Pre-Feasibility Study

SANITARY WARE MANUFACTURING

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road,
Lahore
Tel: (92 42) 111 111 456, Fax: (92 42) 36304926-7
[email protected]

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KPK BALOCHISTAN

3rd Floor, Building No. 3, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan-e-Iqbal Complex, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Egerton Road Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042) 36304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
[email protected] [email protected] [email protected] [email protected]

May 2011
Pre-feasibility Study Sanitary Ware Manufacturing Unit

DISCLAIMER

The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources and
is based on certain assumptions. Although, due care and diligence has been taken to
compile this document, the contained information may vary due to any change in any of
the concerned factors, and the actual results may differ substantially from the presented
information. SMEDA does not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

DOCUMENT CONTROL

Document No. PREF-90

Prepared by SMEDA-Punjab

Issue Date March 2006

Revision Date May, 2011

Issued by Library Officer

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Pre-feasibility Study Sanitary Ware Manufacturing Unit

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY................................................................................................................. 5

2 INTRODUCTION............................................................................................................................... 6
2.1 PROJECT BRIEF............................................................................................................................. 6
2.2 OPPORTUNITY RATIONALE ........................................................................................................... 6
2.3 PROJECT CAPACITY AND RATIONALE........................................................................................... 6
2.4 PROJECT INVESTMENT.................................................................................................................. 6
3 SECTOR AND INDUSTRY ANALYSIS.......................................................................................... 7
3.1 EVOLUTION OF SANITARY WARE INDUSTRY IN PAKISTAN ........................................ 7
3.2 SANITARY WARE MANUFACTURING UNITS CURRENTLY IN OPERATION IN PAKISTAN ................ 8
4 PRODUCTS OFFERED..................................................................................................................... 8
4.1 PRODUCTION MIX ........................................................................................................................ 9
4.2 RAW MATERIALS REQUIREMENT & AVAILABILITY ................................................................... 10
5 PRODCUTION PROCESS.............................................................................................................. 10
5.1 PRODUCTION PROCESS FLOW ..................................................................................................... 10
5.1.1 Milling Section .................................................................................................................... 11
5.1.2 Casting Section.................................................................................................................... 11
5.1.3 Green ware Section............................................................................................................. 12
5.1.4 Glazing Section ................................................................................................................... 12
5.1.5 Kiln Section ......................................................................................................................... 12
5.1.6 Final Inspection & Packing Section .................................................................................. 12
6 MACHINERY REQUIREMENT.................................................................................................... 12
6.1 FITTINGS & INSTALLATIONS REQUIREMENT .............................................................................. 13
7 OFFICE EQUIPMENTS REQUIREMENT .................................................................................. 13

8 FURNITURE & FIXTURES REQUIREMENT............................................................................ 14

9 VEHICLES REQUIREMENT ........................................................................................................ 14

10 LAND & BUILDING REQUIREMENT ........................................................................................ 14

10.1 BUILDING REQUIREMENT .................................................................................................. 15
11 UTILITY REQUIREMENTS.......................................................................................................... 15

12 HUMAN RESOURCE REQUIREMENTS .................................................................................... 16

13 FINANCIAL ANALYSIS................................................................................................................. 17
13.1 PROJECT COST ........................................................................................................................... 17
13.2 PROJECTED INCOME STATEMENT ............................................................................................... 18
13.3 PROJECTED BALANCE SHEET ..................................................................................................... 19
13.4 PROJECTED CASH-FLOW STATEMENT ........................................................................................ 20
14 PROJECT ASSUMPTIONS ............................................................................................................ 21
TABLE 14-1: FINANCIAL LAYOUT ............................................................................................................ 21
TABLE 14-2: OPERATING ASSUMPTIONS .................................................................................................. 21
TABLE 14-3: DEPRECIATION RATE ASSUMPTIONS .................................................................................... 21

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TABLE 14-4: WORKING CAPITAL TURNOVER ASSUMPTIONS.................................................................... 21

TABLE 14-5: REVENUE ASSUMPTIONS – SALES PRICE & PRODUCTION MIX ............................................ 22
TABLE 14-6: COST OF RAW MATERIAL .................................................................................................... 22
TABLE 14-7: ADMINISTRATIVE EXPENSES ASSUMPTIONS ........................................................................ 23
15 ANNEXTURE ................................................................................................................................... 24
TABLE 15-1: RAW MATERIAL & MACHINERY SUPPLIERS ........................................................................ 24

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1 EXECUTIVE SUMMARY
The Ceramics Sanitary ware manufacturing unit is a project of ceramics sector. Ceramics
products made from inorganic materials having non-metallic properties usually processed
at a high temperature at some time during their manufacture. It’s an art of clay and fire.
The Sanitary Ware Products are classified under three broad categories on the basis of
material type. Sanitary ware made of Plastics, Sanitary ware made of Ceramics and
Sanitary ware made of Iron.

