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Pre-Feasibility Study
(Gems Stone Lapidary)
Small and Medium Enterprises Development Authority
Ministry of Industries & ProductionGovernment of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
LahoreTel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
REGIONAL OFFICE
PunjabREGIONAL OFFICE
SindhREGIONAL OFFICE
Khyber PakhtunkhwaREGIONAL OFFICE
Balochistan3rdFloor, Building No. 3,
Aiwan-e-Iqbal Complex,
Egerton Road Lahore,
Tel: (042) 111-111-456
Fax: (042) [email protected]
5TH Floor, Bahria
Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) [email protected]
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 111-111-456
Fax: (091) [email protected]
Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 2831623, 2831702
Fax: (081) [email protected]
Note: All SMEDA Services / information related to PM's Youth Business Loan areFree of Cost
December, 2013
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Table of Contents
1.DISCLAIMER .......................................................................................................................................... 22.PURPOSE OF THE DOCUMENT ......................................................................................................... 33.INTRODUCTION TO SMEDA .............................................................................................................. 34.INTRODUCTION TO SCHEME ........................................................................................................... 45.EXECUTIVE SUMMARY ...................................................................................................................... 46.BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 47.CRITICAL FACTORS ............................................................................................................................ 58.INSTALLED & OPERATIONAL CAPACITY .................................................................................... 59.GEOGRAPHICAL POTENTIAL FOR INVESTMENT/SUITABLE LOCATIONS ........................ 510. POTENTIAL TARGET MARKETS/CITIES ................................................................................. 611. PRODUCTION PROCESS FLOW .................................................................................................. 712. PROJECT COST SUMMARY ......................................................................................................... 712.1. PROJECT ECONOMICS ....................................................................................................................... 712.2. PROJECT FINANCING ........................................................................................................................ 812.3. PROJECT COST .................................................................................................................................. 812.4. SPACE REQUIREMENT....................................................................................................................... 812.5. MACHINERY AND EQUIPMENT .......................................................................................................... 912.6. RAW MATERIAL REQUIREMENTS ................................................................................................... 1012.7. ROUGH GEMSTONES ....................................................................................................................... 1012.8. LAPIDARY CONSUMABLES ............................................................................................................. 1012.9. HUMAN RESOURCE REQUIREMENT ................................................................................................ 1112.10. REVENUE GENERATION .................................................................................................................. 1112.11. OTHER COSTS................................................................................................................................. 1213. CONTACTS ...................................................................................................................................... 1214. ANNEXURE ..................................................................................................................................... 1314.1. INCOME STATEMENT ...................................................................................................................... 1314.2 STATEMENTOFCASHFLOW .................................................................................................. 1414.3 BALANCESHEET ....................................................................................................................... 1514.2. USEFULPROJECTMANAGEMENTTIPS ................................................................................ 1614.3. USEFULLINKS ........................................................................................................................... 1715. KEY ASSUMPTIONS ..................................................................................................................... 19
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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general
idea and information on the subject. Although, the material included in this document is
based on data / information gathered from various reliable sources; however, it is based
upon certain assumptions which may differ from case to case. The information has beenprovided on, as is where is basis, without any warranties or assertions as to the
correctness or soundness thereof. 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, its employees or agents do not assume any liability for any
financial or other loss resulting from this memorandum in consequence of undertaking
this activity. The contained information does not preclude any further professional
advice. The prospective user of this memorandum is encouraged to carry out additional
diligence and gather any information which is necessary for making an informed
decision, including taking professional advice from a qualified consultant / technical
expert before taking any decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
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2. PURPOSE OF THE DOCUMENT
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,production, marketing, finance and business management.
The purpose of this document is to facilitate potential investors in Gems Stone Lapidary
by providing them a general understanding of the business with the intention of
supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and its successful management.
Apart from carefully studying the whole document, one must consider critical aspects
provided later on, which form basis of any Investment Decision.
3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs", SMEDA has carried out sectoral research to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.
Preparation and dissemination of pre-feasibility studies in key areas of investment has
been a hallmark of SME facilitation by SMEDA.
Concurrent to the pre-feasibility studies, a broad spectrum of business development
services is also offered to SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types, in addition to business guidance through help desk services.
