bed linen stitching unit

8/17/2019 Bed Linen Stitching Unit

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Pre-Feasibili ty Study Bed Linen Stitching Unit

PREF-52/August, 2002/1

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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-52

Revision 1

Prepared by SMEDA-Punjab

Approved by GM Punjab

Issue Date August 10, 2002

Issued by Library Officer


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The objective of this document is to provide information regarding investment opportunityin Bed Linen sector. Bed Linen is an important value added sub-sector of Textile sector.The products include bed sheets, pillow covers, quilts, etc. This project providesinformation about stitching unit of Bed Linen.

11 ..22 OO pp pp oo rr tt uu nn iitt yy R R aa tt iioo nnaa llee

Bed Linen is among the largest sector in terms of production and exports amongst all themade ups in Pakistan. Pakistan is a major exporter of Bed Linen in the world and the basicreason for the development of this industry in Pakistan is the existence of a hugeinfrastructure of weaving in formal & informal sectors. The informal sector is also knownas Power Loom sector. Most of the products in Bed Linen are made from low-densityfabrics of wider widths. This fabric can be easily manufactured on Power & Auto Looms,which forms the major chunk of weaving industry of Pakistan. The competitive edge incotton has also played an important role in development of Power Loom industry, as thestaple length of cotton produced in Pakistan is suitable for medium count yarn, which isused to produce low-density fabrics. The cost of a low-density fabric is low compared to afabric meant for garments. Processing of the fabric meant for Bed Linen is done through

printing and dyeing, and Pakistan has an exceptional infrastructure of such printing anddyeing in Faisalabad, Karachi and Lahore.

All these factors have led to a competitive advantage for Pakistan over other countries inthe Bed Linen industry, resulting in extra-ordinary growth during the past few years. The

projected growth rates in the said sector are also very high and promise good growthopportunities to new entrants in the industry.

11 ..33 PP rr oo pp ooss ee dd CC aa ppaa cciitt yy The proposed capacity of the project is based on 8-hour single shift and will produce 1,000Bed Linen sets per day with 20 stitching machines.

11 ..44 TT oo tt aa ll PP rr oo j jee cctt CC ooss tt Total cost of the proposed project is about Rs. 3.5 Million.

22 CC UUR R R R EE NNTT IINN DD UUSSTT R R YY SSTT R R UUCC TT UUR R EE A major chunk of the Pakistani Bed Linen industry is in the informal sector. According to

industry sources, there are 150 units producing Bed Linen in the organized sector and therest of the units are in the unorganized sector. There is no data available on these units. TheBed Linen industry may be large or small depending upon the number of operationscarried out by a unit itself. It involves weaving/knitting, processing and stitching. A BedLinen manufacturer may be buying fabric from outside and converting it into final productafter processing it in-house. Or the processing is subcontracted and manufacturers are justcutting, stitching and packing in their own premises. Vertically integrated units are smaller


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in number and they operate in relatively upper market segments since it is easy to controlthe quality in a vertically integrated operation.

Another reason for non-availability of data about Bed Linen industry is the nature of datareporting. The classification of the industry is based on the operations rather than the

products. Moreover, manufacturers also keep on changing products. Major clusters of BedLinen are in Karachi, Faisalabad, Lahore, Multan and Hyderabad.

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The major raw material used in the Bed Linen is printed woven fabric, which ismanufactured on Power/Auto Looms or Shuttle-less Looms. Majority of the Bed Linenmanufacturers procures yarn and converts it into woven grey fabric by paying conversioncharges to the looms units.

Figure 3-1 Process flow Diagram

The grey fabric is provided to printing & processing unit and printing charges are paid toget printing according to the given designs and colors. The other possible option used inthe market is to directly buy printed fabric from the market and convert it into Bed Linen.

Once the bed sheet is stitched, final inspection is done. All the sheets are checked for anydefective stitching or loose threads and then they are packed in polyethylene bags alongwith insert, which is the printed material with brand name etc and card called stiffener.

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44 ..11 LL iiss tt oo f f R R aa ww MM aa tt ee rr iiaa ll ? Printed Woven Fabric? Stitching Thread & Other Accessories? Packaging Material

Stitching thread and packaging material are easily available in the local market. Packagingmaterial consists of stiffener, which is of cardboard material, an insert, which is a printedmaterial with company’s name and design and polyetnene bag, which is the plastic cover.

