Pre-Feasibility Study

BOUTIQUE
(Women Designer Wear)

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE Waheed Trade Complex, 1 Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756 helpdesk@smeda.org.pk
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REGIONAL OFFICE PUNJAB Waheed Trade Complex, 1st Floor, 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore. Tel: (042) 111-111-456 Fax: (042) 5896619, 5899756 helpdesk@smeda.org.pk

REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk

REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk

REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

July, 2002

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Boutique (Women Designer Wear)

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-57 1 SMEDA-Punjab GM Punjab July 31, 2002 Library Officer

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1 INTRODUCTION
1.1 Project Brief The pre-feasibility study focuses on the establishment of women designer wear Boutique including the operations of apparel designing, manufacturing, selling and marketing. The study has been designed to capture the dynamics of the Boutique industry, with its many components and possible strategic opportunities. 1.2 Opportunity Rationale Clothing is a beautiful visual demonstration of the social and emotional needs of people wearing it. It also portrays in a clearly understood visual manner, what people of different cultures and styles want socially. Fashion, through times, has gone through so many rapid changes and bizarre extremes that it has examples of nearly every kind of clothing function. However, in a boutique business, the specifications and descriptions of the designs and clothes are so general that they can fit more than one costume, which actually are quite different in nature from each other and this is solely dependent on the taste of the people. The range of Pakistani dresses is remarkably wide, according to the vast cultures, geographical differences, purchasing capacities, influence of the western culture, and bewildering diversities of the ethnic groups. One has, therefore, to sift and isolate, and then relate and bring together, the ideas for creating various designs, which can fit in the context of the fashion in vogue and the culture in practice. In reference to Pakistan, the Boutique business is quite in vogue but has yet to be formalized. The market of this enterprise is quite scattered and unorganized. There are a few major players in Boutique business and these entrepreneurs have also taken an initiative based on their caprice and experience in the field of fashion design. However, there is a massive potential in this field, if one has the ability to design and market his/her products through introducing innovative designs both in stitching as well as the fabric sector. Furthermore, there is massive export potential in this sector, as the demand of Pakistani dresses, especially in countries like UAE, USA, and UK, is massive due to a high number of Pakistani expatriates who have settled in these countries. The Boutique business can also be expanded into a more profitable venture by providing stitching facilities to other boutiques, which do not own a stitching unit or are lacking this facility. 1.3 Proposed Capacity The Boutique business capacity is greatly dependent on the market size and the number of potential clientele one can attract. Furthermore, the women fashion wear
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garments will be designed through a contracted designer and then stitched through in-house stitching unit. On average, a designer can supply forty designs per month from which nearly twenty designs are selected on average. Approximately, total capacity of the defined unit with 5 stitching machines (basis on 8-10 hours shift) will be about 5001 dresses. The breakup of the total number of dresses will be as follows: Total designs selected by designer 20 Number of dresses in each design 5 Number of dresses in each size 5 Total Number of dresses 500 This production and sales capacity is estimated to be economically viable and justifies the capital as well as operational costs of the project. 1.4 Total Project Cost The Boutique shop needs a total investment of about Rs. 1.45 million. This includes a capital investment of Rs.881,920 and a sum of Rs.569,600 as working capital.

2 CURRENT INDUSTRY STRUCTURE

Currently, the boutique industry is relatively unorganized and is scattered in and around the posh areas of the metropolitan cities of Pakistan i.e. Lahore, Islamabad, Karachi, Peshawar, and Quetta. The boutiques in Peshawar and Quetta, mostly sell the traditional dresses having indigenous/local designs, whereas the ones in Lahore, Islamabad, and Karachi deal in fashion wear greatly influenced by the west and the local trends in vogue. As such, there is no exact detail available of the number of boutiques, especially in women wear, because there is no association or link between these enterprises. The reason being the business rivalries and the competitive structure of this industry. However, one can name a few major players in the business such as Indifference, Generation, Parahan, Nee Punhal, Bossini, Kapre Waghera, Maria B, Ninas, and some individual designer players like Beegees, Nilofar Shahid, Nadia Mistri, Amir Adnan, Shayan Malik, and Sahar Saigol.

