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September 2013
Pre-Feasibility Study
Table of Contents
1 DISCLAIMER ......................................................................................................................................... 2
2 PURPOSE OF THE DOCUMENT ........................................................................................................ 3
3 INTRODUCTION TO SMEDA ............................................................................................................. 3
4 INTRODUCTION TO SCHEME .......................................................................................................... 4
5 EXECUTIVE SUMMARY ..................................................................................................................... 4
6 BRIEF DESCRITION OF PROJECT & PRODUCT .......................................................................... 4
7 CRITICAL FACTORS ........................................................................................................................... 5
8 INSTALLED & OPERATIONAL CAPACITIES ................................................................................ 5
9 GEOGRAPHICAL POTENTIAL FOR INVESTMENT .................................................................... 5
10 POTENTIAL TARGET MARKETS / CITIES .................................................................................... 5
11 PROJECT COST SUMMARY .............................................................................................................. 6
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
11.9
11.10
Pre-Feasibility Study
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
Pre-Feasibility Study
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).
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.
Pre-Feasibility Study
4 INTRODUCTION TO SCHEME
Prime Ministers Small Business Loans Scheme, for young entrepreneurs, with
an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand
(100,000) beneficiaries, through designated financial institutions, initially through
National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL).
Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will
be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh,
Khyber Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and
Federally Administered Tribal Areas (FATA).
5 EXECUTIVE SUMMARY
This SME venture entails setting up Footwear Retail outlet in urban centres of
Pakistan. The outlet is proposed to cater the demand of ladies and childrens
footwear, belonging to middle to upper middle income groups.
The demand for footwear is constantly rising and there are a number of local
manufacturers producing quality footwear. The consumers are becoming
increasingly quality conscious and seek products offering value for money. This
trend has led to strong growth in retail footwear outlets around Pakistan.
The focus of the business would be to provide casual, semi-formal and formal,
quality footwear at affordable prices. The shoes are assumed to be purchased
from different subcontract manufacturers and sold at the retail outlet.
The total project cost for setting up footwear retail outlet is estimated at Rs. 2.16
million out of which Rs. 0.93 million is capital cost and Rs. 1.23 million as working
capital. The project is proposed to be financed through 90% debt and 10%
equity. The project NPV is calculated to be around Rs 4.79 million, with an IRR of
49% and payback period of 2.83 years. This business will provide employment
opportunity to 7 individuals including the owner manager. The outlet will remain
operational for 12 hours per day, and sell 16,000 pairs of shoes in first year. The
legal business status of this project is proposed as Sole Proprietorship
Pre-Feasibility Study
quantities will be sourced from the wholesale market and small shoe
manufactures.
The product mix would include ladies' and children's shoes in all the sizes. This
product mix is divided into further categories: casual, semi-formal and formal
footwear which include pumps, heels, coat shoes, sandals, slippers etc. made of
leather and other materials. The three categories among ladies' and children's
shoes are further classified by three different proposed selling prices, ranging
between Rs.700 Rs. 1,050 for ladies shoes and Rs. 350 Rs. 630 for
childrens shoes.
7 CRITICAL FACTORS
Following are the factors critical for the success of the footwear retail business.
Develop strong linkages with suppliers for sourcing quality product at
competitive prices.
Efficient management of stock to keep inventory cost at the minimum.
Selection of a central location keeping in mind the target market.
Remain updated of the market trends including latest fashions and designs.
Induction of trained sales personnel for efficient customer handling.
Strong competition with several shops opened in same commercial area.
Very frequent changes in designs in shoe brands in the market.
Pre-Feasibility Study
manufacturing units and numerous shoe stores are established in these cities.
Therefore, any of the above cities would be a profitable option for setting up a
footwear retail outlet.
Description
Internal Rate of Return (IRR)
Payback Period (yrs)
Net Present Value (NPV)
Details
49%
2.83
Rs. 4,797,019
Returns on the scheme and its profitability are highly dependent on the efficiency
of the entrepreneur in selecting appropriate business location, hiring trained
sales persons and maintaining quality in terms of shoe designs and customer
services.
Pre-Feasibility Study
Description
Total Equity (10%)
Bank Loan (90%.)
Markup to the Borrower (%age/annum)
Tenure of the Loan (Years)
Details
Rs.216,506
Rs.1,948,557
8%
7
Capital Investment
Furniture & fixtures
Office equipment
Pre-operating costs
Total Capital Costs
Working Capital
Repair material inventory
Opening inventory
Upfront building rent
Cash
Total Working Capital
Total Investment
Rs.
