Pre-Feasibility Study

PRINTING PRESS

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]

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Table of Contents

1 DISCLAIMER ........................................................................................................................... 2
2 EXECUTIVE SUMMARY ........................................................................................................ 3
3 INTRODUCTION TO SMEDA............................................................................................... 3
4 PURPOSE OF THE DOCUMENT ......................................................................................... 4
5 BRIEF DESCRIPTION OF PROJECT & PRODUCT .......................................................... 4
5.1 PRODUCTION PROCESS ......................................................................................................... 5
5.1.1 The Design / Creative Stage ............................................................................................ 5
5.1.2 The Prepress Stage .............................................................................................................. 5
5.1.3 The Printing Stage ................................................................................................................. 6
5.1.4 The Bindery Stage ................................................................................................................. 6
5.2 INSTALLED AND OPERATIONAL CAPACITY ........................................................................ 9
6 CRITICAL FACTORS .............................................................................................................. 9
7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT .....................................................10
8 POTENTIAL TARGET CUSTOMERS / MARKETS ........................................................10
9 PROJECT COST SUMMARY ...............................................................................................11
9.1 PROJECT ECONOMICS ..........................................................................................................11
9.2 PROJECT FINANCING.............................................................................................................11
9.3 PROJECT COST .......................................................................................................................12
9.4 SPACE REQUIREMENT ..........................................................................................................12
9.5 MACHINERY & EQUIPMENT REQUIREMENT ....................................................................13
9.6 FURNITURE & FIXTURES REQUIREMENT .........................................................................14
9.7 OFFICE EQUIPMENT REQUIREMENT .................................................................................14
9.8 RAW MATERIAL REQUIREMENT .........................................................................................15
9.9 HUMAN RESOURCE REQUIREMENT ..................................................................................15
9.10 UTILITIES AND OTHER COSTS ............................................................................................16
9.11 REVENUE GENERATION........................................................................................................16
10 CONTACT DETAILS .............................................................................................................18
10.1 MACHINERY SUPPLIERS .......................................................................................................18
10.2 RAW MATERIAL SUPPLIERS ................................................................................................18
11 USEFUL WEB LINKS............................................................................................................19
12 ANNEXURES ..........................................................................................................................20
12.1 INCOME STATEMENT .............................................................................................................20
12.2 BALANCE SHEET.....................................................................................................................21
12.3 CASH FLOW STATEMENT .....................................................................................................22
13 KEY ASSUMPTIONS ............................................................................................................23
13.1 OPERATING COST ASSUMPTIONS .....................................................................................23
13.2 PRODUCTION ASSUMPTIONS ..............................................................................................23
13.3 REVENUE ASSUMPTIONS .....................................................................................................23
13.4 FINANCIAL ASSUMPTIONS ....................................................................................................24

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1 DISCLAIMER

This information memorandum is to introduce the subject matter and provide a

general idea and information on the said matter. Although, the material included in
this document is based on data / information gathered from various reliable
sources; however, it is based upon certain assumptions, which may differ from
case to case. The information has been provided on as is where is basis without
any warranties or assertions as to the correctness or soundness thereof. 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, its
employees or agents do not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
contained information does not preclude any further professional advice. The
prospective user of this memorandum is encouraged to carry out additional
diligence and gather any information which is necessary for making an informed
decision, including taking professional advice from a qualified consultant /
technical expert before taking any decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

Document Control
Document No. PREF-69
Revision No. 3
Prepared by SMEDA-Punjab
Revision Date May 2015
Provincial Chief (Punjab)
For Information
[email protected]

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2 EXECUTIVE SUMMARY

The market for printed material in Pakistan has been developing steadily over the
last decade. This pre-feasibility aims to highlight the basic information for setting
up a printing press business in any of the major urban city in Pakistan. The
proposed business venture is presumed to produce different types of printing
material for a variety of client segments including business enterprises,
educational sector and others. The printed materials produced by the unit mainly
include promotional material (brochures, catalogues, posters, calendars, diaries
and visiting cards, etc.), office stationary (letterheads, printed files, vouchers,
invoices, inward / outward documents, etc.), published materials (literature and
text books, etc.) and packing material printings.
Currently in Pakistan, majority of printing presses are using Solna and Rota
machines, as they are easily available in local market at economical rates and
cheap maintenance. Accordingly, in this feasibility study it is recommended to
install two conventional machines (i.e. Solna and Rota) along with one Digital
XEROX 5,000 to cater for the needs of high-end quality oriented customers. The
potential of digital printing presses in local market is very huge and it is further
increasing with changing market trends and technologies.
The proposed unit has an installed capacity of producing 14,175 impressions per
hours, with Rota Machine 4,000, Solna 10,000 and Digital Printing 175
impressions per hour, respectively. Therefore, on 8 hours single shift basis
proposed press will produce more than 37 million impressions annually. The unit
will operate at 60% of the installed capacity during first year with a gradual
increase of 5% in subsequent years to achieve the maximum capacity (i.e. 95%).
The estimated total cost of the proposed printing press is Rs. 7.18 million out of
which Rs. 5.37 million is the capital cost and Rs. 1.81 million is for working capital.
The project is to be financed through 50% debt and 50% equity. The project NPV
is around Rs. 5.43 million, with an IRR of 30% and Payback Period of 4.79 years.
The project will provide direct employment opportunities to 13 people including
owner manager. The legal business status of this project is proposed as ‘Sole
Proprietorship’.

