Manufacturing Unit For Varnishes and Lacquers Rs. 13.42 Million Oct-2021

Pre-feasibility Study
MANUFACTURING
UNIT FOR
VARNISHES AND
LACQUERS
October 2021
The figures and financial projections are approximate due to fluctuations in

exchange rates, energy costs, and fuel prices etc. Users are advised to focus on
understanding essential elements such as production processes and capacities, space,
machinery, human resources, and raw material etc. requirements. Project
investment, operating costs, andrevenues can change daily. For accurate financial
calculations, utilize financial calculators on SMEDA’s website and consult financial
experts to stay current with market conditions.
Small and Medium Enterprises Development Authority

Ministry of Industries and Production
Government of Pakistan
Pre-Feasibility Study Manufacturing Unit for Varnishes and Lacquers
Table of Contents
1. DISCLAIMER .................................................................................................. 5
2. EXECUTIVE SUMMARY ................................................................................. 6
3. INTRODUCTION TO SMEDA ......................................................................... 8
4. PURPOSE OF THE DOCUMENT ................................................................... 9
5. BRIEF DESCRIPTION OF PROJECT & products ......................................... 9
5.1. Machinery and Equipment ......................................................................... 11
5.2. Process Flow for Manufacturing of Varnishes and Lacquers ..................... 17
5.3. Installed and Operational Capacities ......................................................... 27
6. CRITICAL FACTORS ................................................................................... 32
7. GEOGRAPHICAL POTENTIAL FOR INVESTMENT ................................... 32
8. POTENTIAL TARGET MARKETS/Customers ............................................ 32
9. PROJECT COST SUMMARY ....................................................................... 33
9.1. Initial Project Cost ...................................................................................... 34
9.1.1. Land................................................................................................................. 34
9.1.2. Building / Infrastructure ................................................................................ 35
9.1.3. Machinery and Equipment ........................................................................... 35
9.1.4. Office Equipment ........................................................................................... 36
9.1.5. Furniture and Fixture .................................................................................... 37
9.1.6. Vehicles .......................................................................................................... 37
9.1.7. Pre-Operating Costs ..................................................................................... 37
9.1.8. Licenses and Permits ................................................................................... 38
9.1.9. Security against Building .............................................................................. 38
9.1.10. Initial Working Capital ................................................................................... 39
9.2. Breakeven Analysis ................................................................................... 40
9.3. Revenue Generation .................................................................................. 40
9.4. Variable Cost Estimate .............................................................................. 44
9.5. Fixed Cost Estimate ................................................................................... 52
9.6. Financial Feasibility Analysis ..................................................................... 52
9.7. Financial Feasibility Analysis with 50% Debt ............................................. 53
9.8. Human Resource Requirement.................................................................. 53
10. CONTACT DETAILs ..................................................................................... 55
11. USEFUL LINKS ............................................................................................ 57
12. ANNEXURES ................................................................................................ 59
12.1. Income Statement ...................................................................................... 59
12.2. Balance Sheet............................................................................................ 60
12.3. Cash Flow Statement ................................................................................. 61
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13. KEY ASSUMPTIONS .................................................................................... 62

13.1. Operating Cost Assumptions ..................................................................... 62
13.2. Revenue Assumptions ............................................................................... 62
13.3. Financial Assumptions ............................................................................... 62
13.4. Debt Related Assumptions......................................................................... 63
13.5. Cash Flow Assumptions ............................................................................ 63
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Table of Tables
Table 1: Installed and Operational Capacity ..................................................................... 28
Table 2: Packing Wise Distribution-Polyurethane Varnish ............................................. 28
Table 3: Packing Wise Distribution-Synthetic Varnish .................................................... 29
Table 4: Packing Wise Distribution-Nitrocellulose lacquer ............................................. 30
Table 5: Packing Wise Distribution-1K-Arcylic Lacquer .................................................. 30
Table 6: Packing Wise Distribution-2K-Arcylic Lacquer .................................................. 31
Table 7: Initial Project Cost estimates................................................................................ 34
Table 8: Breakup of Space Requirement .......................................................................... 34
Table 9: Building Renovation Cost ..................................................................................... 35
Table 10: Machinery Cost Details ....................................................................................... 35
Table 11: Office Equipment Cost Details .......................................................................... 36
Table 12: Furniture & Fixtures Cost Details ...................................................................... 37
Table 13: Office Vehicle Cost Details ................................................................................ 37
Table 14: Pre-Operating Cost Details ................................................................................ 37
Table 15: Licenses, Permits Cost Details ......................................................................... 38
Table 16: Security against Building .................................................................................... 38
Table 17: Initial Working Capital Details ............................................................................ 39
Table 18: Lab Consumable ................................................................................................. 39
Table 19: Breakeven Analysis ............................................................................................. 40
Table 20: Revenue Details .................................................................................................. 40
Table 21: Revenue Retail-Polyurethane Varnish ............................................................. 41
Table 22: Revenue Wholesale-Polyurethane Varnish .................................................... 41
Table 23: Revenue Retail-Synthetic Varnish .................................................................... 41
Table 24: Revenue Wholesale-Synthetic Varnish ........................................................... 42
Table 25: Revenue Retail-Nitrocellulose Lacquer ........................................................... 42
Table 26: Revenue Wholesale-Nitrocellulose Lacquer ................................................... 42
Table 27: Revenue Retail-1K-Acrylic Lacquer ................................................................. 42
Table 28: Revenue Wholesale-1K-Acrylic Lacquer ......................................................... 43
Table 29: Revenue Retail-2K-Acrylic Lacquer ................................................................. 43
Table 30: Revenue Wholesale-2K-Acrylic Lacquer ......................................................... 43
Table 31: Variable Cost Estimate ....................................................................................... 44
Table 32: Raw Material Cost-Polyurethane Varnish ....................................................... 45
Table 33: Raw Material Cost-Synthetic Varnish............................................................... 45
Table 34: Raw Material Cost-Nitrocellulose Lacquer ...................................................... 45
Table 35: Raw Material Cost-Acrylic Lacquer-1K ............................................................ 46
Table 36: Raw Material Cost-2K Acrylic Lacquer and Hardener ................................... 46
Table 37: Raw Material Cost Details - Polyurethane Varnish-....................................... 46
Table 38: Raw Material Cost Details - Synthetic Varnish ............................................... 47
Table 39: Raw Material Cost - Nitrocellulose Lacquer .................................................... 48
Table 40: Raw Material Cost - Acrylic Lacquer-1K .......................................................... 49
Table 41: Raw Material Cost - Acrylic Lacquer-2K .......................................................... 49
Table 42: Raw Material Cost – Acrylic Lacquer-2K Hardener ....................................... 50
Table 43: Packing Cost – Tin Cans .................................................................................... 50
Table 44: Carton Cost for Packing ..................................................................................... 51
Table 45: Other Consumables ............................................................................................ 51
Table 46: Vehicle Maintenance........................................................................................... 51
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Table 47: Direct Labor .......................................................................................................... 51

