Pre-Feasibility Study

BOUTIQUE
(Women Designer Wear)

Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6th Floor LDA Plaza Egerton Road, Lahore Tel (042)111 111 456, Fax: 36304926-7 helpdesk@smeda.org.pk
REGIONAL OFFICE PUNJAB 8th Floor LDA Plaza, Egerton Road, Lahore. Tel: (042) 111 111 456, Fax: (042) 36370474 helpdesk.punjab@smeda.org.pk REGIONAL OFFICE SINDH 5th Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk.sindh@smeda.org.pk REGIONAL OFFICE KHYBER PAKTUNKHWA Ground Floor State Life Building The Mall, Peshawar. Tel: (091)111 111 456, 9213046-7 Fax: (091) 286908 helpdesk.NWFP@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chamn Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk.balochistan@smeda.org.pk

December, 2011

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

DOCUMENT CONTROL
Document No. Revision Prepared by Revision Date Issued by PREF-57 3 SMEDA-Punjab December, 2011 Library Officer

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1 2

EXECUTIVE SUMMARY ................................................................................ 5 INTRODUCTION .............................................................................................. 6 2.1 2.2 2.3 2.4 PROJECT BRIEF................................................................................................ 6 OPPORTUNITY RATIONALE.............................................................................. 6 PROPOSED CAPACITY ...................................................................................... 7 TOTAL PROJECT COST:.................................................................................... 7

3 4 5 6 7

CURRENT INDUSTRY STRUCTURE ........................................................... 7 MARKETING..................................................................................................... 8 RAW MATERIAL.............................................................................................. 9 5.1 6.1 RAW MATERIAL .............................................................................................. 9 PRODUCTION PROCESS FLOW.......................................................................... 9 PRODUCTION PROCESS FLOW .................................................................. 9 PRODUCTS ...................................................................................................... 10 7.1 PRODUCT MIX ............................................................................................... 10 7.1.1 Ethnic Wear........................................................................................... 11 7.1.2 Contemporary Wear .............................................................................. 11 7.1.3 Western Wear ........................................................................................ 11 7.2 COSTS OF GOODS SOLD AND OTHER EXPENSES:............................................ 11

8 9 10

HUMAN RESOURCE REQUIREMENTS.................................................... 12 MACHINERY/EQUIPMENT DETAILS ...................................................... 12 PREMISES FOR SHOP AND STITCHING UNIT................................... 14 RECOMMENDED MODE FOR RENTING A SHOP ........................................... 14 INFRASTRUCTURE REQUIREMENTS ............................................................. 14

10.1 10.2 11 12

KEY SUCCESS FACTORS ......................................................................... 14 THREATS FOR THE BUSINESS............................................................... 15 COMPETITIVE STRUCTURE OF THE MARKET ............................................... 15 ECONOMIC RECESSION .............................................................................. 15 PILFERAGE IN THE DESIGNS........................................................................ 15 SELECTION OF THE WRONG VENUE............................................................. 15 SELECTION OF THE WRONG DESIGN ............................................................ 15 TAX ........................................................................................................... 15 PROJECT COST, FINANCING PLAN AND PROJECT RETURNS:....................... 16 PROJECTED INCOME STATEMENT:.............................................................. 17
3

12.1 12.2 12.3 12.4 12.5 12.6 13 14 13.1 14.1

PROJECT ECONOMICS ............................................................................ 16 FINANCIAL ANALYSIS ............................................................................. 17

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14.2 14.3 15 15.1 15.2 15.3 15.4 15.5 16

PROJECTED CASH FLOW STATEMENT: ....................................................... 18 PROJECTED BALANCE SHEET STATEMENT:................................................ 19 PRODUCTION ASSUMPTIONS ...................................................................... 20 OPERATING ASSUMPTIONS ........................................................................ 20 CASH FLOW ASSUMPTIONS ........................................................................ 20 EXPENSE ASSUMPTIONS............................................................................. 20 FINANCIAL ASSUMPTIONS ......................................................................... 20