3 INTRODUCTION TO SMEDA

The Small and Medium Enterprises Development Authority (SMEDA) was

established in October 1998 with an objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).

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With a mission "to assist in employment generation and value addition to the
national income, through development of the SME sector, by helping increase the
number, scale and competitiveness of SMEs", SMEDA has carried out ‘sectoral
research’ to identify policy, access to finance, business development services,
strategic initiatives and institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment
has been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business
development services is also offered to the SMEs by SMEDA. These services
include identification of experts and consultants and delivery of need based
capacity building programs of different types in addition to business guidance
through help desk services.

4 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential

entrepreneurs in project identification for investment. The project pre-feasibility
may form the basis of an important investment decision and in order to serve this
objective, the document / study covers various aspects of project concept
development, start-up, and production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in Printing Press
Unit by providing them with a general understanding of the business with the
intention of supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes
such reports reveal certain thumb rules; best practices developed by existing
enterprises by trial and error, and certain industrial norms that become a guiding
source regarding various aspects of business set-up and it’s successful
management.
Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form basis of any Investment Decision.

5 BRIEF DESCRIPTION OF PROJECT & PRODUCT

The importance of printing and graphic arts sector is often under-estimated.

However, due to continual increase in advertisement and promotion trends vis-à-
vis massive expansion of educational sector, the business of printing press is
experiencing a large scale of turnover in Pakistan. Currently, print media is
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recognized as one of the most effective and economical mode of communication

and promotion by all type of businesses.
There is huge variety of printing materials / products which are being produced by
the printing presses mainly for business users of industrial as well as educational
sector. Educational text books have the largest share in the local printing industry
followed by the promotional materials.
Accordingly, the proposed printing press would mainly cater for the printing
requirements of following four business categories:
 Promotional Material; Printing material such as, Brochures, Product
Catalogues, Posters, Annual Reports, Calendars, Diaries, etc.
 Office Stationary; Company Letter Heads, Files, Vouchers, Invoices,
Visiting Cards, Book of Accounts, etc.
 Publishing Material; Text Books, Literature Books, etc.
 Packaging Material; Printing of packing material of all kinds, such as,
Boxes, Cartons, Shopping Bags, etc.
The project is proposed to be set up in any of the four provincial capitals or major
urban city of Pakistan. The business legal status of the proposed project can either
be sole proprietorship or partnership. However, this pre-feasibility assumes the
legal status to be Sole Proprietorship.

5.1 Production Process

5.1.1 The Design / Creative Stage

In the Design Stage the designer prepares the design of the product taking into
account the overall look and feel of the paper. Text to be printed is typed and
graphics to be shown are created. Designing of graphics is of two types, halftone
and line art. Halftone is the reproduction of continuous-tone artwork (such as a
photograph) through the application of a screen that converts the image into dots
of various sizes. Line art is the art that is made up of continuous lines such as pen
& ink drawings or typefaces. There is no tonal difference from one area to another.
After designing the designer sets page layout and the design is sent to the pre-
press department.

5.1.2 The Prepress Stage

In the Pre-press Stage the artwork is taken from its delivered state (either
reflective art or digital file) all the way to the press plates. In pre-press stage:

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 The artwork is transformed to negative film either by imaging a digital file

through an image setter, or by shooting reflective artwork with a copy
camera.
 The pages are stripped together into a flat that reflects how the pages will
be printed on the press sheet.
 The flat is burned onto a metal plate.
After the flat is burned onto the plate, the plate is washed in the developing
chemical. This developed plate is wrapped around the press cylinder.
For the purpose of this feasibility, this process will be outsourced because of the
high capital cost of machinery and equipment used in the process and the
infrequent use of machinery.