3 MARKETING
The marketing of boutique follows the conventional marketing pattern which is dependent on selection of venue of the outlet/s and the product mix (designs and sizes), as well as the promotional strategy. Furthermore, the boutique owner has to marketing techniques like: Usage of print media i.e. printing of posters and pamphlets as well as displaying it and distributing it at proper places Advertisement in print media i.e. newspapers and fashion magazines, etc.

This production also includes additional suits that will be prepared on orders/outsourcing/CMT (Cutting, Manufacturing and Trimming) per month in order to utilize the maximum capacity of the stitching unit. 4

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Usage of electronic media i.e. projection of the boutique in fashion programs, advertisement on television, and provision of dresses to various television plays and films. Event arrangement like fashion shows and photo-shoots. Usage of e-commerce i.e. launching of website and advertising on web. Moreover, in order to keep abreast with the emerging trends and client tastes, surveys regarding customer satisfaction/needs should be a regular feature of this project. As this project of Boutique deals in designer women wear, therefore the product mix will comprise of different styles of the female dresses in different sizes. Whereas, the styles will be Shalwar Kameez, Q-lots, Pajama Kameez, Frocks, Kurta, Peeshwaz, Party dresses, Casual Dresses and other prevalent dresses based on the market trends. The average sale price per dress is assumed to be Rs.2,100. Apart from this, there is a vast export potential in this industry, which is evident from the export figures of 1998-99 (available from the data of Federal Bureau of Statistics-FBS). SITC2 Code 8422102 8422103 8422104 8422202 8424002 8424003 8424004 8424006 8427006 Product Classification Suit women cotton not knitted Suit women synthetic not knitted Suit women (other textile material not knitted) Ensembles women cotton not knitted Dresses women not knitted Dresses women man made fiber not knitted Dress women other textile not knitted Shisha embroided dresses of cotton Baluchi Kameez of Silk Total 2000 2001 Value (Rs. 000) 1,415,124 501,917 46,861 2,107 463,346 63,438 17,723 286 27 2,510,826

Source: Federal Bureau of Statistics

Even these figures represent the formal export patterns of women dresses from Pakistan and are not representative of the export of these dresses taking place on informal level. Most of the women dresses prepared in Pakistan are exported to USA, UK, Germany, UAE, Saudi Arabia, France, Belgium, Netherlands, and South Africa. The end users of these dresses in foreign countries are mostly Pakistani and Indian women who have immigrated to these countries.

Standard International Trade Classification 5

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4 RAW MATERIAL
4.1 Raw Material The raw-material required for such sort of projects, would be as follows: Fabric: The fabric, which is the basic raw material requirement for a boutique and a major component of the cost, can be obtained from wholesale markets or from markets specializing in designer cloth at Faisalabad, Karachi, and Lahore. Accessories: Accessories such as buttons, laces, zippers, elastics, threads, needles, embroidery threads, glasses, etc. will be procured from the local market at competitive rates. Labels, tags and packaging: Labels and tags can be obtained on order, as these serve as an identity for the boutique and are useful for promotion. 5 PRODUCTION PROCESS FLOW 5.1 Production Process Flow The process for converting fabric in designer wear garments follows the below mentioned sequence: Design: The initial process starts from the designing phase. Various patterns of clothing and the fashions in vogue, which also relate to the tastes of the concerned clientele, are designed. This is done by the contracted designer as he/she will provide the basic designs of which the fabric will be converted into the designer wear garment. On average, a designer is supposed to provide 40 designs per month or 100-120 designs per season i.e. three months. From these designs, approximately 50% of the designs are selected for further development of clothes. Pattern Making/Cutting: Based on the designs selected, patterns for cutting are developed and based on these patterns, fabric is cut, embroided, block printed, and processed accordingly3. Stitching: The cutting is then followed by stitching, which can either be done by the in-house stitching unit or by outsourcing it4. Labels are also attached to the apparels in this process. Finishing: The final phase is that of finishing, in which the garment will be checked for quality control and will cleaned (if required) for final presentation at the outlet. The garments will also be tagged for identification of sizes, prices, addresses, handling instructions, etc.

