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National Ghee & Oil Mills (Pvt) Limited

A FEASIBILITY REPORT On

NATIONAL GHEE & OIL MILLS (PVT) LIMITED

Submitted to:

Sir Javed
Iqbal
Submitted by:

Aasma Amanat
Roll
No: 38
Taneem Akhtar
Roll No: 12
Ambreen Shahid
Roll
No: 20

Department Of Commerce

National Ghee & Oil Mills (Pvt) Limited

Preface
To understand the Project Appraisal an integral
part of MSc. Accounting & Finance Program
because it gives us practical knowledge of what we
have learnt during our study period. This report is
being written to fulfill the requirement of degree
MSc. Accounting & Finance. Project Appraisal
provides opportunity to have keen observation and
experience. This report process is valuable in
course of learning.
This report is also a step of some chance of
practical experience form. In this report we will be
covering all vital information and their scanning
exposures in the form of our observation.
In this report we have tried our levels best effort
to encompass and elaborate the necessary
inferences suitable to enhance the knowledge. We
hope our effort of transfer of knowledge through
this report will be information gaining for readers.

asma Amanat
Taneem Akhtar

National Ghee & Oil Mills (Pvt) Limited

breen Shahid

Am

Dedication
We dedicate this Report to our dearest
parents and teachers whose prayers &
Support are always with us.

National Ghee & Oil Mills (Pvt) Limited

Acknowledgement:
We owe our heart-felt thanks to God Almighty who
enabled us to discharge such an onerous
responsibility with due care and caution in the
prime interest of the general public and to the
great credit of our worthy teacher and Sir Javed
Iqbal who is the main source of the enlightment
of our minds and the development of our natural
potentialities. We also feel highly indebted to our
parents who guided us at every stage and whose
pains are repaid in the form of what we are today.
Our thanks are bound even to our beloved country
Pakistan the sacred soil of which goes to the
making of our whole personality and character by
providing every possible facility and golden
opportunity of ideal education and training.

Aasma Amanat
TaneemAkhtar
AmbreenShahid

National Ghee & Oil Mills (Pvt) Limited

National Ghee & Oil Mills (Pvt) Limited

Table of Contents

Contents

Page#

Executive Summary
Vision and Mission Statement
Objectives & Key Success Factors
Introduction
Management
Technical Analysis
Market Analysis
Economic Analysis
Assumptions underlying Earning Forecast
Projected Financial Statements
Auditing Plan
Exit Strategy and Risk Assessment

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09
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National Ghee & Oil Mills (Pvt) Limited

EXECUTIVE SUMMARY

The proposed project contemplates to set up a new Ghee & Oil Mill Unit
at Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The
sponsors of the project are professionally qualified and have valuable and
extensive experience of business management in industrial fields namely

Miss Aasma, Miss Tasneem, Miss Ambreen. The overall


management and control of the firm will be actively managed by the full
time paid management under the direct supervision of Miss Aasma,

Miss Tasneem, Miss Ambreen, who will actively participate in


management decisions and control the affairs of the firm.
The production of Oil Cake, Refined Oil, and Oil Dirt (By-Product) will be
obtained by crushing Cotton Seed as input. The entire production of the
firm will be sold locally to the local Ghee Mills. The proposed project site
enjoys the benefits of
1) Easy availability of raw material,
2) Quick access to main road,
3) Sources of power, water, fuel etc.,
4) Availability of Transport and modern Communication systems,
5) Availability of Skilled and Un-Skilled labor, and
6) Free from environmental hazards like water logging and salinity and
floods.

The demand of the project is sophisticated enough on the basis of which


project will make sales of Rs. 256,244,000 in its first year of Operations,
Rs. 286,813,000 in its 2nd year of Operations whereas it will make sales of
Rs. 304,795,000 in its 3rd and subsequent years of operations. The annual

National Ghee & Oil Mills (Pvt) Limited

rated crushing capacity of the plant is estimated about 21,600,000


kilogram of Cotton Seed working 360 days a year and tripled shift per day
of 8 hours each. The project shall be equipped with latest locally
manufacturing plant and Machinery. The plant of the proposed project will
be capable of crushing 10,000/kg/expeller/day.
Of the total production of sunflower seed and cotton seed of the country
the share of Multan, Bahawalpur and D.G. Khan Division is more than
60%. Further Multan division consisting of Sahiwal, Vehari, Khanewal, and
Lodhran is the major cotton seed production area, nearly 40% of the total
production of cotton seed is produced by this division. The basic raw
materials of the proposed project are Cotton Seed and Caustic Soda of
which later is used to refine crude oil. The proposed project is located at
Hasilpur Road, 1-Km away from Hamatian, Plot No. 15/06 Jindu Missan.
The project will contribute in eliminating unemployment and will best
make the use of available resources. This project will create employment
opportunities for Skilled, Semi-Skilled and Unskilled labor along with the
Factory administrative and Marketing Staff.
The total cost of the project have been estimated to be Rs. 33,053,000
consisting of Land, Building Machinery (including installation and other
cost), Vehicle, Furniture, Office Equipment, Pre-Production Expenses,
Interest during construction and the initial net working Capital
Requirement.
The completion time period of the project is estimated to be 6 months. A
plot of land measuring 1 Acre has been purchased in the name of the
company at the proposed site. The cost of land including cost of
registration and development etc. is Rs. 1,590,000. The land is considered

National Ghee & Oil Mills (Pvt) Limited

to be sufficient for the proposed project. Building and Other Civil Works
consist of mainly Factory Building, Ware house, and Administrative Staff.
The erection and installation cost is estimated amounting to Rs. 838,000.
The debt equity ratio fulfills the maximum requirement i.e. 60 : 40of the
bank even though the current government policy is leaner towards easy
loan and lower equity requirement. The ratio of debt in the cost is such
that it allows for easy servicing of the loan. The debt equity-ratio is
considered satisfactory and long term loan would have a safe equity
margin.
The total manufacturing cost of the project have been bifurcated Rs.
211,410,000 in respect of raw material consumption, Rs. 9,666,000 for
labor and Rs. 5,532,000 for Factory overheads rated at 75% Capacity.
The financing cost of the project is estimated to be is to be 14% of the
debt obtained from the financial institution. Firm's total administrative,
General and Selling Expenses have been estimated to be Rs. 14,416,000.

National Ghee & Oil Mills (Pvt) Limited

VISION, MISSION & CORE VALUES

Our Vision
To be the premier Pakistani
, enterprise with a global reach
eulav gniusrup yletanoissaP
sredlohekats lla rof noitaerC

ruO
noissiM
tsom eht reviled dna poleved oT
remotsuc eganam ,stcudorp lio laedi
ecivres ytilauq reviled ,ecneirepxe
,htgnerts dnarb ot setubirtnoc taht
egatnavda evititepmoc a sehsilbatse
suht ,ytilibatiforp secnahne dna
sredlohekats eht ot eulav gnidivorp
ynapmoc eht fo.

10

National Ghee & Oil Mills (Pvt) Limited

Leadership

We value leaders of high integrity, energy and enthusiasm who


have the necessary managerial, professional and people skills to
inspire a group or an organization to set high goals and achieve
them willingly. We believe that leadership skills need to be
strengthened at all levels within our organization and that
managerial and professional competence is a necessary foundation.

Teamwork and Partnership

We believe that high performing teams containing appropriate


diversity can achieve what individuals alone cannot. Consciously
using the diversity of style, approach and skills afforded by teams is
strength we must continue building into our organization.