5.1.3 The Printing Stage

The Printing Stage covers the transfer of an image to paper. Offset lithography is
based upon the principle that, “the ink and water do not mix”.
The paper is fed through the press from a pile of paper already cut to the size of
the machine. Offset printing presses print at a high speed. When a printing plate is
made, the printing image is rendered ink-receptive and water-repellent, while the
non-printing areas are rendered water-receptive and ink-repellent. The ink is
distributed to the plates through a series of rollers.
On the press, the plates are dampened, first by water rollers, and then ink rollers.
The rollers distribute the ink from the ink fountain onto the plates. The image area
of the plates picks up ink from the ink rollers. The water rollers keep the ink off of
the non-image areas of the plate. Each plate then transfers its image to a rubber
blanket that in turn transfers the image to paper. The plate itself does not actually
touch the paper. All of this occurs at a high speed. During the process the machine
man checks the blending of inks to maintain the color control. Print quality is
checked frequently by the press operator.

5.1.4 The Bindery Stage

The Bindery Stage is when any trimming, folding, perforating, collating, stitching,
or gluing is performed as required. Mostly, Printing Press performs the trimming
and folding in-house, and works closely with an outside bindery on the collating,
stitching and gluing.
A typical job such as an 8.5 x 11 newsletter may include:
i. A post press cut

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ii. A half fold

iii. A double parallel fold
For the purpose of this feasibility, this process will be outsourced because the
process is labor intensive and to perform the process in-house the business
requires steady orders of binding.

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Figure: Production Process Flow Diagram

Ink & Water Paper

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5.2 Installed and Operational Capacity

The proposed printing press unit has an installed capacity of printing 14,175
impressions per hour with combination of three (03) machines (i.e. Rota, Solna
and Digital Printing) having different printing technologies. The installed production
capacities of Rota, Solna and Digital printing mainly comprises of 4,000 imp / hr,
10,000 imp / hr and 175 imp / hr, respectively.
The project would initially operate at 60% production capacity in year 1, and 5%
capacity utilization growth is assumed in the subsequent years. The maximum
capacity utilization of the unit is worked out at 95% of installed capacity, because
of the wastage of time during cleaning and trial runs of the machines. The unit will
operate on 8 hours single shift basis with 330 operational days in a year.
Details of operational and installed capacity according to product mix are provided
in the table below:

Table 1: Installed and Operational Capacity

Maximum
Description of Capacity
Production Installed Capacity
Machine / Utilization in
Proportion Capacity (Units) Utilization
Product Mix Year 1 (60%)
(95%)
Solna 125 26,400,000 25,080,000 15,840,000
Financial Report 25% 6,600,000 6,270,000 3,960,000
Brochure 15% 3,960,000 3,762,000 2,376,000
Book 50% 13,200,000 12,540,000 7,920,000
Pamphlet 5% 1,320,000 1,254,000 792,000
Letterhead 5% 1,320,000 1,254,000 792,000
Rota 10,560,000 10,034,000 6,336,000
Vouchers 40% 4,224,000 4,013,000 2,534,000
Visiting Cards 5% 528,000 502,000 317,000
Packing Material 35% 3,696,000 3,512,000 2,218,000
Invitation Cards 20% 2,112,000 2,007,000 1,267,000
Digital Printing
462,000 439,000 277,000
Machine

6 CRITICAL FACTORS

Following are the factors critical for the success of this business venture;

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 Relations in business sector are important in success of a printing

press, as it is an order-based business.
 Technical skills are vital for effectively operating the business, as skilled
workers can reduce wastage; insure lower machine maintenance cost,
in-time delivery and quality finish of the product.
 Order size is of a great importance for profitability of the business, as
major cost of printing is the designing, image setting and plate making
i.e. fixed costs. So, if the order size is large the cost per unit will be
lower.
 Well-organized company profile with client’s information and nature of
job done is very effective from marketing point of view. Normally Multi-
National companies go through the profile of company before ordering
any assignment.
 Trained staff should be engaged and comprehensive staff training
programs to be adopted for capacity building.
 Careful selection of good location and purchase of land at competitive
price.

7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

As the major customers of printing press are industrial buyers, so the unit can be
established in any major city comprising of large industrial and educational sector
bases. Therefore, cities like Karachi, Lahore, Peshawar, Quetta, Faisalabad,
Sialkot, Multan, Rawalpindi and Hyderabad can be suitable locations for setting up
printing press. Subsequently, availability of skilled labor, raw material and close
customer proximity is extremely important for the success of this business.
Concerning to that, Karachi, Lahore, Sialkot and Faisalabad are considered as the
most appropriate location for the proposed venture.

8 POTENTIAL TARGET CUSTOMERS / MARKETS

Potential target customers for the produced printed material will mainly comprise
of buyers from local business enterprises, educational institutions and other
organizations. As majority of the target customer belongs to business segments,
therefore, the business clients operating in major big cities, such as Lahore,
Karachi, Peshawar, Quetta, Faisalabad, Sialkot, Rawalpindi and Hyderabad will be
key potential markets for the proposed venture.

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9 PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability
of the proposed Printing Press Unit. Various costs and revenue related
assumptions along with results of the analysis are outlined in this section.