After cutting, the fabric is embroided and this is normally outsourced to any locally available commercial embroidery unit. 4 In case of over-lock stitching, it will be done in-house. The stitching of buttonholes as well as elastic embedding will be outsourced. This will cost approximately @Rs.5 per dress. 6 PREF-57/July, 2002/ Rev 01

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Presentation/Market: Once the designer wear garment is ready after going through the above-mentioned process, it is presented at the outlet/shop for sale to the clientele.
Pattern Designing Making/Cutting Stitching

Market/Clientele

Presentation

Finishing

6 HUMAN RESOURCE REQUIREMENTS

The project of Boutique requires the following Human Resources/Staff: Positions Chief Executive/Owner Designer Sales Girls Production Supervisor/Cutting Master Stitchers/Tailors5 Press/Iron Man/Finishing man Office Boy Total Required 1 1 2 1 5 1 1 12 Salary per Month 30,000 15,000 5,000 8,000 6,000 3,000 2,000 Salary per Annum 360,000 180,000 120,000 96,000 360,000 36,000 24,000 1,176,000

7 MACHINERY/EQUIPMENT DETAILS
The boutique will require a small in-house stitching unit. The cost of the stitching machinery will be as follows: Stitching Machinery 6 Single needle lock-stitch machine (Juki China) Over-lock stitch machine (Juki China) Accessories (Scissors, Cutting Board, Table, stools, carpet, etc.) Total No. 4 1 Rs/Unit 20,000 50,000 50,000 Rs 80,000 50,000 50,000 180,000

5
6

Though the prices here are given of the new machines but second hand machines are also widely available which can function properly and can reduce the project cost too. 7

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Furthermore, the following will also be required to setup a Boutique: Other Equipment Air-conditioner Stereo System Computer and Printer Telephone & Fax Credit Card Machine7 Total No. 1 1 1 1 1 Rs/Unit 30,000 23,000 35,000 10,000 Rs 30,000 23,000 35,000 10,000 98,000

8 PREMISES FOR SHOP AND STITCHING UNIT

8.1 Recommended mode for renting a Shop It is recommended that the proposed location for the said enterprise be a posh area, where people have the buying capacity for women fashion wear. The size of the shop should be at least 800 Sq.ft i.e. 20 feet front and 40 feet depth. Furthermore, a small building will be required to establishing the stitching unit. One viable option is to rent a small house for this purpose. The shop will be obtained on rental basis, and the rent estimation for such a shop is Rs 30,000/month. According to the prevailing practice, six months rent as advance and three months rent as security would be required for renting the shop. It is assumed that security is a one-time expenditure, whereas pre-paid rent will only be given at the beginning, while establishing the boutique. After first six months, rent will be paid on monthly basis. The cost estimates for setting up the Boutique are as follows: Rs Security for renting shop/outlet (Rent @ Rs.30,000 per month. 3 months rent as security) Interior decoration (installing lighting, mannequins, hanging racks, mirrors, glass panes, cash counter, and other dcor, etc.) Security for renting a house for installing the stitching unit (Rent @ Rs.6,000 per month) 90,000 300,000

9,000

Credit card machines are installed free of cost by the Bank on fulfilling the Bank requirements like having a Bank account, copy of registry or lease agreement of shop, etc. However, these requirements may vary from Bank to Bank. 8

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8.2 Infrastructure requirements The project will have the following infrastructure components: Infrastructure Requirements Main shop Try Room Small Store Kitchen Building for Stitching Unit Sq.ft 600 36 100 64 10 Marla House

