ghee and oil mill

National Ghee & Oil Mills (Pvt) Limited

A FEASIBILITY REPORT On

NATIONAL GHEE & OIL MILLS (PVT) LIMITED

Submitted to:

Sir Javed Iqbal

Submitted by:

Aasma Amanat Roll No: 38 Taneem Akhtar

Roll No: 12 Ambreen Shahid Roll No: 20

Department Of Commerce


Preface

To understand the Project Appraisal an integral part of MSc. Accounting & Finance Program because it gives us practical knowledge of what we have learnt during our study period. This report is being written to fulfill the requirement of degree MSc. Accounting & Finance. Project Appraisal provides opportunity to have keen observation and experience. This report process is valuable in course of learning.

This report is also a step of some chance of practical experience form. In this report we will be covering all vital information and their scanning exposures in the form of our observation.

In this report we have tried our level’s best effort to encompass and elaborate the necessary inferences suitable to enhance the knowledge. We hope our effort of transfer of knowledge through this report will be information gaining for readers.

Aasma Amanat

Taneem Akhtar Ambreen Shahid

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Dedication

We dedicate this Report to our dearest parents and teachers whose prayers & Support are always with us.

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Acknowledgement:

We owe our heart-felt thanks to God Almighty who enabled us to discharge such an onerous responsibility with due care and caution in the prime interest of the general public and to the great credit of our worthy teacher and “Sir Javed Iqbal” who is the main source of the enlightment of our minds and the development of our natural potentialities. We also feel highly indebted to our parents who guided us at every stage and whose pains are repaid in the form of what we are today. Our thanks are bound even to our beloved country Pakistan the sacred soil of which goes to the making of our whole personality and character by providing every possible facility and golden opportunity of ideal education and training.

Aasma AmanatTaneemAkhtar AmbreenShahid

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Table of Contents

ContentsPage#

Executive Summary 06Vision and Mission Statement 09Objectives & Key Success Factors 12Introduction 14Management 15Technical Analysis 17Market Analysis 26Economic Analysis 33Assumptions underlying Earning Forecast 40Projected Financial Statements 41Auditing Plan 53Exit Strategy and Risk Assessment 54

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EXECUTIVE SUMMARYThe proposed project contemplates to set up a new Ghee & Oil Mill Unit

at Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The

sponsors of the project are professionally qualified and have valuable and

extensive experience of business management in industrial fields namely

Miss Aasma, Miss Tasneem, Miss Ambreen. The overall

management and control of the firm will be actively managed by the full

time paid management under the direct supervision of Miss Aasma,

Miss Tasneem, Miss Ambreen, who will actively participate in

management decisions and control the affairs of the firm.

The production of Oil Cake, Refined Oil, and Oil Dirt (By-Product) will be

obtained by crushing Cotton Seed as input. The entire production of the

firm will be sold locally to the local Ghee Mills. The proposed project site

enjoys the benefits of

1) Easy availability of raw material,

2) Quick access to main road,

3) Sources of power, water, fuel etc.,

4) Availability of Transport and modern Communication systems,

5) Availability of Skilled and Un-Skilled labor, and

6) Free from environmental hazards like water logging and salinity and

floods.

The demand of the project is sophisticated enough on the basis of which

project will make sales of Rs. 256,244,000 in its first year of Operations,

Rs. 286,813,000 in its 2nd year of Operations whereas it will make sales of

Rs. 304,795,000 in its 3rd and subsequent years of operations. The annual

rated crushing capacity of the plant is estimated about 21,600,000

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kilogram of Cotton Seed working 360 days a year and tripled shift per day

of 8 hours each. The project shall be equipped with latest locally

manufacturing plant and Machinery. The plant of the proposed project will

be capable of crushing 10,000/kg/expeller/day.

Of the total production of sunflower seed and cotton seed of the country

the share of Multan, Bahawalpur and D.G. Khan Division is more than 60%.

Further Multan division consisting of Sahiwal, Vehari, Khanewal, and

Lodhran is the major cotton seed production area, nearly 40% of the total

production of cotton seed is produced by this division. The basic raw

materials of the proposed project are Cotton Seed and Caustic Soda of

which later is used to refine crude oil. The proposed project is located at

Hasilpur Road, 1-Km away from Hamatian, Plot No. 15/06 Jindu Missan.

The project will contribute in eliminating unemployment and will best

make the use of available resources. This project will create employment

opportunities for Skilled, Semi-Skilled and Unskilled labor along with the

Factory administrative and Marketing Staff.

The total cost of the project have been estimated to be Rs. 33,053,000

consisting of Land, Building Machinery (including installation and other

cost), Vehicle, Furniture, Office Equipment, Pre-Production Expenses,

Interest during construction and the initial net working Capital

Requirement.

The completion time period of the project is estimated to be 6 months. A

plot of land measuring 1 Acre has been purchased in the name of the

company at the proposed site. The cost of land including cost of

registration and development etc. is Rs. 1,590,000. The land is considered

to be sufficient for the proposed project. Building and Other Civil Works

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consist of mainly Factory Building, Ware house, and Administrative Staff.

The erection and installation cost is estimated amounting to Rs. 838,000.

The debt equity ratio fulfills the maximum requirement i.e. 60 : 40of the

bank even though the current government policy is leaner towards easy

loan and lower equity requirement. The ratio of debt in the cost is such

that it allows for easy servicing of the loan. The debt equity-ratio is

considered satisfactory and long term loan would have a safe equity

margin.

The total manufacturing cost of the project have been bifurcated Rs.

211,410,000 in respect of raw material consumption, Rs. 9,666,000 for

labor and Rs. 5,532,000 for Factory overheads rated at 75% Capacity. The

financing cost of the project is estimated to be is to be 14% of the debt

obtained from the financial institution. Firm's total administrative, General

and Selling Expenses have been estimated to be Rs. 14,416,000.

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VISION, MISSION & CORE VALUES

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Our Vision

To be the premier Pakistani

enterprise with a global reach ,

eulav gniusrup yletanoissaP

sredlohekats lla rof noitaerC

ruOnoissiM

tsom eht reviled dna poleved oT

remotsuc eganam ,stcudorp lio laedi

ecivres ytilauq reviled ,ecneirepxe

,htgnerts dnarb ot setubirtnoc taht

egatnavda evititepmoc a sehsilbatse

suht ,ytilibatiforp secnahne dna

sredlohekats eht ot eulav gnidivorp

ynapmoc eht fo.


“LeadershipWe value leaders of high integrity, energy and enthusiasm who have the necessary managerial, professional and people skills to inspire a group or an organization to set high goals and achieve them willingly. We believe that leadership skills need to be strengthened at all levels within our organization and that managerial and professional competence is a necessary foundation.

“Teamwork and PartnershipWe believe that high performing teams containing appropriate diversity can achieve what individuals alone cannot. Consciously using the diversity of style, approach and skills afforded by teams is strength we must continue building into our organization.

“DiversityWe value differences in gender, race, culture, personality and style because diverse solutions, approaches and structures are more likely to meet the needs of customers and achieve our business goals.