Table 48: Fixed Cost Estimate ............................................................................................ 52
Table 49: Financial Feasibility Analysis ............................................................................. 52
Table 50: Financial Feasibility Analysis with 50% Debt .................................................. 53
Table 51: Human Resource................................................................................................. 53
Table 52: Contact Details ..................................................................................................... 55
Table 53: Useful Links .......................................................................................................... 57
Table 54: Operating Cost Assumptions ............................................................................. 62
Table 55: Revenue Assumptions ........................................................................................ 62
Table 56: Financial Assumptions ........................................................................................ 62
Table 57: Debt Related Assumption .................................................................................. 63
Table 58: Cash Flow Assumptions ..................................................................................... 63
Table of Figures
Figure 1: High Power Mixing Machine ............................................................................... 12
Figure 2: Packing and Filling Machine ............................................................................... 12
Figure 3: Platform Trolley..................................................................................................... 13
Figure 4: Carry Trolley with Tub (150 liter) ....................................................................... 13
Figure 5: Weigh Scales ........................................................................................................ 14
Figure 6: Measuring Cup...................................................................................................... 14
Figure 7: Portable Spectrophotometer............................................................................... 15
Figure 8: Lacquer Porosity Tester ...................................................................................... 15
Figure 9: Ammeter ................................................................................................................ 16
Figure 10: petri Dish and Glass Beakers........................................................................... 16
Figure 11: Magnetic Mixer and Test Tubes ...................................................................... 16
Figure 12: Glass Stirrer and Nitrocellulose Filter Paper ................................................. 17
Figure 13: Test Tube Stand and Test Tube Holder ......................................................... 17
Figure 14: Process Flow for Manufacturing of Varnishes ............................................... 18
Figure 15 Liquid Varnish ...................................................................................................... 20
Figure 16 MPC Test Results ............................................................................................... 21
Figure 17: Finished Product-Varnish ................................................................................. 21
Figure 18: Process Flow for Manufacturing of Lacquers ................................................ 22
Figure 19: Nitrocellulose Cotton ......................................................................................... 23
Figure 20: Finished Product-Lacquer................................................................................. 26
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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 to be obtained by the user. 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. 226
Prepared by SMEDA-Punjab - OS
Revision Date October 2021
For information [email protected]
October 2021 5
2. EXECUTIVE SUMMARY
Varnish is an oily liquid that is coated on wood or other products to give a hard,
clear, shiny surface. Varnishes provide a non-porous layer which prevents dust and
dirt from being fixed on the surface of the product. When the products such as
wooden furniture needs to be cleaned, the older varnish layer can be easily removed
from the product, along with the dust and dirt that has gathered on the top of surface.
The proposed unit will manufacture two types of varnishes; polyurethane varnish and
synthetic varnish.
Polyurethane varnish is a type of resin1 used to protect floors, cabinets and other
woodwork. It provides resistance to heat, chemicals and scratches. When it is
applied to the surface, it creates a lustrous finish that enhances the brightness of the
surface.
Synthetic varnish is scratch-resistant and durable coating; particularly suitable for the
coating of wood, metals and plastics, which are heavily stressed during use. It is
recommended as a finishing varnish for interior wood applications. It is suitable for
the coating of wood, wood-based materials, metals and hard PVC in interior and
exterior areas.
Lacquer is a type of hard and potentially shiny coating or finish applied to materials
such as wood or metal. Lacquer is a modern finish that is commonly used on high
end furniture. It is fast drying, waterproof coating which maintains its transparency
over time, as it ages. The proposed unit will manufacture three types of lacquers;
nitrocellulose lacquer, 1k acrylic lacquer and 2k acrylic lacquer.
Nitrocellulose lacquers produce a hard yet flexible, durable finish that can be
polished to a high sheen.2
Acrylic lacquer is more commonly used for automotive refinishing and restoration
purposes; however, it is also used for finishing of products like musical instruments,
furniture, etc. Acrylic lacquer provides a long-lasting lacquer finish that can be
polished to a very high gloss. Acrylic lacquer is normally made in two types;
identified by 1K and 2K types.
1K acrylic lacquer is a paint coating on the surface of finishing products that does not
require any hardener, catalyst or activator to cure it. This term can be used to
describe paints that dry in the air ideally at room temperature.
2K acrylic lacquer is a very high gloss and durable automotive paint which does not
dry without the use of 2K hardener. 2K means an activator is required to dry/cure,
sometimes referred to as a hardener. The hardener works by chemically reacting
with a catalyst which sets hard to form a very tough finish.
1
https://homeguides.sfgate.com/polyurethane-varnish-98832.html
2
Sheen is a measure of the reflected light from various types of paints. Paint that has a higher sheen contains
more enamel, making it harder, easier to clean, and more resistant to scratching, scuffing, and staining.
October 2021 6
Varnishes and lacquers are widely used to have a hard, clear, shiny and glossy
finish on wooden furniture as well as on metals works. Both varnish and lacquer
provide shiny and glossy finishes to fixture surfaces. While varnishes produce a
semi-gloss or satin sheen finish, lacquers provide more sheen levels, ranging from
high gloss to ultra-matte.
The proposed business unit will target both wholesale market and retail market. The
percentage ratio of selling the products to retail market is 30% and wholesale market
is 70%.
This “Pre-feasibility Document” provides details for setting up a “Manufacturing Unit
for Varnishes and Lacquers” (hereinafter referred to as proposed
business/manufacturing unit). Increasing consumption trends of varnishes and
lacquers make the proposed project profitable. The potential target market for
varnishes and lacquers includes furniture manufactures (metal as well as wood),
automotive industries, construction industry, fastener industry, etc.
Pakistan’s paints and coatings market is expected to grow at a CAGR of over 3%
during the period 2021-26. The construction industry in Pakistan is expected to
expand by 3% in real terms in 2021. The local manufacturing sector grew by 12.73%
in August of 2021 and automobile sector recorded a growth of 23.4%. With GDP
realizing a growth of 3.95%,3 the size of the economy exceeded to reach $280 billion
in 2021.
The proposed manufacturing unit may be established in industrial areas of major
cities like Lahore, Karachi, Islamabad, Peshawar, Quetta and medium cities such as
Faisalabad, Multan, Rawalpindi, Hyderabad, Bahawalpur, Sargodha, Sukkur,
Mardan, Sheikhupura, Sialkot, Gujranwala, Gujrat, Lasbela, etc. These cities are
suitable locations due to presence of industrial clusters, availability of strong supply
chains, industrial infrastructure and distribution channels. Availability of skilled and
low-cost labor is also a major factor in selecting suitable location for this unit.
The proposed project has an annual capacity of manufacturing 196,000 liters of
different types of varnish and lacquer products; including 49,000 liters of
Polyurethane Varnish, 49,000 liters of Synthetic Varnish, 49,000 liters of
Nitrocellulose Lacquer, 19,600 liters of Acrylic Lacquer-1K and 29,400 liters of 2K-
Acrylic Lacquer. The capacity utilization in the first year of operations is assumed to
be 50% which translates into production of 98,000 liters of all the five types of
products. The maximum capacity utilization is assumed to be 90% which will be
achieved in 9th year of production.
This manufacturing unit will be set up in a rented building with an area of 2,676
square feet (12 Marla). The project requires a total investment of PKR 13.42 million.
This includes capital investment of PKR 9.12 million and working capital of PKR 4.30
million. The project will be established using 100% equity financing. The Net Present
3
https://www.pc.gov.pk/uploads/cpec/PES_2020_21.pdf
October 2021 7
Value (NPV) of project is PKR 62.66 million with an Internal Rate of Return (IRR) of
52% and a Payback period of 3.06 years. Further, this project is expected to
generate Gross Annual Revenues of PKR 70.92 million during 1st year, Gross Profit
(GP) ratio ranging from 27% to 33% and Net Profit (NP) ratio ranging from 4% to14%
during the projection period of ten years. The proposed project will achieve its
estimated breakeven point at capacity of 39% (76,972 liters, 128,289 tin cans) with
annual breakeven revenue of PKR 55.69 million.
The proposed project may also be established using leveraged financing. At 50%
financing at a cost of KIBOR+3%, the proposed business provides Net Present
Value (NPV) of PKR 72.27 million, Internal Rate of Return (IRR) of 51% and
Payback period of 3.07 years. Further, this project is expected to generate Net Profit
(NP) ratio ranging from 3% to 14% during the projection period of ten years. The
proposed project will achieve its estimated breakeven point at capacity of 40%
(78,294-liter, 130,294 tin cans) with breakeven revenue of PKR 56.65 million.
The proposed project will provide employment opportunities to 31 people, working in
single shift of 8 hours during 280 days in a year. High return on investment and
steady growth of business is expected to the entrepreneur having some prior
experience or education in the related field of business. 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 the objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).
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 ‘sectorial 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.
National Business Development Program for SMEs (NBDP) is a project of SMEDA,
funded through Public Sector Development Program of Government of Pakistan.
The NBDP envisages provision of handholding support / business development
services to SMEs to promote business startup, improvement of efficiencies in
October 2021 8
existing SME value chains to make them globally competitive and provide conducive
business environment through evidence-based policy-assistance to the Government
of Pakistan. The Project is objectively designed to support SMEDA's capacity of
providing an effective handholding to SMEs. The proposed program aimed at
facilitating around 314,000 SME beneficiaries over a period of five years.
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 setting up a
“Manufacturing Unit for Varnishes and Lacquers” by providing a general
understanding of the business with the intention of supporting them in 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 setup and its successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form the basis of any investment decision.
5. BRIEF DESCRIPTION OF PROJECT & PRODUCTS

This document provides details about varnishes and lacquers, their uses, machinery
and equipment required for their manufacturing, required raw materials and the
details of the production processes.
Varnish
Varnish is a clear transparent hard protective coating or film. The term “varnish”
refers to the finished appearance of the product. It usually has a yellowish shade;
which comes from its manufacturing process and the raw materials used; however, it
may also be pigmented as per the usage need.
Varnish finishes are usually glossy but may also be designed to produce satin or
semi-gloss sheens by the addition of flatting agents. Two types of varnishes have
been covered in this document; polyurethane varnish and Synthetic varnish (simple
varnish). Descriptions of these two are provided in the following paragraphs:
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 Polyurethane Varnish
Polyurethane varnish is a liquid coating that is applied with a brush and dries clear. It
is a type of resin used to protect floors, cabinets and other woodwork. Polyurethane
varnishes are super-tough coatings, popularly used as a finishing layer for protecting
interior and exterior wooden floors, stairs and other surfaces which are prone to
pedestrian wear and tear. It can also be used on chipboard, plywood, hardboard,
and parquet4 surfaces. It is also used on wooden flooring, book cases, desks, picture
frames and hard woods.
 Synthetic Varnish
Synthetic varnish can be used on wood and wooden surfaces. It is recommended as
a finishing varnish for interior wood applications. This product can also be mixed with
synthetic enamels for gloss enhancement. It dries slowly and requires up to 6 hours
to come into final condition. Synthetic varnish is most commonly used for coating of
wood, wood-based materials, metals and hard PVC in interior and exterior areas.
Lacquer
Lacquer is a type of hard and potentially shiny coating or finish applied to materials
such as wood or metal. Lacquer is made by dissolving cellulose derivatives or
synthetic resins in a volatile solvent. Lacquer is a modern wood finish that is
commonly used on high end furniture. It is fast drying, waterproof and maintains its
transparent look as it ages.
Lacquer provides extremely shiny and glossy finish to a wood surface that is
otherwise difficult to obtain through the use of varnishes, shellac5 or other finishing
substances. Although it is highly durable, scratches may appear over time due to
excessive contact. Automotive Lacquer is a nitrocellulose-based, high gloss, lacquer
type paint that is easy to apply, dries rapidly to a long-wearing attractive finish to
indoor wood and metal surfaces such as doors, doorjambs, cabinets, and shelves.
There are different types of lacquers such as nitrocellulose lacquer, 1k acrylic
lacquer and 2k acrylic lacquer.
 Nitrocellulose Lacquer
Nitrocellulose lacquer is made by mixing NC cotton with a number of fast drying
solvents, diluents and plasticizers. It is fast drying liquid and can be applied by a
brush or spray. This lacquer is effectively resistant to heat and water.
NCL Nitrocellulose Lacquer is a single pack,6 fast drying general purpose lacquer.
Potential uses are for high quality furniture, shop fittings, doors, cabinets, desks,
paneling, partitions and most interior timberwork
4
Surface (such as a floor) made of small pieces of pure wood that fit together to form a pattern.
5
Shellac is actually a natural product (it's made from combining a secretion from the female lac bug with a
solvent such as alcohol) that is very safe once dried and hardened.
6
A single-pack lacquer is one where a hardening agent, a catalyst, has already been applied to the resin base
during the manufacturing process
October 2021 10
 Acrylic Lacquer
Acrylic lacquer is a premium automotive formulation designed to give a lustrous
durable finish to surfaces. It dries quickly and provides a superior grip to metal. This
lacquer dries to a high gloss sheen. There are two main types of acrylic lacquers; 1K
and 2K.
1K-Acrylic lacquer
1K-acrylic lacquer is designed for spot repairs or complete repainting of machinery
and vehicles. It offers scratch resistant properties and ultraviolet protection. 1k-
acrylic takes up to 24 hours to completely dry.
2K-Acrylic Lacquer
2K-acrylic lacquer is a very high gloss and durable automotive paint.7 A hardener is
an activator required to dry/cure the lacquer. Once the hardener is activated, the
contents can be applied within 8 hours before it becomes unusable. The hardener
works by chemically reacting with a catalyst which sets hard to form a very tough
finish. Hardener is an environmentally-friendly paint/lacquer management solution
that quickly hardens acrylic lacquer. The primary ingredient in lacquer hardener is
sodium Poly Acrylate, which is a crystallized salt product.
5.1. Machinery and Equipment
Details of the machinery and equipment used in this proposed project are as follows:
High Power Mixer/Mixing Machine
High power mixer / mixing machine is an automatic machine used for manufacturing
varnishes and lacquers. This machine has a tank which has stirring mechanism
installed in it. It has a tank capacity of 100 liter and electricity power of 3.5 kilowatts.
Chemicals (according to the standard ratios) are put into the mixing machine and it is
run for 1 hour for manufacturing of varnishes and lacquers. Its material is stainless
steel. Figure 1 shows high power mixing machine.
7
https://en.wikipedia.org/wiki/Automotive_paint
October 2021 11
Figure 1: High Power Mixing Machine
Packing and Filling Machine

