SMEDA Marble Processing Plant

Pre-Feasibility Study

MMaarrbbllee PPrroocceessssiinngg PPllaanntt

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th Floor, LDA Plaza, Egerton Road, Lahore

Tel: (042) 111-111-456 Fax: (042) 6304926, [email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor, LDA Plaza, Egerton Road, Lahore

Tel: (042) 111-111-456Fax: (042) 6304926, 6304927

[email protected]

5TH Floor, BahriaComplex II, M.T. Khan Road,

Karachi.Tel: (021) 111-111-456

Fax: (021) [email protected]

Ground FloorState Life Building

The Mall, Peshawar.Tel: (091) 9213046-47


Bungalow No. 15-AChaman Housing Scheme

Airport Road, Quetta.Tel: (0812) 831623, 831702


January, 2007

Pre-feasibility Study

BAL-PREF-05/January, 2007

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DISCLAIMER

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

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

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

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

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

factors, and the actual results may differ substantially from the presented information.

SMEDA does not assume any liability for any financial or other loss resulting from this

memorandum in consequence of undertaking this activity. Therefore, the content of this

memorandum should not be relied upon for making any decision, investment or otherwise.

The prospective user of this memorandum is encouraged to carry out his/her own due

diligence and gather any information he/she considers necessary for making an informed

decision. The content of the information memorandum does not bind SMEDA in any legal

or other form.

DOCUMENT CONTROL

Document No. PREF-05

Prepared by SMEDA-Balochistan

Approved by Head of Department

Issue Date

Issued by Library Officer



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11 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

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

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

SME support program.1i

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

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

research was conducted and comprehensive development plans were formulated after

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

strategy involved recommending changes in the regulatory environment by taking into

consideration other important aspects including financial aspects, niche marketing,

technology up-gradation and human resource development.

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

vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear,

textiles, surgical instruments, urban transport and dairy. Whereas the task of SME

development at a broader scale still requires more coverage and enhanced reach in terms of

SMEDA’s areas of operation.

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

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

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

provides business guidance through its help desk services as well as development of project

specific documents. These documents consist of information required to make well-

researched investment decisions. Pre-feasibility studies and business plan development are

some of the services provided to enhance the capacity of individual SMEs to exploit viable

business opportunities in a better way. This document is in the continuation of this effort to

enable potential investors to make well-informed investment decisions.

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



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22 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

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

33 PPRROOJJEECCTT PPRROOFFIILLEE

The project is related to setting up Marble Processing Units in Quetta, Marble City Gaddani, Loralai, Khuzdar and other promising areas of Balochistan. The document highlights all the marketing, management, and financial aspects required for the establishment and successful running of the project.

33..11 PPrroojjeecctt BBrriieeff

The plant would process (cut to predefined sizes and polish) raw marble blocks and produce marble strips/tiles and slabs. The project would not only focus the construction industry and demand for marble within Quetta city, Marble City Gadani, Loralai, Khuzdar, but other parts of the province as well. Once the facility starts at its full capacity, it could also supply marble steps, strips, tiles, and slabs to other parts of the country.

The total project investment is Rs. 20.5 millions with a very healthy Project Internal Rate of Return (IRR) of 30% against the Capital Cost (WACC) of 12%. The total project investment would be paid back in approximately 3.99 years.

33..22 DDiimmeennssiioonnaall SSttoonnee –– AA ddeeffiinniittiioonn

All natural stones including Onyx, marble, granite and slate, which can be cut to sizes, polished and used for construction purposes, are referred to as dimensional stones. Each of these stones represents a family of similar stones, with various combinations of different minerals. The major distinction is made on the basis of their base minerals which are Calcium compounds (calcareous) for marbles, Silica compounds (siliceous) for granite and Shale clay for slate.

Dimensional stones are characterized by aesthetics/acoustics and practicality in use. Their apparent occurrences have lent them to many uses for centuries particularly construction and allied uses. Their different chemical, mineralogical, and physical properties determine their appropriate extraction and processing requirements, in addition to bearing upon their end use.

33..22..11 MMaarrbbllee

Marble is a crystalline, compact variety of metamorphosed limestone, consisting primarily of calcite (CaCO3), dolomite (CaMg (CO3)2 or a combination of both minerals. Pure calcite is white, but mineral impurities add color in variegated patterns. Extensive deposits are located in Italy, India, Pakistan, Spain, Greece, Brazil, China, Afghanistan, Turkey, Great Britain, and in the United States. Commercially the term marble is extended to include any rock composed of calcium carbonate that takes polish including ordinary limestone. The term is further extended in the loose designation of stones such as Onyx, alabaster,



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serpentine and other soft rocks. Specific gravity of marble ranges between 2.68 to 2.72,determining the density of the stone.

Marble is a durable stone in dry atmosphere only when protected from rain. The surface of marble crumbles readily when exposed to moist or acidic environment. Purest form of marble is statuary marble, which is white with visible crystalline structure. The distinctive luster of statuary marble is caused by the reflection of penetrated light from the surfaces of inner crystals.

33..33 OOppppoorrttuunniittyy RRaattiioonnaallee

Marble is included in the list of largest minerals extracted among chromite, coal, rock salt, lime stone, china clay, dolomite, fire clay, gypsum, silica sand etc. Since 1990 mining & quarrying has consistently contributed 0.5 percent to the Gross Domestic Product2.

Marble processing is gaining popularity due to increase in its usage in constructionindustry. Today almost all the modern architectural designs of houses and plazas include the final touch of beautiful shades of marble in exterior as well as interior portions. In Quetta, there is a great demand for a fully equipped marble processing plant. The new plantcould not only explore the construction industry within the city which is on a boom since past 5 years, but could also be able to full fill the orders from the adjoining areas. Moreover Government of Balochistan has also announced establishment of marble city at Gaddani, where number of incentives has been announced for the investors. So far 8 units have already been commissioned, 50 under construction and 06 ready to start construction.Expansion in this cluster will be more beneficial being the future gateway to the export markets.

33..44 MMaarrkkeett EEnnttrryy TTiimmiinngg

In Pakistan, the construction process is not affected by weather conditions however, in some parts of the country, few areas of construction process is not feasible during the extreme cold weather conditions where the temperature falls below 0 degrees but that again do not affect the overall construction process. Therefore, extraction and processing of dimensional stones is a round the year process.

