smeda medical store

Pre-Feasibility Study

MEDICAL STORE

Small and Medium Enterprise Development AuthorityGovernment of Pakistan

www.smeda.org.pk

HEAD OFFICE

6th Floor LDA Plaza Egerton Road, Lahore

Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk

[email protected]

REGIONAL OFFICE PUNJAB

REGIONAL OFFICE SINDH

REGIONAL OFFICE

NWFP

REGIONAL OFFICE BALOCHISTAN

8th Floor LDA Plaza Egerton Road, Lahore

Tel 111 111 456, Fax: 6304926-7 Website www.smeda.org.pk

[email protected]

5TH Floor, Bahria

Complex II, M.T. Khan Road, Karachi.

Tel: (021) 111-111-456

Fax: (021) 5610572

[email protected]

Ground Floor

State Life Building

The Mall, Peshawar.

Tel: (091) 9213046-47

Fax: (091) 286908

[email protected]

Bungalow No. 15-A

Chaman Housing Scheme

Airport Road, Quetta.

Tel: (081) 831623, 831702

Fax: (081) 831922

[email protected]

January, 2007

Pre-Feasibility Study Medical Store

PREF-82/January 2007/Rev3 1

DISCLAIMER

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

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

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

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

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

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

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

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

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

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

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

DOCUMENT CONTROL

Document No. PREF-82

Revision 3

Prepared by SMEDA-Punjab

Issue Date August, 2004

Revision Date January , 2007

Issued by Library Officer



1 INTRODUCTION TO SMEDA.................................................................................................... 4

2 PURPOSE OF THE DOCUMENT............................................................................................... 4

3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT..................... 5

4 PROJECT PROFILE.................................................................................................................... 5

4.1 OPPORTUNITY RATIONALE ...................................................................................................... 54.2 PROJECT BRIEF ....................................................................................................................... 54.3 MARKET ENTRY TIMING ......................................................................................................... 64.4 PROPOSED BUSINESS LEGAL STATUS ....................................................................................... 64.5 PROJECT CAPACITY AND RATIONALE....................................................................................... 64.6 PROJECT INVESTMENT............................................................................................................. 64.7 PROPOSED PRODUCT MIX........................................................................................................ 74.8 PROPOSED LOCATION.............................................................................................................. 74.9 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS............................................................ 84.10 STRATEGIC RECOMMENDATIONS ............................................................................................. 8

4.10.1 Product Range counts a lot............................................................................................ 84.10.2 Customer Service .......................................................................................................... 84.10.3 Location of the outlet..................................................................................................... 8

5 SECTOR & INDUSTRY ANALYSIS........................................................................................... 8

5.1 SECTOR CHARACTERISTICS ..................................................................................................... 85.2 SUB SECTOR INFORMATION ..................................................................................................... 9

The Pharma Industry has experienced major growth in recent years. As per an estimate the Pharma industry is growing at 18 % annually. The Pakistan’s harsh climate provides more favorable business opportunities in pharmaceutical business.......................................................................................... 9

5.3 LEGAL ISSUES REGARDING INDUSTRY ..................................................................................... 95.4 MAJOR PLAYERS..................................................................................................................... 9

6 MARKET INFORMATION ......................................................................................................... 9

6.1 MARKET POTENTIAL ............................................................................................................... 96.2 TARGET CUSTOMERS ............................................................................................................ 10

7 PRODUCT................................................................................................................................... 10

7.1 MAJOR SUPPLIERS ................................................................................................................. 107.1.1 Products of Multinational Companies .............................................................................. 107.1.2 Products of National Companies...................................................................................... 117.1.3 Herbal Products .............................................................................................................. 117.1.4 Food Supplements............................................................................................................ 117.1.5 Eatables .......................................................................................................................... 117.1.6 Toiletries ......................................................................................................................... 117.1.7 Sanitation Products.......................................................................................................... 117.1.8 Prepaid Cards ................................................................................................................. 11

7.2 PROFIT MARGINS .................................................................................................................. 117.3 OTHER INCOME..................................................................................................................... 12

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

8.1 LAND REQUIREMENT ............................................................................................................ 128.2 UTILITIES REQUIREMENT ...................................................................................................... 12

9 OFFICE EQUIPMENT............................................................................................................... 12

10 HUMAN RESOURCE REQUIREMENT................................................................................... 13



11 PROJECT COSTS ...................................................................................................................... 14

12 FINANCIAL ANALYSIS............................................................................................................ 15

12.1 PROJECTED INCOME STATEMENT........................................................................................... 1512.2 PROJECTED BALANCE SHEET ................................................................................................. 1612.3 PROJECTED CASH FLOW STATEMENT..................................................................................... 1712.4 REVENUE CALCULATION....................................................................................................... 18

13 KEY ASSUMPTIONS................................................................................................................. 19



11 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

The Small and Medium Enterprise Development Authority (SMEDA) was established with the objective to provide fresh impetus to the economy through the launch of an aggressive SME support program.

