14323 51152934964 7001722029 SAMEER MUKESHKUMAR VISHAVADIYA MUKESHKUMAR K VISHAVADIYA 09/05/1991

Financial Pre- Feasibility Report on RMG Manufacturing Unit

Raw material

The basic raw material for the manufacturing of dress trousers is dyed woven fabric with different sorts of finishes on it. The woven fabric that is used in the manufacturing of dress trousers is made of cotton, or polyester/cotton (P/C), wool and other blends of man-made fibers. The weight of these fabrics normally varies from 200-240 grams/sq. m (for the light qualities of P/C 65:35 fabrics) and from 240-300 gram/sq. m (for heavy qualities of P/C 65:35 fabrics). In case of 100% cotton, light quality fabric weight should be at least 180 grams/ sq. m. For the fabric of blended 50/50 polyester/cotton, the weight varies from 100 grams/ sq. m (plain) to 215 gram sq. m (twill). The weight of the finish is not included in these figures. Prices of these fabrics range from Rs. 60 to Rs. 3000 per meter. During the last few years, the Dyeing and Finishing Industry has performed remarkably. Traditionally, the Grieg fabric was being exported and the dyed fabricwas then imported at a higher price. But due to the installation of new dyeing plants, production of high quality dyed finished fabric has increased. This has helped in the reduction of the cost of finished fabric. The industry uses both locally produced and imported raw materials, but it mainly uses locally produced raw material. Some exporters however, prefer to purchase yarn, and process it by paying service chargesaccording to their own requirement and buyers specification. This strategy also further reduces the cost of fabric. Besides fabric, other raw materials used in manufacturing of men’s formal wear arelisted below: Sewing thread Buckles Hooks Buttons Zipper Labels fusing (called ‘Buckram’ in the local language) Packing Material

LaborIn order to achieve high degree of value addition, as in the apparel and textile made ups sector, the engine of export growth, the skilled labor has a pivotal role in labor intensive processes like stitching. This sector normally follows piecework system under “trolley system” (division of labor) in which one garment is prepared by different persons during different stages of process. Normally there are 25-30 different processes involved in dress trouser manufacturing. Each process has its separate predetermined piece rate. The garment industry of Pakistan, especially export based, is dependent on job orders and thus, there is an aversion to employ workers on long term basis. So the exporters prefer to employ labor under contract system. This means that the designated contractor is the primary employer and the units in which the workers produce goods are the secondary employers. The result is that there has been more productivity and efficiency through contract workers. The exporters usually demand that the contractors must have trained and skilled workers on their rolls, so that the

Production is accelerated and there is better quality and minimum hassle in training or orienting the workers to produce as per requirements. However, the units, which have regular export orders, prefer to employ permanent labor on piece rate system.

MACHINERY DETAILS

The industrial sewing machines are mainly imported from Japan and are capable of working at high speed up to 4,500 stitches per minute. These are especially suitable for assembly line operation and are mostly used by the organized sector. Besides industrial sewing machines, household sewing machines along with parts andElectric irons etc. are also being imported. Imports of sewing machines and their parts are given in Table. The other important machine used by the ready-made garment industry is the over locking, which is used to trim the edges of cut cloth. In addition, specialized machines are used for cutting, making button holes and stitching of buttons. According to an estimate, one specialized machine is required for very five sewing Machines.

The investment layout in different years is given in the financial calculation

OTHER EQUIPMENT

OFFICE EQUIPMENT

LAND AND BUILDING

Project should be located where skilled manpower is within reach, and where electricity gas water and public transport are easily available. Easy access to the normal public transport is must for a success of any garment factory; otherwise the workers will have to be provided transport in company arranged buses. Potential industrial locations in Bangladesh for setting up the unit include Dhaka, Chittagong etc. These comparatively better and recommended locations because necessary technical and skilled manpower is easily available. Secondly good quality and sufficient quantity of raw material at competitive prices is easily available. Since this industry is export oriented, so Dhaka has the advantage of being near to seaport. However, final selection of site will depend upon investor’s own choice and convenience. For manufacturing unit with installation of the above said machines, approximately5, 300 sq. ft. area is required which includes space for admin office, stitching unit and stores. It is recommended that the machinery unit may be established in a rented building, which can be easily found in the industrial zones. The rent has been taken as Rs. 65,000 per month.

TOTAL AREA REQUIREMENT

7 PROJECT ECONOMICS

PROJECT ECONOMICS

PROJECT RETURNS

FINANCING PLAN

8 KEY SUCCESS FACTORS & THREATS

Key Success FactorsThe changing global trade patterns offer more opportunities than it poses threats.The apparel export product mix from Bangladesh is heavily tilted towards men's wearand knitted garments. As the global market demand characteristics are changing,woven segment of the garments is a much larger market than the knit garments andoffers higher price realizations. The following are the main key success factors: Strong marketing skills/knowledge is required from entrepreneur Assurance of high consistent quality Assurance of on time delivery Competitive rates Cost efficiency Better services to the customer i.e. claim settlement etc. Better communication development with customers

Threats and Weakness of the Business

One major threat that garments manufacturers and exporters from under developing countries like Bangladesh will have to face is the introduction of non-tariff trade barriers. While the free trade regime is increasingly gaining foothold in the international export arena, developed countries are becoming increasingly selectivein their import preferences. Issues like compliance to environmental standards and self-defined working environment can severely restrict exports from the developing countries. The main threats and weakness of the business are as follows: Continuous increase in utility rates Non friendly attitudes of Government agencies Less productive labor due to lack of education and training Lack of market research especially in prospective markets Growing demand for International Standards Certifications Lack of financial and human resources to attain immediate certification.

9 REGULATIONS For an exporter, registration is compulsory with Income Tax Department, Chamber of Commerce and Industry, Sales Tax Department and Export Promotion Bureau. Income tax on export is deducted at source on export proceeds at the rate of 0.75%, which is full and final discharge of income tax liability. Sales tax on export is charged at zero percent called zero-rated and whole input sales tax consumed in exports is refundable. If the project is 100% export oriented there is an exemption of custom duty, sales tax, income tax, on the import of machinery by an exporter. Government provides an export rebate of 2.62% of the F.O.B value on Trousers export.

10 FINANCIAL ANALYSES

PROJECTED INCOME STATEMENT

PROJECTED CASHFLOW

PROJECTED BALANCE SHEET

11 KEY ASSUMPTIONS

MACHINARY ASSUMPTION

OPERATING ASSUMPTION

ECONOMY RELATED ASSUMPTION

CASH FLOW ASSUMPTION

REVENUE ASSUMPTION

EXPENSE ASSUMPTION

FINANCIAL ASSUMPTION