TextilesFeasibility.pdf

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Pre-Feasibility Study Commercial Embroidery Unit

PREF-0/Junel 2006/REV 2

1

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-04

Revision 2

Prepared by SMEDA-Punjab

Approved by GM Punjab

Revision Date June 2006

Issued by Library Officer


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11 IINNTTRROODDUUCCTTIIOONN

11..11 CCoommmmeerrcciiaallEEmmbbrrooiiddeerryy

Commercial embroidery is a new business introduced in Pakistan a few years ago. There

is a lot of potential in this business because of less number of factories in the market andan increasing demand of embroidery in local as well as international market. Industrialembroidery machines (multi head machines) of different makes & origins (Japanese,Chinese and Korean) are used for embroidery.

11..22 OOppppoorrttuunniittyyRRaattiioonnaallee

The trend of usage of embroidery on garments of all sorts is on a rise since last few years.Initially, the embroidery work was used to be done on export garments as per foreigncustomer's requirements. However, with the passage of time the trend has changed andlocal market of ladies suits has also emerged as a main customer of embroidery work.Also, the cotton fabric of ladies suits, which is exported to middle east market, is

embroided before being exported. Apart from these, the embroidery work is also done onbed sheets, table cloths, and sofa covers, badges etc. Almost 70% of the potentialembroidery business exists with the local market while the remaining 30% is done forforeign market. So there is a potential for new people to come into the business ofcommercial embroidery.

11..33 PPrroojjeeccttBBrriieeff

The proposed project is designed as a small-scale commercial embroidery unit. This unitwill be capable of providing its services to local garments and fabric manufacturers aswell as to those garment manufacturers who are dealing in export and require embroiderywork on their garments. This sort of project is quite flexible in a way that there is no

processing of raw materials required and each machine is independent in its working. Theproject can be started even with a single machine. However keeping in view the potentialand industry norms, the project will be more feasible and economical with twoembroidery machines.

11..44 PPrrooppoosseeddCCaappaacciittyy

960,000Stitches/Hour per Machine/20 Heads1

11..55 TToottaallPPrroojjeeccttCCoosstt

Rs. 12.45 Million

11..66 PPrroocceessssFFlloowwCChhaarrtt

Receipt of

Fabric

Designing

& Tracing

Embroidery ThreadingLoading on

Machine

Packing &

Dispatch

1This is an average production rate of a machine having 20 heads.20% Time wastage allowance is included


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22 CCuurrrreennttIInndduussttrryySSttrruuccttuurree

Textile industry is the largest sector of Pakistan economy. It plays a major role instrengthening the economy and also contributing a lion share in earning of muchneeded foreign exchange for national exchequer.

From 2005, there are no quota restrictions for textile products exporting countries likePakistan. Considering the importance of textile sector, Government of Pakistanconstituted a Committee which carried out a study and finalized a report TextileVision 2005 on the existing setup of textile sector, its problems and has givenrecommendations on future of textile sector. The basic objective of Textile Vision2005 is to prepare the Pakistani Textile Sector to face the challenges of post quotafree era. In this report, the importance of value added products is stressed, and it ispredicted that value-added products will earn the highest unit value for the countryunlike primary products i.e. cotton and cotton yarn.

According to Textile Commissioners Organization (TCO) there are about 600Textile Processing Units, of which only 30 units are from the integrated mill sector,while the rest of the companies are a independent commercial dyeing and finishingunits. Out of these 600 processing units, 394 units are woven fabrics processing unitswhile remaining portion can be further subdivided into knitted fabric and yarnprocessing units.

There is an installed capacity of about 350 million pcs year of knitwear. The sector isnot only catering for domestic demand, but also has enormous export potential. Theknitwear industry is almost totally export oriented and highly value added. Theproducts made in Pakisan include T-shirts, jogging suits, jerseys, sport shirts, childrenwear, gloves tracksuits, sweaters and socks etc. the bulk of knitwear garments aremainly exported to developed countries like USA, Germany, UK, Canada, France etc.About 15% of the total output is consumed domestically.

33 MMAARRKKEETTIINNGG

33..11TTaarrggeettCCuussttoommeerrss

World imports of embroidered fancy fabric is growing at almost 10% a year, and ithas reached a figure of more than US$ 537 million by the end of fiscal year2004.USA is the largest importer of embroidered fabric with annual imports of US$129 Million in the year 2004. While, France, United Kingdom and Italy follow the

lead.