KEY ASSUMPTIONS .................................................................................. 20

ANNEXURE: ................................................................................................. 21

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EXECUTIVE SUMMARY

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. 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. Few years back Boutique industry of Pakistan was totally unorganized and only few players were working. But now the scenario is totally changed as a lot of business enterprises have entered in to this industry rapidly and still many more are expected. The reason behind this change is the shift in demand of people of Pakistan in recent years. Many people now prefer to purchase readymade designers outfits instead of measure to make clothing. So now we can say that the Boutique Industry of Pakistan is much Organized and Competitive as well. One needs to come up with innovative ideas of dress designing and marketing in order to grab market share in Pakistan. Beside local market, there is a huge demand of Pakistan Cultural dresses and bridle ware in international market especially in United Kingdom and United Arab Emirates. So one can also export his designer wear dresses. The Boutique shop needs a total investment of about Rs. 4.072 million. This includes a capital investment of Rs.2.007 million and a sum of Rs.2.064 million as working capital. Projected IRR, NPV and Payback period of the proposed project are 39%, Rs. 9.983 million and 4.11 years respectively. The pre-feasibility study is prepared by SMEDA and is intended on the establishment of women designer wear Boutique including the operations of apparel designing, manufacturing, marketing and selling. The study has been designed to capture the dynamics of the Boutique industry with its many components and possible strategic opportunities.

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2
2.1

INTRODUCTION
Project Brief

The pre-feasibility study focuses on the establishment of women designer wear Boutique including the operations of apparel designing, stitching, selling and marketing. The study has been designed to capture the dynamics of the Boutique industry with its many components and possible strategic opportunities. 2.2 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 and very much organized now. Few years back the market of this enterprise was quite scattered and unorganized. There were a few major players in Boutique business and those entrepreneurs have also taken an initiative based on their caprice and experience in the field of fashion design. However, now the scenario is totally changed in Boutique industry of Pakistan and there is an intense competition in this industry. A Lot of organizations enter in this market as wearing trend changes with the passage of time. But still 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. So one need to market its products through innovative, eye catching designs and massive advertisement. 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.

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2.3

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 garments will be designed through two in-house designers and then stitched through in-house stitching unit. On average, a designer can supply 3,000 designs per annum from which nearly 100 designs are selected on average. Approximately, total capacity of the defined unit with 6 stitching machines (basis on 8-10 hours shift) will be about 1,920 dresses. The breakup of the total number of dresses will be as follows: Table 2-1: Proposed Capacity Total designs selected by designer Number of dresses in each design Number of dresses in each size Total Number of Ready Made Dresses Made to Order as percentage of Ready Made Dresses @ 40%. Total No. of Dresses 120 4 4 1,920 768 2,688

This production and sales capacity is estimated to be economically viable and justifies the capital as well as operational costs of the project. 2.4 Total Project Cost:

The proposed Boutique shop would need a total investment of about Rs. 4.072 million. This includes a capital investment of Rs.2.007 million and a sum of Rs.2.064 million as working capital.

CURRENT INDUSTRY STRUCTURE

Currently, the boutique industry is relatively organized and is working in and around the posh areas of the metropolitan cities of Pakistan i.e. Lahore, Islamabad, Karachi, Peshawar, Quetta, Faisalabad, Sialkot and Multan. 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, The Working Women, Mohagni, Generation, Chinyor, Parahan, Beech Tree, Nee Punhal, Bossini, Kapre Waghera, Maria B, Ninas, and some individual designer players like Beejees, Nilofar Shahid, Nadia Mistri, Amir Adnan, Shayan Malik, and Sahar Saigol. Beside these, there are many other Brands who entered in Boutique industry in last few years which make this industry very much competitive.
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MARKETING

