Pre-Feasibility Study

GARMENTS STITCHING UNIT

(Polo T-shirt)

Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6 Floor LDA Plaza Egerton Road, Lahore
Tel (042)111 111 456,
Fax: 36304926-7
helpdesk@smeda.org.pk
th

REGIONAL OFFICE

REGIONAL OFFICE

REGIONAL OFFICE

REGIONAL OFFICE

PUNJAB

SINDH

KHYBER PAKTUNKHWA

BALOCHISTAN

8th Floor LDA Plaza,

Egerton Road,
Lahore.
Tel: (042) 111 111 456,
Fax: (042) 36370474
helpdesk.punjab@smeda.org.pk

5TH Floor, Bahria Complex II,

M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
helpdesk.sindh@smeda.org.pk

Ground Floor
State Life Building The Mall,
Peshawar.
Tel: (091)111 111 456, 9213046-7
Fax: (091) 286908
helpdesk.NWFP@smeda.org.pk

Bungalow No. 15-A Chamn

Housing Scheme Airport Road,
Quetta.
Tel: (081) 2831623, 2831702
Fax: (081) 2831922
helpdesk.balochistan@smeda.org.pk

March, 2012

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

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-03

Revision

Prepared by

SMEDA-Punjab

Issue Date

Mar 28, 2001

Revised on

March, 2012

Issued By

Library Officer

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EXECUTIVE SUMMARY .................................................................................................... 3

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

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

PROJECT INTRODUCTION ............................................................................................... 5

4.1
4.2
4.3
4.4
4.5
4.6

PROJECT BRIEF .................................................................................................................. 5

OPPORTUNITY RATIONALE ................................................................................................ 5
PROPOSED CAPACITY: ....................................................................................................... 5
TOTAL PROJECT INVESTMENT: .......................................................................................... 5
PROPOSED BUSINESS LEGAL STATUS ................................................................................ 6
PROCESS FLOW CHART ...................................................................................................... 6

CURRENT INDUSTRY STRUCTURE ............................................................................... 6

MARKETING ......................................................................................................................... 8
6.1
6.2
6.3

GUIDELINES FOR GARMENTS EXPORT BUSINESS ............................................................... 8

TOTAL MARKET SIZE AND GROWTH ................................................................................. 9
WORLD EXPORTS OF POLO T-SHIRTS .............................................................................. 10

RAW MATERIAL ............................................................................................................... 10

HUMAN RESOURCE REQUIREMENTS ........................................................................ 11

MACHINERY & EQUIPMENT DETAILS ...................................................................... 12

9.1
9.2
9.3

10
10.1
10.2
10.3
10.4

MACHINERY LIST ............................................................................................................ 12

OTHER OPTIONS AVAILABLE FOR MACHINERY ............................................................... 12
FURNITURE & FIXTURE ................................................................................................... 12
LAND & BUILDING ....................................................................................................... 13
TOTAL LAND REQUIREMENT ........................................................................................... 13
RECOMMENDED MODE .................................................................................................... 13
SUITABLE LOCATIONS ..................................................................................................... 14
UTILITIES REQUIREMENTS ............................................................................................... 14

11

KEY SUCCESS FACTORS ............................................................................................. 14

12

THREATS FOR THE BUSINESS .................................................................................. 14

13

PROJECT COSTS & FINANCIAL ANALYSIS ........................................................... 16

13.1
13.2
13.3
13.4

TOTAL PROJECT COST AND RETURNS .............................................................................. 16

INCOME STATEMENT ....................................................................................................... 18
BALANCE SHEET ............................................................................................................. 19
CASH FLOW STATEMENT ................................................................................................. 20

14

ASSUMPTION .................................................................................................................. 21

15

ANNEXURE...................................................................................................................... 23

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1 EXECUTIVE SUMMARY
The local knitwear and apparel industries of Pakistan have, no doubt, made
tremendous strides over the last few decades. While there have been some periods
of slump in the past, for the past ten years the industry has been growing and
progressing quite steadily.
Pakistan's knitwear sector, which comprises 18,000 knitting machine, is the
leading growth sector in the entire textile chain with a growth potential estimated
at around 12% a year over the next five years, which would allow it to fetch more
than US$5bn in foreign exchange by 2014.1
The objective of the pre-feasibility study is to provide details about the investment
opportunity in a stitching unit for knitted garments. Mainly the production of this
unit will be for export purpose, and hence will contribute in the earning of foreign
exchange for the country. There is a vast range of knitted products like knitted Tshirts, blouses, trousers and shorts etc. However, this unit is designed on basic
Polo T-shirt. Initially, for some time period, this unit will operate on CMT2
(commercial basis), but ultimately, this would be an export-oriented unit.
Therefore, all the calculations and financial workings have been done while
treating this as an export based project. This project will also have the potential
for horizontal as well as vertical integration.
The estimated cost of the project is Rs. 20.896 million. The project shall be
financed through 50% equity and 50% by Bank Loan. The project will be run by
qualified & experienced professionals. Projected IRR, NPV and Payback of the
proposed project are 34%, Rs. 33.089 million and 4.21 years respectively.

