Project Evaluation

CONFIDENTIAL
PROJECT REPORT
OF
M/S. MARGARINE (PVT.) LIMITED (PROPOSED)

NOORIABAD INDUSTRIAL ESTATE, DISTT. DADU
PROJECT EVALUATION DEPARTMENT

INDUSTRIAL DEVELOPMENT BANK
FEBRUARY, 1993
M/S. MARGARINE (PVT.) LTD.
TABLE OF CONTENTS
CONTENTS: PAGE NUMBER

SUMMARY OF PROJECT I-ii
I- INTRODUCTION:
II- THE BORROWERS AND MANAGEMENT: 1-3

- The borrowers
- Management
III DESCRIPTION OF THE PROJECT: 4-13

- The projects
- Raw Materials
- Location and Land
- Building
- Plant & Machinery
- Utilities
- Personnel
- Environmental Hazards
- Construction Schedule
IV- COST OF PROJECTS AND FINANCIAL PLAN: 14-15
- Cost of Project
- Financing Plan
- Debt Equity ratio
- Security
V- MARKET PROSPECTS: 16-23
- Introduction
- Domestic Production and Capacity
- Installed Capacities of End Users
- Raw Material Requirements
- Demand For Industrial Margarine/Shortening
- Proposed Scheme & Product Mix
- Conclusion
BSA MARGARINE PRODUCTS (PVT.) LTD.
-: B :-
VI- FINANCIAL PROJECTIONS: 24-25
- Profitability
- Debt Service Coverage
- Break Even Analysis
- Cash Flow
- Inter Financial Rate of Return
VII- ECONOMIC EVALUATION: 26
- Contribution to G.N.P
- Value added Per Worker
- Employment Opportunities
- Capital Employment Ratio
- Internal Economic Rate of Return
- Domestic Cost Per Dollar Saved
VIII- CONCLUSIONS AND RECOMMENDATION: 27-31

LIST OF ANNEXES
ANNEX NUMBER D E S C PR I PTI O N
I DETAILS OF BUILDING
II LIST OF LOCAL MACHINERY
III CONSTRUCTION SCHEDULE
IV ESTIMATES OF WORKING CAPITAL
V APPRAISED COST OF PROJECTS
VI FORECAST OF EARNING
VII SALE ESTIMATE
VIII COST OF GOODS SOLD STATEMENT
IX GENERAL, ADMINISTRATIVE
X ESTIMATES OF FINANCIAL EXPENSES
XA COMPUTATION OF RESALE PRICE
XI INCOME TAX COMMUTATION
XII CASH FLOW FORECAST STATEMENT
XIII PROJECTED BALANCE SHEET
XIV BREAK EVEN ANALYSIS
XV INTERNAL FINANCIAL RATE OF RETURN
XVI INTERNAL ECONOMIC RATE OF RETURN
XVII DOMESTIC COST PER DOLLAR SAVED
XVIII SENSITIVITY ANALYSIS
XIX EFFECTIVE RATE OF PROTECTION
SUMMARY OF PROJECT
1- Name of the project: M/s BSA margarine (Pvt.) Ltd.(Proposed)
2- Location Office: 1017, Uni Plaza I.I Chundrigar Road,

Karachi.
Factory: 94 KM, Nooriabad Industrial Estate,
District Dadu, Sindh
3- New/B&Mrep Expansion: New
4- Amount of Loan: L/C Assistance Rs.24.150million (LMM)

L/C Assistance Rs.3.800million (BOR)
5- Rated Capacity of the 18,000 tons of industrial margarine/

Project shortening based on 3 shifts and 300 days/
annum.
1,800 tons of Liquid Soap
300tons of Chain Lubricant
150 tons of Carbon Dioxide Gas
6- Machinery to be a) Local Machinery

Purchase under the Pre-Refine Machinery including
Scheme: Neutralizer & Bleacher, Hydrogenation
Machinery, Post Refinery Machinery
Including Post Refiner & Bleacher,
Margarine Plant, Liquid Soap,
Chain Lubricant plant, Boiler,
Natural Gas Cracking Plant, Water
Softening Plant, generator etc
.
(Rs. IN MILLION)
7- Cost of proposed Scheme: Fixed Cost RS.39.066
Net Working Capital RS. 8.534
Total: RS.47.600
-ii- CONTD. SUMMARY OF PROJECT
BSA MARGARINE (PVT.) LTD.
IDBP L/C Loan (LMM) RS.24.150
IDBP L/C Loan (BOR) RS. 3.800
Directors Loan RS. 0.650
Paid Up Capital:
I- Sponsors RS. 19.000
Total : RS.47.600
8- Debt Equity Ratios : In Fixed Cost 73:27
In Overall Cost 60:40
9- Annual Recurring Foreign : RS. 229.472 million
Exchange (C&F) Require-
ments of the projects at
100%
10- Percentage of C&F Value : 95%
of Imported Raw Materials
to Cost to total Raw
Materials.
11- New Job Opportunities : 130 Persons.
12- Projected Profit : Gross Profit RS.28.491 million
(4th Yr.) Operation Operating Profit RS.21.214 million
Net Profit Before
Tex. RS.11.109 million
Gross Profit to
Sales. 9.35%
Operating Profit to
Sales 6.96%
Pre-tax Profit to 3.65%
Sales.
Return on Equity 26.81%
Return on
13- Debt Service Coverage : 1.88 Times
th
(4 Yr.) With Dep.
14- Break Even : 44%Capacity Utilization
15- I.F.R.R. : 43%
16- Contribution to G.N.P : Rs. 13.470 million
Fourth Year
(Rs. In Million)
17- I.E.R.R. : 31.687%
18- Bruno’s Ratio (Rs./US$) : 25.74
-ii- CONTD. SUMMARY OF PROJECT
BSA MARGARINE (PVT.) LTD.
19- Effective Rate of
Protection. : 67%
20- Security
I- First charge on fixed assets of the projects estimated at Rs.39.066 million

(coverage : 1.37 times of Financial Assistance.)\
II- Outside collateral in shape of urban property to the extent of 25% of financial
assistance.
III- Personal Guarantee of all the Directors of the company.
21- Project Benefits:
The Projects being located in Nooriabad Industrial Estate, District Dadu, Sindh will enjoy tax
holiday for the first five years as a Government incentives given to the project to be in Rural
Area.
I- INTRODUCTION
The sponsors of the captioned concern have approached us for financial assistance for setting up
of an industrial margarine / shortening and their by-product unit at SITE, Nooriabad Industrial
Estate, Dadu, Sindh.
The Proposal of the sponsors has been processed for a local currency assistance of Rs. 24.150
mullion under SBP Scheme for LMM and local currency assistance of Rs. 3.800 million from
Bank’s Own Resources.
The rated capacity of the projects would be 18,000 tonnes of industrial margarine/shortening
liquid soap 1,800 tonnes, chain lubricant 300 tones and carbon di-oxide 150 tonnes based on 3
shifts 300 days per annum.
This is the first loan application of the company. However, the main sponsor Shaid Rasheed
availed financial assistance in the name and style of M/s. imperial Rubber Industries Ltd. on 25-
6-1965 which was later liquidated on 1-11-1983.
II- THE BORROWERS AND MANAGEMENT
THE BORROWERS:
M/s . BSA Margarine (Pvt.) Ltd., will be incorporated as a private limited company with a paid
up and subscribed capital of at least Rs. 19.000 million. The control and management of the
company would be entrusted with the Board of Directors consisting of the following :
S .NO NAME
1- Shahid Rasheed
2- Hussain Habib
3- Ashraf Kamal
-: 2 :- BSA MARGARINE.
Brief resume in respect of the sponsors of the captioned concern is as under:
SHAHID RASHEED: is the Chief Executive of the company. At present he is running a textile
rubber cots and aprons manufacturing unit namely M/s. Bhitai Rubber Industries Located at
Korangi, Karachi. He is the former member of National Assembly and was at that time member
of Economic Committee/Bodies i.e. finance Committee, Budget Committee, Economic
Deregulation Committee. Presently he is working as member of Deregulation, Disinvestments &
Denationalization Committee.
HUSSAIN HABIB: He will be the Financial Director of the company. Has done B.B.A from
Boston University and had worked in top management position at Hanover Manufactures
Limited, Bank in London.
ASHRAF KAMAL: He is friend of Shahid Raeheed. He is looking after business in Punjab

after graduation from American School.
PAST OPERATIONS OF SISTER CONCERN:

The financial statement of the sister concern of the company are summarized below:
M/S. BHITTAI RUBBER INDUSTRIES LTD.
BALANCE SHEET
AS AT 31ST DECEMBER
ASSETS: 1991 1990
Currents Assets 4,106 2,559
Long Term Deposit 67 67
Fixed Assets 27,484 28,619
Unallocated Capital Expenditure 26,620 24,021
Total Assets 58,187 55,266
LIABILITIES & OWNER’S EQUITY:

Current Liabilities 3,662 1,993
Long Term Liabilities 42,375 47,493
Total Liabilities 46,037 49,486
OWNER’S EQUIT:
Paid up Capital 12,880 5,780
Retained Earning/Loss (730) ---
Total Owners Equity 12,150 55,266
-3- BSA MARGARINE
The company has started commercial production from July 1991. The profit & Loss Account
depicts picture of half year operations.
M/SBHITTAI RUBBER INDUSTRIES LTD.
PROFIT & LOSS ACCOUNT

FOR THE PERIOD JULY, 1991 OT 31ST DECEMBER ,1991
(Rs.in’000)
Sales 4,486
Cost of Goods Sold 3,155
Gross Profit 1,331

Operating Expenses 695
Operating Profit 636
Financial Expenses 1,403
Profit /Loss After Interest 767

Other Income 36
Net Profit / Loss 731
CREDIT WORTHINESS:
The credit worthiness of directors is being investigated and sanction letter will be issued after
receipt of satisfactory credit report on the sponsors and the company.
-: 4 :- BSA MARGARINE
III – THE PROJECT

The scheme envisages establishment of a margarine/shortening and their by-product
manufacturing unit with a rated capacity of 18,000 tonnes to rated capacity of the project is
based on 15 tonnes of processing (deodorizing )per batch of approx. 8 hours
Which gives annual production of 18,000 tonnes of main products viz maragine/shortening in
300 days from 2 deodorization per day . The product range, their rated capacities and proposed
selling price would be as under:
S. NO ITEM RATED CAPACITY PROPOSED

