SMEDA Beach Resort

Pre-Feasibility Study

BBeeaacchh RReessoorrtt

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th Floor, LDA Plaza, Egerton Road, Lahore.Tel: (042) 111-111-456, Fax: (042) , 6304926, 6304927

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICENWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor, LDA Plaza, Egerton Road, Lahore.Tel: (042) 111-111-456Fax: (042) 6304926, [email protected]

5TH Floor, BahriaComplex II, M.T. Khan Road, Karachi.Tel: (021) 111-111-456Fax: (021) [email protected]

Ground FloorState Life BuildingThe Mall, Peshawar.Tel: (091) 9213046-47Fax: (091) [email protected]

Bungalow No. 15-AChaman Housing SchemeAirport Road, Quetta.Tel: (081) 2831623, 2831702Fax: (081) [email protected]

June, 2008

Pre-feasibility Study Beach Resort

BAL-PREF-11/June 2008

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DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject matter and

provide a general idea and information on the said area. All the material included in this

document is based on data/information gathered from various sources and is based on certain

assumptions. Although, due care and diligence has been taken to compile this document, the

contained information may vary due to any change in any of the concerned factors, and the

actual results may differ substantially from the presented information. SMEDA does not assume

any liability for any financial or other loss resulting from this memorandum in consequence of

undertaking this activity. Therefore, the content of this memorandum should not be relied upon

for making any decision, investment or otherwise. The prospective user of this memorandum is

encouraged to carry out his/her own due diligence and gather any information he/she considers

necessary for making an informed decision. The content of the information memorandum does

not bind SMEDA in any legal or other form.

DOCUMENT CONTROL

Document No. PREF-11

Revision 0

Prepared by SMEDA-Balochistan

Issued by Library Officer

Issue Date June, 2008



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TABLE OF CONTENTS

1 PURPOSE OF THE DOCUMENT............................................................................................................. 5

2 PROJECT PROFILE.................................................................................................................................. 5

2.1 PROJECT BRIEF ..................................................................................................................................... 52.2 OPPORTUNITY RATIONALE .................................................................................................................... 52.3 MARKET ENTRY TIMING ....................................................................................................................... 62.4 PROPOSED BUSINESS LEGAL STATUS..................................................................................................... 62.5 PROJECT CAPACITY AND RATIONALE..................................................................................................... 72.6 PROPOSED PRODUCT MIX...................................................................................................................... 72.7 PROJECT INVESTMENT........................................................................................................................... 72.8 RECOMMENDED PROJECT PARAMETERS................................................................................................. 72.9 PROPOSED LOCATION ........................................................................................................................... 72.10 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ......................................................................... 82.11 GOVERNMENT INCENTIVES FOR INVESTMENT IN TOURISM SECTOR......................................................... 8

2.11.1 Tourism Industry ............................................................................................................................. 82.11.2 Foreign Exchange ........................................................................................................................... 92.11.3 Chartered Flights ............................................................................................................................ 92.11.4 Work Visas ...................................................................................................................................... 9

3 CURRENT INDUSTRY STRUCTURE ................................................................................................... 10

3.1 GLOBAL SCENARIO ............................................................................................................................. 103.2 OVERVIEW OF THE YEAR 2008 ............................................................................................................ 113.3 CURRENT DOMESTIC TOURISM INDUSTRY SITUATION AND FUTURE GROWTH ....................................... 12

3.3.1 Demand......................................................................................................................................... 123.3.2 Future Growth............................................................................................................................... 123.3.3 Contribution to GDP ..................................................................................................................... 133.3.4 Employment................................................................................................................................... 133.3.5 Visitor Exports............................................................................................................................... 133.3.6 Capital Investment......................................................................................................................... 143.3.7 Government Expenditure ............................................................................................................... 14

4 MARKETING STRATEGY ..................................................................................................................... 15

4.1 TARGET CUSTOMERS .......................................................................................................................... 154.2 MARKET POTENTIAL........................................................................................................................... 154.3 PRICING STRATEGY............................................................................................................................. 15

4.3.1 Additional Revenue........................................................................................................................ 15

5 PROJECT REQUIREMENTS ................................................................................................................. 16

5.1 MAIN PROJECT REQUIREMENTS........................................................................................................... 165.2 EQUIPMENT DETAILS .......................................................................................................................... 165.3 FURNITURE AND EQUIPMENT MAINTENANCE ....................................................................................... 175.4 HUMAN RESOURCE REQUIREMENT ...................................................................................................... 17

6 LAND & BUILDING REQUIREMENT .................................................................................................. 18

6.1 LAND REQUIRED................................................................................................................................. 186.2 COVERED AREA REQUIREMENT........................................................................................................... 186.3 RECOMMENDED MODE ....................................................................................................................... 186.4 UTILITIES AND INFRASTRUCTURE REQUIREMENT ................................................................................. 18

7 STARTING A SUCCESSFUL BEACH RESORT BUSINESS ........................................................... 19

7.1 HOW TO START A BEACH RESORT?...................................................................................................... 19



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7.1.1 Work in a Similar Hospitality Business........................................................................................... 197.1.2 Know Your Target Market ............................................................................................................. 197.1.3 Develop a Business Plan................................................................................................................ 197.1.4 Choose a Location & Layout.......................................................................................................... 197.1.5 Getting the Appropriate Funding ................................................................................................... 207.1.6 Be Familiar with Safety Regulations .............................................................................................. 207.1.7 Hiring Employees .......................................................................................................................... 207.1.8 Advertise & Market ....................................................................................................................... 20

7.2 DECIDING ON THE LAYOUT ................................................................................................................. 207.3 HIRING THE RIGHT EMPLOYEES........................................................................................................... 217.4 A GOOD HOSPITALITY BUSINESS EXPERIENCE ..................................................................................... 22

8 PROJECT ECONOMICS......................................................................................................................... 23

8.1 PROJECT COST .................................................................................................................................... 238.2 PROJECT RETURNS.............................................................................................................................. 238.3 PROJECT FINANCING ........................................................................................................................... 23

9 FINANCIAL ANALYSIS.......................................................................................................................... 24

9.1 PROJECTED INCOME STATEMENT......................................................................................................... 259.2 PROJECTED BALANCE SHEET............................................................................................................... 269.3 PROJECTED CASH FLOW STATEMENT................................................................................................... 27

10 KEY ASSUMPTIONS............................................................................................................................... 28

10.1 PROJECT CAPACITY ASSUMPTIONS ...................................................................................................... 2810.2 REVENUE ASSUMPTIONS ..................................................................................................................... 2810.3 ECONOMIC ASSUMPTIONS ................................................................................................................... 2810.4 EXPENSE ASSUMPTIONS ...................................................................................................................... 2810.5 DEPRECIATION EXPENSE ASSUMPTIONS............................................................................................... 2910.6 COST OF GOODS SOLD ........................................................................................................................ 2910.7 CASH FLOW ASSUMPTIONS.................................................................................................................. 2910.8 FINANCING ASSUMPTIONS................................................................................................................... 29



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Introduction to SMEDA

The Small and Medium Enterprise Development Authority (SMEDA) was established with the

objective to provide fresh impetus to the economy through the launch of an aggressive SME

support program.1

Since its inception in October 1998, SMEDA had adopted a sectoral SME development

approach. A few priority sectors were selected on the criterion of SME presence. In depth

research was conducted and comprehensive development plans were formulated after

identification of impediments and retardants. The all-encompassing sectoral development

strategy involved recommending changes in the regulatory environment by taking into

consideration other important aspects including financial aspects, niche marketing, technology

up gradation and human resource development.

SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables,

marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical

instruments, urban transport and dairy. Whereas the task of SME development at a broader scale

still requires more coverage and enhanced reach in terms of SMEDA’s areas of operation.

Along with the sectoral focus a broad spectrum of business development services is also offered

to the SMEs by SMEDA. These services include identification of viable business opportunities

for potential SME investors. In order to facilitate these investors, SMEDA provides business

guidance through its help desk services as well as development of project specific documents.

These documents consist of information required to make well-researched investment decisions.

Pre-feasibility studies and business plan development are some of the services provided to

enhance the capacity of individual SMEs to exploit viable business opportunities in a better way.

This document is in the continuation of this effort to enable potential investors to make well-

informed investment decisions.

1 For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk



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11 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

22 PPRROOJJEECCTT PPRROOFFIILLEE

The project is about starting the business of a Beach Resort at Gwadar beach, Balochistan. The proposed plan is to offer complete package of boarding/lodging and dinning for tourists/visitors, and conference hall for different corporate clients for holding meetings/seminars etc. at Gwadar beach.

22..11 PPrroojjeecctt BBrriieeff

A seaside resort is a resort located on the coast and where a beach is the primary focus for tourists, it may be called a beach resort. The study provides basic information regarding the investment opportunity for setting up a Beach Resort at any of the Balochistan’s major coastal areas such as Gaddani, Sonmiani, Ormara, Pasni and Gwadar. Such a business could also be established on beaches that fall in Sindh, after conducting initial market research/surveys and properly analyzing the demand. Currently the project is being designed/proposed for Gwadar being the most developed part of Balochistan’s coastal Zone.

The project would serve as a place where tourists, visitors, vacationers and leisure travelers could stay overnight, dine, and enjoy the breathtaking view of the clear ocean. Initially the project is proposed to attract domestic tourists/visitors but after its maturity, international tourists could also become a major part of its customer base.

The main features of the project would include miles of unspoiled virgin beach, luxurious ocean view, beautiful separate huts, in-hut dining, dining hall, conference hall, and other basic entertainment facilities.

22..22 OOppppoorrttuunniittyy RRaattiioonnaallee

Balochistan has more than 750 Kilometers long coastline with clean and virgin beaches, tropical forests, exotic mountains, coral reefs and many breathtaking locations. Balochistan coastal zone has so far been neglected for tourism and travel development despite of tremendous potential in the sector. Very few areas are seen to have given a bit of attention by the Government as far as beach tourism and travel is concerned and that too due to traffic increase of visitors because of Gwadar. During the preliminary surveys, it was found that towns such as Gaddani, Ormara and Gwadar have been given attention by the government and private sector for investment. The completion of Makran Coastal Highway has provided the very basic infrastructure facility that connects the major towns such as Gaddani, Sonmiani, Ormara, Pasni and Gwadar. Similarly Gwadar Airport has provided the visitors the facility to reach the town in around 45 minutes from Karachi and in around 90 minutes from Quetta.



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Visitors and vacationers from Karachi city have diverted to beaches of Balochistan due to increase of pollution and crowd on Karachi and adjacent beaches. Families are observed at Gaddani beach on weekends and the number so far has seen inclining. Gwadar on the other hand has seen to have a bit higher rate of development in terms of tourism and travel activities, mainly due to Government’s priority in developing Gwadar Port that has attracted the attention of both public and private sector in investment possibilities. Other than Gaddani and Gwadar, Ormara has been given attention by the Government due to its strategically important location in naval point of view. Other tourism and travel related developments on Balochistan Coastal Belt includethe establishment of Hingol National Park, a few kilometers away from the beach at Hingol Valley, near Ormara.

Looking at a broader perspective, Balochistan coastline was required to be developed by the government and private sector for tourism and related business activities/investments much earlier, but this negligence on the other hand provides countless opportunities for all-scale tourism businesses not only for domestic but also for international investors specifically in Beach Resorts. Following are the key points that make the project very much feasible and attractive for the investors:

The only beach resort in the province and country

8 bamboo structured ocean front view huts

24 hour guest service

Miles of unspoiled beach

Ocean view indoor and outdoor dining facility

Ocean view conference hall

24 Hour business center

Cable TV

Mini Bar

Peaceful environment

22..33 MMaarrkkeett EEnnttrryy TTiimmiinngg

Although the weather conditions in Gwadar is suitable for tourists/visitors almost throughout the year but the project is assumed to have business mostly during the winters and springs as the weather conditions in these 6 months (October – March) becomes very much comfortable for the visitors. The project therefore, is proposed to become operational in the start of winter season to attract most of the customers.

22..44 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

Although the legal status of the business tends to play an important role in any setup, the beach resort business is proposed to be operated on a sole proprietorship basis which may extend to partnership in case of expansion and/or addition of new products/services that might add significant business to the existing setup. Also less complications and costs are involved in



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forming, administering and running such a setup and the tax rates applicable for such arrangement are lower than private or public limited.

22..55 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee

The project is proposed to have eight (08) separate huts for visitors to stay overnight, one conference hall, a dinning hall, and an open air dinning place on the first floor. After project’s maturity in the peak seasons, the resort would entertain 8 families per day and would facilitate three conferences/seminars/trainings per month.

22..66 PPrrooppoosseedd PPrroodduucctt MMiixx

The business setup is proposed to have the following products/services:

1. 08 separate huts on the beach, made of bamboos providing a unique experience to visitors2. Conference hall for all sorts of seminars, workshops, and training programs for corporate

clients3. Open-air dining on the roof and indoor dining services (dining hall and hut delivery services)

To make the project’s operations smooth and less hectic for the investor, it is proposed that the kitchen (food and beverages) should be handed over to the second party on Theka basis. The second party contractee will be responsible for arranging experienced cooks and installing required kitchen machinery & equipments.

22..77 PPrroojjeecctt IInnvveessttmmeenntt

The total investment required for this project is 9.77 m. The investment mainly covers capital costs of 9.5 m and working capital requirement of 0.25 m.