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9 PROJECT ECONOMICS
9.1 Project Cost Description Machinery & equipment Furniture & Fixture (Interior Decoration) Security Deposits for Premises8 Pre-operating expenses Salaries9 Promotional Expenses Total Capital Cost Working Capital Raw material (Fabric & Accessories) Accounts Receivable Prepaid Rent (Boutique and Stitching Unit) Total Working capital Project Cost 9.2 Project Returns Internal Rate of Return (IRR) Payback Period (Years) Net Present Value (NPV) 9.3 Financing Plan Financing Equity Debt 50% 50% Rs. 725,760 725,760 40.18% 3.87 2,267,714 Cost (Rs.) 278,000 300,000 108,000 98,000 97,920 881,920 28,800 108,800 432,000 569,600 1,451,520

Security Deposit for Boutique Rs.90,000 (@Rs.30,000 per month for three months), and for Stitching Unit Rs.18,000 (@Rs.6,000 per month for three months). 9 One month salary of staff 10 PREF-57/July, 2002/ Rev 01

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10 KEY SUCCESS FACTORS

There are a number of factors, which contribute towards the success of a project. In case of the project of Boutique, some of the Key Success Factors are as follows: Proper care while producing dresses should be adopted Proper Inventory management i.e. keeping minimum inventory as per past sales trends. The dress designs should be according to the emerging trends and fashions. Designing of dresses according to the consumer tastes/preferences gathered through consumer surveys. The location of the outlet should be properly selected and attractively decorated so as to target the clientele effectively. The customer satisfaction should be given due importance, because it is the customer satisfaction, which can increase the sales. Hence, excellent customer service should be provided.

11 THREATS FOR THE BUSINESS

Competitive Structure of the market The market of the boutiques is highly competitive, therefore if the entrepreneur is not well responsive to the tastes and response of the clientele as well as the fashions in vogue he/she may not be able to capitalize the opportunity properly. Pilferage in the designs The designs which a designer produce can be sold by the staff even before that design is launched and that can pose serious threat to the business because in the fashion industry it is the uniqueness of the design which matters. Selection of the wrong venue Selection of the wrong venue can be a major hurdle in achieving the desired business objectives. Selection of the wrong design If the designs are not selected according to the tastes of the clientele then it can be detrimental for the business, so the clientele taste should be properly tracked. Tax Improper documentation of the sales receipt record may lead to problems with Tax department.

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12 FINANCIAL ANALYSIS
12.1 Projected Income Statement
Y ea r 1 S ales C o st o f G o o d s S o ld R a w M ate rial P ayro ll P ro d uctio n S taff M a chine M a inten ance E m b ro id e ry & A cce sso ries co sts D irect E lectric ity T o ta l G r o ss P ro fit O p era tin g E x p en ses F ix ed E lectric ity P ayro ll A d m inistratio n S h o p & stic hing ho use rent A m o rtizatio n p re O p s. E xp . T elep ho ne, Intern et C harg es P ro m o tio n al E xp en ses D ep reciatio n T o ta l O p e rating P ro fit N o n O p era tin g E xp en ses F in ancia l C harge s R u nnin g F inan ce T o ta l P ro fit b efo re T a x Tax P ro fit a fter T a x O p e ning R etaine d ea rning s R e tained earn ing b eg innin g o f year 3 ,2 6 4 ,0 0 0 Y ea r 2 3 ,6 9 8 ,1 1 2 Y ea r 3 4 ,1 8 9 ,9 6 1 Y ea r 4 4 ,7 4 7 ,2 2 6 Y ea r 5 5 ,3 7 8 ,6 0 7 Y ea r 6 6 ,0 9 3 ,9 6 1 Y ea r 7 6 ,9 0 4 ,4 5 8 Y ea r 8 7 ,8 2 2 ,7 5 1 Y ea r 9 8 ,8 6 3 ,1 7 7 Y ea r 1 0 1 0 ,0 4 1 ,9 8 0

P R O JE C T E D IN C O M E S T A T E M E N T

5 7 6 ,0 0 0 6 7 2 ,0 0 0 1 0 ,0 0 0 3 0 0 ,0 0 0 4 8 ,0 0 0 1 ,6 0 6 ,0 0 0 1 ,6 5 8 ,0 0 0

