garments stitching unit mens dress trousers

Pre-Feasibility Study

GARMENTS STITICHING UNIT(Men’s Dress Trousers)

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th Floor LDA Plaza Egerton Road, LahoreTel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk

[email protected] OFFICE

PUNJABREGIONAL OFFICE

SINDHREGIONAL OFFICE

NWFPREGIONAL OFFICE

BALOCHISTAN

8th Floor LDA Plaza Egerton Road, Lahore

Tel 111 111 456, Fax: 6370474-7 Website www.smeda.org.pk

[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: (081) 831623, 831702


November,2007

Pre-Feasibility Study Garments Stitching Unit (Men’s Dress Trousers)

PREF-58/November, 2007/Rev 22

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-58

Revision 2

Prepared by SMEDA-Punjab

Approved by GM Punjab

Revision Date November, 2007

Issued by Library Officer



11 IINNTTRROODDUUCCTTIIOONN

11..11 PPrroojjeecctt bbrriieeff

This pre-feasibility study provides information and guideline about the investment opportunity in a stitching unit for woven dress trousers for men. The production of this unit will be for export purpose, and therefore will earn foreign exchange for the country. There is a vast variety in dress pants in relation to quality of the fabric used, style, stitching techniques, etc. This project will start its operation on CMT1 basis (commercial basis), but ultimately, this would be an export-oriented unit. Problems like lower margin and longer cash cycles are not prevalent in the export business because it is operated on LCs (letter of credit) basis. This unit will also be capable of producing other similar garments like twill and denim trousers with little modification of process.

11..22 OOppppoorrttuunniittyy RRaattiioonnaallee

The main competitive advantage of this industry is the availability of fine quality organic fiber of Pakistan, mainly, the cotton and wool, besides the synthetic. The apparel segment is the highest value added link in the entire textile value chain. The trade in the sector accounts for 53% of the total value of global textiles trade and has been consistently growing since the last two decades. According to WTO estimates, with the elimination of quotas in the year 2005, the total trade of textiles and clothing will exceed the US $500 billion mark, and this growth will be driven primarily by the clothing sector, which will constitute almost 70% of the total trade.

Readymade garments industry of Pakistan enjoys active demand in the foreign as well as domestic markets. Besides being a potential source of foreign exchange earnings, it provides an important means of diversification within textile industry, by allowing conversion of domestically made cloth into a higher value added production in the form of garments. This industry also provides an employment opportunity for skilled and semi-skilled labor, which is easily available in the areas where the clusters of this industry exist. Needless to say that import of one industrial sewing machine valued at about US $500 creates 3 jobs and earns US $27,000 per year in the shape of foreign exchange. The development of this industry not only offers attractive return on capital but is also advantageous to the economy as its exports maximize value addition to raw cotton.

1 Cut, Manufacture and Trim



According to statistics, the global textile market possesses a worth of more than $400 billions presently. In a more globalize environment, the industry has faced high competition as well as opportunities. It is predicted that Global textile production will grow by 25 percent between 2002 and 2010 and Asian region will largely contribute in this regard. The world trade organization (WTO) has taken so many steps for uplifting this sector. In the year 1995, WTO had renewed its MFA and adopted Agreement on Textiles and Clothing (ATC), which states that all quotas on textile and clothing will be removed among WTO member countries.

However the level of exports in textiles from developing countries is increasing even if in the presence of high tariffs and quantitative restrictions by economically developed countries.

Moreover the role of multifunctional textiles, eco-textiles, e-textiles and customized textiles are considered as the future of textile industry.

Because this project is 100% export oriented, the Government of Pakistan has exempted on the import of machinery by an exporter from custom duty, sales tax and income tax. The export of trousers are zero rated (sales tax rate zero percent) and the whole input sales tax is refundable.

This unit can be established with low investment and industrial technological complications and provides better returns on investments, which are the main deriving force of medium type industries.

11..33 PPrrooppoosseedd CCaappaacciittyy

The proposed unit is able to stitch approximately 800 pieces per day with 40 stitching machines.

During the first two years, the unit will provide CMT services with 40 stitching machines. This will help to establish harmonized system flow and synergies, which will lead to better productivity and efficiency. In the third and forth year, it will start its own manufacturing and export by utilizing 50% of its capacity, remaining 50% will continued to be used for CMT. In the fifth year, the unit will utilize 100% of its capacity for own manufacture and export.

