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Pre-Feasibility Study
FOOTWER RETAIL OUTLET
Small and Medium Enterprise Development Authority
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th & 8th Floor LDA Plaza, Egerton Road, Lahore.
Tel: (92 042) 111-111-456 Fax: (92 042) [email protected]
REGIONAL OFFICEPUNJAB
REGIONAL OFFICESINDH
REGIONAL OFFICE
NWFP
REGIONAL OFFICE
BALOCHISTAN
8th Floor LDA Plaza,
Egerton Road, Lahore.
Tel: (042) 111-111-456Fax: (042) 6304926-7
5
TH
Floor, BahriaComplex II, M.T. Khan Road,
Karachi.Tel: (021) 111-111-456
Fax: (021) 5610572
Ground FloorState Life Building
The Mall, Peshawar.Tel: (091) 9213046-47
Fax: (091) 286908
Bungalow No. 15-AChaman Housing Scheme
Airport Road, Quetta.Tel: (081) 831623, 831702
Fax: (081) 831922
September, 2006
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DISCLAIMER................................................................................................................................................3
1 PURPOSE OF THE DOCUMENT.......................................................................................................4
2 CRUCIAL FACTORS AND STEPS IN DECESION MAKING..........................................................4
2.1 SWOT ANALYSIS........................................................................................................................42.1.1 Strengths ...................................................................................................................................4
2.1.2 Weaknesses ...............................................................................................................................42.1.3 Opportunities.............................................................................................................................4
2.1.4 Threats......................................................................................................................................4
3 PROJECT PROFILE............................................................................................................................5
3.1 OPPORTUNITY RATIONAL........................................................................................................5
3.2 PROJECTBRIEF...........................................................................................................................5
3.3 MARKETENTRY TIMINGS........................................................................................................53.4 BUSINESS LEGAL STATUS ........................................................................................................5
3.5 PROJECT CAPACITY & RATIONAL...........................................................................................5
3.6 PROJECT INVESTMENT .............................................................................................................6
3.7 PROPOSED LOCATION...............................................................................................................73.8 KEY SUCCESS FACTORS ...........................................................................................................7
3.9 STRATEGIC RECOMMENDATION ............................................................................................7
3.9.1 Marketing..................................................................................................................................73.9.2 Pricing ......................................................................................................................................7
3.9.3 Store layout and presentation.....................................................................................................8
3.9.4 Use of computer.........................................................................................................................8
3.9.5 Inventory...................................................................................................................................8
4 MACROECONOMIC INDICATORS OF PAKISTAN.......................................................................8
4.1 DEMOGRAPHY OF PAKISTAN ..................................................................................................8
4.2 POPULATION GROWTH.............................................................................................................94.3 DEMAND& SUPPLY...................................................................................................................9
5 SECTOR & INDUSTRY ANALYSIS...................................................................................................9
5.1 SECTOR CHARACTERISTICS ....................................................................................................95.2 SUBSECTOR INFORMATION ....................................................................................................9
5.3 ISSUES REGARDING INDUSTRY ..............................................................................................96 MARKETING.....................................................................................................................................10
6.1 MARKETPOTENTIAL...............................................................................................................10
6.2 COMPETITIVE ENVIRONMENT ..............................................................................................106.3 MAJOR PLAYERS FOOTWEAROUTLET..............................................................................10
6.4 TARGETCUSTOMERS..............................................................................................................106.5 TRADE STATISTICS..................................................................................................................10
7 PROJECT PROFILE..........................................................................................................................11
7.1 LAND REQUIREMENT..............................................................................................................11
7.1.1 Recommended Mode................................................................................................................11
7.2 UTILITIES REQUIREMENTS ....................................................................................................117.3 TIMESCHEDULE ......................................................................................................................11
7.4 SUITABLELOCATION..............................................................................................................11
7.5 FURNITURE, FIXTURES & OFFICEEQUIPMENT...................................................................127.6 HUMAN RESOURCE REQUIREMENT.....................................................................................14
8 FINANCIAL PROJECTIONS............................................................................................................15
8.1 PROJECT SUMMARY ......................................................................................................................15
8.2 INCOME STATEMENT.....................................................................................................................168.3 BALANCE SHEET...........................................................................................................................17
8.4 CASH-FLOW STATEMENT ..............................................................................................................18
9 KEY ASSUMPTIONS.........................................................................................................................19
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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. The prospective user of this memorandum is
encouraged to carry out additional diligence and gather any information he/she feels
necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-96
Prepared by SMEDA-Punjab
Issue Date September 2006
Issued by Library Officer
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1 PURPOSE OF THE DOCUMENT
This document provides details of setting up a retail outlet of shoes. The objective of this pre
feasibility study is to provide information and overview about outlet of footwear and to
evaluate its viability under present circumstances. This document may form the basis to make
important investment decisions and in order serve the objective; this study covers various
aspects of project development, start up, marketing, finance and management.