“Quality and Continuous ImprovementsWe believe that quality and relentless commitment to continuous improvements are essential to our ongoing success. To this end, we define quality as understanding the customer’s expectations, agreeing on performance and value, and providing products and services that meet expectations 100 percent of the time. Our motto is, “Quality in all we do”.

“Ethics and IntegrityWe do care how results are achieved and will demonstrate honest and ethical behavior in all our activities. Choosing the course of highest integrity is our intent and we will establish and maintain the highest professional and personal standards. A well-founded reputation for scrupulous dealing is itself a priceless asset.

“Candid and Open CommunicationWe value communications that are courteous, candid and open and that enables each of us to do our jobs more effectively by providing information that contributes to the quality of our judgment and decision making. Effective communication should provide the means for gaining understanding of the company’s overall objectives and plans and of the thinking behind them.

“Innovation

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Success requires us to continually strive to produce break through ideas that result in improved solutions and services to customers. We encourage challenges to the status quo and seek organizational environment s in which ideas are generated, nurtured and developed.

“Individual Growth and DevelopmentWe strongly believe in the dignity and value of people. We must consistently treat each other with respect and strive to create an organizational environment in which individuals are encouraged and empowered to contribute, grow and develop them and help to develop each other.

“Enjoyment and FunWe believe that excitement, satisfaction and recognition are essential elements of a healthy, creative and high performing work environment. Having fun in our work should be a normal experience for everyone

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OBJECTIVES AND KEY SUCCESS FACTORS

The main objectives of the development of project are:

Capitalize on excellent opportunity to extract maximum revenue in a branch out market.

To launch the oil unit with a highly targeted publicity campaign and in a grand opening event in the mid September of 2008.

To maintain tight control of costs, operations, and cash flow through diligent management and automated computer control.

To maintain a high standard of product and service provided. Capitalize on excellent location opportunity. Maintain tight control of costs, operations, and cash flow

through diligent management and automated computer control.

To be the premier company that achieves the goals of profit maximization and value maximization for all the stakeholders of the company.

The keys to success in achieving our goals are:

Provide an exceptional service and product that leaves an impression.

Consistent utilizing of ingredients that creates product quality. Managing our internal finances and cash flow to enable

upward capital growth. Strict control of all costs at all times, without exception. The Company will be strategically located to maximize the

revenue derived from the sales of the quality product. Provide exceptional product that leaves an impression with

our core customers. Consistent entertainment atmosphere and product quality. Managing our internal finances and cash flow to enable

upward capital growth. Strict control of all costs, at all times, without exception. Accelerated sales growth experienced in the category of

sachet packs. Extensive distribution channel for the sachet packs focusing

even on small kiosks in the urban and rural areas. The product would be focusing the price conscious segment of

the market by providing similar and better quality branded product at lesser price.

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Emphasizing on excellent service to the other wholesalers. Adapting to the rapid social and economic changes. Regular flow of local as well as Export orders is the key

success factor for efficiently running of the project. Selection and procurement of consistent quality raw material

would be another contributing factor for carrying out successful operations of proposed project.

Production of quality products meeting the Health Standards of International level is necessary for Export sales.

Competitive price of end products. Abundant supply of raw material. Cost efficiency through better management. Media campaign for the awareness of the retail customers. Availability of low cost skilled labor. The main elements of export strategy are reducing cost of

doing business, increasing market access, technology, environmental & Security Compliance, encouraging export-oriented foreign investment, region-specific strategy, country & business image building and value addition.

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INTRODUCTIONThe proposed project contemplates to set up a new Oil Mill Unit at

Baghdad 1-Km away from Hamatian, Hasilpur Road, Bahawalpur. The

annual rated crushing capacity of the plant is estimated about 21,600,000

kilogram of Cotton Seed working 360 days a year and tripled shift per day

of 8 hours each. The project shall be equipped with latest locally

manufacturing plant and Machinery.

The total Capital Cost of the project is estimated to be Rs. 34,059,907.

This total Cost of the project comprises of Fixed Assets Rs. 25,162,873

and Initial Net Working Capital of Rs. 8897034.

The Cost of the Project is proposed to be financed by Debt and Equity in

the ratios of 60 : 40 respectively.The remaining cost of the project will be

financed by the sponsor's share capital of Rs. 13623963.

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Management

The overall management and control of the firm will be actively managed

by its initiator who will actively participate in management decisions and

control the affairs of the firm.

Name Designation

1. Sir Javed Iqbal Managing Director

The partner will contribute in the equity of the project and participate in

the profit and loss of the firm's business according to her capital

contribution ratio.

Sponsors

The sponsors of the project are professionally qualified and have valuable

and extensive experience of business management in industrial fields.

They have got good trading contacts and market reputation in the

industry. Moreover, they are professionally qualified in the field of

business Management from the Islamia University of Bahawalpur under

MSc Accounting & Finance Program. The sponsors experience would assist

the firm in its smooth and profitable operations.

The sponsors are financially sound and capable to contribute their part of

equity in the proposed project.

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The Sponsors detail is as under:-

1. Name : Miss Aasma Amanat

Age : 21 years

Address : House # 653, Block A, Mian Channu.

Qualification : MSc. Accounting & Finance

2. Name : Miss Tasnem Akhtar

Age : 21 years

Address : House # 65, Block B, Satellite town,

Bahawalpur.


3. Name : Miss Ambreen Shahid

Age : 21 years

Address : House # 159, Block C, Civil lines, jhang.


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Technical Analysis

Location of the Project

The project is proposed to set up at Hasilpur Road, Bahawalpur. The site

enjoys the following advantages:-

- Easy availability of raw material

- Access to the main road, Sources of Power, water, fuel etc.

- Availability of transport & communication like telephone, telex,

Internet etc.

- Availability of skilled and Un-Skilled manpower

- Free from other environmental hazards like water logging,

floods, salinity etc

SCOPE OF BUSINESS:

This business has widely scope in the field of Ghee mills. This business

provides the raw material to the Ghee Mills, from which they make the

cooking oil & Ghee from it and then they provide us in final shape.

CRUCIAL FACTORS & STEPS IN DECISION

MAKING INVESTMENT.

Before making any investment decision it is admissible to

evaluate the associated risk factor by taking into consideration certain key

elements. These may include

Availability of resources

Technical know-how

Past experience

Managerial skills

At the time of evaluation and analysis of strength, weakness,

opportunities & threats [SWOT] for a particular business serves the of

basic tools in investment decision making

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KEY SUCCESS FACTORS/ PRACTICAL TIPS

FOR SUCCESS :

Availability of trained and professional staff

Reasonable prices against the competitors

High stander environment for the staff and customers

OPERTUNITIES :

Availability of raw material easily.

Availability of labour at low cost.

Transportation facilities

Availability of electricity easily.

Skilled person is available easily.

THREATS :

One of the major threat to business is highly salary pakge should be

competitive.