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4. INTRODUCTION TO SCHEME
Prime Ministers Youth Loans Scheme, for young entrepreneurs, with an allocated
budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised
financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries,
by designated financial institutions, initially through National Bank of Pakistan (NBP)and First Women Bank Ltd. (FWBL).
Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 1 year
grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries+
across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit
Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
5. EXECUTIVE SUMMARY
While, Lahore & Karachi with its large Gold and Gem studded jewellery making industryare suitable locations, Gems Stone Lapidary is proposed to be located at Peshawar
since major trade/export is taking place in this city. Within Peshawar, Namak Mandi
area is preferable, as large Gems Clusters exist here. These jewellery markets are the
main customers of cut and polished gemstones. The proposed unit will process rough
gemstones, initially semi precious gemstones like Aquamarine, Peridot, Tourmaline etc.
These gemstones mainly come from mines in Chitral, Mardan and Gilgit Baltistan in
addition to gems from Afghanistan and other nearby locations.
Proposed unit will have the capacity to process 3,000 units (Cut & Polished Gemstones,
(average 3 carat weight per stone). In the first year of operation, the unit would run on60% of the total production capacity, which is processing 1,800 pieces.
The total cost of the project is Rs. 2.08 million, with capital cost of Rs. 1.19 million andoperation cost of Rs. 0.89 million. Given the cost assumptions, IRR and payback are38 % and two years respectively, thus making the project a profitable venture.
The most critical considerations or factors for success of the project are:
1. Awareness about current market trends i.e. the type of stone & type of cutrequired by customers, which in this case are jewellers.
2. Availability of skilled labour.
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT
Technology:This proposed unit with modern processing machines includes
faceting, cutting and polishing to produce cut and polished precious and semi-
precious gem stones of both calibrated and non-calibrated types.
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Location: The unit will be located in or near gems trading clusters such as
Namak Mandi in Peshawar, or Lahore and Karachi also, where access to raw
gemstones is easy.
Product: The unit would initially process semi-precious gem stones like
Aquamarine, Tourmaline, Peridot etc. which comes from Chitral and Northernareas.
Target Market: An enormous export market for Pakistani gemstones exists in
Europe, USA, Middle East, Hong Kong, Taiwan, etc. The Government of
Pakistan, recognizing the potential for local value addition has waived off import
duty on lapidary equipment.
Employment: The proposed project will provide direct employment to 9 people.
Profitability: Financial analysis shows the unit shall be profitable from the very
first year of operation.
7. CRITICAL FACTORS
The commercial viability of the Gems Stone Lapidary depends, primarily, on regular
orders from customers. Following are some other points that have to be ensured to
make the business successful:
1. Awareness about current market trends i.e. the type of stone & type of cutsrequired by customers; which in this case are jewellers.
2. Availability of skilled labour.3. Timely delivery of orders
4. Availability of raw material (rough, uncut and unpolished gemstones).
8. INSTALLED & OPERATIONAL CAPACITY
The installed capacity shall be 3,000 pieces per year. The project will run with
approximately 60% capacity in first year of its operations with annual increase of 3% in
production, constraint being skill levels.
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT/SUITABLE
LOCATIONS
The most appropriate location for setting up a Gems Stone Lapidary would bePeshawar, since major trade/export takes place in this city. Within Peshawar, Namak
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Mandi area is preferable as large Gem Clusters exist here. Similarly, Lahore & Karachi,with their large Gold and Gem studded jewellery making industry, are other suitablelocations. Chitral and Mingora as well as Gilgit and Skardu are also suitable locationsfor establishment of Gems Stone Lapidary due to proximity to raw material sources.
10. POTENTIAL TARGET MARKETS/CITIESInitially the products, mainly semi-precious natural gemstones will be processed byfocusing on demand of the jewellery manufactures of Karachi, Lahore and Peshawar.
After having reasonable domestic customers base, export market can be targeted,provided export standards are met. The main export markets for Pakistani Gemstoneare U.A.E, United Kingdom, Thailand, Canada, Italy, China, Netherlands, Saudi Arabia,USA, Hong Kong and Germany.
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11. PRODUCTION PROCESS FLOW
The process of Lapidary includes grading, cutting and polishing of gemstones. Rawstones are either purchased from the market, or provided by the customers (Jewellers).