The marketing of boutique follows the conventional marketing pattern which is dependent on selection of venue of the outlets and the product mix (designs and sizes), as well as the promotional strategy. Furthermore, the boutique owner has to use marketing techniques like: Usage of print media i.e. printing of boutique Catalog and Pamphlets which will comprise on own designs and different promotional and business information to attract customers. Catalogs and Pamphlets can be sent to loyal customers at their homes to provide New Arrival Information. Advertisement in print media i.e. newspapers and fashion magazines, etc. Outdoor Advertisement i.e. should launch a complete outdoor marketing campaign with Hoarding and Streamers in target area to spread information regarding Boutique Opening. Cable Advertisement i.e. should advertise the boutique through a TVC on cable networks of Targeted Area. This will provide the required mileage in very low cost. 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. As initially the proposed target market is Lahore, therefore it is suggested to advertise on City 42 channel only to cut cost of advertisement. Event arrangement like fashion shows and photo-shoots. Usage of e-commerce i.e. launching of website and advertising on web. Social Media Networks i.e. develop own business pages on face book and twitter may that more people could see the designs on line by using internet and can grab all the information regarding new arrivals and promotions going on. Membership Cards can also be issued to the regular customer of the boutique through which they can get 10% to 15% discount on purchases. 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. Beside this Boutique will also deal in Bridal Dresses in readymade category as well as on made to measure basses. Apart from this, there is a huge export potential in this industry for Pakistan, which is evident from the export figures of Rs. 161,492.91 millions for Ready Made Garments available at Federal Bureau of Statistics website. Figure represents over all Export of Ready made Garment from Pakistan. This figure is taken from following link. http://www.statpak.gov.pk/fbs/sites/default/files/other/yearbook2011/Foreign%20Tr ade/9-7.pdf
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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.

5
5.1

RAW MATERIAL
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. 6 6.1

PRODUCTION PROCESS FLOW

Production Process Flow

The process for converting fabric in designer wear garments follows the below mentioned sequence: Purchasing of Material: The first process of designer wear suits is the purchasing of Raw Material such as Fabric and Accessories. Purchasing of Raw Material is done in the beginning because every year textile industry uses to introduce new designs in fabric and also change the quality of fabric. As boutique industry is dependent on the textile industry therefore they use to purchase raw material in the beginning may that they well aware of the latest designs and could design their garments according to the newly introduced trends by Textile industry. Design: The second step 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 more than 250 designs per month or 750-800 designs per season i.e. three months. From these designs, approximately 10% 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 accordingly.

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Stitching: The cutting is then followed by stitching, which can either be done by In-house stitching unit or by Outsourcing it2. 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 be ironed and also be tagged for identification of sizes, prices, addresses, handling instructions, etc. 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.

Figure 6-1: Production Process Follow

Purchasing of Raw Material

Designing

Pattern Making

Stitching

Cutting

Embroidery

Finishing

Presentation

Market/Clientele

7 PRODUCTS
7.1 Product Mix

Products will be priced at the high end to reflect the quality and exclusiveness associated with the brand. High-end materials such as Crinkle Chiffon, Georjot Chiffon, Chinese Raw Silk, Medium Silk, Leafy Print Jamawar, Chamose Silk etc will be used. This boutique will offer following product categories of women wears: Casual Wear Semi Formal Wear
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. 10 PREF-57/Dec, 2011/ Rev 03
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Formal Wear Each product category will include the following product lines: 7.1.1 Ethnic Wear

Formal Wear Party dresses and special occasion dresses 7.1.2 Contemporary Wear

Fusion Wear Combination of eastern and western wear, suitable for the international market as well. 7.1.3 Western Wear

Tops, Pants and various other styles The combination of outfits for the proposed outlet will be as follows Table 7-1 Product Mix Category Casual Wear Semi Formal Wear Formal Wear Table 7-2 Average Sale Price Category Casual Wear Semi Formal Wear Formal Wear 7.2 Costs of Goods Sold and other Expenses: Avg. Price per outfit 3,200 6,500 16,500 % Of Total Outfits 60% 30% 10%

The cost of goods sold has been taken as a percentage of sale price; which is 20% of sale price of a product is estimated as Material cost of that particular product.

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HUMAN RESOURCE REQUIREMENTS

The project of Boutique requires the following Human Resources/Staff: Table 8-1 Staff Salaries Positions Required CEO/ Marketing Manager 1 Design Manager 1 Asst Design Manager & 1 Purchase Officer Master Tailor 2 Tailors 6 Embroidery Workers 4 Press/iron man/finishing 1 Dyer 1 Cashier/ Head Sales Girl 1 Sales Girls 2 Accountant 1 Office Boy 2 Guard 2 25 Total Salary per Month 50,000 40,000 25,000 12,000 9,000 9,000 8,000 8,000 15,000 13,000 17,000 7,000 8,000 333,000 Salary per Annum 600,000 480,000 300,000 288,000 648,000 432,000 96,000 96,000 180,000 312,000 204,000 168,000 192,000 3,996,000