(TONNES) SELLING
(RS./TONNES)
(MAIN PRODUCT)
1. Industrial Margarine /Shortening 18,000 24,625
(BY PRODUCT)
1- Liquid Soap 1,800 15,500
2- Chain Lubricant 300 14,000
(for confectionary units etc.)
3- Carbon Di-oxide 150 4,500
On the basis of market demand, the proposed unit is expected to operate on the following
capacity utilization:
First Year 50%
Second Year 55%
Third Year 60%
Fourth 7 subsequent Year 65%
The fixed cost of the project has been estimated at Rs.39.066 million.
PRODUCT IDENTIFICATION:
Margarine and shortening are diversified dibble fats products and can be classified under less
Cholestrol caloric contanied food products obtained from various types of vegetable fats of
saturated, unsaturated and semi-saturated categories. (saturated fats of satured, unsaturated
single bond carbon linkages whereas un-saturated fats contain one or more double bond
linkages).
Margarine: are grainless greasy paste product containing above mentioned types of vegetable
fats along with the additions of water (potable grade /disinfected), emulsifier, antioxidant, salts
(in some cases), and vitamins A & D in certain quantity and specific ratio.
Shortening: are from same raw materials but without addition of water, and salt they are also
grainless paste products but their uses are different.
Margarine /shortening, in fact, are essential ingredients of most types of bakery product
classified by single fat or oil or a combination of several fats and oils. On processing shortening,
certain physical changes are brought under control to achieve physical properties. Fats and oils
are glycerol items of fatty acids predominantly they are triglyceroid having 3 fatty acids attached
to the glycerol. While single pure triglyceride will have a definite melting point. As temperature
increases the triglyceroide melt and fat softens. The process is basically “interest verification” i.e
molecular rearrangement. As both margarine/shortening produce uniform, unbroken greasy film
these are widely used in biscuits, confectionaries, ice cream, and chocolate/toffee. Etc.
By-products namely liquid soap and chain lubricants prepared fro lye obtained from soap stock
(from bleacher) are widely used for cleaning of clothes and lubrication of conveyor chains of
edible products respectively. Carbon di-oxide gas released from cracking plant is filled in
cylinders (liquid form) and are used by bottlers and for multifarious applications.
MANUFACTURING PROCESS:
Essentially production of margarine and shortening involves almost the same process of refining,
bleaching and filtering, hydrogenation and deodorization like oil/ghee manufacturing unit. The
basic difference, however is that in case of margarine/shortening ready oil after passing through
the above mentioned process is mixed/blended with distill water in presence of emulsifier,
antioxidant and vitamins in stainless steel tanks and then transferred to votator/cutter at constant
flow and pressure. Here the blades scrap them to fine paste. The pasties then transferred to
pinner/polisher to get a special shine commercially appreciated in the market. The steps involve
in the process is briefly described hereunder. It is to be mentioned that every batch for
hydrogenation will be maintained at different melting point based on the specific requirement of
each customer:
a) Refining (Neutralization)
Edible oil refining is done through etherification of free fatty acids, glycerol, mono and
diglycerides by mixing alkaline solution of sodium hydroxide (caustic soda) at temperature
ranging from 80 to 90 with proper agitation. The impurities mixed esterified products (Soap) is
separated by settling/decanting process.
The process involves the neutralization of free fatty acid contents of the oil with caustic soda.
The edible oil, from storage tanks, in measured quantity, is obtained and pumped in to
neutralization tank which is made of mild steel cylinder with a conical bottom. The oil is
constantly stirred with the help of an electrically driven equipment. Steam is passed in to the tank
and the temperature is raised to about 80 to 90 C.A measured solution of caustic soda and hot
water is then pumped into the neutralizing tank so as to neutralize the fatty acids which are
present in edible oil.
The caustic soda and free fatty acids react with each other whereby the free fatty acids are
neutralized resulting in a preciitate in the form of suspended particle, which is called “Foots” and
is drained in to the soap stock tank. The oil free most of the free fatty acids is taken to the
bleacher for further processing.
b) Bleaching And Filtering:

In order to further remove traces of remaining esterified impurities (soap) and colour pigment of
oil it is thoroughly washed with hot water and steam and then bleached with the help of fuller’s
earth and activated carbon under vacuum wherein bleaching agents absorbs all the impurities of
oil turn in to pale yellow colour. It is then passed through filter press for complete separation.
C) Hydrogenation
It is the addition of hydrogen at double bonds in the fatty acid where mono-saturation
acids are converted into polysaturated and semi-saturation to saturated. The process
involves introduction of refined bleached oil in the “Autoclave” through heat exchangers
to get saturated oil from un or semi-saturated oil by absorbing hydrogen in the presence
of nickle catayst.
d) Post Neutralization:
The hundrogenated oil is again refined in the post neutralizer but with different (low)
concentration of caustic soda.
e) Post Bleaching:
After post refining the oil is again bleached with fuller’s earth in the same vacuumed
bleaching vessel and temperature conditions.
f) De-Odorization:
the refined/bleached (semi-un-saturated oils) and refined/bleached and hydrogenated (fully
saturated oils) is charged in the deodrizer through heat exchangers wherein all volatile
remaining free fatty aids and other impurities are sucked off by high level vacuum system at
220-250o C under “open steam” agitation.
Up to this stage the process describe above is almost the same as empolyed in case of
cooking oil/ghee units. After this stage process of margarine/shortening commence.
g) Blending:
the blending of all above mentioned oils/vegetable fats will be done according to production
planning. Unsaturated soyabean oil, 2-4 Di Nitro Benzy1 Toulene etc. are added in the
stainless steel blending tanks under agitation at 42-44o C. Normal blending ratio is given
hereunder:
Products R.B.D.Un- + R.B.D. Semi+ R.B.H.D. + H20 + Emulsifier +Anti-
Saturated Saturated Oil Oxidant
Oil Oil (fully
(Soyabean Oil Saturated
Oil) Oil)
Ind. Margarine 10-12% 35-40% 35-40% 8-10% 0.01-0.1% 0.01%

Shortening 8-10% 40-45% 45-50% ---------- 0.1%
h) Votating/Cutting/Pasting:
The blended products will introduced in the votator / cutter, which is three shell structure, where
outer shell contains liquid foreon-22 and inner shell contains rows of high speed blades. due to
the introduction of product from 42-44o C to 0 –25o C, the product will quickly solidity at the
inner wall of the middle shell and simultaneously these high speed blades will scrap them in
paste from. The same process will take place in Votator # 2 but at a higher tem temperature of –
100C. here entire product will become grain less paste.
i) Polishing/Pinning:
Polisher/Pinner is two shell and single shaft reactor. The outer shall contains liquied F-22 the
inner wall of middle shell and rotating shaft contains special designed stainless steel pins. When
product will enter from votator # 2, it will be hammered with high speed pins and consequently a
portion of un-saturated vegetable fats will appear on the surface of the product giving a shining
appearance to the product. The product is now ready for packing and deliver.
j) Liquid Soap & Chain Lubricant Plant.
Soap stock from nrutralizing tank is pumped in to evaporator having tube bundles and separating
plates. The water contents of soap stock is evaporated. It is then fed to converter having water
and steam jacket with agitation system. Here stock is formed in a fine paste for making liquid
soap. Chemicals such as nonipol (2-4 Di Nitro Pheny1 Amino Propy1), potassium hydroxide and
common salt is added in desired quantity according to required specification for liquid soap and
chain lubricants. Soap stock having light yellow color containing oil emulsion and Beta Carotene
when reacts with Potassium Hydro and alkaline group, it turns the appearance of soap stock in
transparent shape. Products are identified on the concentration of water and PH value describe
below.
a) Liquid soap containing 70% water, PH 7.5-8.5 (Mild Alkaline)
b) Detergents containing 50% water, PH 8-9 (Highly Alkaline)
c) Chain Lubricant containing 30% water, PH 7-7.2 (Neutral) (Bio-Grease)
Usage:
Liquid soap is mainly consumed in dish washing plants of hotels, washing machines of laundries
and by dyeing and bleaching factories etc. Chain lubricants which acts as a bio-grease is used in
roller, bushes and ball bearing in conveyor system of all food processing industries like
beverages, biscuits and toffees etc.
k) Carbon Di-oxide Gas (Liquid Form):

Carbon di-oxide gas released from the cracking plant is compressed and filled in cylinders in
liquid form.
1) Packing:
Industrial Margarine/shortening need not to be chilled before packing/filling like cooking oil
vegetable ghee. Industrial margarine/shortening would be packed in polythen bags in cartons of
16 Kg. Each . Liquid soap and chain lubricants would be packed in plastic drums of 50 kg. Each
Carbon dioxide gas, as such would be sold directly to the consumers with their own arrangement
of filling system inclusive of compressors and cylinders.
Production process flow chart is given at next page.
Natural Gas & Steam Cracking/Reforming Process Description:

At first stage, the natural gas (Methane), will in sulfur removal tower, where all the traces of
sulfur will be removed in another twin towers containing activated carbon catalyst.
At second stage the dry steam and sulfur/iron free will be mixed to gether and will enter in the
reformer through top mounted super heaters, which gains heat energy form flue gases of the
reformer burners. The methane and steam mixture will start cracking at the temperature of
550oC, (in super heaters installed on top of reformer). At this stage 20-25%cracking process will
be perfomed. The semi cracked mixture will completely cracked in the reformer and will start
reforming in form of Co2 and H2 Gases (96-97% reforming will be completed at this stage) and
small quantity of carbon mono-oxide and oxygen will be left untreated.
At third stage, the mixture of H2, CO2 and O2 will convertor will enter in low temperature shift
convertor, where all carbon di-oxide and oxygen gases will be left as gases mixture.
At fourth stage, the reacted gases mixture from H.T.S. convertor will enter in low temperature
shift convertor, where all carbon mono-oxide and oxygen will be removed and remaining
hydrogen carbon di-oxide gases will be lefts as gases mixture.
At fifth stage, the reacted gases mixture will enter in the mono ethylene amine tower (MEA
TOWER), where the carbon dioxide gas of thh mixture will be absorbed in the MEA solution, (at
ambient temperature)and hydrogen gas will be released for collection.
At sixth stage the MEA rich solution will enter in the re-boiler, where it will be boiled up to 105-
110oC through steam heating. All carbon dioxide gas will evolve from stripper of MEA re-boiler,
which will pass through heat exchangers and coolers and will be available for collection. The
MEA solution will be sent to MEA tower througvarious heat exchangers/coolers for Co2
absorption again.
LAND AND LOCATION
The sponsors reportedly own a factory building one plot No. A/327,SITE, Nooriabad, District
Dadu. The area of plot as per drawing is 617x288sq. fts or 16,515 sq. meters approx. Eqt. to 4
acres. It is located at 94 KM on Karachi-Hyderabad Super Highway and very near to SITE
Office, Nooriabad. Infra-structure facilities are available at the plot. However, presently
electricity and water lines are disconnected.
The cost of land including its development is estimated at Rs.600.000/- on the basis of average
purchase price @ Rs.150,000/- acre.
BUILDING & CIVIL WORKS:

Existing Factory Building:
Single storey building reported constructed during 1986-87 have an approx. covered area of 1424
sq.m. and a height of 14 feet as pr drawing from K/s. engineering Associates submitted by the
sponsors. The construction of existing factory building is RCC having pre-fabricated roof slabs
of approx. 225,000 and 45,000 liters respectively is constructed. Keeping in view the quality of
construction and age of factory building its estimated cost been worked out at Rs 3.522 million
as per details in Annes-I .
The factory building was constructed for M/s. Bhittai industries, a rubber cots and aprons
manufacturing unit financed by NDEF in 1987 Later in 1989 they shifted entire machinery to
Korangi in view the permission of NDFC and Sindh Government and presently under is lying
vacant. The premises (including land and building), however, is reportedly under lien with
NDFC and shall be cleared by the sponsors for creating with IDBP.
Proposed Modification / Expansion:
In order to use the present factory building for proposed margarine/shortening plant the factory
was inspected on January 31,1993 and it was observed that machinery other than refinery can be
accommodated in the existing premises. Hence it is proposed that a portion of the factory
building having a covered area of 372 sq. meters would be modified and one more floor would
be constructed to house refinery machinery. In this connection, it is proposed that roof slabs
would be removed and two floor refinery section would be constructed at 22 feet and 40 feet
level with the support of additional 4/5 new columns. Beside, a new ACC construction would be
made to accommodate boiler. It is estimated that a cost of Rs.2.116 million would be incurred to
undertake modification/ expansion as per details given at Annex-I
PLANT AND MACHINERY:
The machinery proposed to be fabricated/manuufactured locally shall mainly be comprised on

the following:
a) Pre-Refining Machinery
Including storage tanks, vessels including neutralizer and bleacher, pumps filters, steam vacuum
system, piping/values and fittings etc.
b) Hydrogenation Machinery:
Including hydrogenation autoclaves, tanks heat exchangers, filter press and catalyst mixing tanks
etc.
c) Post Refining machinery:

Including post bleacher, post refiner tanks and pressure vessels, filter press and deodorization
vessel etc.
d) Blending Section:
Including blending tanks, pumps and gauges etc.
e) Margarine Plant:
Including blending tanks, votator/mixer, pinner/polisher and chilling system etc.
f) Liquid Soap & Chain Lubrication Processing Machinery:
Including emulsion convertor, evaporators and vacuum system etc.
g) Utilities:
Including package type boiler, water softening plant, electrical equipment and installation,
hydrogen gas generation system comprising on cracking plant, gas holders and gas compressors,
etc.
h) Misc. Machinery Including Standby

