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helpdesk@smeda.org.pk
REGIONAL OFFICE
Punjab
REGIONAL OFFICE
Sindh
REGIONAL OFFICE
Khyber Pakhtunkhwa
REGIONAL OFFICE
Balochistan
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 111-111-456
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. 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 ............................................................................................................................ 5
8. INSTALLED & OPERATIONAL CAPACITIES ................................................................................. 6
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ..................................................................... 6
10.
11.
12.
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9
12.10
12.11
13.
14.
ANNEXURE ..................................................................................................................................... 19
14.1
14.2
14.3
14.4
14.5
15.
Pre-Feasibility Study
1.
DISCLAIMER
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
2.
3.
INTRODUCTION TO SMEDA
Pre-Feasibility Study
4.
INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan scheme, 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 by the
National Bank of Pakistan (NBP) and the 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
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
6.
This unit is capable of producing different types of wooden furniture i.e. bed sets,
dinning sets, sofa sets, centre tables, tables for sofa set and office furniture.
The entire finished product depends on the quality of wood. Detailed technical
know-how about the quality of wood and the use of seasoned / dry wood plays a
vital role in the manufacturing of quality furnitureIt is recommended that dry
wood, from forests is used for manufacturing quality wooden furniture. Forest
reserves like Changa Manga, Pakhowal, Kundian, Chicha watni, Bahawalpur and
other forests are potential sources of quality wood. Furniture manufacturing units
in Pakistan mostly use Sheesham wood. Other types of woods used in
manufacturing furniture are; Teak wood, Walnut wood and Keekar wood. Besides
this, substitute material like Lasani and Vinboard are also used in the
manufacturing of furniture. Other materials used in furniture manufacturing
process are nails, screws, glue / solution, spirit, lakh, thiner, lacquer, sealer,
hardener etc. These raw materials are easily available in the market.
The demand for wooden furniture in the domestic market is consistent throughout
the year; however, it significantly increases during the period of October to March
due to wedding season. The demand for furniture almost doubles during this
period and is a good time to enter the market. Since strong competition already
exists in the domestic market, manufacturing of high quality trendy designs and
aggressive marketing is essential to get a prominent place in the market. Despite
the introduction of new / alternative materials in furniture manufacturing, wooden
furniture is still preferred in the domestic as well as in the international market
due to its traditional appeal and durability. Over the years, entry into the global
market has also become more competitive, due to demanding factors like green
furniture, multi-functionality, simplicity and neutral colors, Ready-to-assemble
(RTA) and Do-it-yourself (DIY) furniture. Malaysia, Philippines, Indonesia and
China have established strong brand names and have emerged as key market
players.
7.
CRITICAL FACTORS
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Pre-Feasibility Study
New designs and styles can build brand equity for the business. Creation of
new designs and styles is vital for setting new trends as the market is quite
competitive.
The manufacturing unit will require selling directly to showrooms and direct
clients, for which the owner would need to develop extensive knowledge of
the market.
8.
9.
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
Pre-Feasibility Study
increase their customer base. Flourishing hotel and tourism industry can
considerably increase the demand for wooden furniture whereby,large orders can
also be secured to supply wooden furniture to hotels and resorts. Wooden
furniture retail clusters are found in most areas of all big cities of Pakistan, where
manufactured furniture can be sold.
Wood Cutting at
Trolley (Big Saw)
Wood arrives in
Factory
Wood reaches
Machine Man
Carpenter shapes
the wood into
Furniture
Furniture comes to
Spindle / Molding
Machine
Wood Seasoning
Furniture
Designing on
CAD
Furniture comes to
Carver for Carving
Carpenter
assembles the
Furniture
Project Economics
Pre-Feasibility Study
Dinning Set
Sofa Set
Misc. Furniture
Office Furniture
Total
Superior
Fine
Normal
Total
10%
25%
15%
10%
100%
Office
Furniture
20%
30%
50%
100%
The following table shows internal rate of return, payback period and net present
value:
Table 3 - Project Economics
Description
Internal Rate of Return (IRR)
Payback Period (Yrs)
Net Present Value (NPV)
Details
59%
3.08
Rs. 25,274,301
Project Financing
Following table provides details of the equity required and variables related to
bank loan:
Table 4 - Project Financing
Description
Total Equity (10%)
Bank Loan (90%.)