MACHINERY/EQUIPMENT DETAILS

The boutique will require a small in-house stitching unit. The cost of the stitching machinery will be as follows: Table 9-1: Machinery Detail Stitching Machinery 3 Single needle lock stitching machine Over lock Machine Embroidery Generator for Workshop of 1200 KW UPS of 2200 Watts for Outlet Total No. 6 2 2 1 1 Rs/Unit 19,500 38,500 46,000 350,000 65,000 Rs. 117,000 77,000 92,000 350,000 65,000 701, 000

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. 12 PREF-57/Dec, 2011/ Rev 03

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Furthermore, the following will also be required to setup a Boutique: Table 9-2-Office Equipment Other Equipment Computers Computer printer Telephones Total Table 9-3-Furniture and Fixtures detail: Furniture Description Air Conditioner 1.5 ton split Office Table 6x3 with Box Grace Office Chair Office Tables 2.5x4 Office Chairs Visitors Chairs Work Shop Chairs Hanging Units and Storage Cabinets Cutting Tables at Work shop Iron Table Energy Savers Fans Electric Iron Scissors Statues Embroidery Frame Set Chalks (Pack) Cutting Scales Measuring scales Wood Flooring Roof Sealing Wall Mirror Wall Papers for Outlet Main door Shop Fascia Decoration Pieces Lighting for Outlet Total Quantity 4 1 1 4 4 8 14 7 2 1 30 11 2 12 5 1 3 5 10 450 450 2 450 1 1 8 1 Cost / Rate 40,000 16,000 9,000 4,800 2,600 1,800 1,000 15,000 2,500 2,500 160 2,500 3,000 500 3,500 10,000 100 150 25 115 50 10,000 50 25,000 40,000 1,000 20,000 Rs. 160,000 16,000 9,000 19,200 10,400 14,400 14,000 105,000 5,000 2,500 4,800 27,500 6,000 6,000 17,500 10,000 300 750 250 51,750 22,500 20,000 22,500 25,000 40,000 8,000 20,000 638,350 No. 5 2 4 Rs/Unit 40,000 15,000 2,000 Rs 200,000 30,000 8,000 238, 000

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10 PREMISES FOR SHOP AND STITCHING UNIT

10.1 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, for example a boutique can be opened in W town, as it is newly developed area and people of Wapda Town also have the purchasing power of Designer wear clothes. Plus Wapda town is very much economical as compared to Defense and Gulberg with low competition as well. The size of the shop should be at least 550 Sq.ft i.e. 20 feet front and 27.5 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. 82,500 / month. According to the prevailing practice, three months rent as security would be required for renting the shop. It is assumed that security is a onetime expenditure, whereas the rent is paid quarterly in advance. The cost estimates for setting up the Boutique are as follows: Table 10-1 Rent Cost Detail Rs. Security for renting shop/outlet (Rent @ Rs.82, 500 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 @ Rs15, 000 per month) 10.2 Infrastructure requirements The project will have the following infrastructure components: Table 10-2-Infrastructure Requirement Description Main shop Try Room Small Store Building for Stitching Unit Sq.ft. 450 36 64 10 Marla House 247,500 209,750 45,000

11 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:
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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. A well designed Marketing campaign is very important while Launching the business and at the time of promotions to get success.

12 THREATS FOR THE BUSINESS

12.1 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. 12.2 Economic Recession World wide intense economic recession is a largest threat for any business activity now days. Therefore one needs to take proactive actions according the economic instigators for survival in business. 12.3 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. 12.4 Selection of the wrong venue Selection of the wrong venue can be a major hurdle in achieving the desired business objectives. 12.5 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. 12.6 Tax Improper documentation of the sales receipt record may lead to problems with Tax department.