2 CRUCIAL FACTORS AND STEPS IN DECESION MAKING
2.1 SWOT ANALYSIS
Before making any investment decision it is advisable to evaluate associated risk factors bytaking into consideration certain key elements.
SWOT analysis is a strategic planning tool used to evaluate Strengths, Weaknesses,Opportunities and Threats involved in a project or a business venture. Strengths and
weaknesses are internal to company. Opportunities and threats originate outside the company.A SWOT analysis usually performed early in the project development process, and helps
organization to evaluates internal factors and
2.1.1 Strengths
Availability of popular brands
Effective marketing/promotion schemes
Handsome market for consumption
Growing population
Status symbol to shop from big stores
2.1.2 Weaknesses
Operating at very low rather negligible profit margin in initial years.
Difficulty in building confidence among target customers.
Credibility factor in the initial phase, as suppliers do not give credit to newlyEntrants
2.1.3 Opportunities
Changing fashion style.
Spending is high and is expected to result in sales growth industry-wide.
2.1.4 Threats
Tough Competition
New entrants can easily share the business.
Footwear export is very exacting and competitive and demands high quality.
Consumers are becoming savvier and may lean towards discounted items.
Heavy taxes in the form of sales tax and income tax on retail business
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3 PROJECT PROFILE
3.1 OPPORTUNITY RATIONAL
Footwear is a consumer product and relates to the basic human needs. It is difficult to specify
grade/type or model. However, it can be treated as product, which can be made by picking up
one from each of the following areas/class. For example a ladies shoes can be of leather in a
sandal form or it may be a canvass shoe. Manufacturer can produce mens formal shoe byusing synthetic materials and do on. So, it is very difficult to specify the product by grade,
type or model. We can treat it only as an essential consumer product.
In all countries of the world, the demand for footwear is high and in most developing
countries it is averagely growing. It is also estimated that about 60% of the worlds total
consumption consists of simple footwear made entirely of no-leather materials and that for
the remaining 40% only the upper part of the shoe is made of leather.
The business is of trading nature and carries larger potential for profit. Unfulfilled demand,
change in fashion and good profit margins are few incentives for a new entrants in thisbusiness, especially for those who are committed to quality product.
3.2 PROJECT BRIEFFootwear is a product use to cover feet as boot or shoe. This can be categorized on materials,
style and usage. The generally used materials are leather, man-made materials,rubber/canvas/synthetic and textile along accessories. Further classification is Mens,
Ladies, and children. This can be further subdivided on the basis of style closed or open,formal or casual, sandal or slipper or fancy shoes relates to fashion. The local industry also
caters the special users like army, sportsman, disabled persons, fire brigades and motorcyclist
etc. Domestic industry is also producing safety shoes for work force.
3.3 MARKET ENTRY TIMINGS
There is no time specification for starting such a business because there is no seasonal
impact. Product sold not only in summer, winter but also on occasions like Eid, after
summer vocation. So, business can be start at any time.
3.4 BUSINESS LEGAL STATUS
This Legal status is recommended to be a sole proprietorship/partnership because it requires
less legal requirement to start with than a company. Also the small and medium stores in
existing industry are sole proprietorships or partnerships. Similarly a lower income tax rate oftax is applicable to sole proprietorship than that of companies.