Diversity

We value differences in gender, race, culture, personality and style


because diverse solutions, approaches and structures are more
likely to meet the needs of customers and achieve our business
goals.

Quality and Continuous Improvements

We believe that quality and relentless commitment to continuous


improvements are essential to our ongoing success. To this end, we
define quality as understanding the customers expectations,
agreeing on performance and value, and providing products and
services that meet expectations 100 percent of the time. Our motto
is, Quality in all we do.

Ethics and Integrity

We do care how results are achieved and will demonstrate honest


and ethical behavior in all our activities. Choosing the course of
highest integrity is our intent and we will establish and maintain the
highest professional and personal standards. A well-founded
reputation for scrupulous dealing is itself a priceless asset.

Candid and Open Communication

We value communications that are courteous, candid and open and


that enables each of us to do our jobs more effectively by providing
information that contributes to the quality of our judgment and
decision making. Effective communication should provide the means
for gaining understanding of the companys overall objectives and
plans and of the thinking behind them.

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National Ghee & Oil Mills (Pvt) Limited

Innovation

Success requires us to continually strive to produce break through


ideas that result in improved solutions and services to customers.
We encourage challenges to the status quo and seek organizational
environment s in which ideas are generated, nurtured and
developed.

Individual Growth and Development

We strongly believe in the dignity and value of people. We must


consistently treat each other with respect and strive to create an
organizational environment in which individuals are encouraged and
empowered to contribute, grow and develop them and help to
develop each other.

Enjoyment and Fun

We believe that excitement, satisfaction and recognition are


essential elements of a healthy, creative and high performing work
environment. Having fun in our work should be a normal experience
for everyone

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National Ghee & Oil Mills (Pvt) Limited

OBJECTIVES AND KEY SUCCESS


FACTORS
The main objectives of the development of project are:

Capitalize on excellent opportunity to extract maximum


revenue in a branch out market.

To launch the oil unit with a highly targeted publicity


campaign and in a grand opening event in the mid September
of 2008.

To maintain tight control of costs, operations, and cash


flow through diligent management and automated computer
control.

To maintain a high standard of product and service


provided.

Capitalize on excellent location opportunity.

Maintain tight control of costs, operations, and cash flow


through diligent management and automated computer
control.

To be the premier company that achieves the goals of


profit maximization and value maximization for all the
stakeholders of the company.
The keys to success in achieving our goals are:

Provide an exceptional service and product that leaves


an impression.

Consistent utilizing of ingredients that creates product


quality.

Managing our internal finances and cash flow to enable


upward capital growth.

Strict control of all costs at all times, without exception.

The Company will be strategically located to


maximize the revenue derived from the sales of the quality
product.

Provide exceptional product that leaves an impression


with our core customers.

Consistent entertainment atmosphere and product


quality.

Managing our internal finances and cash flow to enable


upward capital growth.

Strict control of all costs, at all times, without exception.

Accelerated sales growth experienced in the category of


sachet packs.

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National Ghee & Oil Mills (Pvt) Limited

Extensive distribution channel for the sachet packs


focusing even on small kiosks in the urban and rural areas.

The product would be focusing the price conscious


segment of the market by providing similar and better quality
branded product at lesser price.

Emphasizing on excellent service to the other


wholesalers.

Adapting to the rapid social and economic changes.

Regular flow of local as well as Export orders is the key


success factor for efficiently running of the project.

Selection and procurement of consistent quality raw


material would be another contributing factor for carrying out
successful operations of proposed project.

Production of quality products meeting the Health


Standards of International level is necessary for Export sales.

Competitive price of end products.

Abundant supply of raw material.

Cost efficiency through better management.

Media campaign for the awareness of the retail


customers.

Availability of low cost skilled labor.

The main elements of export strategy are reducing cost


of doing business, increasing market access, technology,
environmental & Security Compliance, encouraging exportoriented foreign investment, region-specific strategy, country
& business image building and value addition.

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National Ghee & Oil Mills (Pvt) Limited

INTRODUCTION
The proposed project contemplates to set up a new Oil Mill Unit at
Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The
annual rated crushing capacity of the plant is estimated about 21,600,000
kilogram of Cotton Seed working 360 days a year and tripled shift per day
of 8 hours each. The project shall be equipped with latest locally
manufacturing plant and Machinery.
The total Capital Cost of the project is estimated to be Rs. 34,059,907.
This total Cost of the project comprises of Fixed Assets Rs. 25,162,873
and Initial Net Working Capital of Rs. 8897034.
The Cost of the Project is proposed to be financed by Debt and Equity in
the ratios of 60 : 40 respectively.The remaining cost of the project will be
financed by the sponsor's share capital of Rs. 13623963.

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National Ghee & Oil Mills (Pvt) Limited

Management
The overall management and control of the firm will be actively managed
by its initiator who will actively participate in management decisions and
control the affairs of the firm.
Name
1. Sir Javed Iqbal

Designation
Managing Director

The partner will contribute in the equity of the project and participate in
the profit and loss of the firm's business according to her capital
contribution ratio.

Sponsors
The sponsors of the project are professionally qualified and have valuable
and extensive experience of business management in industrial fields.
They have got good trading contacts and market reputation in the
industry. Moreover, they are professionally qualified in the field of
business Management from the Islamia University of Bahawalpur under
MSc Accounting & Finance Program. The sponsors experience would assist
the firm in its smooth and profitable operations.
The sponsors are financially sound and capable to contribute their part of
equity in the proposed project.

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National Ghee & Oil Mills (Pvt) Limited

The Sponsors detail is as under:-

1.

2.

Name

Miss Aasma Amanat

Age

21 years

Address

House # 653, Block A, Mian Channu.

Qualification

MSc. Accounting & Finance

Name

Miss Tasnem Akhtar

Age

21 years

Address

House # 65, Block B, Satellite town,

Bahawalpur.

3.

Qualification

MSc. Accounting & Finance

Name

Miss Ambreen Shahid

Age

21 years

Address

House # 159, Block C, Civil lines, jhang.

Qualification

MSc. Accounting & Finance

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National Ghee & Oil Mills (Pvt) Limited

Technical Analysis
Location of the Project
The project is proposed to set up at Hasilpur Road, Bahawalpur. The site
enjoys the following advantages:-

Easy availability of raw material

Access to the main road, Sources of Power, water, fuel etc.

Availability of transport & communication like telephone,

telex, Internet etc.


-

Availability of skilled and Un-Skilled manpower

Free from other environmental hazards like water logging,

floods, salinity etc

SCOPE OF BUSINESS:
This business has widely scope in the field of Ghee mills. This business
provides the raw material to the Ghee Mills, from which they make the
cooking oil & Ghee from it and then they provide us in final shape.

CRUCIAL FACTORS & STEPS IN DECISION


MAKING INVESTMENT.
Before making any investment decision it is admissible to
evaluate the associated risk factor by taking into consideration certain key
elements. These may include

Availability of resources

Technical know-how

Past experience

Managerial skills

At the time of evaluation and analysis of strength, weakness,


opportunities & threats [SWOT] for a particular business serves the of
basic tools in investment decision making

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National Ghee & Oil Mills (Pvt) Limited

KEY SUCCESS FACTORS/ PRACTICAL TIPS

:FOR SUCCESS
Availability of trained and professional staff
Reasonable prices against the competitors
High stander environment for the staff and customers

:OPERTUNITIES

Availability of raw material easily.

Availability of labour at low cost.