1
2

Pakistan Textile Journal

CMT: Cutting, Manufacturing and Trimming
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2 INTRODUCTION TO SMEDA
The Small and Medium Enterprises 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 allencompassing 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 industries such as
horticulture, including export of fruits and vegetables, marble and granite, gems
and jewellery, marine fisheries, leather and footwear, textiles, surgical
instruments, transport, dairy etc. Whereas the task of SME development at a
broader scale still requires more coverage and enhanced reach in terms of
SMEDAs areas of operation.
Along with the sectoral focus a broad spectrum of business development services
is also offered to the SMEs by SMEDA. These services include identification of
viable 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.

3 Purpose of the Document

The objective of this proposed Pre-feasibility Study is primarily to facilitate
potential entrepreneurs with the investment information and provide an overview
about the "Garments Stitching Unit (Polo T-shirt)". The project pre-feasibility
study 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 and international scenario, which
have some bearing on the project itself.
The purpose of this document is to facilitate potential investors of the Textile
related business by providing them a macro and micro view of the business with
the hope that the information provided herein will aid the potential investors in
crucial investment decisions.
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This particular Pre-feasibility is regarding setting up "Garments Stitching Unit

(Polo T-shirt)". This report is based on the information obtained from industry
sources as well as discussions made with businessmen and industry key players.
For financial model, since the forecast/projections relate to the future periods,
actual results are likely to differ because of the events and circumstances that
dont occur as frequently as expected.

4 Project Introduction
4.1

Project Brief

The subject pre-feasibility study provides details about the investment opportunity
in a stitching unit for knitted garments. Mainly the production of this unit will be
for export purpose, and hence will contribute in the earning of foreign exchange
for the country. There is a vast range of knitted products like knitted T-shirts,
blouses, trousers and shorts etc. However, this unit is designed on basic Polo Tshirt. Initially, for some time period, this unit will operate on CMT 3 (commercial
basis), but ultimately, this would be an export-oriented unit. Therefore, all the
calculations and financial workings have been done while treating this as an
export based project. This project will also have the potential for horizontal as
well as vertical integration.
4.2

Opportunity Rationale

Exports of knitted garments from Pakistan have been on a rise during the last few
years. The availability of suitable raw material, development of certain skill levels
and introduction of international brands with local garment manufacturers are
some of the favoring factors for further expansion of knit garments industry in the
country. Pakistan is fourth largest producer of Cotton after China, India and USA.
In addition to providing raw material to the local textile industry, the lint cotton is
an export item. During 2010-11, the crop was cultivated on an area of 2689
thousand hectares. The production is estimated at 11.5 million bales.4 Raw
material for Socks Manufacturing unit is easily available in local market so this
validates the opportunity to set up a new sock manufacturing unit to capture the
need of expanding market.
4.3

Proposed Capacity:

1600 T-Shirts / Day (53 Stitching Machines)

4.4

Total Project Investment:

The total cost of the project is estimated at Rs. 20.896 million.

3
4

CMT: Cutting, Manufacturing and Trimming

Economic Survey of Pakistan 2010-11 (Ch #2, Page # 17)
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Table 4-1: Project Investment

Capital Investment
Working Capital Requirement
Total Investment

Rs. 16,573,117
Rs. 4,323,083
Rs. 20,896,200

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.
Table 4-2: Project Financing
Debt
Equity
Total project Investment
4.5

50%
50%

Rs. 10,448,100
Rs. 10,448,100
Rs. 20,896,200

Proposed Business Legal Status

The proposed legal structure of the business entity is either sole proprietorship or
partnership. Although selection totally depends upon the choice of the
entrepreneur but this financial feasibility is based on Sole Proprietorship.
4.6

Process flow Chart

The following figure shows the production process flow of Garments Stitching
Unit (Polo T-shirt).
Figure 4-1: Production Process Flow
Finished Fabric
Receipt

Inspection

Washing
(Optional)