The projected Income Statement, Cash Flow Statement and Balance Sheet are
also attached as annexure.

9.1 Project Economics

All the figures in this financial model have been calculated on the basis of printing
capacity of 14,175 impressions per hours, while unit will operate on 8 hours single
shift basis for 330 days per year. The capacity utilization during year one is worked
out at 60% with 05% increase in subsequent years up to the maximum capacity
utilization of 95%.
The following table shows internal rate of return, payback period and net present
value of the proposed venture.

Table 2: Project Economics

Description Details

Internal Rate of Return (IRR) 30%

Payback Period (Yrs.) 4.79

Net Present Value (Rs.) 5,433,263

9.2 Project Financing

Following table provides details of the equity required and variables related to
bank loan:

Table 3: Project Financing

Description Details
Total Equity (50%) Rs. 3,591,751
Bank Loan (50%) Rs. 3,591,751
Markup to the Borrower (%age / annum) 16%
Tenure of the Loan (Years) 5 Years

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9.3 Project Cost

Following fixed and working capital requirements have been identified for
operations of the proposed business.
Table 4: Project Cost
Description Amount Rs.
Capital Cost
Machinery &Equipment 4,205,000
Furniture &Fixtures 553,500
Office Equipment 211,250
Pre-operating Costs 208,880
Security Deposit 195,000
Total Capital Cost 5,373,630
Working Capital
Raw Material Inventory 1,269,395
Equipment Spare Part Inventory 45,478
Upfront Building Rent 195,000
Cash 300,000
Total Working Capital 1,809,873
Total Project Cost 7,183,503

9.4 Space Requirement

For establishing the proposed printing press unit with installation of three (03)
machines approximately 1,450 sq. ft. area is required. Detail of covered area
requirement for the project is given in below table:

Table 5: Space Requirements

Description Covered Area (Sq. Ft)

Design Section 150

Printing Hall 700
Cutting Hall 200
Owner’s Office 100

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Accounts & Admin. Office 150

Store 150
Total 1,450

In order to reduce the initial capital investment, it is recommended to start the

project in a rented building. Monthly rent assumed for the project is Rs. 65,000,
besides that three (3) months’ rent will be paid in advance.
9.5 Machinery & Equipment Requirement
The project is machine oriented and nature of jobs to be undertaken mostly
depends upon the availability of machinery. Therefore, selection of machinery is
the most important aspect of this project. Following is the detail of machinery
required for this project:

Table 6: Machinery & Equipment Requirement

Unit Cost Total Cost
Description Qty. Availability
(Rs.) (Rs.)
Offset Printing Machine Imported but Locally
1 400,000 400,000
(Rota Reconditioned) Available
Offset Printing Machine
Imported but Locally
(Solna 125, Sweden 1 1,000,000 1,000,000
Available
Reconditioned)
Cutting Machine (920 mm) 1 120,000 120,000 Locally Manufactured
Die Cutting Machine (660 x
1 120,000 120,000 Locally Manufactured
930 mm)
Digital Printing Machine 1 1,515,000 1,515,000 Imported
Generator Set (45 kva) 1 600,000 600,000 Local
Stabilizer for Digital
1 450,000 450,000 Local
Machine
Total 4,205,000
Technical specifications of these machines are given in the following table:

Table 7: Technichal Specification of Machines

Max.
Max. Installation Expected
Sheet
Machine Capacity Area (LxW) Power (KW) Useful Life
Size
(imp/hr) (mm) (Years)
(mm)
Rota 345 x 454 6,000 1840 x 1030 1.15 20

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Solna
483 x 640 8,000 1960 x 1304 3.70 20
125
XEROX
(Digital
200 - 240
Printing 3,000
320 x 488 2400 x 2400 Vac, 50 / 60 20
machine PP / hr
Hz, 30A
) DC
5000

In addition to the above stated machinery, latest more efficient alternative

technologies (i.e. Offset Printing Machines) from Ronald and Hamada brands are
also available in the market. However, the prices of these machines are higher
compared to the proposed machines.
It is suggested that, initially project should be started with above proposed mix of
machines and later on adaptation of latest technologies would be considered as
business grows.

9.6 Furniture & Fixtures Requirement

Details of the furniture and fixture required for the project are given below:

Table 8: Furniture & Fixture

Unit Cost Total Cost
Description Quantity
(Rs.) (Rs.)
Furniture 1 150,000 150,000
Interior Designing 400 250 100,000
Electric Wiring and Lighting 1 100,000 100,000
Air Conditioners (1.5 ton Split) 3 60,000 180,000
Fans 7 2,500 17,500
Tube Lights 12 500 6,000
Total 553,500

9.7 Office Equipment Requirement

Following office equipment will be required for the proposed project.
Table 9: Office Equipment and Vehicles
Unit Cost Total Cost
Description Quantity
(Rs.) (Rs.)