Since its inception in October 1998, SMEDA had adopted a sectoral SME development approach. A few priority sectors were selected on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including finance, marketing, technology and human resource development.

SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in terms of SMEDA’s areas of operation.

Along with the sectoral focus a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of viable business opportunities for potential SME investors. In order to facilitate these investors, SMEDA provides business guidance through its help desk services as well as development of project specific documents. These documents consist of information required to make well-researched investment decisions. Pre-feasibility studies and business plan development are some of the services provided to enhance the capacity of individual SMEs to exploit viable business opportunities in a better way.

This document is in the continuation of this effort to enable potential investors to make well-informed investment decisions.

22 PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, marketing, finance and business management. The document also provides sectoral information, brief on government policies and international scenario, which have some bearing on the project itself.

This particular pre-feasibility is regarding Medical Store, which comes under Pharmaceutical sector. Before studying the whole document one must consider following critical aspects, which forms the basis of any investment decision.



33 CCRRUUCCIIAALL FFAACCTTOORRSS && SSTTEEPPSS IINN DDEECCIISSIIOONN MMAAKKIINNGG FFOORR IINNVVEESSTTMMEENNTT

Before making any investment decision, it is advisable to evaluate the associated risk factors by taking into consideration certain key elements. For starting a medical store critical factors that should be taken into consideration before launching the project are listed below:

Number of customers to the Medical Store will determine the financial success of the project. The entrepreneur should analyze the minimum percentage of population that it will have to mobilize out of the total population to achieve a steady flow of customers. In order to do this, the entrepreneur should analyze existing competing Medical Store businesses in the target vicinity.

Looking at the nature of the products offered on a medical store, it is advised that the store should be established in a city that has a population to cover the sales concept of the project.

Another aspect linked with the revenue generating capacity of the project is the spending pattern of the potential customers in a specific city. Average per capita income in Pakistan is USD 830/yr and increasing concern of people about their health and fitness show that now people are consuming more medicines. This factor is very helpful and it is observed in recent days that international multinational pharmaceutical companies are looking at our country as potential market.

Selection of location for sales outlet is an important factor in the successful running of any medical store. Areas in the vicinity of a hospital/clinic or the developing areas are most suitable locations.

Availability of complete product line is another important factor. In addition to this, provision of other general items, for the customers, also plays a major role in increasing sales of a medical store.

44 PPRROOJJEECCTT PPRROOFFIILLEE

44..11 OOppppoorrttuunniittyy RRaattiioonnaallee

Pakistan is a very populous country. Pakistan’s population has soared up to 149.50 million, and at least one-third of it is living below the poverty level. Majority of population has no access to clean water to drink or proper sanitation facilities. This poses serious threats to health of masses. Moreover the variable and harsh climate of Pakistan causes major viral diseases through out the year. This creates a great demand for Pharmaceutical Products in Pakistan. As the major source of retail sales of Pharma Products is through medical stores, a big investment opportunity exists in this sector.

44..22 PPrroojjeecctt BBrriieeff

The proposed project is a well built medical store with all of the product range in stock for sales. The proposed Size of the medical store should be around 500 sq. feet, with



electricity and 2 telephone lines. The proposed project is based on well-established Pharmaceutical Retail Chains of Pakistan.

44..33 MMaarrkkeett EEnnttrryy TTiimmiinngg

As such there is no specific time required for the entry time in pharmaceutical sector. As the need is increasing day by day due to the increase in population and diseases, investment in this sector can be made any time in the year.