3.5 PROJECT CAPACITY & RATIONAL
Pakistan is the 7th largest populated country in the world. Each year, 3.2 million new children
are born. The population growth rate has been reported as 2.25% during the year 2005-06.
This high population growth rate provides an opportunity for the investor to set up a retail
outlet meet the demands of this sector and earn substantial profits.
The proposed project is to provide footwear for men, ladies and children simultaneously. Thiswill provide the minimum feasible size for the project and minimum capital outlay for project
instigation.
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Table 1 First years capacity
Imported shoes
Branded
Men 945
Ladies 1,215
Children 540
Non-Branded
Men 945
Ladies 1,215
Children 540
Local Shoes
Branded
Men 756
Ladies 972
Children 432
Non-Branded
Men 504
Ladies 648
Children 288
Total 9,000
3.6 PROJECT INVESTMENT
Cost of the project will consist of the following.
Table 2: Project Investment
Lahore Branch Head Office Warehouse
Furniture & Fixture 1,500,000
Office Equipment 700,000
Vehicles 1,400,000
Security deposit 960,000
Pre-operating Expenses 110,000
Total Fixed Cost 4,670,000
Initial Working Capital 1,338,688
Total Project Cost 6,008,688
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3.7 PROPOSED LOCATION
Location of outlet is of primary concern with any retail organization. Spending time and
money wisely in the process of site selection is of primary importance. Keeping in viewproducts offered it is recommended that outlet must be in area like Defence, Gulberg and
Fortress stadium etc. The expansion is planned in various big cities with a single branchopened every year.
3.8 KEY SUCCESS FACTORS
The most important factor for the success of a project is quality of product provided to the
customer. Customer satisfaction will be the key success factor.
Retail store is full of opportunities for success, but that success is reserved for those whoare prepared to commit themselves to everlasting change.
To obtain a good average of profits it is necessary to provide state of art facilities tocustomers.
There should be regular and sustained marketing through fliers distribution and CableTV.
Frequent discount policies used to enhance customer motivation.
The store should have an ample space for customer car parking. It is advisable tomaintain a parking space whereby around 10-15 cars can be parked
The staff hired should be well mannered and well trained in dealing with the customers.
3.9 STRATEGIC RECOMMENDATION
3.9.1 Marketing
Regular and sustained marketing is required for a successful business of retail shop. Theimportant marketing channels would be flyer distribution, Cable TV, etc. Regular
advertisement expense should be at least 1% to 2% of sales in such business. Some marketing
and promotional tips are as under:
Existing customers are best referrals.
Know customers needs.
Frequent clearance sales
3.9.2 Pricing
Retailers have a basic philosophy towards pricing their product. What is important is that
they create and stick to a strategy for pricing so as to convey a clear message to the
consumer. The market has certainly created the need for all retailers, even those at the higher
end, to become more value oriented. That is not to suggest that you necessarily need to
compete on price, only that you be aware of providing consumer perceived value.
Some value pricing strategies are as follows:
Provides the consumer with an incentive to become a repeat customer by offering a futurediscount.
Frequent clearance sales
Include a gift with purchase
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Feature your discounted prices predominantly.
3.9.3 Store layout and presentation
Todays successful retailer is the one making the most profitable use of every square foot of
space in the store and in the warehouse. Because space is costly, retailers need to take a
strategic approach to its use. Floor patterns, location of merchandise, amounts of merchandise
and the appropriate displays are all key factors in determining space. Misuse of space can beas detrimental to success as poor Buying. It is very important for every store to create a
suitable atmosphere and appealing presentations in order to trigger the consumers buying
decision. In a world where one can find identical merchandise in more than one store, layout
and presentation becomes a key-differentiating factor. The proposed store should be air-
conditioned. There should be proper arrangement of lightening.
3.9.4 Use of computer
The computer is an invaluable aid in processing the large number of transactions and vast
amounts of information involved in managing a retail operation. The amount of data needed
for merchandise planning for example would require hundreds of man-hours to produce,
whereas a well-designed computer system can perform the task in seconds. Software for
inventory and sales recording and management should be used to have updated data at all the
times. This software not only records each and every sales transaction but also update stock
and cash position after every transaction.