Transportation facilities

Availability of electricity easily.

Skilled person is available easily.

:THREATS
One of the major threat to business is highly salary pakge should be
.competitive

:IMPORTANCE

OF OIL MILLS

The oil mills have an important role in the economy of our country,
because our country is an agricultural country, in this way we are
producing more cotton. The cotton seed is taken from raw cotton which is
used in oil mills for the purpose of oil and as well as seed cake. This oil is
sent to the Ghee Factories for ghee & cooking oil purpose which we use
in daily cooling. The seed cake is sold to the farmers for animals

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National Ghee & Oil Mills (Pvt) Limited

requirement & the wastage is sent to the soap factories for making soaps.
.The usage of oil is very high in shape of cooking oil & ghee
Oil Mills are performing very high level of business. They are providing the
employment opportunities in the country. They are contributing in GOVT taxes as the
GOVT revenue. It is also a profitable business, so that I have decided to start an Oil
.Mill

Manufacturing Process
o Some vegetable oils, such as olive, peanut, and
some coconut and sunflower oils, are coldpressed. This method, which entails minimal
processing, produces a light, flavorful oil
suitable for some cooking needs. Most oil
sources, however, are not suitable for cold
pressing, because it would leave many
undesirable trace elements in the oil, causing it
to be odiferous, bitter tasting, or dark. These
oils undergo many steps beyond mere
extraction to produce bland, clear, and
consistent oil.

Cleaning and grinding

Incoming oil seeds are passed over magnets to remove


any trace metal before being dehulled, deskinned, or
otherwise stripped of all extraneous material. In the case
of cotton, the ginned seeds must be stripped of their lint
as well as dehulled. In the case of corn, the kernel must
.undergo milling to separate the germ
The stripped seeds or nuts are then ground into coarse
meal to provide more surface area to be pressed.
Mechanized grooved rollers or hammer mills crush the
material to the proper consistency. The meal is then
heated to facilitate the extraction of the oil. While the
procedure allows more oil to be pressed out, more
impurities are also pressed out with the oil, and these
.must be removed before the oil can be deemed edible

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National Ghee & Oil Mills (Pvt) Limited

Pressing

The heated meal is then fed continuously into a screw


press, which increases the pressure progressively as the
meal passes through a slotted barrel. Pressure generally
increases from 68,950 to 20,6850 kilopascals as the oil is
squeezed out from the slots in the barrel, where it can be
.recovered

Extracting additional oil with solvents

Soybeans are usually not pressed at all before solvent


extraction, because they have relatively little oil, but most
oil seeds with more oil are pressed and solvent-treated.
After the initial oil has been recovered from the screw
press, the oil cake remaining in the press is processed by
solvent extraction to attain the maximum yield. A volatile
hydrocarbon (most commonly hexane) dissolves the oil
out of the oil cake, which is then recovered by distilling
the light solvent out. The Blaw-Knox Rotocell is used to
meet the demands of the United States soybean oil
industry. In using this machine, flakes of meal are sent
through wedge-shaped cells of a cylindrical vessel. The
solvent then passes through the matter to be collected at
the bottom. Also still in use by a significant number of
manufacturers is the Bollman or Hansa-Muhle unit, in
which oilseed flakes are placed in perforated baskets that
circulate continuously. The solvent percolates through the
.matter which is periodically dumped and replaced

Removing solvent traces

Ninety percent of the solvent remaining in the extracted


oil simply evaporates, and, as it does, it is collected for
reuse. The rest is retrieved with the use of a stripping
column. The oil is boiled by steam, and the lighter hexane
.floats upward. As it condenses, it, too, is collected

Refining the oil

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National Ghee & Oil Mills (Pvt) Limited

The oil is next refined to remove color, odor, and


bitterness. Refining consists of heating the oil to between
107 and 188 degrees Fahrenheit (40 and 85 degrees
Celsius) and mixing an alkaline substance such as sodium
hydroxide or sodium carbonate with it. Soap forms from
the undesired fatty acids and the alkaline additive, and it
is usually removed by centrifuge. The oil is further washed
.to remove traces of soap and then dried
Oils are also degummed at this time by treating them with
water heated to between 188 and 206 degrees Fahrenheit
(85 and 95 degrees Celsius), steam, or water with acid.
The gums, most of which are phosphatides, precipitate
.out, and the dregs are removed by centrifuge
Oil that will be heated (for use in cooking) is then
bleached by filtering it through fuller's earth, activated
carbon, or activated clays that absorb certain pigmented
material from the oil. By contrast, oil that will undergo
refrigeration (because it is intended for salad dressing, for
example) is winterizedrapidly chilled and filtered to
remove waxes. This procedure ensures that the oil will not
.partially solidify in the refrigerator
Finally, the oil is deodorized. In this process, steam is
passed over hot oil in a vacuum at between 440 and 485
degrees Fahrenheit (225 and 250 degrees Celsius), thus
allowing the volatile taste and odor components to distill
from the oil. Typically, citric acid at. 01 percent is also
added to oil after deodorization to inactivate trace metals
that might promote oxidation within the oil and hence
.shorten its shelf-life

Packaging the oil

The completely processed oil is then I V measured and


poured into clean containers, usually plastic bottles for
domestic oils to be sold in supermarkets, glass bottles for
imports or domestic oils to be sold in specialty stores, or
.(cans for imports (usually olive oil
o By products/Waste
The most obvious byproduct of the oil making process is oil
seed cake. Most kinds of seed cake are used to make animal
feed and low-grade fertilizer; others are simply disposed of.

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National Ghee & Oil Mills (Pvt) Limited

In the case of cotton, the lint on the seed is used to make


yarn and cellulose that go into such products as mattresses,
rayon, and lacquer. Coconut oil generates several
byproducts, with various uses: desiccated coconut
meat(copra) is used in the confectionery industry; coconut
milk can be consumed; and coir, the fiber from the outer
coat, is used to make mats and rope. Since corn oil is derived
from a small portion of the entire kernel, it creates corn meal
and hominy if it is dry milled, and corn starch and corn syrup
if it is wet milled.
Lecithin is a byproduct of the degumming process used in
making soybean oil. This industrially valuable product is
used to make animal feed, chocolate, cosmetics, soap, paint,
and plasticsto name just a few of its diverse uses. Recent
research has focused on utilizing the residual oil seed cake.
The cake is high in protein and other nutrients, and
researchers are working to develop methods of processing it
into a palatable food that can be distributed in areas where
people lack sufficient protein in their diets. This goal
requires ridding (through additional processing) the oil seed
cake of various undesirable toxins (such as gossypol in
cotton seed, or aflatoxin in peanut meal). Initial results are
promising.
o Quality Control
The nuts and seeds used to make oil are inspected and
graded after harvest by licensed inspectors in accordance
with the United States Grain Standards Act, and the fat
content of the incoming seeds is measured. For the best oil,
the seeds should not be stored at all, or for a only very short
time, since storage increases the chance of deterioration due
to mold, loss of nutrients, and rancidity. The seeds should be
stored in well-ventilated warehouses with a constantly
maintained low temperature and humidity. Pests should be
eradicated, and mold growth should be kept to a minimum.
Seeds to be stored must have a low moisture content
(around 10 percent), or they should be dried until it reaches
this level (dryer seeds are less likely to encourage the
growth of mold).
Processed oil should be consistent in all aspects such as
color, taste, and viscosity. Color is tested using the Lovibund
Tintometer or a similar method in which an experienced
observer compares an oil's color against the shading of
standard colored glasses. Experienced tasters also check the