44..44 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

A medical store can be started as a sole proprietorship or a partnership and even it can be registered under company law with Securities and Exchange Commission of Pakistan. Although selection totally depends upon the choice of the entrepreneur but this financial feasibility is based on a Sole Proprietorship. For getting information on the formation of type of firm/company, please visit the Website:

www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html.

http://www.secp.gov.pk/Guides/PromotersGuide.pdf

44..55 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee

The product range offered on a Medical Store is blend of both multinational and national companies’ products and General Products (Food Supplements, Toiletries, Shampoo, Soaps, Diapers (sanitary napkins), Internet Cards, Payphone Cards and Cellular Prepaid Cards). The proposed medical store will remain open for 24 hours (3 shifts). It isrecommended to start with one retail outlet and expand the operation by one outlet after every 3 years.

44..66 PPrroojjeecctt IInnvveessttmmeenntt

The total cost of the project is around Rs. 4.47 million.

TTaabbllee 44--11 PPrroojjeecctt CCoossttss

Capital Investment Rs. 2,939,900 Working Capital Requirement Rs. 1,536,124

Total Investment Rs. 4,476,024

The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity. However this composition of debt and equity can be changed as per the requirement of the investor.

TTaabbllee 44--22 PPrroojjeecctt FFiinnaanncciinngg

Debt 50% 2,238,012



Equity 50% 2,238,012 Total project Investment Rs. 3,918,224

TTaabbllee 44--33 VViiaabbiilliittyy

IRR % 73.22NPV @25% Rs. 23,892,003 Pay Back Period (year) Yrs. 0.70

44..77 PPrrooppoosseedd PPrroodduucctt MMiixx

The proposed medical store will be offering a blend of different products. Percentage quantity of each item offered on the store is based on survey of distribution companies. Following is the list of products, which are to be offered on medical store.

TTaabbllee 44--44 PPrroodduucctt MMiixx

Product Category Percentage In Total SalesProducts of Multinational Companies 39.1

Products of National Companies 44.1

Herbal Products 4.2

Food Supplements 4.2

Eatables 3.3

Toiletries 1.7

Sanitation Products 1.7

Pre Paid Cards 1.7

44..88 PPrrooppoosseedd LLooccaattiioonn

A medical store should be easily accessible and should have considerable population concentration. Considering the spread of new well developed residential areas some of the suitable locations in Lahore are:

Main Boulevard Allama Iqbal Town Near Akbar Chowk Faisal Town Johar Town Near Doctors Hospital DHA EME Colony Tech Society Jail Road Mughal Pura Chowk Chauburji Or any locations near any new hospital or emerging clinics.



44..99 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss

Some of the Key Success factors that will determine the success of this project include:

Availability of regular medicine supplies. A well trained Pharmacist Availability of complete product range Reasonable and competitive prices. Inventory control to avoid any pilferage.

44..1100 SSttrraatteeggiicc RReeccoommmmeennddaattiioonnss

44..1100..11 PPrroodduucctt RRaannggee ccoouunnttss aa lloott

Variety and availability are the key factors in retail business. As far as the Pharma business is concerned, this is the most crucial factor. Almost all major manufacturers of pharmaceutical products offer same drugs with different names (Company Names). So availability of all major brands is crucial.

44..1100..22 CCuussttoommeerr SSeerrvviiccee

Outlet must have a proper temperature and proper outlook to attract the customers. If we take a look at major players in Pharma retail business, like Fazal Din’s, Zaka’s Pharmacy, Clinix Plus, all of them have well-organized outlets all around the city. Not only the outlets for the proposed medical store should be well organized, also the service provided to the customers should be very quick and efficient.

44..1100..33 LLooccaattiioonn ooff tthhee oouuttlleett

The investment in better location pays in the long run. The Pharma retails business is highly dependent upon the easy access for the buyers. This includes all areas near any major hospital or popular clinics.

55 SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

55..11 SSeeccttoorr CChhaarraacctteerriissttiiccss

The review of Pakistani pharmaceutical market shows that there are around 450 companies, which are registered with the Ministry of Health. Out of some 350 manufacturing units operating in the country include dozens of multinationals. Multinational pharmaceutical companies have played a vital role to provide the base for the growth of the pharmaceutical industry since the emergence of Pakistan. They have been enjoying the bulk of the business and are still enjoying after so many years, though their collective market share has dropped significantly during last 18 years. In 1985, the MNCs enjoyed 65 per cent of the market share while the national companies had 35 per cent of it. The national pharmaceutical companies have improved their market share by an average of 1.2 per cent every year. This percentage share increased up to a level of 53% in the year 2000 and this 18 per cent gain has come at the cost of MNCs whose



collective share has dropped by an equal percentage to 47 per cent during the same period. Thus in 2000, the share of national companies stood at 53 per cent, 6 per cent more than that of the MNCs1.