Cutting

Final
Inspection

Stitching

Pressing

Trimming

Packing

5 CURRENT INDUSTRY STRUCTURE

The local knitwear and apparel industries of Pakistan have, no doubt, made
tremendous strides over the last few decades. While there have been some
periods of slump in the past, for the past ten years the industry has been
growing and progressing quite steadily. The major problem with our industry
is that it is still geared to make lower value added products as against other
countries in the same region who have very quickly progressed to produce
higher value added products. Countries like Sri Lanka, Bangladesh, Vietnam,
Indonesia and now even India have improved the quality of their products. In
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Pakistan this has resulted in a concentration on low quality segments of the

textile products with very low margins.
At present there are about 18,000 knitting machines in this industry,
producing about 1.4 billion pieces. Out of this production, 60% comprises
jersey, knitted fabric, T-shirts, sweat shirts, polo shirts, jogging suits, track
suits and children outer wear5. Total exports of Pakistan for Polo T-Shirts
stood at 363 million US Dollars. Major partner Countries for exports are as
shown in the table below:
Table 5-1: Pakistans Exports of Polo T-Shirts6
Partner
USA
UK
Spain
Canada
Belgium
Germany
Italy
France
Netherlands
UAE
Rest of the World

Trade value in US $ (Millions)

2008
2009
2010
275.20
216.58
273.06
32.33
25.07
40.68
12.36
12.07
10.03
5.12
4.34
7.92
3.91
5.22
7.09
6.31
3.90
6.26
3.99
3.26
3.50
1.28
1.45
2.36
3.75
3.21
1.95
1.64
1.97
1.80
9.49
8.01
9.20

%age Change
2009
2010
-21%
26%
-22%
62%
-2%
-17%
-15%
82%
34%
36%
-38%
61%
-18%
7%
14%
62%
-14%
-39%
20%
-8%
-16%
15%

The industry is characterized by majority of the manufacturing units located in

few major cities. Major concentration of the industry is in Lahore and Karachi.
Other hubs are Faisalabad, Gujranwala, and Sialkot.

5
6

Pakistan Textile Journal

Source: UN Comtrade
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6 MARKETING
In view of the fact that main raw material and skilled manpower is available in
Pakistan, scope for garment exports from Pakistan is unlimited. Effective
marketing plays a very crucial role for making this business a success.
Export orders can be generated either through local or foreign buying houses
that have their presence in the country and source export orders for foreign
customers from local industry. The other way to get export orders is through
direct marketing in the international markets while initiating contacts with
potential customers directly and/or through participation in international trade
fairs, exhibitions etc. In the absence of export orders, other factories that have
excess export orders can also provide sub-contract work on CMT basis.
6.1

Guidelines for Garments Export Business

In order to enter into the export business of garments, following basic

guidelines can provide help to any new comer in this business:
a)

Ensure best quality at all costs. This is a basic key for a successful
exporter in the garment exports.

b)

Commitments with buyers regarding quality, price and shipment are

basic essentials to enter and grow in the export business. Pakistan has
lost much business and goodwill due to this factor alone. Therefore, for
any newcomer, commitments with the buyers should be met very
seriously.

c)

Sourcing of export orders, through several apparel buying houses based

in Pakistan, can be a good startup point of marketing efforts. The prices
offered by these buying houses might be lower than those of direct
orders, but at least they can be good entry point and learning experience
for new exporters

d)

Many garment factories are considering it worthwhile setting up their

overseas offices and warehouses in the potential markets. Overseas
office cannot only assist in sales, but also keep the garment factory
continuously informed about the latest design changes, buyers'
requirements and market trends. Warehouses of supplier(s) in the
customer's country make it convenient for the customer to make the
purchase decisions effectively as in this case customer gets the required
products on LDP (Landed Duty Paid) basis and without any hassle of
being involved in shipment and import procedures.

e)

The professional marketing staff and owner(s) should regularly visit

international clothing fairs, shows and exhibitions. Such events provide

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very promising opportunities to penetrate in the international markets,

meeting new customers and negotiating orders7.
f)

In order to be successful in the market, it is very important to be active

and quick in response to the customers. Being flexible with buyers
regarding their requests and requirements can help to develop mutual
understandings with them. Many buyers themselves guide the
manufacturer in correct designing, fabric and accessories selection and
procurement, improvements in production and quality control etc.

g)

Regular subscriptions with local and foreign textile trade and fashion
magazines will ensure the flow of latest marketing and trade information
to the exporter.

6.2

Total Market Size and Growth

Total global trade value of T-shirts is more than $5 billion. USA is the largest
importing country with a share of 29% and a total value of $1.60 billion. USA
is a rapidly growing market with annual growth rates of 12% from last year.
Germany is the second largest importer in this category with imports of $ 449
million. However, German market has been stagnant during last many years
and has grown by only 6% from last year.
China is the third largest importer with total imports of $416 million. Other
major importers are given in the following table:
Table 6-1: International Import Market Statistics8
Country

Value (US $ Million )

%age change

2009
1,425

2010
1,597

2010
12%

Germany

424

449

6%

China

353

416

18%

UK

320

388

21%

Italy

349

364

4%

France

337

324

-4%

Japan

260

273

5%

Spain

247

238

-4%

USA

7
8

The calendar of such events can be obtained from TDAP.