33..55 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

The business can be started as sole proprietorship or partnership because of great potential involved. Furthermore, comparatively fewer complications are involved in forming, administering and running the sole proprietorship or partnership businesses.

33..66 PPrrooppoosseedd PPrroodduucctt MMiixx

The plant would process (cut and polish) raw marble blocks and would produce four types of products i.e. marble steps, strips, slabs, and marble tiles. Strips are thinner in width and are used floor borders, floor designs and stairs front facings. The slabs are wide / thicker and are used for table tops, kitchen tops, washbasin tops, building front facings & floors.

2 ESP 1997-98



6

The plant would produce tiles of various sizes from the slabs depending upon therequirement of customers. Marble Steps are usually used for stairs.

33..77 PPrroodduuccttiioonn CCaappaacciittyy

The unit would have the capacity to process around 370,260 sq.ft. of marble and would produce around 259182 sq.ft. of marble @ 70% capacity in one year, which includes slabsaround 107,375 sq.ft. & tiles/strips/Steps around 262,885 sq.ft.. The marble processing industry has high rate of wastages i.e. almost 45%. The wastages may be reduced if standardized raw material (Square blocks) is provided to the industry.

33..88 PPrroojjeecctt IInnvveessttmmeenntt

The total project investment is Rs. 20.5 millions which includes Capital Cost of Rs. 18.41million and working capital of Rs. 2.12 million. It is assumed that the project would be partially equity financed (70%) and partially debt financed (30%).

33..99 RReeccoommmmeennddeedd PPrroojjeecctt PPaarraammeetteerrss

CapacityHuman

Resource Technology/Machinery Location

370,260 sq.ft./year 15 Local Made

Quetta, Loralai, Khuzdar, Marble City Gadani & other feasible

marble processing areas of Balochistan

Financial Summary

Total Cost IRR NPV Pay Back PeriodCost Of Capital

(WACC)

Rs. 20.5 M 30% 25.19 M 3.99 Years 12%

33..1100 SSuuiittaabbllee LLooccaattiioonn

It is suitable to establish the plant in Quetta, Loralai, Khuzdar, Marble City Gaddani, Hub, and Chagai. However such a plant could be established in other parts of the country provided the following main conditions are fulfilled such as: raw material and man power availability, accessibility to markets, and reasonable trend of using dimensional stones in construction industry.

33..1111 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss

Large deposits of superior quality marble in the country with ample production. Availability of large variety of types and colors. Significant number of mines and processing units.



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Availability of hard working & low-cost marble processing labor. Rehabilitation in Afghanistan. Large and established world markets. Improved technological changes available. Easy availability of local made spare parts for maintenance. Ample opportunity for exports.

33..1122 SSttrraatteeggiicc RReeccoommmmeennddaattiioonnss

Establishment of the unit in the mining vicinity would be more beneficial to reduce transport cost of wastage.

The location plays an important role, as the facility should easily be accessible to thetarget customers.

Emphasizing on excellent services to its customers such as standardized products and timely order fulfillment.

New machinery should be purchased in order to increase the efficiency and lower the maintenance cost. Refurbished standardized machinery is also recommended.

Adapt to the rapid, social, economic and technological changes. Hiring of well-trained / experienced staff will add in the efficiency of the facility.

44 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

44..11 WWoorrlldd DDiimmeennssiioonnaall SSttoonnee PPrroocceessssiinngg IInndduussttrryy

Processing of stones in the industry has seen many improvements in the last 40 years. Cutting, Sizing chamfering or profiling and polishing technology has changed from simple blades, wires and cutting tools to very high efficiency cutting segments and abrasive materials.

Italy, Germany, France, Belgium, Spain, Portugal, Netherlands, Turkey and Switzerland in Europe, United States in America, Lebanon in the Middle East, Taiwan, Japan, South Korea, Malaysia and China in Asia have strong industrial base for the processing of dimensional stone.

Standard processing waste in the world is 41%, while in Pakistan it is 55%. Processing of dimensional stone involves two basic types

(a) Gangsaw cutting for Slabs(b) Block cutter with supporting range of cutters and polishers.

Gangsaw is used at the basic processing stage to cut raw block into slabs of different sizes. This process is of prime importance as this contributes to 300% in value addition. Italy is on the top in the basic processing stage in dimensional stone cutting with 1530 gangsaws that is 26.2 % of the world total. Brazil is in the second position with 1250 gangsaws and contributes to 21.4% of the world gang saw population. India had 110 gangsaws a decade ago and had added another bunch of 100 gangsaws in the last 10 years to bring this figure to 210 and market share of 3.6%.



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44..22 WWoorrlldd SScceennaarriioo ooff MMaarrbbllee && GGrraanniittee

Worldwide natural stone extraction is meanwhile estimated at 150 million tons per year. Annual production after deduction of waste and cutting losses amounts to about 820 million m² – referred to a slab thickness of 2 cm. The total production value is estimated at 40 billion US $.

With the exception of Spain, however, the strong global growth took place mainly outside Europe. China now extracts around twice as much natural stone from its many quarries as the previous market leader Italy. India also overtook Italy last year for the first time.

The weightings have therefore changed appreciably within only a few years. Besides China and India, the »top ten« members Iran, Turkey, Brazil and the USA are among the winners of the last five years, whereas Portugal and Greece had to accept setbacks.

The development in Turkey has been particularly rapid. Production and export have trebled within five years. Last year, Turkey exported finished natural stone goods worth 429 million US $.

The world’s most important customer for finished goods is the USA. Stone products worth 1.72 billion US $ were imported in 2003, 18.3 % more than a year before. The most important supplier was Italy, which increased its US exports by a total of 7.2 % to 535 million US $ within two years.