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33..22 LLeeaaddiinnggIImmppoorrttiinnggCCoouunnttrriieess

TTaabbllee55--11:: MMaajjoorrIImmppoorrttiinnggCCoouunnttrriieessiinnYYeeaarr2200004422

Country Value (US $ million)

USA 129

France 92

United Kingdom 66

Italy 61

Hong Kong 53

Germany 41

Spain 41

Mexico 21

Japan 17

Figures Includes Embroidery without visible ground (code 581010), Cotton (Code 581091, Man made

Fibers (Code581092

) & other Textile material (Code581099

).

33..33MMaarrkkeettDDeemmaannddaannddSSuuppppllyy

Demand for Pakistani-made embroidery is gaining momentum outside the country. Theindustry is receiving orders from Saudi Arabia, United Arab Emirates, United Kingdom,United States, Belgium and Oman. Pakistan has a great potential to compete abroad,particularly in the Middle East markets. With a little effort it can gain a reasonable share.

TTaabbllee55--22 EExxppoorrttssooffEEmmbbrrooiiddeerreeddpprroodduuccttssffrroommPPaakkiissttaann33

YYeeaarr TTrraaddeeVVaalluueeiinnUUSS$$MMiilllliioonn2003 1.18

2004 3.47

Pakistans import for embroidered products has remained nominal over the years. On ofthe major reason is its excellence in hand embroidery. People have preferred handembroidered products over the machine embroidered products. And now with the passageof time, as the trend is changing, Pakistan is also developing its home industry formachine embroidery. So it is expected that the imports will remain nominal as homeindustry is expected to grow at a faster rate due to cheap and easy availability of rawmaterial and man power.

2PC TAS -20043 Source: Trade Analysis System, 2004, Figures Includes Embroidery without visible ground (code581010), Cotton (Code 581091, Man made Fibers (Code 581092) & other Textile material (Code581099).


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44 RRAAWWMMaatteerriiaall

Embroidery is the process of sewing a design onto a garment. With recent advancementsin technology embroidery machines have become computerized and software has beendeveloped to assist in the day to day operation of embroidery machines. This means that

designs and set up costs can be low and the machines can run quicker with any number ofcolors being applied in a single operation.

Designs are converted in to digital format known as digitizing and once this has beendone can be used over and over again. These designs are individually stored on tocomputer disks, which are place in to the embroidery machine every time a design isrequired. This reduces the set-up times required and also means that you no longerrequire large volumes to make it cost effective.

Main raw material required is thread and sequence which is readily available. Followingis the details of raw material required for embroidery fabric:

55 CCOOMMMMEERRCCIIAALLEEMMBBRROOIIDDEERRYYIINNPPAAKKIISSTTAANN

55..11 CCoommmmeerrcciiaallEEmmbbrrooiiddeerryyUUnniittss

According to the estimates given by industry and the machine sellers, there are about1000 embroidery machines working in the Pakistan.

55..22 EEmmbbrrooiiddeerryyHHuubbss

Most of the embroidery factories are located in Karachi, Lahore, Faisalabad and Sialkot.A few factories are also located in Hyderabad, Multan, and Rawalpindi.

55..33 EEmmbbrrooiiddeerryyPPrroodduuccttss

The embroidery work is done on the following products:

Fabrics

Women Suits

Bed Sheets

Table & Sofa Cloths

Badges & Monograms

Export Products (Clothes, T-shirts, Caps etc.)

55..44 MMaarrkkeettssffoorrEEmmbbrrooiiddeerreeddPPrroodduuccttssThe markets for embroidered products are:


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5.4.1 Local Market

According to estimates given by people in business, about 70 % of the embroidedproducts are used in local (Pakistani) market. The products include women suits, table &sofa covers, bed sheets, badges, logos, T-shirts, caps, etc.

5.4.2 Export/Foreign Market

About 30% of the embroidered products are exported to different countries. Theseproducts include T-shirts, caps, badges, logos, women suits, etc.

55..55 TTaarrggeettCCuussttoommeerrss

Following are the target customers for a commercial embroidery unit:

Small & medium scale garments manufacturers who dont have their own embroideryunits and are dependent on commercial embroidery units for their garments.

Commercial exporters of embroidered garments who outsource their embroideryrequirements to commercial embroidery units.