Generator And Workshop Equipment’s etc:
Almost all the machinery would be domestically fabricated/manufactured. The tanks and vessel
are M.S welded construction with top and bottom dished ends with agitation system etc.
Margarine Plants is stainless steel cylindrical construction with rotating cutter/pinner. The total
cost of machinery / equipment on the basis of quotation from M/s. Tech Engg, and others is
estimated at Rs.28.650 million.
Bank shall finance Rs. 24.150 million under LMM and Rs.3.800 Million under BOR. Item such
as crude oil storage tanks, temperature indicators, gas analyzing kit, gas flow meters, hydrogen
gas compressors and workshop equipment worth Rs.1.906 million are not eligible under LMM
financing. Moreover item such as chilling system of margarine plant, boiler and air compressor
containing under LMM. All these and other item including standby diesel generating sets shall be
financed from BOR. The balance cost of machinery worth Rs.0.700 million shall be financed by
sponsors from their own resource.
RAW MATERIAL:
The raw material required is edible oil. Other are processing chemicals and additives.
The proposed unit would sue soybean and R.B.D. Palm oil: the normal blending ration begin
32:68 Chemicals used during process are absorbent like caustic soda, fuller’s earth activated
carbon (for soybean oil) and antioxidant (to create activated oxygen free area) etc. Nickel
catalyst is required to expedite the processing.
Additives namely citric acid (food grade), phosphoric acid (for soybean oil) and vitamin A&D
etc. are used . filter cloth is used in filter press. Nonipol (2-4Di phenyl amino propyI) and
potassium hydroxide are used for clarification of liquid syrup obtained from soap stock. Various
types of catalyst are used in gas cracking plant.
Packing materials include polythene bags, corrugated cartons and plastic drums.
Imported raw materials constitute 95% of total raw materials.
UTILITIES
POWER:
The project would require connected load of 1000 Kw. Maximum demand is estimated at 800
KW. Besides, standby electric generator of 320 KVA is proposed to be acquired for meeting
power requirements for boiler, hydrogen checking plant and votator/mixer etc.
-: 13 :- BSA MARGARINE.
Furnace Oil/Gas:
Boiler is package type and natural gas fired. It is estimated that gas eqvt. To 2000 tonnes of oil is
required annually.
Water:
To, meet water requirement for the project estimated to 50,000 litres per day at an estimated cost
of Rs. 500.000/- annually. The sponsors shall get restored the water supply available at plot from
SITE Authority, Nooriabad.
PERSONNEL:
On production side 100 personnel would be required in various categories including shift
engineers, boiler attendant, plant operators and chemist etc. on administrative side 24 personnel
including required whereas on sales side 6 personnel would be needed.
TRANSPORTATION:
Hired transport would be used for raw material as will finished product. However, Rs.1.500
million has been earmarked for purchase of one small tanker and othervehicles to be used for day
to day business.
ENVIRONMENTAL POLLUTION HAZARDS:
Excess carbon di-oxide released from the plant would be observed in water pose bi
environmental pollution hazard.
CONSTRUCTIO SCHEDULE:
The proposed project is expected to commence commercial production by February, 1994 as

detailed in Annex-III
- 14 - BAS MARGARINE
IV- COST OF THE PROJECT & FINANCIAL PLAN
I. COST OF THE PROJECT
Total fixed cost of the proposed project has been estimated at Rs. 39.066 million as per detail
given in Annex-IV. The initial working capital to be contributed by the sponsors has been
estimated at Rs. 8.534 million (annex-V). The summary of the total cost is given below:
(Rs. In 000)
S. NO. PARTICULARS COST COST OF BE TOTAL
ALREADY MET APPRAISED
MET COST
1. Land 60 600
2. Building 3522 2116 5638
3. Machinery (Installed Cost) 30276 30276
4. Vehicles 1500 1500
5. Furniture / Fixture 500 500
6. Pre-Operating Expenses 552 552
Total Fixed Cost: 4122 34944 39066

7. Net Initial Working Capital 8534 8534
Total Cost 4211 43478 47600
II. FINANCING PLAN
The above cost has been proposed to be financed as under:
(Rs. In 000)
Total
Cost
Debts:
IDBP L/C Assistance (LMM) 24150
IDBP L/C Assistance (BOR) 380
Directors’ Loan 650
Paid Up Capital
Sponsors Contribution 19000
Total 47600
III. DEBT EQUITY RATION:
The debt equity ratio in the fixed cost of the proposed scheme is estimated at 73:27 The debt
equity ratio in the overall cost of the project will be 60:40 which is considered satisfactory. The
sponsors stake in the total cost of the project in Rs. 19.650 million i.e. 41%.
IV. SECURITY
The proposed IDBP local currency loan of Rs. 27.950 million (Rs. 24.150 million under SBP
Scheme for LMM and Rs. 3.800 million from Bank’s Own Resources) will be secured by a first
charge on the fixed assets of the company value estimated at s. 39.066 million on completion of
the project. Project assets will provide security coverage of 1.37 times. The sponsors will provide
outside collateral in shape of urban property to the extent of 25% of financial assistance worth
Rs. 6.990 million. The directors of the company will also provides their personal guarantees.
These security arrangements are considered satisfactory.

V- MARKET PROSPECTS
COST OF THE PROJECT
Margarine was developed by French Chemist H. Mege-Mouries in the late 1860’s.
In Pakistan margarine (Industrial and Table) was introduced by M/s. Lever Brothers in 1985
under the brand name of “Blue Band Margarine”.
Now, industrial margarine is also being manufactured by M/s. Agro Processor (Pvt.) LTd.,
Karachi. Another two new units in Karachi namely M/s. N.Y. Oil Mills (Pvt.) Ltd. and M/s.
Saigal Ghee Mills (Pvt.) Ltd. would likely to commence production of margarine in mid of 1993.
Product Definition
Margarine and shortening are diversified edible fat products and can be classified under the
category of less cholesterol caloric contained food products obtained from various types of
vegetable fats of saturated categories.
Types
There are mainly two types of margarine i.e. Table Margarine and Industrial Margarine, whereas
shortening is also a type of industrial margarine which is without water.
Uses of Margarine / Shortening
Table margarine is a partial substitution of butter used by house holds whereas industrial
margarine / shortening is used a s fat in bakeries items (patties, cream roll, ties, baker khani pillar
sticks etc.) and other industrial end-users like confectionaries, ice cream and biscuits
manufactures.
RAW MATERIALS
The basic raw materials are BD palm oil and soya bean oil, besides, other additives namely citric
acid (food grade), phosphoric acid (for soya bean oil) and vitamin A&D
The import of palm oil and soya bean oil during last five years are given in the following table:
Table – I
Import of Oil
(Qty: Tons)
Year Palm Oil Soyabean Oil

1987-88 458256 500313
1988-89 475007 383744
1989-90 594131 63219
1990-91 687957 271665
1991-92 886000 N.A.
Source : Foreign Trade Statistics
These edible oil are being imported mainly from Argentina, Malaysia and the USA
DOMESTIC PRODUCTION CAPACITY
At present four units in organized sector-three units in Sindh and one in Punjab (R.Y. Khan) are
engaged in the production of margarine with a combined installed capacity of 22800 tons,
details of which are given below:
S.No. Name Capacity (M.Ton)

1. M/s. Lever Brothers Pakistan Ltd. Rahim 7500
Yar Khan
2. M/s. Agro Processors & Atmospheric 900(22800)

Gases (Pvt). Ltd, Karachi
3. M/s. Nutri Pak Food Industries (Pvt) Ltd. 5400

Karachi
4. M/s. H.M. Oil Mills Ltd, Karachi 9000

(under implementation)
5. M/s. Saigal Ghee Mills (Pvt) Ltd. 24000
Total Installed Capacity by 1992-93 46800
NOTE: * National Bank of Pakistan Sanctioned financial assistance to M/s. Saigol

Ghee Mills (Pvt) Ltd. in 1990 for expansion of their existing ghee unit for making industrial
margarine with an installed capacity of 24000 tons. The unit is expected to commence
production in July, 1993.
As can be seen from above table that industrial margarine is being produced by ghee/cooking oil
mills and there is no sales tax/excise duty on production of these items whereas production of
margarine in subject of sales tax (12.5%). Therefore, they hide the production of margarine and
market their product in the name of “Industrial Fat”
Thus authentic production figures of margarine are not available however, it was reliable learnt
that M/s. Lever Bothers, Agro Processes and Nutri Pak are working at 80% capacity while the
remaining unit namely H.M. Oil Mills has just started production and expected to utilize 50% of
its installed capacity in 1992-393 on the basis of capacity utilization, the estimated production
therefore was around 11040 tone during 1991-92
DEMAND FOR INDUSTRIAL MARGARINE
The demand for industrial margarine / shortening stems for bakeries, biscuit, confectionary and
ice cream manufacturers and to the some extent from “Desi Sweet” producers like Ahmed Food
Industries (Pvt) Ltd. and by hotels / restaurants for frying purposes.
The demand for industrial margarine / shortening can be worked out by considering the
following factors of industrial end-users and bakeries:
i. Installed capacity, capacity utilization and percentage of use by end users (biscuit,
confectionary and ice cream manufacturers);
ii. Total number of bakeries and their average annual consumption of industrial margarine
1. Installed Capacity of Biscuit, Confectionary

and Ice Cream Manufactures
The installed capacities of industrial end users of industrial margarine / shortening is given
below:
Table – II
Installed Capacities of Biscuit, Confectionary and
Ice Cream Manufacturers in Pakistan
(Qty: in Tons)
Province Biscuit / Wafers Confectionary Ice Cream

(Toffees etc.)
Sindh 24572 19600 3252
Punjab 10344 19510 3616
Balochistan 4800 1180 448
NWFP/Islamabad 3328 1457
Misc. 1604
Total 43066 53754 8920
Source: Market Enquiries

2. BAKERIES
In order to ascertain the demand for industrial margarine by bakeries a sample survey of bakeries
located in five cities namely Lahore, Faisalabad, Rawalpindi/Islamabad and Peshawar was
undertaken. The details of daily consumption pattern of industrial margarine used by bakeries are
summarized below:
Table – III
Name of City Bakeries Bakeries Not Using Ice Cream

Surveyed Margarine
Lahore 27 9 33%
Faisalabad 20 8 40%
Rawalpindi/Islamabad 32 3 9%
Peshawar 11 1 9%
Karachi 10 2 20%
Total 100 23 23%
Table – IV
Daily Lahore Faisalabad Pindi/ Peshawar Karachi Total

Consumption Islamabad
No. of Bakeries 27 20 32 11 10 100
Margarine
Usage Kgs/Daily 373 129 410 132 142 1186
Av: (Kgs. Day) 13.82 6.45 12.81 12.00 14.2 11.86
- Margarine consumption of a bakery per annum = 4.2 tons

- No. of Operating days = 360
Number of Bakeries:
The total number of bakeries in Pakistan as informed by various bakery owners / association are
around 17000 to 18000. It is pertinent to mention that total number of bakeries as listed by
Federal Bureau of Statistics (FBS) were 6281 in 1983-84 in the country as per PSIC Survey in
1987. The survey conducted by Punjab Small Industries Corporation (PSIC) in 1987-88 have
taken a growth rate of 6% to 25% for bakeries during the period 1983-88. Assuming a
conservative growth of 10% per annum, the bakery units in the country would number between
17000 to 18000 and the same seems to be justified
ANNEX – VIII (Page-5)
M/S. MARGARINE (PVT) LTD.
B-Furnace Oil
Quantity / Ann 2000

@ Rs. / Ton 2400
Furnace Oil = Rs. 4800
C-Water
Quantity / Ann 5000
@ Rs. 100
Total Cost = Rs. 500
Power, Water, Fuel & Other (Year wise)
Year of Operation
Yr 1 Yr2 Yr 3 Yr4
Fixed Cost 1740 1740 1740 1740
Variable Cost 5806 6387 6968 7548
7546 8127 8708 9288
(1) Depreciation (Rs. In 000)
Cost Rate % Amount

Machinery 30276 0.1 3028
Building 5638 0.05 282
3309
(2) Depreciation (Rs. In 000)
Cost Rate % Amount

Furniture / Fixture 500 0.15 75
Building 1500 0.2 300
375
ANNEX-IX
Estimate of General & Admin Expenses

& Selling Expenses
Years of Operation General & Admin Yr. 1 Yr. 2 Yr. 3 Yr. 4

Expenses
Salaries – Office Salaries 1557 1635 1713 1794
Printing & Stationery 200 250 300 350
Postage, Telephone, Telegram, Elect 300 350 400 450
Rent Rates, Taxes & Insurance 100 125 150 175
Traveling Expense 500 600 700 800
Legal & Entertainment 100 125 15 175
Depreciation 375 375 375 375
Pre-Operating Expenses Written off 110 110 110 110
Sub-Total (A) Total 3242 3570 3898 4230
Packing & Selling Expenses Yr. 1 Yr. 2 Yr. 3 Yr. 4

Year of Operation 2228 2576 2811 3047
Commission & Distribution 100% 5470 6146 6709 7276
(2) Office Sales Staff Salaries
(Aamir) Office Salaries) No. Salary Rs. Salary Rs.

