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Project feasibility report of Textile Spinning Mill.The Islamia University of Bahawalpur, Pakistan.
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ContentsPage#
Executive Summary 02Name & Location of Project 04Products, Installed Capacity, Means Of Finance 05Introduction 06Implementation Schedule 08Financial Ratios 09Market Analysis 11Technical analysis 16Machinery Description 18Financial Analysis 22Projected Financial Statements 27SWOT Analysis 30Recommendation 32Conclusion 34
1
Table of Contents
Title: “TEXTILE SPINNING MILL”
Project Assignment:
Each student of M.COM (Finance) 4th semester required preparing a Project Assignment. The Project assignment is given to increase our knowledge about “Project Management”.
Objectives:
1. SWTO analysis of Textile Spinning Mill.2. Identify and list down the all aspects and important points of Textile Spinning Mill.3. What is a Production Process.4. What is Cost of unit, Means of finance, Estimated income statement, Estimated Balance sheet, etc.
Approach to Project:
The Team of project have analyze, summarize, and interpret the data, which are collected different primary and secondary sources.
Data Collection:
Both primary and secondary means of data will be used to collect the Data. Like Books, Internet, personal visits, teacher guidance etc.
2
Executive Summary
Primary Sources:
The Team of Project personally visited the SPINNING MILL for practical view: Unit selected is;‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’
Questionnaire:
Project Team has prepared a Questionnaire that contains 50Questions and exists on 10 pages for Management of‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’
Data Preparation & Analysis:
After collection of all the data through both primary & secondary means, team will used MS. Word, MS. Excel, MS. Power point etc.
Time Frame:
Time period is allowed is one month 03/05/2010 to 15/06/2010.
Limitation:
Team has visited the various people but the information given by them is just based of approximation.
3
“KSZ SPINNING MILL”
Head office: “P.O. BOX. 1245 Small-Industries Bahawalpur”
Tel: 062-2750337
Fax: +92-62-277653, 277652
Contact Person: ZOHAIB SALEEM ( G.M)
E-mail: [email protected]
Kashif Nazeer
Branch: 7- BC HASILPUR ROAD BAHAWALPUR.
“ Pakistan- Bahawalpur”
7- BC HASILPUR ROAD BAHAWALPUR.
4
Name of Project
Location of Project
CITY
LOCATION
Cotton Yarn(22 single)
The capacity of projected plant produces161000 Bags at 100% Efficiency per Year.
RS. In (000)
Fixed Cost 611,215
Initial Working Capital + 1 07,276
718,491
Debt 53% Equity 47%
5
PRODUCTS
Installed Capacity
Cost of Project
Means of Finance
United Bank Ltd. Bahawalpur.
A- Kashif Nazeer
B- Salman Khalid
C- Zohaib saleem
Mr. Dilshad Abbasi
Civil Engineer
Shahzad & co. Bahawalpur
Contact # 0313-6800085
6
Names of Lender
Names of Sponsors
Name of Civil Contractor
Trützschler Group(China)
7
Name of MachinerySupplier
Mr. Jorg Hellwig
CEO
Implementation Schedule
Sr.No. Activities Month Year
1Engineering studies and designing of civil works: 2010
Start January 2010
Complete February 2010
2Construction of Building and Civil works: 2010
Start February 2010
Complete September 2010
3 Order for foreign machinery March 2010
4Arrival of foreign machinery at sea port September 2010
5 Arrival of foreign machinery a site October 2010
6 Installation of Machinery October 2010
7 Arrival of local machinery at site September 2010
8 Trial Run Operation November 2010
9 Start Commercial production December 2010
8
Implementation Schedule
Current Ratio
Gross Profit Ratio
G R O S S P R O F I T 34.3% 33.8% 33.6%
Operating Profit Ratio
Net Profit Ratio
Net Profit 11% 14.7% 21%
Current Ratio 1.42 1.26 1.31
OPERATING PROFIT
28.9% 28.4% 28.3%
9
Financial Ratios
Internal Rate of Return
IRR= 39%
Payback Period
2 YEARS.
Sponsor’s Stake
47%
10
INTERNATIONAL MARKET ANALYSIS
Of the total 163 million spindles in the world, 113 million spindles are
installed in Asia. China has the largest number of installed spindles in the world and accounts
for25% of the world and 39% of the Asia. There has been no change in China’s spinning
capacity during the period 1992-96. China is followed by India, which has 32 million spindles
and contributes 20% to the world and 30% to Asian installed spindles. India has increased its
spinning capacity at a growth rate of 3%.Yarn is a $27 billion global market. Two third of the
total global spinning capacity is installed in Asia and as a result Asian exporters account for 40%
of total world exports. Major Asian yarn producing countries are China, India and Pakistan.