Printing of Fabric

Inspection of

PrintedFabric

Cutting

StitchingThreading &

FinalInspection

Packaging

Procurment of Grey Fabric


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The proposed project with 20 machines will produce 1,000 sets of Bed Linen per day onthe basis of 8-hour single shift. In the first year, the capacity utilization of the project will

be 75%, with annual growth rate of 5 %. The maximum capacity utilization of the projectis 95%. The details regarding the capacity of the project are given below:

Table 5-1: -Capacity Details

DescriptionMaximum Production per Day 1,000 SetsProduction Capacity Per Year 300,000 SetsCapacity Utilization first Year (75%) 225,000 Sets

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The proposed stitching unit has been defined to manufacture bed sets. The general productmix and sizes are defined as follows:

Table 5-2 Product mix

Description No Items MeasurementTwin Set

1 Flat 168x244 cm1 Fitted 178x230 + 20 cm1 Pillow 51x76 + 15 cm

Full Set1 Flat 206x244 cm1 Fitted 178x230 + 20 cm2 Pillows 51x76 + 15 cm

Queen Set1 Flat 229x257 cm1 Fitted 196x241 + 20 cm2 Pillows 51x76 + 15 cm

King Set1 Flat 274x257cm1 Fitted 244x244 + 20cm2 Pillows 51x76 + 15 cm


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55 ..33 PP rr oo dd uucctt iioonn MM iixx The proposed project will produce the products on the basis of following proportion:

Table 5-3 Production Mix Production Details

Description Production Percentage

Twin Set 12.5%Full Set 50%Queen 25%King 12.5%

66 MM AAR R K K EE TT II NNGG Textile made-ups are one of the most valuable and important commodities being tradedinternationally. In 1999, the international textile made-ups trade value was above US$ 11

billion, which can be divided into six major categories i.e. towels & cleaning cloths, bedwear & bed linen, blankets, curtains and furnishings, canvas products and table linen.

Major exporters of textile made-ups include China, Pakistan, Turkey and Portugalexporting nearly 47% of the total international market of textile made-ups. The textilemade-ups industry has been on a slow growth, for the last five years 1 with an averageannual growth rate of 3%, and 1999 was the worst year for textile made-ups products (3%decline in international exports) which is the only year with negative growth in last fiveyears.

Pakistan being the second largest exporter of textile made-ups, has increased its share inthe international market from 6.6% to 10.1% in previous five years by earning a foreignexchange of US$ 1.18 billion in 1999 and an average growth of 15% per annum.According to Federal Bureau of Statistics data, Pakistan exports for the year 2000-01 wereabout US$ 1.3 billion.

66 ..11 GG lloo bb aa ll TT rr aa ddee oof f BB ee dd LL ii nnee nn Bed Linen is an important value-added sub-sector of textile sector. Bed Linen productsinclude bed sheets, pillow covers, quilts, etc. In made ups, Bed Linens sub-sector is thesecond largest in terms of production and exports, and shares 28% of total textile made-upsmarket. Its share has increased from 26.3% as a sub category and has grown by 4% perannum if total exports are analyzed. 2

Table 6-1 World Trade of Bed Linen

(Value in $ Million)1995 1996 1997 1998 1999

World 2,753 2,822 3,028 3,154 3,260Growth % age 3% 7% 4% 3%

1 Here data for the years 1995-99 has been used for international comparison, which is the latest availabledata.2 World trade of Bed Linen is reported under different SITC codes. For the purpose of analysis, all thesecodes have been summed together to get the overall picture of the world’s trade of bed wear & linen.


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The total exports of Bed Linen in 1999 were $ 3,260 million. Within different products ofBed Linen, non-knit Bed Linen of cotton was the largest product in terms of internationalexports. In 1999, total exports of this product were $2.09 billion, which constituted 64% ofthe total exports of Bed Linen. Knit Bed Linen is the smallest category with only 10%share. The rest of the 26% was accounted by Bed Linen of textile materials other thancotton. The export market size of this product was $844 million.

