Pre-Feasibility Study

COMMERCIAL EMBROIDERY UNIT

(Multi Head Embroidery Machine)

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE 6 Floor ,LDA Plaza , Egerton Road , Lahore 54000, Pkaistan Tel: (042) 111-111-456, Fax: (042) 6304926-7 helpdesk@smeda.org.pk
th

REGIONAL OFFICE PUNJAB 8th Floor ,LDA Plaza Egerton Road , Lahore Tel: (042) 111-111-456, Fax: (042) 6304926-7 helpdesk@smeda.org.pk

REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 helpdesk-khi@smeda.org.pk

REGIONAL OFFICE NWFP Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk

REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 helpdesk-qta@smeda.org.pk

June, 2006

Pre-Feasibility Study

Commercial Embroidery Unit

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No. Revision Prepared by Approved by Revision Date Issued by PREF-04 2 SMEDA-Punjab GM Punjab June 2006 Library Officer

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1. 1

INTRODUCTION
Commercial Embroidery

Commercial embroidery is a new business introduced in Pakistan a few years ago. There is a lot of potential in this business because of less number of factories in the market and an increasing demand of embroidery in local as well as international market. Industrial embroidery machines (multi head machines) of different makes & origins (Japanese, Chinese and Korean) are used for embroidery. 1. 2 Opportunity Rationale

The trend of usage of embroidery on garments of all sorts is on a rise since last few years. Initially, the embroidery work was used to be done on export garments as per foreign customer's requirements. However, with the passage of time the trend has changed and local market of ladies suits has also emerged as a main customer of embroidery work. Also, the cotton fabric of ladies suits, which is exported to middle east market, is embroided before being exported. Apart from these, the embroidery work is also done on bed sheets, table cloths, and sofa covers, badges etc. Almost 70% of the potential embroidery business exists with the local market while the remaining 30% is done for foreign market. So there is a potential for new people to come into the business of commercial embroidery. 1. 3 Project Brief

The proposed project is designed as a small-scale commercial embroidery unit. This unit will be capable of providing its services to local garments and fabric manufacturers as well as to those garment manufacturers who are dealing in export and require embroidery work on their garments. This sort of project is quite flexible in a way that there is no processing of raw materials required and each machine is independent in its working. The project can be started even with a single machine. However keeping in view the potential and industry norms, the project will be more feasible and economical with two embroidery machines. 1. 4 Proposed Capacity

960,000Stitches/Hour per Machine/20 Heads1 1. 5 Total Project Cost

Rs. 12.45 Million 1. 6 Process Flow Chart

Designing & Tracing Loading on Machine Embroidery Threading Packing & Dispatch

Receipt of Fabric
1

This is an average production rate of a machine having 20 heads.20% Time wastage allowance is included

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2 Current Industry Structure

Textile industry is the largest sector of Pakistan economy. It plays a major role in strengthening the economy and also contributing a lion share in earning of much needed foreign exchange for national exchequer. From 2005, there are no quota restrictions for textile products exporting countries like Pakistan. Considering the importance of textile sector, Government of Pakistan constituted a Committee which carried out a study and finalized a report Textile Vision 2005 on the existing setup of textile sector, its problems and has given recommendations on future of textile sector. The basic objective of Textile Vision 2005 is to prepare the Pakistani Textile Sector to face the challenges of post quota free era. In this report, the importance of value added products is stressed, and it is predicted that value-added products will earn the highest unit value for the country unlike primary products i.e. cotton and cotton yarn. According to Textile Commissioners Organization (TCO) there are about 600 Textile Processing Units, of which only 30 units are from the integrated mill sector, while the rest of the companies are a independent commercial dyeing and finishing units. Out of these 600 processing units, 394 units are woven fabrics processing units while remaining portion can be further subdivided into knitted fabric and yarn processing units. There is an installed capacity of about 350 million pcs year of knitwear. The sector is not only catering for domestic demand, but also has enormous export potential. The knitwear industry is almost totally export oriented and highly value added. The products made in Pakisan include T-shirts, jogging suits, jerseys, sport shirts, children wear, gloves tracksuits, sweaters and socks etc. the bulk of knitwear garments are mainly exported to developed countries like USA, Germany, UK, Canada, France etc. About 15% of the total output is consumed domestically.