22..88 RReeccoommmmeennddeedd PPrroojjeecctt PPaarraammeetteerrss

Capacity Human Resource Location

8 Huts * 180 Days (six months) = 1,440 nights

17 Gwadar, Balochistan

Financial Summary

Project Cost IRR NPV Payback Period Cost of Capital (WACC)9.77 million 36% 15,848,688 3.2 Yrs 12%

22..99 PPrrooppoosseedd LLooccaattiioonn

The proposed location for the project could be in any of the following areas on Balochistan coastal belt such as Gaddani, Sonmiani, Ormara/Dam, Pasni, Gwadar and Jiwani. But due to the availability of infrastructure and comparatively high traffic rate, it is highly recommended to establish such a project at Gwadar beach to increase its viability. However, such a project could



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also be established on beaches of Karachi and adjacent areas after careful analysis of market demand and project viability.

22..1100 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss

Location plays the most important role for such a project. Clean virgin beaches of Balochistan coastal zone are suitable for the project and its viability.

Trained personnel for the project would add towards the success of the project.

Awareness amongst the general people would attract more customers therefore; use of proper marketing techniques is important

Makran Coastal Highway and Gwadar International Airport provides the connectivity of the proposed location, Gwadar to the rest of the country making the project easily accessible for visitors/vacationers and tourists

Target customers should initially be the domestic tourists. Upon its maturity, international tourists could also be facilitated

Consistency in quality products and services would develop confidence amongst the customers and would help in their retention

Guest feedbacks should be a regular activity by the management and the viable recommendations/suggestions should be adopted

22..1111 GGoovveerrnnmmeenntt IInncceennttiivveess ffoorr IInnvveessttmmeenntt iinn TToouurriissmm SSeeccttoorr

The present Government has taken a number of initiatives to attract investment in tourism sector. The following incentives and concessions are available for domestic and foreign investments in tourism industry2:

22..1111..11 TToouurriissmm IInndduussttrryy

1. Tourism is categorized as ‘Industry’ according to the Investment Policy in vogue. Ministry of Tourism can issue a certificate that a project falls in Tourism Industry

2. Permission is not required for setting up of tourism project in the Private Sector

3. Telephone, Telex, Fax facilities are provided to travel trade on priority basis

4. Plant, Machinery & Equipment (PME) not manufactured locally can be imported @ 5% custom duty

5. Initial depreciation is available @ 50% in addition to normal depreciation allowable @ 10% on all depreciable assets. This incentive practically operates as universal tax holiday as income may not generally be liable to tax for a period of five to six years because of carry forward of unadjusted depreciation loss

2 Ministry of Tourism, Government of Pakistan



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6. Payment of withholding tax at import stage in respect of plant machinery equipment and parts has already been done through inclusion of sub-clause (vii) in clause -56 of part-IV of the Second Schedule to the Income Tax Ordinance, 2001

7. Special equipment for adventure tourism activities like water sports, hang-gliding, golf, indoor sports equipment, power boats, water rafts, canoes, water skiing equipment provided by the travel trade as a services to the tourists is allowed to be imported on 5% customs duty

8. The central air-conditioning equipment and apparatus of general utility in hotels are charged industrial tariff for electricity

9. The World Bank due to importance of the bargain power of Pakistan has become more relaxed in offering cooperation in various activities

10. Recently they have facilitated Ministry of Water and Power in establishing an Expert Advisory Cell in the Ministry which is made by the locals and a couple of foreign consultants on visibly favorable terms

11. There is a policy of the government to avoid to maximum extent barrowing from World Bank however if felt necessary it can be requested with prior consent of the Finance Ministry

22..1111..22 FFoorreeiiggnn EExxcchhaannggee

1. Permission of the State Bank of Pakistan is not required for repatriation of profits from tourism projects

2. Foreigners/local and Overseas Pakistanis can open foreign exchange accounts

3. Full repatriation capital, capital gains, dividends and profits is allowed. However, the share of non-residents is required to be registered with State Bank of Pakistan

4. Foreign investment is welcome. However, it is the prime responsibility of all parties concerned to ensure that foreign exchange has been raised through legitimate transactions and not through money laundering etc.

22..1111..33 CChhaarrtteerreedd FFlliigghhttss

1. Permission for chartered flights is given by the Ministry of Tourism in consultation with Ministry of Interior. Chartered flights are allowed on point-to-point basis from Karachi, Lahore, Islamabad and Peshawar

2. Helicopter chartered flight services is allowed anywhere in Pakistan

22..1111..44 WWoorrkk VViissaass

1. Work visas are granted to foreign technical and managerial personnel for the purpose of transferring skills and know-how. The work visas can be issued for a period up to 5 years. Ministry of Tourism’s representative is a member of the team that issues work visas.



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33 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

33..11 GGlloobbaall SScceennaarriioo33

The year 2007 exceeded the expectations for international tourism with arrivals reaching new record figures close to 900 million. The results confirm both the sustained growth path of the past years and the resilience of the sector regarding external factors. This development has been supported by a strong world economy, which has experienced its longest period of sustained growth for more than two decades.

According to the latest UNWTO World Tourism Barometer, international tourism arrivals expanded by 6% in 2007, as compared to 2006.

3 World Tourism Organization (UNWTO)



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52 Million International Arrivals More

Europe+ 19 million

(38%)

Middle East+ 5 million

(11%)

Africa+3 million

(6%)

Americas+6 million

(12%)

Asia and the Pacific

+ 17 million (33%)

Of the additional 52 million worldwide arrivals, Europe received some 19 million and Asia andthe Pacific 17 million. The Americas was up by around six million, Africa by three million and the Middle East by five million.

All the different regions registered increases above their long-term average, with the Middle East leading the regional growth ranking (+13%), followed by Asia and the Pacific (+10%), Africa (+8%), the Americas (+5%) and Europe (+4%).

33..22 OOvveerrvviieeww ooff tthhee YYeeaarr 22000088

World Gross Domestic Product (GDP) has experienced its longest period of sustained growth for

25 years, with figures around or above 5% since 2004. Particularly emerging markets and

developing economies are driving the global GDP for the most part of this decade. This also

correlates to their behavior as emerging tourism destinations, which on average nearly double the

growth of destinations in high income countries.

For 2008, confidence remains high, although this perception might deteriorate. Economies

worldwide have shown increased volatility and confidence has weakened in some markets due to

uncertainty about the subprime mortgage crises and economic prospects, in particular for the

USA, alongside with global imbalances and high oil prices.

International tourism might be affected by this global context. But based on past experience, the

sector’s proven resilience and given the current parameters, it is unlikely to expect that growth in

world travel and tourism will come to a halt.



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33..33 CCuurrrreenntt DDoommeessttiicc TToouurriissmm IInndduussttrryy SSiittuuaattiioonn aanndd FFuuttuurree GGrroowwtthh44

Pakistan’s overall tourism industry seems to be very promising from the statistics taken from World Travel and Tourism Council WTTC. Following are the details in comparison with the rest of the world.

33..33..11 DDeemmaannddAccording to World Travel and Tourism Council (WTTC), Tourism &Travel (T&T) demand in South Asia was expected to reach US$ 82,037.2 M in 2007 and was forecasted to grow to US$ 204,964.5 M in 2017.