3.9.5 Inventory
Stock of finished goods kept must be for 180 days by farseeing major occasions, holidays,
weather and Islamic events like Eid. Supply source would be outsourcing from leading
manufacturers with own developed brands. There must be well-known imported brand
category and other footwear accessories like socks polishes, laces and gifts for children.
4 MACROECONOMIC INDICATORS OF PAKISTAN
4.1 DEMOGRAPHY OF PAKISTAN
The population of Pakistan was 32.5 million in 1947. Over the last fifty-five years, it has
increased by four folds reaching to a figure of 156 Million approximately. It is expected to
172 million marks in the year 2010. The demographic details of Pakistans population are
given below:
Table 3: Demography of Pakistan 20061
Total Estimated Population 156 Million
Population Density: 185/sq. km
Population Growth 2.25%
Population Doubling Time: 32 Years
Birth Rate: 27.3 per 1000 population
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4.2 POPULATION GROWTH
Achieving a world of population in balance with its environmental resources is crucial to the
future of our planet and the welfare of its people. Population growth is a complex issue that
directly or indirectly impacts all aspects of our lives and the conditions under which we live.
During the past 25 years, cultivable land has increased by 27 percent compared to 98 percentincrease in population.1 Due to high birth rate urban population will double in the next 20
years causing more and more opportunity for the promotion of furniture business.
At present year 2005-6 the annual population growth rate is around 2.25 in country.Pakistans population will be twice over in less than 32 years. Punjab is the most thickly
populated area and Karachi is the most densely populated city. Keeping in view the growthrate of population of the country it is likely that housing requirements will enhance and
automatically demand for home and office furniture will be increase.
4.3 DEMAND & SUPPLY
On the basis of present population and assuming the per capita consumption of one pair, the
present estimated domestic consumption is 160 million pairs as there are no imports offootwear in the country2.
To match the annual growth in population projected future requirement of footwear must be8% for local consumption and 20 %growth for export.
5 SECTOR & INDUSTRY ANALYSIS
5.1 SECTOR CHARACTERISTICS
The footwear industry has been growing since 1996. There has been a continuous increase in
both production and consumption of footwear in Pakistan till the year 1999. During the year
2000, a nominal growth of 0.2% and 0.6% has been recorded in the production and
consumption of shoes respectively. Children shoes being a necessity product, is directlylinked with the population growth rate, and keeping into consideration the per capita
consumption of footwear in Pakistan, estimates can be
5.2 SUB SECTOR INFORMATION
Focal points of footwear outlets are big cities including Karachi, Lahore, and Rawalpindi.
5.3 ISSUES REGARDING INDUSTRY
Departmental stores business like any other business activity must be registered with incometax department and sales tax department. Prevailing rate of income tax for sole proprietorship
is in various slabs max 35%. There are two types of registration available to retailers in Salestax3. Either it can be enrolled for turnover tax if sales are up to Rs. 20M per annum or if sales
exceed Rs. 20 M it must be registered under Retail Tax. Prevailing turnover tax rate is 2% ofall taxable sales without deducting/adjusting any input tax (sales tax paid on purchase of raw
material). The rate of prevailing retail tax is 15% of taxable sales subject to adjustment of
input tax (sales tax paid on purchases).
1 Economic survey of Pakistan 2005-062
www.pakboi.org.pk3
Sales Tax Act 1990
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6 MARKETING
6.1 MARKET POTENTIAL
Paper marketing is essential for attracting clients towards newly established business. Once a
reasonable clientele is established the stress on marketing can be decreased, as it will be
automatically done through word on mouth.
Major marketing is done through advertisement. This includes giving advertisement innewspapers and magazines. An effective marketing campaign plays a vital role in the success
of business.
