laundry & dry cleaning

Pre-Feasibility Study

LAUNDRY & DRY CLEANING

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA LahoreTel: (042) 111-111-456, Fax: (042) 5896619, 5899756

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

Waheed Trade Complex,1st Floor, 36-Commercial Zone,

Phase III, Sector XX,Khayaban-e-Iqbal, DHA Lahore.

Tel: (042) 111-111-456Fax: (042) 5896619, 5899756

[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


October, 2004

Pre-Feasibility Study Laundry & Dry Cleaning

PREF-78/ Oct, 2004/Rev1

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DISCLAIMER

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

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

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

is based on certain assumptions. Although, due care and diligence has been taken to

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

the concerned factors, and the actual results may differ substantially from the presented

information. SMEDA does not assume any liability for any financial or other loss

resulting from this memorandum in consequence of undertaking this activity. The

prospective user of this memorandum is encouraged to carry out additional diligence and

gather any information he/she feels necessary for making an informed decision.

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

DOCUMENT CONTROL

Document No. PREF-78

Prepared by SMEDA-Punjab

Approved by Provincial Chief Punjab

Issue Date October, 2004

Issued by Library Officer



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1. INTRODUCTION TO SMEDA.................................................................................................... 3

2. PURPOSE OF THE DOCUMENT............................................................................................... 3

3. CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 4

4. PROJECT PROFILE.................................................................................................................... 4

4.1 PROJECT BRIEF ....................................................................................................................... 44.2 OPPORTUNITY RATIONALE ...................................................................................................... 44.3 MARKET ENTRY TIMING ......................................................................................................... 44.4 PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 54.5 PROJECT CAPACITY AND RATIONALE....................................................................................... 54.6 PROJECT INVESTMENT............................................................................................................. 54.7 PROPOSED PRODUCT MIX........................................................................................................ 54.8 RECOMMENDED PROJECT PARAMETERS................................................................................... 64.9 PROPOSED LOCATION.............................................................................................................. 7

5. SECTOR & INDUSTRY ANALYSIS........................................................................................... 7

5.1 SECTOR CHARACTERISTICS ..................................................................................................... 7

6. MARKET INFORMATION ......................................................................................................... 7

6.1 MARKET POTENTIAL ............................................................................................................... 76.2 TARGET CUSTOMERS .............................................................................................................. 7

7. PRODUCTION PROCESS........................................................................................................... 7

7.1 PRODUCTION PROCESS FLOW .................................................................................................. 77.2 RAW MATERIAL REQUIREMENT............................................................................................... 97.3 REVENUES .............................................................................................................................. 97.4 TECHNOLOGY AND PROCESSES ................................................................................................ 97.5 MACHINERY REQUIREMENT .................................................................................................. 107.6 MACHINE MAINTENANCE...................................................................................................... 11

8. LAND & BUILDING REQUIREMENT .................................................................................... 12

8.1 LAND REQUIREMENT ............................................................................................................ 128.2 COVERED AREA REQUIREMENT ............................................................................................. 128.3 RECOMMENDED MODE.......................................................................................................... 128.4 UTILITIES REQUIREMENT ...................................................................................................... 128.5 SUITABLE LOCATION............................................................................................................. 12

9. HUMAN RESOURCE REQUIREMENT................................................................................... 14

9.1 ESTIMATED TIME FOR PROJECT COMPLETION ........................................................................ 14

10. PROJECT COST.................................................................................................................... 14

11. FINANCIAL ANALYSIS ....................................................................................................... 15

11.1 PROJECT COSTS .................................................................................................................... 1511.2 PROJECTED INCOME STATEMENT........................................................................................... 1611.3 PROJECTED BALANCE SHEET ................................................................................................. 1711.4 PROJECTED CASH FLOW STATEMENT..................................................................................... 18

12. FINANCIAL ASSUMPTIONS ............................................................................................... 19



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11.. IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

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.