In Pakistan, in 2007, T&T was expected to post PKR 733.6 billion (US$ 11,744.0 mn) of economic activity (Total Demand), and was forecasted to grow to PKR 1,948.9 billion (US$ 26,376.5 mn) by 2017.

33..33..22 FFuuttuurree GGrroowwtthh

T&T is a high-growth activity, which is forecasted to increase its total economic activity by 4.4% per annum worldwide in real terms over the next ten years.

In South Asia, T&T was expected to post average annualized gains of 7.3% between 2008 and 2017. For Pakistan, T&T activity was expected to grow by 5.2% per annum in real terms between 2008 and 2017.

4 World Tourism Organization (UNWTO)

WORLD MARKET SHARE 0.2%

0.00%0.05%0.10%0.15%0.20%0.25%

1988 1992 1996 2000 2004 2008 2012 2016

GROWTH 2007: 6.6% 10Yr: 5.2%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

1989 1993 1997 2001 2005 2009 2013 2017



13

Pakistan Tourism & Travel Gross Domestic Product

(% of Total GDP)

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%

1988 1992 1996 2000 2004 2008 2012 2016

33..33..33 CCoonnttrriibbuuttiioonn ttoo GGDDPP

In 2007, the T&T Industry was expected to contribute 3.6% to worldwide GDP. The broader T&T Economy should contribute 10.4% to world GDP in 2007.

In South Asia, the T&T Industry is expected to post a GDP contribution of 2.1% in 2007, while the T&T Economy contribution will be 5.5%.

Pakistan's T&T Industry was expected to contribute 2.4% to (GDP) in 2007 (PKR 209.6 bn or US$ 3,355.8 mn), rising in nominal terms to PKR 561.5 bn or US$ 7,599.7 mn (2.4% of total) by 2017. The T&T Economy contribution (percent of total) should decline from 6.0% (PKR 520.5 bn or US$ 8,332.4 mn) to 5.8% (PKR 1,347.2 bn or US$ 18,233.1 mn) in this same period.

33..33..44 EEmmppllooyymmeenntt

T&T is human resource intensive, creating quality jobs across the full employment spectrum. In 2007, it was expected that one in 12.0 jobs will be generated by the T&T Economy. The T&TEconomy accounts for 8.3% of global employment. Today there are 231.2 million jobs in the T&T Economy, and these will rise to 262.6 million by 2017. The South Asia T&T Economy will account for 31,493,000 jobs (5.2% of total employment).

Pakistan’s T&T Economy employment was estimated at 2,669,000 jobs in 2007, 4.8% of total employment, or 1 in every 20.6 jobs. By 2017, this should total to 3,498,000 jobs, 4.7% of total employment or 1 in every 21.3 jobs.

33..33..55 VViissiittoorr EExxppoorrttss

T&T is a major exporter, with inbound visitors injecting foreign exchange directly into the economy. T&T exports in South Asia are expected to represent 5.5% of total exports in 2007.



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In Pakistan, exports make up a very important share of T&T's contribution to GDP. Of total Pakistan exports, T&T was expected to generate 6.3% (PKR 91.8 bn or US$ 1,470.1 mn) in 2007, increasing to PKR 299.4 bn, or US$ 4,051.8 mn (4.9% of total), in 2017.

33..33..66 CCaappiittaall IInnvveessttmmeenntt

T&T is a catalyst for construction and manufacturing. In 2007, the public and private sectors combined are expected to spend US$ 1,155,427.0 bn on new T&T capital investment (CI) worldwide, 9.5% of total investment, rising to US$ 2,392,765.0 bn, or 9.9% of the total, in 2017.In South Asia, T&T CI was expected to total US$ 23,306.0 mn in 2007, or 8.0% of total regional capital investment.

Pakistan T&T CI was estimated at PKR 200.1 bn, US$ 3,203.8 mn or 14.0% of total investment in year 2007. By 2017, this should reach to PKR 452.8 bn, US$ 6,128.1 mn or 11.8% of total.

33..33..77 GGoovveerrnnmmeenntt EExxppeennddiittuurree

T&T is both a generator and receiver of government funds. Globally, in 2007, T&T is expected to garner US$ 334,249.2 bn of government expenditures, or 3.8% of total expenditures. By 2017, government spending on T&T should increase to US$ 545,858.2 bn - 3.9% of total government expenditure.

Government T&T operating expenditures in Pakistan in 2007 are expected to total PKR 13.1 bn (US$ 209.9 mn) or 2.0% of the total government spending. In 2017, this spending is forecastedto total PKR 36.8 bn (US$ 498.2 mn), or 2.1% of the total government spending.

2007 2017DescriptionPKR

Billion% of Total

Growth PKR Billion

% of Total

Growth

Personal Travel & Tourism

284.4 4.2 5.7 782.9 4.4 5.5

Business Travel 144.1 12.9 377 5.7Government Expenditures

13.1 2 6.9 36.8 2.1 5.8

Capital Investment 200.1 14 3.8 452.8 11.8 3.3Visitor Exports 64 4.4 5.4 189.9 3.1 6.1Other Exports 27.8 1.9 8.3 109.5 1.8 9.3Travel & Tourism Demand

733.6 6.6 1,948.90 5.2

T&T Industry GDP 209.6 2.4 9.8 561.5 2.4 2.6T&T Economy GDP 520.5 6 8 1,347.20 5.8 5.1T&T Industry Employment

1,055.50 1.9 6.3 1,433.00 1.9 3.4

T&T Economy Employment

2,668.90 4.8 4.5 3,497.50 4.7 2.9



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44 MMAARRKKEETTIINNGG SSTTRRAATTEEGGYY

44..11 TTaarrggeett CCuussttoommeerrss

The target market of the project is very wide in nature. All the tourists/visitors whether domestic or international could be the major target market for the project. On the same time, it could also be a facility for the corporate clients who visit Gwadar on business purposes and want to hold seminars/workshops etc. Similarly, the local residents of Gwadar and adjacent areas could also be one of the major components of the target market who could not only stay overnight at the huts but also could enjoy see view dining, lunch or evening tea.

44..22 MMaarrkkeett PPootteennttiiaall

As discussed earlier, currently there are no such facility available in the whole country, therefore, its uniqueness would attract its customers to have a different and new experience staying at its family huts and/or enjoy the see view meals. Also for corporate culture, its see view conference hall would also provide a very unique environment.

44..33 PPrriicciinngg SSttrraatteeggyy

Since the project has a very wide range of customer class, the pricing strategy should be appealing enough to give its customers the value of their money spend while using its services. On the same time, the charges should neither be very high to compete with PC Gwadar nor very low to give negative impression in the market. After carefully analyzing the current hotel/motel cluster in Gwadar, it is proposed that the customers should be charged somewhere between Rs. 3,000 to 5,000 per night. The investor can always shuffle the charges according to the market situation and seasons. In this report, Rs. 4,000 per night charge for only six months (Sept-March) has been taken to calculate project’s revenue streams. However, the investor can always attract customers to stay at the resort in the off-season as well adding more revenue to the project.