66 MMAACCHHIINNEERRYYDDEETTAAIILLSS

66..11 MMaacchhiinneessRReeqquuiirreedd

A commercial embroidery unit can be started by using any number of machines but acombination of two machines (20 heads each) will be more economical and viable to startthe project.

66..22 MMaacchhiinneessAAvvaaiillaabblleeiinnMMaarrkkeett

Embroidery machines of different makes and origins are available in the market. Theprices of machines depend on make, origin and the number of heads & colors of machine.The machines available in the market are

Tajima (Japanese)

Barudan (Japanese)

SWF (Korean)

Eagle Wheel (Chinese)

Diamond (Chinese)

The Japanese & Korean machines are more expensive, while Chinese machines arecomparatively cheaper. However, the quality of work is almost the same butThe viabilityof this project has been developed on the basis of Japanese machinery (Barudan).


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66..33 TTeecchhnniiccaallDDeettaaiillss

The technical details of Japanese machine are following:

TTaabbllee::33--11 TTeecchhnniiccaallDDeettaaiillssooffMMaacchhiinneerryy

Estimated Price per Machine (Rs) 5,616,0004

No. of Heads 20

Load (KW) 1.5

Electricity Phase 3 Phase(Source: Machinery Suppliers/Industry)

66..44 PPrroodduuccttiioonn

The production details of embroidery machine as follows:

TTaabbllee::33--22 EEssttiimmaatteeddPPrroodduuccttiioonnddeettaaiillss

Average Stitches per Head 8,000 stitches in 10 Minutes

Average Stitches per head per hour 48,000

Total stitches per Hour (20 Heads) 960,000

(Source: Machinery Suppliers)

66..55 OOtthheerrEEqquuiippmmeenntt

Other equipment required as following:

TTaabbllee::33--44 OOtthheerrEEqquuiippmmeenntt

Item Required Cost

Computer 1 30,000

Printer 1 20,000

Air conditioner 2 50,000

Designing Software 1 10,000

Electrical Appliances 10,000

Total Rs. 120,000

4Price Includes Import duties and other costs


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77 .. RRAAWWMMAATTEERRIIAALL

77..11 RRaawwMMaatteerriiaallRReeqquuiirreemmeennttRequired raw materials and their approximate costs as follows:

TTaabbllee 7711RRaawwMMaatteerriiaallSequence Per Reel Rs. 80

Embroidery Thread Per cone Rs. 39

Tile (Metallic thread per cone)Cording Per KG

Rs. 435Rs. 80

(Source: Industry)

88 UUttiilliittiieessRReeqquuiirreemmeenntt

Electricity

Telephone

Fax


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99 HHuummaannRReessoouurrcceess

99..11 HHuummaannRReessoouurrcceeRReeqquuiirreemmeenntt

For a unit of 2 embroidery machines the human resource requirement is given in theTable 6-1

TTaabbllee 9911HHuummaannRReessoouurrcceeRReeqquuiirreemmeennttPositions Required Monthly Salary Annual Salary

Chief Executive5 1 20,000 240,000

Designer/Tracer 1 6,000 72,000

Office Asstt./Comp OperatorAdmin Officer

1 10,0006,500

120,00078,000

Supervisor 1 6,500 78,000

Machine Operator6 2 4,500 108,000

Helper 1 4,000 96,000

ClippersSweeper

21

4,0002,500

192,00030,000

Guard 1 4,500 54,000

Total 11 Rs. 1,068,000

99..22 WWoorrkkiinnggTTiimmee

Working time estimates are given in the following table:

TTaabbllee 9922WWoorrkkiinnggTTiimmeeDescription Time

Per Day Working 22 Hours (in 2 shifts)

Per Month Working 25 Days (Excluding Holidays) (550 Hours)

Per Annum Working 300 Days (6600 Hours)

5Owner of the Embroidery Unit.

6One operator per shift along with one helper.