Table 6-2 World Exports Category-wise

(Value in $ Million)

Commodity SITC Code 3 1995 1996 1997 1998 1999%Share

(Aggregate) 2,753 2,822 3,028 3,154 3,260 100%Bed linen, cotton 65842 1,842 1,807 1,902 1,992 2,097 64.32%Bed linen, other textiles 65843 607 715 835 858 844 25.89%Bed linen, knit, crochet 65841 305 301 291 303 319 9.78%

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China is the main exporter of bed Linen as a whole and exported 21.34% of the Bed Linenmarket in 1999. Pakistan which had the second largest share i.e. 20.89% in 1999 had a

phenomenal growth of 16% per annum in last five years and then was Portugal, capturing11.67% of Bed Linen market.

Table 6-3 Major Exporters of Bed Linen

(Value in $ Million)1995 1996 1997 1998 1999 % Share in 99

China 658 597 708 603 696 21.34%Pakistan 376 469 487 567 681 20.89%Portugal 321 325 355 384 380 11.67%

Turkey 117 131 174 210 214 6.55%USA 103 106 122 144 111 3.39%France 108 103 108 122 127 3.89%Mexico 85 115 121 133 77 2.38%Other 986 975 953 990 974 29.88%

66 ..33 MM aa j joo rr II mm ppoo rr tt ee rr ss oo f f BB ee dd LL ii nn ee nn USA. has been the biggest importer of Bed Linen for the last five years and shared 22.5 %of total imports with a value of US$ 688 million in 1999. Germany was second withapproximately 14.46 % of world imports.

3 Standard International Trade Classificat ion.


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Table 6-4 Major Importers of Bed Linen

(Value in $ Million)1995 1996 1997 1998 1999 % Share in 99

USA 375 373 470 614 688 22.49%Germany 482 500 459 462 442 14.46%Untd. Kingdom 156 177 215 244 273 8.94%France 206 184 194 229 241 7.87%Japan 264 241 238 204 221 7.24%

Netherlands 113 113 104 106 106 3.46%Honk Kong 160 168 168 107 85 2.80%

66 ..44 PP aa k k iiss tt aa nn ’’ss EE xx ppoo rr tt ss ii nn BB ee dd LL iinn ee nn In 1999, Bed Linen accounted for $681 million in foreign exchange earnings, which wasapproximately 57.4% of total textile made-ups exports of Pakistan. The share has increasedfrom 54.4% which shows that Pakistan exports of textile made-ups as a whole hasincreased at a much lower rate than this sub category. In Pakistan, the Bed Linen market

has increased by an annual average of 16% in last five years with a high growth in 1996and 1999, i.e. by 25% and 20% respectively. Looking at the international perspective,Pakistan’s share of the Bed Linen market has increased from 13.65% in 1995 to 21% in1999.

Table 6-5 Pakistan Exports of Bed Linen

(Value in $ Million)Years 1995 1996 1997 1998 1999 2000 2001Value 375.90 469.03 486.78 567.37 681.01 709 752Growth % (Value) 25% 4% 17% 20% 4% 6%

For international comparisons, the data used is for the year 1999. However, data is alsoavailable for Pakistan for the year 2000-2001, which shows that there has been an increasein exports from $681.01 million to nearly $752.53 million – by more than 11% in the lasttwo years.

66 ..55 PP aa k k iiss tt aa nn ’’ss TT rr aa dd ii nngg PP aa rr tt nn ee rr ss Some of the leading importers from Pakistan include USA., which imported 24.9% ofPakistan’s Bed Linen, UK, which imported nearly 12.1% and Germany, which shared11.39% of the Pakistan exports of Bed Linen in 1999.

Table 6-6 Pakistan Trading Partners

(Value in $ Million)Country 1998 % Share 1999 % ShareUSA 133.4 23.50% 169.6 24.90%United Kingdom 65.3 11.51% 82.4 12.10%Germany 72.3 12.74% 77.6 11.39%France 52.1 9.19% 65.6 9.63%

Netherlands 61.7 10.88% 53.4 7.85%


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Looking at the break-up of Pakistani Bed Linen exports, it has been found that about twothird of the total value exported is accounted by just one category which is ‘non-knit BedLinen of cotton’ i.e. 70% of the total Bed Linen exports. This is in line with the worldtrend since this category is the largest category in the global exports with 64% share. Atable showing Pakistani exports to 7-digit SITC codes is given below:

Table 6-7 Pakistan Exports Details for Bed Linen (Value in $ Million)