However, other countries expanded even more strongly in the same period, in both percentage and absolute figures. For example, Brazilian deliveries of finished goods to the USA rose by 101 % in value to 210 million US $. Turkey even increased its exports by 120 % to 183 million US $, India by 63 % to 152 million and China by 85 % to 140 million US $. Germany also managed to increase its exports – at a low level – by 23 % to 12.25 million US $, but the French (-10 %) and Canadians (-13 %) suffered losses. 3

INDIA

Statistics illustrate that India’s contribution to the world stone market is 10%, and the country produces 27% of the world’s stone. The fact is: India is increasingly successful in exporting natural stone and products of natural stone. Apart from a slight drop in 1998, India’s natural stone exports rise every year. The annual growth has settled at about 15 per cent for some years now. This means India is the third largest natural stone producer in the world after Italy and China and plays an increasingly important role in world trade in natural stones.

In figures: Natural stone production in India had already clearly exceeded the 3-million tons mark in 2000. Domestic demand rose at the same time: 160,000 tons of natural stones remained in the country in 2002. This is as much as 20 per cent more than the year before. Besides raw blocks, rough slabs and standard tiles, gravestones were the country’s chief export earner in the past years. This contrasts with the sale of raw blocks, which has dropped by almost four per cent a year since 1998.

3 www.stonereport.com



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CHINA

Natural stone imports to China are currently growing even more strongly than exports in percentage terms. According to the Chinese customs statistics, these rose in value from 438 to 582 million dollars or almost 33 per cent from 2002 to 2003. By far the most important natural stone region in China is Xiamen in the South-East of the country. Around 65 per cent of the export volume in 2003 was attributed to this stone center.

The detailed figures show that Xiamen has succeeded in expanding its strong position in the past years. Virtually all the region’s exports and imports are handled via the port of Xiamen, which makes it China’s and possibly the world’s most important natural stone port.

China has become a serious factor in the world markets in Marble & granite tiles especially in gray, pink and other light colors. Its fast increasing presence has sharply accelerated the trend of lower prices.

China exported natural stones and natural stone products for a record value of more than a billion US dollars last year. This is shown by the latest customs statistics from the People’s Republic. These indicate that natural stone exports increased by almost 20 per cent from 924 million dollars in 2002 to over 1.1 billion dollars in 2003. The increase in the previous year was slightly less than 21 per cent. 4

ITALY

Italian natural stone exports have increased by 5.6 % in quantity and 2.7 % in value in the first half of 2004. This is reported by Internazionale Marmi e Macchine Carrara s.p.a. (IMM), with reference to the official export statistics issued by the Italian Statistics Office ISTAT. The total export quantity of marble, granite and other processed solid stones reached 1.53 million tons in the first six months of the current year 2004, compared with 1.45 million tons in the first half of 2003. The export value rose from 792 million euros to 813.1 million euros. The growth is attributed mainly to more exports of granite and granite products. Marble even showed a slight drop for finished goods. Although not very important, the export of raw marble increased appreciably in return.

GERMANY

Still the most important customer within the EU – also contributed to the overall positiveexport result of the Italian natural stone sector. 435,000 tons of natural stone and natural stone products worth 131 million euros crossed the Brenner Pass in the first six months of the year 2004. For marble, IMM calculated a rise of 13.7 % in quantity and 10.7 % in value. For granite, the growth of 8.5 % in quantity faced an increase of only 1 % in value, which indicates a continuing drop in prices. Imports in Italy have grown more than exports. 1.24 million tons of natural stones (mainly rough blocks) worth 240 million euros were

4 http://www.stonecontact.com



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imported up to the end of June 2004. This corresponds to growth of 10.7 % in quantity and 3.7 % in value.5

USA

The natural stone market in the USA has grown strongly in the past years, with consumption more than trebling between 1994 and 2003. The USA is meanwhile the world’s second most important natural stone consumer after China in absolute figures.

The quantity of imports to the USA in 2003 rose by 39.2 % for granite and granite products and 20.3 % for marble. Expressed in US dollars, however, the rise was »only« 28.9 and 11.7 % respectively. The average import price for both marble and granite dropped by more than a tenth. This is attributed to that fact that cheaper stones are now also being increasingly imported into the United States from Third World countries. Although this is mainly at the expense of Italy, the traditional supplier country, Spain, Portugal, Greece and other European countries are also adversely affected by this development.

The local production of natural stone has increased strongly in the USA, especially in the last three years. Whereas only 1.20 million tons of rough slabs were quarried ten years ago, this figure reached 2.25 million tons in 2003, almost twice as much.

As a result of increasing imports for block goods as well (1994: 94,000 t, 2003: 441,000 t), the quantity processed in the USA itself has also risen markedly, namely from 1.1 million tons to 2.5 million tons. Around 30 % of all today’s natural stone-finished goods in the USA are created in its own production plants.

44..33 PPaakkiissttaann DDiimmeennssiioonnaall SSttoonnee IInndduussttrryy

Marble is included in the list of largest minerals extracted among coal, Chromite, rock salt, lime stone, china clay, dolomite, fire clay, gypsum, silica sand etc. Since 1990 mining & quarrying has consistently contributed 0.5 percent to the Gross Domestic Product6.

Production of marble & granite has grown substantially at 18% in the last twenty five. Ithas been accompanied with high quarry wastage ranging from 60-75% in addition to poor quality, mainly due to uncontrolled blasting.

Processing industry is using wide array of technological options for basic as well as finishing stage, all of vintage age. Due to technological imbalance, wastages are around 45% to 55%. Presently the processing industry relies upon local manufactured machinery and equipment with a very few calibrated and high efficiency machines from reputable local & international suppliers.

5 www.stonereport.com

6 ESP 1997-98



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44..33..11 PPrroobblleemmss ffaacceedd bbyy tthhee sseeccttoorr

Lack of quality production

In the prevailing circumstances the industry is unable to produce quality product for the export markets. One of the major reasons has been the absence of appropriate technology. There are quite few units in the country, which have modern machinery and are capable to process dimensional stones according to the international standards but still these units cannot facilitate large orders placed by the importing firms due to various limitations. Most of the processing units in the country are equipped with local versions of the cutting machinery with little or no calibration, high electricity consumption and low quality production. Products of these units have variations in the tile thickness as high as 1 to 2 mm, and are chipped at the edges whereas international standards allow variations in thickness up to 0.5mm for tiles and the edges properly chamfered. Uneven raw blocks are contributing to high processing loss because of the material structure, cracks in the blocks and inability of extracting large sheets. Another factor involved is the lack of skills among the processing workers, who have not been provided with required training on cutting techniques, even in the plants with imported machinery.