6.2 COMPETITIVE ENVIRONMENT
For a newly established outlet it is imperative to face a competitive environment in themarket as competition enhances a ability to strive for continuous improvement. Some big
manufacturer of footwear have outlet chain world wide, some of which are listed below:
6.3 MAJOR PLAYERS FOOTWEAR OUTLET
Table 2: Key Footwear Outlet
Key Players Areas of Operations
Bata Pakistan Limited International
Service (Pvt.) Ltd Nation wide
Hush Puppies Nation wide
English Shoes Nation wide
Starlet (Pvt.) Ltd Nation wide
Borjan (Pvt.) Ltd Lahore & Surroundings
Stylo Shoes Lahore & Surroundings
Elegant Shoes Lahore & Surroundings
Milli Shoes National wide
Reboc Lahore
Ehsan Chappal Store Lahore & Surroundings
Dulhosie Shoes Lahore
6.4 TARGET CUSTOMERSThe target customer for the proposed project would be the Men, Women and children of
upper middle class and upper class.
6.5 TRADE STATISTICS
Outlet for footwear falls under retail sector. This sector has shown a significant growth over
the last few years. In 2002-2003 this sector showed a growth of 7.30%. This sectors
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contribution towards GDP in the year 2002-2003 is 15.50%. The following table shows the
contribution of retail and wholesale sector towards GDP for the last 5 years at constant factor
cost.
Table 3: Contribution of Retail and Wholesale sector towards GDP
Year Total GDP Wholesale &
Retail trade
Share % age Growth %age
1998-1999 625,233 94,891 15.18 2.97
1999-2000 649,656 96,713 14.89 1.92
2000-2001 663,206 101,911 15.30 5.40
2001-2002 686,382 104,237 15.20 2.30
2002-2003 721,251 111,870 15.50 7.30
2003-2004
2004-2005
7 PROJECT PROFILE
7.1 LAND REQUIREMENT
For the Purpose of this study it is recommended to start project in a rented shop. The
approximately area required is 30*30 feet. This space should be available in Lahore at around
Rs.60, 000 per month.
7.1.1 Recommended ModeOne recommendation is to acquire shop on rent.
7.2 UTILITIES REQUIREMENTS
Telephone-2 lines, one for fax, one for telephone usage
Electricity 3-phase commercial connection
Internet facility
7.3 TIME SCHEDULE
Time required for establishing a set up is six to eight weeks.
7.4 SUITABLE LOCATION
Big cities are suitable location for such type of outlets. It is assumed in this pre-feasibility
that a single new outlet will be opened every year in a new city.
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7.5 FURNITURE, FIXTURES & OFFICE EQUIPMENT
Furniture & Fixtures sq/ft Rate PKR
Lahore Branch
Shoe Racks 1000 500 500,000
Sofa and other sitting arrangements 500 250 125,000
Table & Chair 3 10,000 30,000
Interior Designing 1000 350 350,000
Store & office on roof
Head Office
Table & Chair 7 15,000 105,000
Interior Designing 1000 350 350,000
Warehouse
Table & Chair 4 10,000 40,000
1,500,000
Office Equipment Qty Rate PKR
Main Branch Lahore
Air-conditioning 4 25,000 100,000
Telephone Exchange(Including
Telephone Sets)
1 40,000 40,000
Fax Machines 1 18,000 18,000
Computers
Standard 1 25,000 25,000
Printers
Laser Printer 1 18,000 18,000
Dot Matrix 1 6,000 6,000
Head Office
Air-conditioning 4 25,000 100,000
Branches Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10
Lahore 1
Gujranwala - 1 - - - - - - - -
Rawalpindi - - 1 - - - - - - -
Islamabad - - - 1 - - - - - -
Faisalabad - - - - 1 - - - - -
Sialkot - - - - - 1 - - - -Multan - - - - - - 1 - - -
NWFP - - - - - - - 1 - -
Karachi - - - - - - - - 1 -
Balochistan - - - - - - - - - 1
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Fax Machines 1 18,000 18,000
Computers
Standard Computer 6 25,000 150,000
Printers
Laser Printer 2 18,000 36,000
Networking 1 50,000 50,000Telephone Exchange(Including
Telephone Sets)
1 40,000 40,000
Warehouse
Air-conditioning 2 25,000 50,000
Fax Machines 1 18,000 18,000
Computers
Standard 1 25,000 25,000
Printers
Laser Printer - 18,000 -Dot Matrix 1 6,000 6,000
700,000
Other Branches (Year 2 onwards)
Description Rs.