Source: UN Comtrade
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6.3

Garments Stitching Unit (Polo T-shirt)

World Exports of Polo T-Shirts

The total export volume for exports of Polo T-shirts in the world has been
around 5 billion US Dollars in the year 2010.
Table 6-2: World exports of Polo T Shirts9
Country

Value (US $ Million )

%age Change

China
China, Hong Kong SAR

2009
861
480

2010
1064
564

2010
24%
18%

Pakistan
India
Germany
Peru
Italy
Turkey

285
414
227
183
196
188

363
351
235
230
205
170

27%
-15%
4%
26%
5%
-10%

7 RAW MATERIAL
The main raw materials used in the manufacturing of Polo T-shirts are listed
below:
Printed or dyed knitted fabric (may be 100% Cotton or Polyester/Cotton in
different ratios)
Buttons
Threads
Labels
Zippers
Packing material

Source: UN Comtrade
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8 HUMAN RESOURCE REQUIREMENTS

For a garment-stitching unit of 52 stitching machines, following manpower is
required:
Table 8-1: Human Resource Requirements
Positions
CEO
Production Manager
Marketing Manager
Production Planning
Officer
Accounts Officer
Purchase Officer
Marketing Staff
Stitching Supervisor
Cutting Master
Technician/Electrician
Spot Washer
Machine Operator
Rowing Inspector
Sampling Stitcher
Finishing Supervisor
R/I Supervisor
Cutting Helper
Clippers
Stain Remover
Iron Presser
Rafugar
Packing Staff
Helper (Machine
Operator)
Final Table Inspector
Office Boys
Security guards
Total

Required No.
of Staff
1
1
1
1

Monthly Salary
(Rs.)
60,000
50,000
50,000
25,000

1
1
2
1
1
1
1
52

20,000
20,000
20,000
15,000
15,000
15,000
10,000
9,000

240,000
240,000
480,000
180,000
180,000
180,000
120,000
5,616,000

2
2
1
1
2
6
1
3
1
3
4

8,000
8,000
7,500
7,500
7,500
7,500
7,500
7,500
7,500
7,500
7,500

192,000
192,000
90,000
90,000
180,000
540,000
90,000
270,000
90,000
270,000
360,000

7
2
3
102

7,500
7,000
9,000

630,000
168,000
324,000
12,942,000

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Annual Salary
(Rs.)
720,000
600,000
600,000
300,000

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

9 MACHINERY & EQUIPMENT DETAILS

9.1

Machinery List

Following combination of stitching machines is required for manufacturing

1,600 knitted Polo T-shirts per day. Approx. prices for (JUKI) Japanese origin
machinery are given below:
Table 9-1: Machinery & Equipments Required

Cutting Machine 10"

Lock Stitch (Single Needle)
Safety Stitching Over lock (3
Thread)
Safety Stitching Over lock (4
Thread)
Flat Lock
Button Hole Machine
Button Stitching Machine

1
27

Cost /
Machine
(Rs.)
63,000
78,000

12

47,000

564,000

42,000

168,000

7
1
1

100,000
135,000
90,000

700,000
135,000
90,000

Steam Boiler

200,000

200,000

Factory Fixture

200,000

200,000

Generator Set 60 kVA

1
53

800,000

800,000
5,026,000

Stitching Machinery

Machines
Required

Total
9.2

Total Cost
(Rs.)
63,000
2,106,000

Other Options Available for Machinery

Garments stitching machinery is available in quite a diversified range of

suppliers origins i.e. Japanese, Italian, Chinese, Korean, Taiwanese and Hong
Kong origin. However, there is a substantial difference between their prices.
European and Japanese machinery is 2 to 3 times more expensive as compared to
Chinese or Far Eastern machinery. Second hand machinery of different origins is
also available from the local market.
9.3

Furniture & Fixture

Furniture and fixture requirement is given in the table below:

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Table 9-2: Machinery & Equipments Required

Items

No. of Items

Cost/Item (Rs.)

8
1
1
2
4

45,000
20,000
10,000
1,500
45,000

Computers with UPS

Printers
Fax Machine
Telephone Sets
Air Conditioners
Tube Lights, Fans,
etc
Office Furniture Set
(Aprox)
Total

Total Cost
(Rs.)
360,000
20,000
10,000
3,000
180,000
56,000
250,000
879,000

10 LAND & BUILDING

10.1 Total Land Requirement
For garments stitching unit with production of about 1,600 garments per day,
approx. 7,000 square feet covered area is required. The details are listed below:
Table 10-1: Covered Area requirement
Building & Civil works
Management building
Cutting room
Sampling room
Stitching room
Inspection room
Packing room
Finished garment store
Fabrics and Accessories
inventory room
Total Infrastructure
Cost

Space
Required in
Sq. ft
1,000
600
400
1,500
500
500
1,000
1,500
7,000

Construction
Cost (Rs. /Sq.
Ft.)
1,500
1,000
1,000
1,000
1,000
1,000
850
850

Total Cost (Rs.)