3 MARKETING

3.1 Target Customers World imports of embroidered fancy fabric is growing at almost 10% a year, and it has reached a figure of more than US$ 537 million by the end of fiscal year 2004.USA is the largest importer of embroidered fabric with annual imports of US$ 129 Million in the year 2004. While, France, United Kingdom and Italy follow the lead.

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3. 2

Leading Importing Countries Major Importing Countries in Year 20042 Value (US $ million) 129 92 66 61 53 41 41 21 17

Table 5-1:

Country USA France United Kingdom Italy Hong Kong Germany Spain Mexico Japan

Figures Includes Embroidery without visible ground (code 581010), Cotton (Code 581091, Man made Fibers (Code 581092) & other Textile material (Code 581099).

3.3 Market Demand and Supply Demand for Pakistani-made embroidery is gaining momentum outside the country. The industry is receiving orders from Saudi Arabia, United Arab Emirates, United Kingdom, United States, Belgium and Oman. Pakistan has a great potential to compete abroad, particularly in the Middle East markets. With a little effort it can gain a reasonable share. Table 5-2 Year
2003 2004

Exports of Embroidered products from Pakistan3 Trade Value in US $ Million

1.18 3.47

Pakistans import for embroidered products has remained nominal over the years. On of the major reason is its excellence in hand embroidery. People have preferred hand embroidered products over the machine embroidered products. And now with the passage of time, as the trend is changing, Pakistan is also developing its home industry for machine embroidery. So it is expected that the imports will remain nominal as home industry is expected to grow at a faster rate due to cheap and easy availability of raw material and man power.

2 3

PC TAS -2004 Source: Trade Analysis System, 2004, Figures Includes Embroidery without visible ground (code 581010), Cotton (Code 581091, Man made Fibers (Code 581092) & other Textile material (Code 581099).

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4 RAW Material
Embroidery is the process of sewing a design onto a garment. With recent advancements in technology embroidery machines have become computerized and software has been developed to assist in the day to day operation of embroidery machines. This means that designs and set up costs can be low and the machines can run quicker with any number of colors being applied in a single operation. Designs are converted in to digital format known as digitizing and once this has been done can be used over and over again. These designs are individually stored on to computer disks, which are place in to the embroidery machine every time a design is required. This reduces the set-up times required and also means that you no longer require large volumes to make it cost effective. Main raw material required is thread and sequence which is readily available. Following is the details of raw material required for embroidery fabric:

5
5. 1

COMMERCIAL EMBROIDERY IN PAKISTAN

Commercial Embroidery Units

According to the estimates given by industry and the machine sellers, there are about 1000 embroidery machines working in the Pakistan. 5. 2 Embroidery Hubs

Most of the embroidery factories are located in Karachi, Lahore, Faisalabad and Sialkot. A few factories are also located in Hyderabad, Multan, and Rawalpindi. 5. 3 Embroidery Products

The embroidery work is done on the following products: Fabrics Women Suits Bed Sheets Table & Sofa Cloths Badges & Monograms Export Products (Clothes, T-shirts, Caps etc.) 5. 4 Markets for Embroidered Products

The markets for embroidered products are:

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5.4.1

Local Market

According to estimates given by people in business, about 70 % of the embroided products are used in local (Pakistani) market. The products include women suits, table & sofa covers, bed sheets, badges, logos, T-shirts, caps, etc. 5.4.2 Export/Foreign Market

About 30% of the embroidered products are exported to different countries. These products include T-shirts, caps, badges, logos, women suits, etc. 5. 5 Target Customers

Following are the target customers for a commercial embroidery unit: Small & medium scale garments manufacturers who dont have their own embroidery units and are dependent on commercial embroidery units for their garments. Commercial exporters of embroidered garments who outsource their embroidery requirements to commercial embroidery units.