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National Ghee & Oil Mills (Pvt) Limited

flavor of the oil, and its viscosity is measured using a


viscometer. To use this device, oil is poured into a tube that
has a bulb at one end set off by two marks. The oil is then
drained, and the time required for the bulb to empty is
measured and compared to a chart to determine viscosity.
In addition, the oil should be free of impurities and meet the
demands placed upon it for use in cooking. To ensure this,
the product is tested under controlled conditions to see at
what temperature it begins to smoke (the smoke point),
flash, and catch on fire; warnings are issued appropriately.
To allow its safe use in baking and frying, an oil should have
a smoke point of between 402 and 503 degrees Fahrenheit
(204 and 260 degrees Celsius). The temperature is then
lowered to test the oil's cloud point. This is ascertained by
chilling 120 milliliters of salad oil to a temperature of 35
degrees Fahrenheit (zero degrees Celsius) for five and a half
hours, during which period acceptable salad oil will not
cloud.
Before being filled, the bottles that hold the oil are cleaned
and electronically inspected for foreign material. To prevent
oxidation of the oil (and therefore its tendency to go rancid),
the inert (no reactive) gas nitrogen is used to fill up the
space remaining at the top of the bottle

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National Ghee & Oil Mills (Pvt) Limited

RAW MATERIAL AVAILABILITY


Amongst the oil seeds cultivated in Pakistan, the most important is the
cotton seed, like some other oil seeds cotton seed is also a by-product as
the crop is mainly cultivated for fiber. Its contribution, however, to the
local domestic oil production is about 57%. Next to the cotton seed is the
rape and mustard which account for about 31% of the vegetables byproduction in the country. In addition to these, production of other non
traditional oil seeds such as sunflower, sesamem, groundnuts, linseed &
castor is also increasing.
Out of total production of sunflower seed and cotton seed of the country
the share of Multan, Bahawalpur and D.G. Khan Division is more than
60%. Further Multan division consisting of Sahiwal, Vehari, Khanewal, and
Lodhran is the major cotton seed production area, nearly 40% of the total
production of cotton seed is produced by this division. On the basis of the
information collected, the yearwise production of cotton seed based on
3% Growth Rate is given below:-

Production of Cotton seed


YEAR

COTTON SEED (000 Tons)

2003-04

2369

2004-05

2523

2005-06

2687

2006-07

2862

2007-08

3049

2008-09

3141

PROJECTED AVAILABILITY OF COTTON SEED (3% growth)


YEAR

COTTON SEED (000 Tons)

2008-09

3141

2009-10

3235

2010-11

3332

2011-12

3432

2012-13

3535

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National Ghee & Oil Mills (Pvt) Limited

Against the requirement of the proposed project of cotton seed at 10000


Kg/Expeller/day the estimated production of cotton seed is 3141000 tons
during 2008-09. Keeping in view the past trend, the available production
of cotton seed in Bahawalpur Division the proposed Project would not face
any problem.
PRODUCTION CAPACITY
The Plant is capable of crushing 10000 Kg/Expeller/day of Cotton seed. It
is based on 360 working days per annum and tripled shift per day of eight
hours.
The break up of the Capacity is given as under:Crushing of Cotton Seed (10000/Expeller/Day for 360 Days)
Materials

Annual Production (Kgs)


(000)

Cotton Seed

21,600

Caustic Soda

648

80% of the Crushing of Cotton Seed will produce Ghee, 10% would be
Refined Oil, whereas the 5% would be Oil Dirt obtained after applying
Caustic Soda over Crude Oil and the 5% would be Wastage.
Production of:

(000)

Items

Annual Production (Kgs)

Oil Cake

17,280

Refined Oil

2,160

Oil Dirt

1,080

Wastage

1,080

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National Ghee & Oil Mills (Pvt) Limited

MARKET ANALYSIS
INTRODUCTION
In Pakistan at present, the edible oil industry includes the manufacture of
compound cooking oils (which is a recent development) table or salad oils
(this process is still in its infancy) margarine and refined oils. Important
products of this industry are mustard oil, cotton seed oil, groundnut oil
and newly developed sunflower seed oil, sunflower seed oil and soyabean
Oil of late a number of modern oil mills have been set up for the
production of solvent extraction oils. At present, major sources of raw
materials are cotton seed (about 50%) (Rape and mustard seed about
36%) and other about (6%).
Traditionally the edible oil industry started operation at small and cottage
industry scale. At the village level, there was bullock driven "Kohlu" which
was the oldest way of extracting oil. Later few crushing units of much
bigger size were established which were equipped with locally
manufactured expellers which were equipped with locally manufactured
expellers. These units produced edible oil in raw form and oil meal or oil
cakes, food for animals or exported. Both these processes were inefficient
and left much oil unrecovered. It is estimated that about one third of oil
was left in the oil cakes. Further, large sized units were developed,
equipped with modern expellers and a few of them with preparatory
equipments for cleaning and Delinting of seeds. Finally, solvent extraction
plants were set up and their number is increasing. These considered being
the most efficient way of oil extraction.

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National Ghee & Oil Mills (Pvt) Limited

PRESENT CAPACITY
At present, there are over 300 oil mills with more than 1500expellers in
Sindh and 1000 mills with 4000 expellers in the Punjab. Most of these
units are old and are generally equipped with locally fabricating expellers.
Moreover, many units are not equipped with decorticating and Delinting
machinery for cotton seed as a result of which oil recovery in very low.
Total annual production is 3,000,000 to 5,000,000 tons in Punjab and
1,800,000 in Sindh. This Capacity has been estimated on the basis of 20
to 25 percent of Oil recovery.
In addition to this the following are the Oil Mill Units in Sindh and Punjab
with a total annual Production Capacity of 80.154% tons of vegetable oil
per year. Thus total production capacity of all types of edible producing
units is 765,000 tons a year.
Following is the detail of Oil Mill Units along with their production
capacity:-

NAME OF FIRM/COMPANY

LOCATION

CAPACITY

Fatima Enterprises

Multan

30,000

Solvex Pakistan Ltd.

Multan

18,750

P.P. Industries

Khanewal

22,500

Bureewal Textile Mills

Vehari

25,000

Oil & Cake Industries

Nawabshah

20,000

Kohinoor Oil Mills

Sheikhupura

30,000

Unied Oil Industries

Muridke

4,800

Jeelan Oil Mills

Sialkot

8,750

Kuku Abbas & Co.

Vehari

3,600

Data Oil Mills

Faisalabad

12,000

AL-Data Oil Mills

Vehari

3,600

Aleem Oil Mills

Sukkar

4,000

Ali Saqib Enterprises

Vehari

3,600

Roshan Oil Mills

Okara

3,600

Jilan Oil Mills

Sialkot

17,500

Friends Oil Mills

Bhakkar

3,600

Haq Baho Oil Mills

Jacobabad

4,500

Shary Extraction (Pvt) Ltd.

Bahawalpur

18,000

28

National Ghee & Oil Mills (Pvt) Limited

Adnan Hanir Enterprises (Pvt) Ltd.

Karachi

21,500

Sattar Solvent Extraction & Scap Ltd.

Sukkar

17,500

Khokar Industries (Pvt) Ltd.