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1100 LLaanndd&&BBuuiillddiinnggRReeqquuiirreemmeenntt

1100..11 CCoovveerreeddAArreeaaRReeqquuiirreemmeenntt

The covered area required for one embroidery machine is approx. 500 sq. ft. Thisspace is inclusive of machine installation space, fabric-handling space, clippingspace, etc. Other space requirements are listed in the table below:

TTaabbllee 110011CCoovveerreeddAArreeaaType Description

CoveredArea(sq.ft)

Large Hall For Installation of Machines 1,000

Store For Storing Raw material/Goods 500

Designing Room For Designing & Other related issues 200

Office Official Work 200

Wash Room 50

Total Covered Area 1,950

1100..22 RReeccoommmmeennddeeddOOppttiioonn

It is recommended that the embroidery unit should be established in a rentedbuilding, which can be easily found in the industrial zones. The maximum rent fora building having covered area of 1,950 Sq. feet can be Rs.23, 400/- per month.(12 Rs@ per S.F)

1100..33 SSuuiittaabblleeLLooccaattiioonn

The clusters of embroidery industry exist in Karachi, Lahore, Faisalabad, Sialkot,Multan, and Rawalpindi.So it is recommended that the unit may be set up in oneof these cities.


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1111 PPRROOJJEECCTTCCOOSSTT&&RREEVVEENNUUEESS

1111..11 PPrroojjeeccttCCoossttssEEssttiimmaatteess

The detail of capital cost estimates is given in the Table 8-1.

TTaabbllee 111111PPrroojjeeccttCCoossttEEssttiimmaatteessAccount Head Total Cost

Machinery & Equipment 11,501,000

Furniture & Fixtures 110,000

Office Equipment 71,000

Pre-Operating Costs7 169,352

Total Capital Costs 11,641,797

Equipment Spare Part Inventory8

217Raw Material Inventory9 97,500

Prepaid building rental 280,000

Prepaid insurance payment 230,800

Total Working Capital 608,537

Total Investment in the Project 12,246,173

TTaabbllee 111122FFiinnaanncciinnggPPllaannFinancing

Equity 50% 6,123,087

Debt 50% 6,123,087

Debt Split

Long-term loan 6,123,087

Running finance 0

7Include admin expenses, interest accrued and salaries (2 months salary of the CEO and one month salary

of supervisor and guard).8Oil & needles required for one week.

9Raw material required for one month.


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1111..22 RReevveennuueeEEssttiimmaatteess

The expected revenue estimates are given in Table 8-3.

TTaabbllee 111133Per Day per Machine Production( Max) 42,240,000 Stitches

Per Annum Working Days 300 Days

No. of Machines 2

Average Price for 1000 Stitches Rs. 1

Total Annual Revenue (Max) Rs. 12,672,000

1122 KKeeyySSuucccceessssFFaaccttoorrss

There is a lot of potential in the commercial embroidery business because the trend ofembroidery on garments of all sorts is on a rise.

Production process is simple, there are no complications in the process, and raw materialrequires no processing. Machines are fully computerized and no technicalities arerequired to handle the machines.

The commercial viability of this embroidery unit depends on the regular business ordersi.e. enough orders to operate the unit for at least 300 days a year. This requires aggressivemarketing efforts at the entrepreneurs end. The local as well as foreign markets have tobe identified and approached in order to get the business and to keep the unit running.

Following points should also be ensured to make the business successful:

Assurance of high consistent quality

Surety of products on time delivery

Competitive rates

Cost efficiency through better management

1133 TThhrreeaattssffoorrtthheeBBuussiinneessss

Due to the increase in number of commercial embroidery units and competition, there arechances that the market rates may reduce. However, this can be tackled by providingdifferent value added services to customers.

Another major threat to the business is credit factor. This is also related to thecompetition. The customers may ask for credit facility for a longer period, and this candisturb the cash cycles of the unit. This can be avoided by making a similar policy for allcustomers, so there will be no complaints from customers and cash cycle will not bedisturbed.


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1144 FFiinnaanncciiaallAAnnaallyyssiiss

1144..11 PPrroojjeecctteeddIInnccoommeeSSttaatteemmeenntt

Statement Summaries SMEDA

Income Statement

Rs. in actuals

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 8,236,800 9,313,920 10,478,160 11,735,539 13,092,461 14,555,736 16,132,607 16,939,238 17,786,200 18,675,510

Cost of goods sold 3,705,293 4,325,176 5,025,285 5,815,360 6,706,293 7,710,262 8,840,881 9,607,694 10,445,209 11,360,185

Gross Profit 4,531,507 4,988,744 5,452,875 5,920,179 6,386,168 6,845,474 7,291,726 7,331,544 7,340,991 7,315,324

General administration & selling expenses

Administration expense 432,000 474,060 520,215 570,864 626,444 687,436 754,366 827,812 908,409 996,853