6
6. 1

MACHINERY DETAILS
Machines Required

A commercial embroidery unit can be started by using any number of machines but a combination of two machines (20 heads each) will be more economical and viable to start the project. 6. 2 Machines Available in Market

Embroidery machines of different makes and origins are available in the market. The prices of machines depend on make, origin and the number of heads & colors of machine. The machines available in the market are Tajima Barudan SWF Eagle Wheel Diamond (Japanese) (Japanese) (Korean) (Chinese) (Chinese)

The Japanese & Korean machines are more expensive, while Chinese machines are comparatively cheaper. However, the quality of work is almost the same butThe viability of this project has been developed on the basis of Japanese machinery (Barudan).

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6. 3

Technical Details

The technical details of Japanese machine are following: Table: 3-1 Technical Details of Machinery 5,616,0004 20 1.5 3 Phase

Estimated Price per Machine (Rs) No. of Heads Load (KW) Electricity Phase (Source: Machinery Suppliers/Industry) 6. 4 Production

The production details of embroidery machine as follows: Table: 3-2 Estimated Production details 8,000 stitches in 10 Minutes 48,000 960,000

Average Stitches per Head Average Stitches per head per hour Total stitches per Hour (20 Heads) (Source: Machinery Suppliers) 6. 5 Other Equipment

Other equipment required as following: Table: 3-4 Other Equipment Item Computer Printer Air conditioner Designing Software Electrical Appliances Total Required 1 1 2 1 Cost 30,000 20,000 50,000 10,000 10,000 Rs. 120,000

Price Includes Import duties and other costs

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7. 1

. RAW MATERIAL
Raw Material Requirement

Required raw materials and their approximate costs as follows: Table 71 Raw Material Sequence Per Reel Embroidery Thread Per cone Tile (Metallic thread per cone) Cording Per KG (Source: Industry) Rs. 80 Rs. 39 Rs. 435 Rs. 80

Utilities Requirement

Electricity Telephone Fax

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9. 1

Human Resources
Human Resource Requirement

For a unit of 2 embroidery machines the human resource requirement is given in the Table 6-1 Table 91 Human Resource Requirement Positions Chief Executive Designer/Tracer Office Asstt./Comp Operator Admin Officer Supervisor Machine Operator6 Helper Clippers Sweeper Guard Total 9. 2 Working Time
5

Required 1 1 1 1 2 1 2 1 1 11

Monthly Salary 20,000 6,000 10,000 6,500 6,500 4,500 4,000 4,000 2,500 4,500

Annual Salary 240,000 72,000 120,000 78,000 78,000 108,000 96,000 192,000 30,000 54,000 1,068,000

Rs.

Working time estimates are given in the following table: Table 92 Working Time Description Per Day Working Per Month Working Per Annum Working Time 22 Hours (in 2 shifts) 25 Days (Excluding Holidays) (550 Hours) 300 Days (6600 Hours)

5 6

Owner of the Embroidery Unit. One operator per shift along with one helper.

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10 Land & Building Requirement

10.1 Covered Area Requirement The covered area required for one embroidery machine is approx. 500 sq. ft. This space is inclusive of machine installation space, fabric-handling space, clipping space, etc. Other space requirements are listed in the table below: Table 101 Covered Area Type Large Hall Store Designing Room Office Wash Room Total Covered Area 10.2 Recommended Option It is recommended that the embroidery unit should be established in a rented building, which can be easily found in the industrial zones. The maximum rent for a building having covered area of 1,950 Sq. feet can be Rs.23, 400/- per month. (12 Rs@ per S.F) 10.3 Suitable Location The clusters of embroidery industry exist in Karachi, Lahore, Faisalabad, Sialkot, Multan, and Rawalpindi. So it is recommended that the unit may be set up in one of these cities. Covered Area(sq.ft) For Installation of Machines 1,000 For Storing Raw material/Goods 500 For Designing & Other related issues 200 Official Work 200 50 1,950 Description