Description SITC Code 1999-2000 2000-2001Knit Bed Linen 65841Bed Sheets 6584101 2.87 3.32Pillow Covers 6584102 0.29 1.41Bed Linen nes. 6584109 0.40 0.34Non-Knit Bed Linen of CottonBed Sheet Mill made 6584201 306.1 319.05Bed Sheet Hand loom 6584202 1.13 1.11Bed Cover Mill made 6584203 3.23 4.03Bed Cover Hand loom 6584204 0.51 0.19

Fitted Sheet Mill made 6584205 50.72 61.1Fitted Sheet Hand loom 6584206 0.02 0.01Pillow Cover Mill made 6584207 23.41 27.62Pillow Cover Hand loom 6584208 0.36 0.32Khes Hand loom 6584211 0.26 0.28Quilts 6584212 117.55 107.42Ghilaf with Embroidery 658213 0.11Bed Linen nes. 6584219 0.53 0.92Non-Knit Bed Linen of Other TextilesBed Sheet Mill made 6584301 121.12 133.96Bed Sheet Hand loom 6584302 0.16 0.23Bed Cover Mill made 6584303 0.25 0.54Bed Cover Hand loom 6584304 0.22 0.08Fitted Sheet Mill Made 6584305 11.90 13.93Fitted Sheet Hand loom 6584306 0.46Pillow Cover Mill made 6584307 13.72 18.14Pillow Cover Hand loom 6584308 0.19 0.05Khes Hand loom 6584311 0.05Quilt Cover 6584312 53.46 56.77Bed Linen nes 6584319 0.31 1.26

Total 709.59 752.53


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Table 7-1 Machinery Details 4

Description MachinesRequired

Cost/Machine(Rs)

Total Cost(Rs)

Cutting Machine 1 85,000 85,000Lock Stitch (Single Needle) 18 32,500 585,000Safety Stitching Over Lock (5 Thread) 2 85,000 170,000Other EquipmentElectric Wiring (per machine) 18 1,000 18,000Machine Base Tool 18 1,500 27,000

Total (Rs) 885,000

All the required stitching machinery is easily available in the market. The stitchingmachinery is available in quite a diversified range of suppliers & origins, i.e. Japanese,Italian, Chinese, Korean and Taiwanese origin. There is a substantial difference betweentheir prices. European and Japanese machinery is 2 to 3 times more expensive as comparedto Chinese or Far Eastern machinery. Second hand machinery of different origins is alsoavailable in the local market.

Table 7-2 Other Equipment Details

Description Number Rate (Rs) Cost (Rs)Furniture & Fixture 90,000 90,000Office EquipmentTelephone Set 2 1,500 3,000Fax 1 7,000 7,000

Computer 1 35,000 35,000Printer 1 7,000 7,000Air conditioner 1 45,000 45,000Carpeting 300 Sq ft 20 6,000Total Cost 193,000

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The stitching operators will be paid on piece rate basis. The rates given in the below table:

Table 8-1: -Stitching Charges

Description RateStitching Operators Rs. 8.00 Per Set

4 The machines used in the proposed project is Juki brand, which are assembled in China


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Table 8-2: -Human Resource Requirement

Description Required Salary/Month(Rs)

Salary/Yearly(Rs)

Administrative StaffCEO/Owner 1 30,000 360,000Marketing Manager 1 12,000 144,000Accounts 1 7,000 84,000Security Guards 2 3,000 72,000Total 660,000Direct LaborProduction In charge 1 10,000 120,000Stitching Supervisor 1 10,000 120,000Cutting Master 1 8,000 96,000Finishing Supervisor 1 5,000 60,000Rowing Inspector 2 4,000 96,000Clippers 3 2,500 90,000

Packaging Staff 3 2,500 90,000Final Table Inspector 2 2,500 60,000Technician/Electrician (part time) 1 1,500 18,000Total Direct Labor 750,000

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99 ..11 TT oo tt aa ll LL aa nn dd R R ee qquu ii rr ee mmee nn tt The detail regarding the area required for a Bed Linen unit of 20 stitching machines isgiven below:

Table 9-1 Covered Area RequirementDescription Required Area (sq. ft)Production Area 1,600Cutting Area 400Inspection Room 700Raw Material Store 400Finished Goods Store 400Management Building 300Free Space 700Total 4,500

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It is recommended that this project should be started in a rented building, as this willreduce the initial capital cost of the project. An appropriate premises is generally availablein many commercial/industrial areas of the main clusters of Bed Linen. One year rent will

be paid in advance.


