1st Draft

PRE-FESIBILITY STUDY
(Sheep Fattening)

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH
Government of Pakistan
www.parc.gov.pk
January 2014

CONTENTS
1. DISCLAIMER.......................................................................................................................................1
2. PURPOSE OF THE DOCUMENT.......................................................................................................2
3. INTRODUCTION TO SCHEME..........................................................................................................2
4. EXECUTIVE SUMMARY..................................................................................................................2
5. BRIEF DESCRIPTION OF PROJECT.................................................................................................2

Selection of Suitable Breed.3

Location..3

Target Markets3

Employment Generation3

6. CRITICAL FACTORS......................................................................................................................3
7. OPERATIONAL CAPACITIES............................................................................................................4
8. POTENTIAL TARGET MARKET.......................................................................................................4
9. PRODUCTION PROCESS FLOW.......................................................................................................4
10. BREED SELECTION.........................................................................................................................4
11. PROJECT COST SUMMARY............................................................................................................4
12. PROJECT ECONOMICS..4
13. PROJECT FINANCING....5
a. Project Cost.5
b. Space Requirement.5
c. Machinery and Equipment.....6
d. Human Resource Requirement......6
e. Revenue Generation6
14. CONTACTS-SUPPLIERS, EXPERTS/CONSULTANTS6
15. ANNEXURES.....................................................................................................................................7
16. KEY ASSUMPTIONS.....................................................................................................................9

ii

LIST OF TABLES
Table 1: Project Economics

Table 2: Project Financing

Table 3: Project Cost

Table 4: Space Requirement

Table 5: List of Machinery and Equipment

Table 6: Human Resource Requirement

Table 7: Revenue Generation

LIST OF ANNEXURES
14.1. Income Statement

14.2. Cash Flow Statement

iii

1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general idea and
information on the subject. Although, the material included in this document is based on data / information
generated from experiments and field testing by a team of relevant scientists; however, it is based upon
certain assumptions which may differ from case to case. The contained information may vary due to any
change in any of the concerned factors, and the actual results may differ accordingly from the presented
information. The PARC and its employees do 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 contact qualified consultant/technical expert, especially designated focal
person(s) of this enterprise for reaching to an informed decision.

2. PURPOSE OF DOCUMENT
The purpose of this document is to facilitate potential investors in Sheep Fattening by providing them
with a general understanding of the business, with the intention of supporting potential investors in crucial
investment decisions. 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, production, finance, and business management. The need to come up with prefeasibility reports for undocumented or minimally documented sectors attains greater imminence as the
research that precedes such reports reveal certain thumb rules; best practices developed by existing
enterprises by trial and error, certain industrial norms and well established research findings that become a
guiding source regarding various aspects of business set-up and its successful management. Apart from
carefully studying the whole document, one must consider critical aspects provided later on, which form
the basis of investment decisions.
3. INTRODUCTION TO SCHEME
Prime Ministers Youth Business Loan Program, for young entrepreneurs, with an allocated budget of Rs.
5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8% mark-up per annum for
one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through
National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Loans from Rs. 0.1 million to Rs.
2.0 million with tenure up to 8 years inclusive of 1 year grace period, and a debt: equity of 90: 10 will be
disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa,
Balochistan, Gilgit-Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).
4. EXECUTIVE SUMMARY
Sheep Fattening Farm is proposed to be located at any suitable areas of Pakistan. The project is related to
sheep fattening purposes, the total capacity is 50 sheep. Project Cost Estimate is Rs. 0.66 Million with
fixed investment of Rs. 0.07 Million. Given the cost assumptions, IRR and payback are 15% and 7.56
years for sheep.
5. BRIEF DESCRIPTION OF PROJECT
The following parameters must be addressed as per pre-feasibility study,

Selection of Suitable Sheep Breed

2

In Punjab Kajli, Lohi, Thali and Fateh Khani of Salt range sheep breeds, in KPK, Balkhi,
Hashtnagri and Waziri sheep breeds , in Baluchistant, Baluchi sheep breed, in Sindh Dumbi, Kachi and
Kooka are most suitable breed.

Location
The farm can be established in sheep rearing areas of country where range grazing is available. In
Punjab, the suitable areas to establish the sheep farming are Southern Punjab (Thal, Cholistan) and
also pothowar areas. In Balochistan the suitable areas to establish sheep farm are northern and
central parts. Major production areas in Northern Balochistan include Killla Saifullah, Ziarat,
Loralai, Zhob, Barkhan and Musakhel Districts, Central Balochistan includes Sibi, Kalat, Mastung
and Khuzdar Districts. In KPK, the northern areas, Malakanad and Hazara divisions.

Targets Market
In addition to major cities such as Lahore, Multan, Quetta, Karachi, Hyderabad and Islamabad,
there is demand of Pakistani mutton in Middle East and Malaysia countries.