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11 PROJECT COST & REVENUES

11.1 Project Costs Estimates The detail of capital cost estimates is given in the Table 8-1. Table 111 Project Cost Estimates Account Head Machinery & Equipment Furniture & Fixtures Office Equipment Pre-Operating Costs7 Total Capital Costs Equipment Spare Part Inventory8 Raw Material Inventory9 Prepaid building rental Prepaid insurance payment Total Working Capital Total Investment in the Project Table 112 Financing Plan Financing Equity Debt Debt Split Long-term loan Running finance 50% 50%
6,123,087 6,123,087

Total Cost 11,501,000 110,000 71,000 169,352

11,641,797

217 97,500 280,000 230,800

608,537 12,246,173

6,123,087 0

Include admin expenses, interest accrued and salaries (2 months salary of the CEO and one month salary of supervisor and guard). 8 Oil & needles required for one week. 9 Raw material required for one month.

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11.2 Revenue Estimates The expected revenue estimates are given in Table 8-3. Table 113 Per Day per Machine Production( Max) Per Annum Working Days No. of Machines Average Price for 1000 Stitches Total Annual Revenue (Max) 42,240,000 Stitches 300 Days 2 Rs. 1 Rs. 12,672,000

12 Key Success Factors

There is a lot of potential in the commercial embroidery business because the trend of embroidery on garments of all sorts is on a rise. Production process is simple, there are no complications in the process, and raw material requires no processing. Machines are fully computerized and no technicalities are required to handle the machines. The commercial viability of this embroidery unit depends on the regular business orders i.e. enough orders to operate the unit for at least 300 days a year. This requires aggressive marketing efforts at the entrepreneurs end. The local as well as foreign markets have to be identified and approached in order to get the business and to keep the unit running. Following points should also be ensured to make the business successful: Assurance of high consistent quality Surety of products on time delivery Competitive rates Cost efficiency through better management

13 Threats for the Business

Due to the increase in number of commercial embroidery units and competition, there are chances that the market rates may reduce. However, this can be tackled by providing different value added services to customers. Another major threat to the business is credit factor. This is also related to the competition. The customers may ask for credit facility for a longer period, and this can disturb the cash cycles of the unit. This can be avoided by making a similar policy for all customers, so there will be no complaints from customers and cash cycle will not be disturbed.

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14 Financial Analysis
14.1 Projected Income Statement
Statement Summaries
Income Statement
Year 1 Revenue Cost of goods sold Gross Profit General administration & selling expenses Administration expense Rental expense Utilities expense Communications expense (phone, fax, etc.) Repairs & renewals Office vehicles running expense Office expenses (stationary, etc.) Promotional expense Insurance expense Professional fees (legal, audit, etc.) Depreciation expense Amortization expense Miscellaneous expense Subtotal Operating Income Other income Gain / (loss) on sale of assets Earnings Before Interest & Taxes Interest expense Earnings Before Tax Taxable earnings for the year Tax NET PROFIT/(LOSS) AFTER TAX Balance brought forward Total profit available for appropriation Dividend Balance carried forward 8,236,800 3,705,293 4,531,507 Year 2 9,313,920 4,325,176 4,988,744 Year 3 10,478,160 5,025,285 5,452,875 Year 4 11,735,539 5,815,360 5,920,179 Year 5 13,092,461 6,706,293 6,386,168 Year 6 14,555,736 7,710,262 6,845,474 Year 7 16,132,607 8,840,881 7,291,726 Year 8 16,939,238 9,607,694 7,331,544 Rs. in Year 9 17,786,200 10,445,209 7,340,991 actuals Year 10 18,675,510 11,360,185 7,315,324