Individual stone is then examined (graded) and cut into smaller stones along its majorline of fracture and inclusions. The smaller pieces are then mounted on cutting tools,which are then faceted on faceting machines. The final operation involves polishing ofthe faceted stones. Polished stones are then delivered to the customers or sold in themarket.
12. PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability ofGems Stone Lapidary under the Prime Ministers Youth Business Loan Scheme.Various cost and revenue related assumptions along with results of the analysis are
outlined in this section.
12.1. PROJECT ECONOMICS
A target processing and production of 3000 units (cut & polished gemstones) wherebyunits processed and produced by Gems Stone Lapidary in year one will be around 1800units (cut & polished gemstones) running at 60% production capacity.
The following table shows internal rates of return and payback period.
Table 1 - Project EconomicsDescription Details
Internal Rate of Return (IRR) 38%
Payback Period (years) 02
Net Present Value (NPV) 4,714,799
Raw Stones ofCustomers
Purchase ofRaw Stones
Grading Cutting Polishing
Delivery toCustomers
Sale toMarket
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requirement for processing area and office. The Units operating in the industry do notfollow any set pattern. Following table shows calculations for project space requirement.
Table 4: Space Requirement
Space Requi rement (in ft.) Sqft
Cutting & Polishing Room 500Offices & Strong Room 250
Total Area 750
Monthly rent for the building with covered area of 750 Sft is estimated at Rs. 21,000
12.5. MACHINERY AND EQUIPMENT
Following combination of machinery is required for cutting and polishing ofapproximately 3,000 units (cut & polished gemstones, with average weight of 3 carats)
per year. Approximate prices for machinery of different origins are given below:
Table 5: List of Machinery and Equipment
MachineryDescription
QuantityCost
Rs/unitTotalRs.
Trim Saw 2 60,000 120,000
Faceting unit 2 60,000 120,000
Calibrating machineswith wheels
1 350,000 350,000
Dual Grinder 2 40,000 80,000
Wet belt sander
Horizontal 1 70,000 70,000
Vertical 1 80,000 80,000
Faceting Accessories 1 150,000 150,000
Faceting Table 1 20,000 20,000
Total 990,000
Main equipment for Gems Stone Lapidary is Trim Saw, for initial trimming of roughGems Stone. After initial trimming, faceting takes place followed by polishing.
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12.6. RAW MATERIAL REQUIREMENTS
Details of Lapidary Consumables and rough (uncut and unpolished) gemstones aregiven below:
12.7. ROUGH GEMSTONES
Table 6 Raw Material (Rough Gemstones)
Raw Material Weight(grams)
Carat Weight Rate/carat Total Cost (Rs.)
Rough Aquamarine 1,500 7,500 20 150,000
Rough Tourmaline 1,500 7,500 20 150,000
Total 3,000 15,000 20 300,000
In the first stage, rough gemstones are graded on the basis of quality for furtherprocessing. According to industry sources, when 3,000 grams of rough gemstones areprocessed, almost 30% i.e. 900 grams is not suitable for cutting and polishing andaround 70% i.e. 2100 grams can be processed further.
12.8. LAPIDARY CONSUMABLES
Basic raw material required for cutting and polishing gemstones is Silicon CarbidePaper, which comes in three sizes of 220, 600 and 1,000 meshes. Raw materialrequired for grinding and polishing of precious stones includes Diamond Powder,
Cerium Oxide and Chrome Oxide, Expandable Drum and Grinding Wheels etc.
Table 7: Lapidary Consumables
Raw Material Quantity Cost (Rs.)
