Hamza Irfan Project ManagerAwais Younas CFOUsman Bukhari Marketing ManagerAsim Khalid Operations ManagerMudassar Nawaz Chief Accounts OfficerShazib Qamar Legal Advisor

Group Members

National

Non Industrial

Conventional Technology

Medium in Scope

A Grass Root Project

Normal in nature

Project Type (Turn-key)

Owner

Construction

Project Manageme

nt Company

Supply Technical

Hierarchy

Feasibility Study

2008-0951.8% contribution of total agricultural sector11.3% contribution to national GDPValue of livestock is 6.1% more than combined major and minor cropsFocal point of government policies

Demand Study-Market

Potential

Increasing trend in livestock

Strategic agreements betweenZTBL & M/S Nestle Pakistan limitedZTBL & M/S Pakistan Dairy development

companyIncrease milk supply, Mitigate poverty and Improve the living standard of the rural population.

White Revolution

Wheat straw(from land owners)Green fodder(grow themselves on leased land)Mineral mixture(available from factories or outlets)

Raw material study

Pakistan: 175 million people, high milk consuming tradition

Some facts about agri-sector

• Irrigable land in Pakistan –20 million hectares

• Fodder cultivated in 2.8 million hectares, i.e. only 14%

• Fodder yield very low -24 Tones/hectare (Australia approx 70 Tones/hectare)

• Largest irrigation network in the world

• Cheap farm labor, though unskilled

(Still demand is high and supply is low)

High domestic demand

The feasibility study suggests an initial herd size of 200 Cows, which is economical to justify the overhead cost. The farm size will increase to approximately 1,000 cows within 10 years. Herd mix of 100% cows is recommended to get the maximum milk production round the year.

Proposed supply Capacity

Cost-based strategy In this feasibility study, it is assumed that all the milk will be sold to milk processing companies, dairies & milk shops etc. @ Rs. 40/liter.

pricing

Following are some of the target clients for a dairy farmer. 1. Milk outlets in local markets 2. Dairy Companies 3. Milk collection companies

The cost of production per liter of raw milk should be lower than its sale price so that farmer could feel it economical.

Target Customers

SWOT AnalysisAbout the sector

• Back bone and main stay of economy. Provides raw material for food & Leather industry. • Major source of food, i.e. Milk & Meat • Source of Farmyard Manure (FYM). • Sizeable foreign exchanges earning through exports. • Wide scope of Milk Production, ranking 5th in the world.• Ample human resource employment sector. • Stationed, Permanently located secured loaning sector. • Huge demand and supply gap in dairy sector.

Strengths

Lack of appropriate knowledge, research extension • Lack of commercially viable breeds of animal • Lack of education and initiative in farmer, traditional approach due to lack of skills and management. • Unorganized sector, unaware of basic farm management practices. • Remote area, lack of farm to market approach & transportation. • Non-availability of communication services. • Lack of farm/ market infra structures & marketing information. • Lack of record keeping on farm.

Weaknesses

Govt. of Pakistan & Sate Bank of Pakistan priority sector.

Dairy products needs are 30% higher than supply. Ample opportunities are available in the Banking

Sector. Commercially viable sector with great credit

potential and absorption capacity. Vast range of area of operation, more needs and

scope of development. Value added dairy products are in demand.

Opportunities

Implementation of WTO will result in open & competitive commodity pricing.

Due to fear of default, banker community has reluctance for lending loans.

High risks of diseases in live stock. Defective and unorganized markets. Imbalance between prices of inputs & outputs. Rising trend of cost of production with higher rate

of interest as compared to profit ratio. Lack of media projection, non-recognition of

problems and monopoly of multinationals. Lack of community organizations and out dated

farm practices.

Threats

Facts over the years

Noon Pakistan Nestle Milkpak Prime Dairies Idara-e-Kisan (Halla) Chaudhry Dairy Millack foods Dairy Land Engro foods Limited ShakarGunj Foods Alturhem Milk JK Dairies Doctor Dairies Gourmet Foods

Dairy Market Players

Proposed capacity: for 200 cows with an upper limit of 1000 cows at most.

Herd mix: 100% cows.Business status: Sole

Proprietorship/Partnership/Company Pvt Ltd.Total Project Cost: 84,000,000.

The proposal

Location of our dairy farm is Darajke, Sadhoke 20 km off G.T road Lahore

District.

Location

Availability of land is easy because of the links of the project director over there. We need 3 acres of land for our dairy farm and it cost Rs. 3, 000, 000.

Availability and cost of land

Approach to site

Approach to the dairy farm is convenient. While coming from Ravi bridge G.T road it is 40 km and coming from Thokar Niaz baig it is 56 km approxiamately. The road is also doubled well carpeted from ravi bridge to Sadhoke. From Sadhoke to Darajke is single road but well built. Any vehicle from car to 24 wheeler truck could approach there easily.

As raw material here mostly, consists of feed and feed will be purchased from all over the Pakistan like magnesium, calcium, rice straw, fodder etc. But the most consumable feed is fodder for which the priority will be to purchase it from surrounding villages.

Source of raw material

Transportation and marketing of finished product

Our finished product has to reach to two targets1. Milk outlets in local markets2. Dairy companies3. Collection companies Milk outlets and dairy companies are easily

accessible in the areas of Lahore, Gujranwala, Sheikhupura and Sialkot. Gujranwala is further 60km through G.T road, Sialkot through Pasrur road is further 50km.