55..22 SSuubb sseeccttoorr IInnffoorrmmaattiioonn

The Pharma Industry has experienced major growth in recent years. As per an estimate the Pharma industry is growing at 18 % annually. The Pakistan’s harsh climate provides more favorable business opportunities in pharmaceutical business.

55..33 LLeeggaall IIssssuueess RReeggaarrddiinngg IInndduussttrryy

The medical store must be registered under Drugs Act 1976 with respective District Health Officer (DHO). The registration fee for obtaining license is Rs. 1,200/- and license will be renewed after every 2 years. The office of Executive Director Health is located at 24-Cooper Road, Lahore. A form is duly filled and submitted along with all the required documents. The said form is available at the same office. After that a physical survey is conducted by the health department and only after that license is issued.

Purchase and sale of drugs of narcotics and steroid nature will be maintained in the stock register. All the purchase invoices and stock register will be kept for 5 years.

55..44 MMaajjoorr PPllaayyeerrss

The pharmaceutical industry is growing in Pakistan day by day. Out of the national and multinational companies operating in Pakistan the major players in this sector are:

TTaabbllee 55--11 MMaajjoorr PPllaayyeerrss

Name of the Company No. of retail stores in LahoreFazal Din & Sons (Pvt.) Ltd. 4Fazal Din Pharma Plus 9Zaka Pharmacy 11Clinix 6

66 MMAARRKKEETT IINNFFOORRMMAATTIIOONN

66..11 MMaarrkkeett PPootteennttiiaall22

The review of Pakistani pharmaceutical market shows that there are around 450 companies which are registered with the Ministry of Health, some 350 manufacturing

2 http://www.piribo.com/publications/country/asia_pacific/pharmaceutical_market_pakistan.html

Pakistan Economist Apr 2004



units operating in the country including dozens of multinationals. Healthcare in Pakistan is still in the early stages of development. Widespread poverty and a weak health system underlie the poor health status of the population. Government funding continues to be minimal, equal to around 3% of GDP and achieves little more than maintaining the status quo, while the problems of poor nutrition and sanitation are compounded by Pakistan's large and fast growing population. However as the economy improves, the level of spending may well begin to rise. Other issues at the heart of the problem include the continuing prevalence of communicable diseases, low health manpower levels and the under- utilization of primary health facilities.

The Pakistani pharmaceutical market remains beset with difficulties. Strict government control over pricing has made many drugs uneconomical, with the result that they either become available only on the black market at inflated prices, or disappear completely. In this environment, manufacturers, both local and foreign-owned, have proved unable to generate the profits needed for capital investment. This is not helped by a regulatory system best described as rudimentary. There is virtually no public drug reimbursement or IP protection; patent law was officially tightened in December 2000, although the effectiveness of this has been questioned. In 2002, further changes were made, making Pakistan's IP laws even weaker. The appointment of drug inspection teams to investigate the manufacture and sale of 'fake' drugs has met with disappointing results so far, largely due to a lack of resources and bureaucratic complications.

Drug prices are officially controlled, although the government lacks the capacity to enforce its policies in this area. Some price rises have been allowed since 2000, but the current government shows little sign of enacting any serious reform of the pharmaceutical sector, preferring to allege profiteering on the part of the pharmaceutical industry. New legislation permitting imports of Indian-made drugs was introduced in June 2005, although this has yet to be capitalized upon in any significant way and is unlikely to be in the near future.

66..22 TTaarrggeett CCuussttoommeerrss

The major target market for the facility consists of residential areas in the vicinity of the medical store.

77 PPRROODDUUCCTT

The proposed medical store will be offering a blend of different pharmaceuticals. Alongwith pharmaceutical products, it will also be providing approximately 33% general items. These general items include herbal products, eatables, food supplements and toiletries.

