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REGIONAL OFFICE
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Fax: (091) 5286908
helpdesk-pew@smeda.org.pk
Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost
December, 2013
Pre-feasibility Study
Table of Contents
1.
DISCLAIMER ..................................................................................................................................................... 2
2.
3.
4.
5.
6.
7.
CRITICAL FACTORS....................................................................................................................................... 5
8.
9.
10.
11.
12.
12.1
PROJECT ECONOMICS................................................................................................................................ 7
12.2
PROJECT FINANCING .................................................................................................................................. 7
12.3
PROJECT COST .......................................................................................................................................... 7
12.4
SPACE REQUIREMENT ................................................................................................................................ 7
12.5
MACHINERY AND EQUIPMENT .................................................................................................................... 8
12.6
FURNITURE & FIXTURES ............................................................................................................................ 8
12.7
HUMAN RESOURCE REQUIREMENT ........................................................................................................... 8
12.8
REVENUE GENERATION ............................................................................................................................. 8
13. CONTACT DETAILS OF EXPERTS AND CONSULTANTS ..................................................................... 9
14.
ANNEXURES................................................................................................................................................... 10
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 an 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
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3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs" , SMEDA has carried out sectoral research to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to 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.
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4. INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan program, 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 National Bank of
Pakistan (NBP) and First Women Bank Ltd. (FWBL).
Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 1 year
grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries+
across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit
Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
Inland Fish Farming Business is proposed to be located primarily in a warm area,
having a water temperature range of 5 - 30 degrees Centigrade. It is suggested that the
farms may be established in Sibi, Jacobabad or any other place, having similar
attributes.
Fish is a nutritious product, widely consumed around the world. In addition, fish is also
used in the medicine industry. All such factors contribute towards making fish farming a
viable project for investment.
The project will start operations with 18,000 fish of different ages, for the first 9 month
cycle with survival rate of 80%.
Total cost estimate is Rs. 2.20 million, with fixed investment of Rs. 0.8 million and
working capital amounting to Rs. 1.40 million.
Given the cost assumptions, IRR and Payback are 52% and 2.80 years respectively.
The most critical considerations or factors for success of the project are:
1. Healthy and certified seedlings
2. Ample supply of water
Techniques: Three different techniques are used for inland fish farming.
However, keeping in view the economical, technical and managerial factors, a
semi-intensive fish farming technique is suggested for the proposed project.
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Location: The project would be located in Sibi, Naseer Abad, Jaffar Abad
(Balochistan) or warm areas that provide suitable environment/water temperature
range i.e. between 5-30 degree centigrade.
Product: Fish is not only used in a wide range of traditional to modern dishes,
but is also sold as a canned product. In addition, fish is also used in the medicine
industry.
Target Market: In addition to major cities, such as Quetta, Karachi, Lahore and
Islamabad, there is an enormous export potential for Middle Eastern countries.
7. CRITICAL FACTORS
The commercial viability of the proposed project depends on the following factors:
Selection of proper location with water, equipment and staff play an important
role in ensuring that the project runs successfully.
Farm should be positioned away from agricultural activities in order to avoid
spray application of pesticides.
Elevation is required for easy desiccation, during the off season.
Healthy certified seedlings must be purchased from certified dealers.
To attract larger number of customers, the product must meet basic/minimum
quality standards.
Each farm should maintain a written health and welfare program, for elimination
of diseases and quality production.
Farm should have a whole sale distribution network of its final product.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
10.
The target customers for fish are households, hotels, restaurants and pharmaceutical
companies. Production, trade and utilization of fish has been increasing dramatically in
the world. Fish industry trade is expected to reach $130 billion by the end of 2013. In
2007, USA was the largest consumer of fish with imports worth US$ 13.63 billion. Japan
followed as second major importer with US$11.38 billion, whereas, Spain stood at third
position with imports of US$ 6.98 billion.
11.
The overall production cycle for the inland fish farming comprises of 8-9 months, subject
to the life/age of the seedlings (species). In case of fresh seedlings (with an age of less
than 20 days), the production cycle will take 9 months to achieve the desired output.
Keeping in view the economical prospective, it is suggested that fish with different ages
may be used for different ponds.
12.
A detailed financial model has been developed to analyze the commercial viability of
Inland Fish Farming under the Prime Ministers Youth Business Loan program. Various
costs 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 annexures.
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12.1
Project Economics
All figures in the financial model have been calculated, for 18,000 units of fish on 4
acres of land. The following table shows internal rates of return and payback period.
Table 1 - Project Economics
Description
Internal Rate of Return (IRR)
Payback Period (yrs)
Net Present Value (NPV)
Details
52%
2.80
Rs.10,026,520
Factors that influence the profitability of Inland Fish Farm are farm management,
selection of fish seedlings, proper feeding and care of oxygen in ponds.
12.2
Project Financing
Following table provides details of the equity required and variables related to bank
loan;
Description
Total Equity (10%)
Bank Loan (90 %.)