SMEDA

432,000 280,800 515,455 30,000 21,600 82,368 225,860 41,184 1,147,400 16,780 2,793,447 1,738,060 1,738,060 865,166 872,894 872,894 82,368 790,526

474,060 308,880 567,001 33,000 23,703 93,139 203,274 46,570 1,147,400 16,780 2,913,807 2,074,937 2,074,937 754,231 1,320,706 1,320,706 93,139 1,227,567 395,263 1,622,830 811,415 811,415

520,215 339,768 623,701 36,300 26,011 104,782 180,688 52,391 1,147,400 16,780 3,048,035 2,404,840 2,404,840 603,034 1,801,806 1,801,806 104,782 1,697,024 811,415 2,508,439 1,254,220 1,254,220

570,864 373,745 686,071 39,930 28,543 117,355 158,102 58,678 1,147,400 16,780 3,197,468 2,722,711 2,722,711 418,652 2,304,060 2,304,060 117,355 2,186,704 1,254,220 3,440,924 1,720,462 1,720,462

626,444 411,119 754,678 43,923 31,322 130,925 135,516 65,462 1,147,400 16,780 3,363,570 3,022,598 3,022,598 239,362 2,783,237 2,783,237 130,925 2,652,312 1,720,462 4,372,774 2,186,387 2,186,387

687,436 452,231 830,146 48,315 34,372 145,557 112,930 72,779 1,147,400 16,780 3,547,946 3,297,528 57,355 3,354,883 17,422 3,337,460 3,337,460 145,557 3,191,903 2,186,387 5,378,290 2,689,145 2,689,145

754,366 497,454 913,161 53,147 37,718 161,326 90,344 80,663 1,147,400 16,780 3,752,359 3,539,368 179,564 3,718,931 3,718,931 3,718,931 161,326 3,557,605 2,689,145 6,246,750 3,123,375 3,123,375

827,812 547,200 1,004,477 58,462 41,391 169,392 67,758 84,696 1,147,400 16,780 3,965,367 3,366,177 299,568 3,665,745 3,665,745 3,665,745 169,392 3,496,353 3,123,375 6,619,728 3,309,864 3,309,864

908,409 601,920 1,104,924 64,308 45,420 177,862 45,172 88,931 1,147,400 16,780 4,201,126 3,139,865 403,765 3,543,631 3,543,631 3,543,631 177,862 3,365,769 3,309,864 6,675,633 3,337,816 3,337,816

996,853 662,112 1,215,417 70,738 49,843 186,755 22,586 93,378 1,147,400 16,780 4,461,861 2,853,464 550,998 3,404,462 3,404,462 3,404,462 186,755 3,217,707 3,337,816 6,555,523 3,277,761 3,277,761

790,526 395,263 395,263

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14.2 Projected Cash flow Statement

Statement Summaries
Cash Flow Statement
Year 0 Operating activities Net profit Add: depreciation expense amortization expense Deferred income tax Accounts receivable Finished good inventory Equipment inventory Raw material inventory Pre-paid building rent Pre-paid lease interest Advance insurance premium Accounts payable Other liabilities Cash provided by operations Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Rs. in Year 9 actuals Year 10

SMEDA

(217) (97,500) (280,800) (225,860) (604,377)

790,526 1,147,400 16,780 (617,760) (185,265) (41) (18,263) (28,080) 22,586 87,452 1,215,336

1,227,567 1,147,400 16,780 (698,544) (30,994) (47) (20,982) (30,888) 22,586 89,695 1,722,573

1,697,024 1,147,400 16,780 (168,102) (35,005) (53) (24,067) (33,977) 22,586 25,275 2,647,860

2,186,704 1,147,400 16,780 (181,621) (39,504) (61) (27,564) (37,374) 22,586 27,888 3,115,233