Fixture & Furniture 650,000
Electrical Equipment 68,000
Office Equipment 43,000
TOTAL 761,000
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7.6 HUMAN RESOURCE REQUIREMENT
Table 4: Human Resource Requirement
Lahore (Head Office & Ware House) (1st Year)
Position Reqd. Salary / Month Total
Executive Director 1 25,000 25,000
Accounts Officer 1 10,000 10,000
Accountant 1 7,500 7,500
Purchase Officer 1 8,000 8,000
Store In-charge 1 8,000 8,000
Office Assistant 2 5,000 10,000
Office Boys 1 3,000 3,000
Security Guard 2 3,500 7,000
Sweeper 1 2,000 2,000
11 80,500Other Benefits 10% 8,050
Gross Monthly wages and salaries 88,550
Gross wages and salaries per annum 1,062,600
For Lahore Branch (1st
Year)
Position Reqd. Salary / Month Total
Branch Manager 1 15,000 15,000
Salesmen 3 6,000 18,000
Helper 2 4,000 8,0006 41,000
Other Benefits 10% 4,100
Gross Monthly wages and salaries 45,100
Gross wages and salaries per annum 541,200
For Other Branches (2nd year onwards)
Position Reqd. Salary / Month Total
Branch Manager 1 10,000 10,000
Salesmen 2 6,000 12,000Helper 1 4,000 4,000
4 26,000
Other Benefits 10% 2,600
Gross Monthly wages and salaries 28,600
Gross wages and salaries per annum 343,200
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8 FINANCIAL PROJECTIONS
8.1 Project Summary
PROJECT COST
Furniture & Fixture 1,500,000Office Equipment 700,000Vehicles 1,400,000
Security deposit 960,000
Pre-operating Expenses 110,000Total Fixed Cost 4,670,000Initial Working Capital 1,338,688
Total Project Cost 6,008,688
FINANCIAL PLAN
Capital 50% 3,004,344Long term loan 1,425,131Short Term loan 1,079,213Other Liabilities/Criditors 500,000
Total Funds 6,008,688
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8.2 Income Statement
FOR THE YEAR 1 2 3 4 5 6 7 8 9 10
Revenue 6,709,500 15,408,846 27,269,363 42,984,548 63,369,811 87,408,113 115,626,210 148,619,677 187,061,407 231,711,119
Less: Cost of Services 4,948,730 12,297,600 19,764,194 29,347,193 41,424,560 55,221,125 71,179,093 89,481,628 110,466,125 134,494,920
Gross Profit / ( Loss ) 1,760,770 3,111,246 7,505,169 13,637,355 21,945,251 32,186,988 44,447,117 59,138,049 76,595,282 97,216,199
Operating Expenses
Administration & SellingExpenses
2,965,570 3,652,327 4,537,000 5,580,304 6,559,118 7,626,113 8,837,536 10,184,981 12,163,541 14,177,963
Financial Charges 423,095 523,508 659,123 827,826 1,025,911 1,284,136 1,617,522 2,022,749 2,481,483 222,300
3,388,665 4,175,835 5,196,123 6,408,130 7,585,030 8,910,249 10,455,057 12,207,730 14,645,024 14,400,263
Profit Before Taxation (1,627,895) (1,064,589) 2,309,046 7,229,225 14,360,221 23,276,739 33,992,059 46,930,319 61,950,258 82,815,937
Income tax 33,548 77,044 461,809 1,445,845 2,872,044 4,655,348 6,798,412 9,386,064 12,390,052 16,563,187
Net Profit After Tax (1,661,443) (1,141,633) 1,847,237 5,783,380 11,488,177 18,621,391 27,193,647 37,544,256 49,560,206 66,252,749
Balance brought forward - (1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218
(1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218 215,487,967
Retained Earning (1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218 215,487,967