Norwal

10,395

Raja Oil Mills

Chichawatni

3,600

Tariq Oil Mills

Okara

3,600

Mughal Oil Mills

Multan

3,600

Rohel Industries

Sahiwal

3,600

Roshan Oil Mills

Okara

3,600

Al-Rehan Oil Mill

Bahawalpur

22,500

Shamim Oil Mills

Bahawalpur

23,500

Al-Hamd Oil Mills

Bahawalpur

17,500

Naveed Oil Mills

Bahawalpur

16,000

Friends Oil Factory

Bahawalpur

10,500

Malik Oil Mills

Bahawalpur

8,500

29

National Ghee & Oil Mills (Pvt) Limited

PRODUCTION
Actual Production is very low about 457000 tons a year. The following
table shows the output of edible oil in recent years from various oil
seeds:REFINED OIL PRODUCTION
("000" Tons)

YEAR

TOTAL PRODUCTION

COTTON SEED

OTHER

2002-03

2,286

1,341

945

2003-04

1,836

774

1062

2005-06

2,826

1,746

1080

2006-07

3,060

1,935

1125

2007-08

3,111

1,977

1134

2008-09

3,134

2,090

1044

IMPORTS
Since the domestic availability of refined (5 red to 7 red) oil is below the
requirement, Pakistan has to import it to meet the gap. The vegetable oil
imported in the country can be grouped as edible and non-edible or the
soft and technical oils. The refined oil, particularly is imported every year
against a lot of foreign exchange. Imports are being made from several
sources including the U.S.A., Brazil, Indonesia, Malaysia, and Singapore.
The refined oil imports and value since 1981-82 are shown in the table:IMPORT OF REFINED OIL

YEAR

QUANTITY (000 Tons)

AMOUNT ($ 000)

2003-04

1872

10350

2004-05

1968

11010

2005-06

2571

19554

2006-07

1992

20862

2007-08

2475

18387

2008-09

2654

19861

30

National Ghee & Oil Mills (Pvt) Limited

FUTURE DEMAND
According to the Nutritional Plan of the Federal Government per capital
availability of cooking medium should be at least one ounce per day or
365 ounce per year. As such present consumption of edible oils comes
very high. Refined Oil serves as input for edible oil.
The consumption of edible oil is directly proportionate with population.
Therefore, future projection is made on the basis of population only, which
is increasing about 3.00% a year. Yearwise future Demand and Supply
gap is given below:-

PROJECTED DEMAND FOR REFINED OILS (In "000" Tons)

YEAR

POPULATION

PROJECTED DEMAND

SUPPLY

GAP

2009-10

167,753,406

5,780

1,445

4,335

2010-11

170,819,939

5,898

1,475

4,423

2011-12

173,942,527

6,006

1,502

4,504

2012-13

177,122,197

6,115

1,529

4,586

OIL CAKE
The Cotton seed actually result in two main products one is the crude oil
and the other is Oil Cake. Crude oil is further converted into refined oil by
applying Caustic Soda which separates the Oil Dirt from Crude Oil. This Oil
Dirt is by-product which is being sold to Soap Manufacturing firms for the
production of Soap.
The Oil Cake is mainly used as raw material in poultry and animal feed. It
is an excellent source of nutrition having almost double the protein
content over the undlinted and undecortecated expeller cakes. It is mainly
used to increase the nutritional value and balance the cattle and poultry
feed.
The establishment of modern "Diary" cattle and poultry farms, the
demand for specially prepared feed is increasing rapidly.

31

National Ghee & Oil Mills (Pvt) Limited

The ever increasing demand for milk and meat has led to the
establishment of large scale cattle farms in urban areas. This in turn has
created the demand for proper animal feed. It is very clear that in order
to improve the growth performance and productivity of livestock
population; it is necessary that balanced diet in the form of unconventional feed be provided to the animals.
The growth of poultry feed industry started with the growth of commercial
poultry industry after 1963. This in turn resulted in the generation of
demand for mixed feeds for commercial hybrid chickens which have exact
nutritional requirements. The present installed capacity of poultry feed
and cattle feed is around 2595000 Tons per annum.
In Pakistan, about 15% of the total areas is meant for fodder crop. This is
decreasing rapidly mainly because other cash crops are high yielding
products. The demand for compound feed is increasing due to the more
development of livestock and its products.
It can therefore, be reasonable assumed that the meal, hull and husk etc.
shall be readily sold to the feed milks.

OIL DIRT OR SOAP FOOTING


Soap footing or Oil dirt is obtained as a by-product in the process of
refining crude oil obtained from extraction. Caustic Soda is then applied
for refining the Crude Oil which in turns refines the Crude Oil into three
categories ranging from "5 red to 8 red" (the oil is red to the extent of
these numbers, however it is the refined oil quality, considered to be one
of the good quality refined oils) and separates Oil Dirt from the Crude Oil.
The application of Caustic Soda over improves the Color of the Oil. The
by-Product obtained is being sold to soap manufacturing firms who further
process the Oil Dirt and manufactures soap. This soap is being sold in the
market under the name of "KALA SOAP".
There is large consumption of this "KALA SOAP" in our country. it is widely
produced all over in the country at cottage industry level and in the
unorganized sector.

CONCLUSION

32

National Ghee & Oil Mills (Pvt) Limited

To conclude, it is evident that nothing obtained as main product or byproduct, fro the proposed unit goes waste or has no outlet. All the
products serve directly of indirectly human needs as well as they are
involved in the development of overall economic outlook. Hence the
market viability of the project being based on local raw material will result
in substantial saving in valuable foreign exchange.

PRICING ANALYSIS
Main Products
OIL CAKE
The Cotton Seed Oil Cake will be sold in the Grain Market to the dealers @
of 12.00/Kg. The prices of Oil Cake have been computed on average of
past five years.
REFINED OIL
The Cotton Seed Refined Oil will be sold to the local ghee mills in bulk
quantities @ 67.00/kg.
OIL DIRT
Oil Dirt will be sold to Soap Manufacturing Firms @ 7.00/kg. Oil Dirt will
be sold in large bulk quantities but will not be kept as inventory, however
a provision of 5% inventory has been assumed at the end of every year.
Following is the table showing prices of the products and by-products:TABLE SHOWING THE PRICES OF PRODUCTS AND BY-PRODUCTS

S. No.

Product

Prices (Per Kg)

Oil Cake

12.00

Refined Oil

67.00

Oil Dirt

7.00

NOTE: The current prevailing prices of Cotton Seed and Caustic Soda are
Rs. 12.00/kg and Rs. 35.00/kg. Moreover, these prices have been
computed on average of past five years.

33

National Ghee & Oil Mills (Pvt) Limited

Economic Analysis
Economic evaluation is considered prominent yardstick to measure the
viability of a project. This analysis is directed towards determining
whether the project is likely to contribute significantly to the development
of the economy as a whole and the contribution of the project would be
great enough to justify the use of available resources. This aspect is
reviewed under the following:-

INITIAL IMPACT
In order to pursue a theory of balanced growth of the economy the
current government is putting an emphasis on industrialization of our
inherently agrarian economy. Industrialization of substantial dynamic
benefits is important for changing the traditional structure of our less
developed economy, while providing employment for a rapidly increasing
labor force, and saving scarce foreign exchange by import substitution
and creating export potentials.
A capital expenditure creates incomes for people engaged in the
fabrication of capital goods, who in turns spend their incomes on
consumer goods. An initial original capital investment creates a wave of
income and spending which has multiplied effect on the national income,
increasing it by several times, the original investment. The initial original
capital investment of Rs. 34,174,000 in local currency would have a
healthy impact on the GNP of the country, the extent of which depends on
the degree of multiplied effect.