809,725
103,500
21,758
934,983
Rs.
5,241
546,840
378,000
300,000
1,230,081
2,165,064
Pre-Feasibility Study
Rs/Sqft
Shop
70
Sqft
900
Amount
(Rs.)
63,000
Amount
20,000
7,500
10,000
15,000
20,000
30,000
1,000
103,500
Pre-Feasibility Study
Price (Rs)
750
625
500
20%
50%
30%
450
350
250
The table above provides details of human resource required in 1st year to run
this project. Salaries of all employees are estimated to increase at 10% annually.
11.9 Revenue Generation
Table 8: Revenue Generation
Product
Ladies Shoes
Pair A
Pair B
Pair C
Children Shoes
Pair A
Pair B
Pair C
Total
Unit
Qty
Sales Price
(Rs./Unit)
First Year
Sales
Revenue
(Rs)
No.
No.
No.
2,575
6,440
3,864
1,050
875
700
2,704,800
5,635,000
2,704,800
No.
No.
No.
644
1,610
966
630
490
350
405,720
788,900
338,100
12,577,320
Pre-Feasibility Study
Description
Furniture
Executive Chairs
Counter
Seating for customers
Floor equipment (baskets, mirrors etc)
Interior Designing
Shoe Racks with glass material
False ceiling, front door & paint
Flooring 900 sq ft @ 167
Electrical equipment
Air conditioners
(2 ton split)
Generator (5 KVA)
Electric wiring & lighting
Bracket fans
Shoe Store
Shoe Racks with iron & Wood
Lighting & Wiring
Wooden Stools
Admin Office
Desks and Chairs
Total Furniture & Fixtures
10
Amount / Other
1
1
8
1
7,000
20,000
1,500
10,000
7,000
20,000
12,000
10,000
315
450
450
515
500
167
162,225
225,000
75,000
60,000
60,000
70,000
1,800
70,000
60,000
7,200
280
300
1,000
13,300
84,000
30,000
4,000
13,300
809,725
Pre-Feasibility Study
Principal
Govt. Institute of Leather
Technology, Gujranwala
P.O Anwar Industry G.T.Road,
Gujranwala
Phone, 055 9230056
Principal
Footwear Training Institute
Plot # 24, Phase 5, Hayatabad,
Peshawar
091 9217244
Principal
Principal
Pakistan School of Fashion Design
51-J/3, Johar Town, Lahore
TEL: +92 42 3531 5401 08
11
Pre-Feasibility Study
13 ANNEXURE
13.1 Income Statement
Income Statement
Revenue
Year 1
12,577,320
Year 2
15,424,794
Year 3
18,101,576
Year 4
21,159,466
Year 5
24,647,919
Year 6
28,622,467
Year 7
31,553,911
Year 8
34,709,302
Year 9
38,180,232
Year 10
41,998,255
Cost of sales
Cost of purchasing shoes
Direct labor
Fixing and repair material
Direct Electricity
Transport rental expense
Generator expense
Total cost of sales
Gross Profit
9,374,400
720,000
125,773
438,696
234,360
147,150
11,040,379
1,536,941
11,048,400
790,100
154,248
482,566
276,210
161,865
12,913,389
2,511,405
12,963,456
867,025
181,016
530,822
324,086
178,052
15,044,457
3,057,118
15,151,039
951,440
211,595
583,904
378,776
195,857
17,472,611
3,686,855
17,646,504
1,044,074
246,479
642,295
441,163
215,442
20,235,957
4,411,961
20,489,552
1,145,726
286,225
706,524
512,239
236,987
23,377,253
5,245,214
22,538,508
1,257,276
315,539
777,177
563,463
260,685
25,712,647
5,841,263
24,792,358
1,379,686
347,093
854,894
619,809
286,754
28,280,595
6,428,707
27,271,594
1,514,014
381,802
940,384
681,790
315,429
31,105,014
7,075,218
29,998,754
1,661,421
419,983
1,034,422
749,969
346,972
34,211,520
7,786,735
204,000
377,320
126,000
36,000
20,400
180,000
91,323
4,352
1,039,394
497,547
223,862
462,744
138,600
39,600
22,386
189,000
91,323
4,352
1,171,866
1,339,539
245,657
543,047
152,460
43,560
24,566
198,450
91,323
4,352
1,303,414