Per Month Per Annum
General Manager 1 15000 180000
C. Accountant 1 8000 96000
Accountant 2 4000 96000
Accountant Asstt. 2 3000 72000
Labour Officer 1 3000 36000
Security Officer 1 3000 36000
Store Keeper 1 2500 30000
Typist / Clerks 4 1500 72000
Driver 3 1500 54000
Peon 4 1000 48000
Chowkidar 4 1000 48000
Sub-Total (A) Total 768000
ANNEX – IX (Page-2)
2. (B) Sales Staff No. Salary Rs. Salary Rs.

Per Month Per Annum
Sales Manager 1 8000 96000
Sales Officer 2 3500 84000
Sales Assistant 3 2500 90000
Sub-Total 2 (B) 270000
TOTAL 2 (A+B) 1038
(Rs. In 000)
Year of Operation Yr. 1 Yr. 2 Yr. 3 Yr. 4

Basic Salary 1038 1038 1090 142
Increment 5.00% 52 52 54
Total Basic Salary 1038 1090 1142 1196
Fringe Benefits 50.00% 519 545 571 598
Total Office Salaries 1557 1635 1713 1794

ANNEX-X
M/S. BSA MARGARINE (PVT) LTD. (PROPOSED)
Financial Expenses
Year Yr. 1 Yr. 2 Yr. 3 Yr. 4

IDBP L/C Assistance 1034 2069 2069 2069
Cash Back Finance 5649 6302 6879 7151
Total Financial Expenses 6683 8371 8947 9520
ANNEX-X-A
M/S. BSA MARGARINE (PVT) LTD.
COMPUTATION OF RESALE PRICE
COMPUTATION OF RESALE PRICE
1. Bank Finance 24150 3800

2. Resale Date 1 Feb, 93 1 Feb, 93
2. Date of Com Production 1 March, 93 1 March, 93
4. Mode of Repayment (½ Year) 16 20
5. Date of Repayment of 1st 1 Sept, 94 1 Sept, 94
6. Rate of Markup % 8 18.5
7. Rate of Markup % 22 22
Calculation of Mark up During Construction and Grace Period

L.M.M.
Date of Disbursement Amount Debt Pd of Mark-up @

Disbursed Balance Mark-up 8 Ps 22 Ps
0.25 1 Mar, 93 6038 6037.5 6 242 664
0.60 1 Sept, 93 14490 20527.5 5 684 1882
0.15 1 Feb, 94 3623 24150 19 3059 8412
3985 10958
Amount of Installment @ 8 Paisa Rs = 2322 3958

Resale Price @ 8 Paisa Rs. = 37146 63322
Profit of the Bank Rs. = 12996 39172
B.O.R.
Date of Disbursement Amount Debt Pd of Mark-up @

Disbursed Balance Mark-up 8 Ps 22 Ps
0.25 1 Mar, 93 950 950 6 88 105
0.60 1 Sept, 93 2280 3230 5 249 296
0.15 1 Feb, 94 570 3800 19 1113 1324
1450 1724
Amount of Installment @ 16 Paisa Rs = 368

Resale Price @ 16 Paisa Rs. = 7356
Profit of the Bank Rs. = 3556
Amount of Installment @ 22 Paisa Rs = 404

Resale Price @ 22 Paisa Rs. = 8084
Profit of the Bank Rs. = 4284
ANNEX- XI
M/S. MARGARINE (PVT) LIMITED

TAX COMPUTATION
TAX HOLIDAY
ANNEX-XII
M/S BSA MARGARINE (PVT) LTD.
CASH FLOW FORECAST STATEMENT
Year End of Yr 1 Yr 2 Yr 3 Yr 4
Const. Pd
Sources of Funds:
Operating Profit 15517 17592 19159 21214
Add Depreciation & Amortization 3795 3795 3795 3795
Total Funds from Operation 0 19312 21387 22954 25009
Paid-up Capital :
Sponsors 19000
IDBP L/C Assistance 27950
(LMM&BOR)
Director’s Loan (P.B) 650
Increase in Short Tem Borrowings 30951 3581 3158 3139
Increase in Creditors 0 16629 1663 1663 1663
47600 663921 26632 27775 29811
Including Capital Expenditure 39066
Interest / Profit on:

Shot Term Borrowings 5649 6302 6879 7451
Amortization of:
IDBP L/C Loan 2781 5563 5563 5563
Dividend 0 2850 2850 2850
Worker’s Participation 0 442 461 511
Inch. in Current Assets 55356 6854 5690 5661
Total 39066 63785 22010 21442 22035
Cash Surplus During the Year 8534 3107 4622 6333 7776
Cash at the Beginning of the Year 8534 11651 16263 22596
Cash at the End of the Year 8534 11641 16263 22596 30372
ANNEX –XIII
Forecast Balance Sheet
Year End of Yr 1 Yr 2 Yr 3 Yr 4
Const. Pd
Current Assets
Cash 8534 11654 16263 22596 30372
Stocks: 44044 49074 53543 57984
Stores & Spares 172 258 301 344
Debtors 11140 12878 14056 15233
Total 8534 66997 78472 90495 103932
Fixed Assets Net. 39066 35271 31476 27681 23886
Total Assets 47600 102268 109948 118176 127818
Current Liabilities
Short Term Borrowing’s 30951 34532 37690 40829
Worker’s Participation Fund 442 461 511 585
Dividend 2850 2850 2850 2850
Income Tax 0 0 0 0
Creditors 16629 18292 19955 21618
Total 50872 56135 61006 65882
Long Term Liabilities

IDBP L/C Assistance 44502 41720 36158 30595 25033
Less: Markup on L/C Assistance 16552 15517 13448 11380 9311
Director’s Loan (NBP) 650 650 650 650 650
28600 26853 23359 19866 16372
Total Liabilities 28600 77725 79495 80872 82254
Owner’s Equity
Paid up Capital Sponsor’s 19000 19000 19000 19000 19000
Retained Earnings 0 5543 11453 18305 26564
Total Equity 19000 24543 30453 37305 45564
Total Liabilities & Equity 47600 102268 109948 118176 127818

ANNEX – XIV
BREAK EVEN ANALYSIS
Operational Yr 4 Variable
Total Fixed
Raw Material 216181 0 216181
Factory Wages & Salary 4553 2276 2276
Depreciation & Amortization 3795 3795 0
Water, Power & Fuel 9288 4644 4644
Repair & Maintenance 718 359 359
Stores & Spares 573 0 573
Excise Duty 38081 0 38081
W.P.P. Fund 585 0 585
M. Overhead 4626 02313 2313
Financial Expenses 9520 5712 3808
Selling Expenses 3047 0 3047
G.& Admn Expenses 3744 1872 1872
Total 294712 20972 273740
Sales Value of Production = 304654

Break Even Analysis = 206693
Capacity Utilization Required = 44
Margin Safety = 21
ANNEX – XV
Internal Financial Rate of Return
Year Capital Operation Depreciation Worker’s Income Net Cash

Qutlay Income Amortization Participation Tax Inflow
Expense Funds
0 47600
1 15517 3795 442 0 -476010
2 17592 3795 461 0 18870
3 19159 3795 511 0 20926
4 21214 3795 585 0 22443
5 20738 3795 560 0 24424
6 1500 20738 3795 560 6600 23972
7 500 20738 3795 560 6720 22472
8 20738 3795 560 6818 16872
9 20738 3795 560 6897 17155
10 --11953 3795 3795 560 6897 29029
Rate = 43
(Enter Rate upto NPV=0) = -153
Internal Financial Rate of Return = 43
Salvage Value
Lend 600
Building 2819
Furniture / Fixture 0
Vehicles 0
W. Capital 8534
11953
ANNEX – XVI
Internal Economic Rate of
Year Capital Sales Raw Labour Overhead Gen. Admn Total

Qutlay Board Material at Cost Exp & Selling Cash
Price Border Price Exp
0 39066
1 144794 120209 4118 11760 3428 -39066
2 167379 132230 4323 13019 4026 5279
3 182694 144251 4537 14112 4511 13781
4 197987 156272 4761 15206 4997 15283
5 198800 156272 4995 15211 5159 16752
6 1500 198800 156272 4995 15211 5159 17163
7 500 198800 156272 4995 15211 5159 15663
8 198800 156272 4995 15211 5159 16663
9 198800 156272 4995 15211 5159 17163
10 -11953 198800 156272 4995 15211 5159 17163
Rate = 31.68
(Enter Rate upto WPV=0) = 121
Internal Economical Rate of Return = 31.68
Salvage Value
Lend 600
Building 2819
Furniture / Fixture 0
Vehicles 0
W. Capital 8534
11953
ANNEX-VIII (PAGE-3)
Factory Wages & Salaries
(a) Fixed (Rs. In 000)
Types of Staff No. Salary R Salary Rs.

Per Month Per Annum
Production Manager 1 12000 144000
Shift Manager 4 6000 288000
Boiler supervisor 1 4000 48000
Plant Operator 27 2500 810000
Skilled Worker 50 1500 900000
Boiler Attendant 4 2000 96000
Technician 4 2000 96000
Chemist 1 4000 48000
Lab. Assistant 4 2000 96000
Store Keeper 2 2000 48000
Security Men 2 2000 48000
Sub Total (a) 2622000
Year of Operation Yr. 1 Yr. 2 Yr. 3 Yr. 4

Basic Salary 2622 2622 2753 2894
Increment of % 0.05 131 139 145
Total Basic Salary 2622 2753 2891 3035
Fringe Benefits @ 0.5 1311 1377 1445 1518
Total factory Wages Salaries 3933 4130 4336 4553

ANNEX-VIII
Domestic Cost per Dollar Earned
(For the 4th Year of Operation 19961-1997 (Rs. In 000)
a) Charge on Domestic Capital

i. Markup on IDBP local car assistant 2069
ii. Markup on shot term borrowings 7451
iii. Markup on long term Ptc’s 0
iv. Differential Amount of interest on
IDBP L/C Loan @ 5% 0
9520
b) Depreciation on Domestic Capital :

i. Machinery & Equipment @ 10% p.a 2865
ii. Building @ 5% p.a. 282
iii. Furniture / Fixture @ 15% p.a. 75
iv. Vehicles @ 20p.a 300
v. Pre-Operating Expenses @ 20% p.a 110
3632
c) Current Domestic Cost:

i. Raw Materials 156272
ii. Water, Power & Fuel 9288
iii. Repairs & Maintenance Overheads 718
iv. Stores & Spares 573
v. Other Manufacturing O/H 4626
vi. Factory Wages & Salaries 4553
vii. Admin and Selling Expenses 6791
182822
Total Domestic Cost (A+B+C) 195974 195974
ANNEX-XVIII (Page – 2)
2. Foreign Exchange Cost
a. Charge on DBP Foreign

Currency Loan @ 9% 0
b. Depreciation on Imported
Machinery @ 10% 0
c. Stores & Spares

d. Repatriation of Profit / Royalty / Equity 0
Total Foreign Cost (Aamir+B+C)
3. Foreign Exchange Saved / Earned 197987