Markup to the Borrower (%age/annum)
Tenure of the Loan (Years)
Grace Period (Year)
Details
Rs. 219,677
Rs. 1,977,097
8%
8
1
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Pre-Feasibility Study
12.3
Project Cost
12.4
Space Requirement
2 kanals (with covered area of 7,200 sq. ft) land is sufficient for setting up the
proposed wooden furniture manufacturing unit. The land would be acquired on
lease, preferably in the outskirts of the city. Covered area details of the
manufacturing unit are as follows:
Table 6 - Factory (Covered Area)
Description
Factory Main Hall
Carving Room
Polish Room
Store for un-finished products
Store for finished product
Office for factory admin officer & CAD operator
Rooms for Labor
Kitchen & Washrooms
Total
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12.5
Machinery & equipment required for Wooden Furniture Manufacturing unit can be
easily purchased locally. Following table provides list of machinery required for
the factory:
Table 7 Factory Machinery Details
Machinery Description
Unit
Unit Price
Saw 18
1
42,000
Saw 27
1
70,000
Saw 30
1
80,000
Cutter sliding
1
20,000
Cutter round
1
15,000
Gauge 14
1
60,000
Gauge 18
1
110,000
Planer / Shaper 12
2
70,000
Spindle Moulder Machine
2
50,000
Chapaka
2
15,000
Hand Chapaka (jug saw)
2
15,000
Grinder
2
6,500
Drill machine
10
3,500
Compressor
2
16,000
Miscellaneous Tools (Hand Tools, Paint
1
20,000
Gun etc.)
Installation costs for machines
1
30,000
Total Machinery and Equipment
12.6
Total Cost
42,000
70,000
80,000
20,000
15,000
60,000
110,000
140,000
100,000
30,000
30,000
13,000
35,000
32,000
20,000
30,000
827,000
Machine Maintenance
Furniture
Description
1
4
3
Cost/Unit
(Rs)
10,000
3,500
12,000
Total Cost
(Rs)
10,000
14,000
36,000
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10
Pre-Feasibility Study
Fire Extinguishers
Total Furniture & Fixtures
12.8
4,500
9,000
69,000
Office Equipment
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11
Pre-Feasibility Study
12.9
As different variety of material is used for the manufacturing of each type of furniture; following tables shows the raw
material requirement for each type of furniture:
Table 10 Bed Set Cost
Costing Bed Set Superior Quality
Raw Material Cost
Description
Wood (Cubic ft)
Nails/Screws
Glue/Solution
Spirit (in Ltr.)
Lakh (in kgs)
Thinner (in Ltr.)
Lacquer (in Ltr.)
Wooden Frame for Matress
Sealer (in Ltr.)
Dressing Set Glass
Tapestry Dressing St. (in Meters)
Foam
Channels, Handles
Thinner (Butyl)
Thinner (imported)
Total
No. of
Unit
15
1
1
20
1.5
8
2
1
3
16
0.5
1
1
1
1
Rate / Total
Unit
Amount
2,000
30,000
350
350
300
300
60
1,200
350
525
120
960
300
600
5,000
5,000
285
855
200
3,200
250
125
150
150
2,500
2,500
160
160
240
240
46,165
No. of
Unit
12
1
1
15
1
4
2
2
1
16
0.5
1
1
1
1
Total
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31,425
12
No. of
Unit
3
5
1
1
1
10
1
1
16
0.5
1
1
1
1
1
Rate / Total
Unit
Amount
1,500
4,500
2,250
11,250
350
350
300
300
1,500
1,500
120
1,200
300
300
4,000
4,000
150
2,400
250
125
150
150
450
450
160
160
240
240
2,000
2,000
28,925
Pre-Feasibility Study
34,360
No. of
Unit
8
8
1
1
1
1
15
2
32
1
3
1
Rate / Total
Unit
Amount
1,500
12,000
375
3,000
400
400
400
400
450
450
2,000
2,000
120
1,800
300
600
200
6,400
1,500
1,500
250
750
1,000
1,000
Total
30,300
Total
23,160
30,190
No. of
Unit
6
6
1
1
7
10
25
0.5
1
25
Total
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Rate / Total
Unit
Amount
700
4,200
1,200
7,200
200
200
300
300
200
1,400
75
750
22
550
180
90
3,000
3,000
250
6,250
23,940
13
21,624
Pre-Feasibility Study
Total
Total
Total
18,325
17,360
16,200
Total
Total
Total
48,495
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
34,410
14
25,550
Pre-Feasibility Study
12.10
The labor required for manufacturing process is easily available on daily wages
and on per unit basis. It is recommended that only selective skilled labor be
employed permanently, while others should be hired on temporary basis.