Since its inception in October 1998, SMEDA had adopted a sectoral 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 sectoral development strategy involved overhauling of the regulatory environment by taking into consideration other important aspects including finance, marketing, technology 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, transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDAs areas of operation.

Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable businessopportunities for potential SME investors. In order to facilitate these investors, SMEDA provides 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 an effective way.

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, production, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself.

This particular pre-feasibility is regarding Laundry & dry cleaning which comes under service sector. Before studying the whole document one must consider following critical aspects, which forms the basis of any investment decision.



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33.. CCRRUUCCIIAALL FFAACCTTOORRSS && SSTTEEPPSS IINN DDEECCIISSIIOONN MMAAKKIINNGG FFOORR IINNVVEESSTTMMEENNTT

Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. These may include availability of resources, academic knowledge, past experience and specific managerial and technical skill set. Following are some of the key success factors for a Laundry and Dry Cleaning business:

There should be warranty of clothes from damages and any type of color fading. Prime business location for proposed dry cleaning. Reasonable and competitive charges, positioned against competitors. On time delivery of clothes can leave good impression on the customers. Technical and efficient labor. There should be advertisement on local cable and banners. Existing dry cleaners are

not advertising for their services.

44.. PPRROOJJEECCTT PPRROOFFIILLEE

44..11 PPrroojjeecctt BBrriieeff

The proposed project entails setting up a dry cleaning unit. It provides a range of services relating to domestic and commercial sector. These services range from washing, drying and pressing to more complex services like cleaning sensitive fabric, blankets, shirwanis and suits etc.

44..22 OOppppoorrttuunniittyy RRaattiioonnaallee

There is an important factor for the entrepreneurs to set up a dry cleaning business in big cities of Pakistan due to the fact that it has become difficult for the people to wash all types of clothes in their houses i.e. Jackets, Sherwanis and other sensitive clothes.

In Pakistan dry clean industry has grown over the years in small set-ups, with low quality services, and there is a need for better service oriented dry clean units. There is a lot of unfilled demand as can be judged from excessive rush at the existing dry clean setups.

The business is service-oriented and carries large potential for profits due to its unique nature and uncontrolled spending of people, especially on marriages. The life style of the people in Pakistan has changed over the years. Now days, people are more conscious about their clothes and the need for dry cleaning has increased.

44..33 MMaarrkkeett EEnnttrryy TTiimmiinngg

The suitable timings for starting this business would be in October because this type of business has a busy schedule in winters. In winter season, people normally wear worm clothes that are sweaters, jackets, suits etc. and it is also season of weddings. Due to these activities and wearing pattern the demand for dry cleaning increases compared to other seasons.



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44..44 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

There are three main forms of business: Sole Proprietorship, Partnership and Company. An enterprise can be a proprietorship or a partnership and even it can be registered under company law with corporate law authority. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a private limited company.

For getting information on the formation of type of firm/company, please refer to the website: www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html

It is recommended that the proposed project be started as a sole proprietorship or a partnership because it requires less legal requirement. Similarly a lower income tax rate of tax is applicable to sole proprietorship than that of companies.

44..55 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee

The proposed dry clean will handle 60 kg of clothes per bath. Details of the project capacity are as follow:

TTaabbllee 44--11:: PPrroojjeecctt CCaappaacciittyyProject Dry Cleaning

Working hours per day 8 hoursOperating shift per day 1Working days per annum 300 daysMaximum clothes dry clean per day 395 units of clothesMaximum weight of clothes per day 320 KgMaximum weight of clothes per batch 60KgHours utilized per batch (Laundry & Dry cleaning) 1.5 hours

44..66 PPrroojjeecctt IInnvveessttmmeenntt

Total project cost of the proposed laundry and dry cleaning unit is Rs. 2.6 million. This includes a fixed cost of Rs. 2.22 million and a working capital of Rs. 0.35 million.