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Laptop 4 42,000 168,000

Color Printer (DeskJet HP) 1 15,750 15,750
Printer Mono Laser Jet (HP) 1 8,000 8,000
Scanner- Flat Bed (BEN Q) 1 7,500 7,500
Fax Machine 1 12,000 12,000
Total 211,250

9.8 Raw Material Requirement

Papers, plates and ink of different colors are the major raw material used for the
printing purposes. Imported as well as local paper and board is being used by the
industry. Imported paper is normally used in annual reports, brochures,
catalogues, prospectus and visiting cards etc. Imported paper is also readily
available in local markets.
Majority of business is done on order basis; therefore raw material inventory is
maintained on the nature and scope of ongoing orders. The list of different types of
papers and other raw material required by the unit is provided in the following
table:

Table 10: Major Raw Material Required

Description Unit Unit Cost Price (Rs.) Availability

Mat Art Paper 135 gram Rim 4,800 Imported

Mat Art Paper 115 gram Rim 4,830 Imported

Mat Art Card 310 gram Rim 2,400 Imported

Offset Paper 100 gram Rim 3,360 Imported

Art Card 310 gram Rim 2,520 Imported

Flying Paper 68 gram Rim 1,785 Local

Plate 174 Imported

9.9 Human Resource Requirement

The project is machine oriented but skilled labor (machine man) is required to
operate the machines efficiently and effectively. Skilled machine man will result in
lower wastage of paper and ink, lower maintenance cost of machines and also
longer life of machines. This will enhance quality of product and timely delivery of
order and hence, help in creating a good image among customers.

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The table below shows Human Resource requirement and the proposed salary:

Table 11: Human Resource Requirement

Description No. of Staff Monthly Salary (Rs.)
Owner / Manager 1 40,000
Graphic Designer 1 35,000
Account Officer 1 18,000
Supervisor 1 20,000
Composer 2 17,000
Machine Man 3 14,000
Cutting Master 1 12,000
Office Boy 1 12,000
Security Guard 2 13,000
Total Salaries 13

9.10 Utilities and Other Costs

The other essential cost to be borne by the project is the cost of electricity and
diesel expenses for generator, which are assumed as Rs. 100,000 during first year
of operations. An increase of 10% in electricity and diesel expenses is assumed in
subsequent years. Similarly, travelling expenses are estimated as 10% of
administrative expenses and communication expenses are estimated at Rs. 8,000
per month. Furthermore, promotional expense being essential for marketing of the
unit is estimated as 1% of total revenue.

9.11 Revenue Generation

Based on the capacity utilization of 60%, sales revenue during the first year of
operations is estimated as under:

Table 12: Revenue During 1st Year of Operations

Impressions Sale Price
Sales During 1st
Description During 1st Per
Year
Year Impression
Financial Report 36,000 207.22 7,459,825
Brochure 180,000 36.22 6,518,700

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Book 54,545 203.13 1,079,993

Pamphlet 360,000 5.59 2,012,868

Letterhead 1,440,000 2.68 3,855,456

Voucher 4,608,000 2.23 10,269,896

Visiting Cards 576,000 1.99 1,146,142

Packing Material 372,230 6.85 2,550,237

Invitation cards 41,030 37.06 1,520,605

Digital Prints 277,200 31.97 8,861,160

Total 55,274,880

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10 CONTACT DETAILS

In order to facilitate potential investors, contact details of private sector Service

Providers relevant to the proposed project be given.

10.1 Machinery Suppliers

Name of
Address Phone / Fax E-mail / Website
Supplier
Pakistan 303, Aamir Trade +92-21-34551798, [email protected]
Machinery Centre, 233-1/A, 34522776
And PECHS, Block II,
Fax: +92-21-
Equipment Shahrah-e-
34522786
Co. (Pvt.) Ltd. Quaideen, Karachi
Pakistan C-11/3, Sidco +92-21-35656981, [email protected]
Printing Avenue Centre, 264 35656982
Equipment R.A. Lines, Stretchen
Fax: +92-21-
Co. (Pvt.) Ltd. Road, Karachi
35653620

Pakistan 303, Aamir Trade +92-21-34551798, [email protected]

Machinery Centre, 233-1/A, 34522776
And PECHS, Block II,
Fax: +92-21-
Equipment Shahrah-e-
34522786
Co. (Pvt.) Ltd. Quaideen, Karachi
Pakistan C-11/3, Sidco +92-21-35656981, [email protected]
Printing Avenue Centre, 264 35656982
Equipment R.A. Lines, Stretchen
Fax: +92-21-
Co. (Pvt.) Ltd. Road, Karachi
35653620