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8.3 Balance Sheet
CAPITAL ANDLIABILITIES
0 1 2 3 4 5 6 7 8 9 10
Paid up Capital 3,004,344 3,004,344 3,803,394 4,642,397 5,523,349 6,448,349 7,419,600 8,439,412 9,510,216 10,634,559 11,815,1
Retained Earning (1,661,443) (2,803,076) (955,839) 4,827,540 16,315,717 34,937,109 62,130,756 99,675,012 149,235,218 215,487,9
Total Equity 3,004,344 1,342,901 1,000,318 3,686,557 10,350,890 22,764,067 42,356,708 70,570,169 109,185,228 159,869,777 227,303,0
Long Term Loan 1,425,131 1,213,487 970,234 690,654 369,321 0 - - - -
Current Liabilities
Creditors And OtherLiabilities
500,000 487,000 600,000 746,000 917,000 1,078,000 1,254,000 1,453,000 1,674,000 1,999,000 2,331,0
Short Term Loan 1,079,213 1,821,663 2,837,202 4,159,841 5,778,736 7,671,608 9,877,966 12,442,476 15,559,606 19,088,334 1,710,0
Tax payable 33,548 77,044 4 61,809 1,445,845 2,872,044 4,655,348 6,798,412 9,386,064 12,390,052 16,563,1
Total Current Liabilities 1,579,213 2,342,211 3,514,246 5,367,650 8,141,581 11,621,653 15,787,314 20,693,888 26,619,669 33,477,385 20,604,1
Total Capital AndLiabilities
6,008,688 4,898,599 5,484,799 9,744,862 18,861,792 34,385,719 58,144,022 91,264,056 135,804,897 193,347,163 247,907,2
ASSETS 0 1 2 3 4 5 6 7 8 9 10
Fixed Assets 3,600,000 3,600,000 4,399,050 5,238,053 6,119,005 7,044,005 8,015,256 9,035,068 10,105,872 11,230,215 12,410,7
Less Depreciation 616,400 1,192,940 1,755,572 2,324,753 2,859,721 3,448,923 4,100,442 4,822,085 5,621,705 6,325,8
Net Fixed Assets 3,600,000 2,983,600 3,206,110 3,482,481 3,794,252 4,184,284 4,566,332 4,934,626 5,283,787 5,608,510 6,084,8
Pre-operating Expenses 110,000 88,000 66,000 44,000 22,000 - - - - -
Current Assets
Inventory 838,688 1,926,106 3,408,670 5,373,068 7,921,226 10,926,014 14,453,276 18,577,460 23,382,676 28,963,890
Security deposit 960,000 1,110,000 1,320,000 1,560,000 1,710,000 1,860,000 2,010,000 2,160,000 2,550,000 2,850,000 2,850,0
Cash And Bank Balances 500000 (1,209,107) (2,515,982) (714,687) 5,414,313 17,415,421 37,114,413 65,591,970 104,588,434 155,924,762 238,972,3
Total Current Assets 2,298,688 1,826,998 2,212,689 6,218,381 15,045,539 30,201,435 53,577,689 86,329,430 130,521,109 187,738,652 241,822,3
Total Assets 6,008,688 4,898,598 5,484,799 9,744,862 18,861,791 34,385,719 58,144,022 91,264,056 135,804,897 193,347,162 247,907,2
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8.4 Cash-Flow Statement
FOR THE YEAR 0 1 2 3 4 5 6 7 8 9
Net Profit Before Tax (1,627,895) (1,064,589) 2,309,046 7,229,225 14,360,221 23,276,739 33,992,059 46,930,319 61,950,258 82,8
Add Depreciation 616,400 576,540 562,632 569,181 534,968 589,202 651,519 721,642 799,621 70
Pre-operating Expenses 22,000 22,000 22,000 22,000 22,000 - - - -
(989,495) (466,049) 2,893,678 7,820,406 14,917,190 23,865,941 34,643,578 47,651,962 62,749,878 83,5
(Inc)/Dec in currentassets
Inventor y (838,688) (1,087,418) (1,482,565) (1,964,398) (2,548,158) (3,004,788) (3,527,262) (4,124,183) (4,805,216) (5,581,214) 28,9
Security deposit (960,000) (150,000) (210,000) (240,000) (150,000) (150,000) (150,000) (150,000) (390,000) (300,000)