EMPLOYMENT OPPORTUNITIES
The project would create employment opportunities for the following staff:
Detail

Total Nos.

Skilled Labor

18

Semi-Skilled Labor

18

Factory Administrative Staff

26

Marketing Staff

05

BENEFIT COST ANALYSIS


The benefit/Cost ratio of the project is worked out in times which are
considered satisfactory. The NPV of the expected benefit and costs has
been taken into account for the calculation of this ratio.

34

National Ghee & Oil Mills (Pvt) Limited

National Ghee & Oil Mills


(Pvt) Limited
Estimated Cost of Land

Sr.
No.

Description

Land

Area in

Annexure - I

Unit
Cost

Rs ("000")

160

7,500

1,200

Registration & Legal Requirements 10% of


cost of Land

160

750

120

Stamp Duty 5% of Cost of Land

160

375

60

District Council Fee 2.5% of Cost of Land

160

188

30

Development Charges 15% of Cost of Land

160

1,125

180

Marlas

Total Cost of Land

9,938

Total Cost

1,590

35

National Ghee & Oil Mills (Pvt) Limited

Annexure - II

National Ghee & Oil Mills (Pvt) Limited


Estimated Cost of Civil Works
Sr.
No.

Type of

Unit of

Rate Per

Rs ("000")

Building

Construction area

Unit

Total Cost

Oil Cake Store 1


Expeller Room
(G/Floor)

RCC

Square feet

7,065

575

4,062

RCC

Square feet

2,214

575

1,273

Expeller Room (F/Floor)

RCC

Square feet

2,214

575

1,273

RCC

Square feet

196

575

113

RCC

Square feet

694

575

399

Refinery Room
Office Block and
Corridor
Machinery Covered
area

RCC

Square feet

403

575

232

Store

RCC

Square feet

714

575

411

RCC

Square feet

492

500

246

Open
area

Square feet

42,174

10

Guest Rooms
Cost of Jumbo Lon for
insulation
Boundary Wall and
Gate

11

Brick Pavement

12

Contingency
Total Cost of Civil
Works

Description

Covered

45

1,898

Running feet

503

276

Running feet

901

690

833

544

57763

10,872

36

National Ghee & Oil Mills (Pvt) Limited

Annexure - III

National Ghee & Oil Mills (Pvt) Limited


Estimated Cost of Machinery
Rupees
("000")

Qty

Unit
Cost

Production 250 m/24 hrs.

200,000

1,200

Electric Motor for Expeller 40 HP/950 RPM made


China new.

45,000

270

Electric Motor Pully V-Belt type Local

4,000

24

Small Crude Tank for Expeller material 1/4


thickness Local

7,500

45

Big Crude Tank cap (500 Mon) Local Material

60,000

60

Storage Tank Cap (500 Mon) Local Material

55,000

110

M.S. Refined Tank Cap (250 Mon) heavy material


(3/8 plate Local)

85,000

255

Electric Motor 10 HP/950 RPM China

20,000

40

Electric Motor 5 HP/950 RPM China

13,000

26

10

Refined Pump with Motor

16,000

16

11

Gear Pump 2" X 2" Local

9,500

19

12

Electric Cables with tape fitting Electric Panel

275,000

275

13

Expeller Bolt & Motor Bolts foundation bolts

75,000

225

14

Capacitor 40 HP Motor

20,000

80

15

Electric Pump Gear with 5 HP Motor

13,000

13

16

Contingency

Sr.No.

Description

Oil Expeller Bearing Type duty weight (100 Mon)


with Crude Oil.

Total Cost of Machinery

Total Cost

133
2,791

37

National Ghee & Oil Mills (Pvt) Limited

Annexure - IV

National Ghee & Oil Mills (Pvt) Limited


Estimated cost of the Project
Sr.No.

Description

LCY

Total cost
("000")

Land

1,590

1,590

Building

10,872

10,872

Machinery

2,791

2,791

Installation & Erection of Machinery

419

419

Insurance 5% of Cost of Machinery

140

140

Transportation 10% of Machinery

279

279

Vehicles

6,270

6,270

Furniture and Fixture

300

300

Office Equipment

150

150

10

Pre-operating expenses

980

980

11

Interest during construction

1,377

Estimated fixed cost

25,167

Add:

9,006

Net Initial Net Working Capital

Total Estimated Cost of Project

34,174

38

National Ghee & Oil Mills (Pvt) Limited

Annexure - V

National Ghee & Oil Mills (Pvt) Limited


Initial Net Working Capital Requirement

Rs. "000"
A.

Current Assets:

Inventories:
a) Raw Material 5 Days Requirement:
I) Cotton Seed
II) Caustic Soda

2,700
150

b) Finished Goods

11,450

c) Spares & Stores

142

Total Cost of Inventory

14,442

Advances and Deposits, & Prepayments

85

Accounts Receivables (2% of Sales)

5,202

Cash 1% of Amount withdrawn from Bank for


Inventory

108

Total Current Assets

19,838

B.

Possible Current Liabilities:


Less: Bank Borrowing 75% of Inventories

10,832

Initial Net Working Capital

9,006

39

National Ghee & Oil Mills (Pvt) Limited

Annexure - VI

National Ghee & Oil Mills (Pvt) Limited


Estimated Income Statement
Less:

Years ending September 30 :


Sales
COST OF SALES
Raw Material
Labor
Manufacturing Overheads
Depreciation
Total Cost of Goods Manufactured
Inventory Adjustment Less
Cost of Sales
Gross Profit
OPERATING EXPENSES:
Administrative Expenses
General Expenses
Selling Expenses
Total Operating Expenses
Operating Profit
OTHER EXPENSES:
Financial Charges on:
Long Term Loan
Bank Borrowings
Amortization of Pre-Production Expenses
Total Other Expenses
Profit Before Tax and Worker's Fund
Worker's Fund
Profit/(Loss) Before Tax
Tax Provisions @ 45%

2011
260,091

2012
291,119

2013
309,371

212,382
10,797
5,822
2,250
231,251
11,563
219,688
40,403

225,504
12,416
6,031
2,250
246,202
748
245,454
45,665

239,598
14,279
6,241
2,250
262,368
12,371
249,997
59,374

2,621
1,980
10,404
15,004
25,398

3,014
2,277
11,645
16,936
28,729

3,466
2,619
12,375
18,459
40,915

3,076
327
3,402
21,996
1,760
20,236
9,106

2,768
327
3,095
25,634
1,794
23,840
10,728

2,461
327
2,787
38,128
2,669
35,459
15,956

Net Profit

11,130

13,112

19,502

Ratios:

40

National Ghee & Oil Mills (Pvt) Limited

ASSUMPTION UNDERLYING
EARNING FORECAST

PRODUCTION AND SALES


1.

The proposed Oil Mill Unit would be equipped with 6 most modern
Oil Expeller Bearing Type duty weight (100 Mon) with Crude Oil,
Production 250 m/24 hrs, Electric Motor for Expeller 40 HP/950
RPM, Electric Motor Pully V-Belt, Small Crude Tank for Expeller
material 1/4 thickness. The project will be capable of crushing
60000 kg/day of Cotton Seed. However, immediate target is to
meet the current demand level of the Ghee Mills.

2.

Operating efficiency of the project is assumed at 75% for the first


year and 80% for the second 85% for third and subsequent years.

3.

In line with recent experience of other units based on the most


modern oil mills machinery, 100% of the production would be sold
locally In Pakistan to Ghee Mills particularly located in Bahawalpur
Division.