Major markets for Cotton Yarn are Hong Kong, China, Japan, Italy, Germany, Korea, UK and
the USA. Cotton yarn is the largest product category within yarn and accounts for around 25% of
total global exports. However 92% of yarn exports from Pakistan are concentrated just in this
one category.
11
Market Analysis
National market analysis
Pakistan is the third largest player in Asia. Pakistan’s spinning capacity is 5% of the total
world and 7.6% of the capacity in Asia. Pakistan’s growth rate has been 6.2% and is second only
to Iran amongst the major players
YearNo. of Units
Installed Spindles
Capacity Rotors
LoomsOperative Spindles
Capacity Rotors
1994-95 277 5568 75 15 4827 67
1995-96 307 6216 81 15 5333 67
1996-97 334 6860 95 14 5520 79
1997-98 471 8419 138 14 6105 82
1998-99 494 8610 132 14 6262 74
1999-00 503 8717 143 13 6458 80
2000-01 440 8230 143 10 6538 87
2001-02 442 8368 149 10 6631 80
2002-03 442 8392 166 10 6671 66
2003-04 443 8477 150 10 6825 66
2004-05 444 8600 145 10 6913 70 2005-06 446 8736 155 08 7011 75 2006-07 449 8922 167 11 7231 69 2007-08 453 9568 171 10 7315 802008-09 521 9768 182 15 7454 85
(Source: APTMA)
12
PRODUCTION OF YARNCotton is required for spinning of yarn. There are about 440 spinning units in the county and the production of yarn is detailed as under:
Year Yarn Produced (000) KGS
1994-95 1,055,228
1995-96 1,118,270
1996-97 1,234,539
1997-98 1,498,948
1998-99 1,413,648
1999-00 1,505,244
2000-01 1,530,855
2001-02 1,540,720
2002-03 1,547,632
2003-04 1,678,532
2004-05 1,720,580
2005-06 1,780,582
2006-07 1,865,680
2007-08 1,921,585
2008-09 1,985,654
(Source: APTMA)
13
ESTIMATED DEMAND AND SUPPLY
Demand of yarn is increasing @ 10% per annum while the supply is
increasing @ 5% per annum.
Cotton yarn is gaining popularity on healthy grounds and also for rapid increase in population
Estimated demand and supply is detailed as under considering 5% increase in production and 10% increase in demand.
Year Supply Demand Gap
1994-95 2320 2547 227
1995-96 2436 2801 365
1996-97 2558 3081 523
1997-98 2686 3390 704
1998-99 2820 3729 909
1999-00 2961 4102 1141
2000-01 3109 4512 1403
2001-02 3264 4963 1699
2002-03 3428 5460 2032
2003-04 3599 6006 2407
2004-05 3779 6606 2827
2005-06 3858 6761 2903
2006-07 3945 6822 2877
2007-08 4051 6921 28702008-09 4175 7055 2880
14
Local market analysis
The area in which we will locate our unit is the cotton belt area and
we have lot of access to raw material market like ginned cotton is available
from the whole of the country in four province particularly.
PunjabSindh
The cotton belt areas in both the provinces are
Multan
Kehrore paka
Lodhran
Vehari
Khan pur
Sahiwal
Bahawal pur
The Demand of Yarn in last few years is increasing because the agriculture sector is now
growing and the demand of Yarn in Textile sector also increasing.
We sale our product directly to weaving sector there is no middle man include but
some time middle man may include.