1,500,000
600,000
400,000
1,500,000
500,000
500,000
850,000
1,275,000
7,125,000

10.2 Recommended Mode

Building for the business can be acquired on rent but it is proposed that it should
be purchased or built as machinery will be installed.
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10.3 Suitable Locations

The clusters of garments stitching industry exist predominantly in Lahore,
Karachi and Faisalabad. Most of the garment manufactures are based in these
major cities, so it is recommended that such unit should be started in these areas.
However, the basic criterion for the selection of location within these clusters
should be the accessibility of skilled manpower.
10.4 Utilities Requirements
Electricity
Telephone
Gas
Water

11 KEY SUCCESS FACTORS

The total commercial viability of this proposed stitching unit depends on the
regular supply of export orders, i.e. at least 300 days per year production. This
requires very aggressive marketing efforts at the entrepreneur's end and the
concerned management team.
Following are other key points that can be taken as the key success factors for any
export based stitching unit:
Assurance of high consistent quality
Surety of on time delivery
Competitive rates
Cost efficiency
Better services to the customer i.e. claim settlement etc.
Better communication with the customers
To run a garment manufacturing set-up is a full-time job, and requires
continuous hard work and attention. Anyone who is not prepared to put best
possible efforts, concentration and hard work, should not attempt to enter in
this business.
12 THREATS FOR THE BUSINESS
The labor force at the lowest level i.e. skilled/semi skilled manpower, machine
operators are quite unorganized. Their job behavior and seriousness about the
completion of any assigned job is sometimes quite unpredictable.
Stitching expertise is not available at the very best possible level. This restricts the
industry only to the production of basic garments and it cannot enter in the
production of high quality or fashion garments.
In case of CMT based unit, the requirement of credit and/or delay of payments
from customer side might cause disturbance in the cash cycle.
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Asia pacific markets are emerging as new players in the world knitwear trade.
Competition from China, Hong Kong, Vietnam, Korea is likely to increase in the
coming years. NAFTA (North American Free Trade Agreement) is also one of the
threats.

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13 PROJECT COSTS & FINANCIAL ANALYSIS

13.1 Total Project Cost and Returns
Capital Investment
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office vehicles
Office equipment
Pre-operating costs
Total Capital Costs

Rs. in actuals
1,244,444
7,125,000
5,026,000
486,000
725,535
393,000
1,573,137
16,573,116

Working Capital
Equipment spare part inventory
Raw material inventory
Cash
Total Working Capital

Rs. in actuals
41,883
3,781,200
500,000
4,323,083

Total Investment

20,896,200

Initial Financing
Debt
Equity

Equity
49%
3.69
22,692,860

Internal Rate of Return (IRR)

Payback Period (yrs)
Net Present Value (NPV)

16
PREF-03/March, 2012/3

Rs. in actuals
10,448,100
10,448,100

50%
50%

Project
34%
4.21
33,089,210

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

13.2 Income Statement

Calculations

SMEDA

Income Statement

Revenue

Year 1
68,014,947

Year 2
83,561,221

Year 3
101,056,851

Year 4
114,671,455

Year 5
123,271,814

Year 6
132,517,200

Year 7
142,455,990

Year 8
153,140,189

Year 9
164,625,703

Year 10
176,972,631

Cost of sales
Cost of goods sold 1
Cost of goods sold 2
Operation costs 1 (direct labor)
Operating costs 2 (machinery maintenance)
Operating costs 3 (direct electricity)
Total cost of sales
Gross Profit

45,374,400
8,085,000
251,300
1,636,729
55,347,429
12,667,518

54,449,280
8,872,167
276,430
1,800,402
65,398,279
18,162,942

64,318,212
9,735,974
304,073
1,980,442
76,338,700
24,718,151

71,286,018
10,683,882
334,480
2,178,486
84,482,866
30,188,588

74,850,319
11,724,080
367,928
2,396,335
89,338,662
33,933,152

78,592,835
12,865,553
404,721
2,635,968
94,499,077
38,018,123

82,522,477
14,118,161
445,193
2,899,565
99,985,396
42,470,594

86,648,600
15,492,725
489,713
3,189,522
105,820,560
47,319,629

90,981,030
17,001,119
538,684
3,508,474
112,029,307
52,596,396

95,530,082
18,656,372
592,552
3,859,321
118,638,327
58,334,304

General administration & selling expenses

Administration expense
Administration benefits expense
Electricity expense
Travelling expense
Communications expense (phone, fax, mail, internet, etc.)
Office vehicles running expense
Office expenses (stationary, entertainment, janitorial services, etc.)
Promotional expense
Professional fees (legal, audit, consultants, etc.)
Depreciation expense
Amortization of pre-operating costs
Subtotal
Operating Income