6 3 9 ,9 3 6 7 1 9 ,0 4 0 1 0 ,2 0 0 3 3 3 ,3 0 0 5 2 ,8 0 0 1 ,7 5 5 ,2 7 6 1 ,9 4 2 ,8 3 6

7 1 0 ,9 6 9 7 6 9 ,3 7 3 1 0 ,4 0 4 3 7 0 ,2 9 6 5 8 ,0 8 0 1 ,9 1 9 ,1 2 2 2 ,2 7 0 ,8 3 9

7 8 9 ,8 8 6 8 2 3 ,2 2 9 1 0 ,6 1 2 4 1 1 ,3 9 9 6 3 ,8 8 8 2 ,0 9 9 ,0 1 5 2 ,6 4 8 ,2 1 1

8 7 7 ,5 6 4 8 8 0 ,8 5 5 1 0 ,8 2 4 4 5 7 ,0 6 4 7 0 ,2 7 7 2 ,2 9 6 ,5 8 4 3 ,0 8 2 ,0 2 2

9 7 4 ,9 7 3 9 4 2 ,5 1 5 1 1 ,0 4 1 5 0 9 ,8 3 0 7 7 ,3 0 4 2 ,5 1 5 ,6 6 3 3 ,5 7 8 ,2 9 8

1 ,0 8 3 ,1 9 5 1 ,0 0 8 ,4 9 1 1 1 ,2 6 2 5 6 4 ,1 6 4 8 5 ,0 3 5 2 ,7 5 2 ,1 4 7 4 ,1 5 2 ,3 1 1

1 ,2 0 3 ,4 3 0 1 ,0 7 9 ,0 8 5 1 1 ,4 8 7 6 2 6 ,7 8 7 9 3 ,5 3 8 3 ,0 1 4 ,3 2 7 4 ,8 0 8 ,4 2 4

1 ,3 3 7 ,0 1 1 1 ,1 5 4 ,6 2 1 1 1 ,7 1 7 6 9 6 ,3 6 0 1 0 2 ,8 9 2 3 ,3 0 2 ,6 0 1 5 ,5 6 0 ,5 7 6

1 ,4 8 5 ,4 1 9 1 ,2 3 5 ,4 4 5 1 1 ,9 5 1 7 7 3 ,6 5 6 1 1 3 ,1 8 1 3 ,6 1 9 ,6 5 2 6 ,4 2 2 ,3 2 8

7 2 ,0 0 0 5 0 4 ,0 0 0 4 3 2 ,0 0 0 1 9 ,5 9 2 3 6 ,0 0 0 9 7 ,9 2 0 5 7 ,8 0 0 1 ,2 1 9 ,3 1 2 4 3 8 ,6 8 8

7 9 ,2 0 0 5 3 9 ,2 8 0 4 5 3 ,6 0 0 1 9 ,5 9 2 3 7 ,8 0 0 5 5 ,4 7 2 5 7 ,8 0 0 1 ,2 4 2 ,7 4 4 7 0 0 ,0 9 2

8 7 ,1 2 0 5 7 7 ,0 3 0 4 7 6 ,2 8 0 1 9 ,5 9 2 3 9 ,6 9 0 6 2 ,8 4 9 5 7 ,8 0 0 1 ,3 2 0 ,3 6 1 9 5 0 ,4 7 8

9 5 ,8 3 2 6 1 7 ,4 2 2 5 0 0 ,0 9 4 1 9 ,5 9 2 4 1 ,6 7 5 7 1 ,2 0 8 5 7 ,8 0 0 1 ,4 0 3 ,6 2 3 1 ,2 4 4 ,5 8 9

1 0 5 ,4 1 5 6 6 0 ,6 4 1 5 2 5 ,0 9 9 1 9 ,5 9 2 4 3 ,7 5 8 8 0 ,6 7 9 5 7 ,8 0 0 1 ,4 9 2 ,9 8 4 1 ,5 8 9 ,0 3 8