77..11 MMaajjoorr ssuupppplliieerrss

77..11..11 PPrroodduuccttss ooff MMuullttiinnaattiioonnaall CCoommppaanniieess

Abbott, GSK, Aventis, Novartis, Pfizer, Wythe, ICI, Squib, SKB, Schering, Lilly, Rackitt & Benckiser, BD



77..11..22 PPrroodduuccttss ooff NNaattiioonnaall CCoommppaanniieess

Sami, Hilton, Highmount, Schazoo, Eferoze, Reko, Atco, Nabi Qasim, Highnoon, Woodwards

77..11..33 HHeerrbbaall PPrroodduuccttss

Hamdard, Qurshi, Ajmal

77..11..44 FFoooodd SSuupppplleemmeennttss

Nestle Cereals, Nido, Maggi, Slim up, Set point diet

77..11..55 EEaattaabblleess

Cadburys, Union, Mitchell’s, Coca Cola, Pepsi, Nestle

77..11..66 TTooiilleettrriieess

Rose Petal, Flying, Lever Bros. Etc.

77..11..77 SSaanniittaattiioonn PPrroodduuccttss

Pampers, Always

77..11..88 PPrreeppaaiidd CCaarrddss

Jazz, Instaone, UFone, Tango, PTCL, Flash, Rabta, WOL, CyberNet, Beconet, Hello

77..22 PPrrooffiitt MMaarrggiinnss

The sales prices charged for each item would be competitive and will only be earning a certain percentage of revenue. Percentage margin charged on each type of product is as under:

TTaabbllee 77--11 PPrrooffiitt MMaarrggiinnss

Item Profit MarginMargin on Multinational Sales 10%Margin on National Sales 15%Margin on Herbal Products 30%Margin on Food Supplements 50%Margin on Eatables 10%Margin on Toiletries 10%Margin on Sanitation products 10%Margin on Mobile Cards 3.5%Margin on Calling Cards 5%Margin on Net Cards 20%



Total amount of sales is based on survey and observation. Total sales assumed for the first year are as under:

TTaabbllee 77--22 EEssttiimmaatteedd SSaalleess33

Product Category Expected Sales Amount (Rs.)Products of Multinational Companies 10,998,000 Products of National Companies 12,402,000 Herbal Products 1,440,000 Food Supplements 1,260,000 Eatables 1,080,000 Toiletries 540,000 Sanitation Products 540,000 Pre Paid Cards 1,116,000 Total sales for the first year 29,376,000

Above mentioned sales are assumed for the first year on the basis of survey. Annual growth rate in sales is taken as 10%.

77..33 OOtthheerr IInnccoommee

Other income includes revenues from diabetes tests, blood pressure checking and any sort of intra muscular injections. Such income is taken as 1% of the total annual revenues.

88 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

88..11 LLaanndd RReeqquuiirreemmeenntt

Approximately 500-sq. ft. will be required for a medical store. It is recommended that the area should be acquired for rent. Rent cost for the proposed areas will be ranging between Rs.80,000 to Rs.100,000. Rent cost incorporated for financial analysis is Rs.100,000. Advance rent of six months is also to be paid.

88..22 UUttiilliittiieess RReeqquuiirreemmeenntt

ElectricityTelephone

99 OOFFFFIICCEE EEQQUUIIPPMMEENNTT

The following equipment and furniture will be required for the offices

3 details given in financial analysis(Revenue Calculation)



TTaabbllee 99--11 DDeettaaiillss ooff OOffffiiccee EEqquuiippmmeenntt

Office Equipment Quantity Price (Rs.) Total (Rs.)Refrigerator 1 20,000 20,000

Split Units 2 25,000 50,000 Computers 1 25,000 25,000

UPS 1 8,500 8,500Printers (Epson small) 1 12,000 12,000

Software 1 100,000 100,000Chairs 6 600 3,600Counter & Show cases 537,000 537,000

Gluco meter & BP apparatus

1 8,800 8,800

Total 764,900

1100 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

Medical Store will run for 24 hours in three shifts (i.e. 8 hours per shift). Shift timing will be:

TTaabbllee 1100--11 SShhiifftt SScchheedduulleess

Shift 1 8:00 am to 4:00 pmShift 2 4:00 pm to mid nightShift 3 midnight to 8:00 am

The staff will include Pharmacist who will have B-Pharmacy degree. Accounts officer must be B. Com and having one year experience in related field. Computer operator will be one year diploma holder having knowledge of proper inventory control.

Human resource requirement for the proposed project is as under:

TTaabbllee 1100--22 SSttaaffff RReeqquuiirreemmeenntt ((33 sshhiiffttss))

Positions Number Salary/month(Rs.)