Incapability of meeting consistent supply

Existing distribution system both for raw as well as finished products is disjointed. The processing units acquire their raw material supplies directly from the mines in small lots resultantly they can not ensure regular supply of similar products of the consistent grade, shade and color of material ordered by the buyer. These supplies may also be delayed or even stopped by the miners due to many reasons that include.

Low production because of non scientific quarrying

Incapability of doing product grading

Local issues including surface rent and right of way resulting into halting of mining operations

Poor infrastructure due to which trucks cannot carry heavy loads on contouring roads in the hilly areas.

Besides all the mentioned reasons, there is no arrangement of keeping stock at the processing units or at mines mainly due to financial constraints.

44..44 RReeggiioonnaall DDiissttrriibbuuttiioonn

Mining of marble and granite is carried out in Balochistan, NWFP, and Sindh.

44..44..11 BBaalloocchhiissttaann CCoonnttrriibbuuttiioonn ttoo tthhee SSeeccttoorr

Balochistan has nearly 254 mines in operation. Total estimated reserves of marble, onyx,and granite in the province are around approximately 4.2 billion tons however; proper survey of the deposits in the province has not been done hence actual reserves are much more rather inexhaustible. The break down of reserves of marble, onyx, and granite,



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number of mines leased, leased area, and annual production in Balochistan are shown in the table 4.4.1.

Table 4.4.1 Marble/granite reserves, leased mines, and annual production in Balochistan7

Description Reserves (MT) Mines Leased Leased Area (Acres) Annual Production (MT)

Onyx 20 million 26 12,110 0.47

Marble 2.5 billion 218 48,080 2.84

Granite 1.5 billion 10 19,753 0.036

Total 4.2 254 79,943 3.346

The colors found in Balochistan are widely accepted in the local markets and have the capability of international acceptance due to their similarity with the Italian stones, which have widespread demand in the global markets. Balochistan onyx is one of the favorites in the world markets and is used for facings, floorings and decorative items. Two onyx mine in Balochistan (M/s Zehri corporation & Marble Industries Pvt. Ltd. - MIL) in Chaghi Dist) are the only mines in the country which are properly equipped with modern mining machinery where quarrying is done on advanced methods.

44..44..22 NNWWFFPP FFAATTAA aanndd NNoorrtthheerrnn aarreeaass CCoonnttrriibbuuttiioonn ttoo tthhee SSeeccttoorr

The province produces about 87% marble, 1% Granite and 12% slate. There are wide varieties of marble and granite with huge reserves available in the province. Proper study on reserves calculation for Granite has not been undertaken so far, however a study conducted by a private consultant in the northern areas indicate 414 million tons of marketable granite reserves in a single area8. Actual deposits of granite with multiple shades can be manifold. There are four major clusters of processing units in NWFP and FATA including Peshawar, Buner, Mardan/Swabi, and Mohmand/Khyber Agency.According to the official estimates there are 148 processing units in the province.

44..44..33 SSiinnddhh CCoonnttrriibbuuttiioonn ttoo tthhee SSeeccttoorr

Sindh also has good colors of granite widely spread in the area of Tharparker. There are 10 mines in operation; while reserves are not known as any efforts in this direction has not been made so far. The mines are producing blocks in squared shape and are supplied to feed the local industry. Sindh granite can compete in the international markets with India, as the colors found in Sindh are better than the colors found in India. There is a big cluster of

7 Industry Estimate

8 2nd Segmite Int.Conf 1994 pp35-43



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processing units in Sindh at Karachi with over 180 medium size units. In addition there are more than 600 units of small and micro sizes with 1-3 cutters in each unit9.

44..44..44 PPuunnjjaabb CCoonnttrriibbuuttiioonn ttoo tthhee SSeeccttoorr

In quarry production, Punjab has no contribution to the sector, as there are no mines identified as yet that are capable of producing marble and granite. However deposits of Slate and Limestone in the northern Punjab have been identified but no proper source can be mentioned. Three significant sized clusters of processing units in the province exist at Lahore, Rawalpindi and Islamabad. Number of processing units in these cities is 93, 112 and 51 respectively. In addition there are smaller clusters in Multan, Faisalabad, Gujranwala, Sargodha, Sialkot and Gujrat.

55 MMAARRKKEETT IINNFFOORRMMAATTIIOONN

55..11 UUsseess ooff DDiimmeennssiioonnaall SSttoonnee

Major categories for usage of dimensional stones are architectural works, funeral trade and sculptures etc. In the architectural work that include construction and structural works total share of the dimensional stone is 70% while in the decorative, sculptures and memorial art etc. its share is 30%. According to their peculiar characteristics, including weather effects, color fading, load tolerance, edge cuts, water absorption, color choice, hygienic factor, hardness etc; various type of dimensional stones are used in different locations and places.

55..11..11 MMaarrbbllee oorr CCaallccaarreeoouuss SSttoonneess

Restricted choice of marble for external applications is due to its porosity. They hardly sustain color and shine due to rainfalls and environmental pollution etc. Marble is preferred over granite for special works that include sculptures, decorative items, fireplaces etc. due to their comparative softness.

9 Market survey



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55..22 MMaarrkkeettaabbiilliittyy ooff DDiimmeennssiioonn SSttoonnee//SSttoonnee SSeelleeccttiioonn CCrriitteerriiaa

Selection of dimensional stone is normally a function of esthetics attached with the particular purpose and end use. They are graded on the following features:

55..22..11 CCoolloorr

Color is the most important esthetic element that determines chances of marketability of the product. Preferences for color of dimensional stone vary from market to market, from time to time and for stone type. Presently various shades in white color of marble and white &green in onyx are preferred in the European markets. Middle East and Far Eastern markets are interested in white, black & beige colors in marble and green colors in onyx.

55..22..22 PPaatttteerrnn

The pattern is given by the weave i.e. by the spatial distribution of the elements comprising the rocks. The pattern is derived from overlapping layers of different colors. Veined pattern is caused by veins crossing the ground mass of rock. Either giving the material, a well-defined direction or forming more or less uneven weave, in case of randomly arranged veins. In the veined pattern, normally found in marble, cutting direction is very important as this highly influences its appearance.

