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June 2007
Pre-Feasibility Study
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DOCUMENT CONTROL
Document No. PREF-52
Revision
Prepared by
SMEDA-Punjab
Approved by
Revision Date
JUNE, 2007
Issued by
Library Officer
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study
Introduction .............................................................................................................4
Project Brief.....................................................................................................4
1. 1
Opportunity Rat ionale ......................................................................................4
1. 2
Proposed Capacit y ...........................................................................................4
1. 3
Total Project Cost ............................................................................................4
1. 4
2
Current industry structure ........................................................................................4
3
Production process flow...........................................................................................5
4
Raw material ...........................................................................................................5
List of Raw Material ........................................................................................5
4. 1
5
production ...............................................................................................................6
Production Capacit y .........................................................................................6
5. 1
Product Mix .....................................................................................................6
5. 2
Production Mix ................................................................................................7
5.3
6
Marketing ................................................................................................................7
7
Global Trade of Bed Linen ......................................................................................8
Major Exporters/Importers of Bed Linen, of Textile or Crochet Materials (In
7.1
2006) (HS 2002-630210) .............................................................................................9
Major Exporter / Importer of Bed Linen, o f Cotton, Printed not Knit (In 2006)
7. 2
(HS 2002-630221) .....................................................................................................10
Pakistans Exports in Bed Linen (In 2006) .....................................................11
7. 3
8
Machinery requirement.......................................................................................... 11
9
Human resource requirement ................................................................................. 12
10
Land & Building................................................................................................ 13
10.1 Total Land Requirement................................................................................. 13
10.2 Rental Details ................................................................................................ 13
10.3 Suitable Locations .......................................................................................... 14
10.4 Utilit ies Requirements....................................................................................14
11
Project Economics ............................................................................................. 14
12
Key success factors............................................................................................15
13
Threats for the business...................................................................................... 15
14
Financial statements...........................................................................................16
14.1 Projected Income Statement ........................................................................... 16
14.2 Projected Balance Sheet ................................................................................. 17
14.3 Projected Cash Flows .....................................................................................18
15
KEY ASSUMPTIONS.......................................................................................19
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INTRODUCTION
Opportunity Rationale
Bed Linen is among the largest sector in terms of production and exports amongst all the
made ups in Pakistan. Pakistan is a major exporter of Bed Linen in the world and the
basic reason for the development of this industry in Pakistan is the existence of a huge
infrastructure of weaving in formal & informal sectors. The informal sector is also known
as Power Loom sector. Most of the products in Bed Linen are made from low-density
fabrics of wider widths. This fabric can be easily manufactured on Power & Auto Looms,
which forms the major chunk of weaving industry of Pakistan. The competitive edge in
cotton has also played an important role in development of Power Loom industry, as the
staple length of cotton produced in Pakistan is suitable for medium count yarn, which is
used to produce low-density fabrics. The cost of a low-density fabric is low compared to
a fabric meant for garments. Processing of the fabric meant for Bed Linen is done
through printing and dyeing, and Pakistan has an exceptional infrastructure of such
printing and dyeing in Faisalabad, Karachi and Lahore.
All these factors have led to a competitive advantage for Pakistan over other countries in
the Bed Linen industry, resulting in extra-ordinary growth during the past few years. The
projected growth rates in the said sector are also very high and promise good growth
opportunities to new entrants in the industry.
1.3 Proposed Capacity
The proposed capacity of the project is based on 8-hour single shift and will produce 990
Bed Linen sets per day with 18 stitching machines.
1.4 Total Project Cost
Total cost of the proposed project is about Rs.5.084 Million.
A major chunk of the Pakistani Bed Linen industry is in the informal sector. According to
industry sources, there are 150 units producing Bed Linen in the organized sector and the
rest of the units are in the unorganized sector. There is no data available on these units.
The Bed Linen industry may be large or small depending upon the number of operations
carried out by a unit itself. It involves weaving/knitting, processing and stitching. A Bed
Linen manufacturer may be buying fabric from outside and converting it into final
product after processing it in-house. Or the processing is subcontracted and
manufacturers are just cutting, stitching and packing in their own premises. Vertically
integrated units are smaller in number and they operate in relatively upper market
segments since it is easy to control the quality in a vertically integrated operation.