44..77 PPrrooppoosseedd PPrroodduucctt MMiixx

Following is the product mix of the proposed laundry & dry cleaning shop:



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TTaabbllee 44--22:: PPrrooppoosseedd PPrroodduucctt MMiixxAverage Weight

per unit (kg)Average Number of units per day

Average Weight per day (kg)

Trousers 0.35 80.00 28.00Coats (all Kinds)(winter) 2.00 15.00 30.00Shirts 0.18 60.00 10.80Jackets/sweater 2.25 15.00 33.75Dupata 0.05 25.00 1.25Shalwar Qameez 0.45 40.00 18.00Blankets 2.25 10.00 22.50Bed sheets 0.35 80.00 28.00Curtain 1.25 10.00 12.50Others(avg.) 2.25 60.00 135.00Total 11.38 395.00 320The proposed business is affected through seasonal variations. Following table shows the seasonal distribution of different clothes/ fabric:

TTaabbllee 44--33 SSeeaassoonnaall VVaarriiaattiioonnss

Description Spring Summer Autumn Winter TotalTrousers 6,000 6,000 6,000 6,000 24,000Coats (all Kinds)(winter) 0 0 0 1,125 1,125Shirts 4,500 4,500 4,500 4,500 18,000Jackets/sweater 0 0 0 1,125 1,125Dupta 1,875 1,875 1,875 1,875 7,500Shalwar Qameez 3,000 3,000 3,000 3,000 12,000Blankets 0 0 0 750 750Bed sheets 6,000 6,000 6,000 6,000 24,000Curtain 750 750 750 750 3,000Others(avg.) 4,500 4,500 4,500 4,500 18,000Total 26,625 26,625 26,625 29,625 109,500

44..88 RReeccoommmmeennddeedd PPrroojjeecctt PPaarraammeetteerrss

Capacity Human Resource Technology/Machinery Location320 kgs per day 7 Local Manufacturing

MachinerySee Table 8-3

Financial SummaryProject Cost IRR NPV Payback Period

Rs. 2.6 Million 33.39% Rs. 1.59 Million 3.5 years



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44..99 PPrrooppoosseedd LLooccaattiioonn

Large public sector dry cleaners are concentrated in major cities of the country. Therefore, it is suggested that new dry cleaner should be opened up in areas mentioned in table 8-3, where there is little presence of existing dry cleaning facilities.

55.. SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

55..11 SSeeccttoorr CChhaarraacctteerriissttiiccss

The numbers of Dry Cleaners in Pakistan has increased at a slow pace over the last few years. The size of this sector is still growing. There are few large dry cleaners operating in commercial areas of Lahore like Mall Road, Defence and Main Market Gulberg. They have a created a monopolized situation with less competition. They are currently four to five large-scale dry cleaners in Lahore such as Pearl dry cleaners at Barkat Market and Mall Road, British Kwick dry cleaners at Mall Road, National dry cleaners at Wahdat Road and Faisal Town and PC dry cleaners. These dry cleaners are using machines of 60kg capacity in general. Similarly, few large Dry cleaners have also been operating in prime business locations in Rawalpindi, Multan, Karachi and Quetta.

66.. MMAARRKKEETT IINNFFOORRMMAATTIIOONN

66..11 MMaarrkkeett PPootteennttiiaall

From 1981 to 2004 the estimated population of Pakistan has grown from 85 million to 150 million making Pakistan the seventh most populous country in the world. This growth rate has increased the demand for various products and services, and one of the services is the proposed business. People in big cities are now inclined to use more sophisticated measures to cleaning their clothes. These people range from middle class to upper class.

66..22 TTaarrggeett CCuussttoommeerrss

The major target market for the dry cleaning services will depend on the location where dry cleaning business is situated. The target customers for proposed business will not only be general public but also the commercial sector i.e. hostels, catering companies, film industry and hospitals.