Silicon Carbide Paper
220 mesh 200 Carats 4,000
600 mesh 300 Carats 8,000
1000 mesh 300 Carats 8,000
Diamond Powder
0.5 micron (Rs.25/carat) 200 Carats 4,000
1 micron (Rs.30/carat) 200 Carats 6,000
15 micron (Rs.30/carat) 200 Carats 6,000
Sanding belt 6 X 0.5
220 (70/piece) 50pc 3,500
600 (70/piece) 50pc 3,500
Sanding disk
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220 (70/pc) 50pc 3,500
600 (70/pc) 50pc 3,500
Cerium Oxide (500/lbs) 5 lbs. 2,500
Chrome Oxide (500/lbs) 10 Kg 5,000
Grinding Wheels (1,000/piece) 12 12,000
Expandable Drum 6 X 0.5 (3000/drum) 2 6,000
Leather Belt for polishing (1000/belt) 5 5,000
Misc./Contingencies - 9,500
Total 90,000
12.9. HUMAN RESOURCE REQUIREMENT
Table 8: Human Resource RequirementDescription No. of Employees Salary per month
Manager/Supervisor 1 35,000Cutters @10000 5 50,000
Accounts/AdministrationIncharge
1 12,000
Helper/Peons 1 10,000
Security Services Fees 1 10,000
Total 9 117,000
12.10. REVENUE GENERATION
In the first year of production, the unit will process 1800 units @60% production
capacity with 3% annual production increase,and process the finished product with anaverage weight of 3 carats. Initially semi- precious stones i.e Aquamarine, Tourmalineetc. will be processed and later on cutting and polishing of precious stones, such asemerald and ruby will be undertaken.
Table 8: Revenue
Product UnitSalesPrice
(Rs./Unit)
First YearProduction
Units
First YearSales
Revenue(Rs)
Category A(Cut & polishedAquamarine &Tourmaline)
3 carat 5000 306 1,530,000
Category B (Cut & polishedAquamarine &Tourmaline)
3 carat 1800 630 1,134,000
Category C(Cut & polishedAquamarine &Tourmaline)
3 carat 700 864 604,800
Total Sales Revenue 1800 3,268,800
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12.11. OTHER COSTS
An essential cost to be borne is the monthly rent @ 20,000 / month and utility charges@ 10,000 / which are projected to increase at the rate of 10% per year. In year 1, the
total rent cost amounts to Rs. 240,000. Similarly, electricity expense is estimated to beabout 10,000 per month which comes to Rs.120,000 per annum.
13. CONTACTS
1. Mr. Pervez Ellahi MalikM/S Malik Gems InternationalNamak Mandi PeshawarPh# 0321-8592517091-5252517
2. Mr. Afzal KhanLapidary InstructorGems and Jewellery Training and Manufacturing Centre (GJTMC)Opp. Imperial Store, Saddar, Cantt. PeshawarPh# 091-5269253
3. Mr. Naveed Masood
Director GGIP,
Gems and Gemological Institute of PakistanSuite # 209, 1st Floor, Benevolent Fund Building, Sadder Road, PeshawarPhone: (+92-91) 9213303, 9213196, 091-9213197, 0333-9155097
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14. ANNEXURE
14.1. INCOME STATEMENT
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Projected Income Statement
YEAR- 1 YEAR- 2 YEAR- 3 YEAR- 4 YEAR- 5 YEAR- 6 YEAR- 7 YEAR- 8 YEAR- 9 YEA
SALES
Gem Stone (Cut & Polished) 1,530,000 1,767,150 2,041,058 2,357,422 2,722,823 3,144,860 3,632,314 4,195,322 4,845,597 5,5
1,134,000 1,309,770 1,512,784 1,747,266 2,018,092 2,330,896 2,692,185 3,109,474 3,591,443 4,1604,800 698,544 806,818 931,875 1,076,316 1,243,145 1,435,832 1,658,386 1,915,436 2,2
- - - - - - - - -
272400 3,268,800 3,775,464 4,360,661 5,036,563 5,817,231 6,718,901 7,760,331 8,963,182 10,352,476 11,9
COST OF SALES
Gem Stone (Cut & Polished) 390,000 471,900 570,999 690,909 836,000 1,011,560 1,223,987 1,481,024 1,792,039 2,1
- - - - - - - - -
- - - - - - - - -
- - - - - - - - -
COST OF GOODS SOLD 390,000 471,900 570,999 690,909 836,000 1,011,560 1,223,987 1,481,024 1,792,039 2,1