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study
Another reason for non-availability of data about Bed Linen industry is the nature of data
reporting. The classification of the industry is based on the operations rather than the
products. Moreover, manufacturers also keep on changing products. Major clusters of
Bed Linen are in Karachi, Faisalabad, Lahore, Multan and Hyderabad.
The major raw material used in the Bed Linen is printed woven fabric, which is
manufactured on Power/Auto Looms or Shuttle-less Looms. Majority of the Bed Linen
manufacturers procures yarn and converts it into woven grey fabric by paying conversion
charges to the looms units.
Figure 3-1
Procurement
of Printed
Fabric
Packaging
Inspection of
Printed
Fabric
Threading
and Final
Inspection
Cutting
Stitching
The grey fabric is provided to printing & processing unit and printing charges are paid to
get printing according to the given designs and colors. The other possible option used in
the market is to directly buy printed fabric from the market and convert it into Bed Linen.
Once the bed sheet is stitched, final inspection is done. All the sheets are checked for any
defective stitching or loose threads and then they are packed in polyethylene bags along
with insert, which is the printed material with brand name etc and card called stiffener.
RAW MATERIAL
Stitching thread and packaging material are easily available in the local market.
Packaging material consists of stiffener, which is of cardboard material, an insert, which
is a printed material with companys name and design and polyetnene bag, which is the
plastic cover.
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Pre-Feasibility Study
PRODUCTION
312
55 per Day
990
308,880
123,552 Sets
Product mix
Description
Twin Set
No
Items
Measurement
1
1
1
Flat
Fitted
Pillow
168x244 cm
178x230 + 20 cm
51x76 + 15 cm
1
1
2
Flat
Fitted
Pillows
206x244 cm
178x230 + 20 cm
51x76 + 15 cm
1
1
2
Flat
Fitted
Pillows
229x257 cm
196x241 + 20 cm
51x76 + 15 cm
1
1
2
Flat
Fitted
Pillows
274x257cm
244x244 + 20cm
51x76 + 15 cm
Full Set
Queen Set
King Set
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5.3
Production Mix
The proposed project will produce the products on the basis of following proportion:
Table 5-3
Description
Twin Set
Full Set
Queen
King
Production Percentage
12.5%
50%
25%
12.5%
MARKETING
Pakistans textile industry ranks amongst the top in the world. Pakistan is world's fourth
largest producer of cotton and the third largest consumer of the same. Cotton based
textiles contribute over 60% to the total exports, accounts for 46% of the total
manufacturing and provide employment to 38% manufacturing labor force. The
availability of cheap labor and basic raw cotton as raw material for textile industry has
played the principal role in the growth of the Cotton Textile Industry in Pakistan. With
the advent of the quota free global imperative for a rapidly developing country like
Pakistan to further explore potential new markets both in its neighboring territories as
well as distant ones. In this context, Pakistan has signed a Free Trade agreement (FTA)
with China. This FTA is predicted to bring around $5 billion increase in our trade volume
with China which is going to consist mostly of textile related commodities
Pakistans textile industry had proven its strength in global market during the last four
decades. It has proved its strength even in post quota era (2005) by not only sustaining its
position but also showing growth of 5% over 2005.
The current scenario posses challenges firstly to sustain its global positioning and
secondly to increase its market share by both increase in volume as well as increase in
unit values. The unit value can be increased only through marked improvement in
quality, market tie-up, image building and change in business philosophy. This requires
up gradation in resource development both in manufacturing and marketing.