3,942,000
39,420
633,078
39,420
118,260
36,277
39,420
680,149
340,075
1,078,254
314,627
7,260,980
5,406,538

4,325,799
43,258
696,386
43,258
129,774
39,904
43,258
835,612
417,806
1,078,254
314,627
7,967,936
10,195,006

4,746,965
47,470
766,025
47,470
142,409
43,895
47,470
1,010,569
505,284
1,078,254
314,627
8,750,436
15,967,715

6,382,579
63,826
842,627
63,826
191,477
48,284
63,826
1,146,715
573,357
1,078,254
314,627
10,769,398
19,419,191

7,003,996
70,040
926,890
70,040
210,120
53,113
70,040
1,232,718
616,359
1,099,427
314,627
11,667,370
22,265,782

7,685,915
76,859
1,019,579
76,859
230,577
58,424
76,859
1,325,172
662,586
1,099,427
12,312,257
25,705,865

8,434,226
84,342
1,121,537
84,342
253,027
64,266
84,342
1,424,560
712,280
1,099,427
13,362,350
29,108,244

9,255,394
92,554
1,233,690
92,554
277,662
70,693
92,554
1,531,402
765,701
1,099,427
14,511,631
32,807,998

10,156,513
101,565
1,357,059
101,565
304,695
77,762
101,565
1,646,257
823,129
1,125,163
15,795,274
36,801,122

11,145,365
111,454
1,492,765
111,454
334,361
85,539
111,454
1,769,726
884,863
1,125,163
17,172,144
41,162,160

Gain / (loss) on sale of office equipment

Earnings Before Interest & Taxes

5,406,538

10,195,006

15,967,715

196,500
19,615,691

22,265,782

25,705,865

29,108,244

317,447
33,125,445

36,801,122

41,162,160

Interest on short term debt

Interest expense on long term debt (Project Loan)
Interest expense on long term debt (Working Capital Loan)
Subtotal
Earnings Before Tax

426,049
1,325,849
302,433
2,054,332
3,352,207

590,267
1,133,058
197,436
1,920,761
8,274,244

164,218
909,421
74,351
1,147,990
14,819,725

650,001
650,001
18,965,689

349,075
349,075
21,916,708

25,705,865

29,108,244

33,125,445

36,801,122

41,162,160

Tax
NET PROFIT/(LOSS) AFTER TAX

838,052
2,514,155

2,068,561
6,205,683

3,704,931
11,114,794

4,741,422
14,224,267

5,479,177
16,437,531

6,426,466
19,279,399

7,277,061
21,831,183

8,281,361
24,844,084

9,200,281
27,600,842

10,290,540
30,871,620

18
PREF-03/March, 2012/3

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

13.3 Balance Sheet

Calculations

SMEDA

Balance Sheet
Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

500,000

41,883
3,781,200
4,323,083

8,385,404
5,031,584
48,375
4,673,563
18,138,927

9,343,736
5,945,298
55,873
5,686,266
21,031,174

4,160,943
11,380,566
6,939,882
64,534
6,491,346
29,037,271

13,280,501
13,298,320
7,680,261
74,537
7,020,391
41,354,010

24,905,048
14,667,736
8,121,697
86,090
7,592,553
55,373,123

40,854,515
15,767,816
8,590,825
99,434
8,211,346
73,523,936

58,880,891
16,950,402
9,089,581
114,846
8,880,571
93,916,291

78,792,211
18,221,682
9,620,051
132,647
9,604,337
116,370,928

101,541,640
19,588,308
10,184,482
153,207
10,387,091
141,854,729

136,959,253
21,057,432
10,785,302
168,801,987

Fixed assets
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office vehicles
Office equipment
Total Fixed Assets