11..44 PPrroojjeecctt CCoosstt

The total project cost of this Dress Trouser Manufacturing unit is Rs. 3.68 million. This includes a fixed cost of Rs 2.314 million and a working capital of Rs 1.369million.



11..55 PPrroodduuccttiioonn pprroocceessss ffllooww cchhaarrtt

Inspection

Cutting

Final Inspection

Washing(Outsourced)

Stitching

Pressing

Packing

Trimming

Procurement of

Finished Fabric

Dispatch/shipment



22 CCUURRRREENNTT IINNDDUUSSTTRRYY SSTTRRUUCCTTUURREE

The readymade garments industry generally operates on small and medium scale, and mostly, in an unorganized way. According to an estimate, about 70 percent of its units are in the unorganized sector and are established in shops, commercial plazas and houses. These units normally do not have modern machines like over-locking, creasing, buttoning, and cutting. These units are mostly equipped with 4 to 10 machines, which are usually locally, assembled. The locally assembled machines operate at slow speed up to 250 stitches per minutes. The industrial sewing machines are mainly imported from Japan, Italy, Korea and China and are capable of working at high speed up to 4,500 stitches per minutes. These are especially suitable for assembly line operations.

In spite of the fact that industry has shown rapid growth, no figures of production data of formal wear dress pants are available. However, the export data of men’s trousers is available which includes formal wear trousers and casual wear trousers. Determination of production in this industry is difficult to make. Firstly, due to pre-dominance of unorganized cottage scale units where the major portion of work is performed manually. Secondly, the capacity of the same machines varies significantly. Thirdly, it is easy to switch over from one product to another.

According to Pakistan Readymade Garments Manufacturer and Exporters Association (PRGMEA), the number of existing manufacturers/exporters of trousers (includes all type of trousers) in Punjab north zone (Lahore) is 73 till mid august 2007 follows:

TTaabbllee 22--11:: MMaannuuffaaccttuurriinngg UUnniittss ooff TTrroouusseerrss iinn NNoo ooff CCoommppaanniieess EExxppoorrttiinnggAAggaaiinnsstt SSppeecciiffiicc HHSS CCooddee iinn LLaahhoorree22

HS Code No Of companies dealing in specific HS Code6013.42 16103.41 46103.42 206103.43 36103.49 66104.61 16104.62 116104.63 16104.69 56203.41 186203.411 16203.42 606203.43 5

2 Source PRGMEA (Pakistan Readymade Garments Manufacturer and Exporters Association)



6203.49 106204.61 16204.62 266204.63 56204.69 16

TTaabbllee 22--22 PPaakkiissttaann’’ss EExxppoorrtt ((MMeeaannss,, bbooyyss ssuuiittss,, jjaacckkeettss,, ttrroouusseerrss eettcc kknniitt oorrccrroocchheett--22000033--22000066)) ((HHSS ccooddee 66110033))

Reporting Countries Trade Value in $MillionsUSA 27.794484United Kingdom 4.204848Spain 2.241756Italy 2.373816Germany 1.947852

Pakistan's Export

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33 MMAARRKKEETTIINNGG

For formulating strategies for marketing in the foreign markets, the following should be considered:

A market opportunity analysis to determine suitable sales market(s) and suitable sales channels.

1. Selection of target markets to identify suitable markets for selling trousers. The evaluation is based on the following five criteria:a. Market potentialb. Product standardc. Trade situationd. Export conditionse. Exporting experience ( exporting country)

2. Sales channel assessment to estimate the requirements of potential sales channels in respect to product standards, logistics and marketing. The sales channel within the international market must be assessed and identified on each particular market, which best suits the product and the unit.