1,753,704
269,575
634,784
167,706
47,916
26,957
208,373
91,323
4,352
1,450,985
2,235,870
295,821
739,438
184,477
52,708
29,582
218,791
91,323
4,352
1,616,490
2,795,471
324,622
858,674
202,924
57,978
32,462
229,731
91,323
1,797,715
3,447,499
356,228
946,617
223,217
63,776
35,623
241,217
91,323
1,958,001
3,883,262
390,911
1,041,279
245,538
70,154
39,091
253,278
91,323
2,131,574
4,297,133
428,971
1,145,407
270,092
77,169
42,897
265,942
91,323
2,321,801
4,753,418
470,736
1,259,948
297,101
84,886
47,074
279,239
91,323
2,530,306
5,256,429
497,547
1,339,539
1,753,704
2,235,870
2,795,471
3,447,499
3,883,262
4,297,133
4,753,418
5,256,429
155,885
155,885
341,662
138,414
138,414
1,201,125
119,546
119,546
1,634,158
99,169
99,169
2,136,701
77,161
77,161
2,718,310
53,393
53,393
3,394,106
27,723
27,723
3,855,539
4,297,133
4,753,418
5,256,429
Tax
NET PROFIT/(LOSS) AFTER TAX
341,662
120,113
1,081,013
245,124
1,389,034
320,505
1,816,196
543,662
2,174,648
678,821
2,715,285
771,108
3,084,431
1,074,283
3,222,850
1,188,354
3,565,063
1,314,107
3,942,322
341,662
341,662
341,662
1,422,675
1,422,675
1,422,675
2,811,709
2,811,709
2,811,709
4,627,905
4,627,905
4,627,905
6,802,553
6,802,553
6,802,553
9,517,838
9,517,838
9,517,838
12,602,270
12,602,270
12,602,270
15,825,120
15,825,120
15,825,120
19,390,183
19,390,183
19,390,183
23,332,504
23,332,504
12
September 2013
Pre-Feasibility Study
(5,241)
(546,840)
(378,000)
(930,081)
1,948,557
216,506
2,165,064
(934,983)
(934,983)
300,000
300,000
300,000
300,000
Year 1
Year 2
Year 3
Year 5
Year 6
Year 7
341,662
91,323
4,352
(140,082)
(480,016)
(1,508)
(129,875)
(37,800)
837,011
485,067
1,081,013
91,323
4,352
(372,349)
(59,540)
(1,567)
(156,998)
(41,580)
152,962
697,615
1,389,034
91,323
4,352
(424,881)
(88,932)
(1,891)
(189,409)
(45,738)
175,325
909,182
1,816,196
91,323
4,352
(555,542)
(101,325)
(2,277)
(228,096)
(50,312)
201,249
1,175,567
2,174,648
91,323
4,352
(570,845)
(115,307)
(2,738)
(274,225)
(55,343)
230,738
1,482,602
2,715,285
91,323
(712,762)
(131,072)
(2,398)
(236,444)
(60,877)
256,573
1,919,627
3,084,431
91,323
(809,663)
(95,167)
(2,731)
(273,092)
(66,965)
193,487
2,121,622
(218,379)
(218,379)
(235,850)
(235,850)
(254,718)
(254,718)
(275,095)
(275,095)
(297,103)
(297,103)
(320,871)
(320,871)
(346,541)
(346,541)
Year 8
3,222,850
91,323
(687,541)
(106,998)
(3,154)
(315,422)
(73,662)
214,026
2,341,422
Year 9
3,565,063
91,323
(760,547)
(117,684)
(3,643)
(364,312)
(81,028)
236,869
2,566,041
Year 10
3,942,322
91,323
(841,029)
(129,438)
27,147
2,714,712
891,304
1,930
6,698,271
266,688
461,765
654,464
900,472
1,185,499
1,598,756
1,775,081
2,341,422
2,566,041
6,698,271
300,000
566,688
566,688
566,688
566,688
1,028,453
1,028,453
1,028,453
1,028,453
1,682,918
1,682,918
1,682,918
1,682,918
2,583,390
2,583,390
2,583,390
2,583,390
3,768,889
3,768,889
3,768,889
3,768,889
5,367,645
5,367,645
5,367,645
5,367,645
7,142,727
7,142,727
7,142,727
7,142,727
9,484,149
9,484,149
9,484,149
9,484,149
12,050,189
12,050,189
12,050,189
12,050,189
18,748,460
18,748,460
18,748,460
13
September 2013
Year 4
Pre-Feasibility Study
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
300,000
5,241
546,840
378,000
1,230,081
566,688
480,016
6,748
676,715
415,800
2,145,967
1,028,453
