,513,802
Rent Expense 360,000 396,000 435,600 479,160 527,076 579,784 637,762 701,538 771,692 848,861
Office Miscellaneous Expenses 300,000 330,000 363,000 399,300 439,230 483,153 531,468 584,615 643,077 707,384
Amortization of Preliminary Expenses 5,000 5,000 5,000 5,000 5,000 - - - - -
Depreciation Expense 47,600 42,840 38,556 34,700 31,230 28,107 25,297 22,767 20,490 18,441
Maintenance Expense 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000
Selling & Distribution 3,697,556 4,288,284 4,910,835 5,591,880 6,316,955 7,267,186 8,288,754 9,376,366 10,743,113 11,639,578
Subtotal 5,107,156 5,823,324 6,584,811 7,419,542 8,314,443 9,447,177 10,675,623 11,991,362 13,609,556 14,783,067
Operating Income 646,031 877,502 992,630 1,073,522 1,035,394 1,578,266 1,926,684 2,111,670 2,938,677 3,169,929
Financial Charges (8 % Per Annum) 147,724 140,313 123,294 104,862 84,900 63,281 39,868 14,512 - -
Earnings Before Taxes 505,718 754,209 887,768 988,623 972,113 1,538,398 1,912,173 2,111,670 2,938,677 3,169,929
Tax 50,572 35,631 55,665 70,793 68,317 153,260 209,326 239,251 435,235 481,486
Net Profit 455,146 718,577 832,103 917,829 903,796 1,385,139 1,702,847 1,872,420 2,503,441 2,688,444
Monthly Profit After Tax 37,929 59,881 69,342 76,486 75,316 115,428 141,904 156,035 208,620 224,037
14.2 STATEMENT OF CASH FLOW
Projected Statement of Cash Flows (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Cash Flow From Operating Activities
Net Profit 0 455,146 718,577 832,103 917,829 903,796 1,385,139 1,702,847 1,872,420 2,503,441 2,688,444
Add: Depreciation Expense 0 47,600 42,840 38,556 34,700 31,230 28,107 25,297 22,767 20,490 18,441
Amortization Expense 0 5,000 5,000 5,000 5,000 5,000 - - - -
(Increase) / decrease in Receivables - (395,038) (63,112) (66,512) (72,761) (77,465) (101,520) (109,142) (116,198) (146,020) (95,776)
(Increase) / decrease in RM Inventory - 184,608 (77,783) (86,792) (96,715) (107,639) (119,656) (132,871) (147,395) (163,350) (105,361)
(Increase) / decrease in Finished Goods
Inventory (682,080) (23,520) (104,935) (112,172) (119,409) (157,403) (168,258) (179,114) (226,154) (144,738)
Net Cash Flow From Operations 0 (384,764) 602,002 617,420 675,881 635,513 1,034,666 1,317,872 1,452,480 1,988,408 2,361,009
Cash Flow From Financing Activities
Receipt of Long Term Debt 1,846,544

Repayment of Long Term Debt (205,055) (222,074) (240,506) (260,468) (282,087) (305,500) (330,856) - -
Owner's Equity 205,172
Net Cash Flow From Financing Activities 2,051,716 0 (205,055) (222,074) (240,506) (260,468) (282,087) (305,500) (330,856) 0 0
Cash Flow From Investing Activities
Capital Expenditure (335,000) 0 0