3. Company assessments of the unit’s performance in respect to product standards, logistics and marketing.

4. Supply and demand comparison to compare the requirement of the sales channels with the unit’s performance, so as to identified the most suitable sales channel(s)

Building up trade relations consists of the following:a. Reviewing the product mix, packaging, seasonal influencesb. Identifying a suitable trade partnerc. Participation in trade fairsd. Organizing sales campaign by internet, e-mail, Fax and telephonee. Drawing up an offerf. Free sampling and personal visitsg. Handling up contracth. Sales promotion

While the USA and the European Union remain to be the largest markets for garments and other apparel products with a combined share of 73% in total global clothing trade, the apparel production centers are shifting to the countries with lower production cost and/or strategic geographic location. Asian countries have the advantage, especially in the first case with low wage rates and indigenous production of the major raw materials. In 1997, over 59% of textile exports and 70% of clothing export originated from Asia. However, this competitive advantage of Asia is vulnerable to two basic developments; one is the emerging regional trade blocks that allow for preferential trade treatments and the other is the threat from countries that are located on the borders of major markets. Apparel is a rapidly changing business with very short product life cycles, consumer preference depends not only on seasons but also on numerous other factors. Responding quickly to these changing demands is vital for the success of garment exports. Countries like Mexico and



Turkey have the advantage of minimal lead times and are expected to give tough competition to the exporters from Asia.

At present, the major thrust of garment exports from Pakistan is on the USA market. The European Union is the second largest market for garment manufacturers from Pakistan. Major markets that Pakistani manufactures have so far not been able to explore include the Japanese market, the Far East and some markets in the European Union. These markets demand high product standards and in return offer higher unit price realizations.

Marketing research and development is one of the fundamental aspects that our industry lacks. Garment industry in Pakistan comprises of numerous small players with little resources available for marketing purposes.

Pakistan has an opportunity to survive and compete in the quota free environment i.e. post January 1, 2005 scene. The three important factors that the exporter must adhere to are 3 Cs i.e. compatibility, competitiveness and credibility on an individual level and on a collective level.

33..11 WWoorrlldd TTrraaddee AAnnaallyyssiiss

TTaabbllee 33--11 ((MMeeaannss,, bbooyyss ssuuiittss,, jjaacckkeettss,, ttrroouusseerrss eettcc kknniitt oorr ccrroocchheett--22000033--22000066))((HHSS ccooddee 66110033))

Exporter Countries Trade Value in $MillionsChina 11,338Honkong, SAR 663Thailand 597Cambodia 595Mexico 551

Top Exporters

02,0004,0006,0008,000

10,00012,000

China

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It is evident from the chart above that China is the biggest exporter of trousers, and occupies a large share of the world market. Whereas Pakistan is on 19th position in the global trade.

TTaabbllee 33--22 ((MMeeaannss,, bbooyyss ssuuiittss,, jjaacckkeettss,, ttrroouusseerrss eettcc kknniitt oorr ccrroocchheett--22000033--22000066((HHSS ccooddee 66110033))

Importer Countries Trade Value in $MillionsUSA 3,336United Kingdom 1,007Japan 726China, Honkong, SAR 631Italy 576

TTaabbllee 33--11:: TToopp ttwweennttyy eexxppoorrtteerrss ooff wwoorrlldd ((UUSS $$ mmiilllliioonn))33

Statistics shows that US is the main importer of dress trousers followed by United Kingdom, and the quantity difference is significantly high from other importing countries

TTaabbllee 33--33 PPaakkiissttaann’’ss EExxppoorrtt ooff TTrroouusseerrss iinn 2200006644

Reporter Countries Trade QuantityUSA 72,260,076Germany 25,114,920United Kingdom 21,680,820Belgium 10,826,928Italy 9,960,120

3 Source: Trade Analysis System/ITC4 UN comtrade (comtrade.un.org)

T op Im por te r s

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1 ,0 0 01 ,5 0 02 ,0 0 02 ,5 0 03 ,0 0 03 ,5 0 04 ,0 0 0

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France 10,310,388Spain 9,581,520Netherlands 6,212,256Canada 3,351,444Sweden 1,954,224Ireland 1,625,700

33..22 RRaaww mmaatteerriiaall

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 griege fabric was being exported and the dyed fabric was 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 charges according 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 are listed below: Sewing thread Buckles Hooks Buttons Zipper Labels Fusing (called ‘Buckram’ in the local language) Packing Material