539,557
8,315
833,712
457,380
2,867,418
1,682,918
628,489
10,206
1,023,121
503,118
3,847,852
2,583,390
729,814
12,483
1,251,217
553,430
5,130,334
3,768,889
845,121
15,221
1,525,442
608,773
6,763,446
5,367,645
976,193
17,619
1,761,886
669,650
8,792,993
7,142,727
1,071,360
20,350
2,034,978
736,615
11,006,030
9,484,149
1,178,358
23,504
2,350,400
810,277
13,846,687
12,050,189
1,296,042
27,147
2,714,712
891,304
16,979,394
18,748,460
1,425,480
20,173,940
809,725
103,500
913,225
728,753
93,150
821,903
647,780
82,800
730,580
566,808
72,450
639,258
485,835
62,100
547,935
404,863
51,750
456,613
323,890
41,400
365,290
242,918
31,050
273,968
161,945
20,700
182,645
80,973
10,350
91,323
21,758
21,758
2,165,064
17,406
17,406
2,985,276
13,055
13,055
3,611,052
8,703
8,703
4,495,813
4,352
4,352
5,682,621
7,220,059
9,158,283
11,279,998
14,029,332
17,070,717
20,173,940
837,011
837,011
989,973
989,973
1,165,299
1,165,299
1,366,548
1,366,548
1,597,286
1,597,286
1,853,859
1,853,859
2,047,346
2,047,346
2,261,372
2,261,372
2,498,240
2,498,240
2,500,170
2,500,170
(140,082)
1,730,178
1,590,096
(512,430)
1,494,328
981,898
(937,311)
1,239,610
302,299
(1,492,854)
964,515
(528,339)
(2,063,699)
667,412
(1,396,287)
(2,776,461)
346,541
(2,429,920)
(3,586,124)
(3,586,124)
(4,273,666)
(4,273,666)
(5,034,213)
(5,034,213)
(5,875,241)
(5,875,241)
216,506
341,662
558,169
2,985,276
216,506
1,422,675
1,639,182
3,611,052
216,506
2,811,709
3,028,216
4,495,813
216,506
4,627,905
4,844,412
5,682,621
216,506
6,802,553
7,019,060
7,220,059
216,506
9,517,838
9,734,345
9,158,283
216,506
12,602,270
12,818,776
11,279,998
216,506
15,825,120
16,041,626
14,029,332
216,506
19,390,183
19,606,689
17,070,717
216,506
23,332,504
23,549,011
20,173,940
Assets
Current assets
Cash & Bank
Closing stock
Equipment spare part inventory
Opening inventory
Pre-paid building rent
Total Current Assets
Fixed assets
Furniture & fixtures
Office equipment
Total Fixed Assets
Intangible assets
Pre-operation costs
Legal, licensing, & training costs
Total Intangible Assets
TOTAL ASSETS
Liabilities & Shareholders' Equity
Current liabilities
Accounts payable
Total Current Liabilities
Other liabilities
Deferred tax
Long term debt (Project Loan)
Long term debt (Working Capital Loan)
Total Long Term Liabilities
Shareholders' equity
Paid-up capital
Retained earnings
Total Equity
TOTAL CAPITAL AND LIABILITIES
1,948,557
1,948,557
216,506
216,506
2,165,064
14
September 2013
Pre-Feasibility Study
Footwear Retail Outlet
14 USEFUL LINKS
Prime Ministers Office, www.pmo.gov.pk
Small and Medium Enterprise Development Authority, www.smeda.org.pk
National Bank of Pakistan (NBP), www.nbp.com.pk
First Women Bank Limited (FWBL), www.fwbl.com.pk
Government of Pakistan, www.pakistan.gov.pk
Ministry of Industries & Production, www.moip.gov.pk
Ministry of Education, Training & Standards in Higher Education,
http://moptt.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 (FPCCI)
www.fpcci.com.pk
State Bank of Pakistan (SBP), www.sbp.org.pk
15
September 2013
Pre-Feasibility Study
Footwear Retail Outlet
45%
5%
90%
10%
10%
Cash Sales
60
15
10
90%
10%
8%
7
Office Equipment
Furniture & Fixtures
33%
10%
Table 15: Revenue Related Assumptions
10%
10%
80%
20%
16
September 2013