In Pakistan Ceramics Sanitary ware industry has key strengths e.g. a strong
manufacturing skills base, and established training support infrastructure, sources of
investment funding, transport infrastructure and national & international market etc.
These attributes should be proactively promoted investor. Improvement in living
standards and construction of buildings is generating the high demand of Ceramics
sanitary ware products both at national and international level. The vender development
program can help to standardize and quality and create more business opportunities in the
area. Growth trend of Ceramics sanitary ware idnustry has been increasing every year.
The industry has not only fulfilling the domestic needs but also exporting small quantities
of ceramics sanitary ware goods over the last few years.

A Ceramics Sanitary ware manufacturing unit with a proposed capacity of 400 pieces per
day needs a capital investment estimated at Rs. 47.192 million for construction and
purchasing machinery & equipment. In addition to this, an estimated sum of Rs. 6.270
million is required as working capital. The total project cost is estimated at Rs. 53.462
million. Projected IRR, Net Present Value and Payback of this project are 49%, Rs.
149,738,602 and 3.23 years respectively.

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2 INTRODUCTION

2.1 Project Brief

This particular Pre-feasibility is regarding “Sanitary Ware Manufacturing Unit”. The
objective of the Pre-feasibility study is primarily to provide an overview about the
Sanitary Ware Manufacturing business. The proposed Pre-feasibility defines the
criteria on which the investment decision is based. This document covers various
aspects of Sanitary Ware Manufacturing business concept development, Start-up,
Production, Marketing, Finance and Business Management. The Sanitary Ware
Products are classified under following three broad categories on the basis of material
type. This particular pre-feasibility however discusses the sanitary ware made of
ceramics.

• Sanitary ware made of Plastics such as baths, showers, washbasins, bidets,

lavatory pans, seats and covers, flushing cisterns of plastics;
• Ceramic sanitary ware such as sinks, wash basins, wash basin pedestals, baths,
bidets, lavatory pans, flushing cisterns, urinals and similar sanitary fixtures;
• Sanitary ware made of iron or steel such as baths shower basins and
washbasins;

2.2 Opportunity Rationale

The Sanitary wares available in the local market are produced mainly in the Province
of Punjab and Sindh. In addition some niches of the market are also served by imports
as small quantity of some multinational brands is also available in the local market
imported mainly from Spain, Italy UK and USA.

Demand for sanitary ware is influenced by general economic conditions as well as the
number of new houses built and old houses renovated. New housing also presents
opportunities for new kitchens, bath rooms and latrine facilities.

2.3 Project Capacity and Rationale

This particular Pre-feasibility study is however based on the capacity of 400 Pieces
per day which is the minimum viable size for a Sanitary ware Manufacturing Unit.
The project will be working on a single shift basis in all except the Kiln which will be
working on three shift basis.

2.4 Project Investment

The estimated cost of the project is about Rs 53.462 million.

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Table 2-1: Project Parameters

Capacity Human Resource Technology/Machinery Location

400 pieces 78 Local Gujranwala
Financial Summary
Project Cost (Rs.) IRR NPV (Rs.) Payback period
53.462 million 49% 149.739 million 3.23 Yrs

Table 2-2: Total project cost is worked out in the table below:-

Capital Investment 47,192,291

Working Capital Requirement 6,269,552
Total Investment 53,461,843

3 SECTOR AND INDUSTRY ANALYSIS

3.1 EVOLUTION OF SANITARY WARE INDUSTRY IN PAKISTAN

This is a story of how the manufacture of sanitary ware started in a small town called
Gujranwala (now in Pakistan), way back to the prior to partition. Situated along the
contours of the old Grand Trunk Road, Gujranwala is famous for its Sanitary Fittings
and Sanitary ware and Electric Fans & Motors.

The know-how about this industry is a result of technology and skill transfer from
Gujrat to Gujranwala, where people have been associated with this sector prior to the
partition. The first major pottery factory (M/S Premier Ceramics Limited) which was
established in early 60’s in Gujrat and subsequently the establishment of Institute of
Ceramics, Gujrat in 1965 have contributed to the development of the trend/style,
expertise about manufacturing of different products and in technology transfer. Over
the years this industry has expanded and resulted in a long chain of ceramics factories
in this area and still they are growing.
Growth trend of Ceramics sanitary ware idnustry has been increasing every year. The
industry has not only fulfilling the domestic needs but also exporting small quantities
of ceramics sanitary ware goods over the last few years. Though the exports trend in
the past two decades has been insignificant volume wise and erratic, the capability of
the sector for export exists keeping in mind the technology & know-how available
with the manufacturers. The main reason for not achieving the significant break
through in exports by this industy is the uncompetitive cost structure of domestic
products due to ever increasing utilities prices coupled with the high tariffs on
imported materials

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3.2 Sanitary Ware Manufacturing Units Currently in Operation in Pakistan