44 MMAANNPPOOWWEERR RREEQQUUIIRREEMMEENNTT

TTaabbllee 55--11:: MMaannppoowweerr RReeqquuiirreemmeenntt aatt SSttaarrtt

Positions Number Salary/month (Rs.) Annual SalaryChief Executive 1 45,000 540,000 Commercial Manager 1 18,000 216,000 Final Table Inspector 2 4,600 110,400 Production In charge 1 15,000 180,000 Finishing supervisor 1 10,000 10,000 Stitching Supervisor 1 10,000 120,000 Cutting Master 1 15,000 180,000 Cutting Helpers 2 4,600 110,400 Rowing Inspector 2 6,500 156,000 Helper (machine operator) 4 4,600 220,800 Clippers 3 5,000 180,000 Iron Presser 2 4,600 110,400 Packing Staff 2 4,600 110,400 Store Keeper 1 5,000 60,000 Stain remover 1 4,600 55,200 Store keeper 1 4,600 55,200 Accounts officer 1 15,000 180,000 Security Guards 2 5,000 120,000 Driver 1 5500 66,000Total 30 2,780,800

44..11 LLaabboorr

In 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.

55 MMAACCHHIINNEERRYY DDEETTAAIILLSS

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 and electric 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, specializedmachines 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.

TTaabbllee 66--11:: MMaacchhiinneerryy LLiisstt

Description Qty Price(Rs.) Total Machinery Cost

Cutting Machine (ZJ- 10") 1 15,500 15,500 5 thread safety over lock machines (ZJ-732-38) 3 36,000 108,000 1 Needle Lock Stich Machine (ZJ 8800A)) 29 15,500 449,500 Button Holding Machine (ZJ -781) 1 90,000 90,000 Button stitching Machine(ZJ-373) 1 45,000 45,000 Belt loops making machine(TK-KING) 1 70,000 70,000 Waist Band Making machine(TK-KING) 1 65,000 65,000 Feed Off Arm Machine with puller (ZJ -926) 1 125,000 125,000 Computer Controlled Bartaking Machine(ZJ-1900) 1 150,000 150,000 2 Needle Lock stitch machine(ZJ 842) 2 48,000 96,000 Electric Steam Boiler 1 120,000 120,000 Electric Steam Iron 3 7,000 21,000 Total 45 1,360,915



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

TTaabbllee 66--22:: Other Equipment

Furniture and Fixture Qty Per unit Cost

Total Cost in Rs.

Wooden stool for Labor 69 175 12,075 Trolleys for Stitching Department 5 7,500 37,500 Cutting Table 1 8,000 8,000 Finishing Table 2 4,000 8,000 Others 1 10,000 10,000 Total 75,575

TTaabbllee 66--33:: OOffffiiccee EEqquuiippmmeenntt

Description QTY Price (Rs) Total Cost in Rs.Fax, Telephone etc 1 15,000 15,000 Air conditioner 2 35,000 70,000 Computer 1 27,000 27,000 Tube lights -- 30,000 30,000 Office furniture 1 50,000 50,000 Total Cost 192,000



66 LLAANNDD AANNDD BBUUIILLDDIINNGG

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 Pakistan for setting up the unit include Karachi, Hyderabad, Sukkur, Rawalpindi, Lahore, Faislabad, Multan, Chounia, Lasbella, Hattar, Gadoon Amazai, Islamabad, etc.

Karachi, Lahore and Faisalabad are 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 Karachi 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, approximately 5,300 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.

TTaabbllee 77--11:: TToottaall AArreeaa RReeqquuiirreemmeenntt

Description AreaFabric & Accessories inventory room 938 Stitching room 2,050 Packing & Inspection Room 600 Finishing Hall 600 Finished Garment Store 500 Management Building 300 Total 5,300



77 PPRROOJJEECCTT EECCOONNOOMMIICCSS

TTaabbllee 88--11 PPrroojjeecctt EEccoonnoommiiccss

Account Head Total Cost (Rs)Plant and Machinery 1,360,915 Furniture/ Fixture & Equipment 267,575 Preliminary Expenses5 311,200 Vehicles 375,000 Total Capital Cost 2,314,690 Working Capital6 1,369,419 Total Project Cost 3,684,109

TTaabbllee 88--22 PPrroojjeecctt RReettuurrnnss

ProjectIRR 36.53%NPV (Rs) 34,539,877 Payback Period (Years) 7.394

TTaabbllee 88--33 FFiinnaanncciinngg PPllaann

Financing Ratio RsEquity 50% 1,842,055 Debt 50% 1,842,055

5 Includes registration cost, and 1 month salaries chief executive, Production manager, Commercial manager and Accounts Officer6 Includes 12 months Prepaid Rent