44..33..11 AAddddiittiioonnaall RReevveennuuee

The hall rental per day for different venues such as seminars, training programs, workshops, birthday parties, anniversaries and other social gatherings should be in line with the other similar service providers so that the customers could be attracted. Here, it is assumed that a total of 24 venues (2 per month) will be facilitated and Rs. 10,000 per venue hall rental will be charged.

The last revenue component of the project is the monthly/quarterly/semi-annually/annually kitchen Theka. Under normal circumstances, such agreements are made keeping in view the regular flow of customers throughout the year. Since due to weather conditions, this project has one peak-season (Sept-March) in the year, therefore, it is assumed that the flow of customers would not be regular throughout the year. The investor has to keep this factor in mind while deciding the Theka rate. In this pre-feasibility report, a monthly kitchen Theka rate of Rs. 35,000 has been taken to calculate project’s additional revenue stream.



16

55 PPRROOJJEECCTT RREEQQUUIIRREEMMEENNTTSS

55..11 MMaaiinn PPrroojjeecctt RReeqquuiirreemmeennttss

The basic requirements for a beach resort includes management staff and waiters/servers, furniture and fixture, electronics such as TV/DVD, Multimedia, fridge, air conditioners, telephone/fax, computer/printer, and electric generator. These equipments are easily and readily available in the local markets.

55..22 EEqquuiippmmeenntt DDeettaaiillss

The details of the different machinery and equipment required for the project are given as below:

TTaabbllee 55..22--11 EEqquuiippmmeenntt && MMaacchhiinneerryy DDeettaaiillss

Description No. of Units Price/Unit Total Price (PKR)

Television Sets 9 14,000 126,000

DVD Players 8 5,000 40,000

Multimedia 1 70,000 70,000

Generator 1 350,000 350,000

Fridge (small) 9 8,000 72,000

Air-conditioners 4 30,000 120,000

Telephone/intercom sets 8 1,000 8,000

Total 786,000

TTaabbllee 55..22--22 OOffffiiccee EEqquuiippmmeenntt DDeettaaiillss

Other Equipment Details Qty Cost/Unit Total Cost (PKR)

Computers 2 35,000 70,000

Printers 2 15,000 30,000

Fax 1 12,000 12,000

Telephone Sets 3 1,000 3,000

Total 115,000

TTaabbllee 55..22--33 FFuurrnniittuurree && FFiixxttuurree DDeettaaiillss

Description Total Cost (PKR)

Total Office Furniture 60,000

Total Hut Furniture 400,000

Carpeting and Bedroom Necessities 200,000

Total 660,000



17

55..33 FFuurrnniittuurree aanndd EEqquuiippmmeenntt MMaaiinntteennaannccee

The furniture and equipment maintenance process will be conducted on yearly basis.

55..44 HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt

The manpower required for operating the Day Care Center is as follows:

TTaabbllee 55..44--11 HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt DDeettaaiillss

Description QtyMonthly

Salary/PersonTotal Monthly Salary

(PKR)

Manager 1 25,000 25,000

Accounts/Admin Officer 1 12,000 12,000

Waiters/Servers 5 5,000 25,000

Guards 3 4,000 12,000

Office Peon 1 4,000 4,000

Sweepers 6 3,500 21,000

Total Monthly Cost 17 99,000Note: The staff salaries are estimated according to the market trends; however, the investor may set different pay scales.



18

66 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

66..11 LLaanndd RReeqquuiirreedd

Such an arrangement is possible by acquiring the land on 99 year lease from the revenue department, Government of Balochistan, pre-approved by GDA. The details are as under:

TTaabbllee 66--11 LLaanndd RReeqquuiirreemmeenntt DDeettaaiillss

Description Area Required Total Lease Price/Acre Total Price (Rs.)

Land ½ Acre Rs. 120,000 60,000

Total 60,000

66..22 CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

The proposed project layout is to have main building of 3,000 Sq.ft. in the center with 08 separate bamboo huts (04 huts on each side of the building). The building will consist of one office, reception area, lobby, kitchen space, and a conference hall. Each hut will have one living room, one bedroom, and one washroom. The estimated cost details are as under:

TTaabbllee 66--22 CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt DDeettaaiillss55

Description Sq .ft RequiredConstruction Rate/Sq.Ft

Total Cost (PKR)

Reception, lobby, Kitchen, Conference Hall, Washrooms (ground floor)

3,000 1,200 3,600,000

Dining hall, Washrooms (1st floor) 1,500 1,000 1,500,000

Terrace Grills (open air dining) 20,000

08 Bamboo Huts (each with bedroom, living room, and washroom)

396 * 8 = 3,168 850 2,692,800

Total Building/Covered Area 7,812,800

66..33 RReeccoommmmeennddeedd MMooddee

It is recommended that the proposed project should be constructed on leased/purchased land rather than rented space to maximize monthly revenue and to increase viability of the project.

66..44 UUttiilliittiieess aanndd IInnffrraassttrruuccttuurree RReeqquuiirreemmeenntt

Basic utilities like electricity, gas and water are required for operating the project.

5 All cost estimates are based on June 2008 market prices



19

77 SSTTAARRTTIINNGG AA SSUUCCCCEESSSSFFUULL BBEEAACCHH RREESSOORRTT BBUUSSIINNEESSSS

From small restaurants and motels to large size hotels, more and more tourist stay areas are popping up in attractive places in the country. Since hospitality services are becoming a common business venture, people must also enjoy running them. However, all of those advantages come at a price – building and operating such a structure from scratch and that too for the first time in areas like Gwadar is not an easy task. It is a hard and expensive process, and the reality is thatmany resorts/hotels fail in their first year of business due to improper planning and forecasting. But rest assured there are ways to reduce the risk of becoming another statistic. Following aresome of the handy tips that can help run a successful beach resort establishment.

77..11 HHooww ttoo SSttaarrtt aa BBeeaacchh RReessoorrtt??

77..11..11 WWoorrkk iinn aa SSiimmiillaarr HHoossppiittaalliittyy BBuussiinneessss

One of the best ways to reduce the risk of owning a failed resort is to have some hospitalityservice providing experience before you start your own. Many successful hotel/motel/resort owners have said that the best way to prepare for owning a similar setup is by working in one. You will learn more than just how to receive guests and provide your services with a smile, you can learn marketing, venue management, payroll, and other significant components. Working in the hotel industry and learning the basics is an important first step to becoming a successfulowner.

77..11..22 KKnnooww YYoouurr TTaarrggeett MMaarrkkeett

Who does the investor see as guests in his/her resort? Is he/she targeting the whole family, youngsters, seniors, or corporate people? Knowing the target market before start planning will not only help the investor solidify his/her overall services but it will also help determine thelocation, decor and the overall atmosphere of the resort. A family-style resort, which caters to parents and their kids, may not appeal to seniors and/or corporate clients. On the other hand, an upscale, quiet atmosphere offering a two-hour dining experience wouldn't be appealing to teenagers or families with small children.