Rental expense 280,800 308,880 339,768 373,745 411,119 452,231 497,454 547,200 601,920 662,112

Utilities expense 515,455 567,001 623,701 686,071 754,678 830,146 913,161 1,004,477 1,104,924 1,215,417

Communications expense (phone, fax, etc.) 30,000 33,000 36,300 39,930 43,923 48,315 53,147 58,462 64,308 70,738

Repairs & renewals - - - - - - - - - -

Office vehicles running expense - - - - - - - - - -

Office expenses (stationary, etc.) 21,600 23,703 26,011 28,543 31,322 34,372 37,718 41,391 45,420 49,843

Promotional expense 82,368 93,139 104,782 117,355 130,925 145,557 161,326 169,392 177,862 186,755

Insurance expense 225,860 203,274 180,688 158,102 135,516 112,930 90,344 67,758 45,172 22,586

Professional fees (legal, audit, etc.) 41,184 46,570 52,391 58,678 65,462 72,779 80,663 84,696 88,931 93,378

Depreciation expense 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400

Amortization expense 16,780 16,780 16,780 16,780 16,780 16,780 16,780 16,780 16,780 16,780

Miscellaneous expense - - - - - - - - - -

Subtotal 2,793,447 2,913,807 3,048,035 3,197,468 3,363,570 3,547,946 3,752,359 3,965,367 4,201,126 4,461,861

Operating Income 1,738,060 2,074,937 2,404,840 2,722,711 3,022,598 3,297,528 3,539,368 3,366,177 3,139,865 2,853,464

Other income - - - - - 57,355 179,564 299,568 403,765 550,998

Gain / (loss) on sale of assets - - - - - - - - - -

Earnings Before Interest & Taxes 1,738,060 2,074,937 2,404,840 2,722,711 3,022,598 3,354,883 3,718,931 3,665,745 3,543,631 3,404,462

Interest expense 865,166 754,231 603,034 418,652 239,362 17,422 - - - -

Earnings Before Tax 872,894 1,320,706 1,801,806 2,304,060 2,783,237 3,337,460 3,718,931 3,665,745 3,543,631 3,404,462

Taxable earnings for the year 872,894 1,320,706 1,801,806 2,304,060 2,783,237 3,337,460 3,718,931 3,665,745 3,543,631 3,404,462

Tax 82,368 93,139 104,782 117,355 130,925 145,557 161,326 169,392 177,862 186,755

NET PROFIT/(LOSS) AFTER TAX 790,526 1,227,567 1,697,024 2,186,704 2,652,312 3,191,903 3,557,605 3,496,353 3,365,769 3,217,707

Balance brought forward 395,263 811,415 1,254,220 1,720,462 2,186,387 2,689,145 3,123,375 3,309,864 3,337,816

Total profit available for appropriation 790,526 1,622,830 2,508,439 3,440,924 4,372,774 5,378,290 6,246,750 6,619,728 6,675,633 6,555,523

Dividend 395,263 811,415 1,254,220 1,720,462 2,186,387 2,689,145 3,123,375 3,309,864 3,337,816 3,277,761

Balance carried forward 395,263 811,415 1,254,220 1,720,462 2,186,387 2,689,145 3,123,375 3,309,864 3,337,816 3,277,761


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1144..22 PPrroojjeecctteeddCCaasshhfflloowwSSttaatteemmeenntt


Cash Flow Statement

Rs. in actuals

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Operating activities

Net profit - 790,526 1,227,567 1,697,024 2,186,704 2,652,312 3,191,903 3,557,605 3,496,353 3,365,769 3,217,707

Add: depreciation expense - 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400 1,147,400

amortization expense - 16,780 16,780 16,780 16,780 16,780 16,780 16,780 16,780 16,780 16,780

Deferred income tax - - - - - - - - - - -

Accounts receivable - (617,760) (698,544) (168,102) (181,621) (196,073) (211,515) (228,011) (178,763) (124,019) (130,220)

Finished good inventory - (185,265) (30,994) (35,005) (39,504) (44,547) (50,198) (56,531) (38,341) (41,876) (45,749)

Equipment inventory (217) (41) (47) (53) (61) (70) (80) (58) (64) (71) 762

Raw material inventory (97,500) (18,263) (20,982) (24,067) (27,564) (31,525) (36,009) (26,231) (28,919) (31,884) 342,943