2,652,312 1,147,400 16,780 (196,073) (44,547) (70) (31,525) (41,112) 22,586 30,761 3,556,512

3,191,903 1,147,400 16,780 (211,515) (50,198) (80) (36,009) (45,223) 22,586 33,921 4,069,565

3,557,605 1,147,400 16,780 (228,011) (56,531) (58) (26,231) (49,745) 22,586 36,653 4,420,448

3,496,353 1,147,400 16,780 (178,763) (38,341) (64) (28,919) (54,720) 22,586 30,562 4,412,873

3,365,769 1,147,400 16,780 (124,019) (41,876) (71) (31,884) (60,192) 22,586 24,268 4,318,761

3,217,707 1,147,400 16,780 (130,220) (45,749) 762 342,943 662,112 22,586 7,143 5,241,463

Financing activities Change in long term debt 6,123,087 Change in short term debt Change in export re-finance facility Add: land lease expense Land lease payment Lease principal repayment Issuance of shares 6,123,087 Purchase of (treasury) shares Cash provided by / (used for) financing activities 12,246,173 Investing activities Capital expenditure (11,641,797) Acquisitions Cash (used for) / provided by investing activities (11,641,797) NET CASH Cash balance brought forward Cash available for appropriation Dividend Cash carried forward -

(926,322) 106,250 (820,073)

(1,056,007) 144,849 (911,158)

(1,203,848) (189,792) (1,393,640)

(1,372,387) (22,383) (1,394,771)

(1,564,521) 194,396 (1,370,125)

(233,320) (233,320)

395,263 395,263 395,263 -

811,415 811,415 811,415 -

1,254,220 1,254,220 1,254,220 -

1,720,462 1,720,462 1,720,462 -

2,186,387 2,186,387 2,186,387 -

3,836,245 3,836,245 2,689,145 1,147,100

4,420,448 1,147,100 5,567,547 3,123,375 2,444,172

4,412,873 2,444,172 6,857,046 3,309,864 3,547,182

4,318,761 3,547,182 7,865,943 3,337,816 4,528,127

5,241,463 4,528,127 9,769,590 3,277,761 6,491,828

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14.3 Projected Balance Sheet

Statement Summaries
Balance Sheet
Year 0 Assets Current assets Cash & Bank Accounts receivable Finished goods inventory Equipment spare part inventory Raw material inventory Pre-paid annual land lease Pre-paid building rent Pre-paid lease interest Pre-paid insurance Total Current Assets Fixed assets Land Building/Infrastructure Machinery & equipment Furniture & fixtures Office vehicles Office equipment Total Fixed Assets Intangible assets Pre-operation costs Training costs Total Intangible Assets TOTAL ASSETS Liabilities & Shareholders' Equity Current liabilities Accounts payable Export re-finance facility Short term debt Other liabilities Total Current Liabilities Other liabilities Lease payable Deferred tax Long term debt Total Long Term Liabilities Shareholders' equity Paid-up capital Retained earnings Total Equity TOTAL CAPITAL AND LIABILITIES Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Rs. in Year 9 actuals Year 10