4.

Year-end Inventory is assumed at 5% of the production of that


particular year.

5.

Selling Prices are assumed in accordance with the current prevailing


rates in the local market. These selling prices are based on average
of last five years.
Based over these assumptions, following is the year-wise detail of
production, Sales and Sales Revenue of the proposed project:-

41

National Ghee & Oil Mills (Pvt) Limited

Projected Financial Statement:

Annexure-VI-A

Year ending 30th September:


Capacity Utilized

2011

2012

2013
80% Annexure-VI-A
85%

75%

Quantity ("000")

Production at 100% Capacity


Production of Oil Cake:
a)
Number of Units Manufactured
Crushing Of Cotton Seed:
Add: Opening Inventory
Total Units available for Sales

12,960

13,824

14,688

648

691

12,960

14,472

15,379

No. of
%
Less:
Closing
Inventory
5% of Production
648
691
10000
Kg of
Cotton
Seed/day/Expellers
Expellers
Output
Units
Units Sold
12,312
13,781
Oil Cake
6
80
Production of Refined Oil:
Refined
6
b) Oil Number of Units Manufactured
1,620 10
1,728
Add:
Oil Dirt
Wastage
Less:
Total
c)
Add:
Less:

Opening inventory

Total Units available for Sales

6
Closing Inventory 5% of Production
Quantity Sold

1,620
81
1,539

5
5
100

734
("000")
14,645
17,280

1,836
2,160
81
86
1,080
1,809
1,922
1,080
86
92
21,600
1,723
1,831

Production of Oil Dirt:


Number of Units Manufactured

810

864

918

Opening Inventory

41

43

Total Production available for Sales

810

905

961

Closing Inventory 5% of Production

41

43

46

770

861

915

75%

80%

85%

Quantity Sold
Sales Revenue:
Description

Unit Price

Rupees

Oil Cake

13

160,056

179,150

190,382

Refined Oil

62

95,418

106,801

113,497

Oil Dirt

4,617

5,168

5,492

260,091

291,119

309,371

Total Sales (a+b+c)

42

National Ghee & Oil Mills (Pvt) Limited

Annexure-VI-A

Raw Material:
Years
Capacity Utilized

2011

2012

2013

75%

80%

85%

Consumption of Raw
Material:

a)
b)

Description

Quantity ("000")

Cotton Seed
10000kg/day/Expeller

16,200

17,280

18,360

Caustic Soda

486

518

551

Total Quantity Consumed

16,686

17,798

18,911

Cost of Raw material:


Description

Rs. ("000")

Cotton seed @ 12/kg

194,400

207,360

220,320

Caustic soda @ 37/kg

17,982

18,144

19,278

Total Cost

212,382

225,504

239,598

43

National Ghee & Oil Mills (Pvt) Limited

Annexure-VI-A

Labor Cost:
a) Direct Labor:
No. of

Salary/Month

Plant Labor

Employees

/Worker

Skilled

18

14,000

Annual
Salary
("000")
3,024

Semi-Skilled

18

9,000

1,944

Un-Skilled

18

5,000

1,080

Total

54

28,000

6,048

Sr.
No.
1

Add: Fringe Benefits (45% of Basic Salary)

2,722

Total Cost of Plant Labor

8,770
No. of

Salary/Month

Production Labor

Employees

/Worker

Plant Manager

20,000

Annual
Salary
("000")
480

Electricians

9,000

648

Peon/Sweeper

4,500

270

Total

13

33,500

1,398

Sr.
No.
1

Add: Fringe Benefits (45% of Basic Salary)

629

Total Cost of Production Labor

2,027

Assumptions:
1

Direct labor will increase every year @ 15%.

Year Wise Wages of Labor:


Sr. No.
1
2

Description
Plant Labor
Production Labor
Total Cost of Labor

Years
2011
Rs ("000")
8,770
2,027
10,797

2012

2013

10,085
2,331
12,416

11,598
2,681
14,279

44

National Ghee & Oil Mills (Pvt) Limited

Annexure-VI-A

Manufacturing Overhead Cost:


Rs
("000")

Description
a) Fixed Cost:

876
849

Power: @ 365/200/KW/Month
Insurance: @ 3% of Fixed Assets Cost
Maintenance and Depreciation:

96
544
314

Overhauling Expenses @ 16000 Per Expeller


Maintenance of Building @ 5% of Cost of Building
Maintenance of Vehicles @ 5% of Cost of Vehicles

2,678

Total Fixed Cost


b) Variable Manufacturing Expenses:

3,787
405

Power: @ 4.87/unit of 200/KW/Monthx90%


Machinery Re. 1.00 Per 40/Kg on Crushing of Cotton Seed
Total Variable Cost

4,192

The fixed cost has been projected as constant while the variable cost has
been budgeted as per operational level for the corresponding years.
Following is the detail:-

Year ending Manufacturing Overheads as per Different Capacities:


Years
Description

2011

2012

2013

Rupees ("000")
75%

80%

85%

Fixed Cost

2,678

2,678

2,678

Variable Cost

3,144

3,354

3,563

Total Cost of Manufacturing Overheads

5,822

6,031

6,241

45

National Ghee & Oil Mills (Pvt) Limited

Annexure-VI-A

Administrative And General Expenses


Sr.
No.
1
2
3
4
5
6
Add:

Designation
Managing Director
Accountant
Clerk
Cashier
Chowkidar/Godown Keeper
Peon/Sweeper
Total
Fringe Benefits @ 40%

No. of
Employees
1
1
4
1
3
3
12

Total Cost of Administrative Staff

Salary/
Month
50,000
15,000
12,000
10,000
6,000
5,000
48,000
21,600
69,600

Rupees
("000")
Annual
Salary
600
180
576
120
216
180
1,272
572
1,844

General Expenses:
Sr. No.
1
2
3
4
5
6
7
Total

Description
Traveling Expenses
Printing & Stationary
Telephone, Telex, Postage
Rents, Rates and Taxes
Entertainment
Legal & Audit
Miscellaneous

Year Exp.
("000")
250
80
500
400
100
150
500
1,980

Assumptions:
1
Administrative Salaries will increase @ 10% every year.

46

National Ghee & Oil Mills (Pvt) Limited

Year Wise Administrative Salaries:


No. of

Rupees ("000")

Employees

2009

2010

2011

Sr.
No.

Designation

Managing Director

600

690

794

Accountant

180

207

238

Clerk

576

662

762

Cashier

120

138

159

Chowkidar/Godown Keeper

216

248

286

Peon/Sweeper

180

207

238

13

1,872

2,153

2,476

749

861

990

2,621

3,014

3,466

Total
Add:

Fringe Benefits @ 40%

Total Administrative Salaries per Year

General Expenses:
Sr.
No.
1

Description
Traveling Expenses

Rupees ("000")
250
288

331

Printing & Stationary

80

92

106

Telephone, Telex, Postage

500

575

661

Rents, Rates and Taxes

400

460

529

Entertainment

100

115

132

Legal & Audit

150

173

198

Miscellaneous

500

575

661

1,980

2,277

2,619

Total

Selling Expenses:
Selling Expenses are assumed to be 2% of Sales
Sr.
No.

Description

Rupees ("000")

Selling Expenses 4% of Sales Revenue

10,404

11,645

12,375

Annexure-VI-A

47

National Ghee & Oil Mills (Pvt) Limited

Depreciation Schedule of Fixed Assets:

Sr. No.
1
2
3
4
5

Description
Plant & Machinery 10%
Building 5%
Vehicles 20%
Furniture & Fixture 20%
Office Equipment 20%
Total

Total Cost (Rs.)