1 1 5 ,9 5 7 7 0 6 ,8 8 6 5 5 1 ,3 5 4 1 9 ,5 9 2 4 5 ,9 4 6 9 1 ,4 0 9 5 7 ,8 0 0 1 ,5 8 8 ,9 4 4 1 ,9 8 9 ,3 5 4

1 2 7 ,5 5 2 7 5 6 ,3 6 8 5 7 8 ,9 2 1 1 9 ,5 9 2 4 8 ,2 4 3 1 0 3 ,5 6 7 5 7 ,8 0 0 1 ,6 9 2 ,0 4 4 2 ,4 6 0 ,2 6 7

1 4 0 ,3 0 8 8 0 9 ,3 1 4 6 0 7 ,8 6 7 1 9 ,5 9 2 5 0 ,6 5 6 1 1 7 ,3 4 1 5 7 ,8 0 0 1 ,8 0 2 ,8 7 8 3 ,0 0 5 ,5 4 6

1 5 4 ,3 3 8 8 6 5 ,9 6 6 6 3 8 ,2 6 1 1 9 ,5 9 2 5 3 ,1 8 8 1 3 2 ,9 4 8 5 7 ,8 0 0 1 ,9 2 2 ,0 9 3 3 ,6 3 8 ,4 8 3

1 6 9 ,7 7 2 9 2 6 ,5 8 3 6 7 0 ,1 7 4 1 9 ,5 9 2 5 5 ,8 4 8 1 5 0 ,6 3 0 5 7 ,8 0 0 2 ,0 5 0 ,3 9 9 4 ,3 7 1 ,9 2 9

1 3 0 ,6 3 7 1 3 0 ,6 3 7 3 0 8 ,0 5 1 1 0 7 ,8 1 8 2 0 0 ,2 3 3 2 0 0 ,2 3 3

1 1 2 ,3 7 7 1 1 2 ,3 7 7 5 8 7 ,7 1 6 2 0 5 ,7 0 0 3 8 2 ,0 1 5 2 0 0 ,2 3 3 5 8 2 ,2 4 8

9 0 ,8 3 0 9 0 ,8 3 0 8 5 9 ,6 4 8 3 0 0 ,8 7 7 5 5 8 ,7 7 1 5 8 2 ,2 4 8 1 ,1 4 1 ,0 2 0

6 5 ,4 0 4 6 5 ,4 0 4 1 ,1 7 9 ,1 8 4 4 1 2 ,7 1 4 7 6 6 ,4 7 0 1 ,1 4 1 ,0 2 0 1 ,9 0 7 ,4 9 0

3 5 ,4 0 2 3 5 ,4 0 2 1 ,5 5 3 ,6 3 6 5 4 3 ,7 7 2 1 ,0 0 9 ,8 6 3 1 ,9 0 7 ,4 9 0 2 ,9 1 7 ,3 5 3

1 ,9 8 9 ,3 5 4 6 9 6 ,2 7 4 1 ,2 9 3 ,0 8 0 2 ,9 1 7 ,3 5 3 4 ,2 1 0 ,4 3 3

2 ,4 6 0 ,2 6 7 8 6 1 ,0 9 3 1 ,5 9 9 ,1 7 4 4 ,2 1 0 ,4 3 3 5 ,8 0 9 ,6 0 6

3 ,0 0 5 ,5 4 6 1 ,0 5 1 ,9 4 1 1 ,9 5 3 ,6 0 5 5 ,8 0 9 ,6 0 6 7 ,7 6 3 ,2 1 1

3 ,6 3 8 ,4 8 3 1 ,2 7 3 ,4 6 9 2 ,3 6 5 ,0 1 4 7 ,7 6 3 ,2 1 1 1 0 ,1 2 8 ,2 2 6

4 ,3 7 1 ,9 2 9 1 ,5 3 0 ,1 7 5 2 ,8 4 1 ,7 5 4 1 0 ,1 2 8 ,2 2 6 1 2 ,9 6 9 ,9 7 9