Office Equipment & Furniture (141,000)
Preliminary Operating Expenses (25,000)
Security Deposit and Advance Rent (180,000)
Raw Material Inventory (657,216)
Net Cash Flow From Investing Activities (1,338,216) 0 0 0 0 0 0 0 0 0 0
NET CASH FLOW 713,500 (384,764) 396,947 395,346 435,375 375,045 752,580 1,012,373 1,121,624 1,988,408 2,361,009
Cash at the Beginning of the Period 0 713,500 328,736 725,683 1,121,029 1,556,404 1,931,449 2,684,028 3,696,401 4,818,025 6,806,433
Cash at the End of the Period 713,500 328,736 725,683 1,121,029 1,556,404 1,931,449 2,684,028 3,696,401 4,818,025 6,806,433 9,167,442
14.3 BALANCE SHEET
Projected Balance Sheet (Rs.) 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 Balance 713,500 328,736 725,683 1,121,029 1,556,404 1,931,449 2,684,028 3,696,401 4,818,025 6,806,433 9,167,442
Raw Material Inventory 657,216 472,608 550,391 637,184 733,899 841,538 961,194 1,094,065 1,241,460 1,404,810 1,510,171
Finished Goods Inventory 682,080 705,600 810,535 922,708 1,042,117 1,199,520 1,367,778 1,546,892 1,773,046 1,917,785
Accounts Receivable 0 395,038 458,150 524,662 597,423 674,888 776,409 885,551 1,001,748 1,147,768 1,243,545
Prepaid Rent 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000 180,000
Total Current Assets 1,550,716 2,058,462 2,619,825 3,273,410 3,990,434 4,669,992 5,801,151 7,223,795 8,788,126 11,312,057 14,018,942
Fixed Assets
Plant Machinery & Facility 275,000 247,500 222,750 200,475 180,428 162,385 146,146 131,532 118,378 106,541 95,887
Furniture & Fixtures 141,000 126,900 114,210 102,789 92,510 83,259 74,933 67,440 60,696 54,626 49,164
Vehicle 60,000 54,000 48,600 43,740 39,366 35,429 31,886 28,698 25,828 23,245 20,921
Total Fixed Assets 476,000 428,400 385,560 347,004 312,304 281,073 252,966 227,669 204,902 184,412 165,971
Intangible Assets
Preliminary and Transportation Expenses 25,000 20,000 15,000 10,000 5,000 0 0 0 0 0 0
Total Assets 2,051,716 2,506,862 3,020,385 3,630,414 4,307,737 4,951,065 6,054,117 7,451,464 8,993,028 11,496,469 14,184,913
Owner's Equity 205,172 660,317 1,378,895 2,210,998 3,128,827 4,032,623 5,417,761 7,120,608 8,993,028 11,496,469 14,184,913
Short-term Liabilities
Account Payable
Long Term Liability 1,846,544 1,846,544 1,641,490 1,419,416 1,178,910 918,442 636,356 330,856 0 0 0
Total Equity & Liabilities 2,051,716 2,506,862 3,020,385 3,630,414 4,307,737 4,951,065 6,054,117 7,451,464 8,993,028 11,496,469 14,184,913
14.4 USEFUL PROJECT MANAGEMENT TIPS

Technology
• List of Machinery & Equipment: (As per Section 12.5)
• Required Raw Material: Suppliers credit agreements and availability as per
schedule be ensured before start of operations.
• Energy Requirement: Should not be overestimated or installed in excess and
alternate source of energy for critical operations be arranged in advance.
• Quality Assurance Equipment & Standards: Whatever means required,
products quality standards need to be defined on the packaging and a system
to check them instituted, this improves credibility.
Marketing
• Product Development & Packaging: Expert's help may be engaged for
product/service and packaging design & development.
• Ads & P.O.S. Promotion: Business promotion and dissemination through
banners and launch events is highly recommended. Good quality brochures to
be printed.
• Sales & Distribution Network: Expert's advise 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
• List of Human Resource: (As per Section 12.8)
• Adequacy & Competencies: Skilled and experienced staff should be
considered an investment even to the extent of offering share in business
profit.
• Performance Based Remuneration: Attempt to manage human resource cost
should be focused through performance measurement and performance based
compensation.
• Training & Skill Development: Encouraging training and skill of self &
employees through experts and exposure of best practices is route to success.
Least cost options for Training and Skill Development (T&SD) may be linked
with compensation benefits and awards.
14.5 USEFUL LINKS