IMPORTANCE OF OIL MILLS:

The oil mills have an important role in the economy of our country,

because our country is an agricultural country, in this way we are

producing more cotton. The cotton seed is taken from raw cotton which is

used in oil mills for the purpose of oil and as well as seed cake. This oil is

sent to the Ghee Factories for ghee & cooking oil purpose which we use

in daily cooling. The seed cake is sold to the farmers for animal’s

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requirement & the wastage is sent to the soap factories for making soaps.

The usage of oil is very high in shape of cooking oil & ghee.

Oil Mills are performing very high level of business. They are providing the

employment opportunities in the country. They are contributing in GOVT taxes as the

GOVT revenue. It is also a profitable business, so that I have decided to start an Oil

Mill.

Manufacturing Process

o Some vegetable oils, such as olive, peanut, and some coconut and sunflower oils, are cold-pressed. This method, which entails minimal processing, produces a light, flavorful oil suitable for some cooking needs. Most oil sources, however, are not suitable for cold pressing, because it would leave many undesirable trace elements in the oil, causing it to be odiferous, bitter tasting, or dark. These oils undergo many steps beyond mere extraction to produce bland, clear, and consistent oil.

Cleaning and grinding

Incoming oil seeds are passed over magnets to remove any trace metal before being dehulled, deskinned, or

otherwise stripped of all extraneous material. In the case of cotton, the ginned seeds must be stripped of their lint as well as dehulled. In the case of corn, the kernel must

undergo milling to separate the germ .

The stripped seeds or nuts are then ground into coarse meal to provide more surface area to be pressed.

Mechanized grooved rollers or hammer mills crush the material to the proper consistency. The meal is then

heated to facilitate the extraction of the oil. While the procedure allows more oil to be pressed out, more

impurities are also pressed out with the oil, and these must be removed before the oil can be deemed edible .

Pressing

The heated meal is then fed continuously into a screw press, which increases the pressure progressively as the meal passes through a slotted barrel. Pressure generally

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increases from 68,950 to 20,6850 kilopascals as the oil is squeezed out from the slots in the barrel, where it can be

recovered .

Extracting additional oil with solvents

Soybeans are usually not pressed at all before solvent extraction, because they have relatively little oil, but most oil seeds with more oil are pressed and solvent-

treated. After the initial oil has been recovered from the screw press, the oil cake remaining in the press is

processed by solvent extraction to attain the maximum yield. A volatile hydrocarbon (most commonly hexane)

dissolves the oil out of the oil cake, which is then recovered by distilling the light solvent out. The Blaw-

Knox Rotocell is used to meet the demands of the United States soybean oil industry. In using this machine, flakes

of meal are sent through wedge-shaped cells of a cylindrical vessel. The solvent then passes through the

matter to be collected at the bottom. Also still in use by a significant number of manufacturers is the Bollman or

Hansa-Muhle unit, in which oilseed flakes are placed in perforated baskets that circulate continuously. The

solvent percolates through the matter which is periodically dumped and replaced .

Removing solvent traces

Ninety percent of the solvent remaining in the extracted oil simply evaporates, and, as it does, it is collected for reuse. The rest is retrieved with the use of a stripping

column. The oil is boiled by steam, and the lighter hexane floats upward. As it condenses, it, too, is collected .

Refining the oil

The oil is next refined to remove color, odor, and bitterness. Refining consists of heating the oil to between

107 and 188 degrees Fahrenheit (40 and 85 degrees Celsius) and mixing an alkaline substance such as sodium

hydroxide or sodium carbonate with it. Soap forms from the undesired fatty acids and the alkaline additive, and it

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is usually removed by centrifuge. The oil is further washed to remove traces of soap and then dried .

Oils are also degummed at this time by treating them with water heated to between 188 and 206 degrees

Fahrenheit (85 and 95 degrees Celsius), steam, or water with acid. The gums, most of which are phosphatides,

precipitate out, and the dregs are removed by centrifuge .

Oil that will be heated (for use in cooking) is then bleached by filtering it through fuller's earth, activated

carbon, or activated clays that absorb certain pigmented material from the oil. By contrast, oil that will undergo

refrigeration (because it is intended for salad dressing, for example) is winterized—rapidly chilled and filtered to

remove waxes. This procedure ensures that the oil will not partially solidify in the refrigerator .

Finally, the oil is deodorized. In this process, steam is passed over hot oil in a vacuum at between 440 and 485 degrees Fahrenheit (225 and 250 degrees Celsius), thus

allowing the volatile taste and odor components to distill from the oil. Typically, citric acid at. 01 percent is also

added to oil after deodorization to inactivate trace metals that might promote oxidation within the oil and hence

shorten its shelf-life .

Packaging the oil

The completely processed oil is then I V measured and poured into clean containers, usually plastic bottles for

domestic oils to be sold in supermarkets, glass bottles for imports or domestic oils to be sold in specialty stores, or

cans for imports (usually olive oil) .

o By products/Waste

The most obvious byproduct of the oil making process is oil seed cake. Most kinds of seed cake are used to make animal feed and low-grade fertilizer; others are simply disposed of. In the case of cotton, the lint on the seed is used to make yarn and cellulose that go into such products as mattresses, rayon, and lacquer. Coconut oil generates several byproducts, with various uses: desiccated coconut meat(copra) is used in the confectionery industry; coconut milk can be consumed; and coir, the fiber from the outer coat, is used to make mats and rope. Since corn oil is derived from a small portion of the entire kernel, it creates

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corn meal and hominy if it is dry milled, and corn starch and corn syrup if it is wet milled.

Lecithin is a byproduct of the degumming process used in making soybean oil. This industrially valuable product is used to make animal feed, chocolate, cosmetics, soap, paint, and plastics—to name just a few of its diverse uses. Recent research has focused on utilizing the residual oil seed cake. The cake is high in protein and other nutrients, and researchers are working to develop methods of processing it into a palatable food that can be distributed in areas where people lack sufficient protein in their diets. This goal requires ridding (through additional processing) the oil seed cake of various undesirable toxins (such as gossypol in cotton seed, or aflatoxin in peanut meal). Initial results are promising.

o Quality Control

The nuts and seeds used to make oil are inspected and graded after harvest by licensed inspectors in accordance with the United States Grain Standards Act, and the fat content of the incoming seeds is measured. For the best oil, the seeds should not be stored at all, or for a only very short time, since storage increases the chance of deterioration due to mold, loss of nutrients, and rancidity. The seeds should be stored in well-ventilated warehouses with a constantly maintained low temperature and humidity. Pests should be eradicated, and mold growth should be kept to a minimum. Seeds to be stored must have a low moisture content (around 10 percent), or they should be dried until it reaches this level (dryer seeds are less likely to encourage the growth of mold).

Processed oil should be consistent in all aspects such as color, taste, and viscosity. Color is tested using the Lovibund Tintometer or a similar method in which an experienced observer compares an oil's color against the shading of standard colored glasses. Experienced tasters also check the flavor of the oil, and its viscosity is measured using a viscometer. To use this device, oil is poured into a tube that has a bulb at one end set off by two marks. The oil is then drained, and the time required for the bulb to empty is measured and compared to a chart to determine viscosity.