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13 PROJECT ECONOMICS
13.1 Project Cost, Financing Plan and Project Returns:
Capital Investment Machinery & equipment Furniture & fixtures Office equipment Pre-operating costs Total Capital Costs Working Capital Equipment spare part inventory Raw material inventory Upfront building rent Cash Total Working Capital Total Investment Initial Financing Debt Equity Rs. in actuals 701,000 638,350 238,000 430,000 2,007,350 Rs. in actuals 2,576 142,195 1,170,000 750,000 2,064,771 4,072,121 Rs. in actuals 2,036,061 2,036,061 Equity 56% 3.40 6,493,158 Project 39% 4.11 9,982,958

50% 50%

Internal Rate of Return (IRR) Payback Period (yrs) Net Present Value (NPV)

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14 FINANCIAL ANALYSIS
14.1 Projected Income Statement:
Calculations
Income Statement
Year 1 8,531,712 1,706,342 2,242,500 15,456 240,148 4,204,447 4,327,265 Year 2 11,357,069 2,168,168 2,552,541 19,639 319,676 5,060,024 6,297,045 Year 3 14,288,145 2,603,749 2,803,157 23,585 402,179 5,832,669 8,455,476 Year 4 17,691,865 3,077,467 3,077,865 27,876 497,986 6,681,194 11,010,671 Year 5 20,592,508 3,419,209 3,385,799 30,971 579,632 7,415,612 13,176,896 Year 6 22,701,543 3,598,060 3,723,611 32,591 638,997 7,993,259 14,708,284 Year 7 24,971,697 3,777,963 4,086,147 34,221 702,897 8,601,228 16,370,470 Year 8 27,468,867 3,966,861 4,483,980 35,932 773,186 9,259,959 18,208,907 Year 9 30,215,753 4,165,205 4,920,546 37,728 850,505 9,973,984 20,241,769 Year 10 33,237,329 4,373,465 5,399,618 39,615 935,555 10,748,253 22,489,076

SMEDA

Revenue Cost of sales Cost of goods sold 1 Operation costs 1 (direct labor) Operating costs 2 (machinery maintenance) Operating costs 3 (direct electricity) Total cost of sales Gross Profit General administration & selling expenses Administration expense Administration benefits expense Building rental expense Electricity expense Travelling expense Communications expense (phone, fax, mail, internet, Office expenses (stationary, entertainment, janitorial Promotional expense Depreciation expense Amortization of pre-operating costs Subtotal Operating Income Other income (interest on cash) Earnings Before Interest & Taxes Interest expense on long term debt (Project Loan) Interest expense on long term debt (Working Capital Lo Subtotal Earnings Before Tax Tax NET PROFIT/(LOSS) AFTER TAX

1,656,000 49,680 1,170,000 457,338 82,800 33,120 16,560 1,023,805 157,735 86,000 4,733,039 (405,773) 88,720 (317,054) 155,045 156,637 311,682 (628,736) (628,736)

1,817,231 54,517 1,287,000 503,072 90,862 36,345 18,172 1,362,848 157,735 86,000 5,413,781 883,264 33,275 916,540 131,066 131,630 262,696 653,844 98,077 555,767

1,994,159 59,825 1,415,700 553,379 99,708 39,883 19,942 1,714,577 157,735 86,000 6,140,908 2,314,568 59,887 2,374,455 103,096 102,375 205,471 2,168,984 542,246 1,626,738

2,188,313 65,649 1,557,270 608,717 109,416 43,766 21,883 2,123,024 157,735 86,000 6,961,773 4,048,898 159,870 4,208,768 70,471 68,152 138,623 4,070,144 1,017,536 3,052,608

2,401,370 72,041 1,712,997 669,589 120,068 48,027 24,014 2,471,101 157,735 86,000 7,762,942 5,413,954 389,429 5,803,383 32,419 28,115 60,534 5,742,850 1,435,712 4,307,137

2,635,171 79,055 1,884,297 736,548 131,759 52,703 26,352 2,724,185 157,735 8,427,804 6,280,480 725,240 7,005,719 7,005,719 1,751,430 5,254,289

2,891,735 86,752 2,072,726 810,202 144,587 57,835 28,917 2,996,604 157,735 9,247,093 7,123,377 1,160,131 8,283,508 8,283,508 2,070,877 6,212,631

3,173,278 95,198 2,279,999 891,223 158,664 63,466 31,733 3,296,264 157,735 10,147,559 8,061,348 1,675,024 9,736,372 9,736,372 2,434,093 7,302,279