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12.2

Projected 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

PROJECTED CASH FLOW STATEMENT

Operating Activities Net Profit Amortization of preoperational expenses Security Deposit Building Rent Expense Building Rent Repayment Depreciation Stock and inventory Account Receivable Account Payable Cash provided by operations Financing Activities Share capital Addition to Long Term Debt Long Term Loan Repayment Short Term Loan Repayment Cash Provided/Used for Financing Activities Investing Activities Capital Expenditure Cash Used Provided by Investing Activities Net Cash inflow/(outflow) Cash Balance Brought forward Cash Balance Running Finance Cash Carried Forward

(108,000) (432,000) (28,800) (108,800) (677,600)

200,233 19,592 432,000 (453,600) 57,800 (3,197) (14,470) 19,200 257,558

382,015 19,592 453,600 (476,280) 57,800 (3,552) (16,395) 2,131 418,912

558,771 19,592 476,280 (500,094) 57,800 (3,946) (18,575) 2,368 592,196

766,470 19,592 500,094 (525,099) 57,800 (4,384) (21,046) 2,631 796,058

1,009,863 19,592 525,099 (551,354) 57,800 (4,870) (23,845) 2,923 1,035,207

1,293,080 19,592 551,354 (578,921) 57,800 (5,411) (27,017) 3,247 1,313,724

1,599,174 19,592 578,921 (607,867) 57,800 (6,012) (30,610) 3,607 1,614,605

1,953,605 19,592 607,867 (638,261) 57,800 (6,679) (34,681) 4,008 1,963,252

2,365,014 19,592 638,261 (670,174) 57,800 (7,420) (39,293) 4,453 2,368,232

2,841,754 19,592 670,174 57,800 74,271 334,733 4,947 4,003,270

725,760 725,760

(101,445)

(119,705) (119,705)

(141,252) (141,252)

(166,678) (166,678)

(196,680) (196,680)

1,451,520

(101,445)

(773,920) (773,920) -

156,113 156,113 156,113

299,206 156,113 455,319 455,319

450,943 455,319 906,263 906,263

629,380 906,263 1,535,643 1,535,643

838,528 1,535,643 2,374,170 2,374,170

1,313,724 2,374,170 3,687,894 3,687,894

1,614,605 3,687,894 5,302,500 5,302,500

1,963,252 5,302,500 7,265,751 7,265,751

2,368,232 7,265,751 9,633,983 9,633,983

4,003,270 9,633,983 13,637,253 13,637,253

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12.3

Projected Balance Sheet

PROJECTED BALANCE SHEET Year 0 Current Assets Cash Security Deposit Stocks and Inventory Prepaid Rent Accounts Receivables Total Gross Fixed Assets Machinery & Equipment Less: Accumalated Depriciation Net Fixed Assets Intangible Assets Pre-operational Expenses Total Total Assets Liabilities Long Term Debt Short Term Debt Accounts Payable Total Equity Paid -up Capital Retained Earnings Total Total Liabilities And Equity Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