Packing and filling machine is used to fill the manufactured varnishes and lacquers in
the cans of 250 ml, 500 ml, 750 ml and 1,000 ml. This machine has capacity of filling
150-200 tin cans per hour and requires an electricity power of 200 watts. This
machine helps filling the product tin cans in efficient and effective manner. Figure 2
shows packing and filling machine.
Figure 2: Packing and Filling Machine
Platform Trolley
Platform trolley is used for carrying load or to carry the raw materials from the store
to production hall and to carry the finished products from the production hall to the
finished goods store. Figure 3 shows platform trolley.
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Figure 3: Platform Trolley
Carry Trolley with Tub (150 liter)

These tubs are used for moving varnish and lacquer from production department to
filling and packing department. These are aging resistant and easy to clean. These
tubs have a capacity of 150 liters and are made of linear low-density polyethylene
(LLDPE) material. Figure 4 shows carry trolley with tub.
Figure 4: Carry Trolley with Tub (150 liter)
Weigh Scale
Weigh scale is used to measure the weight of the product. In the proposed project,
three weigh scales have been suggested, which are required in the production
department and quality test lab for weighing.
 Electronic Weight Scale (100 Kg) is used for verifying the quantity of raw
materials supplied by a supplier. It consumes electric power of 10 watts
 Electronic Weight Scale (30 Kg) is used for measuring the quantity of raw
material for production.
 Lab precision weigh scale is used in the lab to measure very small quantities;
it has the precision of 0.001 gram.
Figure 5 shows weigh scale.
October 2021 13
Figure 5: Weigh Scales
Measuring Cups 5L
Liquid measuring cups are usually made of glass or plastic and are equipped with a
handle. They are used to pour a liquid into the cup and bring it even with a
measurement line without spilling. The proposed unit uses measuring cups to
measure the exact quantity being poured in the manufacturing process. Figure 6
shows measuring cup.
Figure 6: Measuring Cup
Portable Spectrophotometer
A spectrophotometer is an analytical instrument that measures the amount of a

known chemical substance (concentration) by measuring the intensity of the light. In
the proposed project, portable spectrophotometer is used in the quality assurance
lab to test the quality of varnish. Figure 7 shows portable spectrophotometer.
October 2021 14
Figure 7: Portable Spectrophotometer
Lacquer Porosity Tester

This equipment is specially designed for testing of the porosity of lacquer which is
internally coated on metallic tubes as per European Standard. It is easy to operate,
battery operated with handheld current meter. This machine has a user-friendly
validation gauge of current flow for lacquer porosity test apparatus. The current
validation range of lacquer porosity tester is 0-1000 mA. It has clear visibility LCD
display. Figure 8Error! Reference source not found. shows lacquer porosity tester.
Figure 8: Lacquer Porosity Tester
Ammeter
Ammeter is an instrument for measuring either direct or alternating electric current, in
amperes. In the proposed project, ammeter will be used in quality testing lab to
measure the current during lacquer testing. Figure 9 shows ammeter.
October 2021 15
Figure 9: Ammeter
Other Lab Equipment

Other lab equipment includes test tubes, test tube stands, test tube holders, glass
beakers of different sizes, glass stirrers, petri dishes, nitrocellulose filter papers and
magnetic mixers. Figure 10 shows petri dish and glass beakers.
Figure 10: petri Dish and Glass Beakers
Figure 11 shows magnetic mixer and test tubes.

Figure 11: Magnetic Mixer and Test Tubes
Figure 12 shows glass stirrer and nitrocellulose filter paper.
October 2021 16
Figure 12: Glass Stirrer and Nitrocellulose Filter Paper
Figure 13 shows test tube stand and test tube holder.

Figure 13: Test Tube Stand and Test Tube Holder
5.2. Process Flow for Manufacturing of Varnishes and Lacquers

Varnishes
The manufacturing process for the proposed two types of varnishes is same. Only
difference is in raw materials, which vary for the two types of products, polyurethane
varnish and synthetic varnish. The manufacturing process of varnishes is shown in
Figure 14.
October 2021 17
Figure 14: Process Flow for Manufacturing of Varnishes
Mixing of
Procurement of
Chemicals in Quality Test
Raw Materials
the Mixer
Transferring of
Storing the Filling and Varnish to
Finished Packaging of Filling Machine
Goods Varnish Tank
Procurement of Raw Material (Chemicals)

 Polyurethane Varnish
The chemicals required for manufacturing of polyurethane varnish are polyurethane
resin, MTT (Mineral Turpentine), lead acetate, calcium carbonate, cobalt blue and
anti-skinning agent.
 Synthetic Varnish
The chemicals required for manufacturing of synthetic varnish are alkyd resin, MTT
(Mineral Turpentine), lead acetate, calcium carbonate, cobalt blue and anti-skinning
agent.
Polyurethane Resin
Polyurethane resins are copolymers that are formed when an alcohol called polyol
(each of its molecules contains 3 or more reactive hydroxyl groups) reacts with an
isocyanate (dual or polymeric); in the presence of appropriate additives and
catalysts. A wide range of di-isocyanates and polyols can be made to react to make
polyurethane resin. Polyurethane resins are used for durable high gloss coatings like
in cars, industrial applications, floorings, wood coatings as well as PU resins are
used to modify alkyd resins, which are used in paints, enamels and varnishes.
Alkyd resin
Alkyd resins are oil-based polyesters, consisting of dibasic acids, polyols, and fatty
acids. These belong to thermosetting polymers.
Alkyd resin are used in paints, varnishes and in molds for casting. They are the
dominant resin or binder in most commercial oil-based coatings.
October 2021 18
MTT/ Mineral Turpentine

Mineral turpentine is a clear liquid derived from petroleum, and it an important
organic solvent for paints. This type of hydrocarbon solvent is mainly used in
production of conventional solvent-based paints.
Calcium Carbonate
Calcium carbonate is a chemical compound with the formula CaCO3. It is a common
substance found in rocks such as calcite8 and limestone. Calcium Carbonate Powder
is exclusively used in Paint & Coating Industries for the producing Coatings and
Emulsion Paint.
Cobalt Blue
Cobalt blue is a blue pigment made by sintering cobalt (II) oxide with aluminum (III)
oxide (alumina) at 1200 C. Cobalt blue is used in paints and varnishes to help the
oils dry.
Lead Acetate
Lead acetate (Pb (CH3COO)2) is a white crystalline chemical compound. Like many
other lead compounds, it is toxic. Lead acetate is soluble in water. Lead acetate is
used as a drier in paints and varnishes. It is also useful as a mordant in textile
printing and dyeing.
Anti-skinning agent
When varnish is packed in closed tin cans, due to the oxidation, skin formation takes
place due to the presence of air between the coating surface and the closed lid. The
skinning results in loss of coating material and a possible contamination of the bulk.
Anti-skinning agents are therefore added to solvent-borne air-drying coatings to
prevent in-can skinning during storage by prohibiting the drier effect until application
of the coating. Methyl Ethyl Ketoxime is the most commonly used anti-skinning agent
in paints.
Quality Assurance and Storage of Raw Materials
These chemicals are purchased from the suppliers of chemicals present in the major
cities of Pakistan and are stored in the raw material store of the manufacturing unit.
For quality assurance of the raw materials, a chemist is hired as quality controller to
check their quality. Moreover, the manufacturing unit procures chemicals only from
the suppliers which follow the standards of Pakistan Standards & Quality Control
Authority.
All the materials required for the production of varnish and lacquer are highly
inflammable. Following conditions should be met for storing these chemicals:
 Temperature of the store room must be maintained at 20-degree C or below.
 Fire Alarms system should be installed in store room.
8
Calcite is a rock-forming mineral with a chemical formula of CaCO3
October 2021 19
 Chemicals should be kept in tightly closed containers.

 Containers should be protected against damage and should not be exposed
to heating.
 Storage should be segregated, well ventilated, and equipped with both
decomposition & explosion vents, having maximum amount of free opening.
Raw material inventory is maintained for one month production. The payment to
supplier is made within 35 days from the receipt of raw materials.
Mixing of Chemicals in the Mixer
In this process, chemicals (such as polyurethane resin, MTT/Mineral Turpentine,
lead, calcium, cobalt and anti-skinning agent) are introduced into the high-power
mixer machine and mixed for one hour. Chemicals are added in the high-power
mixer machine according to the standardized formula of the type of varnish or
lacquer to be made.
 Polyurethane Varnish-per Batch 100 liter
For manufacturing one batch of 100 liters of polyurethane varnish, polyurethane
resin (30 liter), MTT/Mineral Turpentine (60 liter) and additives such as lead acetate
(3 kg), calcium carbonate (4 kg), cobalt blue (1.5 kg) and anti-skinning agent (1.5 kg)
are mixed up to one hour in a high-power mixing machine after which the varnish
formation is completed.
 Synthetic Varnish-per Batch 100 liter
For manufacturing one batch of 100 liters of synthetic varnish, the required
chemicals are alkyd resin (35 liter), MTT/Mineral Turpentine (64 liter) and driers
which include lead acetate (0.20 kg), calcium carbonate (0.40 kg), cobalt blue (0.20
kg) and anti-skinning agent (0.20 kg) are mixed up to one hour in a high-power
mixing machine after which the varnish formation is completed. Figure 15 shows
liquid varnish.
Figure 15 Liquid Varnish
October 2021 20
Quality Tests
Membrane patch colorimetry (MPC) varnish potential testing (ASTM D7843) is an
analytical test to determine the propensity for a lubricant to form varnish deposits.
There are two main parts to the MPC test: filtration and color measurement.
During the first part, 50 ml of varnish is diluted with an equal volume of petroleum
ether. In second step, this mixture is filtered through a 0.45 μm (micrometer)
nitrocellulose patch. The color of the patch is then measured using a
spectrophotometer that calculates the color difference (ΔE) value.
There are 4 levels on the varnish potential scale: Good (ΔE<15), Monitor (ΔE = 15-
25), Abnormal (ΔE = 25-35) and Critical (ΔE >35). Figure 16 shows MPC test results.
Figure 16 MPC Test Results
Transferring of Varnish to Filling Machine Tank