The focus should be on R & D, technical innovation, product development on one hand
and brand & market development on other with the goal of moving up in the global
textile value chain. The performance of textile industry during the last five years has been
satisfactory. The market was responsive, the Government policy was supportive and
inputs were viable. The industry made profits and re-invested in new machinery for
balancing, modernizing, and restructuring (BMR) and expansion. The industry made an
investment of approx. $ 6.0 Billion during the period 1999-2006. Textile Machinery
worth $.0.8 billion has been imported during 2005-06 .The major investment has been
made in spinning, weaving, Textile Processing and making up sectors. Approx. 454,000
new direct jobs have been created and industry has been able to make increase production
and exports. Import of textile regime spear headed by the WTO it has become machinery,
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study
which is the single largest item in the machinery group, accounted for $ 771.500 million
in 2005-06.
Bed Linen is an important value-added sub-sector of textile sector. Bed Linen products
include bed sheets, pillow covers, quilts, etc. In made ups, Bed Linens sub-sector is the
second largest in terms of production and exports.
Table 7-1 World Wide Imports in Recent Years (Trade value in millions$)
Years
2003
2004
2005
2006
Bed Linen, Of Textile Knit Or Crochet
562,652
672,465
623,142
417,480
Materials
Bed Linen, Of Cotton, Printed ,Not 1,351,865 1,569,697 1,804,811 1,228,173
Knitted
Table 7-2 World Wide Exports in Recent Years (Trade value in million $)
Years
Bed Linen, Of Textile
Knit Or Crochet Materials
Bed Linen, Of Cotton,
Printed ,Not Knitted
2003
474,483
2004
580,054
2005
607,342
2006
470,254
1,173,274
1,278,179
1,496,379
704,484
www.Comtrade.un.org
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7.1
Belg ium.
Den mark.
4%
2%
Ch in a.
10%
Pakis tan .
74%
Germa n y .
10%
Top Importe rs
Ausria
6%
Belgium
8%
Ireland
5%
Germany
46%
USA
35%
PREF-52/June, 2007/Rev2
Pre-Feasibility Study
7.2 Major Exporter / Importer of Bed Linen, of Cotton, Printed not Knit (In 2006)
(HS 2002-630221)
Top Exporters
Romania
8%
Germany
11%
China
52%
Belgium
12%
Pakistan
17%
Table 7-5 Major Exporter of Bed Linen, of Cotton, Printed Not Knit
Countries
China
Pakistan
Belgium
Germany
Romania
Top Importer
A ust ria
7%
Belgium
8%
Sweden
6%
USA
55%
Germ an y
2 4%
Table 7-6 Major Importer of Bed Linen, of Cotton, Printed Not Knit
Countries
USA
Germany
Belgium
Austria
Sweden
PREF-52/June, 2007/Rev2
Pre-Feasibility Study
MACHINERY REQUIREMENT
Table 8-1
Machinery Details2
Machines
Required
Machines
Stitching Machines
Safety Lock Machines
Cutting Machines
Finishing Iron
Total
18
2
1
2
Cost/Machine
(Rs)
26,000
85,000
75,000
7,000
Total Cost
(Rs)
468,000
170,000
75,000
14,000
727,000
Above quoted prices are of Juki brand. All the required stitching machinery is easily
available in the market. The stitching machinery is available in quite a diversified range
of suppliers & origins, i.e. Japanese, Italian, Chinese, Korean and Taiwanese origin.
There is a substantial difference between their prices. European and Japanese machinery
2
Aalmurtaza Machinery Co. (Pvt) Ltd. 63/1-c, Model Town, Jail Road, Faisalabad.
Tel: 041-2636830-31, 041-2648955 Fax: 041-2644961 website: www.almurtaza.com
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study
Office Equipment
Computers P4
Printer
External Modem
Switch D-Link
Split Air-conditioner 2 Ton
Mini Telephone Exchange
Telephone Sets
Fax Machine
Furniture and Fixture
Work Stations
Chairs
Sofa Set
Cutting Tables
Net Working & Electrification
Total Office Equipment
No
5
1
1
1
2
1
10
1
Total Cost
125,000
12,000
5,000
10,000
60,000
20,000
5,000
10,000
10
30
1
2
1
6,500
600
5,500
8,000
50,000
65,000
18,000
5,500
16,000
50,000
401,500
The stitching operators will be paid on piece rate basis. The rates given in the below
table:
Table 9-1: -Stitching Charges
Description
Stitching Operators
Rate
Rs.10 Per Set
No.