55..22..33 GGrraaiinn SSiizzee

This defines the size and shape of the crystals or lithoid elements that constitute the rock. There are three major categories of the grain size of dimensional stone; fine grain, medium grain and large grain material. The grain size does not usually influence the esthetics of the material but has its impacts on the usage. Fine grain material has micro hardness and can be

Distribution of Marble (47% of Processed Trade) Fig 2

other uses7%

special works7%

funeral trade11%

structural works7%

stairs and similar6%

internal facing16%

externa facing9%

internal flooring30%

external flooring7%



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applied in the load bearing areas and sharp corners while medium and especially the large grain material is avoided to be used in the load bearing areas and sharp corners in the wake of its breakage and cracks. The market segmentation according to pricing and quality preference is shown in table 5.23.

Table: 5.23 Market Segmentation According to Pricing and Quality Preference

Quality High Medium LowFine Grain Medium/Large Grain Large Grain

Homogeneous Pattern Homogeneous/Heterogeneous Pattern

Heterogeneous Pattern

Rare Colors Rare/Common Colors Common ColorsFine Glaze Fine Glaze High Glaze

Price High Medium Low (Source: Industry analysis and experts opinion)

Although color plays a dominant role in price determination but other attributes as explained in the above table also play a vital role in the marketability of the dimensional stones. If the product is rare in color and has fine grain and homogeneous pattern, then itwill attract discerning customers with price on the higher side. Those with medium grain, common colors and homogeneous pattern are priced in the middle range, while in the same category products with rare colors having large grain size and heterogeneous pattern are also ranked in the medium price range.

55..33 MMaarrbbllee CCoolloorrss AAvvaaiillaabbllee iinn BBaalloocchhiissttaann

Majority of the colors traded in the international markets are available in the country. Balochistan contributes a wide range of colors in marble. Table 5.3 indicates the colors of marble available in different parts of the province.

Table 5.3 Major colors / shades of marble available in Balochistan10

S.No. Varieties Areas1 China Verona Khuzdar, Loralai, Naal2 Plane Verona Khuzdar, Loralai, Naal, Wadh3 Amber/Hamza Green Khuzdar, Wadh4 Botesina Loralai, Khuzdar, Lasbela5 Burma teak Lasbela, Wadh, Naal7 King Gold Lasbela, Wadh, Khuzdar8 Ziarat/Super White Loralai, Quetta, Ziarat, Khuzdar, Lasbela9 Badel Quetta, Loralai, Khuzdar, Lasbela10 Brown Naal, Khuzdar, Lasbela

10 Industry & Market Research



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11 Green Khuzdar, Wadh12 Pink Bela, Lasbela, Wadh, Loralai13 Onyx Chaghi, Nukundi, Dalbandin, Zeh, Julli, Botik.

(Source: Industry and market research)

55..44 PPoossssiibbllee PPrroodduucctt CCaatteeggoorriieess aafftteerr PPrroocceessssiinngg

55..44..11 SSllaabbss

Slabs are large semi processed sheets of marble stone with varied sizes and thickness of 2 inches. They are further processed in the local industry or exported to the international markets. Slabs are cut on gang saws from large blocks of marble and granite. This product is used for tabletops, kitchen tops, wall facing, flooring and other allied purposes. Price of slab varies with the quality of material and the size of the sheet.

55..44..22 UUnnppoolliisshheedd TTiilleess

These are processed and sold by units normally lacking machinery to finish and section the material. These are available in different sizes, colors and shades. These tiles are polished either at the factory or after application at the desired surface. Main attraction for the consumer for this product is its low price. Unpolished tiles are sold comparatively cheaper than the polished ones to individuals and other small processing units from where they are polished and sold to market.

55..44..33 PPoolliisshheedd TTiilleess

These are the fully processed tiles sold in the market at competitively higher prices, which depend on vein structure color & shades.

55..44..44 DDeeccoorraattiivvee IItteemmss

Decorative items including, pillars, fire places, railings, sculpture, flower vase, ashtrays, tabletops, office table sets and many other similar items are produced in many countries of the world. In the countries where labor cost is high, carving is done with CNC machines. In Pakistan these items are produced all over the country without the high tech machinery.Major cluster of these items lies in Karachi, where more than 400 units are involved in this activity followed by a few units at Lahore and Rawalpindi. Prices of these items vary from product to product, the quality of craftsmanship, and stone used.

55..44..55 MMaarrbbllee CChhiippss

Marble Chips are tiny pieces normally of crushed marble used in flooring and facing in the construction industry. These are processed on completely different machinery set up that includes stone crushers of various grades. They vary in size from large grains of 1 inch to 0.5 centimeter, depending on the choice of the consumer.



17

55..55 TTaarrggeett CCuussttoommeerrss

The target customers for processed marble steps/strips/tiles and slabs includes individuals and construction companies.

55..66 MMaarrkkeett PPootteennttiiaall

Due to modern architectural designs, use of marble steps/strips/tiles and slabs in the construction industry of the province is increasing, additionally there is huge demand in Afghanistan also. The increase in demand of marble strips, tiles and slabs could be judgedeasily from its supply from Karachi and areas of Punjab in spite of the presence of reasonable number of marble processing units in Quetta and Loralai, from where the customers can buy such products at comparatively low prices.

There is great potential for the manufacturing of decorative items including marble handicrafts, Fire places, office table sets, sculptures etc.

Pakistan’s marble export is around estimated $20-30 million, which can be enhanced many folds if standardized production measures are ensured. 11

66 BBAASSIICC RREEQQUUIIRREEMMEENNTT FFOORR AA MMAARRBBLLEE PPRROOCCEESSSSIINNGG PPLLAANNTT

Following are the basic requirements for Marble Processing Plant.