Following permanent human resource is required at the factory.
Table 15 Factory Staff requirement details in Year 1
Description
No.
Monthly Salary
Total Annual
(Rs)
Salary (Rs)
Production supervisor
1
30,000
360,000
Carpenter
8
16,000
1,536,000
Machine man
1
16,000
192,000
Polish man
3
16,000
576,000
Carving
2
18,000
432,000
Helpers
2
10,000
240,000
Factory admin officer
1
15,000
180,000
Draftsman / CAD Operator
1
15,000
180,000
Purchaser/Store Officer
1
15,000
180,000
Gate Keeper
1
10,000
120,000
Total Production Staff
21
3,996,000
Table 16 Additional Human Resource Required in Year 2
Description
No.
Monthly Salary
Total Annual
(Rs)
Salary (Rs)
Carpenter
1
16,000
192,000
Machine man
1
16,000
192,000
Polish man
1
16,000
192,000
Helpers
1
10,000
120,000
Total Additional Staff
4
696,000
Table 17 Additional Human Resource Required in Year 3
Description
No.
Monthly Salary
Total Annual
(Rs)
Salary (Rs)
Carpenter
1
16,000
192,000
Helpers
1
10,000
120,000
Total Additional Staff
2
312,000
One production supervisor is sufficient for 30 workers. Salaries of all employees
are estimated to increase at 10% annually.
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15
Pre-Feasibility Study
12.11
Expected production figures of proposed product mix during year 1 are given in
table below:
Table 18 Number of Furniture Sale during Year 1
Description
Product Mix
Total Units Sold
Bed Set
Superior
20%
8
Fine
30%
17
Normal
50%
36
Dinning Set
Superior
20%
2
Fine
30%
4
Normal
50%
9
Sofa Set
Superior
20%
5
Fine
30%
11
Normal
50%
23
Misc. Furniture
Superior
20%
6
Fine
30%
14
Normal
50%
30
Office Furniture
Superior
20%
5
Fine
30%
11
Normal
50%
23
Total Furniture Units
202
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16
Pre-Feasibility Study
20%
3,161,043
731,394
1,684,478
1,273,491
1,433,372
8,283,777
35%
1,185,391
274,273
631,679
477,559
537,514
3,106,416
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
4,346,434
1,005,667
2,316,157
1,751,050
1,970,886
11,390,194
17
Pre-Feasibility Study
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18
Pre-Feasibility Study
14.
ANNEXURE
14.1
Income Statement
Calculations
Projected Income Statement
SMEDA
Year 1
11,390,194
Year 2
14,585,516
Year 3
17,883,542
Year 4
21,628,836
Year 5
26,367,442
Year 6
32,415,994
Year 7
40,202,397
Year 8
50,306,665
Year 9
63,517,015
Year 10
80,906,951
Cost of sales
Procurement Cost
Direct Labor (Production Staff)
Direct Electricity
5,364,197
3,336,000
504,000
6,732,769
4,365,600
547,800
8,468,317
5,114,160
595,485
10,682,765
5,625,576
647,406
13,524,860
6,188,134
703,948
17,192,580
6,806,947
765,529
21,949,731
7,487,642
832,606
28,148,119
8,236,406
905,681
36,257,176
9,060,046
985,299
46,903,503
9,966,051
1,072,058
9,204,197
2,185,997
11,646,169
2,939,347
14,177,962
3,705,580
16,955,747
4,673,089
20,416,941
5,950,501
24,765,055
7,650,939
30,269,978
9,932,419
37,290,206
13,016,460
46,302,522
17,214,494
57,941,613
22,965,338
660,000
600,000
66,000
53,642
3,300
56,951
25,000
145,600
7,166
1,617,659
568,338
726,000
660,000
72,600
67,328
3,630
72,928
26,250
145,600
7,166
1,781,501
1,157,846
798,600
726,000
79,860
84,683
3,993
89,418
27,563
145,600
7,166
1,962,882
1,742,698
878,460
798,600
87,846
106,828
4,392
108,144
28,941
154,427
7,166
2,174,804
2,498,285
966,306
878,460
96,631
135,249