The main sanitary ware units currently in operation in Pakistan are reproduced below:
Table 3-1: Major players of the market
No. COMPANY NAME ADDRESS
G.T.Road, Gujranwala,
1- 3 Star Ceramics
Tel # 055-3252941
G.T. Road, Gujranwala
2- Master Sanitary ware
Tel # 055-4271668
Rahwali Road, Gujranwala
3- Dar Ceramics
Tel # 055-4294425
G.T. Road, Attawa, Gujranwala.
4- Asia Ceramics
Tel # 055- 3264263
G.T. Road, Attawa, Gujranwala
5- Rizwan Ceramics
Tel # 055- 3264379-80
G.T.Road, Gujranwala
6- Ihsan Ceramics
Tel # 055 4241100.
G.T.Road, Kamonke,
7- Minhas Ceramics
Tel # 055 6810731
G.T. Road, Attawa, Gujranwala
8- Capital Ceramics
Tel # (055) 3262310

4 PRODUCTS OFFERED
The proposed project will be capable of making following ceramics sanitary ware items.
These are of various design sizes and specifications.

The product group ceramics sanitary ware consists of:

Ceramics Sanitary ware porcelain /China

(HS691010)
Ceramics Sanitary (HS 691090)

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4.1 Production Mix

Keeping in view the demand of the product mix the proposed production is divided into
the below proportion.
Table 4-1: Production Mix
Sanitary Ware Production Mix Production Ratio
Bath Tub including legs 5%
Shower Tray 5%
Wash Basin 25 %
Wash Stand 25 %
Toilet combination 20 %
Wall Toilets 5%
Bidet 4%
One piece Toilet 7%
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Urinal 4%
100%

4.2 Raw Materials Requirement & Availability

The Raw Material involved in the manufacturing process is detailed below:

Table 4-2: Raw Material Requirements & Availability

Sr. Description
No.
1. Pottery Clay locally available from Mianwali & Attock
2. Feldspar ( Stone) locally available from Mansehra & Abbotabad
3. Quartz available from Frontier
4. K.D 7 & K.D10 Stone locally available from Mianwali & Attock
5. Lime Stone Locally Available from Frontier
6. Chemicals & Colors
a) Available from America, China, Australia & Italy as it
- Zirconium Silicate
is not available locally.
b) - Zinc Oxide Locally available.
c) - Barium Carbonate Available from China
d) - Bar Clay/ China Clay Available from China.
e) - Coloring Available from England, Korea & China
f) - CMC Available from Germany

5 PRODCUTION PROCESS

5.1 Production Process Flow

The following figure shows the production process flow of Sanitary Ware:

Milling & Slip Casting Section Green ware

preparation Section
Section

Final Inspection Kiln Section Glazing Section

& Packing Section

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5.1.1 Milling Section

Material in Raw shape is mixed in a standard composition and put in Ball milling
machines for grinding. The composition of raw material mix is stated below along
with the usage requirement of these material based on the production capacity of
400 pieces.

Table 5-1: Raw Material Composition

Percentage Qty (Tons)
Pottery Clay 35% 5
Quartz – Natural Silicon 17.5% 2.50
Grinding Stone 3.5% 0.50
Feldspar Stone 14% 2
Sub Total 70% 10
Water 30% 4.29
Total 100% 14.29

The Raw Material requirement in tons is determined based on industry general

trends and visits to various sanitary ware manufacturing units.

The Ball section machinery keeps the raw material in constant rotation. After
being grinded the machine converts the raw material in the form of slurry mixture.
There is no waste production at this stage of the process. The slurry mixture is
then further stirred and un-dissolved material is separated from the slurry mixture
for further refining. This Slurry in liquid form (called slip) is then transferred to
overhead tanks through piping for further supply to casting section.
5.1.2 Casting Section
The slip is then put in the moulds and then left for 2 to 3 hours for dryness. In the
casting section there should be a heating system to keep the temperature a bit
higher to facilitate the drying process. This requires the use of Gas heaters, extra
heat of Kiln section can also be utilized through the use of piping system. After 2
to 3 hours the unfinished product (Green ware) is taken out from the moulds and
kept in the open areas for further 2 to 3 days for hardness. About 20% of the
Production is wasted which is recycled.

The moulds of required design and dimensions are prepared from the mother
moulds. These moulds are made from Plaster of Paris for final reshaping of the
required product. Plaster of Paris is mixed in water to prepare a slurry mixture
which is then put in the mother moulds for 1 to 2 hours. The heating system helps
to facilitate the drying process. These sample moulds are taken out from the
mother moulds and then sent to the Casting department.

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5.1.3 Green ware Section

The Green ware is then stored in the green ware section (the storage section)
temporarily with the heating system for continuous dryness. These pieces are then
inspected; the defected pieces if any are rejected for recycling while the approved
pieces are then forwarded to the Glazing Section.

5.1.4 Glazing Section

The green ware pieces after being successful inspection are transferred to Glazing
section where the glaze of required color is sprayed on the green ware pieces for
color & painting through pump machines in the glaze booths. The glaze is
manufactured for the purpose of shining the sanitary ware products. This is
manufactured using different chemicals, some of which are listed in section 8.10,
and required coloring schemes.