Annual salary(Rs,)

ADMINISTRATIVE STAFF:Owner 1 100,000 1,200,000

Accounts officers 2 10,000 240,000

Pharmacist 7 12,000 1,008,000

Computer operators 5 7,500 450,000

Security Guards 3 4,500 162,000



Grand Total: 18 3,060,000

1111 PPRROOJJEECCTT CCOOSSTTSS

The breakdown of total project cost is in the table below:

TTaabbllee 1111--11 PPrroojjeecctt CCoossttss

Capital Costs Rs.Office Equipment 764,900 Preliminary Expenses 75,000Pre-operational Expenses4 2,100,000 Total Capital Costs 2,939,900Working Capital Inventory 1,569,000

Accounts Payable ( 32,876)

Total Working Capital 1,536,124 Project Cost 4,476,024

4 Pre-operational Expenses include advance rent of six months


PREF-82/January, 2007/Rev3

15

1122 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1122..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Projected Income StatementRs. in Thousands

Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XSales/Revenue 29,376 32,314 35,545 39,099 43,009 47,310 52,041 57,246 62,970 69,267 Cost of Sales:

Add opening stock - 1,569 1,726 1,898 2,088 2,297 2,527 2,780 3,058 3,363 Operating expenses 20,519 20,820 22,876 25,137 27,622 30,355 33,359 36,662 40,294 44,287 Less closing stock 1,569 1,726 1,898 2,088 2,297 2,527 2,780 3,058 3,363 3,700

18,950 20,663 22,704 24,947 27,414 30,125 33,106 36,384 39,988 43,950

Gross Profit 10,426 11,650 12,841 14,152 15,596 17,185 18,935 20,862 22,982 25,317 Operating Expenses:

Administrative Expenses 3,356 3,675 4,027 4,415 5,521 6,046 6,642 7,298 8,020 8,815 Marketing Expenses 100 95 90 86 81 77 74 70 66 63

Operating Profit 6,970 7,881 8,724 9,651 9,994 11,062 12,220 13,494 14,896 16,438

Financial Charges 298 235 172 110 47 - - - - - L C Charges - - - - - - - - - -

Other Income 294 323 355 391 430 473 520 572 630 693

Profit before Taxation 6,966 7,969 8,907 9,932 10,377 11,535 12,740 14,066 15,525 17,131 Taxation 1,393 1,594 1,781 1,986 2,075 2,307 2,548 2,813 3,105 3,426

Profit after Taxation 5,573 6,375 7,126 7,946 8,301 9,228 10,192 11,253 12,420 13,705

Acc. Profit b/f - 5,573 11,948 19,074 27,020 35,321 44,549 54,741 65,994 78,415

Un-appropriated Profit c/f 5,573 11,948 19,074 27,020 35,321 44,549 54,741 65,994 78,415 92,119



16

1122..22 PPrroojjeecctteedd BBaallaannccee SShheeeett

Projected Balance SheetRs. In Thousands

Year - 0 Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XTangible Fixed Assets 765 673 593 524 464 411 365 324 289 257 229 Preliminary Expenses 75 60 45 30 15 - - - - - - Current Assets:

Stock in hand 1,569 1,569 1,726 1,898 2,088 2,297 2,527 2,780 3,058 3,363 3,700 Accounts Receivable - - - - - - - - - - - Pre-paid rent 600 - - - - - - - - - - Cash in Hand / Bank 1,500 8,703 14,759 21,529 29,112 36,911 46,185 56,406 67,683 80,124 93,844

3,669 10,272 16,485 23,427 31,201 39,208 48,712 59,186 70,741 83,487 97,544 4,509 11,005 17,123 23,981 31,680 39,619 49,077 59,510 71,030 83,744 97,773

Owners Equity:Capital 2,238 2,238 2,238 2,238 2,238 2,238 2,238 2,238 2,238 2,238 2,238 Accumulated Profit - 5,555 11,916 19,031 26,968 35,262 44,484 54,671 65,921 78,338 92,040

Long Term Loan 2,238 1343 895 448 - - - - - - - Current Liabilities:

Current Portionof Long Term Loan - 448 448 448 448 - - - - - - Tax provision - 1,389 1,590 1,779 1,984 2,074 2,305 2,547 2,812 3,104 3,426 Accounts Payable 33 32.876 36 39 42 46 50 54 59 64 70