Table 6-1 Machinery and Equipment Requirement

Description Qty Cost/Unit Total Amount (PKR)Gantry Crane (span-65’, Capacity-25ton,track-300Rft, 25hp motor)

1 2,800,000 2,800,000

Gang Saw (80-blades, 100hp motor, double connecting rods)

1 5,500,000 5,500,000

H/V Cutter (conventional two pillar, regular)

1 1,400,000 1,400,000

Small Cutting Machine (for Splitting / section & Slab cutting)

2 300,000 600,000

Cross Cutting Machine 1 250,000 250,000

Polishing Machine (manual) 2 85,000 170,000

Transformer (200-KVA) 1 350,000 350,000

Machinery Installation Cost 1,500,000

Total 12,570,000

11 APMIA



18

Table 6-2 Office Equipment

Description Qty Cost/Unit Total Amount (PKR)Computer (P-IV) 1 30,000 30,000Telephone with Connection 1 1,200 1,200Fax Machine with Extra Phone Line 1 12,000 12,000

Total 43,200

Table 6-3 Furniture and Fixtures

Description Total Amount (PKR)

Furniture 22,000Office Electric Wiring and Lighting 5,000

Total 27,000

66..11 MMaacchhiinnee MMaaiinntteennaannccee

All the spare parts and mechanical expertise is available in Karachi, Lahore, Faisalabad, Gujranwala, Rawalpindi and Peshawar.

77 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

The total human resource required for this project with their proposed/estimated monthly salaries is shown in the table 7-1.

TTaabbllee 77--11 HHuummaann RReessoouurrccee RReeqquuiirreemmeenntt DDeettaaiillss

Positions Number Salary / Month Total Monthly Salary (Rs.)

Manager 1 35,000 35,000

Gang Saw Operator 1 12000 12,000

H/V Cutter Operator 1 5,500 5,500

Cuttermen for small cutters 02 4,500 9,000

Helper 08 4,000 32,000

Electrician 1 7,000 7,000

Mechanic 1 7,000 7,000

Total Direct Labor Cost 15 107,500



19

88 LLAANNDD AANNDD BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

A total of around 30,000 sq.feet land would be required/purchases for the plant area and office.

Table 8-1 Land Cost

Description Cost/sq.ft Area in sq.ft Total Cost (Rs.)

Land 150 30,000 4,500,000

TTaabbllee 88--22 BBuuiillddiinngg aanndd BBoouunnddaarryy WWaallll CCoonnssttrruuccttiioonn CCoosstt

Description Cost/sq.ft Area in sq.ft Total Cost (Rs.)

Office 1100 150 165,000

3 Labor Rooms 1100 450 495,000

3 Wash Rooms 1100 75 82,500

Boundary Wall 550 173 95,150

Machine Shed 450 800 360,000

Total 1,197,650

88..11 RReeccoommmmeennddeedd MMooddee

It is recommended to acquire/buy the total land required as most of the machinery requiresfixed installation and cannot be moved easily once installed.

88..22 UUttiilliittiieess aanndd IInnffrraassttrruuccttuurree RReeqquuiirreemmeenntt

Marble processing requires massive use of water for cutting of stones and electricity for machinery. It is recommended that a separate transformer (at least 200 KVA) be installed.Arrangements should be made for sufficient water storage / availability & recycling if possible to reduce water losses.



20

99 PPRROOJJEECCTT EECCOONNOOMMIICCSS

99..11 PPrroojjeecctt CCoosstt

Description Amount in (Rs.)Land 4,500,000

Building/Infrastructure 1,197,650 Machinery and Equipment 12,570,000 Furniture & fixtures 27,000 Office equipment 43,200 Pre-operating costs 72,500 Total Capital Costs 18,410,350 Equipment spare part inventory 19,192 Raw Material inventory 875,549 Upfront insurance payment 628,500 Cash 600,000 Total Working Capital 2,123,241 Total Investment 20,533,591

99..22 PPrroojjeecctt RReettuurrnnss

Description Equity ProjectIRR 33% 30%MIRR 21% 18%Payback Period (yrs) 4.00 3.99Net Present Value (NPV) 17.74 million 25.19 million

99..33 PPrroojjeecctt FFiinnaanncciinngg

Description Percentage Amount in RsDebt Financing 30% 6,075,416Equity Financing 70% 14,458,175Total 20,533,591

Pre-feasibility Study Marble Processing Plant

BAL-PREF-05/November, 2004

21

1100 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1100..11 PPrroojjeecctt CCoosstt

Capital Investment Rs. in actualsLand 4,500,000 Building/Infrastructure 1,197,650 Machinery & equipment 12,570,000 Furniture & fixtures 27,000 Office vehicles - Office equipment 43,200 Pre-operating costs 72,500 Training costs - Total Capital Costs 18,410,350

Working Capital Rs. in actualsEquipment spare part inventory 19,192 Raw material inventory 875,549 Upfront land lease rental - Upfront building rent - Upfront machinery & equipment lease rental * - Upfront office equipment lease rental * - Upfront office vehicles lease rental * - Upfront insurance payment 628,500 Cash 600,000 Total Working Capital 2,123,241

Total Investment 20,533,591

Initial Financing Rs. in actualsDebt 6,075,416 Equity 14,458,175 Lease - Export re-finance facility -



22

1100..22 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Income StatementRs. in actuals

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

Revenue 14,446,562 16,732,983 18,921,070 21,311,490 23,920,644 26,766,175 28,403,289 30,107,486 31,913,936 33,828,772 Cost of goods sold 8,128,841 9,254,522 10,291,350 11,404,759 12,599,904 13,882,289 14,587,078 15,315,593 16,085,649 16,900,023

Gross Profit 6,317,721 7,478,461 8,629,720 9,906,731 11,320,740 12,883,886 13,816,211 14,791,893 15,828,286 16,928,749