10.2 Raw Material Suppliers

A few of the prominent suppliers of papers, plates and ink are listed below:
Name of Supplier Address Phone Fax
Akbari Paper Store 15-Shahrah-e-Millat, 92-42-7232599 92-42-7236484
(Ganpat Rd.) Lahore
Javed Commercial 4-Ahtesham Chambers, 92-42-7248509, 92-42-7244671
Corporation Paper Market, Shahrah- 7357635
e-Millat, Lahore
Grapho Scan Kashif Centre, 2nd Floor, 92-42-7232582, 92-42-7351100
Supplies (Pvt.) 55-A, Chamberlaine 7351200

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Limited Road, Lahore

Malik Paper Mart Ganpat Road, Lahore 92-42-7353482, 92-42-7248115,
7311553, 5837408
7224255
Royal Paper House 10 Royal Park, Lahore 92-42-6313265, 92-42-6363266
6363266
Zap Traders Paper Market, 473 92-21-2621423,
Shahrah-e-Liaquat, 2628387
Karachi

11 USEFUL WEB LINKS

Small & Medium Enterprises Development Authority (SMEDA) www.smeda.org.pk

Government of Pakistan www.pakistan.gov.pk
Ministry of Industries & Production www.moip.gov.pk
Government of Punjab www.punjab.gov.pk
Government of Sindh www.sindh.gov.pk
Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk
Government of Balochistan www.balochistan.gov.pk
Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk
Government of Azad Jamu Kashmir www.ajk.gov.pk
Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk
Security Commission of Pakistan (SECP) www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry
www.fpcci.com.pk
(FPCCI)
State Bank of Pakistan (SBP) www.sbp.org.pk
Punjab Small Industries Corporation (PSIC) www.psic.gop.pk
Sindh Small Industries Corporation (SSIC) www.ssic.gos.pk
Punjab Vocational Training Council (PVTC) www.pvtc.gop.pk
Technical Education and Vocational Training Authority
www.tevta.org
(TEVTA)
Punjab Industrial Estates (PIE) www.pie.com.pk
Faisalabad Industrial Estate Development and Management
www.fiedmc.com.pk
Company (FIEDMC)
Pakistan Association of Printing and Graphic Arts Industry
www.papgai.pk
(PAPGAI)
Print Pak www.printpak.com.pk
National College of Arts (NCA) www.nca.edu.pk

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12 ANNEXURES

12.1 Income Statement

Calculations SMEDA
Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 55,274,880 65,869,131 78,029,729 91,963,544 107,904,057 126,112,710 146,884,413 170,548,934 187,603,828 206,364,210

Cost of sales
Cost of goods sold 1 45,698,203 54,456,952 64,510,644 76,030,361 89,209,073 104,262,991 121,435,859 141,000,387 155,100,426 170,610,469
Operation costs 1 (direct labor) 1,260,000 1,419,142 1,557,549 1,709,421 1,876,070 2,058,938 2,259,604 2,479,804 2,725,226 2,990,558
Operating costs 2 (machinery maintenance) 1,091,475 1,334,978 1,581,677 1,864,367 2,187,777 2,557,226 2,978,687 3,458,868 3,810,326 4,191,358
Operating costs 3 (direct electricity + Gen Expen) 1,200,000 1,320,000 1,452,000 1,597,200 1,756,920 1,932,612 2,125,873 2,338,461 2,572,307 2,829,537
Total cost of sales 49,249,678 58,531,071 69,101,870 81,201,349 95,029,841 110,811,767 128,800,023 149,277,520 164,208,284 180,621,922
Gross Profit 6,025,203 7,338,060 8,927,859 10,762,195 12,874,216 15,300,943 18,084,390 21,271,414 23,395,544 25,742,289

General administration & selling expenses

Administration expense 1,572,000 1,725,052 1,893,006 2,077,311 2,279,561 2,501,503 2,745,052 3,012,315 3,305,598 3,627,436
Administration benefits expense 47,160 51,752 56,790 62,319 68,387 75,045 82,352 90,369 99,168 108,823
Building rental expense 780,000 858,000 943,800 1,038,180 1,141,998 1,256,198 1,381,818 1,519,999 1,671,999 1,839,199
Electricity expense 600,000 660,000 726,000 798,600 878,460 966,306 1,062,937 1,169,230 1,286,153 1,414,769
Water expense 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477
Travelling expense 157,200 172,505 189,301 207,731 227,956 250,150 274,505 301,231 330,560 362,744
Communications expense (phone, fax, mail, internet, etc.) 96,000 105,600 116,160 127,776 140,554 154,609 170,070 187,077 205,785 226,363
Office expenses (stationary, entertainment, janitorial services, etc.) 78,600 86,253 94,650 103,866 113,978 125,075 137,253 150,616 165,280 181,372
Promotional expense 552,749 658,691 780,297 919,635 1,079,041 1,261,127 1,468,844 1,705,489 1,876,038 2,063,642
Professional fees (legal, audit, consultants, etc.) 276,374 329,346 390,149 459,818 539,520 630,564 734,422 852,745 938,019 1,031,821
Depreciation expense 496,975 496,975 496,975 496,975 496,975 496,975 496,975 496,975 496,975 496,975
Amortization of pre-operating costs 41,776 41,776 41,776 41,776 41,776 - - - - -
Bad debt expense 276,374 329,346 390,149 459,818 539,520 630,564 734,422 852,745 938,019 1,031,821
Subtotal 5,035,209 5,581,295 6,191,652 6,873,665 7,635,572 8,444,746 9,394,943 10,455,714 11,442,209 12,526,441
Operating Income 989,994 1,756,765 2,736,207 3,888,530 5,238,644 6,856,197 8,689,447 10,815,700 11,953,334 13,215,848