77.. PPRROODDUUCCTTIIOONN PPRROOCCEESSSS

77..11 PPrroodduuccttiioonn PPrroocceessss FFllooww

Liquid solvent and small amount of water are added to the machine. The machine then agitates clothes in a manner similar to a domestic washing machine to remove dirt, oil, and stains. Once clean, the clothes are then manually transferred to a dryer (laundry procedure), then pressed and shaped.



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The above chart shows two processes separately that are laundry and dry cleaning. Each process is explained as below:a) Tagging :- The clothes are firstly tagged with a specific number, mentioned in the

invoice given to customers. This procedure is used for identification of clothes once ready for collection by the customers

b) Washing :- The clothes are washed in a washing machine using detergent i.e. Surf, washing powder etc. This procedure is only followed when laundry service is required by the customers.

c) Dry Cleaning: - In this process, the sensitive, expensive and only dry clean recommended clothes are cleaned. The chemical used to clean the clothes in this process is called Perclon (see raw material section for details).

d) Drying :- The clothes washed in a laundry procedure are dried using dryers.e) Steam Pressing :- In this process both the clothes either washed or dry cleaned are

pressed and shaped using steam press equipments.f) Packing :- Once pressed, the clothes are properly hanged and covered in the plastic

wrap and then tagged so that it can be easily identified.

a) Tagging

b) Washing

d) Drying

e) SteamPressing

Detergent(WashingSoapSimple)

Bleach onwhiteclothes

c) Dry CleanPerclon

(Chemicalused)



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77..22 RRaaww MMaatteerriiaall RReeqquuiirreemmeenntt

Raw material used for the purpose of dry cleaning of clothes is Perclon chemical by ICI Pakistan. Perchloroethylene, or perclon, is the dominant chemical solvent used in dry cleaning. Perclon (Perchloroethylene) is a liquid chemical that consists of 40% alcohol, 50% kerosene oil and 10% liquid used to save the color fading of clothes. Perclon (Perchloroethylene) is a clear, colorless liquid and evaporates quickly.

Bleach is also used especially for white clothes. Detergent is used for simple washing i.e. washing soap and surf. Following table shows the raw material costing:

TTaabbllee 77--11 RRaaww MMaatteerriiaall CCoossttiinngg

Chemicals Quantity Required per

day (Liter)

Rate per Liter

Total Cost per

day

Total Cost Per Annum

(Rs.)Perc Lon 20 285 5,700 1,710,000Bleach 2 55 110 33,000Tar pine Oil 20 30 600 180,000Cost of chemicals per day 1,923,000Packing Cost 548,000Total raw material cost 2,471,000

77..33 RReevveennuueess

The proposed product mix has been given in table 4-2. Sale prices and the number of clothes processed are listed in the table below:

TTaabbllee 77--22 SSaallee PPrriiccee

Items Number of units per year

Rate (Rs.) Total sale price (Rs.)

Trousers 24,000 55 1,320,000Coats (all Kinds)(winter) 1,125 100 112,500Shirts 18,000 25 450,000Jackets/sweater 1,125 120 135,000Dupatta 7,500 15 112,500Shalwar Qameez 12,000 45 540,000Blankets 750 190 142,500Bed sheets 24,000 60 1,440,000Curtain 3,000 140 420,000Others(avg.) 18,000 70 1,260,000Total 109,500 5,932,500

77..44 TTeecchhnnoollooggyy aanndd PPrroocceesssseess

There are several manufacturers of dry cleaning machines in Pakistan. In Lahore, there are approximately 5 to 6 manufactures of such machines i.e. Abdul Waheed at Canal Park



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Gulberg, Mushtaq Engineering Works at Township, some others are in Bund Road, Qainchi and Model Town. These machines can also be imported from the following countries: Italy Germany China JapanHowever, the prices of imported machinery are 2 to 3 times higher than local machinery. In terms of quality of cleaning and capacity, there is no major difference between local and imported machinery. Therefore, it is advisable to acquire locally manufacturedmachinery rather than the imported machinery.