1,244,444
7,125,000
5,026,000
486,000
725,535
393,000
14,999,979

1,244,444
6,768,750
4,523,400
437,400
652,982
294,750
13,921,726

1,244,444
6,412,500
4,020,800
388,800
580,428
196,500
12,843,472

1,244,444
6,056,250
3,518,200
340,200
507,875
98,250
11,765,219

1,244,444
5,700,000
3,015,600
291,600
435,321
477,694
11,164,659

1,244,444
5,343,750
2,513,000
243,000
362,768
358,270
10,065,232

1,244,444
4,987,500
2,010,400
194,400
290,214
238,847
8,965,805

1,244,444
4,631,250
1,507,800
145,800
217,661
119,423
7,866,378

1,244,444
4,275,000
1,005,200
97,200
145,107
580,640
7,347,591

1,244,444
3,918,750
502,600
48,600
72,554
435,480
6,222,428

1,244,444
3,562,500
290,320
5,097,264

Intangible assets
Pre-operation costs
Total Intangible Assets
TOTAL ASSETS

1,573,137
1,573,137
20,896,200

1,258,510
1,258,510
33,319,163

943,882
943,882
34,818,528

629,255
629,255
41,431,744

314,627
314,627
52,833,296

65,438,355

82,489,741

101,782,669

123,718,520

148,077,157

173,899,251

6,207,243
4,946,273

7,454,940
1,906,508

8,775,390
-

9,704,642
-

10,220,165
-

10,764,041
-

11,337,915
-

11,943,530
-

12,582,741
-

11,850,736
-

11,153,516

9,361,448

8,775,390

9,704,642

10,220,165

10,764,041

11,337,915

11,943,530

12,582,741

11,850,736

569,723
7,081,615
1,552,054
9,203,392

(232,308)
5,683,881
837,569
6,289,142

(1,688,886)
4,062,509
2,373,622

(3,560,062)
2,181,718
(1,378,344)

(5,726,339)
(5,726,339)

(8,498,229)
(8,498,229)

(11,610,357)
(11,610,357)

(15,124,205)
(15,124,205)

(19,005,621)
(19,005,621)

(23,323,141)
(23,323,141)

10,448,100
19,834,632
30,282,732
41,431,744

10,448,100
34,058,899
44,506,999
52,833,296

10,448,100
50,496,430
60,944,529
65,438,355

10,448,100
69,775,829
80,223,928
82,489,741

10,448,100
91,607,012
102,055,111
101,782,669

10,448,100
116,451,095
126,899,195
123,718,520

10,448,100
144,051,937
154,500,037
148,077,157

10,448,100
174,923,557
185,371,657
173,899,251

Assets
Current assets
Cash & Bank
Accounts receivable
Finished goods inventory
Equipment spare part inventory
Raw material inventory
Total Current Assets

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable
Short term debt
Other liabilities
Total Current Liabilities
Other liabilities
Deferred tax
Long term debt (Project Loan)
Long term debt (Working Capital Loan)
Total Long Term Liabilities
Shareholders' equity
Paid-up capital
Retained earnings
Total Equity
TOTAL CAPITAL AND LIABILITIES

8,286,558
2,161,542
10,448,100

10,448,100
10,448,100
20,896,200

10,448,100
2,514,155
12,962,255
33,319,163

10,448,100
8,719,838
19,167,938
34,818,528

19
PREF-03/March, 2012/3

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

13.4 Cash Flow Statement

Calculations

SMEDA

Cash Flow Statement

Year 0
Operating activities
Net profit
Add: depreciation expense
amortization of pre-operating costs
amortization of training costs
Deferred income tax
Accounts receivable
Finished goods inventory
Equipment inventory
Raw material inventory
Accounts payable
Other liabilities
Cash provided by operations

Year 1

Year 2

Year 3

Year 4

Year 5

(3,823,083)

2,514,155
1,078,254
314,627
569,723
(8,385,404)
(5,031,584)
(6,492)
(892,363)
6,207,243
(3,631,842)

6,205,683
1,078,254
314,627
(802,031)
(958,332)
(913,714)
(7,498)
(1,012,703)
1,247,697
5,151,984

11,114,794
1,078,254
314,627
(1,456,579)
(2,036,830)
(994,584)
(8,660)
(805,080)
1,320,450
8,526,391

14,224,267
1,078,254
314,627
(1,871,175)
(1,917,754)
(740,379)
(10,003)
(529,045)
929,251
11,478,044

16,437,531
1,099,427
314,627
(2,166,277)
(1,369,416)
(441,436)
(11,553)
(572,162)
515,523
13,806,264

Financing activities
Project Loan - principal repayment
Working Capital Loan - principal repayment
Short term debt principal repayment
Additions to Project Loan
Additions to Working Capital Loan
Issuance of shares
Cash provided by / (used for) financing activities

8,286,558
2,161,542
10,448,100
20,896,200

(1,204,943)
(609,488)
(1,814,431)

(1,397,734)
(714,485)
(4,946,273)
(7,058,492)

(1,621,372)
(837,569)
(1,906,508)
(4,365,449)

(1,880,791)
(1,880,791)

(2,181,718)
(2,181,718)

Investing activities
Capital expenditure
Cash (used for) / provided by investing activities

(16,573,116)
(16,573,116)

NET CASH

(41,883)
(3,781,200)

500,000

(5,446,273)

(1,906,508)

(477,694)
(477,694)

4,160,943

9,119,558

20
PREF-03/March, 2012/3

11,624,547

Year 6
19,279,399
1,099,427
(2,771,890)
(1,100,080)
(469,129)
(13,344)
(618,793)
543,877
15,949,467