4,832
131,837
30,388
154,427
7,166
2,405,294
3,545,207
1,062,937
966,306
106,294
171,926
5,315
162,080
31,907
154,427
2,661,191
4,989,748
1,169,230
1,062,937
116,923
219,497
5,846
201,012
33,502
164,645
2,973,593
6,958,826
1,286,153
1,169,230
128,615
281,481
6,431
251,533
35,178
164,645
3,323,267
9,693,193
1,414,769
1,286,153
141,477
362,572
7,074
317,585
36,936
164,645
3,731,211
13,483,283
1,556,245
1,414,769
155,625
469,035
7,781
404,535
38,783
176,474
4,223,247
18,742,091
568,338
1,157,846
1,843,498
2,498,285
3,545,207
5,156,837
6,958,826
9,693,193
13,701,909
18,742,091
164,098
164,098
404,240
150,233
150,233
1,007,613
132,011
132,011
1,711,488
112,275
112,275
2,386,010
90,902
90,902
3,454,304
67,755
67,755
5,089,081
42,687
42,687
6,916,139
15,538
15,538
9,677,655
13,701,909
18,742,091
Tax
NET PROFIT/(LOSS) AFTER TAX
424
403,816
73,642
933,971
189,797
1,521,690
324,702
2,061,308
586,076
2,868,229
1,049,224
4,039,857
1,643,148
5,272,991
2,609,678
7,067,976
4,018,167
9,683,741
5,782,231
12,959,860
Revenue
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19
Pre-Feasibility Study
14.2
Balance Sheet
Calculations
Projected Balance Sheet
SMEDA
Year 0
Assets
Current assets
Cash & Bank
Accounts receivable
Finished goods inventory
Raw material inventory
Pre-paid building rent
Total Current Assets
Year 1
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
700,908
200,000
1,096,945
228,082
132,886
191,754
1,008,556
220,000
1,781,277
630,299
303,050
242,629
1,448,723
242,000
2,866,700
1,545,358
378,806
295,374
2,077,945
266,200
4,563,682
2,849,913
460,978
353,245
2,976,589
292,820
6,933,545
4,802,618
559,957
425,353
4,258,761
322,102
10,368,790
7,795,316
685,807
515,939
6,086,283
354,312
15,437,657
11,801,997
847,215
630,625
8,688,394
389,743
22,357,973
17,414,664
1,055,939
776,879
12,389,489
428,718
32,065,690
25,811,517
1,327,943
964,636
17,648,135
471,590
46,223,820
37,527,771
1,684,946
1,207,117
25,111,913
65,531,747
Fixed assets
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office vehicles
Office equipment
Total Fixed Assets
827,000
69,000
168,000
1,064,000
744,300
62,100
112,000
918,400
661,600
55,200
56,000
772,800
578,900
48,300
194,481
821,681
496,200
41,400
129,654
667,254
413,500
34,500
64,827
512,827
330,800
27,600
225,136
583,536
248,100
20,700
150,091
418,891
165,400
13,800
75,045
254,245
82,700
6,900
260,623
350,223
173,749
173,749
Intangible assets
Pre-operation costs
Total Intangible Assets
TOTAL ASSETS
35,829
35,829
2,196,774
28,663
28,663
2,728,340
21,497
21,497
3,660,998
14,332
14,332
5,399,695
7,166
7,166
7,607,965
10,881,617
16,021,193
22,776,864
32,319,935
46,574,043
65,705,496
127,326
271,923
342,426
422,196
520,427
647,815
814,447
1,034,111
1,325,687
1,715,049
127,326
271,923
342,426
422,196
520,427
647,815
814,447
1,034,111
1,325,687
1,715,049
424
1,977,097
1,977,521
74,066
1,757,545
1,831,611
263,863
1,519,770
1,783,633
588,565
1,262,260
1,850,825
1,174,641
983,377
2,158,018
2,223,865
681,346
2,905,211
3,867,013
354,248
4,221,260
6,476,691
6,476,691
10,494,859
10,494,859
16,277,090
16,277,090
219,677
403,816
623,493
2,728,340
219,677
1,337,787
1,557,465
3,660,998
414,158
2,859,477
3,273,636
5,399,695
414,158
4,920,786
5,334,944
7,607,965
414,158
7,789,014
8,203,173
10,881,617
639,294
11,828,871
12,468,166
16,021,193