77..55 MMaacchhiinneerryy RReeqquuiirreemmeenntt

Total number of different machines required for the proposed project is as follows:

TTaabbllee 77--33:: MMaacchhiinneerryy RReeqquuiirreemmeennttDescription No. Cost Per Unit in Rs. Total in Rs.Washing Machine (60Kg) 1 165,000 165,000Hydro Extractor(25Kg)1 1 38,000 38,000Dryer (60Kg) 1 135,000 135,000Dry Clean Machine (10Kg) 1 550,000 550,000Steam Press with compressor and Boiler 1 310,000 310,000Form Finisher (Recondition ) 1 185,000 185,000Total 6 1,383,000

TTaabbllee 77--44:: CCuussttoommeerr DDeeaalliinngg OOffffiiccee EEqquuiippmmeenntt RReeqquuiirreemmeennttDescription No. Cost Per Unit(Rs.) Total(Rs.)Split Unit 1 40,000 40,000Telephone Sets 2 400 800Fire Extinguish 1 4,000 4,000Total 44,800

1 Hydro Extractor spins the clothes before these are passed on to dryer



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TTaabbllee 77--55:: OOtthheerr EEqquuiippmmeenntt RReeqquuiirreemmeennttDescription No. Cost Per Unit(Rs.) Total(Rs.)Fan(56) 4 1,400 5,600Exhaust Fan 1 500 500Water Cooler 1 8,500 8,500Lighting Appliances 1 6,000 6,000Total 20,600

TTaabbllee 77--66:: FFuurrnniittuurree,, FFiixxttuurree aanndd vveehhiiccllee RReeqquuiirreemmeenntt

Description No. Cost Per Unit(Rs.) Total(Rs.)Wardrobes 2( 10ftx3ft) 12,000 24,000Sofa set 2 seater 1 2,000 2,000Counter Table 1 3,500 3,500Chairs 3 500 1,500Stole 3 150 450Suzuki Loader2 1 450,000 450,000Total 481,450

TTaabbllee 77--77:: TToottaall CCoosstt ooff IInnffrraassttrruuccttuurree

Description Cost (Rs.)Machinery Cost 1,383,000Customer dealing Office Equipments 44,800Other Equipments 20,600Furniture, Fixture and vehicle 481,450Total 1,929,850

77..66 MMaacchhiinnee MMaaiinntteennaannccee

Routine inspection of machinery is essential for long life of the machinery. One lubricant is used twice in a year before peak season.

2 Suzuki Loader is used to provide pick and drop service to commercial sectors i.e. hotels, hospitals etc.



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88.. LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

88..11 LLaanndd RReeqquuiirreemmeenntt

For the recommended machinery, office, furniture & fixture and other equipments, approximately 1,125 square feet area is required.

88..22 CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt

Following is the covered area requirement split into various sections. It is recommended that customer dealing office area should be separate from the machine and working area.

TTaabbllee 88--11 CCoovveerreedd AArreeaa

Sections Area Total Area (sq. ft.)Customer Dealing Office Area 22.50 x 20 450Working & Machine Area 27 x 25 675Total Covered Area 1,125

TTaabbllee 88--22 CCoonnssttrruuccttiioonn CCoosstt

Cost Area is Sq ft. Cost per Sq ft. (Rs.)

Total Cost (Rs.)

Customer Dealing Office Area 450 600 270,000Working and Machinery Area 675 300 202,500Total 472,500

88..33 RReeccoommmmeennddeedd MMooddee

It is suggested that for proposed dry cleaning business, area should be rented. The rent cost for the business depends on the area where the business is situated. Starting the dry cleaning in a rented area would significantly reduce the initial capital cost of the project. A shop having 1,125 square feet area can be rented for approximately Rs. 20,000 per month in commercial areas of large cities of the country.