Electricity Expanse 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 2
Payroll Expanse (All Staff) 1,404,000 1,544,400 1,698,840 1,868,724 2,055,596 2,261,156 2,487,272 2,735,999 3,009,599 3,3
Deprecition Expanse 57,000 54,150 51,443 48,870 46,427 44,106 41,900 39,805 37,815
Machine Maintenance Expanse 22,800 21,660 20,577 19,548 18,571 17,642 16,760 15,922 15,126
Rent Expanse 252,000 264,600 277,830 291,722 306,308 321,623 337,704 354,589 372,319 3
Amortization of Preliminary Expanses 10,000 10,000 10,000 10,000 10,000 - - - -
TOTAL OPERATING EXPANSES 1,865,800 2,026,810 2,203,890 2,398,584 2,612,594 2,837,788 3,096,223 3,380,161 3,692,089 4,0
EARNINGS BEFORE INTEREST & TAXES 1,013,000 1,276,754 1,585,772 1,947,071 2,368,637 2,869,554 3,440,121 4,101,997 4,868,347 5,7
FINANCIAL EXPENSES
Financial Charges on Long term loan 149,904 137,912 122,456 105,763 87,735 68,265 47,237 24,527 -
TOTAL FINANCIAL EXPENSES 149,904 137,912 122,456 105,763 87,735 68,265 47,237 24,527 -
PROFIT BEFORE TAX 863,096 1,138,842 1,463,317 1,841,308 2,280,902 2,801,289 3,392,884 4,077,470 4,868,347 5,7
INCOME TAX 51,964 93,326 141,998 215,762 303,680 422,822 570,721 745,741 983,004 1,2
PROFIT AFTER TAX 811,132 1,045,516 1,321,319 1,625,546 1,977,222 2,378,467 2,822,163 3,331,729 3,885,343 4,5
Retained Earnings at the beginning of year - 811,132 1,451,082 2,249,643 3,214,529 4,378,978 5,768,834 7,401,764 9,322,411 11,5
Dividend 405,566 522,758 660,660 812,773 988,611 1,189,233 1,411,081 1,665,864 1,9
Retained Earnings at the end of year 811,132 1,451,082 2,249,643 3,214,529 4,378,978 5,768,834 7,401,764 9,322,411 11,541,890 14,1
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14.2 STATEMENT OF CASH FLOW
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cted Cash Flow Statement
YEAR- 0 YEAR- 1 YEAR- 2 YEAR- 3 YEAR- 4 YEAR- 5 YEAR- 6 YEAR- 7 YEAR- 8 YEAR- 9 Y
RATING ACTIVITIES
rofit - 863,096 1,138,842 1,463,317 1,841,308 2,280,902 2,801,289 3,392,884 4,077,470 4,868,347
ciation - 57,000 54,150 51,443 48,870 46,427 44,106 41,900 39,805 37,815
ization (Pre-operational Expenses) (50,000) 10,000 10,000 10,000 10,000 10,000 - - - -
ofit before working capital changes (50,000) 930,096 1,202,992 1,524,759 1,900,178 2,337,329 2,845,395 3,434,784 4,117,275 4,906,162
ing Capital changes
materials stock (440,000) 351,536 (8,077) (9,774) (11,826) (14,310) (17,315) (20,951) (25,351) (30,674)
- (1,278) (268) (325) (393) (475) (575) (696) (842) (1,019)
ed goods stock - (8,750) (1,838) (2,223) (2,690) (3,255) (3,939) (4,766) (5,767) (6,978)
nts payable - 32,500 6,825 8,258 9,992 12,091 14,630 17,702 21,420 25,918
nts receivable - (272,400) (42,222) (48,766) (56,325) (65,056) (75,139) (86,786) (100,238) (115,774)
ng capital changes (440,000) 101,608 (45,580) (52,830) (61,242) (71,005) (82,338) (95,497) (110,778) (128,528)
- (51,964) (93,326) (141,998) (215,762) (303,680) (422,822) (570,721) (745,741) (983,004)
provided by/ used in operations (490,000) 979,739 1,064,086 1,329,932 1,623,174 1,962,644 2,340,234 2,768,566 3,260,756 3,794,630
NCING ACTIVITIES
erm loan 1,873,800 (149,904) (193,201) (208,657) (225,350) (243,378) (262,848) (283,876) (306,586) -
equity 208,200
nd paid - (405,566) (522,758) (660,660) (812,773) (988,611) (1,189,233) (1,411,081) (1,665,864)
provided by/ used in Financing activities 2,082,000 (149,904) (598,767) (731,415) (886,009) (1,056,151) (1,251,459) (1,473,109) (1,717,667) (1,665,864)