1
1
1
1
1
1
1
2
1
12
PREF-52/June, 2007/Rev2
Per Month
35,000
25,000
15,000
18,000
8,000
4,500
3,500
5,000
5,000
Annually
420,000
300,000
180,000
216,000
96,000
54,000
42,000
120,000
60,000
Pre-Feasibility Study
Total
Production Staff
Production In charge
Stitching Supervisor
Cutting Master
Cutting Helper
Finishing Supervisor
Rowing Inspector
Clippers
Packaging Staff
Final table Inspector
Technician/Electrician
Total
1,488,000
1
1
1
2
1
2
3
3
2
1
15,000
10,000
15,000
4,600
10,000
5,000
4,600
4,600
4,600
10,000
180,000
120,000
180,000
110,400
120,000
120,000
165,600
165,600
165,600
120,000
1,447,200
10 L A N D & B U I L D I N G
10.1 Total Land Requirement
The standard size for stitching machine table is defined to be 5.5x7.5ft.In cutting area 2
tables will be placed of size 24x9ft for cutting sheets and 24x8ft for cutting pillow.
Details regarding the area required for a Bed Linen unit are given below:
Table 10-1
Description
Production
Cutting Area
Inspection room/packing room
Raw material store
Finished goods store
Management building
Free space
Total
5,500
Rent Cost
Rent Cost
Building Rent Cost (per 5,500 sq. ft)
Annual Rent (Rs)
3 Months Rent As Security
PREF-52/June, 2007/Rev2
Pre-Feasibility Study
33,0000
Electricity
Telephone
Water
11 PROJECT ECONOMICS
Table 11-1 Project Cost
Description
Furniture& Fixtures
Office Equipment
Plant & Machinery
Vehicle
Preliminary Expenses
Sub Total
Working Capital3
Rupees
154,500
247,000
727,000
669,000
165,000
1,962,500
3,121,935
5,084,435
60%
40%
3,050,661
2,033,774
5,084,435
In Percentage
In years
In Millions
Working Capital includes 26 days raw material and 6 months advance rent of the premise
14
PREF-52/June, 2007/Rev2
31
6
1.986
Pre-Feasibility Study
15
PREF-52/June, 2007/Rev2
Pre-Feasibility Study
14 FINANCIAL STATEMENTS
14.1 Projected Income Statement
(ooo)
Year - I
Sales/Revenue
Cost of Sales
Operation Salaries
Cost of bed sheets
Electricity Chg.
Other Utilities
Consumable Store
Repair & Maintenance
Plant Insurance
Depreciation
Amortization of Prelmn.Exp
Gross Profit
Operating Expenses:
Administrative Expenses
Administrative Salaries
Printing & Stationary
Consultancy Charges & Audit Fee
Entertainment
Telephone Fax and Postage
Rent
Operating Profit
Year - II
Year - III
Year - IV
Year - V
Year - VI
Year - VII
Year - VIII
Year - IX
Year - X
39,827
46,000
53,130
61,365
70,877
81,863
94,552
109,207
126,134
145,685
1,447
35,170
366
300
50
29
20
344
17
37,743
2,084
1,592
40,621
402
330
55
24
5
277
15
43,320
2,680
1,751
46,917
443
363
61
19
4
223
13
49,793
3,337
1,926
54,189
487
399
67
15
3
180
12
57,278
4,087
2,119
62,589
536
439
73
12
2
145
11
65,926
4,951
2,331
72,290
589
483
81
10
2
117
10
75,912
5,951
2,564
83,495
648
531
89
8
2
94
9
87,439
7,112
2,820
96,437
713
585
97
6
1
76
8
100,743
8,464
3,102
111,384
784
643
107
5
1
62
7
116,096
10,039
3,412
128,649
862
707
118
4
1
50
6
133,810
11,875
1,488
60
20
60
72
1,700
660
1,815
66
22
66
79
2,048