After the quality test, the approved varnish batch is transferred to the filling machine
tank manually, using carry trolleys.
Filling and Packaging of Varnish
A manual filling machine is used to fill the manufactured varnish in tin cans (sizes of
250 ml, 500 ml, 750 ml and 1000 ml). After filling the tin can is automatically sealed
by the same machine and the label is attached on each box manually by the labor.
Figure 17 shows finished product.
Figure 17: Finished Product-Varnish
October 2021 21
Storing the Finished Goods

The cartons are transferred to finished goods store using trolleys. They are stored
with the consideration to avoid any damage or loss. Finished goods inventory that is
equal to half month of production capacity will be stored.
Lacquers
The manufacturing process for all types of lacquers is same, but raw material for
each type will change. Different chemicals are used in the manufacturing of different
types of lacquers such as nitrocellulose lacquer, acrylic lacquer-1K and acrylic
lacquer 2K. The manufacturing process of lacquer is discussed in
Figure 18.
Figure 18: Process Flow for Manufacturing of Lacquers
Mixing of Transferring of
Procurement of Quality Test Lacquer to Filling
Chemicals in
Raw Material Machine Tank
the Mixer
Storing the Filling and

Delivery and
Finished Packaging of
Payment
Goods Lacquer
Procurement of Raw Material (Chemicals)

 Nitrocellulose Lacquer
The chemicals required for manufacturing of nitrocellulose lacquer are NC-cotton,
coconut resin, butyl acetate, methyl ethyl ketone (MEK), ethyl acetate, xylene, and
dioctyl phthalate (plasticizer).
 1K-Acrylic Lacquer
The chemicals required for manufacturing of acrylic lacquer-1K are acrylic resin,
xylene, methyl ethyl ketone (MEK) and dioctyl phthalate (plasticizer).
 2K-Acrylic Lacquer
The chemicals required for manufacturing of acrylic lacquer-2K are acrylic resin,
xylene, methyl ethyl ketone (MEK), dioctyl phthalate (plasticizer) and hardener.
October 2021 22
Wet Nitrocellulose cotton (Guncotton)

Nitrocellulose (also known as cellulose nitrate, flash paper, flash cotton, guncotton,
pyroxylin and flash string, depending on form) is a highly inflammable compound
formed by nitrating cellulose with a mixture of nitric acid and sulfuric acid. One of its
first major uses was as guncotton, a replacement for gunpowder as propellant in
firearms. It was also used to replace gunpowder as a low-order explosive in mining
and other applications. It is the main ingredient in lacquer formulations.
Because of their fluffy and nearly white appearance, nitrocellulose products are often
referred to as cottons, e.g., lacquer cotton, celluloid cotton, and gun cotton.
Guncotton was originally made from cotton (as the source of cellulose) but
contemporary methods use highly processed cellulose from wood pulp.
While guncotton is dangerous to store, the hazards it presents can be reduced by
storing it dampened with various liquids, such as alcohol. For this reason, accounts
of guncotton usage dating from the early 20th century refer to "wet guncotton."
Nitrocellulose cotton should be stored in a damped condition at the temperature of
20-degree C in a cool, dry and well-ventilated area away from all possible sources of
heat or ignition. NC cotton is available in major cities of Pakistan. Figure 19 shows
nitrocellulose cotton.
Figure 19: Nitrocellulose Cotton
Resin (coconut)
Coconut-Oil Based Short Oil Alkyd Resin, is a white viscous liquid. It is an additive
that can be used in polyester urethane gloss coatings, polyester surface coatings,
acid-cured paints, and nitrocellulose coatings.
Butyl acetate
n-Butyl acetate, also known as butyl ethanoate, is an ester that is a colorless,
flammable liquid at room temperature. Butyl acetate is an active solvent for film-
formers such as cellulose acetate butyrate, nitrocellulose, polyesters, epoxies,
alkyds, vinyl copolymers, and acrylic resins. It is widely used in nitrocellulose
lacquers, readily dissolving the resin and imparting good flow properties.
October 2021 23
Methyl Ethyl Ketone (MEK)

Butanone also known as methyl ethyl ketone, is an organic compound. This
colorless liquid ketone has a sharp, sweet odor. It is produced industrially on a large
scale. MEK is highly effective and commonly-used solvent. As a solvent, it is used in
manufacturing processes for gums, resins, cellulose acetate, and nitrocellulose
coatings.
Xylene
Xylene is a volatile liquid hydrocarbon obtained by distilling wood, coal tar, or
petroleum, used in fuels and solvents and chemical synthesis.
It is primarily used as a solvent in the printing, rubber, leather and coating industries.
Along with other solvents, xylene is also widely used as a thinner for paints and
varnishes.
DOP (Plasticizer)
Di-octyl Phthalate (DOP) is a general use Plasticizer. Plasticizer are added to
improve the plasticity of lacquer film to permit the expansion and contraction without
effecting the quality of lacquer. Dioctyl Phthalate (DOP) is a transparent, colorless
oily liquid used to increase the flexibility and tensile strength of Lacquer. It provides
good solubility for many components used in paint and has low volatility, low
separability and good conductance properties.
Acrylic resin
Acrylic resin is a thermoplastic or thermosetting plastic substance typically derived
from acrylic acid, methacrylic acid and acrylate monomers. Acrylic resins feature
excellent transparency and durability, and are used in a broad range of applications
from consumer items like lenses to industrial products like molding materials,
coatings and adhesives.
Hardener
An activator is required to dry/cure paint and lacquer, sometimes referred to as a
hardener. The primary ingredient in paint/lacquer hardener is sodium poly acrylate,
which is a crystallized salt product. The hardener works by chemically reacting with a
catalyst which sets hard to form a very tough finish. Once the hardener has been
activated, user has up to 8 hours to apply the contents before the can becomes
unusable.
Quality Assurance and Storage of Raw Materials
These chemicals are purchased from suppliers of chemicals available in the major
cities of Pakistan. All these chemicals are then placed in the raw material store room.
For quality assurance of the raw materials, a chemist is hired as quality controller to
check their quality. Moreover, the manufacturing unit only procure chemicals from
suppliers who follow the standards of Pakistan Standards & Quality Control
Authority.
October 2021 24
All the materials required for the production of varnish and lacquer are highly
inflammable, following conditions should be met for storing these chemicals
 Temperature of the store room must be maintained at 20-degree C or below.
 Fire Alarms system should be installed in store room.
 Chemical should be kept in tightly closed containers.
 Containers should be protected against damage & not exposed to heating.
 Storage should be segregated, well ventilated, & equipped with both
decomposition & explosion vents, having max amt of free opening.
Raw material store room maintain raw material inventory (chemicals), average of
equal to one-month production. The payment to supplier against his supplies
provided is made within 35 days from the receipt of raw material inventory.
Mixing of Chemicals in the Mixer
In this process, the raw chemicals (such as NC-cotton, resin, butyl acetate, MEK,
ethyl acetate, xylene, toluene, DOP (plasticizer) are mixed in a high-power mixer
machine. Chemicals will be added in the high-power mixer machine according to the
standardized mixing ratios for manufacturing of desired lacquer.
The details of Lacquers products (such as nitrocellulose lacquer, 1K-acrylic lacquer-
and 2K-acrylic lacquer) is as below:
 Nitrocellulose Lacquer-per Batch 100 Liter

For manufacturing one batch of 100 liters of nitrocellulose lacquer, the details of
chemicals and its usage are as follows:
NC-cotton (10 liter), resin (coconut) (30 liter), butyl acetate (5 kg), MEK (5 kg), ethyl
acetate (4 liter), xylene (45 kg) and DOP (plasticizer) (1 kg) are mixed up to one hour
in a high-power mixing machine. After mixing these chemicals for up to one hour in a
mixing machine, the manufacturing process of nitrocellulose lacquer is complete.
 1K-Acrylic lacquer-per Batch 100 Liter
For manufacturing one batch of 100 liter of 1K-acrylic lacquer the details of
chemicals and its usage are as follows:
Acrylic resin (45 liter), xylene (53 kg), MEK (1 kg) and DOP-plasticizer (1 kg) are
mixed up to one hour in a high-power mixing machine. After mixing these chemicals
for up to one hour in a mixing machine, the manufacturing process of 1K-acrylic
lacquer is complete.
 2K-Acrylic lacquer-per Batch 100 Liter
For manufacturing one batch of 100 liter of 2K-acrylic lacquer the details of
chemicals and its usage is as follows:
October 2021 25
Acrylic resin (44.80 liter), xylene (53.6 kg), MEK (0.8 kg), DOP-plasticizer (0.8 kg)
and are mixed up to one hour in a high-power mixing machine. After mixing these
chemicals for up to one hour in a mixing machine, the manufacturing process of
acrylic lacquer-2K is complete.
Quality Test
The function of a porosity test is to examine the quality of an applied coating. The
appearance of pores in the coating, reaching the substrate, could introduce serious
corrosion attack limiting the effectiveness of the coating.
Porosity of lacquer is evaluated using the electrochemical method (WACO test). The
lacquer coated sample (Tin can) is filled with sodium chloride and copper electrode
of machine (which acts as Anode) is dipped in the lacquer. The tin can outer body
itself makes contact with the cathode which is installed in the machine. Both cathode
and Anode are connected to auto range current source of 0-1000mA, ammeter is
used to measure the current. When test is performed, the current is passed through
these two poles and the flow of current is measured for 4 seconds and displayed on
LCD Display. The displayed current flow is directly proportional to the pores formed
in internal lacquer coating. Higher flow of current means a lower resistance offered
by the lacquer layer coated on tin can and greater pores formation which is indication
of lower quality of lacquer. For good quality lacquer, the current values should be in
the of range of 4.0- 8.0 µA.
Transferring of Lacquer to Filling Machine Tank
After quality testing, the approved lacquer batch is transferred to the filling machine
tank manually, using carry trolleys.
Filling and packaging of Lacquer
A manual filling machine is used to fill the manufactured lacquer in tin cans (sizes of
250 ml, 500 ml, 750 ml and 1000 ml). After filling of lacquer, the cans is automatically
sealed by the same machine and the label is attached on each box manually by
labor and are packed in carton boxes. Figure 20 shows finished product.
Figure 20: Finished Product-Lacquer
October 2021 26
Finished Goods Store Room