Manufacturing this product Mix
4. Net Foreign Exchange / Earned

Manufacturing this product mix
at home (3-2)
5. Net Foreign Exchange / Earned in

terms of USA Dollar
@ Rs. 26/US 7615
Foreign Exchange rate of the prod. 25.74

ANNEX-XVIII
M/S BSA MARGARINE (PVT) LTD.
SENSITIVITY ANALYSIS
As per Cost of Cost of Cost of Sales price

Project Raw Project Project & raw lower by
report (4th Materials Higher by materials 10%
Year Higher by higher by
10% & 20%
304651 304651 304651 304651 274186
Cost of Sales:
Raw Material 216181 237799 216181 237799 216181

Excise Duty 38081 38081 38081 3801 38081
Water, Power & Fuel 9288 9288 9288 9288 9288
Labour Cost 4553 4553 4553 4553 4553
Stores & Spares 573 573 573 688 573
Repairs & Maint. 718 718 718 862 718
Other Mfg Overheads 4626 4626 4626 5552 4626
Admin. & Selling Exp. 6791 6791 6791 6791 5336
(Less: Dep/Amt)
Dep. & Amt. of Prela. Exp. 3795 3795 4554 4554 3795
Financial Exp. 9520 9520 11424 11424 9520
Stock Adjustment -1170 -1170 -1170 -1170 -1170
Total 292957 314575 296804 318422 291502
Profit after Financial Exp. 11694 -9924 7848 -13771 -17316
Workers Participation Fund 585 -496 392 -689 -866
Net Profit B/T 11109 -9428 7455 -13082 -16450
Less: Income Tax 0 0 0 0 0
Net Profit 11109 -9428 7455 -13082 -16450

Add: Depreciation 3795 3795 4554 4554 3795
Financial Exp. 9520 9520 11424 11424 9520
Cash Generated from 24424 3887 23433 2896 -3135
Operations
Applications:
Financial Exp. 9520 9520 11424 11424 9520

Liquidation of Longer Loan 3494 3494 4193 4193 3494
Total Applications: 13014 13014 15617 15617 13014

Debt Servi Coverage (Times) 1.88 0.30 1.50 0.19 -0.24
ANNEX-XIX
EFFECTIVE ATE OF PROTECTION

(4th YEAR)
(Rs. In 000)
A. VALUE ADDED (DOMESTIC PRICES):
i. Value of Production: 304266

ii. Less: Cost of Production
Raw Material 209065
Stores & Spares 573
Utilities 988
Repairs & Maintenance 714
Other Overheads 4626
Total (ii) : 224266

Value Added at Domestic Prices ; 80385
B. VALUE ADDED (WORLD PRICES) :
i. Value of Production: 197987

ii. Less: Cost of Production
Raw Material 152715
Stores & Spares 573
Utilities 9288
Repairs & Maintenance 714
Other Overheads 4626
Total (ii) : 167616

Value Added at Domestic Prices ; 30071
ERP = Value Added at Domestic Prices – Value added at Would at World Prices
Value Added at World Prices
ERP = 80385 – 30071

30071
ERP = 67%
EXPLANATORY REMARKS;
ERP has been worked out on the following basis:

1. Imported aw Material at C&F and Local Raw Material at 50%
2. Sales at Border and Domestic Prices
3. Other Inputs at Project Cost
The survey of bakeries reveal that out of 100 bakeries (sample) 21 (233%) bakeries donot use
margarine; eithr tehey own margarine by crude method or use butter. The bakeries using butter
are fewer in number.
The summary of installed capacities of major end users, their percentage of capacity utilization
and usage are of industrial margarine by each end user in summarized in below table:
TABLE –V
SUMMARY OF INSTALLED CAPACITY OF END USER AND
USAGE RATE OF MARGARINE / SHORTENING
The installed capacities of major end users alongwith usage are of margarine / shortening is
given below:
Sub-Group Installed Capacity Usage rate of

Capacity Utilization Margarine/ shortening
(M.Ton)* (Estimated by weight ******
%)
A. Biscuits 43044 38740 (90%
Manufacturing
B. Confectionery 53747 48372 (90%)

Manufacturing
C. Ice Cream 8920 8028 (90%)

Manufacturing
D. Bakery Products 17800 13700 4.2 tons/yr/bakery.****

Manufacturing (No.) ** ***
Source : Table II, III & IV.
* The details regarding break-up of capacities has already been worked out separately in
Table IV.
** The estimated total number of bakeries in Pakistan based on survey / enquiries.
*** Bakeries using industrial margarine (i.e. 77% of 17800)
**** he usage ate of industrial margarine as revealed by the sample survey is 4.2
tons/bakery/annum (Page I)
***** Based on enquiries from manufacturers / end users

One the basis of the foregoing analysis and Table-V the projected demand has been worked out
the following assumptions.
Assumptions:
i. No. of Bakeries using margarine :13700
ii. Conservative usage rate: 4.0 tons/bakery/annually on the basis of survey.
iii. Growth rate in demand has been taken conservatively at 55 per compatible with change
in dietary habits 1% increase in disposable in come 1% and 3% increase in population.
TABLE-VI
Projected Demand
Year Bakery Demand Industrial Demand Total Demand

1992-93 54800 7638 62438
1993-94 57540 8020 65560
1994-95 60417 8421 68838
1995-96 63438 8842 72280
1996-97 66610 9284 75894
Source: IDBP Estimates
Estimates of Supply:
It is been assumed that during 1990-91 three units namely M/s. Lever Brothers, M/s. Agro
Processor and M/s. Nutri Pak have utilized optimum level of efficiency at 80% of their installed
capacity and supplied produced 11040 tons of industrial margarine.
TABLE-VII
Future Supply Schedule
Year Total Supply (Tons)

1991-92 11040
1992-93 11040 + 4500a + 3000b 18540
1993-94 11040 + 5400 + 12000c 32040
1994-95 11040 + 6300 + 14400 + 9000d + 9000 53940
1995-96 11040 + 4800 + 16800 + 10800 + 10800 61440
1996-97 11040 + 4800 + 19200 + 12600 + 12600 67440
Source: IDBP Estimates
Assumptions:
Capacity Utilization at 50%, 60% 70% and 80%
a. M/s. H.M. Oil Mills, Karachi (9000 tons)
b. M/s. N.Y. Oil Mils, Karachi (6000 tons)
c. M/s. Saigal Ghee Mills, Karachi (24000 tons)
d. M/s. Pan Asia Food Products, Nooribad (19000 tons)
e. M/S. MARGARINE (Pvt) Ltd. Nooriabad (19000 tons)
TABLE-VII
Demand / Supply Gap
(Tons)
Year Total Demand Total Supply Gap

1992-93 62438 18540 43898*
1993-94 65560 32040 33520
1994-95 68838 53940 14898
1995-96 72280 61440 10840
1996-97 75894 97440 8454
Source: Table VI & VII
* Presently the gap is being bridged by using margarine / fats made by crude method and /
or slightly by butter.
THE PROPOSED SCHEME
The proposed scheme envisages to producing industrial margarine / shortening and by products.
THE PROPOSED PRODUCT MIX:
i. Main Products: Industrial Margarine/Shortening 18000 tons/annum
ii. By-Products: Liquid Soap 1800 tons/annum

Chain Lubricants 3500 “ “
Carbon Di-Oxide 150 “ “
THE PROPOSED MARKETING MIX:
The intended marketing mix of M/S. MARGARINE would be as follows:
1. The Product:
The proposed product is industrial margarine/shortening which is used with different melting
points by bakeries, confectioners, ice cream makers where as shortening is used by biscuit
manufacturers. M/s. Lever Brothers are marketing their product in the brand name of “Uni
Puff/Master Puff.” The brand name of Agro Processor’s product is “Taqat”, whereas “Maza
Industrial Fat” is being marketed by M/s. M.H. Oil Mills.
2. PRICE:
The intended ex-factory price of 16 kgs. Carton would be Rs. 380/-
3. BY-PRODUCTS
1. Liquid Soap Rs. 12000/- ton

2. Cain Lubricant Rs. 14000/- ton
3. Carbon Di-oxide Rs. 45000/- ton
4. PROMOTION
The samples of products shall be provided to the bakeries to the bakeries and other industrial
end-users for test / use.
5. PLACE
M/S. MARGARINE proposed to appoint distributors in main cities of Pakistan especially in

Karachi and other parts of Sindh.
Manufacturer
Distributor
Direct Purchases Door to Door Delivery
CONCLUSION
From the foregoing analysis, the conclusion drawn that proposal of M/S. MARGARINE (*Pvt)
Ltd., Nooriabad to setup an industrial margarine / shortening manufacturing unit would not face
difficulty in marketing their product if they could produce good quality product and execute an
efficient marketing / sales promotion strategy.
VI- FINANCIAL PROJECTIONS
1. PROFITABILITY
The projections of financial operation of he proposed project are given in Annex-VI. A summary
is given below:
1st Yr. 2nd Yr. 3rd Yr. 4th Yr.

Sales Revenue 222802 257553 281120 304561
Gross Profit 20988 23738 25868 28491
Net Profit before Tax 8393 8761 9701 11109
Net Profit after Tax 8393 8761 9701 11109
Ratios (%)
Gross Profit to Sales 9.42 9.22 9.20 9.35
Operating to Sales 6.96 6.86 6.82 6.96
Pre-Tax Profit to Sales 3.77 3.40 3.45 3.65
Return on Owners’ Equity 38.55 31.86 28.64 26.81
Return on Capitalization 19.05 20.58 21.21 22.13
The ratios of gross profit to sales, operating profit to sales and pre-tax profit to sales expected to
be achieved are considered satisfactory from profitability point of view.
2. DEBT SERVICE COVERAGE
The debt servicing capabilities o the project for the first four years would be as follows:

SOURCES
Net Profit after Tax 8393 8761 89701 11109
Add: Depreciation and 3795 3795 3795 3795
Amortization
Financial Charges 6683 8371 8947 9520
Total 18870 20926 22443 24424
Liquidation of:
IDBP L/C Assistance 1747 3494 3494 3494
Financial Expenses 6683 8371 8947 9520
Total 8430 11865 12441 13014
Debt Service Coverage 2.24 1.76 1.80 1.88

(Times)
Debt service coverage as indicated above reflects availability of a satisfactory safety margin.
3. BREAK EVEN ANALYSIS
The project will be break even at a sales value of Rs. 206.693 million requiring capacity
utilization of 44 per cent (Annex-XIV). This can be achieved with the normal production
efficiency.
4. CASH FLOW
Internally generated funds are expected to be sufficient enough to service IDBP’s loan and pay
15% dividend from the first year of operation to be share holders. The company would be
maintaining satisfactory liquidity level after paying the above mentioned dividend (Annex-XII)
5. INTERNAL FINANCIAL RATE OF RETURN (IFRR)
The IFRR of the proposed project works out to be 43% (Please refer to Annex-XV). IFRR is high
due to high turn over as compared to capital cost of the project.
6. SENSITIVITY ANALYSIS
Sensitivity analysis at Annex-XVIII of the project under different assumptions has been carried
out. The project is highly sensitive to decrease in selling prices and increase in raw material cost.
At present circumstances, the prices are not likely to decline. Increase in raw material prices is
reflected in the end product’s price. The recent increase of Rs. 0.50 Kg and Rs. 1 kg in the prices
of palm oil and soyabean oil has resulted in increase of margarine price from Rs. 21.50 kg to
24.60 kg.
VII- ECONOMIC EVALUATIONS
1. CONTRIBUTION TO GNP
The project after implementation would contribute to the GNP of the country as under

Value of Production 222802 257553 281120 304651
Less: Intermediate Inputs
Raw Material 166293 182922 199552 126181
Stores and Spares 287 430 501 573
Water, Power and Fuel 7546 8127 8708 288
Repairs & Maintenance 359 539 628 718
Other Mfg. Overheads 3568 3923 4275 4626
Rent, Rates, Taxes & Ins. 100 125 150 175
Postage, Teleph, Telgm, Elec 300 350 400 450
Stationary & Printing 200 250 300 350
Traveling & Conveyance 500 600 700 800
Sales Tax / Excise Duty 27830 32194 35140 38081
Advertising & Selling Exp. 2228 2576 2811 3047
Legal & Entertainment 100 125 150 175
Total Intermediate Inputs: 209332 232161 253315 274465