Inc/(Dec) in current
liabilities
Creditors & OtherLiabilities
500,000 (13,000) 113,000 146,000 171,000 161,000 176,000 199,000 221,000 325,000 33
Change in working capital (1,298,688) (1,250,418) (1,579,565) (2,058,398) (2,527,158) (2,993,788) (3,501,262) (4,075,183) (4,974,216) (5,556,214) 29,2
Net Inflow/Outflow from
Operating Activities
(1,298,688) (2,239,914) (2,045,613) 835,280 5,293,248 11,923,402 20,364,679 30,568,395 42,677,745 57,193,664 112,
Capital Expenditure (4,210,000) - - - - - - - - -
Cash-flow from
Financing Activities
Addition to long term loan 1,425,131
Repay long term loans (211,645) (243,252) (279,580) (321,333) (369,321) - - - - Incr in short term Loan 1,079,213 742,451 1,015,539 1,322,639 1,618,895 1,892,873 2,206,357 2,564,510 3,117,130 3,528,728 (17,3
Tax paid - (33,548) (77,044) (461,809) (1,445,845) (2,872,044) (4,655,348) (6,798,412) (9,386,064) (12,3
Owners Investment 3,004,344 - - - - - - - -
Net Inc/(Dec) in Cash (1,709,107) (1,306,874) 1,801,294 6,129,000 12,001,108 19,698,992 28,477,557 38,996,463 51,336,329 83,0
Cash in beginning of year 500,000 500,000 (1,209,107) (2,515,982) (714,687) 5,414,313 17,415,421 37,114,413 65,591,970 104,588,434 155,
Cash balance (end ofyear)
500,000 (1,209,107) (2,515,982) (714,687) 5,414,313 17,415,421 37,114,413 65,591,970 104,588,434 155,924,762 238,
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9 KEY ASSUMPTIONS
Capacity Utilization Assumptions
Starting Capacity Utilization 50%
Annual Growth Rate in Capacity Utilization 10%
Maximum Capacity Utilization for the Project 90%
Financial Projections
Debt 50%
Equity 50%
Interest on Long term Loan 14%
Debt tenure (Years) 5 Years
No. of installments per year 12
Amortization (years) 5
Income tax rate 20%
Operational Assumptions
No. of working days in a month 25
Working days in a year 300
Sales per annum (60 pairs per day) @ 100% 18,000
Product Mix
Ratio
Imported 60.0%
Branded 60 % 50%
Non-Branded 50%
Local 40%
Branded 60%
Non-Branded 40%
Men 35%
Ladies 45%
Children 20%
Cash Flow Related Assumptions
Sales 100% cash based
Creditors 60
Inventory 45
Cash in Bank 45
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Depreciation Assumptions
Depreciation Method WDV
Furniture and Fixture 10%
Vehicle 20%
Office equipment 30%
Price Assumption( Average basis)
Imported
Branded
Men 1,500
Ladies 900
Children 500
Non-Branded
Men 1,000
Ladies 500
Children 300Local
Branded
Men 600
Ladies 650
Children 350
Non-Branded
Men 500
Ladies 400
Children 250
Cost Assumption
Rupees
Imported
Branded
Men 750
Ladies 450
Children 250
Non-Branded
Men 500
Ladies 250
Children 150
Local
Branded
Men 300
Ladies 325
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Children 175
Non-Branded
Men 250
Ladies 200
Children 125
Furniture & Fixtures
Interior Designing of store includes:
Walls
Fall ceiling
Flooring
Lighting
Space Assumptions
Outlets RentWarehouse Rent
Head office Rent
Outlets Rents
Lahore main branch 60,000
Lahore Outlet 35,000
Gujranwala 25,000
Rawalpindi 35,000
Islamabad 40,000
Faisalabad 25,000
Sialkot 25,000
Multan 25,000
NWFP 25,000
Karachi 65,000
Head office 40,000
Warehouse 25,000