After completion of manufacturing process, the cartons of lacquers products are
transferred to finished goods store room by trolleys. They are stored with the
consideration to avoid any damage or loss. Finished goods inventory that is equal to
half month of production capacity will be stored.
Delivery and Payment
From finished goods store, the products are dispatched to the customers. Usually,
the payment is made in cash but for reliable customers, credit facility of 30 days is
provided. The manufacturing unit also provides delivery service for large orders and
long-standing customers. Carry van is used to deliver the products.
5.3. Installed and Operational Capacities

The total production capacity of the unit is based on the production capacity of the
High-Power Mixing Machine (for lacquer and varnishes). The proposed production
unit will run for 8 hours in a day for 280 days in a year. The proposed business will
have maximum capacity of producing 196,000 liters of different Varnish and Lacquer
products per year. These include 49,000 liter of polyurethane varnish, 49,000 liter of
synthetic varnish, 49,000 liter of nitrocellulose lacquer, 19,600 liters of 1K lacquer
and 29,400 liters of 2k Lacquer. This production will be sold in four types of tin cans
(250 ml, 500 ml, 750 ml and 1000 ml). The production translates into a total of
326,668 tin cans.
The project is assumed to attain 50% capacity utilization during the first year of
operations; which is equal to 98,000 liters of varnish and lacquer products These
include 24,500 liter of polyurethane varnish, 24,500 liter of synthetic varnish, 24,500
liter of nitrocellulose lacquer, 9,800 liters of 1K lacquer and 14,700 liters of 2k
Lacquer. The total production at 50% capacity utilization translates into 163,334 tin
cans.
It has been assumed that the operational capacity utilization of the unit will increase
at the rate of 5% per annum. From the utilized operational capacity of 50% during
first year, the unit will attain maximum 90% of its total installed capacity in year 9.
Table 1 shows details of maximum annual capacity and operational capacity utilized
during first year of operations.
October 2021 27
Table 1: Installed and Operational Capacity
Product Production Per Day Per Day Total Production Annual Initial Year
Capacity of Mixing Capacity Capacity Annual Ratio Capacity Capacity
Machine (Liter) (Milliliter) Capacity @100% @ 50%
(Liter/hour) (liter) (liter) (liter)
Polyurethane Varnish 25% 49,000 24,500
Synthetic Varnish 25% 49,000 24,500
Nitrocellulose Lacquer 25% 49,000 24,500

100 700 700,000 196,000,
1K-Acrylic Lacquer 10% 19,600 9,800
2K-Acrylic Lacquer 15% 29,400 14,700
Total 100% 196,000 98,000
Table 2 shows packing wise distribution of polyurethane varnish production in different packing sizes.
Table 2: Packing Wise Distribution-Polyurethane Varnish
Products Ratio Total Annual Capacity No.of Tin Can at No. of Varnish Tin Can @
per year (Liter) 100% capacity 50% capacity
Packing of 250ml (Tin Can) 10% 19,600 9,800

49,000
October 2021 28
Total 100% 81,667 40,834
Table 3 shows packing wise distribution of synthetic varnish production in different packing sizes.
Table 3: Packing Wise Distribution-Synthetic Varnish
Products Ratio Total Annual Capacity No.of Tin Can at 100% No. of Varnish Tin
per year (liter) capacity Can@ 50% capacity

49,000
Total 100% 81,667 40,834
Table 4 shows packing wise distribution of nitrocellulose lacquer production in different packing sizes.
October 2021 29
Table 4: Packing Wise Distribution-Nitrocellulose lacquer

49,000
Total 100% 81,667 40,834
Table 5 shows packing wise distribution of 1K-arcylic lacquer production in different packing sizes.
Table 5: Packing Wise Distribution-1K-Arcylic Lacquer
per year (Liter) capacity Can@ 50% capacity

19,600
Total 100% 32,667 16,334
October 2021 30
Table 6 shows packing wise distribution of 2K-arcylic lacquer production in different packing sizes.
Table 6: Packing Wise Distribution-2K-Arcylic Lacquer

29,400
Total 100% 49,000 24,500
October 2021 31
6. CRITICAL FACTORS
Before making the decision to invest in manufacturing unit for varnishes and
lacquers, one should carefully analyze the associated risk factors. The important
considerations in this regard include:
 Engagement of skilled staff
 Use of good quality raw materials
 Good knowledge of accurate formulas/composition of the products
 Good knowledge of process parameters; especially the practical knowledge
gained through experience; which is usually not available in the books
 Maintaining quality of finished product
 Use of modern technology and machines for maintaining quality
 Continuous inspection of production process
 Fine finishing as visual appeal is central to the consumer decisions
 Strong distribution channels
7. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

Major users of varnishes and lacquers are in furniture manufacturing, fastener
manufacturing, automobile manufacturing and construction industries. Therefore, the
proposed manufacturing unit has potential to provide good entrepreneurship
opportunity if the business is established in metropolitan cities of Pakistan like
Lahore, Karachi, Islamabad, Peshawar, Quetta and medium cities such as
Faisalabad, Multan, Rawalpindi, Hyderabad, Bahawalpur, Sargodha, Sukkur,
Mardan, Sheikhupura, Sialkot, Gujranwala, Lasbela, Gujrat, etc. These are suitable
locations to establish the proposed manufacturing unit due to easy access to raw
materials and low-cost labor. Other reasons of proposing metropolitan cities for
setting up of this business are presence of manufacturing units of automobiles,
furniture and paint in these cities. In addition to above factors, majority of urban
housing is also located in above cities, which directly creates demand for the
products produced by the proposed business.
8. POTENTIAL TARGET MARKETS/CUSTOMERS

The potential target markets/customers for varnishes and lacquers are retail shops of
paints, construction companies, manufacturing units of furniture and automobile
manufacturers.
October 2021 32
The construction industry in Pakistan is expected to expand by 3% in real terms in

2021, following a decline of 6.2% in 2019.9 Manufacturing sector grew by 12.73% in
August of 2021 over the same month during the previous year,10 and automobile
sector recorded a growth of 23.4%.11 The growth in aforementioned industries is
expected to directly generate demand for the products manufactured by the
proposed manufacturing unit.
There are around 20 large to medium size units operating in the formal sector and
around 110 medium to small units existing in the unorganized sector; engaged in
manufacturing different paint and related products; including varnishes and lacquers.
The Pakistani paint industry has multinational paint producers such as AkzoNobel
(formerly ICI), Jotun, Berger, Kansai, Nippon and local companies Buxly, Brighto,
Diamond, Happilac, Master and Nelson. Pakistan’s paint and coating industry is
expected to register steady growth rates in the coming years on account of current
low per capita consumption, rising disposable income, growing economy and
decreasing repainting cycle.12
The Pakistan paints and coatings market is expected to grow at a CAGR of over 3%
during the forecast period (2021-26).13 The paint and coatings industry in Pakistan
has registered a steady growth on the back of strong economic performance of the
domestic economy in the last few years. With GDP growth at 3.95% for FY2021,14
and healthy growth in the construction sector, continued growth in the manufacturing
sector, and healthy contribution by the services sector, the size of the economy is
exceeded to reach at $280 billion by the end of 2021.15
9. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of
manufacturing unit for varnishes and lacquers. Various assumptions relevant to
revenue and costs along with the results of the analysis are outlined in this section.
The projected Income Statement, Cash Flow Statement and Balance Sheet are
attached as annexures of this document.
All the figures in this financial model have been calculated after carefully considering
the relevant assumptions and target market.
9
https://finance.yahoo.com/news/pakistan-construction-market-trends-opportunities-
10
https://tradingeconomics.com/pakistan/manufacturing-production.
11
https://propakistani.pk/2021/07/23/pakistans-automobile-sector.
12
https://www.coatingsworld.com/issues/2018-11-01/view_india_asia_pacific_reports/overview-of-paint-
coatings-industry-in-pakistan/
13
https://www.grwoth+of+paint+sector+in+pakisyan&oq=grwoth+of+paint+sector+in+pakisyan
14
https://www.worldbank.org/enpakistan-s-sustained-economic-
growthThe%20October%202021%20Pakistan%20
15
https://tradingeconomics.com/pakistan/gdp
October 2021 33
9.1. Initial Project Cost

Table 7 provides fixed and working capital requirements for establishment of
manufacturing unit for varnishes and lacquers.
Table 7: Initial Project Cost estimates
Particulars Cost (PKR) Reference
Land - 9.1.1
Building Renovation Cost 724,650 9.1.2
Machinery & equipment 3,477,400 9.1.3
Office equipment 1,571,000 9.1.4
Furniture & fixtures 1,200,000 9.1.5
Office vehicles 1,167,250 9.1.6
Pre-operating costs 494,362 9.1.7
License and Permits 34,500 9.1.8
Security against building 450,000 9.1.9
Total Capital Cost - (A) 9,119,162
Equipment spare part inventory 43,468

Raw Material Inventory 3,220,813
Lab Consumable 37,404
Cash 1,000,000
Working Capital Requirement - (B) 4,301,685 9.1.10
Total Project Cost - (A+B) 13,420,846
9.1.1. Land
The proposed unit will be established in a rented space having an area of 2,676
square feet (12 Marla). Total rental cost has been estimated as PKR 150,000. The
breakup of the space requirement is provided in .
Table 8.
Table 8: Breakup of Space Requirement
Particular Number Length Width Area (Sq. Ft.)
Executive Office 1 12 12 144
Office Area 1 30 25 750
October 2021 34
Raw Material Store Room 1 15 15 225
Finished Goods Store Room 1 15 15 225
Production Department 1 30 30 900
Quality Assurance Lab 1 15 16 240
Washrooms 3 8 8 192
Total Area 2,676
9.1.2. Building / Infrastructure