Value Added 13470 25393 27804 30186
2. VALUE ADDED FOR WORKER:

The value added per worker amounts to Rs. 130620 in the firs year, Rs. 195330 in the second
year, Rs. 213884 in the third year, Rs. 232200 in the fourth year and subsequent years of
operations.
3. EMPLOYMENT OPPORTUNITIES
The project would create new employment opportunities for the 1230 persons in different fields
and categories.
4. CAPITAL EMPLOYMENT RATIO

The fixed capital cost per person to be employed works out of Rs. 0.300 million.
5. INTERNAL ECONOMIC RATE OF RETURN (IERR)

The IERR of the project works out to 31.68% as calculated in Annex-XVI. The IERR is quite
satisfactory.
6. DOMESTIC SOT PER DOLLAR SAVED (BRUNO’S RATIO)

Burno’s ratio comes to Rs. 25.74 US$ saved as calculate din Annex-XVII.
7. EFFECTIVE RATE OF PROTECTION

The effective rate of protection for the project works out to 67% in the forth year of operation i.e.
1997 (Annex-XIX). The ERP is on higher side because government has recently enhanced
regularity duty on edible oil whereas prices of these products in international market has slightly
increased.
VIII- CONCUSSION AND RECOMMENDATION
Having appraised and evaluated, the project is considered technically, economically and
financially viable and suitable for IDBP financing. It is, therefore, recommended that a local
currency assistances of Rs. 27.950 million Rs. 24.150 million under SBP Scheme for locally
manufactured machinery (LMM) and Rs. 3.800 million from Bank’s own recourses) may be
sanctioned to M/S. MARGARINE (Pvt) Ltd., at resale price of Rs. 71.406 million (Net rebate
Rs. 44.502 million) on the Bank’s standard terms and the following conditions:
1. SCHEDULE OF PAYMENTS OF RESALE PRICE

Rs. 24.150 million under SBP Scheme for LMM
Resale price of Rs. 63.322 million to be paid by the customer in 16 equal half yearly installments
of Rs. 6.958 million each (rebated installment of Rs. 2.322 million each will be accepted if paid
within due date):
The resale price and schedule of payments are subject to change as may be determined by IDBP
as soon as practicable or when purchase price has been paid by IDBP.
Rs. 3.800 million from bank’s Own Resources
Resale price of Rs. 8.804 million to be paid by the customer in 20 equal quarterly installments of
Rs. 0.404 million each. In case if payment is made on or before due date the amount of
installment shall stand reduced to Rs. 0.368 million.
The resale price and schedule of payments are subject to change as may be determined by IDBP
as soon as practicable or when purchase price has been paid by IDBP.
2. BANK’S CHARGES
i. Commitment charges @ ¼ percent of the 1st quarter and @ ½ percent per quarter for the
subsequent quarters on the undisguised portion of financial assistance.
ii. Charges for IDBP’s interim finance as per rates in fore, presently @ 22 paisas per rupee
per annum (without rebate).
iii. Documentation charges @ ¼% of financial assistance.

iv. Monitoring fee @ 0.125% per annum on the outstanding liability amount.
v. Other charges as per rates inforce.
3. DISBURSEMENT SCHEDULE
Local currency assistance of Rs. 27.950 million (Rs. 24.150 million under SBP schema for LMM
and Rs. 3.800 million form banks’ Own Resources) shall be disbursed in installment or in full to
the local machinery supplier for purchase of locally manufactured machinery in accordance with
the Bank’s procurement procedure for purchase of locally manufactured machinery. The
disbursement will be made keeping in view security coverage of 1.5 times.
4. DURATION AND REPAYMENT

For LMM scheme
a. Financial assistance under SBP scheme for LMM to be repaid in 10 years including a
grace period of 2 years in 16 biannual installments. First installment of resale price shall
be payable by the company on March 31 or September, 30 whichever date falls first after
2 years from the date of disbursement of 1st installment of IDBP’s financial assistance.
b. For Bank’s Own Resources

Financial assistance from Bank’s Own Resources to be repaid in 7 years including a grace
period of 2 years in 20 quarterly installments. First installment of resale price shall e
payable installments. First installment of resale price shall be payable by the company on
March 31, June, 30, September 30 and December 31 whichever date falls first after 2
years from the date of disbursement of 1st installment of IDBP’s financial assistance
5. SECURITY
Before signing the financing agreement / disbursement of letter of funds the company shall:
i. Transfer the title deeds of land measuring 4 acres located at Nooriabld Industrial Estate,
District Dadu, Sindh in the name of the company and the same will be mortgaged with
the Bank. The cost of land including development charges is estimated at Rs. 0.600
million.
ii. Execute an agreement to mortgage / hypothecate the existing and future fixed assets of
the company value estimated as under:
At the time of Future Total on

Signing of the Assts complete financing
Agre ion ement (existing assets)
A. IMMOVEABLE ASSETS
i. Land 0.600 - 0.600

ii. Building 3.522 2.116 5.6983
iii. Machinery (installed cost)
B. MOVEABLE ASSETS
(Hypothecation)
i. Furniture & Fixture - 0.500 0.500
ii. Vehicles - 1.500 1.500
Total 4.122 34.392 38.514
(Valid mortgage / hypothecation on the above assets would be created on completion of the
project).
iii. Personal guarantee of the sponsoring directors of the company covering the entire loan
liability. (in case of local currency financial assistance “amount of financial assistance
plus mark up thereon”) till its repayment in full:
iv. Provide outside collateral security comprising of urban property to the extend of 25% of
financial assistance.
6. CAPITAL STRUCTURE
Before signing of financing agreement / disbursement of local currency assistance, the
company shall:
i. incorporate a private limited company under the name ad style of M/S. MARGARINE
(Pvt) Ltd., and submit certificate of incorporation for approval of the bank:
ii. Raise its paid up capital to Rs. 5.000 million and undertake to raise it to Rs. 19.000
million by completion of he project:
iii. Advance interest free director’s loan amounting to Rs. 0.650 million which will not be
repaid ring the currency of IDBP assistance.
iv. Submit an undertaking from the directors of the company to the effect hat they shall
provide any additional amount that may be required for implementation of the project in
case of over run in expenditure in order to complete the project
7. SPECIAL CONDITION
The financial assistance shall further be governed as under:
1. Effectiveness of the sanction will subject to:
a. Satisfactory credit repot in respect of the sponsors of the captioned concern:

b. Deposit of 10% sponsor’s equity.
c. NC from NDFC for creation of IDBP first share on plot and existing building of the
project.
ii. The sponsors will submit an irrevocable stamped undertaking acceptable to IDBP to
restrict to the production of designated items only. In case of default the Bank may
withdraw the financial assistance / loan sanctioned to them by the Bank together with all
dues / over dues under Section 38 of the IDBP Ordinance;
iii. The sponsors will enter into technical know-how agreement with machinery suppliers to
the satisfaction of IDBP regarding margarine plant to ensure desired operating result:
iv. Financial assistance to be provided / sanctioned by the Bank under SBP Schemed for
LMM shall automatically be reduced if the prices of machinery finally selected by the
bank are found on lower side. Also funds under the scheme shall be provided only for the
machinery / equipments eligible.
v. Disbursement of local currency assistance of Rs. 24.150 million under SBP Scheme for
LMM will be made only after funds from Bank’s Own Resources to the turn of Rs. 3.800
million have been allocated by IDBP for this specific project;
vi. The financial assistance of local currency assistance to the extent of Rs. 27.950 million
(Rs. 24.150 million under SBP Scheme for LMM and Rs. 3.800 million from Bank’s
Own Resources) is subject to availability of funds with IDBP.
vii. The local currency assistance of Rs. 27.950 million )(Rs. 24.150 million under SBP
scheme for LMM and Rs. 3.800 million from Banks’ Own Resources) will be subject to
such additional terms and conditions which the SBP have specified or may specify from
time to time in respect of their scheme.
The IDBP loan / financial assistance shall further be governed by the all other general terms and
conditions of sanction.
ANNEX-I
DERAILS OF EXISTING & PROPOSED BUILDING
S.# Description Covered Area (Sq.mt) Rate/agm (Rs.) Appraised cost

(Rs. In 000)
Existing Proposed Total Existing Proposed Existing Proposed Total
1. Refinery section (2 floor) 371 371 742 1800 2500 668 927 1595
including R.M. Godown (G.F.) (F.F)
& Operational Staff Room
at 1st Floor
2. Machinery Hall 297 - 297 1800 - 535 - 535
(Margarine lant & Filling
Section)
3. Liquid Soap & Chain 148 - 148 1800 - 266 - 266
Lubricant
4. Gas Cracking & Chain 167 - 167 1800 - 301 - 301
Machinery
5. Workshop / Laboratory 223 - 223 1800 - 140 - 140
6. Finished Goods Godown 78 - 78 1800 - 401 - 401
7. Boiler House 186 186 - 2000 - 372 372
8. Labour Dornantry - 250 250 - 2200 - 550 550
9. Sub-Station / H.T. Panel 48 - 48 1800 - 86 - 86
10. Office Building 74 78 1800 133 133
11. Pump Room 18 - 18 1800 32 32
12. Under Ground Water Tank 225000 Rs. 3/Lt 675 675
13. Overhead Water Tank 45000 Rs. 3/Lt 135 135
14. Misc. Civil work L/S L/S L/S 150 75 225
including internal Road,
Boundary Wall, Lime
Water pond etc.
Total 3522 1924 5446
Contingencies @ 10% 1925 192
Grand Total : 3522 2116 5638
Note:
1. Construction of Existing building RCC with Pre-fabricated roof slabs of approx. 6 ft
open.
2. Covered area of Existing Building AS per Drawing.
3. Proposed refinery section to be constructed on Existing Ground Floor Section having
covered area of 371 sq. m. roof slabe to be removed and with the additional 4/5 new
columns, two floors refinery section would be constructed to accommodate refinery
machinery. Height of Ground floor would be 22 feet and first floor 40 feet.
4. Height of existing building as per drawing is 14 feet.
5. Estimation of existing factory building reportedly constructed running 1996-97 has been
worked out keeping in view the type and quality of construction.
6. construction of boiler house would be asbestos sheets over steel trusses.
7. Ground Floor, First Floor
ANNEX-I
LIST OF LOCALLY MANUFACTURED MACHINERY
S.No. Description Capacity Qty. Unit Total

Price Cost
OIL STORAGE & HANDLING
1. Crude Oil Storage Tanks (26’D x 500000 Lit 4 Nos. 350 1400
35’H), Wt. Approx. 24.5 T.
2. Decanting Tank (16’ x 6’ x 6’) 10800 Lit 1 No. 100 100

rectangular with 3 chamber, Wt.
2.9 T
3. Crude oil pumps, Centrifugal type 30 ft 3/min 3 Nos. 100 300

with 15 Hp Motor, starters etc.
PRE-REFEINING SECTION (PRE-NEUTRALIZATION & BLEACHING)

1. Neutralizing Vessel (8’Dx12’H)
wt. 8.95 T 15000 Lit 2 Nos. 300 600
Complete with 10 Hp motor,
M.S. Construction with top open
& conial bottom, speed reducing
gear box, agitation system,
chemical spraying system etc.
2. Soap Lye Tank

(5’Dx5’H) Wt. 0.5 T 200 Lt 1 No. 25 25
3. Soap ye Pumps
(Centrifugal type with 2 Hp 5 ft 3/min 1 No. 25 25
motors etc. )(
4. Bleaching *& Drying vessles 15000 Lit 1 No. 380 380

(8’D x 12’H) Wt. 10.5 T
Complete with 10 Hp motor,
M.S. Cylinderical Construction
with dished top and bottom ends,
speed traducing gears, steam
ejector vacuum system etc.
5. Preparation Vessel (chemical 2250 lit 1 N. 25 25

spraying system (5’Dx5’H).
6. Filter Press Pumps with 15 Hp 7 ft 3/min 2 Nos. 50 100