Earnings Before Interest & Taxes 989,994 1,756,765 2,736,207 3,888,530 5,238,644 6,856,197 8,689,447 10,815,700 11,953,334 13,215,848

Interest on short term debt 125,543 184,376 58,833 - - - - - - -

Interest expense on long term debt (Project Loan) 429,890 367,380 294,869 210,755 113,183 - - - - -
Interest expense on long term debt (Working Capital Loan) 80,331 - - - - - - - - -
Subtotal 635,765 551,757 353,702 210,755 113,183 - - - - -
Earnings Before Tax 354,229 1,205,009 2,382,505 3,677,775 5,125,461 6,856,197 8,689,447 10,815,700 11,953,334 13,215,848

Tax - 103,251 324,001 641,943 1,060,138 1,622,168 2,263,806 3,007,994 3,406,166 3,848,046
NET PROFIT/(LOSS) AFTER TAX 354,229 1,101,757 2,058,504 3,035,831 4,065,323 5,234,029 6,425,641 7,807,705 8,547,168 9,367,802

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12.2 Balance Sheet

Calculations SMEDA
Balance Sheet

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 300,000 - - 430,577 2,356,977 4,968,388 9,108,492 14,061,951 20,406,886 27,142,075 48,148,447
Accounts receivable 1,514,380 1,659,507 1,971,217 2,328,675 2,737,912 3,205,709 3,739,687 4,348,402 4,906,202 5,396,822
Finished goods inventory 1,407,134 1,629,345 1,923,312 2,259,778 2,644,309 3,083,142 3,583,308 4,152,669 4,561,341 5,017,276
Equipment spare part inventory 45,478 58,405 72,658 89,927 110,802 135,989 166,322 202,791 234,566 270,924 -
Raw material inventory 1,269,395 1,663,962 2,168,274 2,811,011 3,628,083 4,664,350 5,975,862 7,632,496 9,235,320 11,174,738 -
Pre-paid building rent 195,000 214,500 235,950 259,545 285,500 314,049 345,454 380,000 418,000 459,800 -
Total Current Assets 1,809,873 4,858,382 5,765,734 7,485,590 10,969,815 15,464,997 21,884,982 29,600,233 38,795,844 48,515,080 58,562,545

Fixed assets
Security Deposit 195,000 195,000 195,000 195,000 195,000 195,000 195,000 195,000 195,000 195,000 195,000
Machinery & equipment 4,205,000 3,784,500 3,364,000 2,943,500 2,523,000 2,102,500 1,682,000 1,261,500 841,000 420,500 -
Furniture & fixtures 553,500 498,150 442,800 387,450 332,100 276,750 221,400 166,050 110,700 55,350 -
Office equipment 211,250 190,125 169,000 147,875 126,750 105,625 84,500 63,375 42,250 21,125 -
Total Fixed Assets 5,164,750 4,667,775 4,170,800 3,673,825 3,176,850 2,679,875 2,182,900 1,685,925 1,188,950 691,975 195,000

Intangible assets
Pre-operation costs 208,880 167,104 125,328 83,552 41,776 - - - - - -
Total Intangible Assets 208,880 167,104 125,328 83,552 41,776 - - - - - -
TOTAL ASSETS 7,183,503 9,693,261 10,061,862 11,242,967 14,188,441 18,144,872 24,067,882 31,286,158 39,984,794 49,207,055 58,757,545

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 1,993,646 2,384,912 2,835,339 3,354,806 3,953,309 4,642,290 5,434,925 6,325,855 7,000,948 7,183,637
Short term debt - 1,457,507 794,440 - - - - - - - -
Total Current Liabilities - 3,451,153 3,179,352 2,835,339 3,354,806 3,953,309 4,642,290 5,434,925 6,325,855 7,000,948 7,183,637