88..44 UUttiilliittiieess RReeqquuiirreemmeenntt

Electricity Telephone Gas Water88..55 SSuuiittaabbllee LLooccaattiioonn

The dry cleaner is supposed to be in a location that is easily accessible and has considerable population concentration. Considering the spread of new residential area some of the suitable areas are:



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TTaabbllee 88--33:: SSuuiittaabbllee LLooccaattiioonnssCity Location

Lahore Main Road Johar Town PCSIR Canal Area Valencia Wapda Town Punjab Co-operative Society Sabza Zar Eden City

Islamabad Aabpara Market Super Market Blue Area Karachi Company

Karachi Gulshan Iqbal Defence Phase 1 to 111 Tariq Road Sadar Federal B Area

Quetta Cantonment Area Liaqat Bazar Saryab Road Satelite Town Jinnah Road

Faisalabad Satelite Town Madina Town Railway Road Peoples Colony(D Ground) Satiana Road

Multan Cantonment Area New Multan



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99.. HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

For the proposed size of dry cleaning, following manpower is required:

TTaabbllee 99--11:: HHRR RReeqquuiirreemmeennttPosition Required Salary Per

Month(Rs.)Salary Per

Annum(Rs.)Supervisor 1 8,000 96,000Machine Operators 3 5,000 180,000Semi Skilled Workers 3 3,000 108,000Total 7 32,000 384,000

99..11 EEssttiimmaatteedd TTiimmee FFoorr PPrroojjeecctt CCoommpplleettiioonn

1. 20 days for completion of initial formalities, i.e., selection of suitable location and renting of building etc.

2. 1 month for sanction of loan (in case, if financing has to be arranged through bank).3. 1.5 month for purchase of machinery and equipments.4. 1 month for furnishing and staff appointments.5. This project can take-off within 2 months, as some of the activities will be in progress

simultaneously.

1100.. PPRROOJJEECCTT CCOOSSTT

TTaabbllee 1100--11:: PPrroojjeecctt CCoossttDescription Total Cost (in 000Rs.)Plant & Machinery (Local) 1,383Pre-production expenses 145Furniture, fixture, equipment and vehicle 547Erection and Installation (5% of machinery cost) 69Contingencies 75Total fixed cost 2,219Initial working capital 373Project cost 2,592

TTaabbllee 1100--22:: FFiinnaanncciinngg PPllaannDescription % Amount (in 000Rs.)Debt 50 1,296Equity 50 1,296Total 2,592



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1111.. FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1111..11 PPrroojjeecctt CCoossttss

Laundry and Dry CleaningPROJECT COST Rs in 1000

DESCRIPTION Total Cost

Plant & Machinery (Local) 1,383 Pre-production expenses 145 Furniture, fixture, equipment and vehicle 547 Erection and Installation 69 Contingencies 75 Total fixed cost 2,219 Initial working captial 354

Project cost 2,573

Means of Finance

Debt 50% 1,287 Equity 50% 1,287

Project ReturnsIRR % 33.39%Pay Back period Yrs. 3.48 NPV Rs. 1,593



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1111..22 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Laundry and Dry CleaningPROJECTED INCOME STATEMENT Rs. in 1,000

YEAR 1 2 3 4 5 6 7 8 9 10

Sales 2,966 3,433 3,927 4,458 5,029 5,651 6,359 7,109 7,902 8,742 Less: cost of sales 1,975 2,170 2,378 2,604 2,848 3,112 3,396 3,699 4,025 4,374

Gross profit 991 1,263 1,549 1,854 2,181 2,539 2,963 3,410 3,877 4,368 33 37 39 42 43 45 47 48 49 50

Less: operating expensesAdministrative 575 614 657 704 757 788 854 926 1,004 1,090