3,482,233 104,467 2,507,999 980,345 174,112 69,645 34,822 3,625,890 157,735 11,137,248 9,104,522 2,278,450 11,382,972 11,382,972 2,845,743 8,537,229

3,821,268 114,638 2,758,799 1,078,379 191,063 76,425 38,213 3,988,479 157,735 12,225,000 10,264,076 3,051,216 13,315,292 13,315,292 3,328,823 9,986,469

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14.2 Projected Cash Flow Statement:

Calculations
Cash Flow Statement
Year 0 Operating activities Net profit Add: depreciation expense amortization of pre-operating costs amortization of training costs Deferred income tax Accounts receivable Finished goods inventory Equipment inventory Raw material inventory Pre-paid building rent Accounts payable Cash provided by operations Financing activities Project Loan - principal repayment Working Capital Loan - principal repayment Additions to Project Loan Additions to Working Capital Loan Issuance of shares Purchase of (treasury) shares Cash provided by / (used for) financing activities Investing activities Capital expenditure Acquisitions Cash (used for) / provided by investing activities NET CASH Year 1 (628,736) 157,735 86,000 (701,237) (182,802) (861) (47,519) (29,250) 157,393 (1,189,277) Year 2 555,767 157,735 86,000 98,077 (116,111) (29,295) (897) (49,505) (32,175) 42,445 712,042 Year 3 1,626,738 157,735 86,000 (213,627) (236,566) (32,203) (1,045) (57,660) (35,393) 40,950 1,334,930 Year 4 3,052,608 157,735 86,000 (651,223) (260,334) (35,378) (896) (49,460) (38,932) 43,427 2,303,548 Year 5 4,307,137 157,735 86,000 (918,856) (259,083) (29,985) (658) (36,339) (42,825) 31,384 3,294,509 Year 6 5,254,289 157,735 (1,149,656) (205,877) (23,390) (711) (39,225) (47,107) 18,116 3,964,175 Year 7 6,212,631 157,735 (1,354,102) (179,967) (25,332) (783) (43,245) (51,818) 18,539 4,733,658 Year 8 7,302,279 157,735 (1,586,561) (195,917) (27,447) (864) (47,678) (57,000) 19,656 5,564,204 Year 9 8,537,229 157,735 (1,850,017) (215,509) (29,751) (952) (52,565) (62,700) 20,848 6,504,319

SMEDA

Year 10 9,986,469 157,735 (2,159,188) (237,060) (32,261) 10,243 565,390 689,700 (30,040) 8,950,987

(2,576) (142,195) (292,500) (437,271)

1,003,675 1,032,386 2,036,061 4,072,121

(144,109) (147,222) (291,331)

(168,089) (172,229) (340,318)

(196,059) (201,483) (397,542)

(228,683) (235,707) (464,390)

(266,736) (275,744) (542,480)

(2,007,350) (2,007,350) 1,627,500

(1,480,608)

371,724

937,388

1,839,158

2,752,030

3,964,175

4,733,658

5,564,204

6,504,319

8,950,987

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Boutique (Women Designer Wear)

14.3 Projected Balance Sheet Statement:

Calculations
Balance Sheet
Year 0 Assets Current assets Cash & Bank Accounts receivable Finished goods inventory Equipment spare part inventory Raw material inventory Pre-paid building rent Total Current Assets Fixed assets Machinery & equipment Furniture & fixtures Office equipment Total Fixed Assets Intangible assets Pre-operation costs Legal, licensing, & training costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Total Current Liabilities Other liabilities Deferred tax Long term debt (Project Loan) Long term debt (Working Capital Loan) Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIES 1,627,500 146,892 701,237 182,802 3,437 189,715 321,750 1,545,832 518,616 817,347 212,097 4,334 239,219 353,925 2,145,538 679,120 1,053,913 244,300 5,378 296,879 389,318 2,668,908 2,518,278 1,314,247 279,678 6,274 346,339 428,249 4,893,066 5,270,308 1,573,330 309,663 6,933 382,678 471,074 8,013,986 9,234,482 1,779,208 333,052 7,643 421,903 518,182 12,294,470 13,968,140 1,959,174 358,384 8,427 465,148 570,000 17,329,273 19,532,344 2,155,092 385,832 9,290 512,825 627,000 23,222,383 26,036,663 2,370,601 415,583 10,243 565,390 689,700 30,088,179 34,987,650 2,607,661 447,844 38,043,155 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