Other liabilities
Long term debt (Project Loan) 2,686,815 2,296,127 1,842,929 1,317,219 707,395 - - - - - -
Long term debt (Working Capital Loan) 904,936 - - - - - - - - - -
Total Long Term Liabilities 3,591,751 2,296,127 1,842,929 1,317,219 707,395 - - - - - -

Shareholders' equity
Paid-up capital 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751 3,591,751
Retained earnings 354,229 1,447,830 3,498,657 6,534,489 10,599,812 15,833,841 22,259,482 30,067,187 38,614,355 47,982,157
Total Equity 3,591,751 3,945,981 5,039,581 7,090,409 10,126,240 14,191,563 19,425,592 25,851,233 33,658,939 42,206,107 51,573,908
TOTAL CAPITAL AND LIABILITIES 7,183,503 9,693,261 10,061,862 11,242,967 14,188,441 18,144,872 24,067,882 31,286,158 39,984,794 49,207,055 58,757,545

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12.3 Cash Flow Statement

Calculations SMEDA
Cash Flow Statement

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 354,229 1,093,601 2,050,827 3,035,831 4,065,323 5,234,029 6,425,641 7,807,705 8,547,168 9,367,802
Add: depreciation expense 496,975 496,975 496,975 496,975 496,975 496,975 496,975 496,975 496,975 496,975
amortization of pre-operating costs 41,776 41,776 41,776 41,776 41,776 - - - - -
Accounts receivable (1,514,380) (145,127) (311,710) (357,458) (409,237) (467,797) (533,977) (608,715) (557,800) (490,620)
Finished goods inventory (1,407,134) (222,211) (293,968) (336,465) (384,531) (438,834) (500,166) (569,361) (408,672) (455,934)
Equipment inventory (45,478) (12,927) (14,253) (17,268) (20,876) (25,187) (30,333) (36,469) (31,775) (36,358) 270,924
Raw material inventory (1,269,395) (394,568) (504,312) (642,737) (817,072) (1,036,266) (1,311,512) (1,656,634) (1,602,824) (1,939,417) 11,174,738
Pre-paid building rent (195,000) (19,500) (21,450) (23,595) (25,955) (28,550) (31,405) (34,545) (38,000) (41,800) 459,800
Accounts payable 1,993,646 391,266 450,427 519,467 598,503 688,981 792,634 890,931 675,093 182,688
Cash provided by operations (1,509,873) (461,883) 1,116,265 1,750,727 2,536,224 3,318,806 4,140,105 4,953,459 6,344,935 6,735,189 21,006,372

Financing activities
Project Loan - principal repayment (390,688) (453,198) (525,710) (609,824) (707,395) - - - - -
Working Capital Loan - principal repayment (904,936) - - - - - - - - -
Short term debt principal repayment - (1,457,507) (794,440) - - - - - - -
Additions to Project Loan 2,686,815 - - - - - - - - - -
Additions to Working Capital Loan 904,936 - - - - - - - - - -
Issuance of shares 3,591,751 - - - - - - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 7,183,503 (1,295,624) (1,910,706) (1,320,150) (609,824) (707,395) - - - - -

Investing activities
Capital expenditure (5,373,630) - - - - - - - - - -
Acquisitions
Cash (used for) / provided by investing activities (5,373,630) - - - - - - - - - -

NET CASH 300,000 (1,757,507) (794,440) 430,577 1,926,400 2,611,410 4,140,105 4,953,459 6,344,935 6,735,189 21,006,372

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13 KEY ASSUMPTIONS

13.1 Operating Cost Assumptions

Description Details
Rs. 0.05 per unit of
Machinery Maintenance
Production
Office Expenses (Janitorial Services, Stationery,
5% of Administrative Cost
Entertainment etc)
Communication Expenses Rs. 8,000 Per Month
Travelling Expenses 10% of Administrative Cost
Promotional Expenses 1% of Revenues
Operating Expense Growth Rate 10%
Depreciation Method Straight Line
Depreciation Rate for Furniture & Fixtures & Office
10% each
Equipment

13.2 Production Assumptions

Description Details
Days Operational / Year 330
Hours Operational / Day 8
No of Shifts 1 Shift
Installed Capacity of Printing Machines 14,175
Production Capacity Utilization in First Year 60%
Percentage Increase in Production Capacity every
5%
Year
Maximum Production Capacity Utilization 95%
Cost of Goods Sold Growth Rate 10%

13.3 Revenue Assumptions

Description Details
Sales Price Growth 10%
Percentage of Profit on
Financial Report 25%
Brochure 15%

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Book 50%
Pamphlet 5%
Letterhead 5%
Voucher 40%
Visiting Cards 5%
Packing Material 35%
Invitation cards 20%

13.4 Financial Assumptions

Description Details
Debt 50%
Equity 50%
Interest Rate on Debt 16%
Debt Tenure 5 Years
Debt Payments / Year 12

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