Pre-paid building rent (280,800) (28,080) (30,888) (33,977) (37,374) (41,112) (45,223) (49,745) (54,720) (60,192) 662,112

Pre-paid lease interest - - - - - - - - - - -

Advance insurance premium (225,860) 22,586 22,586 22,586 22,586 22,586 22,586 22,586 22,586 22,586 22,586

Accounts payable - 87,452 89,695 25,275 27,888 30,761 33,921 36,653 30,562 24,268 7,143

Other liabilities - - - - - - - - - - -

Cash provided by operations (604,377) 1,215,336 1,722,573 2,647,860 3,115,233 3,556,512 4,069,565 4,420,448 4,412,873 4,318,761 5,241,463

Financing activities

Change in long term debt 6,123,087 (926,322) (1,056,007) (1,203,848) (1,372,387) (1,564,521) - - - - -

Change in short term debt - 106,250 144,849 (189,792) (22,383) 194,396 (233,320) - - - -

Change in export re-finance facility - - - - - - - - - - -

Add: land lease expense - - - - - - - - - - -

Land lease payment - - - - - - - - - - -

Lease principal repayment - - - - - - - - - - -

Issuance of shares 6,123,087 - - - - - - - - - -

Purchase of (treasury) shares - - - - - - - - - - -Cash provided by / (used for) financing acti 12,246,173 (820,073) (911,158) (1,393,640) (1,394,771) (1,370,125) (233,320) - - - -

Investing activities

Capital expenditure (11,641,797) - - - - - - - - - -

Acquisitions - - - - - - - - - - -

Cash (used for) / provided by inve sti ng activ (11, 641 ,797) - - - - - - - - - -

NET CASH - 395,263 811,415 1,254,220 1,720,462 2,186,387 3,836,245 4,420,448 4,412,873 4,318,761 5,241,463

Cash balance brought forward - - - - - - 1,147,100 2,444,172 3,547,182 4,528,127

Cash available for appropriation - 395,263 811,415 1,254,220 1,720,462 2,186,387 3,836,245 5,567,547 6,857,046 7,865,943 9,769,590

Dividend - 395,263 811,415 1,254,220 1,720,462 2,186,387 2,689,145 3,123,375 3,309,864 3,337,816 3,277,761

Cash carried forward - - - - - - 1,147,100 2,444,172 3,547,182 4,528,127 6,491,828


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1144..33 PPrroojjeecctteeddBBaallaanncceeSShheeeett


Balance Sheet

Rs. in actuals

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Assets

Current assets

Cash & Bank - - - - - - 1,147,100 2,444,172 3,547,182 4,528,127 6,491,828

Accounts receivable - 617,760 1,316,304 1,484,406 1,666,027 1,862,100 2,073,615 2,301,626 2,480,388 2,604,408 2,734,628

Finished goods inventory - 185,265 216,259 251,264 290,768 335,315 385,513 442,044 480,385 522,260 568,009Equipment spare part inventory 217 257 304 357 419 489 569 627 691 762 -

Raw material inventory 97,500 115,763 136,744 160,811 188,376 219,901 255,910 282,140 311,060 342,943 -

Pre-paid annual land lease - - - - - - - - - - -

Pre-paid building rent 280,800 308,880 339,768 373,745 411,119 452,231 497,454 547,200 601,920 662,112 -

Pre-paid lease interest - - - - - - - - - - -

Pre-paid insurance 225,860 203,274 180,688 158,102 135,516 112,930 90,344 67,758 45,172 22,586 -

Total Current Assets 604,377 1,431,198 2,190,067 2,428,686 2,692,225 2,982,965 4,450,504 6,085,567 7,466,797 8,683,198 9,794,466

Fixed assets

Land - - - - - - - - - - -

Building/Infrastructure - - - - - - - - - - -

Machinery & equipment 11,293,000 10,163,700 9,034,400 7,905,100 6,775,800 5,646,500 4,517,200 3,387,900 2,258,600 1,129,300 -

Furniture & fixtures 110,000 99,000 88,000 77,000 66,000 55,000 44,000 33,000 22,000 11,000 -

Office vehicles - - - - - - - - - - -

Office equipment 71,000 63,900 56,800 49,700 42,600 35,500 28,400 21,300 14,200 7,100 -

Total Fixed Assets 11,474,000 10,326,600 9,179,200 8,031,800 6,884,400 5,737,000 4,589,600 3,442,200 2,294,800 1,147,400 -