Motor
7. Filter (Press) 1 N. 150 150

(800mm x 800 mm x 32 plates)
cast steel consecution of plates &
M.S. Construction of frame with
trays, cock, valves etc.
8. Intermediate Oil Storage Tanks 12000 Lt 3 Nos. 50 150

Size: (8’ x 8’ x 8’ x 6 mm) Wt. 1 T
(M.S. Welded Construction with
steam coils & fittings)
9. Bleached Oil Pumps, Centrifugal, 20 fit 3/min 2 No.s 50 100

Complete with 7.5 Hp Motor,
Starter etc.
10. Lye Preparation Vessel 3500 Lit 1 No. 25 25

Size: (8’x4’x4’), Wt. 0.5 T
11. Caustic Lye Pump, Compete with 5 ft 3 / min 1 No. 25 25

2 Hp Motor, Starter etc.
12. Measuring Vessel for caustic lye 2500 Lit 1 No. 25 25

(5’Dx5’Hx6mm) WT. 450 Kg.
13. Measuring vessel for Hot Water 2500 Lit 1 No. 25 25

5’Dx5’Hx6mm) WT. 450 kg
14. Vacuum system ejector, 2.5 kg/sec. 1 No. 25 25

M.S. welded concoction with
nozzle, top dished end, bottom
cone equipped with steam trap,
pressure reducing valve and catch
pot.
15. Vacuum Receiver 2 Nos. 12.50 25

Size: (325mmx400mmx3mm)
16. Barometric Condenser 2 Nos. 12.50 25

Size : (325mmx1500mm)
Tube bundle in shell with fittings
etc.
17. Automatic Air Compressor plant, 87.3 ft 3 per 2 Nos. 100 200
450 Psi piston type complete with min
7.5 H motor and receiver etc. (to
blow off spent fuller’s eath in filter
press)
18. Oil, Soap, Water separation Tank, 5500 Lit 1 No. 50 50

Size: (13’x4’x4’x5mm) M.S.
Construction with 3 chamber at
different level to decant oil, soap
and water
19. Piping, valves and fittings 1 Lot 200
Sub Total 2180
HYDROGENATION SECTION
1. Hydrogenation Autoclave 15000 lit 2 350 700
(6’-10”Dx16’-5”H), Wt. 9.5 T
complete with 10 Hp motor M.S.
Consecution with top and bottom
dished ends having light and sight
glasses etc. speed reducing gear
box, hydrogen spraying system,
pressure reducing system, heating
and cooling coil and agitation
system
2. Filter press pump complete with 7 ft 3/min 1 No. 50 50

15 Hp motor
3. Filter press 1 No. 150 150

(800mmx800mmx32 plates) cast
steel construction of plates and
M.S. construction of frame with
trays, cock, valves etc.
4. Oil cooler / heat exchanger 1 No. 350 350

Size: (30000x2250mm) with 10
Hp motor, gears etc. M.S.
construction with top and bottom
dished ends design based on 1:1
ratio equipped with 10 HP motor,
gears etc.
5. Hydro generated Oil pump 70 ft 3/min 1 No. 50 50

compete with 120 Hp motor
6. Hydro generated oil storage tanks 12000 lit 2 Nos. 50 100

(M.S. tanks with steam coil and
fittings).
7. Catalyst Mixing Tanks 1500 Lit 2 Nos. 25 50

Size : (1200Dx1100mmH)
complete with 3 Hp motor M.S.
Cylindrical construction top open
with flat bottom, gears, steam
coils, agitation system etc.
8. Pressure reducing system M.S. 2 Nos. 12.5 25

construction cylinder cal shape
with for reducing valves and
gauges (to be used in autoclave)
9. Steam ejector system M.S. welded 2 Nos. 25 50

construction cylindrical shape with
nozzle, top dished end, bottom
core equipped with steam trap,
pressure reducing valve and catch
pot
10. Vacuum recover M.S. consecution 2 No.s 25 50

with top and bottom dished end
equipped with 4 half chamber
inversely located.
11. Fatty acid separators 2 Nos. 25 50

Size (400Dx750mmH) M.S.
Cylindrical Construction with
plates and tubes arrangements.
12. Hydrogen Gas drying towers 2 Nos. 25 50

(700Dx2500mmH) M.S.
Cylindrical Construction with
tubes bundles to remove moisture
13. Return gas scrubbers 2 Nos. 20 40

(600x3500mm) M.S. Cylindrical
construction with plates and
retaining valves, fittings.
Sub Total 1715
POST REFINING SECTION (POST NEUTRALIZATION AND BLEACHING
1. Post Neutralizer 15000 lit 1 No. 300 300
2. Post Bleacher 15000 lit 1 No. 380 380
3. Soap lye tank 2500 lit 1 No 25 25
4. Soap lye pump 5 ft 3/min 1 No 25 25
5. Preparation vessel 2250 lit 1 No. 25 25
6. Filter press 1 No 150 150
7. Filter press pump 7 ft 3/min 1 No 50 50
8. Intermediate storage tanks 12000 lit 1 No. 50 50
9. Measuring vessel for Lye 2500 lit 1 No 25 2

10. Measuring tank for hot water 2500 lit 2 Nos. 12.5 25
11. Vacuum receiver 1 No 12.5 12.5
12. Barometric condenser 1 No. 12.5 12.5
13. Vacuum steam ejector 2.5 kg/sec 1 No. 25 25
14. Deodorizer vessel 15 ft 3/min 2 Nos. 50 100

Size: (3200mmx3200mm)
15. Deodorizer Vessel 15000 lit 2 Nos. 400 800

Size: (3200mmx3200mm)
16. Height vacuum equipment, high 760 mm Hg. 2 Nos. 200 400
booseter/3 steam jet
17. Condensate receiver 50 ft 3/min 2 NOs. 50 100
18. Catch pot (1250mmDx1800mmH) 2 Nos. 12.5 25

M.S. cylindrical construction with
top dished ends and conical
bottom
19. Oil Cooler / Heat Exchanger 1 No. 350 350

(10’Dx10’H)
20. Filter press pump complete with 7 ft 1 No. 50 50

motor etc
21. Filter press for polishing (final 12000 lit 2 Nos. 100 100
filter)
22. Finished oil tanks 12000 lit 2 Nos. 50 100

Size : (8’x8’x8’)
Sub Total 3130
BLENDING SECTION
1. Blending tank charging pump 2 Nos. 25 50

complete with 2 Hp motor etc.
2. Blending tanks M.S. Cylindrical 2 Nos. 12.5 25

construction complete with
agitation system
3. Filling tanks M.S. Cylindrical 2 Nos. 50 100

construction
4. Hot Water circulating pump 1 No. 25 25
(2”x1-1/2”)
5. Temperature indicator 1 No. 5 5

(Blending/filling tanks)
Sub Total 205
MARGARINE PLANT
1. Service tanks, clinderical 2000 lit 2 Nos. 150 300

construction with agitation system,
steam coil. (All stainless steel
material)
2. Votator mixer, three shell 1200 kg/her 1 No. 1000 1000

combined structure with high
speed blades driven by 5 Hp
motor, valves, fittings and
mountings etc. (al stainless steel
material).
3. Pinners / polisher two shell

structure with shaft and pins.
Driven by 5 Hp motor, valves,
fittings and mountings etc. all
stainless steel material
4. Chilling / cooling sysem R-22 15 tons 1 No. 800 800

system), complete with 30 HP
motor, condenser filter, etc.
LIQUID SOAP AND CHAIN LUBRICANT SECTION
1. Evaoporaors, M.S. construction 2 Nos. 300 600

with top and bottom dished ends
with tube bundles and separating
plates.
2. Emulsion converter reactor 10000 lit 2 Nos. 50 900

compete with 10 HP motor,
agitator, steam coil, vacuum
system etc. M.S. cylindrical
construction, top dished ends and
bottom cone.
3. Vacuum system (main), three stage 760 mm Hg/ 2 Nos. 350 700
vacuum system. M.S. construction 30’ Hg
with vacuum venture nozzle
system, water drain column, catch
pot etc.
4. Installation pipes, valves and 1 Lot 300

fittings
Sub Total 2500
HYDROGEN GAS GENERATION SYSTEM
1. Natural gas cracking plant, 150m 3/hr 1 No. 4235 4235

comprised of 1 No. reformer / 800 kg. of
cracker & 2 shift convertor, mono CO2 as by-
ethanol amine (MEA) tower, re- product
boiler, pressure balancer etc. to (98% pure
crack and reform the methane and H2)
steam molecule to produce
hydrogen and carbon dioxide gas
as final product, M.S. construction
is involved with electronic control
process equipment, pumps
pipelines fittings and gauges etc.
2. Gas analyzing Kit 1 set 10 10
3. Hydrogen and Oxygen gas flow 1 set 40 40

meter (imported).
4. Low pressure Hydrogen Gas 5250 ft3 1 No. 200 200

holder
Outer shell dia 18’
Inner shell dia 15’ and
height 12ft
M.S. Construction with double
shell structure.
5. High pressure hydrogen gas holder

Outer shell dia 18’
Inner shell dia 15’ and
Height 12 ft.
Special steel alloy
Cylindrical structure with pressure
control devices.
6. Hydrogen Gas compressors Two 5250 ft 3/hr 2 Nos. 150 150

stage, three cylinder oil free,
driven by 25 HP motor water
cooled (imported)
Sub Total 5258

UTILITIES:
1. Pacakge type (dual fired) 12000 lbs/hr 1 No. 3500 3500
Boiler, HMC make, 250 Psi, fire
tube, compete in all respect with
necessary mounting and fitting.
2. Feed water tank 2700 lit 1 No. 30 30

(1200mmxDx5000mmH)
3. Condencate tank 4000 lit 1 No. 25 25

Size: (1100x2200x1800mm)
4. Softening (water) plant 800 lit and 1 No. 100 100

Size: (2500Dx500mmH) and 150 lit twin
(350Dx1500mH) salt dissolving towers tanks
tank and ion exchange vessel etc.
Sub Total 3655
ELECTRICAL EQUIPMENT
1. H.T. Switch Board 1000 KVA 1 No. 430 430
2. Electric taransfomer 1000 KVA 1 No. 640 640
3. L.T. Panel (10 circuits) 1 No. 450 450
4. Distribution Boards 15 Nos. 16 240
5. Cables and joints L.S. 16 175
WORKSHOP EQUIPMENTS
1. Lathe 6’-6” 1` No. 55 55
2. Drill machine (bench type) 1 N. 20 20
3. Bench grinder 1 No. 8 8
4. Welding transformer 450 A,mp. 1 No. 19 19
5. Gas Welding Set 1 set 14 14
6. Hard Grinder (Hitachi) 1 No. 23 23
7. Workshop Tools 1 Lot 12
Sub Total 151

ELECTRICAL GENERATOR
1. Stand by Diesel generating set 320 KVA 1 No. 1594 1594
with Auto Main failure panel, with
necessary mounting and fittings,
Sub Total 1594

Grand Total 28650
BASIS
1. Quotation from M/s. Technegg., 345 – Bhayani Shopping Centre

Block M, Nazimabad, Karachi
2. Quotation from Johnson and Phillip for H.T. Switch Board and Electrical Transformer.
3. Quotation from Sindh Engineering for workshop equipment and L.T. Panel etc.
4. Cost of Diesel Generating set is IDBP’s Estimates
NOTE:
Bank shall finance Rs. 24.150 million under LMM and 3.800 million under BOR. Items (Marked
as*) such as crude oil storage tanks, temperature indicators, gas analyzing kit, gas flow meters,
hydrogen gas compressors and workshop equipment wroth Rs. 1.906 million are not eligible
under LMM financing. Moreover, items such as chilling system of margarine plant, boiler and air
compressor containing imported components to the extent of Rs. 1.000 million shall not be
considered under LMM. All these and other items including standby diesel generating sets shall
be financed from BOR. The balance cost of machinery worth Rs. 0.700 million shall be financed
by sponsors from their own resources.
ANNEX-III
CONSTRUCTION SCHEDULE
S.No. PARTICULARS MONTH AND YEAR
1. Land Already Existed
2. Placement of Plant /Machinery Order March, 1993
3. Modification / Expansion of Existing Factory Building March, 1993