575 614 657 704 757 788 854 926 1,004 1,090

Operating profit 416 649 892 1,150 1,424 1,751 2,109 2,484 2,873 3,278 Less:Financial expenses 122 96 71 45 19 - - - - - Profit Before Taxation 294 553 821 1,105 1,405 1,751 2,109 2,484 2,873 3,278 Income Tax (23) 68 161 261 366 487 612 743 880 1,021

Net profit After Taxation 317 485 660 844 1,039 1,264 1,497 1,741 1,993 2,257 Retained earnings - 317 802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 Net profit transferred to Balance sheet 317 802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 12,097

Opening balance - 317 802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 Profit for the year 317 485 660 844 1,039 1,264 1,497 1,741 1,993 2,257

Profit for appropriation 317 802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 12,097

Drawings - - - - - - - - -

Closing balance 317 802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 12,097



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1111..33 PPrroojjeecctteedd BBaallaannccee SShheeeett

Laundry and Dry CleaningPROJECTED BALANCE SHEET Rs. in 1,000

YEAR 0 1 2 3 4 5 6 7 8 9 10CAPITAL & RESERVES:Share capital 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 Retained earnings - 317 802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 12,097

1,287 1,604 2,089 2,749 3,593 4,632 5,896 7,393 9,134 11,127 13,384 LOANS AND DEFERRED LIABILITIES:Term Loan 1,287 771 513 255 - - - - - - -

1,287 771 513 255 - - - - - - - CURRENT LIABILITIES:Current portion of long term liability 258 258 258 255 A/C Payable - 32 33 38 42 47 53 59 65 72 79 Accrued Exp. 50 52 55 58 61 65 68 72 76 80 Tax Payable - (23) 68 161 261 366 487 612 743 880 1,021

- 317 411 512 616 474 605 739 880 1,028 1,180 2,574 2,692 3,013 3,516 4,209 5,106 6,501 8,132 10,014 12,155 14,564

FIXED ASSETS: - Fixed Assets 2,074 1,874 1,674 1,474 1,274 1,074 874 674 474 274 74

2,074 1,874 1,674 1,474 1,274 1,074 874 674 474 274 74 Pre-Operation Expenses 145 116 87 58 29 - CURRENT ASSESTS:Advance rent 120 Store & Spares Inventory 1 2 2 2 2 2 2 2 2 2 - Raw material inventory 124 141 160 180 201 224 249 276 304 334 - A/C Receivable - 69 80 92 104 117 132 148 166 184 204 Cash/Bank 110 490 1,010 1,710 2,599 3,689 5,244 7,032 9,068 11,361 14,286

355 702 1,252 1,984 2,906 4,032 5,627 7,458 9,540 11,881 14,490

2,574 2,692 3,013 3,516 4,209 5,106 6,501 8,132 10,014 12,155 14,564

- - - - - - - - - - -



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1111..44 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Laundry and Dry CleaningPROJECTED CASH FLOW STATEMENT Rs. in 1000

YEAR 0 1 2 3 4 5 6 7 8 9 10

Operating activitiesNet profit 317 485 660 844 1,039 1,264 1,497 1,741 1,993 2,257 Amortization (Pre-operational Expenses) 29 29 29 29 29 - - - - - Depreciation 200 200 200 200 200 200 200 200 200 200 Raw Material Inventory (124) (17) (19) (20) (21) (23) (25) (27) (28) (30) 334 Store & Spare Inventory (1) (1) - - - - - - - - 2 Accounts receivable - (69) (11) (12) (12) (13) (15) (16) (18) (18) (20) Accounts payable - 32 1 5 4 5 6 6 6 7 7 Tax Payable - (23) 91 93 100 105 121 125 131 137 141 Salaries & Other Expense Payable - 50 2 3 3 3 4 3 4 4 4 Building rent prepayments (120) Prepaid Payments 120 Cash provided by operations (245) 638 778 958 1,147 1,345 1,555 1,788 2,036 2,293 2,925 Financing activitiesLong term debt principal repayment (258) (258) (258) (258) (255) Addition to Long Term Debt 1,287 Owner's investment 1,287 - - - - - - - - - - -