Intangible assets

Pre-operation costs 167,797 151,017 134,237 117,458 100,678 83,898 67,119 50,339 33,559 16,780 0

Training costs - - - - - - - - - - -

Total Intangible Assets 167,797 151,017 134,237 117,458 100,678 83,898 67,119 50,339 33,559 16,780 0

TOTAL ASSETS 12,246,173 11,908,815 11,503,505 10,577,944 9,677,303 8,803,864 9,107,223 9,578,106 9,795,157 9,847,378 9,794,466

Liabilities & Shareholders' Equity

Current liabilities

Accounts payable - 87,452 177,147 202,421 230,309 261,070 294,991 331,644 362,206 386,475 393,617Export re-finance facility - - - - - - - - - - -

Short term debt - 106,250 251,099 61,307 38,924 233,320 - - - - -

Other liabilities - - - - - - - - - - -

Total Current Liabilities - 193,701 428,246 263,729 269,233 494,390 294,991 331,644 362,206 386,475 393,617

Other liabilities

Lease payable - - - - - - - - - - -

Deferred tax - - - - - - - - - - -

Long term debt 6,123,087 5,196,764 4,140,757 2,936,909 1,564,521 - - - - - -

Total Long Term Liabilities 6,123,087 5,196,764 4,140,757 2,936,909 1,564,521 - - - - - -

Shareholders' equity

Paid-up capital 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087 6,123,087

Retained earnings - 395,263 811,415 1,254,220 1,720,462 2,186,387 2,689,145 3,123,375 3,309,864 3,337,816 3,277,761

Total Equity 6,123,087 6,518,350 6,934,502 7,377,306 7,843,549 8,309,474 8,812,232 9,246,462 9,432,951 9,460,903 9,400,848

TOTAL CAPITAL AND LIABILITIES 12,246,173 11,908,815 11,503,505 10,577,944 9,677,303 8,803,864 9,107,223 9,578,106 9,795,157 9,847,378 9,794,466


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16

1144..44 KKeeyyAAssssuummppttiioonnss

TTaabbllee 114411MMaacchhiinneerryyAAssssuummppttiioonnssNumber of Machines Installed 2

Capacity Utilization 1stYear 65%Total Production per hour (Stitches) per Head 48,000

Total Production of the embroidery unit per day (Stitches) 42,240,000

Annual Production Capacity (Stitches) 8,236,800,000

TTaabbllee 114422OOppeerraattiinnggAAssssuummppttiioonnssHours operational per day 22

Days operational per month 25

Days operational per year 300

TTaabbllee 114433EEccoonnoommyy--RReellaatteeddAAssssuummppttiioonnssElectricity growth rate 10%

Wage growth rate 10%

Office equipment price growth rate 5%

Office vehicles price growth rate 10%

TTaabbllee 114444CCaasshhFFlloowwAAssssuummppttiioonnssAccounts Receivable cycle (in days) 45

Accounts payable cycle (in days) 30

Raw material inventory (in days) 30

Equipment spare part inventory (in days) 30

TTaabbllee 114455RReevveennuueeAAssssuummppttiioonnssProduction capacity of the unit (double shift basis) 12,672,000,000

Sale price per unit in year 1 (in Rs.) 1 Rs. per 1000 stitches

Sale price growth rate 10%

Maximum capacity utilization 95%

Domestic Sales 100%

Export Sales 0%

TTaabbllee 114466EExxppeennsseeAAssssuummppttiioonnssCost Per 1000 Stitch (Direct) 0.0142 Rs

Office expenses (stationery, entertainment etc) 5% of admin expense

Machine maintenance growth rate 2%Pre-paid building Rent (months) 12

Pre-paid insurance (months) 12

Insurance rate (% of net fixed assets) 5%

Promotional Expenses 1% of Revenue


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TTaabbllee 114477FFiinnaanncciiaallAAssssuummppttiioonnssProject life (years) 10

Debt ratio 50%

Equity ratio 50%

Interest rate on long-term debt 14%

Interest rate on short term debt 14%Debt tenure (years) 5

Debt payments per year 1

Discount rate (weighted avg. cost of capital for NPV) 20%

TTaabbllee 114488PPrroojjeeccttssffiinnddiinnggIRR 28%

NPY 2,572,780

Pay Back Period (Years) 4.8

TextilesFeasibility.pdf

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