Present Demand
Distribution Channel
Technical Analysis
THE PROJECT
The project envisages the establishment of a Textile Spinning Unit consisting of 15000 spindles using cotton and as a raw material for the production of yarn.
FACILITIES FOR THE PROJECT
PARTICULARS OF LAND
The location of the project is selected after taking into consideration the following
factors.
AVAILABILITY OF RAW MATERIAL
Bahawalpur is cotton growing area; therefore, plenty of raw material is
available.
AVAILABILITY OF MANPOWER
There is no dearth of manpower because there are quite a good number of industries
and the skilled labor is attracted to this region.
Grid Station: Because there is grid station so we selected this land.
LABOUR:
Both skilled and unskilled labour is abundantly in this area and no difficulty is
foreseen in hiring and retaining experienced and efficient workers.
B low Room
Card
List of Machinery
Drawing
Simplex
Ring Frame
Coning
RS in(000)
item unit cost Qty price
Blowroom 8,000,000 3 24,000
Card 7,250,000 15 108,750
Drawing 8,500,000 5 42,500
Simplex 7,500,000 8 60,000
Ring Frame 1,500,000 15 22,500
Autocone 8,500,000 9 76,500
COST OF MACHINARY 334,250
Import Duty 15% 50,138
COST OF MACHINARY 384,388
Cost of Machinery
Brief Description of Finance
In Financial Analysis we see the sources of finance and calculate the ratios
of our project that how much it is profitable for us and also we make financial statements
to know that how much it is feasible for us.
Cost of ProjectThe total cost of project is Rs. 718,4 91,000
Salary Annual per
Month Costa) Administrative Salaries Nos (Rs.) (000)
Chairman 1 40,000 480Chief Executive 1 20,000 240President 1 10,000 120Financial Controller 1 10,000 120Purchase Manager 1 8,000 96Computer Manager 1 8,000 96Personal Manager 1 7,000 84Assistants 3 5,000 180Clerks and Typists 3 4,500 162Driver and Peons 6 4,500 324Sweepers 5 4,000 240 TOTAL 2,142Add: Fringe Benefits @ 10% 214
TOTAL 2,356
Personnel Analysis
Financial Analysis
Means of FinanceIn the sources of finance we take Loan from UBL and the remaining is from the
Sponsors.
CURRENT ASSETS (Rs. in 000 )
Cash 27,533Accounts Receivable @2% of sales 2% 24,151
Raw materials 66,354
Imported components 0
Imported raw material 0
Packaging materials Finished Goods Inventory 5% of production 60,378
Stores & Spares 20,000
Advances & deposits 20,000
Total 218,417CURRENT LIABILITIESAccounts Payable 3% inventory 23,888
Accrued Expenses 3% inventory 23,888Bank Borrowings 50% of inventories 50% 63,366
Total 111,141
INITIAL NET WORKING CAPITAL 107,276
Initial Working Capital
Operating Years : YAER 1 YEAR 2 YEAR 3
Production Effeciency Assumed :
65% 70% 75% b) Porduction of yarn 22 single
104,650
112,700
120,750
Add : Begining Inventory
-
5,233
5,897
Available for sale
104,650
117,933
126,647
Less : End. Inventory 5%
5,233
5,897
6,332
SALE
99,418
112,036
120,314 60% 65% 70%
b) Porduction of WASTE 108,000 117,000 126,000Add : Begining Inventory 0 5,400 6,120 Available for sale 108,000 122,400 132,120Less : End. Inventory 5% 5,400 6,120 6,606SALE 102,600 116,280 125,514
102,600 116,280 125,514 sale in amount
price per bag
22 Single
12,100
1,202,9
52
1,355,6
34 1,455,803
sale of waste 45
4,617
5,233
5,648
Total Sales 1,20
7,569 1,36
0,867 1,46
1,451 sale increase with 15%
Total Net Sales 1,20
7,569 1,56
4,997 1,68
0,669 ending inventory of finished goods 5%
yarn 6 6 7
Estimated Production
0,148 7,782 2,790
waste
231
262
282
a) Cotton bails 49,000 Rs. In (000)
65% 70% 75%
I II III
a) Cotton bails 31,850 34,300 36,750