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Table 9-2 Rent Cost

Rent Cost Monthly Rent(Rs)

Annual Rent(Rs)

Building rent cost (@ Rs. 15,000 per 4,500 sq. ft) 15,000 180,000

99 ..33 SS uu ii tt aa bb llee LL ooccaa tt iioo nnss The clusters of Bed Linen stitching industry exist predominantly in Karachi, Faisalabad,Lahore and Multan. Most of the Bed Linen manufacturers are based in these major cities,so it is recommended that such unit should be started in these areas. The basic criteria forthe selection of location within these clusters should be the accessibility of skilledmanpower and easy accessibility of raw material. Also, basic utilities like electricity, waterand public transport are a must for the establishment of such sort of unit.

99 ..44 UUtt ii llii tt iiee ss R R ee qquu ii rr ee mmee nn tt ss ? Electricity? Telephone? Water


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Table 10-1 Project Cost/Capital Requirements

Project CostsPlant & Machinery 885,000

Furniture & Fixtures 90,000Office Equipment 103,000Pre-Operating Costs 5 137,000Total Fixed Cost 1,215,000

Raw Material Inventory 2,170,680Advance Building rent 180,000Pre paid Insurance 32,340Working Capital 2,383,019

Total Investment in Project 3,598,019

Table 10-2 Financing Plan

Equity 50 % 1,799,009Debt 50 % 1,799,009Long Term LoanShort Term (Running Finance) 1,799,009Total Debt 1,799,009

Major portion of investment is required for working capital, due to which the debtrecommended for the project is in form of short term because majority of investment will

be in raw material etc.

Table 10-3 Project Returns

Internal Rate of Return 69.07% Net Present Value (NPV) (Rs) 12,049,513Payback Period (Years) 5.33

5 These expenses are incurred before the unit is operational, e.g. salaries of key personal for 1 month, stationery, company formation expenses, legal and registration charge, etc.


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11 11 K K EE YY SS UUCC CC EE SS SS FF AACC TT OO R R SS The commercial viability of this Bed Linen stitching unit depends on the regular exportorders, which means a very effective marketing of the product in the international market.

One of the important factors in success of this business is procurement of raw material,especially the grey woven fabric which is manufactured in a huge quantity. Due to which,there is a huge fluctuation in the price of grey fabric. With better information regardingquality manufactures and lower prices, a high profit margin can be attained.

Another aspect, which is mostly over-looked in this sector, is R&D. If the company has aneffective R&D department, it can come up with new designs, color schemes or innovative

packaging. This will increase the sales and also help in building high quality image of the product, hence moving the product to upper tiers & quality conscious market segment,resulting in higher profit margins.

Following are some of the points that have to be ensured to make this business successful:

? Assurance of high consistent quality?

Surety of products delivery on time? Competitive Rates? Cost efficiency through better managerial techniques? Better services to customers, i.e. claim settlement, etc.

11 22 TT HH R R EE AATT SS FF OO R R TT HH EE BB UUSS IINN EE SS SS Due to the low capital requirement of the business there has been an increase in the numberof commercial Bed Linen stitching units, which has resulted in an increase in competitionInternationally.

The elimination of quotas in 2004 will make it harder to compete. This might decrease the

profit margins in international market. Competition will be based on product quality andcompetitive prices.


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Pre-Feasibility Study Bed Linen Stitch ing Unit


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Project Income Statement SMEDAIn Rs

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

Sales 95,184,281 104,575,797 86,976,920 94,856,006 103,129,558 106,223,444 109,410,148 112,692,452 116,073,226 119,555,423

COST OF GOODS SOLDRaw Material 63,086,880 68,602,525 74,309,354 80,212,788 86,318,390 88,000,272 89,715,347 91,464,274 93,247,726 95,066,388Quota Cost 24,986,250 26,652,000 - - - - - - - - Payroll (Production Staff) 750,000 968,000 1,244,485 1,594,405 2,036,409 2,464,055 2,981,507 3,607,623 4,365,224 5,281,921Machine Maintenance 112,500 121,200 128,775 136,350 143,925 143,925 143,925 143,925 143,925 143,925Direct Electricity 164,448 180,893 198,982 218,880 240,768 264,845 291,329 320,462 352,509 387,760Stationery 237,961 261,439 217,442 237,140 257,824 265,559 273,525 281,731 290,183 298,889Clearing Cost 562,500 600,000 637,500 675,000 712,500 712,500 712,500 712,500 712,500 712,500Sea Freight 3,375,000 3,600,000 3,825,000 4,050,000 4,275,000 4,275,000 4,275,000 4,275,000 4,275,000 4,275,000Total 93,275,538 100,986,057 80,561,538 87,124,563 93,984,817 96,126,156 98,393,134 100,805,516 103,387,067 106,166,382