108,000 28,800 432,000 108,800 677,600

156,113 108,000 31,997 453,600 123,270 872,980

455,319 108,000 35,548 476,280 139,665 1,214,813

906,263 108,000 39,494 500,094 158,241 1,712,092

1,535,643 108,000 43,878 525,099 179,287 2,391,907

2,374,170 108,000 48,749 551,354 203,132 3,285,405

3,687,894 108,000 54,160 578,921 230,149 4,659,124

5,302,500 108,000 60,172 607,867 260,758 6,339,297

7,265,751 108,000 66,851 638,261 295,439 8,374,302

9,633,983 108,000 74,271 670,174 334,733 10,821,161

13,637,253 108,000

13,745,253

578,000 578,000

578,000 57,800 520,200

578,000 115,600 462,400

578,000 173,400 404,600

578,000 231,200 346,800

578,000 289,000 289,000

578,000 346,800 231,200

578,000 404,600 173,400

578,000 462,400 115,600

578,000 520,200 57,800

578,000 578,000 -

195,920 195,920 1,451,520

176,328 176,328 1,569,508

156,736 156,736 1,833,949

137,144 137,144 2,253,836

117,552 117,552 2,856,259

97,960 97,960 3,672,365

78,368 78,368 4,968,692

58,776 58,776 6,571,473

39,184 39,184 8,529,086

19,592 19,592 10,898,553

13,745,253

725,760 725,760

624,315 19,200 643,515

504,610 21,331 525,941

363,357 23,699 387,056

196,680 26,330 223,009

(0) 29,252 29,252

32,499 32,499

36,107 36,107

40,114 40,114

44,567 44,567

49,514 49,514

725,760 725,760 1,451,520

725,760 200,233 925,993 1,569,508

725,760 582,248 1,308,008 1,833,949

725,760 1,141,020 1,866,780 2,253,836

725,760 1,907,490 2,633,250 2,856,259

725,760 2,917,353 3,643,113 3,672,365

725,760 4,210,433 4,936,193 4,968,692

725,760 5,809,606 6,535,366 6,571,473

725,760 7,763,211 8,488,971 8,529,086

725,760 10,128,226 10,853,986 10,898,553

725,760 12,969,979 13,695,739 13,745,253

14 PREF-57/July, 2002/ Rev 01

Pre-Feasibility Study

Boutique (Women Designer Wear)

13 KEY ASSUMPTIONS
13.1 Production Assumptions 5 500 200 60% 40% 120 80

Number of Stitching Machines Production Capacity (No. of dresses per month) Capacity Utilization for the first year (No. of dresses per month) Self Production (% of total production) Dresses manufactured on CMT basis (% of total production) Monthly self production (Year 1) Monthly Dresses manufactured on CMT basis (Year 1) 13.2 Cost Assumptions

Initial (Year 1) Average cost per dress (Rs.) Material & Fabrics Accessories Embroidery Cost Direct Labor Cost Direct Electricity Cost Machine Maintenance Cost Admin & Rent expenses & promotional expenses Fixed electricity Average unit cost per dress (Rs.) 13.3 Sales Assumptions

400 25 100 280 20 4 446 30 1,305

No. of dresses sold per month(Year 1) Average unit price per dress (Rs.) Average Monthly Sales through retail outlet (Rs.) No. of dresses sold on CMT basis per month(Year 1) Average unit price per dress on CMT basis (Rs.) Average Monthly Sales through outsourcing(Rs.) Total Average Monthly Sales (Year 1) (Rs.) Sale growth rate (Units) Sale growth rate (price)

120 2,100 252,000 80 250 20,000 272,000 10% 3%

15 PREF-57/July, 2002/ Rev 01

Pre-Feasibility Study

Boutique (Women Designer Wear)

13.4

Operating Assumptions 8 25 25

Hours operational per day Days operational per month (Production) Days operational per month (Boutique) 13.5 Cash flow Assumptions

Account Payable Cycle (Days) Account Receivable Cycle (Days) Raw Material Inventory (Days) 13.6 Expense Assumptions

10 10 15

Initial Promotional Expenses (Year 1) (%age of expected sales) Promotion Expenses after Year 1 (% of expected sales) Machine Maintenance per annum Direct Electricity per month (Year 1) Fixed Electricity per month (Year 1) Telephone and Internet charges (Year 1) Raw Material Price Growth rate Payroll growth rate Machine Maintenance growth rate Direct electricity growth rate Fixed electricity growth rate Rent growth rate Telephone and Internet charges growth rate Depreciation Method 13.7 Financial Assumptions

3% 1.5% Rs.10,000 4,000 6,000 3,000 1% 7% 2% 10% 10% 5% 5% Straight Line

Project Life Debt: Equity Interest Rate on Long Term Debt Interest Rate on Short Term Debt Debt Tenure Debt Payment per year Discount Rate

10 Years 50:50 18% 18% 5 Years 1 18%

16 PREF-57/July, 2002/ Rev 01