• Prime Minister’s Office
www.pmo.gov.pk
• Small & Medium Enterprises Development Authority (SMEDA)
www.smeda.org.pk
• National Bank of Pakistan (NBP)
www.nbp.com.pk
• First Women Bank Limited (FWBL)
www.fwbl.com.pk
• Government of Pakistan
www.pakistan.gov.pk
• Ministry of Industries & Production
www.moip.gov.pk
• Ministry of Education, Training & Standards in Higher Education
http://moptt.gov.pk
• Government of Punjab
www.punjab.gov.pk
• Government of Sindh
www.sindh.gov.pk
• Government of Khyber Pakhtoonkhwa
www.khyberpakhtunkhwa.gov.pk
• Government of Balochistan
www.balochistan.gov.pk
• Government of Gilgit Baltistan
www.gilgitbaltistan.gov.pk
• Government of Azad Jammu & Kashmir
www.ajk.gov.pk
• Trade Development Authority of Pakistan (TDAP)
www.tdap.gov.pk
• State Bank of Pakistan (SBP)
www.sbp.org.pk
15. KEY ASSUMPTIONS
Item Assumption(s)
Sales Volume Increase 5%
5% per year for first 5 years. 8% per
Sales Price Increase
year from 6th year onwards
Increase in Cost of Sales 10 %
Increase in Staff Salaries 10 % per year
Increase in Utilities 10 % per year
Increase in Rent 10 % per year
Increase in Office Expenses 10 % per year
Debt / Equity Ratio 90 : 10
Depreciation: Premises Renovation 10 % per annum (Diminishing Balance)
Furniture 10 % per annum (Diminishing Balance)
Lease Period 8Years
Lease Installments Monthly
Financial Charges (Lease Rate) 8 % per annum
Grace Period (year) 1
Bad Debts 5% of Sales

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Pre-Feasibility Study

(Spices Processing, Packing & Marketing)

Small and Medium Enterprises Development Authority

2. PURPOSE OF THE DOCUMENT

6. BRIEF DESCRIPTION OF PROJECT & PRODUCT

8. INSTALLED AND OPERATIONAL CAPACITIES

9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

10. POTENTIAL TARGET MARKETS/CITIES

11. PRODUCTION PROCESS FLOW

i. Cleaning Procured raw materials are manually sorted and cleaned.

12. PROJECT COST SUMMARY

12.1 Project Economics

12.2 Project Financing

Total Equity (10%) Rs. 205,172

Bank Loan (90 %.) Rs. 1,846,544

Markup to the Borrower (%age/annum) 8%

Tenure of the Loan (Years) 8

Grace Period (Year) 1

12.3 Project Cost

Table 3: Capital Investment for the Project

1 Plant & Machinery 275,000

2 Office Equipment & Furniture 141,000

3 Vehicles (Motor Cycle) 60,000

4 Rent in Advance (6-month) 180,000

5 Preliminary Expenses 25,000

Total Capital Cost 681,000

12.4 Space Requirement

Table 4: Space Requirement

1 Raw Material Storage 45 400

12.5 Machinery and Equipment

Following table provides list of machinery and equipment

Table5: Machinery & Equipment

12.6 Office Equipment & Furniture

The breakup of Office / Factory Furniture & Fixtures is as follows:

Table 6: Furniture & Office Equipment Cost

Table 7: Office Vehicle Cost

1 Motor Cycle 1 60,000 60,000

12.7 Raw Material Requirements

Table 8: Raw Material & Prices

12.8 Human Resource Requirement

Table 9: Human Resource Requirement

12.9 Revenue Generation

Table 10: Cost & Revenue Sheet

Cost of Packing per packet 5.0 Rs / Packet

Total Packing Cost per packet 5.00 Rs

Total Cost per packet 16.41 Rs.

12.10 Other Costs

13. CONTACTS - SUPPLIERS, EXPERTS/CONSULTANTS

14.1 INCOME STATEMENT

General Administrative & Selling Expenses

14.2 STATEMENT OF CASH FLOW

Cash Flow From Operating Activities

Cash Flow From Financing Activities

Receipt of Long Term Debt 1,846,544

Cash Flow From Investing Activities

Capital Expenditure (335,000) 0 0

Net Cash Flow From Investing Activities (1,338,216) 0 0 0 0 0 0 0 0 0 0

14.3 BALANCE SHEET

14.4 USEFUL PROJECT MANAGEMENT TIPS

14.5 USEFUL LINKS