There will be no cost of building construction since the manufacturing unit for
varnishes and lacquers will be established in a rented building having an area of
2,676 square feet. However, there will be a renovation cost required to make the
building usable for the business. Building rent of PKR 150,000 per month has been
included in the operating cost. The proposed project requires electricity load of
around 10-11 KW for which a three-phase industrial electricity connection will be
required. Table 9 provide details of building renovation cost.
Table 9: Building Renovation Cost
Cost Item Unit of Total Cost/Unit Total Cost

Measurement Units (PKR) (PKR)
Paint Cost Liter 71 500 35,520
Labour Cost- Paint Sq. Feet 7,104 10 71,040
Tiles Cost Sq. Feet 894 120 107,280
Labour Cost- Tiles Sq. Feet 894 40 35,760
Curtains Units 4 3,000 12,000
Shelves-Precasted Sq. Feet 240 300 72,000
Glass Partitions Units 711 550 391,050
TOTAL (PKR) 724,650
9.1.3. Machinery and Equipment

Table 10 provides details of machinery and equipment for the proposed project.
Table 10: Machinery Cost Details
Number of Unit Cost Total Cost
Cost Item
Items (PKR) (PKR)
High Power Mixing Machine (for lacquer 1 750,000 750,000
October 2021 35
and Varnish) 100 liter/hour

Automatic Packing and Filling Machine 1 1,200,000 1,200,000
(300 tin cans/ hour)
Platform Trolley 4 30,000 120,000
Generator (10 KW) 1 600,000 600,000
Electronic Weigh Balance (100 kg) 4 5,000 20,000
Carry Trolly with Tub 4 30,000 120,000
Electronic Weigh Balance (30 kg) 2 4,800 9,600
Lab Equipment
Spectrophotometer 1 380,000 380,000
Lacquer Porosity Apparatus 1 85,000 85,000
Ammeter 1 800 800
Lab precision weight scale 2 15,000 30,000
Fire Handling and Safety Equipment
Fire Extinguisher (2 kg) 6 2,000 12,000
Fire Alarm System 1 150,000 150,000
Total 3,477,400
9.1.4. Office Equipment

Table 11 shows details of equipment cost required for the manufacturing unit for
varnishes and lacquers.
Table 11: Office Equipment Cost Details
Cost Item No. Unit Cost (PKR) Total Cost (PKR)

Laptop 6 100,000 600,000
Printer 2 40,000 80,000
Desktop Computer 7 40,000 280,000
LED/LCD (Survellience) 2 40,000 80,000
Water Dispenser 2 20,000 40,000
Ceiling Fan 15 5,000 75,000
Wi-Fi / Internet Routers 2 5,000 10,000
Exhaust Fan 6 3,000 18,000
1.5 ton Air Conditioner 4 90,000 360,000
October 2021 36
Security Cameras - 2MP 8 2,000 16,000

Digital Video Recorder (DVR) 1 12,000 12,000
Total 1,571,000
9.1.5. Furniture and Fixture

Table 12 provides details of furniture and fixtures.
Table 12: Furniture & Fixtures Cost Details
Cost Item Number of Items Unit Cost (PKR) Total Cost (PKR)
Owner Tables 1 30,000 30,000
Owner Chairs 1 20,000 20,000
Office Chairs 38 10,000 380,000
Office Tables 14 35,000 490,000
Wall Racks 12 15,000 180,000
Cabinets 10 10,000 100,000
Total 76 1,200,000
9.1.6. Vehicles
Table 13 provides details of the vehicles required along with their cost for the
proposed project.
Table 13: Office Vehicle Cost Details
Number of
Cost Item Unit Cost (PKR) Total (PKR)
Vehicles
Motorcycle 1 80,000 80,000
Carry Van 1 1,075,000 1,075,000
Registration Charges-Motorcycle 1 1,500 1,500
Registration Charges-Carry Van 1 1% 10,750
Total Cost (PKR) 1,167,250
9.1.7. Pre-Operating Costs

Table 14 provides details of estimated pre-operating costs.
Table 14: Pre-Operating Cost Details
Costs Item No. Hiring Months Unit Cost (per Annual

Before in Year 0 month) (PKR) Cost (PKR)
October 2021 37
Production Manager 1 1 100,000 100,000

Labour Skilled 1 1 35,000 35,000
Labour - Unskilled 1 1 25,000 25,000
Procurement Manager 1 1 60,000 60,000
Admin and HR Manager 1 1 75,000 75,000
Sales Manager 1 1 75,000 75,000
Research and 1 1
50,000 50,000
Development Officer
Security Guard 1 1 22,000 22,000
Office Boy 1 1 22,000 22,000
Utilities expenses. 30,362
Total Cost (PKR) 494,362
9.1.8. Licenses and Permits

Trademark is an important requirement for protecting brand identity. It will stop the
competitors from approaching proposed project’s customers by copying the brand. It
is also important to provide protection to the reputation of the business. The details
of legal and licensing fee are provided in the Table 15.
Table 15: Licenses, Permits Cost Details
Particular Cost (PKR)

Trade Mark Registration
Professional charges for registration 30,000
Trade Mark search fee 500
Trade Mark application fee 1,000
Trade Mark Certificate fee 3,000
Total 34,500
9.1.9. Security against Building

Table 16: Security against Building
Particular Months Rent per month (PKR) Total (PKR)

Security against building 3 150,000 450,000
Total (PKR) 450,000
October 2021 38
9.1.10. Initial Working Capital

Table 17 provides details of working capital requirements for the project.
Table 17: Initial Working Capital Details
Particulars No. of Months Total Cost (PKR)

Equipment spare part inventory 1 43,468
Raw Material Inventory 1 3,220,813
Lab Consumable 1 37,404
Cash 1,000,000
Total Working Capital 4,301,685
Table 18 shows the details of the lab consumables.

Table 18: Lab Consumable
Cost Item No. Unit Cost (PKR) Total Cost (PKR)

Nitrocellulose/Filter Paper 10 35,000 350,000
Sandwich, 0.45 µm (box of 100)
Petrolum Ether (2.5 liter bottel) 5 1,000 5,000
Measuring Cups 5 liters 10 2,000 20,000
Test Tube 100 50 5,000
3 layer test tube stand (50 holes) 4 2,000 8,000
Test Tube Holder 10 60 600
Magnetic Mixer 300 ml 4 5,000 20,000
Lab Gloves-box 10 1,000 10,000
Face Mask-box 10 500 5,000
Petri dish (10 pieces) 5 850 4,250
Glass Beaker (set of 5) 5 1,850 9,250
Glass stirrer (set of 3) 4 1,500 6,000
Sodium cloride(1 Kg pack) 115 50 5,750
Total Working Capital 448,850
October 2021 39
9.2. Breakeven Analysis

Table 19 shows calculation of break-even analysis.
Table 19: Breakeven Analysis
Amount First Year Profitability

Particulars
(PKR) Ratio
Sales (PKR) – A 70,916,146 100%
Variable Cost (PKR) – B 52,790,601 74%
Contribution (PKR) (A-B) = C 18,125,545 26%
Fixed Cost (PKR) – D 14,236,308 20%
Contribution Margin 26%
Breakeven Analysis
Breakeven Revenue (PKR) 55,699,518
Breakeven (Tin cans) 128,289
Break-Even (Liter) 76,972
Breakeven Capacity 39%
9.3. Revenue Generation

Table 20 provides details regarding revenue generation from the manufacturing for
varnishes and lacquers during the first year of its operations. The proposed business
unit will target both wholesale market and retail market. The percentage ratio of
selling the products to retail market is 30% and wholesale market is 70%.
Table 20: Revenue Details
Total Total Reference Reference

Total
Revenue Revenue Retail Wholesale
Products Revenue
(PKR) (PKR) Revenue Revenue
(PKR)
(Retail) (Wholesale)
Polyurethane
4,982,990 11,054,682 16,037,672 Table 21 Table 22
Varnish
Synthetic Table 23
4,316,080 9,571,089 13,887,169 Table 24
Varnish
Nitrocellulose Table 25
4,597,870 10,201,126 14,798,996 Table 26
Lacquer
1K-Acrylic 2,197,673 4,871,569 7,069,242 Table 27 Table 28
October 2021 40
Lacquer
2K-Acrylic Table 29
5,945,133 13,177,934 19,123,067 Table 30
Lacquer
Total 22,039,746 48,876,400 70,916,146
Table 21: Revenue Retail-Polyurethane Varnish
Quantity Sold Price Per Total

Products during the Year Can (PKR) Revenue
(Tin cans) (A) (B) (PKR) (A*B)
Polyurethane Varnish-250 ml 2,818 180 507,240
Polyurethane Varnish-500 ml 4,226 350 1,479,100
Polyurethane Varnish-750 ml 1,879 530 995,870
Total 11,741 4,982,990
Table 22: Revenue Wholesale-Polyurethane Varnish

Total 27,393 11,054,682
Table 23: Revenue Retail-Synthetic Varnish
Quantity Sold Total

Price Per Can
Products during the Year Revenue
(PKR) (B)
(Tin cans) (A) (PKR) (A*B)
Synthetic Varnish-250 ml 2,818 160 450,880
Synthetic Varnish-500 ml 4,226 310 1,310,060
Total 11,741 4,316,080
October 2021 41
Table 24: Revenue Wholesale-Synthetic Varnish

Total 27,393 9,571,089
Table 25: Revenue Retail-Nitrocellulose Lacquer

Nitrocellulose Lacquer-250 ml 2,818 170 479,060
Nitrocellulose Lacquer-500 ml 4,226 330 1,394,580
Nitrocellulose Lacquer-750 ml 1,879 490 920,710
Total 11,741 4,597,870
Table 26: Revenue Wholesale-Nitrocellulose Lacquer
Quantity Sold Total

Price Per Can
Products during the Year Revenue
(PKR) (B)
(Tin cans) (A) (PKR) (A*B)
Total 27,393 10,201,126
Table 27: Revenue Retail-1K-Acrylic Lacquer

1K-Acrylic Lacquer-250 ml 1,127 200 225,400
October 2021 42

1K-Acrylic Lacquer-750 ml 752 585 439,920
Total 4,697 2,197,673
Table 28: Revenue Wholesale-1K-Acrylic Lacquer