STING ACTIVITIES
l Expenditure (1,140,000) - - - - - - - -
provided by/ used in Investing activities (1,140,000) - - - - - - - - -
ash Flow 452,000 829,835 465,319 598,517 737,165 906,493 1,088,775 1,295,457 1,543,089 2,128,766
alance B/ F - 452,000 1,281,835 1,747,154 2,345,670 3,082,835 3,989,328 5,078,103 6,373,560 7,916,649
balance C/ F 452,000 1,281,835 1,747,154 2,345,670 3,082,835 3,989,328 5,078,103 6,373,560 7,916,649 10,045,415
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14.3 BALANCE SHEET
Projected Balance Sheet
YEAR-0 YEAR - 1 YEAR - 2 YEAR - 3 YEAR - 4 YEAR - 5 YEAR - 6 YEAR - 7 YEAR - 8 YEAR - 9 YEAR
ASSETS
Current Assets
Cash & Bank Balance 250,000 1,301,739 2,039,012 2,630,924 3,406,117 4,352,080 5,481,883 6,820,050 7,926,649 10,075,415 12,54
Raw materials stock 390,000 38,464 46,542 56,315 68,142 82,452 99,766 120,717 146,068 176,742 21
W.I.P - 1,278 1,546 1,871 2,264 2,740 3,315 4,011 4,853 5,873
Finished goods stock - 8,750 10,588 12,811 15,501 18,756 22,695 27,461 33,228 40,206 4
Receivables 272,400 314,622 363,388 419,714 484,769 559,908 646,694 746,932 862,706 99
640,000 1,622,632 2,412,310 3,065,310 3,911,738 4,940,797 6,167,568 7,618,934 8,857,731 11,160,942 13,81
TOTAL CURRENT ASSETS
Fixed Assets
At Cost less: A cc. Depreciation 1,140,000 1,083,000 1,028,850 977,408 928,537 882,110 838,005 796,105 756,299 718,484 68
Intangible Assets
Upfront Insurance 252,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000
Pre-operational Expenses Worth 50,000 40,000 30,000 20,000 10,000
TOTAL ASSETS 2,082,000 2,925,632 3,631,160 4,202,718 4,970,275 5,922,907 7,085,573 8,475,039 9,654,030 11,899,426 14,49
LIABILITIES AND EQUITY
Current Liabilities
Current maturity of long term loan 208,657 225,350 243,378 262,848 283,876 306,586 - -
Accounts Payable - 32,500 39,325 47,583 57,576 69,667 84,297 101,999 123,419 149,337 18
TOTAL CURRENT LIABILITIES - 32,500 247,982 272,933 300,954 332,515 368,173 408,585 123,419 149,337 18
Non current LiabilitiesLong term Loan 1,873,800 1,873,800 1,723,896 1,471,942 1,246,592 1,003,214 740,366 456,490 - -
EQUITY
Paid up Capital 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200 20
Retained Earnings - 811,132 1,451,082 2,249,643 3,214,529 4,378,978 5,768,834 7,401,764 9,322,411 11,541,890 14,10
Total Equity 208,200 1,019,332 1,659,282 2,457,843 3,422,729 4,587,178 5,977,034 7,609,964 9,530,611 11,750,090 14,31
TOTAL LIABILITIES & EQUITY 2,082,000 2,925,632 3,631,160 4,202,718 4,970,275 5,922,907 7,085,573 8,475,039 9,654,030 11,899,426 14,49
- - - - - - - - - -
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14.2. USEFUL PROJECT MANAGEMENT TIPS
Technology
Required Spare Parts & Consumables: Suppliers credit agreements and
availability, as per schedule of maintenance be ensured before start ofoperations.
Energy Requirement:Should not be overlooked and alternate source of
energy for critical operations be arranged in advance.
Machinery Suppliers: Should be asked for training and after sales services
under the contract with the machinery suppliers. They must be communicated
about the timely availability of machinery with clear mutual understanding of
the required time period.
Quality Assurance Equipment & Standards: Product & service qualitystandards need to be defined on the packaging and a system to check them,
instituted. This improves credibility.
Marketing
Product Development & Packaging: Expert's help may be engaged for
product/service and packaging design & development.