SMEDA

217 97,500 280,800 225,860 604,377

617,760 185,265 257 115,763 308,880 203,274 1,431,198

1,316,304 216,259 304 136,744 339,768 180,688 2,190,067

1,484,406 251,264 357 160,811 373,745 158,102 2,428,686

1,666,027 290,768 419 188,376 411,119 135,516 2,692,225

1,862,100 335,315 489 219,901 452,231 112,930 2,982,965

1,147,100 2,073,615 385,513 569 255,910 497,454 90,344 4,450,504

2,444,172 2,301,626 442,044 627 282,140 547,200 67,758 6,085,567

3,547,182 2,480,388 480,385 691 311,060 601,920 45,172 7,466,797

4,528,127 2,604,408 522,260 762 342,943 662,112 22,586 8,683,198

6,491,828 2,734,628 568,009 9,794,466

11,293,000 110,000 71,000 11,474,000

10,163,700 99,000 63,900 10,326,600

9,034,400 88,000 56,800 9,179,200

7,905,100 77,000 49,700 8,031,800

6,775,800 66,000 42,600 6,884,400

5,646,500 55,000 35,500 5,737,000

4,517,200 44,000 28,400 4,589,600

3,387,900 33,000 21,300 3,442,200

2,258,600 22,000 14,200 2,294,800

1,129,300 11,000 7,100 1,147,400

167,797 167,797 12,246,173

151,017 151,017 11,908,815

134,237 134,237 11,503,505

117,458 117,458 10,577,944

100,678 100,678 9,677,303

83,898 83,898 8,803,864

67,119 67,119 9,107,223

50,339 50,339 9,578,106

33,559 33,559 9,795,157

16,780 16,780 9,847,378

0 0 9,794,466

87,452 106,250 193,701

177,147 251,099 428,246

202,421 61,307 263,729

230,309 38,924 269,233

261,070 233,320 494,390

294,991 294,991

331,644 331,644

362,206 362,206

386,475 386,475

393,617 393,617

6,123,087 6,123,087

5,196,764 5,196,764

4,140,757 4,140,757

2,936,909 2,936,909

1,564,521 1,564,521

6,123,087 6,123,087 12,246,173

6,123,087 395,263 6,518,350 11,908,815

6,123,087 811,415 6,934,502 11,503,505

6,123,087 1,254,220 7,377,306 10,577,944

6,123,087 1,720,462 7,843,549 9,677,303

6,123,087 2,186,387 8,309,474 8,803,864

6,123,087 2,689,145 8,812,232 9,107,223

6,123,087 3,123,375 9,246,462 9,578,106

6,123,087 3,309,864 9,432,951 9,795,157

6,123,087 3,337,816 9,460,903 9,847,378

6,123,087 3,277,761 9,400,848 9,794,466

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Commercial Embroidery Unit

14.4 Key Assumptions Table 141 Machinery Assumptions

Number of Machines Installed Capacity Utilization 1st Year Total Production per hour (Stitches) per Head Total Production of the embroidery unit per day (Stitches) Annual Production Capacity (Stitches) 2 65% 48,000 42,240,000 8,236,800,000

Table 142 Operating Assumptions

Hours operational per day Days operational per month Days operational per year 22 25 300

Table 143 Economy-Related Assumptions

Electricity growth rate Wage growth rate Office equipment price growth rate Office vehicles price growth rate 10% 10% 5% 10%

Table 144 Cash Flow Assumptions

Accounts Receivable cycle (in days) Accounts payable cycle (in days) Raw material inventory (in days) Equipment spare part inventory (in days) 45 30 30 30

Table 145 Revenue Assumptions

Production capacity of the unit (double shift basis) Sale price per unit in year 1 (in Rs.) Sale price growth rate Maximum capacity utilization Domestic Sales Export Sales 12,672,000,000 1 Rs. per 1000 stitches 10% 95% 100% 0%

Table 146 Expense Assumptions

Cost Per 1000 Stitch (Direct) Office expenses (stationery, entertainment etc) Machine maintenance growth rate Pre-paid building Rent (months) Pre-paid insurance (months) Insurance rate (% of net fixed assets) Promotional Expenses 0.0142 Rs 5% of admin expense 2% 12 12 5% 1% of Revenue

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Pre-Feasibility Study

Commercial Embroidery Unit

Table 147 Financial Assumptions

Project life (years) Debt ratio Equity ratio Interest rate on long-term debt Interest rate on short term debt Debt tenure (years) Debt payments per year Discount rate (weighted avg. cost of capital for NPV) 10 50% 50% 14% 14% 5 1 20%

Table 148 Projects finding

IRR NPY Pay Back Period (Years) 28% 2,572,780 4.8

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