31,850 39,445 42,263
raw material inc. by 15%
1- COST OF RAW MATERIALS Rs. In (000)
a) cotton @ Rs.25000per bail 796,250 986,125
1,056,563
TOTAL 796,250 986,1251,056,5
63Beginning inventory of raw material 0 23887.5 29583.75ending inventory of raw material 3% 23888 29584 31697
material used794,81
7980,42
91,054,4
49
Raw Material Requirement
Rs. in ( 000 ) COST OF THE PROJECT LOCAL FOREIGN TOTAL
- Project Land & Its Development 30,400
30,400
- Building & Civil Works 113,775
113,775
-Foreign Machinery
(UBL) 384,388
384,388
-Insurance & clearance 107
107
- Engineering /Technical Fees 2,000
2,000
- Erection & Installation 3,844
3,844
- Furniture & Fixture 1,239
1,239
- Vehicles 2,500
2,500
- Mark-up during Construction 61,334
61,334
- Pre-production Expenses 11,430
11,430
- Contingencies 200
200
TOTAL FIXED COST: 226,828
384,388
611,215
- Initial Net Working Capital 107,276 -
107,276
TOATL COST OF THE PROJECT:
334,104
384,388
718,491
MEANS OF FINANCE D e b t
UBL GUARANTEE 0 384,388
384,388
TOTAL DEBT: 384,388
384,388
E q u i t y -
- Paid-up Capital (Sponsors) 334,104 -
334,104
TOTAL EQUITY 334,104
TOTAL DEBT & EQUITY 334,104
384,388
718,491
Cost of Project
( Rs. in 000 )
For the year ending Sept. 30, I II IIIEfficiency Assumed : 65% 70% 75%
SALES 1,207,5
691,564,9
971,680,66
9COST OF GOODS SOLD : - Raw Materials 794,817 980,429 1,054,449- Labour 18,720 20,592 22,651- Manufacturing Expenses 6,457 6,699 6,941- Excise Duty \ Sales tax -Royalty fee - Depreciation 37,002 37,002 37,002 Cost of Goods Manufactured
856,995
1,044,721
1,121,043
Add: Beginning Inventory 0 63,313 71,349Less: Ending Inv. 5% 63,313 71,349 76,621
Cost of Goods Sold : 793,68
21,036,6
851,115,7
71
G R O S S P R O F I T 413,88
7528,31
1564,89
8OPERATING EXPENSES - Admin & General Expenses 4,791 5,031 5,282- Selling Expenses 60,378 78,250 84,033 Total Operating Expenses 65,170 83,281 89,316
OPERATING PROFIT 348,71
7445,03
1475,58
2OTHER INCOME 10,761 74,129 246,803NON OPERATING EXPENSES - Financial Expenses 59,952 53,953 47,651Amortization 1,143 1,143 1,143workers welfare fund 9% 31,385 40,053 42,802workers participation fund 9% 31,385 40,053 42,802Sub-Total 123,864 135,202 134,399P R E - T A X P R O F I T 235,614 383,958 587,986
Income Statements
Provision for Taxes 40% 94,246 153,583 235,194N E T P R O F I T 141,368 230,375 352,792 RETAINED EARNINGS 141,368 230,375 352,792
(Rs. in 000)
As on Sept. 30, Construction. I II IIIASSETSCash 27,533 248,607 1,046,299 1,284,657
Marketable Securities 0 117,922 5,560 6,050
Accounts Receivables 24,151 277,741 359,949 386,554
Finished Goods Inventory 60,378 63,313 71,349 76,621
Raw Material Inventory 66,354 23,888 29,584 31,697
Stores & Spares 20,000 132,969 150,433 160,000
Advances & Deposits 20,000 44,323 50,144 60,000
Total Current Assets 218,417 908,7621,713,3
182,005,5
79Fixed Assets at cost 599,785 599,785 599,785 599,785Less: Accumulated Depreciation. 37,002 74,003 111,005Net Fixed Assets: 599,785 562,783 525,782 488,780Preliminary Expenses: 11,430 10,287 9,144 8,001
Total Assets: 829,6321,481,8
332,248,2
442,502,3
60LIABILITIES & EQUITYCurrent Liabilities- Accounts Payable 23,888 35,910 547,749 588,234
- Accrued Expenses 23,888 277,741 359,949 386,554
- Workers Participation. Fund 0 31,385 40,053 42,802
-Workers Welfare Fund 0 31,385 40,053 42,802
- Dividends Payable
- Taxes Payable 94,246 153,583 235,194
- Bank Borrowings 63,366 170,527 215,649 231,588
- Cur. Mat. of L T Debt
Total Current Liabilities: 111,141 641,1921,357,0
361,527,1