In addition, the oil should be free of impurities and meet the demands placed upon it for use in cooking. To ensure this, the product is tested under controlled conditions to see at what temperature it begins to smoke (the smoke point),

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flash, and catch on fire; warnings are issued appropriately. To allow its safe use in baking and frying, an oil should have a smoke point of between 402 and 503 degrees Fahrenheit (204 and 260 degrees Celsius). The temperature is then lowered to test the oil's cloud point. This is ascertained by chilling 120 milliliters of salad oil to a temperature of 35 degrees Fahrenheit (zero degrees Celsius) for five and a half hours, during which period acceptable salad oil will not cloud.

Before being filled, the bottles that hold the oil are cleaned and electronically inspected for foreign material. To prevent oxidation of the oil (and therefore its tendency to go rancid), the inert (no reactive) gas nitrogen is used to fill up the space remaining at the top of the bottle

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RAW MATERIAL AVAILABILITY

Amongst the oil seeds cultivated in Pakistan, the most important is the

cotton seed, like some other oil seeds cotton seed is also a by-product as

the crop is mainly cultivated for fiber. Its contribution, however, to the

local domestic oil production is about 57%. Next to the cotton seed is the

rape and mustard which account for about 31% of the vegetables by-

production in the country. In addition to these, production of other non

traditional oil seeds such as sunflower, sesamem, groundnuts, linseed &

castor is also increasing.

Out of total production of sunflower seed and cotton seed of the country

the share of Multan, Bahawalpur and D.G. Khan Division is more than 60%.

Further Multan division consisting of Sahiwal, Vehari, Khanewal, and

Lodhran is the major cotton seed production area, nearly 40% of the total

production of cotton seed is produced by this division. On the basis of the

information collected, the yearwise production of cotton seed based on 3%

Growth Rate is given below:-

Production of Cotton seed

YEAR COTTON SEED (000 Tons)

2003-04 2369

2004-05 2523

2005-06 2687

2006-07 2862

2007-08 3049

2008-09 3141

PROJECTED AVAILABILITY OF COTTON SEED (3% growth)

YEAR COTTON SEED (000 Tons)

2008-09 3141

2009-10 3235

2010-11 3332

2011-12 3432

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2012-13 3535

Against the requirement of the proposed project of cotton seed at 10000

Kg/Expeller/day the estimated production of cotton seed is 3141000 tons

during 2008-09. Keeping in view the past trend, the available production

of cotton seed in Bahawalpur Division the proposed Project would not face

any problem.

PRODUCTION CAPACITY

The Plant is capable of crushing 10000 Kg/Expeller/day of Cotton seed. It is

based on 360 working days per annum and tripled shift per day of eight

hours.

The break up of the Capacity is given as under:-

Crushing of Cotton Seed (10000/Expeller/Day for 360 Days)

Materials Annual Production (Kgs)

(000)

Cotton Seed 21,600

Caustic Soda 648

80% of the Crushing of Cotton Seed will produce Ghee, 10% would be

Refined Oil, whereas the 5% would be Oil Dirt obtained after applying

Caustic Soda over Crude Oil and the 5% would be Wastage.

Production of: (000)

Items Annual Production (Kgs)

Oil Cake 17,280

Refined Oil 2,160

Oil Dirt 1,080

Wastage 1,080

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MARKET ANALYSIS

INTRODUCTION

In Pakistan at present, the edible oil industry includes the manufacture of

compound cooking oils (which is a recent development) table or salad oils

(this process is still in its infancy) margarine and refined oils. Important

products of this industry are mustard oil, cotton seed oil, groundnut oil and

newly developed sunflower seed oil, sunflower seed oil and soyabean Oil

of late a number of modern oil mills have been set up for the production of

solvent extraction oils. At present, major sources of raw materials are

cotton seed (about 50%) (Rape and mustard seed about 36%) and other

about (6%).

Traditionally the edible oil industry started operation at small and cottage

industry scale. At the village level, there was bullock driven "Kohlu" which

was the oldest way of extracting oil. Later few crushing units of much

bigger size were established which were equipped with locally

manufactured expellers which were equipped with locally manufactured

expellers. These units produced edible oil in raw form and oil meal or oil

cakes, food for animals or exported. Both these processes were inefficient

and left much oil unrecovered. It is estimated that about one third of oil

was left in the oil cakes. Further, large sized units were developed,

equipped with modern expellers and a few of them with preparatory

equipments for cleaning and Delinting of seeds. Finally, solvent extraction

plants were set up and their number is increasing. These considered being

the most efficient way of oil extraction.

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PRESENT CAPACITY

At present, there are over 300 oil mills with more than 1500expellers in

Sindh and 1000 mills with 4000 expellers in the Punjab. Most of these

units are old and are generally equipped with locally fabricating expellers.

Moreover, many units are not equipped with decorticating and Delinting

machinery for cotton seed as a result of which oil recovery in very low.

Total annual production is 3,000,000 to 5,000,000 tons in Punjab and

1,800,000 in Sindh. This Capacity has been estimated on the basis of 20 to

25 percent of Oil recovery.

In addition to this the following are the Oil Mill Units in Sindh and Punjab

with a total annual Production Capacity of 80.154% tons of vegetable oil

per year. Thus total production capacity of all types of edible producing

units is 765,000 tons a year.

Following is the detail of Oil Mill Units along with their production

capacity:-

NAME OF FIRM/COMPANY LOCATION CAPACITY

Fatima Enterprises Multan 30,000

Solvex Pakistan Ltd. Multan 18,750

P.P. Industries Khanewal 22,500

Bureewal Textile Mills Vehari 25,000

Oil & Cake Industries Nawabshah 20,000

Kohinoor Oil Mills Sheikhupura 30,000

Unied Oil Industries Muridke 4,800

Jeelan Oil Mills Sialkot 8,750

Kuku Abbas & Co. Vehari 3,600

Data Oil Mills Faisalabad 12,000

AL-Data Oil Mills Vehari 3,600

Aleem Oil Mills Sukkar 4,000

Ali Saqib Enterprises Vehari 3,600

Roshan Oil Mills Okara 3,600

Jilan Oil Mills Sialkot 17,500

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Friends Oil Mills Bhakkar 3,600

Haq Baho Oil Mills Jacobabad 4,500

Shary Extraction (Pvt) Ltd. Bahawalpur 18,000

Adnan Hanir Enterprises (Pvt) Ltd. Karachi 21,500

Sattar Solvent Extraction & Scap Ltd. Sukkar 17,500

Khokar Industries (Pvt) Ltd. Norwal 10,395

Raja Oil Mills Chichawatni 3,600

Tariq Oil Mills Okara 3,600

Mughal Oil Mills Multan 3,600

Rohel Industries Sahiwal 3,600

Roshan Oil Mills Okara 3,600

Al-Rehan Oil Mill Bahawalpur 22,500

Shamim Oil Mills Bahawalpur 23,500

Al-Hamd Oil Mills Bahawalpur 17,500

Naveed Oil Mills Bahawalpur 16,000

Friends Oil Factory Bahawalpur 10,500

Malik Oil Mills Bahawalpur 8,500

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PRODUCTION

Actual Production is very low about 457000 tons a year. The following

table shows the output of edible oil in recent years from various oil seeds:-

REFINED OIL PRODUCTION

("000" Tons)

IMPORTS

Since the domestic availability of refined (5 red to 7 red) oil is below the

requirement, Pakistan has to import it to meet the gap. The vegetable oil

imported in the country can be grouped as edible and non-edible or the

soft and technical oils. The refined oil, particularly is imported every year

against a lot of foreign exchange. Imports are being made from several

sources including the U.S.A., Brazil, Indonesia, Malaysia, and Singapore.