5.1.5 Kiln Section

In the Kiln Section, the glazed pieces are then moved into the Kiln through the
Kiln cars. The size of the Kiln should be 75 meter long with a capacity of 34 Kiln
Cars (7.4" long and containing on average 15 pieces per car) in the kiln at a time.
The Kiln is made up of slabs imported from china and fire resisting cement. The
Kiln car passes through the kiln where the temperature increases phase by phase
up to a maximum of 1,125 degree Celsius. The temperature then reduces to
normal and the green ware in finished sanitary ware form comes out of the kiln. It
takes a time of 32 hours for the green ware piece to remain in the kiln to be
transformed into the finished sanitary ware piece. The Kiln section requires a
complete heating system with industrial fans, gas station and burners
5.1.6 Final Inspection & Packing Section
The finished sanitary ware pieces are then inspected for final finishing and then
categorized as Grade A, B and C. These are then sent to the packing department
for packaging into cartons while the defected pieces, about 15% of total
production, are scrapped out.

6 MACHINERY REQUIREMENT
Following table shows the plant & machinery requirement for setting up a sanitary ware
Manufacturing Unit.
Table 6-1: Machinery Detail
No. of Cost Total
Machine Description Make
Units per unit(Rs.) Cost (Rs.)
Slip Section Machine
- Ball Mill Machine (Capacity 5 Ton) Local 2 625,000 1,250,000
(With inner lining & Grinding Media)
- Stirrers 10 H.P Local 2 70,000 140,000
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- Diaphragm Pumps 5 H.P Local 2 100,000 200,000

- Slip Storage Tank (S.S.) Local 2 100,000 200,000
Glazing Section Machine
- Ball Mill 1 Ton (with inner lining & Local 2 250,000 500,000
grinding media)
- Glazing Cabin with Compressor Local 1 250,000 250,000
- Accessories Local 1 150,000 150,000
- Kiln Local 1 900,000 900,000
TOTAL 3,590,000

6.1 Fittings & Installations Requirement

Following fittings & installations are required for factory and management offices.
Table 6-2: Fittings & Installations
No. Cost per Total Cost
Items of unit (Rs.)
Items
Water Tank with a capacity of about 20,000 Liters 1 50,000 50,000
Power House
Generator 80 KVA – China 1 395,000 395,000
Pannel – Local 1 200,000 200,000
Transformer 1 450,000 450,000
Electric Installations and Heating System 1,500,000
Slip Storage Tanks 2 50,000 100,000
Water Pump ( 7.5 H.P ) including boaring 400 ft. 1 250,000
TOTAL 2,945,000

7 OFFICE EQUIPMENTS REQUIREMENT

Following office equipments are required for factory and management offices.
Table 7-1: Office Equipment
No. of Cost per Total
Items
Items unit Cost(Rs.)
Computers 2 30,000 60,000
Printers 1 20,000 20,000
UPS 2 10,000 20,000
Fax Machine 1 12,000 12,000
Telephone Sets 3 1,000 3,000
Internet Connection 1,500 1,500
TOTAL 116,500

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8 FURNITURE & FIXTURES REQUIREMENT

Following furniture & fixtures are required for factory and management offices.
Table 8-1: Furniture & Fixture
No. of Cost per Total
Items
Items unit Cost(Rs.)
Furniture Set 1 800,000 800,000
Fans 30 2,500 75,000
Energy Savers 120 150 18,000
Air conditioners (1.5 ton Split) 2 40,000 80,000
Meco Water Cooler (Capacity 40 gln/hr) 2 30,000 60,000
TOTAL 1,033,000

9 VEHICLES REQUIREMENT
The proposed project will also be using one car costing Rs. 1,000,000/-, One Loader
truck for transportation purposes, two motor cycles costing 55,000, two cycles costing
3,500. The schedule is presented below:
Table 9-1: Vehicle Requirements
Items Qty Cost Total Cost
Rs. Rs.
Cars 1 1,000,000 1,000,000
Loader Truck 1 1,100,000 1,100,000
Motor Cycles 2 65,000 130,000
Registration Cost 66,900
TOTAL 2,296,900

10 LAND & BUILDING REQUIREMENT

Land for the proposed business can be acquired on rent but it is recommended that it
should be purchased or built as machinery will be installed. Total land required for the
Sanitary Ware Manufacturing Unit is approximately 8.19 Kannals. Land price per kannal
is taken to be Rs. 500,000 per Kannal (Gujranwala).
Table 10-1: Land Details
Total Kanals Cost per Kanal Rs. Total Land cost in Rs.
Total 8.189 500,000 4,094,444