639,294
17,101,862
17,741,157
22,776,864
639,294
24,169,839
24,809,133
32,319,935
899,918
33,853,580
34,753,498
46,574,043
899,918
46,813,440
47,713,357
65,705,496
196,037
Year 2
1,977,097
1,977,097
219,677
219,677
2,196,774
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20
Pre-Feasibility Study
14.3
Calculations
Projected Cash Flow Statement
SMEDA
Year 0
Operating activities
Net profit
Add: depreciation expense
amortization of pre-operating costs
Deferred income tax
Accounts receivable
Finished goods inventory
Equipment inventory
Raw material inventory
Pre-paid building rent
Accounts payable
Other liabilities
Cash provided by operations
Financing activities
Debt facility : Bank 1 - principal repayment
Additions to Debt facility : Bank 1
Issuance of shares
Cash provided by / (used for) financing activities
Investing activities
Capital expenditure
Acquisitions
Cash (used for) / provided by investing activities
NET CASH
Year 1
(700,908)
(200,000)
(900,908)
Year 2
403,816
145,600
7,166
424
(132,886)
(191,754)
(307,648)
(20,000)
127,326
32,044
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
933,971
145,600
7,166
73,642
(170,164)
(50,874)
(440,167)
(22,000)
144,596
621,770
1,521,690
145,600
7,166
189,797
(75,756)
(52,746)
(629,222)
(24,200)
70,503
1,152,833
2,061,308
154,427
7,166
324,702
(82,172)
(57,871)
(898,644)
(26,620)
79,770
1,562,066
2,868,229
154,427
7,166
586,076
(98,979)
(72,108)
(1,282,172)
(29,282)
98,231
2,231,587
4,039,857
154,427
1,049,224
(125,850)
(90,586)
(1,827,522)
(32,210)
127,388
3,294,729
5,272,991
164,645
1,643,148
(161,408)
(114,686)
(2,602,112)
(35,431)
166,631
4,333,779
7,067,976
164,645
2,609,678
(208,724)
(146,255)
(3,701,095)
(38,974)
219,664
5,966,915
(219,552)
(219,552)
(237,775)
194,481
(43,294)
(257,510)
(257,510)
(278,883)
(278,883)
(302,030)
225,136
(76,894)
(327,099)
(327,099)
(354,248)
(354,248)
1,977,097
219,677
2,196,774
(1,099,829)
(194,481)
(225,136)
(1,099,829)
(194,481)
(225,136)
196,037
32,044
Year 9
402,218
915,058
1,304,556
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
1,952,704
2,992,699
4,006,680
9,683,741
164,645
4,018,167
(272,004)
(187,757)
(5,258,646)
(42,872)
291,577
8,396,853
Year 10
12,959,860
176,474
5,782,231
(357,003)
(242,481)
(7,463,778)
471,590
389,361
11,716,254
260,623
260,623
(260,623)
(260,623)
5,612,668
8,396,853
11,716,254
21
Pre-Feasibility Study
14.4
Technology
Marketing
Product Development: Creation of new designs and styles is vital not only for
setting new trends in the furniture business but can also build brand equity for
the business.
Human Resources
Adequacy & Competencies: Skilled and experienced carpenters are necessary
for the unit. Staff having experience in craftsmanship, carving, polishing, etc.
should be preferred.
14.5
Useful Links
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
22
Pre-Feasibility Study
http://moptt.gov.pk
15.
KEY ASSUMPTIONS
Table 20: Operating Assumptions
Factory
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
23
Pre-Feasibility Study
8
25
300
10%
10%
10%
3%
30%
10%
Rs. 196,037
7
7
7
120
15
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
10%
10%
33%
24
Pre-Feasibility Study
10
90 : 10
8%
8
12
Sole Proprietorship Tax Slabs
1
SMEDA Services / Information related to PMs Youth Business Loan are FREE OF COST -
25