33 1,869 2,074 2,265 2,474 2,119 2,355 2,601 2,871 3,168 3,495 4,509 11,005 17,123 23,981 31,680 39,619 49,077 59,510 71,030 83,744 97,773



17

1122..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Projected Cash Flow StatementRs. in Thousands

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10Net Profit - 6,944 7,951 8,893 9,921 10,368 11,527 12,734 14,062 15,522 17,128Amortization - 15 15 15 15 15 0 0 0 0 0Depreciation - 92 80 69 60 53 46 41 36 31 28

- 7,051 8,046 8,977 9,996 10,435 11,574 12,775 14,097 15,553 17,156Working Capital Change - 600 (154) (170) (186) (205) (226) (248) (273) (301) (331)Cash form other SourcesOwners 2,238 - - - - - - - - - - Bank Finance 2,238 - - - - - - - - - -

4,476 - - - - - - - - - - Total Sources 4476 7651 7892 8808 9810 10230 11348 12527 13824 15252 16825Applications:Fixed Assets 765 - - - - - - - - - - Preliminary Expanses 75 - Preoperational Expenses 2,100 - Working Capital 1,536 - Re -Payment of Loan - 448 448 448 448 448 - - - - - L C Charges - - - - - - - - - - - Tax - - 1,389 1,590 1,779 1,984 2,074 2,305 2,547 2,812 3,104

4,476 448 1,836 2,038 2,226 2,432 2,074 2,305 2,547 2,812 3,104 Cash Increase/(Decrease) - 7,203 6,055 6,770 7,584 7,798 9,274 10,221 11,277 12,440 13,721Opening Balance 1,500 1,500 8,703 14,759 21,529 29,112 36,911 46,185 56,406 67,683 80,124

Closing Balance 1,500 8,703 14,759 21,529 29,112 36,911 46,185 56,406 67,683 80,124 93,844

1,500 8,703 14,759 21,529 29,112 36,911 46,185 56,406 67,683 80,124 93,844



18

1122..44 RReevveennuuee CCaallccuullaattiioonn

Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XSales Growth Rate 10% 10% 10% 10% 10% 10% 10% 10% 10%

Purchase Price Growth Rate 10% 10% 10% 10% 10% 10% 10% 10% 10%

Revenue (Rupees): Proportion

Multinational 37.4 10,998,000 12,097,800 13,307,580 14,638,338 16,102,172 17,712,389 19,483,628 21,431,991 23,575,190 25,932,709

National 42.2 12,402,000 13,642,200 15,006,420 16,507,062 18,157,768 19,973,545 21,970,900 24,167,989 26,584,788 29,243,267

Herbal 4.9 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

Food Supliments 4.3 1,260,000 1,386,000 1,524,600 1,677,060 1,844,766 2,029,243 2,232,167 2,455,384 2,700,922 2,971,014

Eatables 3.7 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

Toiletries 1.8 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292

Sanitation Products 1.8 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292

Pre-paid Cards 3.8 1,116,000 1,227,600 1,350,360 1,485,396 1,633,936 1,797,329 1,977,062 2,174,768 2,392,245 2,631,470 29,376,000 32,313,600 35,544,960 39,099,456 43,009,402 47,310,342 52,041,376 57,245,514 62,970,065 69,267,071

DiseasesALLOPATHIC

Infection 25% 5,850,000 6,435,000 7,078,500 7,786,350 8,564,985 9,421,484 10,363,632 11,399,995 12,539,995 13,793,994

Health care products 7% 1,638,000 1,801,800 1,981,980 2,180,178 2,398,196 2,638,015 2,901,817 3,191,999 3,511,198 3,862,318

Cardic 10% 2,340,000 2,574,000 2,831,400 3,114,540 3,425,994 3,768,593 4,145,453 4,559,998 5,015,998 5,517,598

Diabetics 13% 3,042,000 3,346,200 3,680,820 4,048,902 4,453,792 4,899,171 5,389,089 5,927,997 6,520,797 7,172,877

ENT 7% 1,638,000 1,801,800 1,981,980 2,180,178 2,398,196 2,638,015 2,901,817 3,191,999 3,511,198 3,862,318

B.P. / Relaxation 7% 1,638,000 1,801,800 1,981,980 2,180,178 2,398,196 2,638,015 2,901,817 3,191,999 3,511,198 3,862,318