SMEDA

2,576 142,195 292,500 2,064,771

701,000 638,350 238,000 1,577,350

630,900 574,515 214,200 1,419,615

560,800 510,680 190,400 1,261,880

490,700 446,845 166,600 1,104,145

420,600 383,010 142,800 946,410

350,500 319,175 119,000 788,675

280,400 255,340 95,200 630,940

210,300 191,505 71,400 473,205

140,200 127,670 47,600 315,470

70,100 63,835 23,800 157,735

430,000 430,000 4,072,121

344,000 344,000 3,309,447

258,000 258,000 3,665,418

172,000 172,000 3,945,053

86,000 86,000 5,925,476

8,802,661

12,925,410

17,802,478

23,537,853

30,245,914

38,043,155

157,393 157,393

199,838 199,838

240,788 240,788

284,216 284,216

315,599 315,599

333,715 333,715

352,254 352,254

371,910 371,910

392,759 392,759

362,719 362,719

1,003,675 1,032,386 2,036,061

859,566 885,164 1,744,730

98,077 691,477 712,935 1,502,489

(115,550) 495,419 511,451 891,320

(766,773) 266,736 275,744 (224,293)

(1,685,629) (1,685,629)

(2,835,285) (2,835,285)

(4,189,387) (4,189,387)

(5,775,948) (5,775,948)

(7,625,965) (7,625,965)

(9,785,152) (9,785,152)

2,036,061 2,036,061 4,072,121

2,036,061 (628,736) 1,407,325 3,309,447

2,036,061 (72,969) 1,963,092 3,665,418

2,036,061 776,885 2,812,945 3,945,053

2,036,061 3,829,493 5,865,554 5,925,476

2,036,061 8,136,630 10,172,691 8,802,661

2,036,061 13,390,920 15,426,980 12,925,410

2,036,061 19,603,551 21,639,611 17,802,478

2,036,061 26,905,830 28,941,890 23,537,853

2,036,061 35,443,059 37,479,119 30,245,914

2,036,061 45,429,528 47,465,588 38,043,155

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Boutique (Women Designer Wear)

15 KEY ASSUMPTIONS
15.1 Production Assumptions Number of Stitching Machines Production Capacity (No. of dresses per Annum) Capacity Utilization for the first year Ready Made Dresses (% of total production) Dresses manufactured on CMT basis (% of total production) 15.2 Operating Assumptions Hours operational per day Days operational per month (Production) Days operational per month (Boutique) 15.3 Cash flow Assumptions Account Payable Cycle (Days) Account Receivable Cycle (Days) 15.4 Expense Assumptions Promotion Expenses after Year 1 (% of expected sales) Machine Maintenance 12% 1% of machinery cost 5% 10% 5% 10% 10 15 (of 30% of sales) 8 25 30 6 2,688 60% 60% 40%

Raw Material Price Growth rate Payroll growth rate Machine Maintenance growth rate Rent growth rate 15.5 Financial Assumptions Project Life Debt: Equity Interest Rate on Long Term Debt Debt Tenure Debt Payment per year

10 Years 50:50 16% 5 Years 4

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Boutique (Women Designer Wear)

16 ANNEXURE:
Machinery Suppliers AA Appliances Shop # 1, Taj Mehal Street # 22, Abid Market, Temple Road, Lahore Phone: +92-42-36313170 Al-Mustafa Machinery Company Showroom 3-A1, Al-Mustafa Center, 6-Allama Iqbal Road, Near Boharwala Chowk. Lahore Phone: +92-42-363.69962 Rex Machinery (PVT) Ltd. Rex Market, 6-Allama Iqbal Road, Near Boharwala Chowk, Lahore Phone: +92-42-36375524 M. Ramazan (Industrial Sewing Machine Co.) 92-B McLeod Road, Lahore Phone: +92-42-37223762 Furniture Suppliers Farrukh and Shabbir Office Furniture Shop # 6, Ground floor, Sharif Complex, Main Market, Gulberg, Lahore Phone: +92-42-35873347

21 PREF-57/Dec, 2011/ Rev 03