- including acquisition & documentation charges

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10.1 BUILDING REQUIREMENT

Table 10-2: Building & Civil Works

Space Construction
Total Cost
Building & Civil works Required Cost Per Sq.
(Rs.)
in Sq. ft Ft. 1
Milling & Slip Section 1,840 1,000 1,840,000
Casting Halls 10,250 1,000 10,250,000
Green ware storage 4,100 1,000 4,100,000
Kiln Hall 2,460 1,000 2,460,000
Glaze Section 580 1,000 580,000
Mould & Dying Section 820 1,000 820,000
Work Shop 250 1,000 250,000
Power House 400 1,000 400,000
Finished Goods Store ( Semi-open ) 8,000 1,000 8,000,000
Air Compressor Room 200 1,000 200,000
Management Office 400 1,000 400,000
Accessories Store 150 1,000 150,000
Toilets 100 1,000 100,000
Total Space Requirement (sq. ft.) 29,550 29,550,000
Open Plot Area (Raw Material Store +
Loading, unloading Bay + Grounds & 7,300 100 730,000
Tracks)
Boundary wall 9'' thick, & 6.00 ft. high
7812 1,1253 878,130
above plinth level
Total Infrastructure Cost 36,850 31,158,130

11 UTILITY REQUIREMENTS
Utilities required for a sanitary ware manufacturing unit are; Electricity, Telephone, Gas
and Water.

1
These per sq. ft rates are estimated on the basis of rates notified by Punjab Building Department, 2nd
quarter of 2010 for Gujranwala and surroundings.
2
Boundary Wall Length in Running Feet 195.14 X Sides 4 = 781
3
These per sq. ft rates are estimated on the basis of rates notified by Punjab Building Department, 2nd
quarter of 2010 for Gujranwala and surroundings.

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12 HUMAN RESOURCE REQUIREMENTS

Following table shows the requirements of Human Recourses in the Sanitary ware
Manufacturing unit:
Table 12-1: Human Resource
Number
Per Month Annual
Description of
Salary Salary
Employees
PRODUCTION STAFF
Ceramics Engineer 1 30,000 360,000
Production Manager 1 25,000 300,000
Sections In charge 2 10,000 240,000
Die maker 1 20,000 240,000
Moulder + Caster 34 8,000 3264,000
Casting Checker 1 18,000 216,000
Skilled Kiln Operator 3 12,000 432,000
Helpers for Kiln + Workshop operator 4 8,000 384,000
Ball Mill Operator 6 8,000 576,000
Packing & Quality Section 8 8,000 768,000
Total Direct Labor 6,780,000
ADMINISTRATIVE STAFF
Accounts Officer 1 12,000 144,000
Purchasers 1 12,000 144,000
Office Boys 3 7,000 252,000
Security Guard, Gate Keepers 2 7000 168,000
Sweeper 2 7,000 168,000
Driver 2 8,000 192,000
Total Administrative Salaries 1,068,000
MARKETING COST
Marketing In charge 1 20,000 240,000
Sales Representatives 5 10,000 600,000
Total Marketing Salaries 840,000

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13 FINANCIAL ANALYSIS

13.1 Project Cost

Capital Investment Rs. in actuals
Land 4,094,444
Building/Infrastructure 31,158,130
Machinery & equipment 6,535,000
Furniture & fixtures 1,033,000
Office vehicles 2,296,900
Office equipment 116,500
Pre-operating costs 1,858,317
Total Capital Costs 47,192,291

Working Capital Rs. in actuals

Equipment spare part inventory 54,458
Raw material inventory 5,100,249
Upfront building rent -
Upfront insurance payment 114,845
Cash 1,000,000
Total Working Capital 6,269,552

Total Investment 53,461,843

Initial Financing Rs. in actuals

Debt 50% 26,730,922
Equity 50% 26,730,922

Equity Project
Internal Rate of Return (IRR) 61% 49%
Payback Period (yrs) 3.06 3.23
Net Present Value (NPV) 99,157,331 149,738,602

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13.2 Projected Income Statement