Markup to the Borrower (%age/annum)
Tenure of Loan (Years)
Grace Period (Years)
12.3
Details
Rs. 219,500
Rs. 1,975,500
8%
8
1
Project Cost
Following requirements have been identified for operations of the proposed business.
Table 1: Capital Investment for the Project
Capital Investment
Total Capital Cost
Initial Working Capital
Total Project Cost
12.4
Amount (Rs.)
7,52,500
1,442,500
2,195,000
Space Requirement
Total area required for the Inland Fish Farming is 4 acres of land that comprises of 3
ponds, office building, guard room and open space.
Space Requirement (Sq. ft.)
Office Building cum Store
Construction of 3 Ponds
Land Advance Rent
Total
Cost/ Unit
600
25,000
Total Cost
90,000
75,000
100,000
265,000
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12.5
Following table provides list of machinery and equipment required for Inland Fish Farm.
Description
No
Misc. Expense
150,000
Total
387,500
Main equipment for Inland Fish Farming is provided in the table given above. Fish
farming does not require special equipment or machinery etc.
12.6
Office equipment
12.7
Description
Owner/manager
No. of Employees
1
Supervisor
Labour @ Rs. 10,000 / person
Guard
Total Staff
1
2
1
5
25,000
12,000
20,000
10,000
67,000
The table above provides details of human resource required to manage basic fish farm.
The staff salaries are estimated according to the market trends. However, these
requirements and pay scales may vary across different areas.
12.8
Revenue Generation
The capacity of farm is 14,400 units of fish for first year with 80% of total capacity
utilization with revenue of 4.6 million.
Product
Fish
Total Sales Revenue
Unit
No.
Sales Price
(Rs./Unit)
325
First Year
Production
14,400
First Year
Revenue (Rs)
4,680,000
4,680,000
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13.
Muhammad Ashraf
Director General Fisheries
Department of Fisheries, Government of Punjab
2- Sanda Road Lahore
Ph: 042-99212374-75 & 79
Director General
Department of Fisheries
Govt. of Balochistan, Quetta
Ph: 081-9211587
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
14.
ANNEXURES
1 4 .1
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Revenue
Bed Debt Expenses
Net (Adjusted Sales)
4,680,000
46,800
4,633,200
5,405,400
54,054
5,351,346
6,243,237
62,432
6,180,805
7,210,939
72,109
7,138,829
8,328,634
83,286
8,245,348
9,619,573
96,196
9,523,377
11,110,606
111,106
10,999,500
12,832,750
128,328
12,704,423
14,821,827
148,218
14,673,608
17,119,210
171,192
16,948,018
Cost of Sales
3,494,800
3,869,030
4,284,519
4,745,988
5,258,722
5,828,640
6,462,376
7,167,372
7,951,975
8,825,557
Cost of fry
Cost of Feed
Salaries (Production Staff)
Utilities
Gross Profit
Gross Profit Margin
450,000
2,332,800
504,000
208,000
1,138,400
25%
519,750
2,566,080
554,400
228,800
1,482,316
28%
600,311
2,822,688
609,840
251,680
1,896,285
31%
693,359
3,104,957
670,824
276,848
2,392,841
34%
800,830
3,415,452
737,906
304,533
2,986,626
36%
924,959
3,756,998
811,697
334,986
3,694,737
39%
1,068,328
4,132,698
892,867
368,485
4,537,124
41%
1,233,918
4,545,967
982,153
405,333
5,537,051
44%
1,425,176
5,000,564
1,080,369
445,866
6,721,633
46%
1,646,078
5,500,620
1,188,406
490,453
8,122,461
48%
300,000
120,000
100,000
30,000
50,250
11,875
25,000
46,332
330,000
132,000
105,000
30,000
45,225
11,875
26,250
53,513
363,000
145,200
110,250
30,000
40,703
11,875
27,563
61,808
399,300
159,720
115,763
30,000
36,632
11,875
28,941
71,388
439,230
175,692
121,551
30,000
32,969
11,875
30,388
82,453
483,153
193,261
127,628
29,672
11,875
31,907
95,234
531,468
212,587
134,010
26,705
11,875
33,502
109,995
584,615
233,846
140,710
24,034
11,875
35,178
127,044
643,077
257,231
147,746
21,631
11,875
36,936
146,736
707,384
282,954
155,133
19,468
11,875
38,783
169,480
Subtotal
Operating Income
683,457
454,943
733,863
748,453
790,398
1,105,887
853,619
1,539,222
924,158
2,062,468
972,730
2,722,007
1,060,142
3,476,981
1,157,302
4,379,748
1,265,231
5,456,402
1,385,077
6,737,383
158,040
150,112
131,904
112,185
90,829
67,700
42,652
15,525
296,903
296,903
616,548
61,655
554,894
993,703
71,555
922,147
1,448,394
139,759
1,308,634
1,994,768
246,454
1,748,314
2,679,355
392,339