2,574 (258) (258) (258) (258) (255) - - - - - Investing activitiesCapital expenditure (2,219)

(2,219) - - - - - - - - - -

Net Cash 110 380 520 700 889 1,090 1,555 1,788 2,036 2,293 2,925 Cash balance brought forward 110 490 1,010 1,710 2,599 3,689 5,244 7,032 9,068 11,361 Cash carried forward 110 490 1,010 1,710 2,599 3,689 5,244 7,032 9,068 11,361 14,286

Cash provided by/ (used for) financing activities

Cash (used for)/ provided by investing activities



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1122.. FFIINNAANNCCIIAALL AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1122--11 OOppeerraattiinngg AAssssuummppttiioonnss

Annual production capacity (No. of units) 118,500Operating Shift per day 1Operating hours per shift 8Days operational per year 300No. of Batches 5.33Hours consumed for one batch 1.50

TTaabbllee 1122--22 MMaacchhiinneerryy AAssssuummppttiioonnss

Number of Machines Installed 6Initial year capacity 50%

Maximum capacity 95%

Annual capacity growth rate 5%Depreciation rate on machinery (Straight Line Method) 10%

TTaabbllee 1122--33 RReevveennuuee AAssssuummppttiioonnss

Sales prices Industry normsSales price growth rate 4-5%

TTaabbllee 1122--44 FFiinnaanncciiaall AAssssuummppttiioonnss

Project life (Years) 10Debt 50%Equity 50%Interest rate on long term debt 10%Debt tenure (Years) 5Principal debt repayments per year 130,000No. of installments in a year 2Amortization (years) 5

TTaabbllee 1122--55 CCoosstt ooff ssaalleess AAssssuummppttiioonnss

Raw Material cost growth rate 5%Wage and salaries growth rate 5%Fringe Benefits 5%Power, fuel and water per month Rs. 5,083Variable Charges growth rate 5%Repair and maintenance (%age of cost of machinery) 1%Repair and maintenance growth rate 5%Insurance of Plant and Machinery 4.50%



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Insurance of Vehicle 3.00% Insurance of Stock 2.00%Insurance of Stores and Spares 5.00%Depreciation (straight line method) 10%

TTaabbllee 1122--66 OOppeerraattiinngg AAssssuummppttiioonnss

Telephone Expense per year Rs. 34,000Printing & stationery per year Rs. 12,000Legal & professional charges per year Rs. 12,000Entertainment per year Rs. 48,000Shop rent per year Rs.240,000Advertisement per year3 Rs. 60,000Traveling & conveyance per year Rs. 43,000Repair and maintenance of vehicle per year Rs. 18,000Miscellaneous expenses per year Rs. 24,000Administrative expense growth rate 10%Income Tax (percentage of Net Profit) 35%

TTaabbllee 1122--77 CCoonnttiinnggeennccyy EExxppeennssee AAssssuummppttiioonnss

Erection and Installation 5%Machinery 3%Furniture and Fixture 1%Pre-operating Expenses 5%Vehicles 5%

TTaabbllee 1122--88 CCaasshh FFllooww AAssssuummppttiioonnss

Accounts Receivable in days 7Accounts Payable in days 7Raw Material Inventory (days) 30Stores and Spares Inventory (days) 30Salaries and other expenses payable 30Minimum Cash Required Rs.109,000Advance rent 6 months

TTaabbllee 1122--99 PPrree--ooppeerraattiioonnaall EExxppeennsseess

Appraisal fee & Legal Documentation Rs.25,000Trial run expenses Rs.50,000Other pre-operating overheads4 Rs.70,000

3 No growth in advertisement expenditure is assumed4Pre operating expenses include salaries & wages, traveling, and other expenses

laundry & dry cleaning

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