Calculations SMEDA
Income Statement
Rs. in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 55,936,000 79,587,200 105,202,240 135,144,416 170,023,005 210,525,867 232,655,563 255,921,119 281,513,231 309,664,554
Cost of sales
Cost of goods sold 1 20,400,996 29,027,070 38,369,396 49,289,916 62,010,846 76,783,064 84,854,214 93,339,635 102,673,598 112,940,958
Operation costs 1 (direct labor) 6,780,000 7,440,110 8,164,490 8,959,396 9,831,696 10,788,924 11,839,348 12,992,044 14,256,968 15,645,047
Operating costs 2 (machinery maintenance) 653,500 718,850 790,735 869,809 956,789 1,052,468 1,157,715 1,273,487 1,400,835 1,540,919
Operating costs 3 (direct electricity) 2,050,473 2,255,521 2,481,073 2,729,180 3,002,098 3,302,308 3,632,539 3,995,792 4,395,372 4,834,909
Operating costs 5 (direct gas) 2,880,000 3,960,000 5,227,200 6,708,240 8,433,216 10,436,105 11,479,715 12,627,687 13,890,455 15,279,501
Total cost of sales 32,764,970 43,401,551 55,032,893 68,556,541 84,234,645 102,362,868 112,963,531 124,228,645 136,617,229 150,241,333
Gross Profit 23,171,030 36,185,649 50,169,347 66,587,875 85,788,359 108,162,999 119,692,032 131,692,474 144,896,002 159,423,221
General administration & selling expenses
Administration expense 1,908,000 2,093,766 2,297,618 2,521,317 2,766,796 3,036,175 3,331,781 3,656,168 4,012,138 4,402,765
Administration benefits expense 190,800 209,377 229,762 252,132 276,680 303,617 333,178 365,617 401,214 440,277
Electricity expense 732,197 805,416 885,958 974,554 1,072,009 1,179,210 1,297,131 1,426,844 1,569,529 1,726,482
Travelling expense 1,678,080 62,813 68,929 75,640 83,004 91,085 99,953 109,685 120,364 132,083
Communications expense (phone, fax, mail, internet, etc.) 286,200 314,065 344,643 378,198 415,019 455,426 499,767 548,425 601,821 660,415
Office vehicles running expense 229,690 252,659 277,925 305,717 336,289 369,918 406,910 447,601 492,361 541,597
Office expenses (stationary, entertainment, janitorial services, etc.) 381,600 418,753 459,524 504,263 553,359 607,235 666,356 731,234 802,428 880,553
Promotional expense 2,796,800 3,979,360 5,260,112 6,757,221 8,501,150 10,526,293 11,632,778 12,796,056 14,075,662 15,483,228
Insurance expense 114,845 91,876 68,907 45,938 22,969 184,959 147,967 110,975 73,984 36,992
Professional fees (legal, audit, consultants, etc.) 139,840 198,968 263,006 337,861 425,058 526,315 581,639 639,803 703,783 774,161
Depreciation expense 2,785,737 2,785,737 2,785,737 2,785,737 2,785,737 3,066,193 3,066,193 3,066,193 3,066,193 3,066,193
Amortization of pre-operating costs 371,663 371,663 371,663 371,663 371,663 - - - - -
Bad debt expense 1,678,080 2,387,616 3,156,067 4,054,332 5,100,690 6,315,776 6,979,667 7,677,634 8,445,397 9,289,937
Subtotal 13,303,532 13,982,068 16,479,849 19,374,572 22,720,423 26,672,203 29,053,321 31,586,235 34,374,872 37,444,682
Operating Income 9,867,499 22,203,581 33,689,498 47,213,303 63,067,936 81,490,796 90,638,711 100,106,240 110,521,131 121,978,539
Other income (interest on cash) 50,000 401,292 1,644,354 3,924,462 7,285,172 12,569,566 19,905,156 28,534,216 38,569,810 52,566,016
Earnings Before Interest & Taxes 9,917,499 22,604,873 35,333,852 51,137,765 71,271,868 94,060,362 110,543,867 128,640,456 149,090,941 174,544,556
Interest expense on long term debt (Project Loan) 3,645,077 3,081,319 2,423,752 1,656,767 762,154 - - - - -
Interest expense on long term debt (Working Capital Loan) 438,604 286,332 107,828 - - - - - - -
Subtotal 4,182,870 3,466,841 2,531,580 1,656,767 762,154 - - - - -
Earnings Before Tax 5,734,628 19,138,032 32,802,272 49,480,998 70,509,714 94,060,362 110,543,867 128,640,456 149,090,941 174,544,556
Tax 1,433,657 4,784,508 8,200,568 12,370,250 17,627,429 23,515,091 27,635,967 32,160,114 37,272,735 43,636,139
NET PROFIT/(LOSS) AFTER TAX 4,300,971 14,353,524 24,601,704 37,110,749 52,882,286 70,545,272 82,907,900 96,480,342 111,818,206 130,908,417

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13.3 Projected Balance Sheet