88 KKEEYY SSUUCCCCEESSSS FFAACCTTOORRSS && TTHHRREEAATTSS

88..11 KKeeyy SSuucccceessss FFaaccttoorrss

The changing global trade patterns offer more opportunities than it poses threats. The apparel export product mix from Pakistan is heavily tilted towards men's wear and knitted garments. As the global market demand characteristics are changing, woven segment of the garments is a much larger market than the knit garments and offers 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

88..22 TThhrreeaattss aanndd WWeeaakknneessss ooff tthhee BBuussiinneessss

One major threat that garments manufacturers and exporters from developing countries like Pakistan 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 selective in 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.



99 RREEGGUULLAATTIIOONNSS

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.


PREF-58/November, 2007/ Rev 219

1100 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1100..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

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

Sales 5,136,768 6,215,489 33,983,010 41,119,442 88,497,932 107,082,497 119,460,018 131,406,020 144,546,622 159,001,284

Cost of goods sold

Raw Material 2,935,296 3,390,267 26,338,332 31,093,794 65,297,015 75,418,052 80,311,181 84,326,740 88,543,077 92,970,230

Washing Cost (OUTSOURCED) 0 0 2,032,358 2,280,306 5,117,007 5,741,282 5,939,097 6,057,879 6,179,037 6,302,618

Payroll (Production Staff) 1,658,800 1,824,680 2,007,148 2,207,863 2,428,649 2,671,514 2,938,665 3,232,532 3,555,785 3,911,364

Machine Maintenance 108,000 115,560 123,649 132,305 141,566 151,476 162,079 173,424 185,564 198,554

Direct Electricity 428,033 470,837 517,920 569,712 626,683 689,352 758,287 834,116 917,527 1,009,280

Total 5,130,129 5,801,343 31,019,407 36,283,980 73,610,920 84,671,675 90,109,309 94,624,691 99,380,990 104,392,045

Gross Profit 6,639 414,146 2,963,603 4,835,462 14,887,011 22,410,822 29,350,709 36,781,329 45,165,632 54,609,239

Operating ExpensesPayroll (Admin) 1,122,000 1,234,200 1,357,620 1,493,382 1,642,720 1,806,992 1,987,691 2,186,461 2,405,107 2,645,617

Fixed electricity 133,825 147,208 161,929 178,122 195,934 215,527 237,080 260,788 286,867 315,553

Insurance expense 100,175 90,157 80,140 70,122 60,105 50,087 40,070 30,052 20,035 10,017

Office expenses 11,220 12,342 13,576 14,934 16,427 18,070 19,877 21,865 24,051 26,456

Administrative Overheads 51,368 62,155 339,830 411,194 884,979 1,070,825 1,194,600 0 0 0

Amortization (Pre-operational Expenses) 31,120 31,120 31,120 31,120 31,120 31,120 31,120 31,120 31,120 31,120

Depreciation 200,349 200,349 200,349 200,349 200,349 200,349 200,349 200,349 200,349 200,349

Total 1,650,057 1,777,531 2,184,564 2,399,223 3,031,634 3,392,971 3,710,787 2,730,635 2,967,528 3,229,113

Operating Profit (1,643,418) (1,363,385) 779,039 2,436,239 11,855,377 19,017,851 25,639,922 34,050,694 42,198,103 51,380,125

Non-operating Expenses

Financial Charges on Long-term Loan 257,888 218,873 174,397 123,695 65,893 0 0 0 0 0

Financial Charges on Short-Term Loan 0 456,886 1,054,992 1,549,216 1,933,450 1,713,292 0 0 0 0

Building Rentel 780,000 858,000 943,800 1,038,180 1,141,998 1,256,198 1,381,818 1,519,999 1,671,999 1,839,199

Total 1,037,888 1,533,759 2,173,189 2,711,091 3,141,342 2,969,489 1,381,818 1,519,999 1,671,999 1,839,199

Profit Before Tax (2,681,306) (2,897,144) (1,394,150) (274,852) 8,714,035 16,048,362 24,258,104 32,530,695 40,526,104 49,540,926