Year 7
21,831,183
1,099,427
(3,112,128)
(1,182,586)
(498,756)
(15,412)
(669,225)
573,873
18,026,376

15,949,467

18,026,376

Year 8
24,844,084
1,099,427
(3,513,848)
(1,271,280)
(530,469)
(17,801)
(723,767)
605,615
20,491,960

(580,640)
(580,640)
19,911,320

Year 9
27,600,842
1,125,163
(3,881,416)
(1,366,626)
(564,432)
(20,560)
(782,753)
639,211
22,749,429

Year 10
30,871,620
1,125,163
(4,317,520)
(1,469,123)
(600,820)
153,207
10,387,091
(732,006)
35,417,613

22,749,429

35,417,613

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

14 ASSUMPTION
Table 14-1: Production Assumptions
Number of Machines (cutting, stitching, buttoning)
Initial Year Capacity Utilization
Capacity Utilization growth rate
Capacity Utilization
Total Production per day (garments)
Defective garment (% of total finished garments)
Annual Production Capacity at 100% (garments)
Production of defective garments Year 1

53
70%
10%
95%
1,600
2%
528,000
7,392

Table 14-2: Operating Assumptions

Hours operational per day
Days operational per year
Maximum capacity utilization

8
330
100%

Table 14-3: Economy-Related Assumptions

Electricity growth rate
Wage growth rate
Exchange rate

10%
10%
Rs. 90.5/US$

Table 14-4: Cash Flow Assumptions

Accounts Receivable cycle (in days)
Accounts payable cycle (in days)
Raw material inventory (in days)
Equipment spare part inventory (in days)
Finished Goods Inventory (in days)

45
45
30
60
30

Table 14-5: Revenue Assumptions

Production of the unit for the first year
Sale price per garment in year 1 ($)
Export Sales Share
Sale price of defective garments (Rs/garment)
Sale price growth rate

21
PREF-03/March, 2012/3

369,600
2.25
100%
55
7.50%

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

Table 14-6: Expense Assumptions

Raw Material Cost per Garment
Cost of Goods sold growth rate
Machine maintenance
Administration Benefit expense
Traveling Expense
Communication Expense
Office Vehicle running Expense
Office Expense
Promotional Expense
Professional Fee
Depreciation Rate on
Machinery and Equipment
Office Equipment
Furniture and Fixture
Office Vehicles

Rs. 136.66
5%
5% of Machinery cost
1.0% of Admin Expense
1.0% of Admin Expense
3.0% of Admin Expense
5.0% of Vehicle Cost
1.0% of Admin Expense
1.0% of Revenue
0.5% of Revenue
10%
25%
10%
10%

Table 14-7: Financial Assumptions

Project life (years)
Debt
Equity
Interest rate on long-term debt
Interest rate on short term debt
Debt tenure
Debt payments per year

10
50%
50%
16%
16%
5
12

22
PREF-03/March, 2012/3

Pre-Feasibility Study

Garments Stitching Unit (Polo T-shirt)

15 ANNEXURE
Table 15-1: Raw Material & Machinery Supplier
Raw Material Suppliers
TOWN CRIER INTERNATIONAL
Labels, Stickers, packaging material
P-3, Fazal Centre Malik Road. Opp
Banking Court Faisalabad, Pakistan.
Tel: +92 - 41 - 2631555
Fax: +92 - 41 2622395
Email: info@towncrier.com.pk
ABUZER PRINTER
Ali Market 1st Floor, Near Gawalmandi
Police Station, Lahore
Pakistan
Tel: +92 - 42-37222567, 37212145
Fax: +92 - 42-37212146
Email: azprints@hotmail.com
CORRUBOARD INDUSTRIES
Junction Lakhuder & Shadipura Stop
Bund Road Lahore
Pakistan
Tel: +92 - 42- 6851675, 6545398
Email: cbi@brain.net.pk

Machinery Suppliers
MUNIR ENTERPRISES
607-Main Gate, Jinnah Colony
Faisalabad, Pakistan.
Phone#: (+92)-(41) 2624133, 5
Fax #: (+92)-(41) - 2624188
Contact : Munir-ul-Zafar

NOORANI INDUSTRIES (PVT) LTD

Address: 143-Regency Arcade, First
Floor The Mall, Mills
Samundri Road, Faisalabad, Pakistan
Phone +92-41-2618432, 8541456,
8544683
Fax +92-41-2618079, 8545692
AL MURTAZA MACHINERY CO. (PVT.)
LTD.
63/1-C, Model Town, Jail Road
Faisalabad, Pakistan
Phone#: (+92)-(41) -2636830
Fax #: (+92)-(41) 2644967

23
PREF-03/March, 2012/3