Sales & Distribution Network: Networking with gems trader and jewellers
should be strengthen.
Price - Bulk Discounts, Cost plus Introductory Discounts: Price shouldnever be allowed to compromise quality. Price during introductory phase may
be lower and used as a promotional tool. Product cost estimates should be
carefully documented before price setting. Government controlled prices shall
be displayed, if applicable.
Human Resources
Adequacy & Competencies: Skilled and experienced staff should be
considered an investment and be retained by offering better term, if necessary.
Performance Based Remuneration:Attempt to manage human resource cost
should be focused through performance measurement and performance based
compensation.
Training & Skill Development: Encouraging training and skill of self &
employees through experts and exposure to best practices is a route to
success. Least cost options for Training and Skill Development (T&SD) may be
linked with compensation benefits and awards.
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14.3. USEFUL LINKS
Prime Ministers Office
www.pmo.gov.pk
Small & Medium Enterprises Development Authority (SMEDA)
www.smeda.org.pk
National Bank of Pakistan (NBP)
www.nbp.com.pk
First Women Bank Limited (FWBL)
www.fwbl.com.pk
Government of Pakistan
www.pakistan.gov.pk
Ministry of Industries & Production
www.moip.gov.pk
Ministry of Education, Training & Standards in Higher Education
http://moptt.gov.pk
Government of Punjab
www.punjab.gov.pk
Government of Sindh
www.sindh.gov.pk
Government of Khyber Pakhtunkhwa
www.khyberpakhtunkhwa.gov.pk
Government of Balochistan
www.balochistan.gov.pk
Government of Gilgi t Baltistanwww.gilgitbaltistan.gov.pk
Government of Azad Jammu &Kashmir
www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP)
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www.tdap.gov.pk
Securities & Exchange Commission of Pakistan (SECP)
www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)www.fpcci.com.pk
State Bank of Pakistan (SBP)
www.sbp.org.pk
Pakistan Institute of Fashion Design (PIFD)
www.pifd.edu.pk
Pakistan Fashion Design Council (PFDC)
www.pfdc.org
Pakistan Gems and Jewellery Development Company
www.pgjdc.org
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15. KEY ASSUMPTIONS
PRODUCTION ASSUMPTIONS
Maximum Capacity Utilization 100
Maximum Capacity Utilization (Year-1) 60At 100% capacity, the following will be the per day production break-up;
Gem Stone (Cut &
Polished) 100% 1
Total production per day 10
Gem Stone (Cut &
Polished) 100% 3,00
3,00
Per Annum 3,000OPERATING ASSUMPTIONS
Annual Production Capacity(Gem Stone (Cut & Polished)) year 1 1,80
Total Production Capacity (Year 1)
Growth Rate in Production (3%) OR (times) 1.0
Hours operational per day
Days operational per month 2
Days operational per year 31
ECONOMY-RELATED ASSUMPTIONS
Electricity growth rate (10%) OR (times) 1
Pay roll growth (10%) OR (times) 1
KEY ASSUMPTIONS
CASH FLOW ASSUMPTIONS
Accounts receivable cycle (in days) 3
Accounts payable cycle (in days) 3
WIP (Days)
Finished Goods (Days)
Raw Materials Inventory (Days) 3
Cash on Hand 260,00
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Financial Assumptions
Project Life (Years) 10
Debt 90%
Equity 10%
Interest Rate on Long term debt 8%Debt Tenure (Years) 8
Debt payment per years 12
Grace Period (Year) 1
REVENUE ASSUMPTIONS
Sales price per unit in year 1
Gem Stone (Cut &
Polished) 1800
Sale price growth rate (5%) OR (times) 1.05
EXPENSES ASSUMPTIONS
Electricity Expenses Per/Year(RS) 120,000
Machine maintenance Cost /year (% of total machinery cost) 2%
Growth in maintenance cost 3 %) OR (times) 1.03
Pre-paid land rent (12 months) 252,000
Cost of Rough Gem Stones 390,000
Raw material cost growth rate 5%
Rent growth rate 5%
COST OF GOODS SOLD ASSUMPTIONS
COGS Year 1
Gem Stone (Cut
& Polished) 216.67
COGS Growth Rate (4%) OR (times) 1.04