The refined oil imports and value since 1981-82 are shown in the table:-

IMPORT OF REFINED OIL

YEAR QUANTITY (000 Tons) AMOUNT ($ 000)

2003-04 1872 10350

2004-05 1968 11010

2005-06 2571 19554

2006-07 1992 20862

2007-08 2475 18387

2008-09 2654 19861

YEAR TOTAL PRODUCTION COTTON SEED OTHER

2002-03 2,286 1,341 945

2003-04 1,836 774 1062

2005-06 2,826 1,746 1080

2006-07 3,060 1,935 1125

2007-08 3,111 1,977 1134

2008-09 3,134 2,090 1044

30


FUTURE DEMAND

According to the Nutritional Plan of the Federal Government per capital

availability of cooking medium should be at least one ounce per day or

365 ounce per year. As such present consumption of edible oils comes

very high. Refined Oil serves as input for edible oil.

The consumption of edible oil is directly proportionate with population.

Therefore, future projection is made on the basis of population only, which

is increasing about 3.00% a year. Yearwise future Demand and Supply gap

is given below:-

PROJECTED DEMAND FOR REFINED OILS (In "000" Tons)

YEAR POPULATION PROJECTED DEMAND SUPPLY GAP

2009-10 167,753,406 5,780 1,445 4,335

2010-11 170,819,939 5,898 1,475 4,423

2011-12 173,942,527 6,006 1,502 4,504

2012-13 177,122,197 6,115 1,529 4,586

OIL CAKE

The Cotton seed actually result in two main products one is the crude oil

and the other is Oil Cake. Crude oil is further converted into refined oil by

applying Caustic Soda which separates the Oil Dirt from Crude Oil. This Oil

Dirt is by-product which is being sold to Soap Manufacturing firms for the

production of Soap.

The Oil Cake is mainly used as raw material in poultry and animal feed. It

is an excellent source of nutrition having almost double the protein

content over the undlinted and undecortecated expeller cakes. It is mainly

used to increase the nutritional value and balance the cattle and poultry

feed.

The establishment of modern "Diary" cattle and poultry farms, the

demand for specially prepared feed is increasing rapidly.

The ever increasing demand for milk and meat has led to the

establishment of large scale cattle farms in urban areas. This in turn has

31


created the demand for proper animal feed. It is very clear that in order to

improve the growth performance and productivity of livestock population;

it is necessary that balanced diet in the form of un-conventional feed be

provided to the animals.

The growth of poultry feed industry started with the growth of commercial

poultry industry after 1963. This in turn resulted in the generation of

demand for mixed feeds for commercial hybrid chickens which have exact

nutritional requirements. The present installed capacity of poultry feed

and cattle feed is around 2595000 Tons per annum.

In Pakistan, about 15% of the total areas is meant for fodder crop. This is

decreasing rapidly mainly because other cash crops are high yielding

products. The demand for compound feed is increasing due to the more

development of livestock and its products.

It can therefore, be reasonable assumed that the meal, hull and husk etc.

shall be readily sold to the feed milks.

OIL DIRT OR SOAP FOOTING

Soap footing or Oil dirt is obtained as a by-product in the process of

refining crude oil obtained from extraction. Caustic Soda is then applied

for refining the Crude Oil which in turns refines the Crude Oil into three

categories ranging from "5 red to 8 red" (the oil is red to the extent of

these numbers, however it is the refined oil quality, considered to be one

of the good quality refined oils) and separates Oil Dirt from the Crude Oil.

The application of Caustic Soda over improves the Color of the Oil. The by-

Product obtained is being sold to soap manufacturing firms who further

process the Oil Dirt and manufactures soap. This soap is being sold in the

market under the name of "KALA SOAP".

There is large consumption of this "KALA SOAP" in our country. it is widely

produced all over in the country at cottage industry level and in the

unorganized sector.

CONCLUSION

To conclude, it is evident that nothing obtained as main product or by-

product, fro the proposed unit goes waste or has no outlet. All the

products serve directly of indirectly human needs as well as they are

involved in the development of overall economic outlook. Hence the

32


market viability of the project being based on local raw material will result

in substantial saving in valuable foreign exchange.

PRICING ANALYSIS

Main Products

OIL CAKE

The Cotton Seed Oil Cake will be sold in the Grain Market to the dealers @

of 12.00/Kg. The prices of Oil Cake have been computed on average of

past five years.

REFINED OIL

The Cotton Seed Refined Oil will be sold to the local ghee mills in bulk

quantities @ 67.00/kg.

OIL DIRT

Oil Dirt will be sold to Soap Manufacturing Firms @ 7.00/kg. Oil Dirt will be

sold in large bulk quantities but will not be kept as inventory, however a

provision of 5% inventory has been assumed at the end of every year.

Following is the table showing prices of the products and by-products:-

TABLE SHOWING THE PRICES OF PRODUCTS AND BY-PRODUCTS

S. No. Product Prices (Per Kg)

1 Oil Cake 12.00

2 Refined Oil 67.00

3 Oil Dirt 7.00

NOTE: The current prevailing prices of Cotton Seed and Caustic Soda are

Rs. 12.00/kg and Rs. 35.00/kg. Moreover, these prices have been

computed on average of past five years.

33


Economic AnalysisEconomic evaluation is considered prominent yardstick to measure the

viability of a project. This analysis is directed towards determining

whether the project is likely to contribute significantly to the development

of the economy as a whole and the contribution of the project would be

great enough to justify the use of available resources. This aspect is

reviewed under the following:-

INITIAL IMPACT

In order to pursue a theory of balanced growth of the economy the current

government is putting an emphasis on industrialization of our inherently

agrarian economy. Industrialization of substantial dynamic benefits is

important for changing the traditional structure of our less developed

economy, while providing employment for a rapidly increasing labor force,

and saving scarce foreign exchange by import substitution and creating

export potentials.

A capital expenditure creates incomes for people engaged in the

fabrication of capital goods, who in turns spend their incomes on

consumer goods. An initial original capital investment creates a wave of

income and spending which has multiplied effect on the national income,

increasing it by several times, the original investment. The initial original

capital investment of Rs. 34,174,000 in local currency would have a

healthy impact on the GNP of the country, the extent of which depends on

the degree of multiplied effect.