General administration & selling expensesAdministration expense 441,000 485,100 533,610 586,971 645,668 710,235 781,258 859,384 945,323 1,039,855 Rental expense - - - - - - - - - - Utilities expense 8,400 8,904 9,438 10,005 10,605 11,241 11,916 12,630 13,388 14,192 Travelling & Comm. expense (phone, fax, etc.) 50,400 55,440 60,984 67,082 73,791 81,170 89,287 98,215 108,037 118,841 Office vehicles running expense - - - - - - - - - - Office expenses (stationary, etc.) 4,200 4,620 5,082 5,590 6,149 6,764 7,441 8,185 9,003 9,903 Promotional expense 43,340 50,199 56,763 63,934 71,762 80,299 85,210 90,322 95,742 101,486 Insurance expense 628,500 565,650 502,800 439,950 377,100 314,250 251,400 188,550 125,700 62,850 Professional fees (legal, audit, etc.) 101,126 117,131 132,447 149,180 167,445 187,363 198,823 210,752 223,398 236,801 Depreciation expense 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 Amortization expense 14,500 14,500 14,500 14,500 14,500 - - - - - Property tax expense - - - - - - - - - - Miscellaneous expense 14,447 16,733 18,921 21,311 23,921 26,766 28,403 30,107 31,914 33,829

Subtotal 2,629,815 2,642,179 2,658,449 2,682,427 2,714,842 2,741,990 2,777,640 2,822,050 2,876,407 2,941,659 Operating Income 3,687,906 4,836,282 5,971,271 7,224,304 8,605,897 10,141,895 11,038,571 11,969,844 12,951,879 13,987,089

Other income 23,415 75,910 158,131 250,336 363,235 513,582 699,615 904,322 1,127,824 1,396,041 Gain / (loss) on sale of assets - - - - - - - - - - Earnings Before Interest & Taxes 3,711,321 4,912,192 6,129,402 7,474,640 8,969,132 10,655,478 11,738,185 12,874,165 14,079,704 15,383,131

Interest expense 668,296 560,987 441,875 309,660 162,902 - - - - - Earnings Before Tax 3,043,026 4,351,204 5,687,527 7,164,979 8,806,230 10,655,478 11,738,185 12,874,165 14,079,704 15,383,131

Tax 669,466 957,265 1,251,256 1,576,295 1,937,371 2,344,205 2,582,401 2,832,316 3,097,535 3,384,289 NET PROFIT/(LOSS) AFTER TAX 2,373,560 3,393,939 4,436,271 5,588,684 6,868,860 8,311,273 9,155,785 10,041,849 10,982,169 11,998,842

Balance brought forward 2,373,560 5,767,499 10,203,771 15,792,455 22,661,314 30,972,587 40,128,372 50,170,221 61,152,390 Total profit available for appropriation 2,373,560 5,767,499 10,203,771 15,792,455 22,661,314 30,972,587 40,128,372 50,170,221 61,152,390 73,151,231 Dividend - - - - - - - - - - Balance carried forward 2,373,560 5,767,499 10,203,771 15,792,455 22,661,314 30,972,587 40,128,372 50,170,221 61,152,390 73,151,231



23

1100..33 PPrroojjeecctteedd BBaallaannccee SShheeeett

Statement Summaries SMEDABalance Sheet

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

AssetsCurrent assets

Cash & Bank 600,000 1,741,528 5,849,470 9,963,623 15,069,965 21,253,492 30,104,739 39,856,716 50,575,442 62,206,998 77,397,117 Accounts receivable - 2,374,777 2,562,702 2,930,470 3,306,786 3,717,710 4,166,040 4,534,476 4,809,105 5,097,651 5,403,510 Finished goods inventory - 172,954 193,071 214,683 237,891 262,802 289,532 303,897 319,075 335,118 352,084 Equipment spare part inventory 19,192 22,900 26,676 30,954 35,792 41,259 45,104 49,254 53,785 58,733 - Raw material inventory 875,549 1,034,785 1,193,942 1,372,184 1,571,564 1,794,347 1,942,896 2,101,436 2,272,914 2,458,383 - Pre-paid annual land lease - - - - - - - - - - - Pre-paid building rent - - - - - - - - - - - Pre-paid lease interest - - - - - - - - - - - Pre-paid insurance 628,500 565,650 502,800 439,950 377,100 314,250 251,400 188,550 125,700 62,850 -

Total Current Assets 2,123,241 5,912,595 10,328,662 14,951,863 20,599,098 27,383,860 36,799,711 47,034,331 58,156,020 70,219,733 83,152,710

Fixed assetsLand 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 4,500,000 Building/Infrastructure 1,197,650 1,137,768 1,077,885 1,018,003 958,120 898,238 838,355 778,473 718,590 658,708 598,825 Machinery & equipment 12,570,000 11,313,000 10,056,000 8,799,000 7,542,000 6,285,000 5,028,000 3,771,000 2,514,000 1,257,000 - Furniture & fixtures 27,000 24,300 21,600 18,900 16,200 13,500 10,800 8,100 5,400 2,700 - Office vehicles - - - - - - - - - - - Office equipment 43,200 38,880 34,560 30,240 25,920 21,600 17,280 12,960 8,640 4,320 -

Total Fixed Assets 18,337,850 17,013,948 15,690,045 14,366,143 13,042,240 11,718,338 10,394,435 9,070,533 7,746,630 6,422,728 5,098,825

Intangible assetsPre-operation costs 72,500 58,000 43,500 29,000 14,500 - - - - - - Legal, licensing, & training costs - - - - - - - - - - -

Total Intangible Assets 72,500 58,000 43,500 29,000 14,500 - - - - - - TOTAL ASSETS 20,533,591 22,984,542 26,062,207 29,347,005 33,655,838 39,102,197 47,194,146 56,104,863 65,902,650 76,642,461 88,251,535

Liabilities & Shareholders' EquityCurrent liabilities

Accounts payable - 383,457 436,788 487,267 541,582 600,007 657,224 688,696 721,174 755,356 642,129 Export re-finance facility - - - - - - - - - - - Short term debt - - - - - - - - - - - Other liabilities - - - - - - - - - - -

Total Current Liabilities - 383,457 436,788 487,267 541,582 600,007 657,224 688,696 721,174 755,356 642,129

Other liabilitiesLease payable - - - - - - - - - - - Deferred tax - 669,466 1,382,700 1,382,700 1,382,700 1,382,700 1,106,160 829,620 553,080 276,540 - Long term debt 6,075,416 5,099,884 4,017,044 2,815,092 1,480,925 - - - - - -

Total Long Term Liabilities 6,075,416 5,769,350 5,399,744 4,197,792 2,863,625 1,382,700 1,106,160 829,620 553,080 276,540 -