Calculations SMEDA
Balance Sheet
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 1,000,000 - 8,025,846 24,861,242 53,628,003 92,075,436 159,315,882 238,787,232 331,897,096 439,499,110 611,821,219
Accounts receivable 4,597,479 5,569,447 7,594,087 9,877,260 12,541,127 15,638,995 18,212,935 20,078,494 22,086,343 24,294,977
Finished goods inventory 1,424,564 1,823,595 2,309,072 2,873,627 3,528,153 4,284,957 4,706,814 5,176,194 5,692,385 6,260,056
Equipment spare part inventory 54,458 62,899 72,649 83,909 96,915 111,937 129,287 149,327 172,473 199,206 -
Raw material inventory 5,100,249 7,619,606 10,575,565 14,264,810 18,843,643 24,499,202 28,428,190 32,834,560 37,923,917 43,802,124 -
Pre-paid insurance 114,845 91,876 68,907 45,938 22,969 184,959 147,967 110,975 73,984 36,992 -
Total Current Assets 6,269,552 13,796,425 26,136,008 49,159,058 85,342,418 132,940,814 207,945,279 294,801,843 395,322,156 511,316,159 642,376,252
Fixed assets
Land 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444 4,094,444
Building/Infrastructure 31,158,130 29,600,224 28,042,317 26,484,411 24,926,504 23,368,598 21,810,691 20,252,785 18,694,878 17,136,972 15,579,065
Machinery & equipment 6,535,000 5,881,500 5,228,000 4,574,500 3,921,000 3,267,500 2,614,000 1,960,500 1,307,000 653,500 -
Furniture & fixtures 1,033,000 929,700 826,400 723,100 619,800 516,500 413,200 309,900 206,600 103,300 -
Office vehicles 2,296,900 1,837,520 1,378,140 918,760 459,380 3,699,180 2,959,344 2,219,508 1,479,672 739,836 -
Office equipment 116,500 104,850 93,200 81,550 69,900 58,250 46,600 34,950 23,300 11,650 -
Total Fixed Assets 45,233,974 42,448,238 39,662,501 36,876,765 34,091,028 35,004,472 31,938,279 28,872,087 25,805,894 22,739,702 19,673,509
Intangible assets
Pre-operation costs 1,858,317 1,486,653 1,114,990 743,327 371,663 - - - - - -
Legal, licensing, & training costs 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 -
Total Intangible Assets 1,958,317 1,576,653 1,194,990 813,327 431,663 50,000 40,000 30,000 20,000 10,000 -
TOTAL ASSETS 53,461,843 57,821,315 66,993,499 86,849,149 119,865,109 167,995,286 239,923,558 323,703,930 421,148,050 534,065,860 662,049,761
Liabilities & Shareholders' Equity
Current liabilities
Accounts payable 2,361,945 3,320,066 4,397,988 5,679,475 7,198,255 8,744,631 9,780,478 10,907,631 12,170,611 9,409,469
Total Current Liabilities - 3,513,502 3,320,066 4,397,988 5,679,475 7,198,255 8,744,631 9,780,478 10,907,631 12,170,611 9,409,469
Other liabilities
Deferred tax 816,875 816,875 816,875 816,875 816,875 653,500 490,125 326,750 163,375 -
Long term debt (Project Loan) 23,596,145 20,208,179 16,256,456 11,647,165 6,270,889 - - - - - -
Long term debt (Working Capital Loan) 3,134,776 2,250,867 1,214,685 - - - - - - - -
Total Long Term Liabilities 26,730,922 23,275,921 18,288,016 12,464,040 7,087,764 816,875 653,500 490,125 326,750 163,375 -
Shareholders' equity
Paid-up capital 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922 26,730,922
Retained earnings 4,300,971 18,654,496 43,256,199 80,366,948 133,249,234 203,794,505 286,702,405 383,182,747 495,000,953 625,909,370
Total Equity 26,730,922 31,031,893 45,385,417 69,987,121 107,097,870 159,980,155 230,525,427 313,433,327 409,913,669 521,731,875 652,640,292
TOTAL CAPITAL AND LIABILITIES 53,461,843 57,821,315 66,993,499 86,849,149 119,865,109 167,995,286 239,923,558 323,703,930 421,148,050 534,065,860 662,049,761

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13.4 Projected Cash-flow Statement

Calculations SMEDA
Cash Flow Statement
Rs. in actuals
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 4,300,971 14,353,524 24,601,704 37,110,749 52,882,286 70,545,272 82,907,900 96,480,342 111,818,206 130,908,417
Add: depreciation expense 2,785,737 2,785,737 2,785,737 2,785,737 2,785,737 3,066,193 3,066,193 3,066,193 3,066,193 3,066,193
amortization of pre-operating costs 371,663 371,663 371,663 371,663 371,663 - - - - -
Deferred income tax 816,875 - - - - (163,375) (163,375) (163,375) (163,375) (163,375)
Accounts receivable (4,597,479) (971,967) (2,024,640) (2,283,173) (2,663,867) (3,097,868) (2,573,941) (1,865,558) (2,007,849) (2,208,634)
Finished goods inventory (1,424,564) (399,031) (485,478) (564,555) (654,525) (756,805) (421,857) (469,380) (516,191) (567,671)
Equipment inventory (54,458) (8,441) (9,749) (11,261) (13,006) (15,022) (17,350) (20,040) (23,146) (26,733) 199,206
Raw material inventory (5,100,249) (2,519,357) (2,955,959) (3,689,245) (4,578,833) (5,655,559) (3,928,988) (4,406,370) (5,089,357) (5,878,207) 43,802,124
Advance insurance premium (114,845) 22,969 22,969 22,969 22,969 (161,990) 36,992 36,992 36,992 36,992 36,992
Accounts payable 2,361,945 958,120 1,077,922 1,281,488 1,518,780 1,546,375 1,035,847 1,127,153 1,262,980 (2,761,141)
Cash provided by operations (5,269,552) 2,120,319 14,165,307 22,659,371 34,143,038 48,417,502 67,240,445 79,471,350 93,109,864 107,602,014 172,322,109
Financing activities
Project Loan - principal repayment (3,387,966) (3,951,724) (4,609,290) (5,376,276) (6,270,889) - - - - -
Working Capital Loan - principal repayment (883,910) (1,036,181) (1,214,685) - - - - - - -
Additions to Project Loan 23,596,145 - - - - - - - - - -
Additions to Working Capital Loan 3,134,776 - - - - - - - - - -
Issuance of shares 26,730,922 - - - - - - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 53,461,843 (4,271,876) (6,139,461) (5,823,976) (5,376,276) (6,270,889) - - - - -
Investing activities
Capital expenditure (47,192,291) - - - - (3,699,180) - - - - -
Acquisitions
Cash (used for) / provided by investing activities (47,192,291) - - - - (3,699,180) - - - - -