1K-Acrylic Lacquer-500 ml 3,945 373 1,471,485
Total 10,959 4,871,569
Table 29: Revenue Retail-2K-Acrylic Lacquer

2K-Acrylic Lacquer--250 ml 1,691 360 608,760
2K-Acrylic Lacquer-750 ml 1,127 1,045 1,177,715
Total 7,045 5,945,133
Table 30: Revenue Wholesale-2K-Acrylic Lacquer

2K-Acrylic Lacquer--250 ml 3,945 342 1,349,190
Total 16,437 13,177,934
October 2021 43
9.4. Variable Cost Estimate

Variable costs of the project have been provided in Table 31.
Table 31: Variable Cost Estimate
Description of Costs Amount (PKR)
Raw Material-Polyurethene Varnish 7,080,154

Raw Material-Syntheic Varnish 5,690,108
Raw Material-NitroCelluluse Laquer 10,486,392
Raw Material-Acrylic Lacquer-1K 4,473,931
Raw Material-Acrylic Lacquer-2K 10,919,169
Direct Utilities Cost 176,640
Direct Labor 5,640,000
Machinery Maintenance - Cost 521,610
Fuel Cost-Generator 54,651
Office vehicles running expense-Carry Van 408,000
Carton for Packaging-Polyurethene Varnish 278,181
Carton for Packaging-Syntheic Varnish 278,181
Carton for Packaging-NitroCelluluse Laquer 278,181
Carton for Packaging-Acrylic Lacquer-1K 111,287
Carton for Packaging-Acrylic Lacquer-2K 166,920
Tin Can Cost-Polyurethene Varnish 1,150,542
Tin Can Cost-Syntheic Varnish 1,150,542
Tin Can Cost-NitroCelluluse Laquer 1,150,542
Tin Can Cost-Acrylic Lacquer-1K 460,290
Tin Can Cost-Acrylic Lacquer-2K 1,175,040
Workers Consumables 48,000
Communications expense ( phone,mail, internet, etc.) 263,520
Office vehicles running expense-motorcycle 126,000
Office expenses (stationery, entertainment, janitariol etc.) 702,720
Total Variable Cost (PKR) 52,790,601
October 2021 44
Table 32: Raw Material Cost-Polyurethane Varnish
Products Tin cans Sold Material Cost Total Cost

during the Year Per Unit (PKR) (PKR) (A*B)
(Units) (A) (B)
Packing of 250ml (Tin Can) 9,392 75 704,400
Packing of 500ml (Tin Can) 14,088 151 2,127,288
Total Cost 39,134 7,080,154
Table 33: Raw Material Cost-Synthetic Varnish

during the Year Per Unit (PKR)
(Units) (PKR) (B) (A*B)
(A)
Total Cost 39,134 5,690,108
Table 34: Raw Material Cost-Nitrocellulose Lacquer

during the Year Per Unit (PKR) (PKR) (A*B)
(Units) (A) (B)
Total Cost 39,134 10,486,392
October 2021 45
Table 35: Raw Material Cost-Acrylic Lacquer-1K

during the Year Per Unit (PKR) (PKR) A*B
(Units) (B)
(A)
Total Cost 15,655 4,473,931
Table 36: Raw Material Cost-2K Acrylic Lacquer and Hardener

during the Year Per Unit (PKR) (PKR)
(Units) (A) (B) A*(B+C)
Packing of 250 ml Lacquer and 5,636 194 1,093,384
125ml Hardener (Tin Can)
Total Cost 23,482 10,919,169
Table 37: Raw Material Cost Details - Polyurethane Varnish-
Cost Item Unit of Consumpti Consump Cost Cost

Measure on per tion per per (PKR)
ment (kg/ltr) batch kg/ltr
(kg/ltr) (PKR)
Polyurethene Resin Liter 0.30 30.00 325 9,750
MTT/ Terpene Liter 0.60 60.00 185 11,100
Additives
Lead Powder KG 0.03 3.00 650 1,950
Calcium Powder KG 0.04 4.00 650 2,600
Cobalt Powder KG 0.015 1.50 2500 3,750
October 2021 46
Antiskining Agents KG 0.015 1.50 650 975

Total 1.00 30,125
Number of Tin Can (250 400
ML) per batch
Cost per Tin Can 75
(PKR)
ML) per batch
Cost per Tin Can 151
(PKR)
ML) per batch
(PKR)
Number of Tin Can 100
(1000 ML) per batch
(PKR)
Table 38: Raw Material Cost Details - Synthetic Varnish
Cost Item Unit of Consu Consumption Cost Cost

Measurement mption per batch per (PKR)
per (kg/ltr) kg/ltr
(kg/ltr) (PKR)
Alkyd Resin Liter 0.350 35.00 325 11,375
MTT/ Terpen KG 0.640 64.00 185 11,840
Driers
Lead Powder KG 0.002 0.20 650 130
Calcium Powder KG 0.004 0.40 650 260
Cobalt Powder KG 0.002 0.20 2500 500
Antiskining Agents KG 0.002 0.20 650 130
Total 1.000 24,235
Number of Tin cans
400
(250 ML) per 1 Liter
Cost per Box (PKR) 61
Number of Tin cans
200
October 2021 47

Number of Tin cans
133
Number of Tin cans
100
Table 39: Raw Material Cost - Nitrocellulose Lacquer
Cost Item Unit of Consumpt Consump Cost Cost

Measure ion per tion per per (PKR)
(kg/ltr) (PKR)
Nitrocellulose NC- Liter 0.100 10 1,000 10,000
Cotton
Resin-Coconut Liter 0.300 30 420 12,600
Butyl Acetate KG 0.050 5 550 2,750
MEK KG 0.050 5 550 2,750
Ethyl Acetate Liter 0.040 4 330 1,320
Xylene & Toluene KG 0.450 45 325 14,625
DOP (plasticizer) KG 0.010 1 600 600
Total 1.000 44,645
Number of Tin cans
400
Number of Tin cans
200
Number of Tin cans
133
Number of Tin cans
100
October 2021 48
Table 40: Raw Material Cost - Acrylic Lacquer-1K

(kg/ltr) (PKR)
Arcylic Resin Liter 0.450 45.00 650 29,250
Xylene & Toluene KG 0.530 53.00 325 17,225
MEK KG 0.010 1.00 550 550
DOP (plasticizer) KG 0.010 1.00 600 600
Total 1.000 47,625
Number of Tin cans
400
Number of Tin cans
200
Number of Tin cans
133
Number of Tin cans
100
Table 41: Raw Material Cost - Acrylic Lacquer-2K

(kg/ltr) (PKR)
Arcylic Resin Liter 0.448 44.80 650 29,120
Xylene & Toluene KG 0.536 53.6 325 17,420
MEK KG 0.008 0.8 550 440
DOP (plasticizer) KG 0.008 0.8 600 480
Total 1.000 47,460
Number of Tin cans
400
October 2021 49
Number of Tin cans

200
Number of Tin cans
133
Number of Tin cans
100
Table 42: Raw Material Cost – Acrylic Lacquer-2K Hardener
Cost Item Unit of Consumption per Consumpt Cost Cost

Measurem (kg/ltr) ion per per (PK
ent batch kg/lt R)
(kg/ltr) r
(PK
R)
2k-Hardener kg 0.500 50 600 300
Total 300
Cost per 250 ML
75
(PKR)
Cost per 500
150
ML(PKR)
Cost per 750 ML
225
(PKR)
Cost per 1000 ML
300
(PKR)
Table 43: Packing Cost – Tin Cans
Products Total Cost (PKR)
Tin Can Cost-Polyurethene Varnish 1,150,542

Tin Can Cost-Syntheic Varnish 1,150,542
Tin Can Cost-NitroCelluluse Laquer 1,150,542
Tin Can Cost-1K-Arcylic Lacquer 460,290
Tin Can Cost-2K-Arcylic Lacquer 1,175,040
Total Cost 5,086,956
October 2021 50
Table 44: Carton Cost for Packing
Products Total Cost (PKR) (A*B)/C
Carton for Packaging-Polyurethene Varnish 278,181

Carton for Packaging-Syntheic Varnish 278,181
Carton for Packaging-NitroCelluluse Laquer 278,181
Carton for Packaging-1K-Acrylic Lacquer 111,287
Carton for Packaging-2K-Acrylic Lacquer 166,920
Total Cost 1,112,750
Table 45: Other Consumables
Cost Item No Unit Cost (PKR) Total Cost(PKR)

Rubber Gloves (pair) 20 500 10,000
Rubber Shoes 10 1,800 18,000
Safety Glasses 50 400 20,000
Total 48,000
Table 46: Vehicle Maintenance
Particulars Motorcycle(s) Carry Van Total (PKR)

(PKR)
(PKR)
Fuel cost 9,000 30,000 39,000
Service Charges 500 2,000 2,500
Oil & Tuning 1,000 2,000 3,000
Monthly expenses/ Motorcycle 10,500 34,000 44,500
Monthly vehicle running cost 10,500 34,000 44,500
Yearly Cost 126,000 408,000 534,000
Table 47: Direct Labor
Personnel Number of Salary per Person Annual Salaries

Personnel (PKR) (PKR)
Production Manager 1 100,000 1,200,000

Labour Skilled 4 35,000 1,680,000
October 2021 51
Labour - Unskilled 4 25,000 1,200,000

Procurement Officer 1 40,000 480,000
Lab Assistant 1 40,000 480,000
Research and Development
1 50,000 600,000
Officer
Total 5,640,000
9.5. Fixed Cost Estimate

Table 48 shows the estimated fixed cost of the project.
Table 48: Fixed Cost Estimate
Description of Costs Amount (PKR)
Management Staff 8,784,000

Administration benefits expense 721,200
Building rental expense 1,800,000
Promotional expense 709,161
Amortization of legal, licensing, and training costs 6,900
Depreciation expense 1,184,813
Indirect Utilities 187,701
Research and development expense 709,161
Amortization of pre-operating costs 98,872
License,Permits,etc. 34,500
Total Fixed Cost 14,236,308
9.6. Financial Feasibility Analysis