77..11..33 DDeevveelloopp aa BBuussiinneessss PPllaann

Like any other type of company, a beach resort will need a concise business plan. This planshould include but is not limited to: the overall concept and goal of the business, specificfinancial information and projections, a description of the target market, the services, menu andpricing, equipment and employee details, advertising and marketing plan, and a potential exit strategy.

77..11..44 CChhoooossee aa LLooccaattiioonn && LLaayyoouutt

It is important to find a location that has a continuous stream of traffic, convenient parking, and is in proximity to other businesses. For a beach resort, u may want to select a beach a little aside the crowded parts of the area where the visitors could enjoy only the beach and not the traffic and noises that they have become fed up of. On the same time, the investor should also keep in view its easy proximity for the visitors from the main town/city. In addition, if the investor



20

acquires the premises on rental basis, he/she should make sure that the monthly rent is in-line with the business plan's projections. Once the location is selected, the layout and design of the interior should be taken into account. Investor should already have a concept of his/her resort in the business plan and bring the concept into the design of the overall structure. When designing the kitchen area, the investor should already have the idea about the daily menu in order to determine what is needed for the food preparation area.

77..11..55 GGeettttiinngg tthhee AApppprroopprriiaattee FFuunnddiinngg

The business plan will help the investor recognize how much money he/she will need to start abeach resort. If unsure about how much money will be needed upfront, talking to other similar business owners can help project the expected start-up costs.

77..11..66 BBee FFaammiilliiaarr wwiitthh SSaaffeettyy RReegguullaattiioonnss

Hotels, motels, restaurants, and resorts are regulated and subject to inspection, and failing to be up to speed with these regulations could be detrimental to the facility. Therefore it is necessary to consult with similar business owners/related govt. departments to become familiar with what one must do to meet the necessary legal requirements.

77..11..77 HHiirriinngg EEmmppllooyyeeeess

One of the biggest challenges hotels and resorts face is the lack of qualified labor. In order to getand retain qualified employees, make sure that the pay scales relate clearly to the job's duties and responsibilities. In addition, find out what other similar setups are paying their employees so that you can be competitive in the job market, without spending too much on payroll. However the investor should try linking the payroll with the bottom line and see how much money can besqueezed out for the employees. Similarly, giving priority of hiring the local people in the staff gives another advantage as they might be more aware of the local customs/traditions and would help develop such atmosphere to attract/satisfy customers. In case of difficulty in finding trained/educated staff, investor may want to train the staff after hiring them according to thebusiness needs and requirements.

77..11..88 AAddvveerrttiissee && MMaarrkkeett

Every business needs a comprehensive marketing plan and such a setup that never has existed before certainly would need a lot of concentration for its proper introduction in the market. After determining marketing budget, price out billboard advertising, flyers in newspapers, and local cable TV advertising. Ask the customers how they found out about your setup and service, so that you can record where the advertising and marketing money could be best spent.

77..22 DDeecciiddiinngg oonn tthhee LLaayyoouutt

Layout and design are major factors in introduction phase of any hospitality business. You'll need to take into account the size and layout of the reception area, kitchen space, conference hall, and especially the individual huts.



21

Separate Bamboo Huts

This component should be the main focus of attention while designing its external and internal layout. The proposed material for constructing the huts is bamboo as it would provide the natural and a bit different look. Similarly, living in a bamboo hut would provide a very unique experience to the visitors/tourists especially the domestic visitors as a major portion of such customers/clients have never had such experience. Since it’s a beach resort, therefore all the openings of huts should be directed towards the sea shores. Also the space between the huts should be reasonable enough to provide privacy to visitors.

Kitchen Operations and Dining Area.

The proposed setup is to hand over the kitchen on Monthly Theka basis. While selecting the contractee, the investor should analyze their previous experience in catering and related services and should discuss/consult the contractee before designing the layout of the kitchen and dining area so that it should meet their requirements. Once again, the ocean view should be kept in mind in designing the layout of the indoor/outdoor dining area.

To accommodate the different groups of customers, use tables for four that can be pushedtogether in areas where there is ample floor space. This gives you flexibility inaccommodating both small and large parties. Place movable umbrella shades on the open dining areas (as proposed the facility will have open terrace on the first floor besides the indoor dining hall) so that the visitors find it comfortable having meals under the sunlight.

Reception Area

For any hospitality business, the layout of the reception area plays a very important role in attracting and retaining clients. Make sure that the layout should be reasonably large, comfortable and attractive. Similarly, there should be plenty of sitting areas so that visitors could comfortably wait for reservation in peak season.

Conference Hall

Since Gwadar has become the focus of not only public sector but also private sector businesses/companies, therefore it is expected that there is a dire need of such a facility to accommodate such customers. The conference hall normally is used for organizing seminars, workshops and training programs. The investor should make sure that the layout of the conference hall should be in a way to house a reasonable number of people comfortably in one time. Ocean view window openings concept can also be used for designing the layout of the conference hall.

77..33 HHiirriinngg tthhee RRiigghhtt EEmmppllooyyeeeess

Choosing employees who will do a good job is not only important to the success of the business, but will also contribute to the overall first and last image of the beach resort, provided they areproperly trained. There are several categories of personnel in the hospitality business such as manager, receptionist, servers, housekeepers, cooks, dishwashers and cleaners. When the business is still new, some employees' duties may cross over from one category to another. For example, your servers may double as the cleaners. The investor should be sure to hire people who are willing to be flexible in their duties.



22

77..44 AA GGoooodd HHoossppiittaalliittyy BBuussiinneessss EExxppeerriieennccee

Based on some surveys conducted, following are some of the factors that contribute to a good hospitality business experience:

Location

Characteristics

Welcome

Food

Environment (parking, restrooms, lighting)

Dessert Variety

Smile factor

Time factor/quick service

The server should greet visitors/tourists on the main gate

The server should be neat and clean

The server should not be too chatty or familiar

The server should know the menu and be able to answer questions



23

88 PPRROOJJEECCTT EECCOONNOOMMIICCSS

88..11 PPrroojjeecctt CCoosstt

Description Amount in (Rs.)Land 60,000Building & Infrastructure 7,812,800Machinery & Equipment 786,000Furniture & Fixtures 660,000Office Equipment 115,000Pre-operating costs 89,331Total Capital Cost 9,523,131Working CapitalRaw Material Inventory 9,450Upfront Insurance Payment 39,300Cash 200,000Total Working Capital 248,750

Total Project Cost 9,771,881

88..22 PPrroojjeecctt RReettuurrnnss

Description Equity ProjectIRR 41% 36%MIRR 22% 18%Pay Back Period (Yrs) 3.08 3.20Net Present Value (NPV) 11,809,899 15,848,688