Tax 0 0 0 0 2,924,912 0 0 0 0 0

Profit After Tax (2,681,306) (2,897,144) (1,394,150) (274,852) 5,789,123 16,048,362 24,258,104 32,530,695 40,526,104 49,540,926

Retained Earnings beginning of year 0 (2,681,306) (5,578,450) (6,972,600) (7,247,452) (1,458,329) 14,590,033 38,848,137 71,378,832 111,904,936

Retained Earnings end of year (2,681,306) (5,578,450) (6,972,600) (7,247,452) (1,458,329) 14,590,033 38,848,137 71,378,832 111,904,936 161,445,862



1100..22 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Const. Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Operating activities

Net profit (2,681,306) (2,897,144) (1,394,150) (274,852) 5,789,123 16,048,362 24,258,104

Amortization (Pre-operational Expenses) 31,120 31,120 31,120 31,120 31,120 31,120 31,120

Depreciation 200,349 200,349 200,349 200,349 200,349 200,349 200,349

Up-front insurance payment (100,175) 10,017 10,017 10,017 10,017 10,017 10,017 10,017

Equipment and spare part inventory (680) (34) (36) (38) (39) (41) (43) (46)

Accounts receivable (740,880) (155,585) (4,004,931) (1,029,293) (6,833,436) (2,680,466) (1,785,219)

Stocks-RM (141,120) (21,874) (1,103,272) (228,628) (1,644,386) (486,588) (235,247) (193,056)

Accounts payable 295,809 45,850 2,312,629 479,239 3,446,885 1,019,964 493,113

Cash provided by operations (241,975) (2,906,797) (3,868,700) (3,073,632) (2,227,844) 2,157,429 14,394,056 23,014,383

Financing acivities

Long term debt principal repayment (278,673) (317,687) (362,163) (412,866) (470,667) 0 0

Add: buliding rent expense 780,000 858,000 943,800 1,038,180 1,141,998 1,256,198 1,381,818

Building rent payment (780,000) (858,000) (943,800) (1,038,180) (1,141,998) (1,256,198) (1,381,818) (1,519,999)

Adition to debt 1,842,055

Issuance of share 1,842,055

Running Finance Repayment (3,263,470) (7,535,657) (11,065,832) (13,810,359) (12,237,797) 0

Cash provided by/ (used for) financing activities 2,904,109 (356,673) (3,666,957) (7,992,200) (11,582,515) (14,395,226) (12,363,417) (138,182)

Total 2,662,134 (3,263,470) (7,535,657) (11,065,832) (13,810,359) (12,237,797) 2,030,640 22,876,201

Investing activities

Capital expenditure (2,314,690)

Cash (used for)/ provided by invetsing activities (2,314,690)

Cash balance brought forward 0 347,444 347,444 347,444 347,444 347,444 347,444 2,378,084

Net Cash 347,444 (2,916,026) (7,188,213) (10,718,387) (13,462,915) (11,890,353) 2,378,084 25,254,285

Running Finance 0 3,263,470 7,535,657 11,065,832 13,810,359 12,237,797 0 0

Cash carried forward 347,444 347,444 347,444 347,444 347,444 347,444 2,378,084 25,254,285



1100..33 PPrroojjeecctteedd BBaallaannccee SShheeeett

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

Current Assets

Cash 347,444 347,444 347,444 347,444 347,444 347,444 2,378,084 25,254,285 56,353,403 95,270,529 147,700,038

Stocks and Inventory 141,120 162,994 1,266,266 1,494,894 3,139,280 3,625,868 3,861,114 4,054,170 4,256,879 4,469,723 0

Receivable 0 740,880 896,465 4,901,396 5,930,689 12,764,125 15,444,591 17,229,810 18,952,791 20,848,070 22,932,877

Equipment and spare part inventory 680 714 750 788 827 868 912 957 1,005 1,056 1,108

Pre-paid insurnace payment 100,175 90,157 80,140 70,122 60,105 50,087 40,070 30,052 20,035 10,017 0

Pre-paid building rent 780,000 858,000 943,800 1,038,180 1,141,998 1,256,198 1,381,818 1,519,999 1,671,999 1,839,199 2,023,119

Total 1,369,419 2,200,189 3,534,865 7,852,824 10,620,342 18,044,590 23,106,588 48,089,274 81,256,113 122,438,594 172,657,143

Gross Fixed Assets 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490 2,003,490