Shareholders' equityPaid-up capital 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 14,458,175 Retained earnings - 2,373,560 5,767,499 10,203,771 15,792,455 22,661,314 30,972,587 40,128,372 50,170,221 61,152,390 73,151,231

Total Equity 14,458,175 16,831,735 20,225,675 24,661,946 30,250,630 37,119,490 45,430,762 54,586,547 64,628,396 75,610,565 87,609,407 TOTAL CAPITAL AND LIABILITIES 20,533,591 22,984,542 26,062,207 29,347,005 33,655,838 39,102,197 47,194,146 56,104,863 65,902,650 76,642,461 88,251,535



24

1100..44 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt- - - - - - - - - - 0

Statement Summaries SMEDACash Flow Statement

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

Operating activitiesNet profit - 2,373,560 3,393,939 4,436,271 5,588,684 6,868,860 8,311,273 9,155,785 10,041,849 10,982,169 11,998,842 Add: depreciation expense - 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 1,323,903 amortization expense - 14,500 14,500 14,500 14,500 14,500 - - - - - Deferred income tax - 669,466 713,234 - - - (276,540) (276,540) (276,540) (276,540) (276,540) Accounts receivable - (2,374,777) (187,925) (367,768) (376,316) (410,924) (448,330) (368,437) (274,628) (288,546) (305,859) Finished good inventory - (172,954) (20,117) (21,612) (23,208) (24,911) (26,730) (14,366) (15,177) (16,043) (16,966) Equipment inventory (19,192) (3,708) (3,776) (4,277) (4,838) (5,467) (3,845) (4,150) (4,531) (4,948) 58,733 Raw material inventory (875,549) (159,236) (159,157) (178,241) (199,381) (222,783) (148,549) (158,540) (171,477) (185,470) 2,458,383 Pre-paid building rent - - - - - - - - - - - Pre-paid lease interest - - - - - - - - - - - Advance insurance premium (628,500) 62,850 62,850 62,850 62,850 62,850 62,850 62,850 62,850 62,850 62,850 Accounts payable - 383,457 53,331 50,480 54,315 58,425 57,217 31,472 32,478 34,181 (113,227) Other liabilities - - - - - - - - - - -

Cash provided by operations (1,523,241) 2,117,059 5,190,782 5,316,105 6,440,509 7,664,453 8,851,247 9,751,977 10,718,725 11,631,556 15,190,119

Financing activitiesChange in long term debt 6,075,416 (975,531) (1,082,840) (1,201,952) (1,334,167) (1,480,925) - - - - - Change in short term debt - - - - - - - - - - - Change in export re-finance facility - - - - - - - - - - - Add: land lease expense - - - - - - - - - - - Land lease payment - - - - - - - - - - - Change in lease financing - - - - - - - - - - - Issuance of shares 14,458,175 - - - - - - - - - - Purchase of (treasury) shares - - - - - - - - - - -

Cash provided by / (used for) financing activities20,533,591 (975,531) (1,082,840) (1,201,952) (1,334,167) (1,480,925) - - - - -

Investing activitiesCapital expenditure (18,410,350) - - - - - - - - - - Acquisitions - - - - - - - - - - -

Cash (used for) / provided by investing activities(18,410,350) - - - - - - - - - -

NET CASH 600,000 1,141,528 4,107,942 4,114,153 5,106,342 6,183,527 8,851,247 9,751,977 10,718,725 11,631,556 15,190,119

Cash balance brought forward 600,000 1,741,528 5,849,470 9,963,623 15,069,965 21,253,492 30,104,739 39,856,716 50,575,442 62,206,998 Cash available for appropriation 600,000 1,741,528 5,849,470 9,963,623 15,069,965 21,253,492 30,104,739 39,856,716 50,575,442 62,206,998 77,397,117 Dividend - - - - - - - - - - - Cash carried forward 600,000 1,741,528 5,849,470 9,963,623 15,069,965 21,253,492 30,104,739 39,856,716 50,575,442 62,206,998 77,397,117



25

1111 KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1133--11 CCoosstt ooff GGooooddss SSoolldd ppeerr UUnniitt ooff PPrroodduuccttiioonn

COGS 1 Rs. 23COGS growth rate 4%

TTaabbllee 1133--22 RReevveennuuee AAssssuummppttiioonnss

Sale price per unit in year 1 Rs. 57

Sale price growth rate 6%

TTaabbllee 1133--33 PPrroodduuccttiioonn RReellaatteedd AAssssuummppttiioonnss

Production capacity per year 370,260 Sqft.Production capacity utilization in first year 70%Production capacity utilization growth rate 5%Maximum production capacity utilization 95%

TTaabbllee 1133--44 EEccoonnoommiicc RReellaatteedd AAssssuummppttiioonnss

Inflation rate 6%Wage growth rate 10%Electricity Growth Rate 6%Water Price Growth Rate 6%

TTaabbllee 1133--55 FFiinnaanncciinngg AAssssuummppttiioonnss

Interest rate on long term debt 11%Debt 30%Equity 70%Tax rate (15% sales tax + 7% income tax) 22%Required rate of return on equity 16%WACC 12%



26

TTaabbllee 1133--66 EExxppeennssee AAssssuummppttiioonnss

Communication Expense 11% of revenue

Promotional Expense 0.3% of revenue

Professional Fee (Legal, Audit etc) 0.7% of revenue

Administration Benefit Expense 5% of administration expense

Office Expense (Stationary, Entertainment, Janitorial Services)

1% of administration expense

Pre-Operational Expense Rs. 72,500

TTaabbllee 1133--77 DDeepprreecciiaattiioonn RRaatteess

Furniture & fixtures 10%Machinery 10%Office equipment 10%

TTaabbllee 1133--88 CCaasshh FFllooww AAssssuummppttiioonnss

Accounts Receivables Cycle (In Days) 60

Accounts Payable Cycle (In Days) 20

Cash on Hand Rs. 600,000

TTaabbllee 1133--99 MMaacchhiinneerryy OOppeerraattiinngg CCoossttss

Maintenance Cost / year 336,000 Direct Electricity Cost / year 1,680,000Direct Water Cost / year 60,000Direct Misc. Cost / year) 210,000

SMEDA Marble Processing Plant

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