The financial feasibility analysis provides the information regarding projected Internal
Rate of Return (IRR), Net Present Value (NPV) and Payback period of the study,
which is shown in Table 49.
Table 49: Financial Feasibility Analysis
Description Project
IRR 52%
NPV (PKR) 62,662,840
Payback Period (years) 3.06
October 2021 52
Projection Years 10
Discount rate used for NPV 15%
9.7. Financial Feasibility Analysis with 50% Debt

The financial feasibility analysis provides the information regarding projected IRR,
NPV and payback period of the study on the basis of Debt: Equity Model (50:50),
which is shown in Table 50.
Table 50: Financial Feasibility Analysis with 50% Debt
Description Project
IRR 51%
NPV (PKR) 72,275,518
Payback Period (years) 3.07
Projection Years 10
Discount rate used for NPV 13%
9.8. Human Resource Requirement

The proposed manufacturing unit shall require the workforce as provided in Table
51.
Table 51: Human Resource
Number of Salary per Annual Salaries

Personnel
Personnel Person (PKR) (PKR)
Owner/Manager 1 -
Production Manager 1 100,000 1,200,000
Labour Skilled 4 35,000 1,680,000
Labour - Unskilled 4 25,000 1,200,000
Procurement
1 60,000 720,000
Manager
Procurement Officer 1 40,000 480,000
Accounts Manager 1 75,000 900,000
Accounts Officer 2 40,000 960,000
Admin and HR
1 75,000 900,000
Manager
October 2021 53
Admin Officer 1 40,000 480,000

HR Officer 1 40,000 480,000
Marketing and Sales
1 75,000 900,000
Manager
Sales Officer 2 40,000 960,000
Quality Controller 1 50,000 600,000
Lab Assistant 1 40,000 480,000
Research and
1 50,000 600,000
Development Officer
Security Guard 4 22,000 1,056,000
Driver 1 25,000 300,000
Office Boy 2 22,000 528,000
Total 31 14,424,000
October 2021 54
10. CONTACT DETAILS

The contact details of all the major suppliers of machinery and equipment and raw
materials are given in Table 52.
Table 52: Contact Details
Name of Supplier Location Category Contact Websit/ Email

NewGenic Lahore Chemicals (042) https://newgenic-
Chemicals supplier 36301555 chemicals.business.
site/ _
Humayun Lahore Chemicals 0321 http://humayunchemi
Chemicals supplier 8467933 cals.com/
Haq Chemicals Peshawar Chemical 0300
Manufacturer 9346775
Frontier Chemical Peshawar Chemical 91823056
Industries Manufacturer
Power Chemical Faisalaba Chemical (041)
Industries Limited d Manufacturer 8530124
Swan Chemical Sukkur Chemical 0300
(private) limited Manufacturer 8178511
NASA Chemicals Karachi Chemical (021)
(private) Limited Manufacturer 32631753
Sindh Chemicals Sukkur Chemical 034011377
Manufacturer 65
Guangzhou China Packaging http://www.lienm.co
Lianmeng Machine and m/en/
Machinery other
Equipment Co., production
Ltd. machines
Jiangyin Ida China Mixer and +8613585 http://www.idamill.co
Equipment Co., filling 068675 m
Ltd Machine
Guangdong China Production http://zonesuntech.c
Shanghang Machinery om
Technology
Limited
Aleem Can Private Multan Tin Can 0321-
Limited 05318550
General Can Karachi Tin Can 92-213-
Industries 6691124
Scientific Lahore Lab 0321
Technical Equipment 9427780
October 2021 55
Corporation (Pvt)
LTD
paradise Hyderaba Lab 0333
laboratory d Equipmen 7835174
equipment co
October 2021 56
11. USEFUL LINKS

Table 53: Useful Links
Name of Organization E-mail Address

Small and Medium Enterprises Development www.smeda.org.pk
Authority (SMEDA)
National Business Development Program (NBDP) www.nbdp.org.pk
Government of Pakistan www.pakistan.gov.pk
Ministry of National Health Services Regulations www.nhsrc.gov.pk
and Coordination
Ministry of Federal Education and Professional www.mofept.gov.pk
Training
Government of Punjab www.punjab.gov.pk
Government of Sindh sindh.gov.pk/
Government of Balochistan balochistan.gov.pk/
Government of KPK kp.gov.pk/
Government of Gilgit Baltistan gilgitbaltistan.gov.pk/
Government of Azad Jammu & Kashmir ajk.gov.pk/
Trade Development Authority of Pakistan www.tdap.gov.pk
Securities and Exchange Commission of Pakistan www.secp.gov.pk
State Bank of Pakistan www.sbp.gov.pk
Federal Board of Revenue www.fbr.gov.pk
Federation of Pakistan Chambers of Commerce www.fpcci.com.pk
and Industry (FPCCI)
Pakistan Stock Exchange (PSX) www.psx.com.pk
Pakistan Standards and Quality Control Authority http://www.psqca.com.pk
(PSQCA)
Punjab Small Industries Corporation https://www.psic.gop.pk/
Sindh Small Industries Corporation https://ssic.gos.pk/
Government of KPK https://small_industries_de.kp.
gov.pk/
Government of Balochistan Industries and https://balochistan.gov.pk/depa
Commerce rtments-download/industries-
and-commerce/
Pakistan Paint Manufacturers Association
Pakistan Chemical Manufacturers Association https://www.pcma.org.pk/
October 2021 57
Pakistan Coating Association

All Pakistan Furniture Makers Association http://apfma.org.pk/
Pakistan Automotive Manufacturers Association https://www.pama.org.pk/
Constructors Association of Pakistan https://cappak.org/
October 2021 58
12. ANNEXURES
12.1. Income Statement
October 2021 59
12.2. Balance Sheet
October 2021 60
12.3. Cash Flow Statement
October 2021 61
13. KEY ASSUMPTIONS

13.1. Operating Cost Assumptions
Table 54: Operating Cost Assumptions
Description Details
Operating costs growth rate 11.2%
Administration benefits expense 6% of administration expenses
Communication expenses 3% of Management staff expense
Office expenses (stationery, janitor, etc.) 8% of Management staff expense
Promotional Expense 1% of revenue
Machinery Maintenance - Cost 15% of Cost of Machinery
Fuel Cost 15% of utilities cost
Depreciation
Building 10% of Building cost
Machinery and Equipment 15% of Cost
Office Equipment/Office Vehicle/Furniture
15% of Cost
and Fixture
13.2. Revenue Assumptions

Table 55: Revenue Assumptions
Description Details
Sale price growth rate 11.2%
Capacity utilization 50%
Capacity utilization growth rate 5%
Maximum capacity 90%
13.3. Financial Assumptions

Table 56: Financial Assumptions
Description Details
Project life (Years) 10
Debt: Equity 0:100
Discount Rate 15%
October 2021 62
13.4. Debt Related Assumptions

Table 57: Debt Related Assumption
Description of Cost Details
Project Life (Years) 10
Debt: Equity 50:50
Discount Rate 13%
Debt Tenure 5 Years
Debt Grace Period 1 Years
Interest Rate (KIBOR+3%) 11.3%
13.5. Cash Flow Assumptions

Table 58: Cash Flow Assumptions
Description Details
Accounts receivable cycle (in days) 25 Days
Accounts payable cycle (in days) 35 Days
`
October 2021 63
Small and Medium Enterprises Development Authority
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
www.smeda.org.pk, [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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Pre-feasibility Study

The figures and financial projections are approximate due to fluctuations in

Small and Medium Enterprises Development Authority

13. KEY ASSUMPTIONS .................................................................................... 62

Table 47: Direct Labor .......................................................................................................... 51

4. PURPOSE OF THE DOCUMENT

5. BRIEF DESCRIPTION OF PROJECT & PRODUCTS

Figure 1: High Power Mixing Machine

Packing and Filling Machine

Figure 3: Platform Trolley

Carry Trolley with Tub (150 liter)

Figure 5: Weigh Scales

A spectrophotometer is an analytical instrument that measures the amount of a

Figure 7: Portable Spectrophotometer

Lacquer Porosity Tester

Other Lab Equipment

Figure 11 shows magnetic mixer and test tubes.

Figure 12 shows glass stirrer and nitrocellulose filter paper.

Figure 12: Glass Stirrer and Nitrocellulose Filter Paper

Figure 13 shows test tube stand and test tube holder.

5.2. Process Flow for Manufacturing of Varnishes and Lacquers

Figure 14: Process Flow for Manufacturing of Varnishes

Procurement of Raw Material (Chemicals)

MTT/ Mineral Turpentine

 Chemicals should be kept in tightly closed containers.

Transferring of Varnish to Filling Machine Tank

Storing the Finished Goods

Figure 18: Process Flow for Manufacturing of Lacquers

Storing the Filling and

Procurement of Raw Material (Chemicals)

Wet Nitrocellulose cotton (Guncotton)

Methyl Ethyl Ketone (MEK)

 Nitrocellulose Lacquer-per Batch 100 Liter

Finished Goods Store Room

5.3. Installed and Operational Capacities

Table 1: Installed and Operational Capacity

Polyurethane Varnish 25% 49,000 24,500

Synthetic Varnish 25% 49,000 24,500

Nitrocellulose Lacquer 25% 49,000 24,500

1K-Acrylic Lacquer 10% 19,600 9,800

2K-Acrylic Lacquer 15% 29,400 14,700

Total 100% 196,000 98,000

Packing of 250ml (Tin Can) 10% 19,600 9,800

Packing of 750ml (Tin Can) 20% 13,067 6,534

Packing of 1000ml (Tin Can) 40% 19,600 9,800

Total 100% 81,667 40,834

Packing of 250ml (Tin Can) 10% 19,600 9,800

Packing of 500ml (Tin Can) 30% 29,400 14,700

Packing of 1000ml (Tin Can) 40% 19,600 9,800

Total 100% 81,667 40,834

Table 4: Packing Wise Distribution-Nitrocellulose lacquer

Packing of 250ml (Tin Can) 10% 19,600 9,800

Packing of 500ml (Tin Can) 30% 29,400 14,700

Packing of 1000ml (Tin Can) 40% 19,600 9,800

Total 100% 81,667 40,834

Packing of 250ml (Tin Can) 10% 7,840 3,920

Packing of 500ml (Tin Can) 30% 11,760 5,880

Packing of 1000ml (Tin Can) 40% 7,840 3,920

Total 100% 32,667 16,334