Skin / Allergies 5% 1,170,000 1,287,000 1,415,700 1,557,270 1,712,997 1,884,297 2,072,726 2,279,999 2,507,999 2,758,799

Kidney 5% 1,170,000 1,287,000 1,415,700 1,557,270 1,712,997 1,884,297 2,072,726 2,279,999 2,507,999 2,758,799

Gyne 7% 1,638,000 1,801,800 1,981,980 2,180,178 2,398,196 2,638,015 2,901,817 3,191,999 3,511,198 3,862,318

Muscullar 5% 1,170,000 1,287,000 1,415,700 1,557,270 1,712,997 1,884,297 2,072,726 2,279,999 2,507,999 2,758,799

Ortopadeic 5% 1,170,000 1,287,000 1,415,700 1,557,270 1,712,997 1,884,297 2,072,726 2,279,999 2,507,999 2,758,799 Others 4% 936,000 1,029,600 1,132,560 1,245,816 1,370,398 1,507,437 1,658,181 1,823,999 2,006,399 2,207,039

100% 23,400,000 25,740,000 28,314,000 31,145,400 34,259,940 37,685,934 41,454,527 45,599,980 50,159,978 55,175,976

Multinational 47% 10,998,000 12,097,800 13,307,580 14,638,338 16,102,172 17,712,389 19,483,628 21,431,991 23,575,190 25,932,709

National 53% 12,402,000 13,642,200 15,006,420 16,507,062 18,157,768 19,973,545 21,970,900 24,167,989 26,584,788 29,243,267 100% 23,400,000 25,740,000 28,314,000 31,145,400 34,259,940 37,685,934 41,454,527 45,599,980 50,159,978 55,175,976

HerbalQurshi 60% 864,000 950,400 1,045,440 1,149,984 1,264,982 1,391,481 1,530,629 1,683,692 1,852,061 2,037,267

Hamdard 40% 576,000 633,600 696,960 766,656 843,322 927,654 1,020,419 1,122,461 1,234,707 1,358,178 100% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

Food SupplimentsSlim up 60% 756,000 831,600 914,760 1,006,236 1,106,860 1,217,546 1,339,300 1,473,230 1,620,553 1,782,608

Others 40% 504,000 554,400 609,840 670,824 737,906 811,697 892,867 982,153 1,080,369 1,188,406 100% 1,260,000 1,386,000 1,524,600 1,677,060 1,844,766 2,029,243 2,232,167 2,455,384 2,700,922 2,971,014

Eatables 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

Toiletries 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292

Sanitation Products 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292

Pre-paid CardsMobile 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292

Calling Cards 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292

Internet 36,000 39,600 43,560 47,916 52,708 57,978 63,776 70,154 77,169 84,886

1,116,000 1,227,600 1,350,360 1,485,396 1,633,936 1,797,329 1,977,062 2,174,768 2,392,245 2,631,470


PREF-82/January, 2007/Rev 319

1133 KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1133--11 OOppeerraattiinngg AAssssuummppttiioonnss

Hours operational per day 24 hoursDays operational per month 30 daysDay operational per year 360 days

TTaabbllee 1133--22 RReevveennuuee AAssssuummppttiioonnss

Revenue assumption Survey of Distribution companies & Pharmacy

Revenue classification On the basis of diseasesSales growth rate 10%Other Income (%age of revenues) 1%

TTaabbllee 1133--33 EExxppeennssee AAssssuummppttiioonnss

Printing & Stationary 1% of RevenueEntertainment 0.1 % of RevenueCommunication Expense 0.1% of RevenueConsultancy Charges and Audit (Annual) Rs.15,000Electricity cost growth rate 10%Electricity rate / unit Rs. 6.75Kilo Watts Consumed per day 8.3Depreciation Method Written Down ValueDepreciation Rate on Furniture 10%Depreciation Rate on Electric Equipment 10%Computers and printers 20%

TTaabbllee 1133--44 CCaasshh FFllooww AAssssuummppttiioonnss

Accounts payable cycle 7 daysInventory 30 days


PREF-82/January, 2007/Rev 320

TTaabbllee 1133--55 FFiinnaanncciiaall AAssssuummppttiioonnss

Project Life 10 YearsDebt 50%Equity 50%Debt Tenure 5 YearsInterest rate 14 %Income tax rate 20 %Discount rate (weighted avg. cost of capital for NPV) 25%Minimum Cash Balance Rs. 1.5 Million

smeda medical store

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