726
1,997
73
24
73
87
2,253
799
2,196
80
27
80
96
2,478
878
2,416
88
29
88
105
2,726
966
2,657
97
32
97
116
2,999
1,063
2,923
106
35
106
128
3,299
1,169
3,215
117
39
117
140
3,629
1,286
3,395
129
43
129
154
3,850
1,415
3,735
141
47
141
170
4,235
1,556
(94)
285
730
1,259
1,889
2,645
3,549
4,774
6,084
(276)
Financial Charges
270
214
157
100
43
(546)
(109)
(308)
(62)
129
26
631
126
1,216
243
1,889
378
2,645
529
3,549
710
4,774
955
6,084
1,217
(437)
(246)
103
505
973
1,512
2,116
2,839
3,819
4,867
(437)
(683)
(580)
(76)
897
2,409
4,524
7,364
11,183
(683)
(580)
(76)
897
2,409
4,524
7,364
11,183
16,050
Taxation
20%
(437)
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study
Year - I
Tangible Fixed Assets
Preliminary Expenses
Current Assets:
Accounts Receivable
Cash in Hand / Bank
Owners Equity:
Capital
Accumulated Profit
Long Term Loan
Current Liabilities:
Accounts Payable
Year - II
Year - III
Year - IV
Year - V
Year - VI
Year - VII
Year - VIII
Year - IX
"000"
Year - X
1,453
149
1,177
134
954
120
774
108
630
97
513
88
418
79
342
71
280
64
230
58
1,328
3,684
1,533
3,483
1,771
3,600
2,046
4,103
2,363
5,071
2,729
6,994
3,152
9,541
3,640
12,844
4,204
17,170
4,856
22,598
6,613
6,326
6,445
7,031
8,161
10,323
13,190
16,897
21,718
27,742
3,051
(437)
3,051
(683)
3,051
(580)
3,051
(76)
3,051
897
3,051
2,409
3,051
4,524
3,051
7,364
3,051
11,183
3,051
16,050
1,627
1,220
814
407
2,372
2,739
3,161
3,650
4,213
4,864
5,615
6,483
7,485
8,642
6,613
6,326
6,445
7,031
8,161
10,323
13,190
16,897
21,718
27,742
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study
Total Sources
Applications:
Fixed Assets
Preliminary Expenses
Re -Payment of Loan
L C Charges
Tax
Year 2
(94)
15
285
13
730
12
344
Year 5
Year 6
1,259
11
1,889
10
Year 7
Year 8
2,645
9
Year 9
3,549
8
4,774
7
223
180
145
117
197
160
521
185
922
214
1,414
247
2,016
285
3,051
2,034
5,084
358
706
620
62
559
563
26
589
506
126
633
449
243
693
378
378
529
529
710
710
955
955
(201)
117
503
968
1,923
2,547
3,303
4,326
5,429
3,684
3,483
3,600
4,103
5,071
6,994
9,541
12,844
17,170
3,483
3,600
4,103
5,071
6,994
9,541
12,844
17,170
22,598
1,798
165
677
109
2,531
1,136
1,661
2,301
2,748
329
3,076
76
6,084
6
277
94
Year 10
85
1,045
3,684
Cash Increase/(Decrease)
Year 4
(276)
17
6,214
Year 3
3,633
379
4,012
62
4,843
438
5,280
50
6,140
505
6,645
1,217
1,217
.
Opening Balance
Closing Balance
3,684
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PREF-52/June, 2007/Rev2
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15 KEY ASSUMPTIONS
Table 15-1
8
26
312
308,880 Sets
40%
10%
95%
123,552 Sets
10%
10%
2.5%
30
15
Products
Growth Rate in Sale Price
Twin Set
Full Set
Queen
King
Table 15-6
Cost in Rs.
223.75
10
20.2
3% of Fabric cost
5.56
Fabric quantity and cost will vary according to the type of bed sheet
19
PREF-52/June, 2007/Rev2
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Table 15-7
20%
20%
10%
20%
10
60%
40%
14%
20
PREF-52/June, 2007/Rev2