EMPLOYMENT OPPORTUNITIES

The project would create employment opportunities for the following staff:

Detail Total Nos.

Skilled Labor 18

Semi-Skilled Labor 18

Factory Administrative Staff 26

Marketing Staff 05

BENEFIT COST ANALYSIS

The benefit/Cost ratio of the project is worked out in times which are

considered satisfactory. The NPV of the expected benefit and costs has

been taken into account for the calculation of this ratio.

34


National Ghee & Oil Mills (Pvt) Limited Annexure - I

Estimated Cost of Land

Sr. No.

DescriptionArea in Unit

CostRs ("000")

Marlas Total Cost

1 Land 160 7,500 1,200

2Registration & Legal Requirements 10% of cost of Land

160 750 120

3 Stamp Duty 5% of Cost of Land 160 375 60

4 District Council Fee 2.5% of Cost of Land 160 188 30

5 Development Charges 15% of Cost of Land 160 1,125 180

Total Cost of Land 9,938 1,590

35


Annexure - II


Estimated Cost of Civil Works

Sr. No.

DescriptionType of Unit of Covered Rate Per Rs ("000")

BuildingConstruction area Unit Total Cost

1 Oil Cake Store 1 RCC Square feet 7,065 575 4,062

2 Expeller Room (G/Floor) RCC Square feet 2,214 575 1,273

3 Expeller Room (F/Floor) RCC Square feet 2,214 575 1,273

4 Refinery Room RCC Square feet 196 575 113

5Office Block and Corridor

RCC Square feet 694 575 399

6Machinery Covered area

RCC Square feet 403 575 232

7 Store RCC Square feet 714 575 411

8 Guest Rooms RCC Square feet 492 500 246

9Cost of Jumbo Lon for insulation

Open area

Square feet 42,174 45 1,898

10Boundary Wall and Gate

Running feet 503 - 276

11 Brick Pavement Running feet 901 - 690

12 Contingency 833 - 544

Total Cost of Civil Works

57763 10,872

36


Annexure - III


Estimated Cost of MachineryRupees ("000")

Sr.No. Description QtyUnit Cost

Total Cost

1Oil Expeller Bearing Type duty weight (100 Mon) with Crude Oil.

Production 250 m/24 hrs. 6 200,000 1,200

2Electric Motor for Expeller 40 HP/950 RPM made China new.

6 45,000 270

3 Electric Motor Pully V-Belt type Local 6 4,000 24

4Small Crude Tank for Expeller material 1/4 thickness Local

6 7,500 45

5 Big Crude Tank cap (500 Mon) Local Material 1 60,000 60

6 Storage Tank Cap (500 Mon) Local Material 2 55,000 110

7M.S. Refined Tank Cap (250 Mon) heavy material (3/8 plate Local)

3 85,000 255

8 Electric Motor 10 HP/950 RPM China 2 20,000 40

9 Electric Motor 5 HP/950 RPM China 2 13,000 26

10 Refined Pump with Motor 1 16,000 16

11 Gear Pump 2" X 2" Local 2 9,500 19

12 Electric Cables with tape fitting Electric Panel 1 275,000 275

13 Expeller Bolt & Motor Bolts foundation bolts 3 75,000 225

14 Capacitor 40 HP Motor 4 20,000 80

15 Electric Pump Gear with 5 HP Motor 1 13,000 13

16 Contingency - - 133

Total Cost of Machinery 2,791

37


Annexure - IV


Estimated cost of the Project

Sr.No. Description LCYTotal cost ("000")

1 Land 1,590 1,590

2 Building 10,872 10,872

3 Machinery 2,791 2,791

4 Installation & Erection of Machinery 419 419

5 Insurance 5% of Cost of Machinery 140 140

6 Transportation 10% of Machinery 279 279

7 Vehicles 6,270 6,270

8 Furniture and Fixture 300 300

9 Office Equipment 150 150

10 Pre-operating expenses 980 980

11 Interest during construction 1,377

Estimated fixed cost 25,167

Add: Net Initial Net Working Capital 9,006

Total Estimated Cost of Project 34,174

38


Annexure - V


Initial Net Working Capital Requirement

Rs. "000"

A. Current Assets:

1 Inventories:

a) Raw Material 5 Days Requirement:

I) Cotton Seed 2,700

II) Caustic Soda 150

b) Finished Goods 11,450

c) Spares & Stores 142

Total Cost of Inventory 14,442

2 Advances and Deposits, & Prepayments 85

3 Accounts Receivables (2% of Sales) 5,202

4 Cash 1% of Amount withdrawn from Bank for Inventory 108

Total Current Assets 19,838

B. Possible Current Liabilities:

Less: Bank Borrowing 75% of Inventories 10,832

Initial Net Working Capital 9,006

39


Annexure - VI


Estimated Income StatementYears ending September 30 : 2011 2012 2013

Sales 260,091 291,119 309,371

Less: COST OF SALES

Raw Material 212,382 225,504 239,598

Labor 10,797 12,416 14,279

Manufacturing Overheads 5,822 6,031 6,241

Depreciation 2,250 2,250 2,250

Total Cost of Goods Manufactured 231,251 246,202 262,368

Inventory Adjustment – Less 11,563 748 12,371

Cost of Sales 219,688 245,454 249,997

Gross Profit 40,403 45,665 59,374

OPERATING EXPENSES:

Administrative Expenses 2,621 3,014 3,466

General Expenses 1,980 2,277 2,619

Selling Expenses 10,404 11,645 12,375

Total Operating Expenses 15,004 16,936 18,459

Operating Profit 25,398 28,729 40,915

OTHER EXPENSES:

Financial Charges on:

Long Term Loan 3,076 2,768 2,461

Bank Borrowings - - -

Amortization of Pre-Production Expenses 327 327 327

Total Other Expenses 3,402 3,095 2,787

Profit Before Tax and Worker's Fund 21,996 25,634 38,128

Worker's Fund 1,760 1,794 2,669

Profit/(Loss) Before Tax 20,236 23,840 35,459

Tax Provisions @ 45% 9,106 10,728 15,956

Net Profit 11,130 13,112 19,502

Ratios:

40


41


ASSUMPTION UNDERLYING EARNING FORECAST

PRODUCTION AND SALES

1. The proposed Oil Mill Unit would be equipped with 6 most modern

Oil Expeller Bearing Type duty weight (100 Mon) with Crude Oil,

Production 250 m/24 hrs, Electric Motor for Expeller 40 HP/950 RPM,

Electric Motor Pully V-Belt, Small Crude Tank for Expeller material

1/4 thickness. The project will be capable of crushing 60000 kg/day

of Cotton Seed. However, immediate target is to meet the current

demand level of the Ghee Mills.

2. Operating efficiency of the project is assumed at 75% for the first

year and 80% for the second 85% for third and subsequent years.

3. In line with recent experience of other units based on the most

modern oil mills machinery, 100% of the production would be sold

locally In Pakistan to Ghee Mills particularly located in Bahawalpur

Division.