88..33 PPrroojjeecctt FFiinnaanncciinngg

Description Percentage Amount in RsEquity Financing 70% 6,819,710Debt Financing 30% 2,952,171Total 9,771,881



24

99 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

Financial Evaluation Summary of Pre-Feb Beach Resort SMEDA

Key VariablesTotal Investment in Project 9,771,881 Equity 70% 6,819,710 Debt 30% 2,952,171 Lease 0% - Interest Rate 15%Debt Tenure 5 Total Number of Employees 17

Rs. in actualsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Free Cash Flow to Equity (FCFE) 1,168,850 2,541,288 2,859,183 3,266,733 3,676,202 4,986,232 5,511,006 6,089,690 6,727,770 7,464,163 Free Cash Flow to Firm (FCFF) 1,952,106 3,338,994 3,673,506 4,100,165 4,531,608 4,986,232 5,511,006 6,089,690 6,727,770 12,016,936

Profit margin on sales 28% 40% 42% 45% 47% 49% 49% 50% 51% 51%ROE 15% 30% 33% 35% 39% 42% 45% 47% 50% 53%Times interest earned 4.28 9.65 13.59 21.43 44.92 - - - - -

Equity ProjectInternal Rate of Return (IRR) 41% 36%Modified Internal Rate of Return (MIRR)* 22% 18%Payback Period (yrs) 3.08 3.20 Net Present Value (NPV) @ 16% 11,809,899 @ 12% 15,848,688



25

99..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Statement Summaries SMEDAIncome Statement

Rs. in actualsYear 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 4,032,000 6,336,000 6,969,600 7,666,560 8,433,216 9,276,538 10,204,191 11,224,610 12,347,072 13,581,779 Cost of goods sold 1,174,800 1,486,860 1,602,727 1,728,409 1,864,793 2,012,846 2,173,629 2,348,302 2,538,133 2,744,514

Gross Profit 2,857,200 4,849,140 5,366,873 5,938,151 6,568,423 7,263,691 8,030,562 8,876,309 9,808,938 10,837,264

General administration & selling expensesAdministration expense 506,760 557,436 613,180 674,498 741,947 816,142 897,756 987,532 1,086,285 1,194,914 Utilities expense 15,000 15,900 16,854 17,865 18,937 20,073 21,278 22,554 23,908 25,342 Travelling & Comm. expense (phone, fax, etc.) 73,800 81,180 89,298 98,228 108,051 118,856 130,741 143,815 158,197 174,017 Office expenses (stationary, etc.) 19,680 21,648 23,813 26,194 28,813 31,695 34,864 38,351 42,186 46,404 Promotional expense 403,200 633,600 696,960 766,656 843,322 927,654 1,020,419 1,122,461 1,234,707 1,358,178 Insurance expense 39,300 35,370 31,440 27,510 23,580 19,650 15,720 11,790 7,860 3,930 Professional fees (legal, audit, etc.) 40,320 63,360 69,696 76,666 84,332 92,765 102,042 112,246 123,471 135,818 Depreciation expense 507,990 507,990 507,990 507,990 507,990 507,990 507,990 507,990 507,990 507,990 Amortization expense 17,866 17,866 17,866 17,866 17,866 - - - - - Miscellaneous expense - - - - - - - - - -

Subtotal 1,623,916 1,934,350 2,067,097 2,213,472 2,374,838 2,534,825 2,730,811 2,946,740 3,184,603 3,446,592 Operating Income 1,233,284 2,914,790 3,299,777 3,724,678 4,193,585 4,728,866 5,299,751 5,929,569 6,624,335 7,390,672

Income from Kitchen Theka and Hall Rental 660,000 726,000 798,600 878,460 966,306 1,062,937 1,169,230 1,286,153 1,414,769 1,556,245 Earnings Before Interest & Taxes 1,893,284 3,640,790 4,098,377 4,603,138 5,159,891 5,791,803 6,468,982 7,215,722 8,039,103 8,946,918

Interest expense 442,826 377,148 301,618 214,759 114,871 - - - - - Earnings Before Tax 1,450,458 3,263,642 3,796,759 4,388,379 5,045,020 5,791,803 6,468,982 7,215,722 8,039,103 8,946,918

Tax 319,101 718,001 835,287 965,443 1,109,904 1,274,197 1,423,176 1,587,459 1,768,603 1,968,322 NET PROFIT/(LOSS) AFTER TAX 1,131,357 2,545,641 2,961,472 3,422,936 3,935,115 4,517,606 5,045,806 5,628,263 6,270,501 6,978,596

Balance brought forward 565,679 1,555,660 2,258,566 2,840,751 3,387,933 3,952,770 4,499,288 5,063,776 5,667,138 Total profit available for appropriation 1,131,357 3,111,320 4,517,132 5,681,502 6,775,866 7,905,539 8,998,575 10,127,551 11,334,276 12,645,734 Owner's Withdrawals 565,679 1,555,660 2,258,566 2,840,751 3,387,933 3,952,770 4,499,288 5,063,776 5,667,138 6,322,867 Balance carried forward 565,679 1,555,660 2,258,566 2,840,751 3,387,933 3,952,770 4,499,288 5,063,776 5,667,138 6,322,867



26

99..22 PPrroojjeecctteedd BBaallaannccee SShheeeett

Statement Summaries SMEDABalance Sheet

Rs. in actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

AssetsCurrent assets

Cash & Bank 200,000 803,171 1,788,799 2,389,416 2,815,399 3,103,667 4,137,129 5,148,847 6,174,762 7,235,394 8,376,690 Accounts receivable - 165,699 213,041 273,403 300,743 330,817 363,899 400,289 440,318 484,350 532,785 Raw material inventory 9,450 14,884 16,409 18,091 19,946 21,990 24,244 26,729 29,469 32,489 - Pre-paid insurance 39,300 35,370 31,440 27,510 23,580 19,650 15,720 11,790 7,860 3,930 -

Total Current Assets 248,750 1,019,123 2,049,689 2,708,420 3,159,667 3,476,125 4,540,993 5,587,655 6,652,408 7,756,163 8,909,474

Fixed assetsLand 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 Building/Infrastructure 7,812,800 7,422,160 7,031,520 6,640,880 6,250,240 5,859,600 5,468,960 5,078,320 4,687,680 4,297,040 3,906,400 Machinery & equipment 786,000 707,400 628,800 550,200 471,600 393,000 314,400 235,800 157,200 78,600 - Furniture & fixtures 660,000 627,000 594,000 561,000 528,000 495,000 462,000 429,000 396,000 363,000 330,000 Office equipment 115,000 109,250 103,500 97,750 92,000 86,250 80,500 74,750 69,000 63,250 57,500

Total Fixed Assets 9,433,800 8,925,810 8,417,820 7,909,830 7,401,840 6,893,850 6,385,860 5,877,870 5,369,880 4,861,890 4,353,900

Intangible assetsPre-operation costs 89,331 71,465 53,598 35,732 17,866 - - - - - -