Started
4. Modification / Expansion of Existing Factor Building June, 1993

Completed
5. Fabrication / Arrival of Complete Machinery at SITE September 1993
6. Machinery Installation Completed December 1993
7. Unforeseen Delays February 1994
8. Commercial Production Started March 1994

ANNEX-IV
APPRAISED COST OF THE PROJECT
S. PARTICULARS COST COST TO BE TOTAL

No. ALREADY MET APPRAISED
METD COST
1. Land 600 3600

2. Building 522 2116 5638
3. Equipment & Machinery
i. Local Machinery 28650 28650
ii. Freight / Transpiration 287 287
iii. Installation 1146 1146
iv. Auxiliary Equipment 50 40
v. Contingencies 143 143
Machinery Cost 30276 30276
4. Vehicles 1500 1500
5. Furniture / fixture 500 500
6. Pre-operating Expenses 552 552
Total Fixed Cost 4122 34944 39066
7. Net initial working capital 8534 8534
Total Cost 4122 43478 47600
ANNEX-V
NET INITIAL WORKING CAPITAL
Current Assets Tied-up Yr. 1 Yr. 2 Yr. 3 Yr. 4

Period
Raw Material
Imported 60 Days 32164 35380 38597 41813
Local 30 Days 547 602 657 712
Working in Process 1 Day 710 785 855 924
Finish Gods 15 Days 10622 12306 13434 14535
Stores and Spares 180 Days 172 258 301 344
Debtors 15 Days 11140 12878 14056 15233
Cash 0 759 800 825 850
Total 56115 63009 68724 74410
Current Liabilities
Commercial Bank Borrow
Estimated 70.00% 30951 34532 37690 40829
Creditors 30 days 16629 18292 19955 21618
Total Current Liabilities 47580 52824 57646 62447
Net Initial N. Capital 8534 10185 11079 11963
ANNEX-VI
FORECAST INCOME STATEMENT
Year of Operations Yr. 1 Yr. 2 Yr. 3 Yr. 4
Sales 222802 257553 281120 304651

Cost of Goods Sold 201814 233815 255252 27616
Gross profit 20988 23738 25868 286161

Admin. General and Selling Exp. 5470 6146 6709 7276

Financial expenses 6683 8371 8947 9520
Profit B/F worker’s fund 8834 9222 10212 11694

Worker’s participation
Funds @ 5.00% 442 461 511 585
Net Profit B/F Tax 8393 8761 9701 11109

Income Tax 0 0 0 0
Net Profit A/F Tax 9393 8761 9701 1109

Dividend % input 15.00% 15.00% 15.00% 15.00%
Dividend 2850 2850 2850 2850
Retained Earnings 5543 5911 6851 8259
Profitability Ratios (%)

Gross Profit to Sales 9.42 9.22 9.20 9.35
Operating to Sales 6.69 6.83 6.82 6.96
Pre-Tax Profit to Sales 3.77 3.40 3.45 3.65
Return on Owners Equity 38.55 31.86 28.64 26.81
Return on capitalization 19.05 20.59 21.21 22.13
Net Profit to Sales 3.77 3.40 3.45 3.65
Return on Equity B/T 38.55 31.86 28.64 26.81
ANNEX-VII
SALES ESTIMATE

Capicty Utilization 50.00% 5.00% 60.00% 65.00%
Add Opening Stock of 34 37 41
Working Process 1 Day
Total work in Process 10125 11138 12150 13163
Less: Closing stock of 34 37 41 44
Work in Process 1 Day
Total Production During 10091 11134 12147 13159
The year
Add Opening Stock of
Finish Goods 15 Days 505 557 607
Less: Closing stock of
Finish Goods 15 Days 505 557 607 658
Quantity Available for Sale 9587 11082 12096 13109
9587 11082 12096 13109

Local
Net Sales:
Local 222802 257553 281120 304651
Total Net Sale 222802 257553 281120 304651
Assumptions and Explanation Remarks
Operating Efficiency
Op. Eff: 50.00% 50.00% 60.00% 65.00%

50.00% 50.00% 60.00% 65.00%
50.00% 50.00% 60.00% 65.00%
50.00% 50.00% 60.00% 65.00%
Margarine Liq. Soap Ch. Lub. CO2 Gas

Operation time (shifts/ days) 3 3 3 3
Production period (days / annum) 300 300 300 300
Rated capacity (meters) 18000 18000 300 150
Net Production (Kgs) 18000 18000 300 150
Work in Process (Days) 1 1 1 1
Finish Goods 15 15 15 15
Local 1 1 1 1
Selling price (Rs. / Tones) 24625 12500 14000 4500
Border Price (Rs / Tonne) 16000 8000 10000 300
Sales at Boarder Price (Year 1 to 5) 144794 167379 182694 197987
ANNEX-VIII
COST OF GOODS SOLD
Capacity utilization 50.00% 55.00% 60.00% 65.00%

Raw material consumed 166293 182922 199552 216181
Factory wages & salaries 3933 4130 4336 4553
Sales Tax 27850 32194 35140 38081
Factory Overheads:
Water, Power and Fuel 7546 8127 8708 9288
Sprees and Stores 287 430 501 573
Repair and Maintenance 359 539 628 718
Depreciation 3309 3309 3309 3309
Other manufacturing O/H 3568 3923 4275 4626
Total Factor Overheads 15070 16328 17422 18515

Total Work in Process 213146 235574 256449 277331
Add Open. Stock of W.I.P.
1 Day 710 785 855
Less Close. Stock of W.I.P.
1 Day 710 785 855 924
Cost of Goods Manufactured 212436 235499 256380 277261
Add Open, stock of Finish Goods
15 Days 10622 12036 13434
Total finish goods available for sale 212436 246121 268686 290695
Less close. Stock of finish goods
15 days 10622 12306 13434 14535
Cost of Goods Sold 201814 233815 25252 276161
ANNEX-VIII (Page-4)
Spares & Stores

% C&F + local 0.01
Amount 287
Repairs & Maintenance

% Machinery Installed Cost 0.01 0.015 0.0175 0.02
& Building 359 539 628 718
Other Manufacturing O/H

@ of 0.02 3568 3923 4275 4626
Excise Duty

Sales Tax 0.125 27850 32194 35140 38081
Total Sales Tax 27850 32194 35140 38081
Utilities
Power, Water Fuel & Others
A-Power
Connected Load (KW) = 1000

Maximum Demand (KW) = 800
a. Fixed Charges
@ Rs. /KW/Month 145
Fixed Charges = Rs. 1740
b. Variable Charges
@ Rs. /KWH/ 1.37
Hours 24
Variable Charges = Rs. 6313
ANNEX-VIII (Page-2)
RAW MATERIAL REQUIREMENT AT 100% CAPACITY

LOCAL RAW MATERIAL
Items Ann Requirements United Cost Total Cost

Tonne Rs/Ton (Rs)
Caustic Soda 18 22150 399
Fuller Earth 90 25700 2313
Activated Carbon 6 27000 162
Citric Acid (Food Grade) 0.37 90000 33
Corrugated Carton (16Kg) 1125000 3.5 3938
Polythene Bag 1125000 0.5 563
Filter Cloth (Meter) 10000 15 150
Plastic Drum (50 Kg) No 40000 75 3000
Potassium Hydroxide 10 39000 390
Misc. Chemicals / Additive 1 50 0.05
10947
RAW MATERIAL IMPORTED Custom Surcharge Sales Tax Other (Ex-Factory)

Duty paid charges price cost at Ex-Factory
Items Qty. C&F C&F Input Input Input Input

Soyabean Oil 2940 13600 80784 3740 0 0 952 18292 108654
RBD Palm Oil 12726 11500 146349 4255 0 0 805 16560 210743
Nicle Catalyst 45 46000 20700 0 0 0 2300 48300 2174
Amnti-Oxidant 0.1 550000 55 0 0 0 27500 277500 58
Vitamin A&D 0.1 550000 55 00 0 0 27500 27555 3
0.05 500000 25 0 0 0 25000 25025 1
0.34 135000 46 0 0 0 6750 6796 2
2 27000 54 0 0 0 1350 14040 3
0.37 91000 34 0 0 0 4550 4584 2
Raw Material Yr. 1 Yr. 2 Yr. 3 Yr. 4
Local Raw Material 5474 5021 6568 7116

Imported Raw Material 160820 176902 192983 209065
Total Raw Material 166293 182922 199552 216181

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CONFIDENTIAL

M/S. MARGARINE (PVT.) LIMITED (PROPOSED)

PROJECT EVALUATION DEPARTMENT

CONTENTS: PAGE NUMBER

II- THE BORROWERS AND MANAGEMENT: 1-3

III DESCRIPTION OF THE PROJECT: 4-13

IV- COST OF PROJECTS AND FINANCIAL PLAN: 14-15

V- MARKET PROSPECTS: 16-23

VI- FINANCIAL PROJECTIONS: 24-25

VII- ECONOMIC EVALUATION: 26

VIII- CONCLUSIONS AND RECOMMENDATION: 27-31

ANNEX NUMBER D E S C PR I PTI O N

1- Name of the project: M/s BSA margarine (Pvt.) Ltd.(Proposed)

2- Location Office: 1017, Uni Plaza I.I Chundrigar Road,

3- New/B&Mrep Expansion: New

4- Amount of Loan: L/C Assistance Rs.24.150million (LMM)

5- Rated Capacity of the 18,000 tons of industrial margarine/

6- Machinery to be a) Local Machinery

I- First charge on fixed assets of the projects estimated at Rs.39.066 million

21- Project Benefits:

II- THE BORROWERS AND MANAGEMENT

Brief resume in respect of the sponsors of the captioned concern is as under:

ASHRAF KAMAL: He is friend of Shahid Raeheed. He is looking after business in Punjab

PAST OPERATIONS OF SISTER CONCERN:

LIABILITIES & OWNER’S EQUITY:

M/SBHITTAI RUBBER INDUSTRIES LTD.

PROFIT & LOSS ACCOUNT

Gross Profit 1,331

Profit /Loss After Interest 767

Net Profit / Loss 731

III – THE PROJECT

S. NO ITEM RATED CAPACITY PROPOSED

b) Bleaching And Filtering:

Ind. Margarine 10-12% 35-40% 35-40% 8-10% 0.01-0.1% 0.01%

k) Carbon Di-oxide Gas (Liquid Form):

Production process flow chart is given at next page.

Natural Gas & Steam Cracking/Reforming Process Description:

BUILDING & CIVIL WORKS:

Proposed Modification / Expansion:

PLANT AND MACHINERY:

The machinery proposed to be fabricated/manuufactured locally shall mainly be comprised on

c) Post Refining machinery:

Including blending tanks, pumps and gauges etc.

Including blending tanks, votator/mixer, pinner/polisher and chilling system etc.

f) Liquid Soap & Chain Lubrication Processing Machinery:

Including emulsion convertor, evaporators and vacuum system etc.

h) Misc. Machinery Including Standby

ENVIRONMENTAL POLLUTION HAZARDS:

The proposed project is expected to commence commercial production by February, 1994 as

IV- COST OF THE PROJECT & FINANCIAL PLAN

I. COST OF THE PROJECT

Total Fixed Cost: 4122 34944 39066

Total Cost 4211 43478 47600

II. FINANCING PLAN

The above cost has been proposed to be financed as under:

III. DEBT EQUITY RATION:

These security arrangements are considered satisfactory.

COST OF THE PROJECT

Margarine was developed by French Chemist H. Mege-Mouries in the late 1860’s.

Uses of Margarine / Shortening

Year Palm Oil Soyabean Oil

Source : Foreign Trade Statistics

DOMESTIC PRODUCTION CAPACITY

S.No. Name Capacity (M.Ton)