Gross Profit 1,908,743 3,589,740 6,415,382 7,731,443 9,144,741 10,097,288 11,017,014 11,886,936 12,686,159 13,389,040

OPERATING EXPENSEPayroll (Admin) 516,000 567,600 624,360 686,796 755,476 831,023 914,125 1,005,538 1,106,092 1,216,701Pa roll Marketin and Sale 144,000 158,400 174,240 191,664 210,830 231,913 255,105 280,615 308,677 339,544Fixed electricity 298,966 328,862 361,749 397,923 437,716 481,487 529,636 582,600 640,860 704,946Insurance Expense 32,340 29,106 25,872 22,638 19,404 16,170 12,936 9,702 6,468 3,234Administrative & Factory Overheads 485,440 543,794 461,152 512,795 568,467 597,019 627,009 658,510 691,599 726,355Amortization (Pre-operational Expenses) 13,700 13,700 13,700 13,700 13,700 13,700 13,700 13,700 13,700 13,700Depreciation 107,800 107,800 107,800 107,800 107,800 107,800 107,800 107,800 107,800 107,800

Total 1,598,246 1,749,263 1,768,872 1,933,317 2,113,393 2,279,113 2,460,311 2,658,465 2,875,195 3,112,280

Operating Profit 310,497 1,840,477 4,646,510 5,798,126 7,031,349 7,818,176 8,556,703 9,228,471 9,810,964 10,276,760

NON-OPERATING EXPENSEFinancial Charges on Running Finance 287,842 686,965 703,883 40,512 0 0 0 0 0 0Building Rental 179,998 197,998 217,798 239,578 263,536 289,889 318,878 350,766 385,843 424,427Total 467,840 884,963 921,681 280,090 263,536 289,889 318,878 350,766 385,843 424,427

PROFIT BEFORE TAX (157,343) 955,514 3,724,828 5,518,036 6,767,813 7,528,286 8,237,825 8,877,705 9,425,122 9,852,334Tax 713,882 784,318 652,327 711,420 773,472 796,676 820,576 845,193 870,549 896,666PROFIT AFTER TAX (871,225) 171,195 3,072,501 4,806,616 5,994,341 6,731,611 7,417,248 8,032,512 8,554,572 8,955,668Retained Earnings beginning of year 0 (871,225) (700,029) 2,372,472 7,179,088 13,173,429 19,905,040 27,322,288 35,354,800 43,909,372Retained Earnings end of year (871,225) (700,029) 2,372,472 7,179,088 13,173,429 19,905,040 27,322,288 35,354,800 43,909,372 52,865,040


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Project Balance Sheet SMEDAIn Rs

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

Current AssetsCash - 50,000 50,000 50,000 4,403,929 10,331,556 17,030,633 24,408,314 32,393,806 40,893,453 52,969,880 Equipment Spare Parts Inventory - 2,344 2,525 2,683 2,841 2,998 2,998 2,998 2,998 2,998 2,998

Up-Front Insurance payment 32,340 29,106 25,872 22,638 19,404 16,170 12,936 9,702 6,468 3,234 - Stocks and Inventory 2,170,680 2,361,700 2,559,493 2,764,252 2,976,178 3,035,702 3,096,416 3,158,344 3,221,511 3,285,941 - Receivable - 4,759,214 5,228,790 4,348,846 4,742,800 5,156,478 5,311,172 5,470,507 5,634,623 5,803,661 5,977,771 Pre-paid building rent 179,998 197,998 217,798 239,578 263,536 289,889 318,878 350,766 385,843 424,427 466,869 Total 2,383,019 7,400,362 8,084,478 7,427,997 12,408,688 18,832,793 25,773,033 33,400,632 41,645,248 50,413,715 59,417,519

Gross Fixed Assets 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 1,078,000 Less: Accumulated depreciation - 107,800 215,600 323,400 431,200 539,000 646,800 754,600 862,400 970,200 1,078,000

Net Fixed Assets 1,078,0 00 970,200 862,400 754,600 646,800 539,000 431,200 323,400 215,600 107,800 -