3,628
10,872
6,270
300
150
21,220

Rs. ("000")
363
544
1,254
60
30
2,250

Note:-

Depreciation will be constant over the life of assets.

Year Wise Depreciation:

Description

Years
2011

2012

2013

2,250

2,250

Rupees ("000")
Depreciation

2,250

Pre-Production Expenses:
Sr. No.

Description

Registration Charges

Rs.
("000")
150

Sales Tax Registration Charges

85

Consultancy & Report Preparation Charges

120

Printing & Stationary

25

Conveyance Charges

50

Telephone & Postage

50

Salaries and Wages during Construction

500

Total Pre- Preproduction Expenses

980

Annexure-VII

48

National Ghee & Oil Mills (Pvt) Limited

National Ghee Oil Mills (Pvt) Limited.


Cash Flow Statement
End of
Construction

Operating Years

2010

2011

2012

2013

25,398
2,250
27,649

28,729
2,250
30,980

40,915
2,250
43,165

20,504
13,669

Total Sources of Funds


APPLICATION OF FUNDS:

34,174

27,649

30,980

43,165

Investment in Fixed Assets


Financial Charges during
Construction
Pre-Production Expenses
Repayment of:
Long Term Loan
Bank Borrowings
Financial Charges On:
Long Term Loan
Bank Borrowings
PAYMENT OF:
Taxes
Dividends
Worker's Fund
Short Term Investment
Increase in Current Assets
(Other than Cash)
Total Application of Funds
Cash Surplus/(Deficit)
Cash at the Beginning of the
Year
Cash at the end of the year

22,810

1,377

980

2,050
-

2,050

3,076
-

2,768

2,461

9,106
1,760
5,000

10,728
1,794
20,000

3,078

24,534

2,024

1,878

31,245
2,928

27,609
39

22,709
8,271

38,911
4,254

2,928

2,968

11,239

2,928

2,968

11,239
15,492
Annexure-VIII

years ending 30th


September:
SOURCES OF FUNDS:
Operating Profits
Add: Depreciation
Total Funds from Operation
Other Sources:
Long Term Loan
Bank Borrowings
Paid-Up Capital

3,000

National Ghee & Oil Mills (Pvt) Limited


Balance Sheet
End of

Operating Years

49

National Ghee & Oil Mills (Pvt) Limited

Year ending 30th September:


ASSETS:
CURRENT ASSETS:
Cash and Bank Balance
Short Term Investment
Accounts Receivable
Inventories:
Cotton Seed
Caustic Soda
Finished Goods
Stores & Spares
Advances, Deposits and Prepayments
Total Current Assets
FIXED ASSETS:
Fixed Assets at Cost
Accumulated Depreciation on Fixed Assets
Fixed Assets Net
Intangibles
Total Assets
LIABILITIES AND EQUITY:
CURRENT LIABILITIES:
Bank Borrowings
Taxes Payable
Dividend Payable
Worker's Fund Payable
Current Maturity of Log Term Debt
Total Current Liabilities
LONG TERM DEBTS:
Long Term Debt
Total long Term Debt
EQUITY:
Paid-Up-capital
Retained Earnings
Total Equity
Total Liabilities and Equity

Construction
2010
Rupees ("000")

2011

2012

2013

2,928
3,000
-

2,968
3,000
5,202

11,239
8,000
5,822

15,492
28,000
6,187

2,700
150
142
85
9,006

9,720
899
11,563
142
85
33,579

10,368
907
12,310
142
85
48,874

11,016
964
13,118
142
85
75,006

24,187
24,187
980
34,174

24,187
2,250
21,937
653
56,170

24,187
4,501
19,687
327
68,888

24,187
6,751
17,436
92,442

9,106
1,760
2,050
12,916

10,728

15,956

1,794
2,050
14,573

2,669
2,050
20,676

20,504
20,504

18,454
18,454

16,403
16,403

14,353
14,353

13,669
13,669
34,174

13,669
11,130
24,799
56,170

13,669
24,242
37,911
68,888

13,669
43,744
57,414
92,442

50

National Ghee & Oil Mills (Pvt) Limited

Annexure XIII

National Ghee & Oil Mills (Pvt) Limited.


Financial Plan
Rupees ("000)
Description

LCY

Total cost

Total Fixed cost of the project

25,167

25,167

Initial Permanent working capital

9,006

9,006

Total cost of the project

34,174

34,174

Long Term Debt

20,504

20,504

Equity Participation

13,669

13,669

Total Capital Required

34,174

34,174

Debt/Equity Ratio

Debt-to-Equity Ratio:

60

40

51

National Ghee & Oil Mills (Pvt) Limited

Annexure - XII

National Ghee & Oil Mills (Pvt) Limited


Loan Repayment Schedule
Years

Opening

Interest

Principle

Balance

Closing
Balance

20,504

3,076

2,050

18,454

18,454

2,768

2,050

16,403

16,403

2,461

2,050

14,353

14,353

2,153

2,050

12,303

12,303

1,845

2,050

10,252

10,252

1,538

2,050

8,202

8,202

1,230

2,050

6,151

6,151

923

2,050

4,101

4,101

615

2,050

2,050

10

2,050

308

2,050

52

National Ghee & Oil Mills (Pvt) Limited

PROJECT AUDIT
The company will have its internal audit committee, which will
conduct the audit of the various functions of the company as well as
the environmental audit. The audit committee of the company
comprises the Chairman of the company and all the functional
heads of the various departments of the company.
The audit committee will be responsible for the edifice of the
performance appraisal of the various functions of the company. The
audit committee will check the performance of the accounts
department, finance department, marketing department and also
check the performance of the human resources of the company. On
the basis of the performance determine by the audit committee
various rewards will be announced for the employees.
The company will utilize its promotion and reward system as the
motivation tool for its employees. On the basis of the performance
various monetary, stocks and training and educational rewards will
be announced for the employees of the company.
The company will strictly follow standards that will give the
guidelines to the company for the safe practices, so that no
environmental hazards will be done. The company will get its
registration with the ISO 14000 and will use this as its promotional
tool in the marketing campaign in the media. The company will
regularly administer its standards and will keep its system up to
date, so that there will be no cause of the environmental pollution
and hazards by the operations of the company.

53

National Ghee & Oil Mills (Pvt) Limited

Exit Strategy and Risk Assessment


The owners are aware of the highly risky nature of launching a oil
unit in the highly competitive market. If the venture fails, the
owner's paid-in capital and expenses may not be recovered.
The venture's actual revenue will be tracked against projections on
a month-to-month basis. If net profitability is not in-line with
forecasts, management and operational adjustments will be made
to address the issues.
If the venture is undercapitalized and requires more working capital,
the owner will consider bringing on investment partners. The owner
will also review the return-on-investment for personally providing
more paid-in capital.
In the event that net profitability cannot be attained, the owner will
take the following sequential steps to exit the venture:
1. The owner will attempt to sell the venture outright to a suitable
buyer.
2. If a buyer cannot be found, the owner will liquidate all viable
assets, including the computers, play stations etc.
3. Capital raised through asset liquidation will be used to reduce
possible debt. All debt will be negotiated prior to settlement.
4. If debts cannot be eliminated, the owner will discuss corporate
bankruptcy options with legal counsel.

54