Employment Generation: The proposed project will provide direct employment to two individuals.
Financial analysis shows the profitability of proposed business within first year of its operation.

6. CRITICAL FACTORS
Establishment of the farm in areas where cheap land is available, but it should not be far away

from the market.

The farming should be done on scientific grounds taking care of Vaccination, Medicine etc.
Healthy and quality male stock should be selected for fattening.
New feeding techniques including concentrate feeding and preparation of urea molasses blocks etc
should be used for better results.

Well-trained / experienced staff adding to the efficiency of the farm.

Strict vaccination and deworming program for successful operation may be followed.

Good feeding and management practice will give the success in the business. Fresh water will be
available all the time. In the concentrate; minerals may also be included.

7. OPERATIONAL CAPACITY
The farm will start production with 50 sheep. The limit of 50 sheep has been imposed on the farm because
a very large flock would be difficult to manage. The farm would focus on rearing of young stock for
3

fattening and marketing. Sheep from aged less than 1 year of age will be purchased and resold in the
market after a fattening period of 120 days.
8. POTENTIAL MARKETS
Target market would be the areas where breeding is being undertaken as well as major cities like Karachi,
Quetta, Lahore, Rawalpindi, Islamabad, Peshawar etc. In addition to local markets there is an enormous
export potential to Middle Eastern countries.
9. PRODUCTION PROCESS FLOW
Animals selected for fattening should be of about of age of 6 months. During this age the daily weightgain capacity is also better particularly in sheep.
10. BREED SELECTION
The farmers should not only select good quality breed which can bring better results for fattening but also
select most suitable animals from the selected breeds. Through better management, the weight gain of
these selected breeds would be higher.
11. PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability of Sheep Fattening
Farm. Various cost and revenue related assumptions along with results of the analysis are outlined in this
section.
12. PROJECT ECONOMICS
All the figures in this financial model have been calculated for 50 sheep for total area of around 21,00
sq.ft, that would be used for different functions of the farm. The following table shows internal rates of
return and payback period.
Table 1. Project Economics
Description
Internal Rate of Return (IRR)
Payback Period (yrs)
Net Present Value (NPV)

Sheep
15%
7.56
311,704

13. PROJECT FINANCING

Following table provides details of the equity required and variables related to bank loan;
Table 2. Project Financing
4

Description
Total Equity (@ 10%)
Bank Loan (@ 90%)
Markup to the Borrower (%age/annum)
Tenure of the Loan (Years)
Grace Period (Year)

Sheep
Rs. 73,848
Rs. 664,636
8%
8
1

a. Project cost
Following requirements have been identified for operations of the proposed business.
Table 3. Project cost
Project Investment

Amount (Rs.)

Building
Machinery & Equipment
Total Capital Cost

330000
90000
420000

b. Space Requirement
Details of the area required are given below:
Table 4 Space requirement
Description
Space per animal sq
Total space sq ft
ft
Shed for 50 kids
12
600
(covered)
Open paddock for 50
24
1200
kids
Isolation Pen for 5
12
60
kids (covered)
Stores for ration &
240
machinery (12x20)
Total

Cost per sq ft

Total cost (Rs.)

300

180000

50

60000

300

18000

300

72000
330000

c. Machinery and Equipment

Following table provides list of machinery and equipment required for Sheep Fattening Farm working for
Livestock sector.
Table 5. List of Machinery and Equipment
Farm supplies

Unit Cost (Rs) Total Cost (Rs)

Feeding mangers 5
Chaff cutter
Water pump
Other farm

3000
50000

15000
50000

20000

20000
5000

equipment
Total cost

90000

d. Human resource requirement

The table above provides details of human resource required for sheep fattening farm.
Table 6 Human resource requirement
Description

No. of Employees

Worker

Salary per
month

10,000

e. Revenue Generation
Table 7 Revenue Generation
Product
Sale of Live Sheeps
Total Sales Revenue

Sales
Price
(Rs./Unit)
400 kg

Average weight
per kg live
weight
45

First Year
Production
50

14. CONTACTS SUPPLIERS, EXPERTS / CONSULTANTS

Dr. M. FatehUllah Khan
Animal Sciences Institute (ASI), NARC
Email: drmfatahullah@gmail.com, Phone: 051-8443944

First Year
Sales
Revenue (Rs)
900000
900000

15. ANNEXURES
15.1 Income Statement
Revenue
Cost of Goods Sold
Feed & Vaccination Cost
Cost of Calves
Direct Labor
Repair & Maintenance
Utilities
Total Cost of Sales
Gross Profit
Travelling & Comm. expense (phone, fax,
etc.)
Office expenses (stationary, etc.)
Depreciation expense
Amortization expense
Subtotal
Operating Income
Earnings Before Interest & Taxes
Interest expense
Earnings Before Tax
NET PROFIT/(LOSS) AFTER TAX
Balance brought forward
Total profit available for appropriation
Balance carried forward