4. Year-end Inventory is assumed at 5% of the production of that

particular year.

5. Selling Prices are assumed in accordance with the current prevailing

rates in the local market. These selling prices are based on average

of last five years.

Based over these assumptions, following is the year-wise detail of production, Sales and Sales Revenue of the proposed project:-

Annexure-VI-A

42


Production at 100% Capacity

Crushing Of Cotton Seed:

10000 Kg of Cotton Seed/day/ExpellersNo. of Expellers

% Output Units ("000")

Oil Cake 6 80 17,280

Refined Oil 6 10 2,160

Oil Dirt 6 5 1,080

Wastage 6 5 1,080

Total 100 21,600

Projected Financial Statement:

Annexure-VI-A

Year ending 30th September:

Capacity Utilized2011 2012 2013

75% 80% 85%

Quantity ("000")

Production of Oil Cake:

a) Number of Units Manufactured 12,960 13,824 14,688

Add: Opening Inventory - 648 691

Total Units available for Sales 12,960 14,472 15,379

Less: Closing Inventory 5% of Production 648 691 734

Units Sold 12,312 13,781 14,645

Production of Refined Oil:

b) Number of Units Manufactured 1,620 1,728 1,836

Add: Opening inventory - 81 86

Total Units available for Sales 1,620 1,809 1,922


Quantity Sold 1,539 1,723 1,831

c) Production of Oil Dirt:

Number of Units Manufactured 810 864 918

43


Add: Opening Inventory - 41 43

Total Production available for Sales 810 905 961


Quantity Sold 770 861 915

Sales Revenue:

Description Unit PriceRupees

75% 80% 85%

a Oil Cake 13 160,056 179,150 190,382

b Refined Oil 62 95,418 106,801 113,497

c Oil Dirt 6 4,617 5,168 5,492

Total Sales (a+b+c) 260,091 291,119 309,371

Annexure-VI-A

Raw Material:

Years 2011 2012 2013

Capacity Utilized75% 80% 85%

Consumption of Raw Material:

Description Quantity ("000")

a)Cotton Seed 10000kg/day/Expeller

16,200 17,280 18,360

Caustic Soda 486 518 551

b) Total Quantity Consumed 16,686 17,798 18,911

Cost of Raw material:

44


Description Rs. ("000")

Cotton seed @ 12/kg 194,400 207,360 220,320

Caustic soda @ 37/kg 17,982 18,144 19,278

Total Cost 212,382 225,504 239,598

Annexure-VI-A

Labor Cost:a) Direct Labor:

No. of Salary/Month Annual

Sr. No.

Plant LaborEmployees

/WorkerSalary ("000")

1 Skilled 18 14,000 3,024

2 Semi-Skilled 18 9,000 1,944

3 Un-Skilled 18 5,000 1,080

Total 54 28,000 6,048

Add:

Fringe Benefits (45% of Basic Salary) 2,722

Total Cost of Plant Labor 8,770

No. of Salary/Month AnnualSr. No.

Production LaborEmployees

/WorkerSalary ("000")

1 Plant Manager 2 20,000 480

2 Electricians 6 9,000 648

3 Peon/Sweeper 5 4,500 270

Total 13 33,500 1,398

Add:

Fringe Benefits (45% of Basic Salary) 629

Total Cost of Production Labor 2,027

45


Assumptions:

1 Direct labor will increase every year @ 15%.

Year Wise Wages of Labor:

Sr. No. DescriptionYears2011 2012 2013Rs ("000")

1 Plant Labor 8,770 10,085 11,598 2 Production Labor 2,027 2,331 2,681 Total Cost of Labor

10,797 12,416 14,279

46


Annexure-VI-A

Manufacturing Overhead Cost:

DescriptionRs ("000")

a) Fixed Cost:

Power: @ 365/200/KW/Month 876

Insurance: @ 3% of Fixed Assets Cost 849

Maintenance and Depreciation:

Overhauling Expenses @ 16000 Per Expeller 96

Maintenance of Building @ 5% of Cost of Building 544

Maintenance of Vehicles @ 5% of Cost of Vehicles 314

Total Fixed Cost 2,678

b) Variable Manufacturing Expenses:

Power: @ 4.87/unit of 200/KW/Monthx90% 3,787

Machinery Re. 1.00 Per 40/Kg on Crushing of Cotton Seed 405

Total Variable Cost 4,192

The fixed cost has been projected as constant while the variable cost has

been budgeted as per operational level for the corresponding years.

Following is the detail:-

Year ending Manufacturing Overheads as per Different Capacities:

Description

Years

2011 2012 2013

Rupees ("000")

75% 80% 85%

Fixed Cost 2,678 2,678 2,678

Variable Cost 3,144 3,354 3,563

Total Cost of Manufacturing Overheads

5,822 6,031 6,241

47


Annexure-VI-A

Administrative And General ExpensesRupees ("000")

Sr. No.

DesignationNo. of Salary/ AnnualEmployees Month Salary

1 Managing Director 1 50,000 6002 Accountant 1 15,000 1803 Clerk 4 12,000 5764 Cashier 1 10,000 1205 Chowkidar/Godown Keeper 3 6,000 2166 Peon/Sweeper 3 5,000 180

Total 12 48,000 1,272

Add: Fringe Benefits @ 40% 21,600 572

Total Cost of Administrative Staff 69,600 1,844

General Expenses:

Sr. No. DescriptionYear Exp. ("000")

1 Traveling Expenses 250 2 Printing & Stationary 80 3 Telephone, Telex, Postage 500 4 Rents, Rates and Taxes 400 5 Entertainment 100 6 Legal & Audit 150 7 Miscellaneous 500

Total 1,980

Assumptions:1 Administrative Salaries will increase @ 10% every year.

48


Year Wise Administrative Salaries:No. of Rupees ("000")

Sr. No.

DesignationEmployees 2009 2010 2011

1 Managing Director 1 600 690 7942 Accountant 1 180 207 2383 Clerk 4 576 662 7624 Cashier 1 120 138 1595 Chowkidar/Godown Keeper 3 216 248 2866 Peon/Sweeper 3 180 207 238

Total 13 1,872 2,153 2,476

Add: Fringe Benefits @ 40% 749 861 990

Total Administrative Salaries per Year 2,621 3,014 3,466

General Expenses:Sr. No. Description Rupees ("000")1 Traveling Expenses 250 288 331

2 Printing & Stationary 80 92 106

3 Telephone, Telex, Postage 500 575 661

4 Rents, Rates and Taxes 400 460 529

5 Entertainment 100 115 132

6 Legal & Audit 150 173 198

7 Miscellaneous 500 575 661

Total 1,980 2,277 2,619

Selling Expenses:

Selling Expenses are assumed to be 2% of Sales

Sr. No.