Less: Accumulated depreciation 0 200,349 400,698 601,047 801,396 1,001,745 1,202,094 1,402,443 1,602,792 1,803,141 2,003,490

Net Fixed Assets 2,003,490 1,803,141 1,602,792 1,402,443 1,202,094 1,001,745 801,396 601,047 400,698 200,349 0

Intangible Assets

Pre-operational Expenses 311,200 280,080 248,960 217,840 186,720 155,600 124,480 93,360 62,240 31,120 0

Total 311,200 280,080 248,960 217,840 186,720 155,600 124,480 93,360 62,240 31,120 0

Total Assets 3,684,109 4,283,410 5,386,617 9,473,107 12,009,156 19,201,935 24,032,464 48,783,681 81,719,051 122,670,063 172,657,143

Current Liabilities

Running Finance 0 3,263,470 7,535,657 11,065,832 13,810,359 12,237,797 0 0 0 0 0

Accounts payable 295,809 341,660 2,654,288 3,133,528 6,580,413 7,600,377 8,093,490 8,498,164 8,923,073 9,369,226

Total 0 3,559,279 7,877,317 13,720,120 16,943,887 18,818,210 7,600,377 8,093,490 8,498,164 8,923,073 9,369,226

Long-term liabilities

Long-term Loan 1,842,055 1,563,382 1,245,695 883,533 470,667 0 0 0 0 0 0

Total 1,842,055 1,563,382 1,245,695 883,533 470,667 0 0 0 0 0 0

Equity

Paid-up Capital 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055 1,842,055

Retained Earnings 0 (2,681,306) (5,578,450) (6,972,600) (7,247,452) (1,458,329) 14,590,033 38,848,137 71,378,832 111,904,936 161,445,862

Total 1,842,055 (839,251) (3,736,395) (5,130,546) (5,405,397) 383,726 16,432,088 40,690,192 73,220,887 113,746,991 163,287,917

Total Liabilities And Equity 3,684,109 4,283,410 5,386,617 9,473,107 12,009,156 19,201,935 24,032,464 48,783,681 81,719,051 122,670,063 172,657,143



1111 KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1122--11:: MMaacchhiinneerryy AAssssuummppttiioonnss

Capacity of stitching unit 244,608 Production per day -(pieces) approximately 800Production Capacity for Year 1 55%Maximum Production Capacity 98%Defected garment 2%Machine maintenance cost (per month / machine) 200Machine maintenance growth rate 7%

TTaabbllee 1122--22:: OOppeerraattiinngg AAssssuummppttiioonnss

Hours operational per day 8 hoursDays operational per month 26 days Days operational per year 312 daysNo of shifts per day Single

TTaabbllee1122--33:: EEccoonnoommyy RReellaatteedd AAssssuummppttiioonnss

Electricity cost growth rate 10%Wages growth rate 10%

TTaabbllee 1122--44:: CCaasshh FFllooww AAssssuummppttiioonnss

Accounts receivable (average) 45daysAccounts payable average 30 days

TTaabbllee 1122--55:: RReevveennuuee AAssssuummppttiioonnss

Sale Price of Trousers for export sales Rs.285 or 4.78$Dollar rate Rs. 60 / dollarCMT rate per piece Rs 35Sales price growth rate per annum (both for export & CMT) 3%Wastage price growth rate 3%



TTaabbllee 1122--66:: EExxppeennssee AAssssuummppttiioonnss

Consumption of fabric per piece 1.5 meters or 250kgFabric purchase price (per meter) Rs.125Raw material price growth rate 2%Insurance rate on machines (on written down value) 1%Tax on CMT service (% of total CMT Revenue) 5%Tax on Export Sales (% of total Export Revenue) 0.75%Packaging cost per piece Rs.9Average Freight charges per piece Rs.5

TTaabbllee 1122--77:: FFiinnaanncciiaall AAssssuummppttiioonnss

Project life (Years) 10Debt 50%Equity 50%Interest rate on long-term debt 14%Debt tenure (Years) 5Debt payments per year 2


PREF-58/August, 2002/ Rev 1

24

garments stitching unit mens dress trousers

Documents

information memorandum

stitching unit

information heshe

presented information

contained information

unit mens dress trouserspref

exportoriented unit

dress pants