NET CASH 1,000,000 (2,151,556) 8,025,846 16,835,395 28,766,762 38,447,433 67,240,445 79,471,350 93,109,864 107,602,014 172,322,109

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14 PROJECT ASSUMPTIONS
Table 14-1: Financial Layout
Projected life of the Project 10 Years
Sponsor’s Equity 50%
Debt Finance 50%
Annual Mark up rate 16%
Debt Tenure in Years 5 Years
Debt Payment in a Year 2
General Inflation rate 5%

Table 14-2: Operating Assumptions

Total no. of working days in a Year 300
No. of Shifts
Kiln 3
Milling section 1
Casting section 1
Working Hours per shift 8
Installed production capacity 400 Pieces per day
Initial Year capacity utilization 40%
Capacity Growth rate 10%
Maximum capacity utilization 95%

Table 14-3: Depreciation rate Assumptions

Depreciation Method Straight Line
Building & Infrastructure 5%
Machinery & Equipment, Fitting &
Installations, Office Equipments, Furniture 10%
& Fixtures
Vehicles 20%

Table 14-4: Working Capital Turnover Assumptions

Raw material inventory 3 Months raw material consumption
Finished goods 15 days goods available for sale
Packing material 30 days goods available for sale
Stores & Spares 30 days stores & spares consumptions
Accounts Receivables 30 days
Accounts Payables 30 Days
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Table 14-5: Revenue Assumptions – Sales Price & Production Mix

Ex – Factory
Price Weighted
Items Production Mix No. of Pieces
Including Avg. Price
Sales Tax
Bath Tub
5% 20 8,000 400
Including Legs
Shower Tray 5% 20 1,200 60
Wash Basin 25 % 100 700 175
Wash Stand 25 % 100 300 75
Toilet 340
20 % 80 1,700
Combination
Wall Toilets 5% 20 700 35
Bidets 4% 16 1,000 40
One Piece Toilet 7% 28 1,100 77
Urinal 4% 16 350 14
Total 100% 400 1,216

Table 14-6: Cost of Raw Material

Raw Material cost during the 1st Year of operation & consumption Requirements for 400
pieces.

Per Kg Cost of Raw

Sr. %age Qty in
Raw Material Cost Material
No contribution Kgs.
(Rs.) (Rs.)
1 Pottery Clay 35% 4,536 20 90,718
2 Quartz – Natural Silicon 17.5% 2,268 2.50 5,670
3 Grinding Stone 3.5% 454 1.80 816
4 Feldspar (stone) 14% 1,814 3.20 5,806
Total (Slip) 70% 9,072 103,011
5 Water 30% 3,892 - -
Total 100% 12,964 103,011
6 Chemical & Colors (10 % of Slip)
Zirconium Silicate 10% 91 150 13,608
Zinc Oxide 10% 91 200 18,144
Barium Carbonate 10% 91 40 3,629
Clay 65% 590 20 11,793
Coloring 5% 45 600 27,216
Total of Chemicals & Colors 100% 907 74,389

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Total Cost of Raw Material for 400 Pieces 177,400

Per piece Cost of Raw Material 443.50

Table 14-7: Administrative Expenses Assumptions

Traveling Expenses 1 % of Sales
Administration Benefit Expenses 10% of Admin Salaries
Machinery Maintenance 10% of Machinery Cost
Promotional Expenses 1% of Sales
Bad Debt Expense 3% of Sales

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15 ANNEXTURE
Table 15-1: Raw Material & Machinery Suppliers
Raw Material Suppliers Machinery Suppliers
M/s J.R. Corporation Allied Machine Craft
G.T.Road, Kangniwala Bypass, Opposite Fruit Mandi,
Gujranwala. Gujrat
Tel : 055- 4275911 Tel: 0332 8484124

M/s Parey Enterprises

G.T.Road, Kangniwala Bypass,
Gujranwala
Tel: 055-4242619

M/s Bashir Traders

G.T.Road, Kangniwala
Gujranwala
Tel: 055-4552364

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