Darajke is in the center of city Kamoke and Muridke and these both cities are the hub for rice cultivation, so the availability of water is in too much excess over here. Upper Chenab canal also passes through these areas. So, the water will be attained by the canal and through boring.

Source and Availability of water

Availability of power and source

Electricity and sui gas is needed in terms of power for the

dairy farm. WAPDA is present over here at Darajke but during summer season load shedding leads to 10-12 hours. So, for this reason we have purchased a 25KVA generator to overcome the load shedding.

Sui gas commercial connection is installed in the dairy farm.

Farm has its own well-designed system for drainage of liquid effluents. As far as cow-dung is concerned, it is used as farmyard manure (FYM). Therefore, it would be sold to fertilizer companies as well as the local farmers. It is also used for household fuel requirements by the villagers.

Facilities of drainage and effluent disposal

Description Area (acres)

Shed for cows 1.57

Cage for calves 0.08

Shed for calves 0.51

Stores for fodder 0.01

Utensils and milk storage 0.01

Servant premises 0.01

Bunker silage 0.77

Total 3 (appx)

Land Requirements

Equipment Cost (Rs)

Maize cutter (1) 450,000

Milking machine (1) 4,000,000

Milk chillers (2) 1,400,000

Generator (25 KVA) 500,000

Pump (1) 350,000

Ventilating fans (4) 300,000

Trolley (1) 150,000

Tractor (1) 600,000

Total 9,000,000

Farm machinery

Description No. Annual Salary (Rs)

Farm Manager 1 420,000

Technician 1 180,000

Workers 8 672,000

Tractor driver 1 84,000

Total 11 1,356,000

Personnel Requirements

Minerals (magnesium, calcium, potassium, sodium, iron)

Fodder crop (wheat straw, grasses, cotton seed hull, sugarcane grass, rice straw, oats, oat straw, maize, millets, corn cobs etc).

Daily consumption/animal: Approximately 50kg fodder per day.

Feed

Artificial Insemination charges: Almost 5000 Rs per animal per year.

Medical Charges (vaccination etc): 2000 Rs per animal per year.

Clinical Charges

Holstein Australian Freisian Sahiwal Jersey

Herd Mix

Financial Aspect

Capital Investment Rs. in actual

Animal Cost (200)40,000,000

Building/Infrastructure 20,000,000Land (3 Acre) 3,000,000Machinery & equipment 9,000,000Pre-operating cost 900,000Office Vehicle 1,000,000Office equipment 100,000Total Capital Costs

73,500,000

Project cost

Working Capital Rs. in actualRaw material Inventory 1,000,000Cash in hand 500,000Total Working Capital 1,500,000____________________________________________________

Total Capital Cost 73,500,000Total Working Capital 1,500,000Total Project cost 84,000,000

Project cost

Investment Rs. in actualPersonal Investment (50%) 42,000,000Bank Financing (50%) 42,000,000Total Investment

84,000,000

Project Financing

No. of Cows * Milk per Cow (Liters) * No. of Days = Total Consumption

200 * 20 * 365 = 1,460,000

Total Milk Production (Liters) * Sales Price (per liters) = Total Revenue

1,460,000 * 40 = 58,400,000

Annual Revenue (est.)

Fodder per Cow (Kg) * No. of Cows * Days in Year = Total Annual Consumption

20* 200* 365 = 1,460,000

Price of Fodder (per Kg) * Total Consumption = Total cost of Fodder

12* 1,460,000 = 17,520,000

_______________________________________________________________

Rs. In Actual

Total Revenue 58,400,000

Raw Material Cost 17,520,000

Gross Profit 40,880,000

Operating Cost 10,500,000

Net Profit 30,380,000

Operating Cost (est.)

Pay Back Period (PBP):

Pay Back period (PBP) = Original Investment / Annual Income = No. of Years

84,000,000 / 30,380,000 = 2.75 years

Return on Investment (ROI):

Return on Investment (ROI) = Average Annual Earning / Average book Investment

(30,380,000 * 10) / 10 = 55% 84,000,000 + 26,000,00

Salvage Value Rs. In Actual

Land 25,000,000

Animals (30,000*200) 6,000,000

Plant & Machinery 4,000,000

Project Viability

Net Present Value (NPV):

NPV = Discounted Inflows – Original Investment

NPV = 164,849,271 – 84,000,000 = 80,849,271

Benefit Cost Ratio (BCR):

BCR = Discounted inflows / Original Investment

BCR = 164,849,271 / 84,000,000 = 1.962

Project Viability

Order of Magnitude Estimates

Farm layout

Shed Cross-section

Process Flow Diagram

Purchase of land

Construction

Housing of cattle

Milking process

Sale of dairy products

Electrical and wiring

Water and gas piping

Installment of

equipment

Purchase of cattle

Construction: The construction contract is done with Izhar construction Pvt Ltd.

Electrical works, gas and water piping is to sub-contracted by the construction company itself.

The total contract has been undertaken at an amount of Rs 20 million.

Sub-contracting

Guestimating Approach

te = (to + 4tm + tp) / 6to = 5 monthstm = 7 monthstp = 9 months

te = 7 Months* This method is used on the based on previous industry information

Time Estimte

Time-line

Feb

15 1 15 1 15 1 1 15151 115

Purchase of land

Construction

MarchApril May June July Aug Sept Oct Nov Dec Jan Feb March

1111 11 115 15151515 151515

Electrical

Water & gas

Equipment installation

Purchase of cattle

Housing of cattle

Milking process

Sale

Zero date – 1st Feb 2011

Ending date – 31st august 2011