2,287,016
3,461,456
587,864
2,873,592
4,364,223
831,767
3,532,456
5,456,402
1,159,421
4,296,982
6,737,383
1,580,584
5,156,799
24,742
46,241
76,846
109,053
145,693
190,585
239,466
294,371
358,082
429,733
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10
1 4 .2
BALANCE SHEET
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
283,000
1,159,500
0
0
100,000
945,953
873,700
0
0
100,000
1,263,139
967,258
0
0
100,000
1,914,534
1,071,130
0
0
100,000
2,917,131
1,186,497
0
0
100,000
4,321,573
1,314,680
0
0
100,000
6,193,996
1,457,160
0
0
100,000
8,609,024
1,615,594
0
0
100,000
11,635,304
1,791,843
0
0
100,000
15,757,766
1,987,994
0
0
100,000
20,715,637
2,206,389
0
0
100,000
1,542,500
1,919,653
2,330,397
3,085,664
4,203,629
5,736,254
7,751,155
10,324,618
13,527,147
17,845,759
23,022,027
Fixed Assets
Plant Machinery & Facility
Factory Construction
Land
Furniture & Fixtures
Vehicle
Total Fixed Assets
237,500
165,000
0
100,000
0
502,500
213,750
148,500
0
90,000
0
452,250
192,375
133,650
0
81,000
0
407,025
173,138
120,285
0
72,900
0
366,323
155,824
108,257
0
65,610
0
329,690
140,241
97,431
0
59,049
0
296,721
126,217
87,688
0
53,144
0
267,049
113,596
78,919
0
47,830
0
240,344
102,236
71,027
0
43,047
0
216,310
92,012
63,924
0
38,742
0
194,679
82,811
57,532
0
34,868
0
175,211
Intangible Assets
Preliminary Expenses
150,000
120,000
90,000
60,000
30,000
2,195,000
2,491,903
2,827,422
3,511,986
4,563,319
6,032,975
Owner's Equity
219,500
516,403
1,071,297
1,993,444
3,302,078
1,975,500
1,756,125
1,518,543
2,195,000
2,827,422
3,511,986
Assets
Current Assets
Cash & Bank Balance
Raw Material Inventory
Finished Goods Inventory
Accounts Receivable
Advnace Rent
Total Assets
1,975,500
2,491,903
8,018,205
10,564,962
13,743,457
18,040,438
23,197,237
5,050,393
7,337,408
10,211,001
13,743,457
18,040,438
23,197,237
1,261,241
982,583
680,796
353,962
4,563,319
6,032,975
8,018,205
10,564,962
13,743,457
18,040,438
23,197,237
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11
1 4 .3
CASH FLOW
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
0
0
0
-
296,903
50,250
30,000
0
285,800
0
662,953
554,894
45,225
30,000
0
(93,558)
0
536,561
922,147
40,703
30,000
0
(103,872)
0
888,977
1,308,634
36,632
30,000
0
(115,367)
0
1,259,899
1,748,314
32,969
30,000
0
(128,183)
0
1,683,100
2,287,016
29,672
0
(142,479)
0
2,174,209
2,873,592
26,705
0
(158,434)
0
2,741,863
3,532,456
24,034
0
(176,249)
0
3,380,242
4,296,982
21,631
0
(196,151)
0
4,122,462
5,156,799
19,468
0
(218,396)
0
4,957,872
(219,375)
(237,583)
(257,302)
(278,658)
(301,786)
(326,835)
(353,962)
(219,375)
(237,583)
(257,302)
(278,658)
(301,786)
(326,835)
(353,962)
1,975,500
2,195,000
219,500
0
(237,500)
(100,000)
(150,000)
(1,159,500)
(100,000)
(165,000)
(1,912,000)
283,000
0
283,000
662,953
283,000
945,953
317,186
945,953
1,263,139
651,395
1,263,139
1,914,534
1,002,597
1,914,534
2,917,131
1,404,442
2,917,131
4,321,573
1,872,422
4,321,573
6,193,996
2,415,028
6,193,996
8,609,024
3,026,280
8,609,024
11,635,304
4,122,462
11,635,304
15,757,766
4,957,872
15,757,766
20,715,637
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12
1 4 .4
Human Resources
Training & Skill Development: Encouraging training and skill of self & employees
through experts and exposure to best practices is a route to success. Least cost
options for Training and Skill Development (T&SD) may be linked with compensation
benefits and awards.
1 4 .5
USEFUL LINKS
Government of Pakistan
www.pakistan.gov.pk
Government of Punjab
www.punjab.gov.pk
Government of Sindh
www.sindh.gov.pk
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13
Government of Balochistan
www.balochistan.gov.pk
15.
KEY ASSUMPTIONS
Particulars
Sales Price Growth Rate
Capacity Utilization Growth Rate
Increase in Cost of Raw Materials
Increase in Utilities (Electricity/Water/Gas)
Debt / Equity Ratio
Plant Building
Machinery
Office Furniture & Equipment
Loan Period
Grace Period
Loan Installments
Financial Charges (Loan Rate)
Assumptions
5 % per year
5 % per year
10 % per year
10 % per year
90 : 10
10 % per annum
10 % per annum
10 % per annum
8 Years
1 Year
Monthly
8 % per annum
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14