Description Rupees ("000")

1 Selling Expenses 4% of Sales Revenue 10,404 11,645 12,375

Annexure-VI-A

49


Depreciation Schedule of Fixed Assets:

Sr. No. Description Total Cost (Rs.) Rs. ("000")1 Plant & Machinery 10% 3,628 3632 Building 5% 10,872 5443 Vehicles 20% 6,270 1,2544 Furniture & Fixture 20% 300 605 Office Equipment 20% 150 30

Total 21,220 2,250

Note:- Depreciation will be constant over the life of assets.

Year Wise Depreciation:

DescriptionYears

2011 2012 2013

Rupees ("000")

Depreciation 2,250 2,250 2,250

Pre- Production Expenses :

Sr. No. DescriptionRs. ("000")

1 Registration Charges 150

2 Sales Tax Registration Charges 85

3 Consultancy & Report Preparation Charges 120

4 Printing & Stationary 25

5 Conveyance Charges 50

6 Telephone & Postage 50

6 Salaries and Wages during Construction 500

Total Pre- Preproduction Expenses 980

Annexure-VII

50


National Ghee Oil Mills (Pvt) Limited.Cash Flow Statement

End ofOperating Years

years ending 30th September:

Construction

2010 2011 2012 2013

SOURCES OF FUNDS:

Operating Profits - 25,398 28,729 40,915

Add: Depreciation - 2,250 2,250 2,250

Total Funds from Operation - 27,649 30,980 43,165

Other Sources:

Long Term Loan 20,504 - -


Paid-Up Capital 13,669 - -

Total Sources of Funds 34,174 27,649 30,980 43,165

APPLICATION OF FUNDS:

Investment in Fixed Assets 22,810 - - -Financial Charges during Construction

1,377 - - -

Pre-Production Expenses 980 - - -

Repayment of:

Long Term Loan - - 2,050 2,050


Financial Charges On:

Long Term Loan - 3,076 2,768 2,461

Bank Borrowings - -

PAYMENT OF:

Taxes - 9,106 10,728

Dividends - - - -

Worker's Fund - 1,760 1,794

Short Term Investment 3,000 - 5,000 20,000Increase in Current Assets (Other than Cash)

3,078 24,534 2,024 1,878

Total Application of Funds 31,245 27,609 22,709 38,911

Cash Surplus/(Deficit) 2,928 39 8,271 4,254Cash at the Beginning of the Year

- 2,928 2,968 11,239

Cash at the end of the year 2,928 2,968 11,239 15,492

Annexure-VIII

National Ghee & Oil Mills (Pvt) LimitedBalance Sheet

End of Operating Years

51


Year ending 30th September:Construction2010 2011 2012 2013

ASSETS: Rupees ("000")CURRENT ASSETS:Cash and Bank Balance 2,928 2,968 11,239 15,492Short Term Investment 3,000 3,000 8,000 28,000Accounts Receivable - 5,202 5,822 6,187Inventories:

Cotton Seed 2,700 9,720 10,368 11,016Caustic Soda 150 899 907 964Finished Goods - 11,563 12,310 13,118Stores & Spares 142 142 142 142

Advances, Deposits and Prepayments 85 85 85 85Total Current Assets 9,006 33,579 48,874 75,006FIXED ASSETS:Fixed Assets at Cost 24,187 24,187 24,187 24,187Accumulated Depreciation on Fixed Assets - 2,250 4,501 6,751Fixed Assets Net 24,187 21,937 19,687 17,436Intangibles 980 653 327 -Total Assets 34,174 56,170 68,888 92,442LIABILITIES AND EQUITY:CURRENT LIABILITIES:Bank Borrowings - -Taxes Payable - 9,106 10,728 15,956Dividend Payable - -Worker's Fund Payable - 1,760 1,794 2,669Current Maturity of Log Term Debt - 2,050 2,050 2,050Total Current Liabilities - 12,916 14,573 20,676LONG TERM DEBTS:Long Term Debt 20,504 18,454 16,403 14,353Total long Term Debt 20,504 18,454 16,403 14,353EQUITY:Paid-Up-capital 13,669 13,669 13,669 13,669Retained Earnings - 11,130 24,242 43,744Total Equity 13,669 24,799 37,911 57,414Total Liabilities and Equity 34,174 56,170 68,888 92,442

52


Annexure – XIII

National Ghee & Oil Mills (Pvt) Limited.

Financial Plan

Rupees ("000”)

Description LCY Total cost

Total Fixed cost of the project 25,167 25,167

Initial Permanent working capital 9,006 9,006

Total cost of the project 34,174 34,174

Long Term Debt 20,504 20,504

Equity Participation 13,669 13,669

Total Capital Required 34,174 34,174

Debt/Equity Ratio

Debt-to-Equity Ratio: 60 : 40

53


Annexure - XII


Loan Repayment Schedule

YearsOpening

Interest PrincipleClosing

Balance Balance

1 20,504 3,076 2,050 18,454

2 18,454 2,768 2,050 16,403

3 16,403 2,461 2,050 14,353

4 14,353 2,153 2,050 12,303

5 12,303 1,845 2,050 10,252

6 10,252 1,538 2,050 8,202

7 8,202 1,230 2,050 6,151

8 6,151 923 2,050 4,101

9 4,101 615 2,050 2,050

10 2,050 308 2,050 -

54


PROJECT AUDIT

The company will have its internal audit committee, which will conduct the audit of the various functions of the company as well as the environmental audit. The audit committee of the company comprises the Chairman of the company and all the functional heads of the various departments of the company.

The audit committee will be responsible for the edifice of the performance appraisal of the various functions of the company. The audit committee will check the performance of the accounts department, finance department, marketing department and also check the performance of the human resources of the company. On the basis of the performance determine by the audit committee various rewards will be announced for the employees.

The company will utilize its promotion and reward system as the motivation tool for its employees. On the basis of the performance various monetary, stocks and training and educational rewards will be announced for the employees of the company.

The company will strictly follow standards that will give the guidelines to the company for the safe practices, so that no environmental hazards will be done. The company will get its registration with the ISO – 14000 and will use this as its promotional tool in the marketing campaign in the media. The company will regularly administer its standards and will keep its system up to date, so that there will be no cause of the environmental pollution and hazards by the operations of the company.

55


Exit Strategy and Risk Assessment

The owners are aware of the highly risky nature of launching a oil unit in the highly competitive market. If the venture fails, the owner's paid-in capital and expenses may not be recovered.

The venture's actual revenue will be tracked against projections on a month-to-month basis. If net profitability is not in-line with forecasts, management and operational adjustments will be made to address the issues. If the venture is undercapitalized and requires more working capital, the owner will consider bringing on investment partners. The owner will also review the return-on-investment for personally providing more paid-in capital.

In the event that net profitability cannot be attained, the owner will take the following sequential steps to exit the venture:

1. The owner will attempt to sell the venture outright to a suitable buyer.

2. If a buyer cannot be found, the owner will liquidate all viable assets, including the computers, play stations etc.

3. Capital raised through asset liquidation will be used to reduce possible debt. All debt will be negotiated prior to settlement.

4. If debts cannot be eliminated, the owner will discuss corporate bankruptcy options with legal counsel.

56

ghee and oil mill

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