Total Intangible Assets 89,331 71,465 53,598 35,732 17,866 - - - - - - TOTAL ASSETS 9,771,881 10,016,398 10,521,108 10,653,983 10,579,373 10,369,975 10,926,853 11,465,525 12,022,288 12,618,053 13,263,374

Liabilities & Shareholders' EquityCurrent liabilities

Accounts payable - 22,971 33,971 35,740 37,605 39,571 41,645 43,832 46,139 48,573 48,197 Other liabilities - - - - - - - - - - -

Total Current Liabilities - 22,971 33,971 35,740 37,605 39,571 41,645 43,832 46,139 48,573 48,197

Other liabilitiesDeferred tax - 93,720 100,980 108,240 115,500 122,760 112,728 102,696 92,664 82,632 72,600 Long term debt 2,952,171 2,514,318 2,010,787 1,431,727 765,807 - - - - - -

Total Long Term Liabilities 2,952,171 2,608,038 2,111,767 1,539,967 881,307 122,760 112,728 102,696 92,664 82,632 72,600

Shareholders' equityPaid-up capital 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 6,819,710 Retained earnings - 565,679 1,555,660 2,258,566 2,840,751 3,387,933 3,952,770 4,499,288 5,063,776 5,667,138 6,322,867

Total Equity 6,819,710 7,385,389 8,375,370 9,078,276 9,660,461 10,207,643 10,772,480 11,318,998 11,883,486 12,486,848 13,142,577 TOTAL CAPITAL AND LIABILITIES 9,771,881 10,016,398 10,521,108 10,653,983 10,579,373 10,369,975 10,926,853 11,465,525 12,022,288 12,618,053 13,263,374



27

99..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Statement Summaries SMEDACash Flow Statement

Rs. in actualsYear 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activitiesNet profit - 1,131,357 2,545,641 2,961,472 3,422,936 3,935,115 4,517,606 5,045,806 5,628,263 6,270,501 6,978,596 Add: depreciation expense - 507,990 507,990 507,990 507,990 507,990 507,990 507,990 507,990 507,990 507,990 amortization expense - 17,866 17,866 17,866 17,866 17,866 - - - - - Deferred income tax - 93,720 7,260 7,260 7,260 7,260 (10,032) (10,032) (10,032) (10,032) (10,032) Accounts receivable - (165,699) (47,342) (60,362) (27,340) (30,074) (33,082) (36,390) (40,029) (44,032) (48,435) Raw material inventory (9,450) (5,434) (1,526) (1,682) (1,854) (2,044) (2,254) (2,485) (2,740) (3,021) 32,489 Advance insurance premium (39,300) 3,930 3,930 3,930 3,930 3,930 3,930 3,930 3,930 3,930 3,930 Accounts payable - 22,971 10,999 1,769 1,865 1,966 2,073 2,187 2,307 2,434 (375) Other liabilities - - - - - - - - - - -

Cash provided by operations (48,750) 1,606,702 3,044,818 3,438,244 3,932,653 4,442,009 4,986,232 5,511,006 6,089,690 6,727,770 7,464,163

Financing activitiesChange in long term debt 2,952,171 (437,853) (503,531) (579,060) (665,919) (765,807) - - - - - Issuance of shares 6,819,710 - - - - - - - - - - Purchase of (treasury) shares - - - - - - - - - - -

Cash provided by / (used for) financing activities9,771,881 (437,853) (503,531) (579,060) (665,919) (765,807) - - - - -

Investing activitiesCapital expenditure (9,523,131) - - - - - - - - - - Acquisitions - - - - - - - - - - -

Cash (used for) / provided by investing activities(9,523,131) - - - - - - - - - -

NET CASH 200,000 1,168,850 2,541,288 2,859,183 3,266,733 3,676,202 4,986,232 5,511,006 6,089,690 6,727,770 7,464,163

Cash balance brought forward 200,000 803,171 1,788,799 2,389,416 2,815,399 3,103,667 4,137,129 5,148,847 6,174,762 7,235,394 Cash available for appropriation 200,000 1,368,850 3,344,459 4,647,982 5,656,150 6,491,600 8,089,899 9,648,135 11,238,537 12,902,532 14,699,557 Owner's Withdrawals - 565,679 1,555,660 2,258,566 2,840,751 3,387,933 3,952,770 4,499,288 5,063,776 5,667,138 6,322,867 Cash carried forward 200,000 803,171 1,788,799 2,389,416 2,815,399 3,103,667 4,137,129 5,148,847 6,174,762 7,235,394 8,376,690



28

1100 KKEEYY AASSSSUUMMPPTTIIOONNSS

1100..11 PPrroojjeecctt CCaappaacciittyy AAssssuummppttiioonnss

Description Calculation

Number of Huts 08

Assumed total No. of Business Days 180 (6 months)

Total Assumed Capacity 08 * 180 = 1,440 Units

Capacity Utilization 1st Year 70%

Growth in Capacity Utilization 30%

Maximum Attainable Capacity 100%

1100..22 RReevveennuuee AAssssuummppttiioonnss

Description Calculation

Hut Rent / Night Rs. 4,000

Rent Growth Rate / Year 10%

Yearly Income from Kitchen Theka Rs. 420,000 (Rs. 35,000/month)

Yearly Income from Hall RentalRs. 240,000 (24 events, Rs. 10,000 rent / event)

1st Year Revenue from Hut Rentals 4,000 * (1,440*0.70) = Rs. 4,032,000

1st Year Total Additional Income 420,000 + 240,000 = Rs. 660,000

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Electricity Price Growth Rate 6%

Gas Price Growth Rate 6%

Water Price Growth Rate 6%

Salary Growth Rate 10%

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Communication Expense 15% of administration expense

Office Expense 4% of administration expense

Promotional Expense 10% of revenue

Professional Fee (Legal, Audit etc) 1% of revenue

Administration Benefit Expense 3% of administration expense



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Operating Cost Growth Rate 5%

Machinery & Equipment Insurance Rate 5%

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Depreciation Method Straight Line

Building & Infrastructure 5%

Machinery & Equipment 10%

Furniture & Fixtures 5%

Office Equipment 5%

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All the direct costs that directly affect the revenue of any project are called Cost of Goods Sold (COGS). For a beach resort, following are the components and estimated value of COGS in the first year:

Description Daily Cost Total Yearly Cost (6 months) Rs.

Daily Hut Makeup Cost 225 * 8 =1,800 1,800 * (180*.70) = 226,800

Direct Labor Cost 696,000

Equipment Maintenance 37,800

Direct Electricity Cost 189,000

Direct Water Cost 25,200

Total COGS 1,174,800

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Accounts Receivables Cycle (In Days) 15

Accounts Payable Cycle (In Days) 30

Initial Cash in Bank 200,000

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Debt 30%

Equity 70%

Long Term Debt Interest Rate 15%

Tax Treatment Sole proprietorship

Discount Rate for NPV (WACC) 12

SMEDA Beach Resort

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