Year 1
882000

Year 2
948150

Year 3
1019261

Year 4
1095706

Year 5
1177884

Year 6
1266225

Year 7
1361192

Year 8
1463281

Year 9
1573027

Year 10
1691005

252500
450000
60000
4900
29400
798800
83200

265125
472500
66000
5145
32340
843210
104940

278368.8
496125
72600
5402.25
35574
890275
128986

292312.2
520931.3
79860
5672.363
39131.4
940222
155483

306937.8
546977.8
87846
5955.981
43044.54
993193
184691

322279.7
574326.7
96630.6
6253.78
47348.99
1049392
216833

338373.7
603043
106293.7
6566.469
52083.89
1109041
252151

355307.4
633195.2
116923
6894.792
57292.28
1172427
290854

373070.2
664854.9
128615.3
7239.532
63021.51
1239756
333271

391703.7
698097.7
141476.9
7601.508
69323.66
1311306
379698

6000
12000
42000
9716.882
69716.88
13483.12
13483.12
55164.46
-41681.3
-41681

6300
12600
42000
9716.882
70616.88
34323.12
34323.12
50503.6
-16180.5
-16180
-41681.3
-57861.8
-57861.8

6615
13230
42000
9716.882
71561.88
57424.37
57424.37
44377.72
13046.65
13046.7
-57861.8
-44815.2
-44815.2

6945.75
13891.5
42000
9716.882
72554.13
82929.26
82929.26
37743.38
45185.88
45185.9
-44815.2
370.7057
370.7057

7293.038
14586.08
42000
9716.882
73595.99
111094.6
111094.6
30558.41
80536.24
80536.2
370.7057
80906.95
80906.95

7657.689
15315.38
42000
0
64973.07
151859.7
151859.7
22777.08
129082.6
129083
80906.95
209989.5
209989.5

8040.574
16081.15
42000
0
66121.72
186029.3
186029.3
14349.9
171679.4
171679
209989.5
381668.9
381668.9

8442.603
16885.21
42000
0
67327.81
223526.7
223526.7
5223.276
218303.4
218303
381668.9
599972.3
599972.3

8864.733
17729.47
42000
0
68594.2
264676.8
264676.8
0
264676.8
264677
599972.3
864649.1
864649.1

9307.969
18615.94
42000
0
69923.91
309774.5
309774.5
0
309774.5
309774
864649.1
1174424
1174424

-41681.3
-41681.3

15.2 CASHFLOW STATEMENT

Operating activities

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Net profit
Add: depreciation
expense
amortization
expense
Equipment
inventory
Raw material
inventory
Accounts payable
Cash provided by
operations
Financing activities
- Change in long
term debt
Issuance of shares
Cash provided by /
(used for) financing
activities
Investing activities Capital expenditure
Cash (used for) /
provided by investing
activities
NET CASH
Cash balance
brought forward
Cash available for
appropriation
Cash carried forward

(41,681)

(16,180)

13,047

45,186

80,536

129,083

171,679

218,303

264,677

309,774

42,000

42,000

42,000

42,000

42,000

42,000

42,000

42,000

42,000

42,000

9,717

9,717

9,717

9,717

9,717

(1,633)

(167)

(185)

(203)

(224)

(247)

(273)

(301)

(331)

(365)

3,931

(234,167)
-

(24,002)
39,755

(26,458)
2,548

(29,184)
2,733

(32,170)
2,935

(35,461)
3,151

(39,089)
3,384

(43,111)
3,638

(47,522)
3,915

(52,384)
4,213

563,547
(21,174)

(235,800)

25,621

11,443

38,110

67,444

99,696

135,105

173,906

216,365

258,141

898,078

664,636
73,848

(73,806)
-

(79,932)
-

(86,567)
-

(93,751)
-

(101,533)
-

(109,960)
-

(119,087)
-

738,484

(71,164)

(38,110)

(67,444)

(99,696)

(135,105)

(134,032)

(119,087)

(468,584)

(468,584)
34,100

25,621

(59,721)

39,874

97,278

258,141

898,078

34,100

59,721

39,874

137,153

395,293

59,721
59,721

39,874
39,874

137,153
137,153

395,293
395,293

1,293,371
1,293,371

34,100
34,100

16. Key Assumptions

Particulars
Sales Price Growth Rate
Capacity Utilization Growth Rate
Increase in Cost of Raw Materials
Increase in Staff Salaries
Increase in Utilities (Electricity / Water / Gas)
Debt / Equity Ratio
Depreciation
Plant Building
Machinery
Office Furniture & Equipment
Loan Period
Loan Installments
Financial Charges (Loan Rate)

Assumption
5 % per year
5 % per year
10 % per year
10 % per year
10 % per year
90 : 10
10 % per annum
10 % per annum
10 % per annum
8 Years (inclusive of 1 year grace
period)
Quarterly