Intangible AssetsPre-operational Expenses 137,000 123,300 109,600 95,900 82,200 68,500 54,800 41,100 27,400 13,700 - Total 137,000 123,300 109,600 95,900 82,200 68,500 54,800 41,100 27,400 13,700 -

Total Assets 3,598,019 8,493,862 9,056,478 8,278,497 13,137,688 19,440,293 26,259,033 33,765,132 41,888,248 50,535,215 59,417,519

Current LiabilitiesRunning Finance 1,799,009 4,293,532 4,399,270 253,201 - - - - - - - Accounts payable - 3,272,546 3,558,227 3,853,814 4,159,590 4,467,855 4,554,984 4,643,834 4,734,439 4,826,833 4,753,469 Total 1,799,009 7,566,078 7,957,498 4,107,015 4,159,590 4,467,855 4,554,984 4,643,834 4,734,439 4,826,833 4,753,469

Long-term liabilitiesTotal - - - - - - - - - - -

EquityPaid-up Capital 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 1,799,009 Retained Earnings - (871,225) (700,029) 2,372,472 7,179,088 13,173,429 19,905,040 27,322,288 35,354,800 43,909,372 52,865,040 Total 1,799,009 927,785 1,098,980 4,171,482 8,978,097 14,972,438 21,704,049 29,121,298 37,153,809 45,708,382 54,664,049

Total Liabilities And Equity 3,598,019 8,493,862 9,056,478 8,278,497 13,137,688 19,440,293 26,259,033 33,765,132 41,888,248 50,535,215 59,417,519


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Project Cash Flow Statement SMEDAIn Rs

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

Operating activities Net profit (871,225) 171,195 3,072,501 4,806,616 5,994,341 6,731,611 7,417,248 8,032,512 8,554,572 8,955,668 Amortization (Pre-operational Expenses) 13,700 13,700 13,700 13,700 13,700 13,700 13,700 13,700 13,700 13,700 Depreciation 107,800 107,800 107,800 107,800 107,800 107,800 107,800 107,800 107,800 107,800 Accounts receivable (4,759,214) (469,576) 879,944 (393,954) (413,678) (154,694) (159,335) (164,115) (169,039) (174,110) Equipment Spare Parts Inventory - (2,344) (181) (158) (158) (158) - - - - - Up-Front Insurance payment (32,340) 3,234 3,234 3,234 3,234 3,234 3,234 3,234 3,234 3,234 3,234 Stocks-RM (2,170,680) (191,020) (197,792) (204,759) (211,926) (59,524) (60,714) (61,928) (63,167) (64,430) 3,285,941 Accounts payable - 3,272,546 285,681 295,587 305,776 308,264 87,130 88,850 90,605 92,394 (73,364) Cash provided by operations (2,203,020) (2,426,522) (85,939) 4,167,849 4,631,087 5,953,980 6,728,066 7,409,569 8,020,568 8,538,232 12,118,869

Financing activitiesAdd: building rent expense 179,998 197,998 217,798 239,578 263,536 289,889 318,878 350,766 385,843 424,427 Building rent payment (179,998) (197,998) (217,798) (239,578) (263,536) (289,889) (318,878) (350,766) (385,843) (424,427) (466,869) Running Finance Repayment (1,799,009) (4,293,532) (4,399,270) (253,201) - - - - - - Issuance of share 1,799,009 Cash provided by/ (used for) financing activities 1,619,011 (1,817,009) (4,313,331) (4,421,050) (277,159) (26,354) (28,989) (31,888) (35,077) (38,584) (42,443)

Total (584,009) (4,243,532) (4,399,270) (253,201) 4,353,929 5,927,627 6,699,077 7,377,681 7,985,492 8,499,647 12,076,427

Investing activitiesCapital expenditure (1,215,000) Cash (used for)/ provided by investing activities (1,215,000)

Net Cash (1,799,009) (4,243,532) (4,399,270) (253,201) 4,353,929 5,927,627 6,699,077 7,377,681 7,985,492 8,499,647 12,076,427