75Long-term Liabilities 384,388 365,168 326,729 288,291Total Long-term Liabilities 384,388 365,168 326,729 288,291EQUITYsponsor’s 334,104 334,104 334,104 334,104
- Un-appropriated Profit 0 141,368 230,375 352,792
Balance Sheet
Total Equity: 334,104 475,472 564,478 686,895Total Liabilities & Equity: 829,632
1,481,833
2,248,244
2,502,360
(Rs. in 000)
Const. Year I II IIISOURCES Operating Profit 0 348,717 445,031 475,582Add Back: Depreciation 0 37,002 37,002 37,002 Amortization 1,143 1,143 1,143
Funds from Operations 0 386,862 483,175513,72
7paid up capital (sponsor’s) 334,104 0 0 0UBL GUARANTEE 384,388 0- Custom Debentures Accrued Expenses 23,888 account payable 23,888 Increase in Current Liabilities. 0 530,051 715,844 170,139Increase in Bank Borrowings 63,366 -107,161 45,122 15,938
TOTAL SOURCES 829,632 809,7521,244,14
1699,80
4APPLICATION OF FUNDS Investment in Fixed Assets: 599,785 0 0 0-Preliminary Exp 11,430 1,143 1,143 1,143Financial Expenses 0 59,952 53,953 47,651Repayment of : UBL loan 0 19,219 38,439 38,439Workers Participation Fund 0 31,385 40,053 42,802-Workers Welfare Fund 31,385 40,053 42,802Taxes 0 94,246 153,583 235,194Dividend 0 0 0 0Increase in current Assets: 190,884 351,350 119,226 53,413
TOTAL 802,099 588,678 446,449461,44
5Surplus/(Deficit) 27,533 221,074 797,692 238,359
Cash Balance - Opening 0 27,533 248,6071,046,2
99
Cash Balance - Ending 27,533 248,607 1,046,2991,284,6
57
Cash Flows
SWOT ANALYSIS
STRENGTHS:This is high where there a few, large players in a market e.g. the large grocery chainIf there are a large number of undifferentiated, small suppliers e.g.
small farming businesses supplying the large grocery chains.
The cost of switching between suppliers is low e.g. from one fleet
supplier of trucks to another.
The power of suppliers tends to be a reversal of the power of buyers
WEAKNESSES
Shortage of Electricity in Pakistan cut down the Business.
Highly dependent on cotton production.
Opportunities:A developing market such as quality yarn production
Mergers, joint ventures or strategic alliances
Moving into new market segments that offer improved profits
A new international market
A market vacated by an ineffective competitor
Threats
A new competitor in your home marketprice wars with competitorsA competitor has a new, innovative product or service
Firm has opportunity to operate successfully in emerging markets by using its great strengths.
Strong competition in current market and also desire to make rapid growth, Market development has become favorable strategy for current situation.
As company is doing good business and there is strong financial position as mentioned from ratio analysis so there is chance of innovation and high profits can be earned.
Company should try to expand its market share by providing quality products at low price and by attracting customer’s attention through stylish and improved design and outlook of packing.
We conclude that on the basis of survey of spinning Mill that the
Yarn is necessary product so its demand increases day by day.
There is no chance to decrease the demand of Yarn. Pakistan is an
agricultural country and it plays a very important role in our
economy. Availability of raw material is very easy. So, conclusion
is that the spinning Mill is a profit motive business because no
chance of decrease of demand.
Our recommendation to new investors is that they must
invest in spinning Mill. So, they take step forward to come
and invest or to start this business, and also contribute in the
economic as well as social growth of Pakistan.
Conclusion