Cash balance brought forward - - 50,000 50,000 50,000 4,403,929 10,3 31,55 6 17,03 0,63 3 24,40 8,314 32 ,393 ,8 06 40,893,453 Cash Balance (1,799,009) (4,243,532) (4,349,270) (203,201) 4,403,929 10 ,3 31,55 6 17,0 30,63 3 24,40 8,31 4 32,39 3,806 40 ,893 ,4 53 52,969,880 Running Finance 1,799,009 4,293,532 4,399,270 253,201 - - - - - - - Cash carried forward - 50,000 50,000 50,000 4,403,929 10 ,3 31,55 6 17,0 30,63 3 24,40 8,31 4 32,39 3,806 40 ,893 ,4 53 52,969,880


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Ratio Analysis SMEDA

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

Profitability ratiosGross profit margin on sales 2.0% 3.4% 7.4% 8.2% 8.9% 9.5% 10.1% 10.5% 10.9% 11.2%Operating Profit on Sales 0.33% 1.76% 5.34% 6.11% 6.82% 7.36% 7.82% 8.19% 8.45% 8.60%

Net profit margin on sales -0.92% 0.16% 3.53% 5.07% 5.81% 6.34% 6.78% 7.13% 7.37% 7.49%ROA -10.26% 1.89% 37.11% 36.59% 30.83% 25.64% 21.97% 19.18% 16.93% 15.07%ROE -63.90% 16.89% 116.59% 73.11% 50.06% 36.71% 29.19% 24.24% 20.65% 17.84%

Liquidity ratiosCurrent ratio 0.99 1.03 1.83 3.00 4.23 5.67 7.20 8.80 10.45 12.50 Quick ratio (Acid Test) 0.68 0.71 1.16 2.29 3.55 4.99 6.52 8.12 9.77 12.50

Asset management ratiosInventory turnover ratio 40 41 31 32 34 34 35 35 35 - Days sales outstanding 8 14 17 14 14 15 15 15 15 15 Fixed assets turnover ratio 98 121 115 147 191 246 338 523 1,077 - Total assets turnover ratio 11 12 11 7 5 4 3 3 2 2

Debt management ratiosDebt ratio 51% 49% 3% - - - - - - - Times interest earned 1.08 2.68 6.60 143.12 - - - - - - Debt service coverage ratio 0.15 0.37 0.91 19.74 - - - - - -


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Pre-Feasibil ity Study Bed Linen Stitching Unit


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Table 14-1 Operating Related Assumptions

Hours operational per day 8

Days operational per month 25Days operational per year 300

Table 14-2 Production Related Assumptions

Annual production capacity 300,000 SetsCapacity utilization (1 st Year) 75%Capacity growth rate (yearly) 5%Maximum Capacity utilization 95%First Year production utilization 225,000 Sets

Table 14-3 Economic Related Assumptions

Electricity growth rate 10%Wages growth rate 10%Office equipment growth 5%Machine maintenance growth rate 5%

Table 14-4 Cash Flow Related Assumptions

Accounts Receivable cycle (in days) 15Accounts Payable cycle (in days) 15Raw material inventory (in days) 15Equipment spare part inventory (in months) 1

Table 14-5 Revenue Related Assumptions

Weighted average sale price ($) 7.27Sale price growth rate 3%Dollar conversation rate $1= Rs 60/-

Table 14-6 Raw Material Related Assumptions

Grey fabric 35 x 35/76 x 56 – 112”(Rs) 34.75/meterWeighted average consumption Fabric per set 5.55 meterPrinting cost per Meter (Rs) 10Stitching & cutting cost per set (Rs) 8.5Packaging cost (Rs) 15Cutting Wastage 3%Printing Wastage 3%Quota charges per set (2 year) 6 (Rs) 111.05Raw material price growth rate 2%

6 Quota charges will not be applicable after Dec. 2004 .


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Pre-Feasibil ity Study Bed Linen Stitching Unit


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Table 14-7 Expense Related Assumptions

Administrative overhead (% of sales) 1%Office Expenses (stationery, entertainment, etc.) 2%Sea freight cost of export per set ($) 0.25

Forwarding/ Clearing cost per set (Rs) 2.50Insurance rate (Annual) 3%Rent growth rate 5%Pre-paid building rent (months) 12Growth rate in spare part inventory 10%Tax treatment 0.75% of Sales Revenue

Table 14-8 Depreciation Related Assumptions

Machinery & Equipment depreciation rate 10%Furniture & Fixtures 10%

Table 14-9 Financial Related Assumptions

Project life (Years) 10Equity 50%Debt 50%Interest rate on short term debt 14%Discount rate for calculation of NPV 20%

bed linen stitching unit

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