-
Pre-Feasibility Study
LAUNDRY & DRY CLEANING
Small and Medium Enterprise Development AuthorityGovernment of
Pakistan
www.smeda.org.pk
HEAD OFFICE
Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III,
Sector XX, Khayaban-e-Iqbal, DHA LahoreTel: (042) 111-111-456, Fax:
(042) 5896619, 5899756
[email protected]
REGIONAL OFFICE PUNJAB
REGIONAL OFFICE SINDH
REGIONAL OFFICE NWFP
REGIONAL OFFICE BALOCHISTAN
Waheed Trade Complex,1st Floor, 36-Commercial Zone,
Phase III, Sector XX,Khayaban-e-Iqbal, DHA Lahore.
Tel: (042) 111-111-456Fax: (042) 5896619, 5899756
[email protected]
5TH Floor, BahriaComplex II, M.T. Khan Road,
Karachi.Tel: (021) 111-111-456
Fax: (021) [email protected]
Ground FloorState Life Building
The Mall, Peshawar.Tel: (091) 9213046-47
Fax: (091) [email protected]
Bungalow No. 15-AChaman Housing Scheme
Airport Road, Quetta.Tel: (081) 831623, 831702
Fax: (081) [email protected]
October, 2004
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Pre-Feasibility Study Laundry & Dry Cleaning
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1
DISCLAIMER
The purpose and scope of this information memorandum is to
introduce the subject
matter and provide a general idea and information on the said
area. All the material
included in this document is based on data/information gathered
from various sources and
is based on certain assumptions. Although, due care and
diligence has been taken to
compile this document, the contained information may vary due to
any change in any of
the concerned factors, and the actual results may differ
substantially from the presented
information. SMEDA does not assume any liability for any
financial or other loss
resulting from this memorandum in consequence of undertaking
this activity. The
prospective user of this memorandum is encouraged to carry out
additional diligence and
gather any information he/she feels necessary for making an
informed decision.
For more information on services offered by SMEDA, please
contact our website: www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-78
Prepared by SMEDA-Punjab
Approved by Provincial Chief Punjab
Issue Date October, 2004
Issued by Library Officer
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1. INTRODUCTION TO
SMEDA....................................................................................................
3
2. PURPOSE OF THE
DOCUMENT...............................................................................................
3
3. CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR
INVESTMENT..................... 4
4. PROJECT
PROFILE....................................................................................................................
4
4.1 PROJECT BRIEF
.......................................................................................................................
44.2 OPPORTUNITY RATIONALE
......................................................................................................
44.3 MARKET ENTRY TIMING
.........................................................................................................
44.4 PROPOSED BUSINESS LEGAL STATUS
.......................................................................................
54.5 PROJECT CAPACITY AND
RATIONALE.......................................................................................
54.6 PROJECT
INVESTMENT.............................................................................................................
54.7 PROPOSED PRODUCT
MIX........................................................................................................
54.8 RECOMMENDED PROJECT
PARAMETERS...................................................................................
64.9 PROPOSED
LOCATION..............................................................................................................
7
5. SECTOR & INDUSTRY
ANALYSIS...........................................................................................
7
5.1 SECTOR CHARACTERISTICS
.....................................................................................................
7
6. MARKET INFORMATION
.........................................................................................................
7
6.1 MARKET POTENTIAL
...............................................................................................................
76.2 TARGET CUSTOMERS
..............................................................................................................
7
7. PRODUCTION
PROCESS...........................................................................................................
7
7.1 PRODUCTION PROCESS FLOW
..................................................................................................
77.2 RAW MATERIAL
REQUIREMENT...............................................................................................
97.3 REVENUES
..............................................................................................................................
97.4 TECHNOLOGY AND PROCESSES
................................................................................................
97.5 MACHINERY REQUIREMENT
..................................................................................................
107.6 MACHINE
MAINTENANCE......................................................................................................
11
8. LAND & BUILDING REQUIREMENT
....................................................................................
12
8.1 LAND REQUIREMENT
............................................................................................................
128.2 COVERED AREA REQUIREMENT
.............................................................................................
128.3 RECOMMENDED
MODE..........................................................................................................
128.4 UTILITIES REQUIREMENT
......................................................................................................
128.5 SUITABLE
LOCATION.............................................................................................................
12
9. HUMAN RESOURCE
REQUIREMENT...................................................................................
14
9.1 ESTIMATED TIME FOR PROJECT COMPLETION
........................................................................
14
10. PROJECT
COST....................................................................................................................
14
11. FINANCIAL ANALYSIS
.......................................................................................................
15
11.1 PROJECT COSTS
....................................................................................................................
1511.2 PROJECTED INCOME
STATEMENT...........................................................................................
1611.3 PROJECTED BALANCE SHEET
.................................................................................................
1711.4 PROJECTED CASH FLOW
STATEMENT.....................................................................................
18
12. FINANCIAL ASSUMPTIONS
...............................................................................................
19
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11.. IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA
Small and Medium Enterprise Development Authority (SMEDA) was
established with the objective to provide fresh impetus to the
economy through the launch of an aggressive SME support
program.
Since its inception in October 1998, SMEDA had adopted a
sectoral SME development approach. A few priority sectors were
selected on the criterion of SME presence. In depth research was
conducted and comprehensive development plans were formulated after
identification of impediments and retardants. The all-encompassing
sectoral development strategy involved overhauling of the
regulatory environment by taking into consideration other important
aspects including finance, marketing, technology and human resource
development.
SMEDA has so far successfully formulated strategies for sectors
including, fruits and vegetables, marble and granite, gems and
jewelry, marine fisheries, leather and footwear, textiles, surgical
instruments, transport and dairy. Whereas the task of SME
development at a broader scale still requires more coverage and
enhanced reach in terms of SMEDAs areas of operation.
Along with the sectoral focus a broad spectrum of business
development services is also offered to the SMEs by SMEDA. These
services include identification of viable businessopportunities for
potential SME investors. In order to facilitate these investors,
SMEDA provides help desk services as well as development of project
specific documents. These documents consist of information required
to make well researched investment decisions. Pre-feasibility
studies and business plan development are some of the services
provided to enhance the capacity of individual SMEs to exploit
viable business opportunities in an effective way.
22.. PPUURRPPOOSSEE OOFF TTHHEE DDOOCCUUMMEENNTT
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, production, marketing, finance and business
management. The document also provides sectoral information, brief
on government policies and international scenario, which have some
bearing on the project itself.
This particular pre-feasibility is regarding Laundry & dry
cleaning which comes under service sector. Before studying the
whole document one must consider following critical aspects, which
forms the basis of any investment decision.
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33.. CCRRUUCCIIAALL FFAACCTTOORRSS && SSTTEEPPSS IINN
DDEECCIISSIIOONN MMAAKKIINNGG FFOORR IINNVVEESSTTMMEENNTT
Before making any investment decision, it is advisable to
evaluate the associated risk factors by taking into consideration
certain key elements. These may include availability of resources,
academic knowledge, past experience and specific managerial and
technical skill set. Following are some of the key success factors
for a Laundry and Dry Cleaning business:
There should be warranty of clothes from damages and any type of
color fading. Prime business location for proposed dry cleaning.
Reasonable and competitive charges, positioned against competitors.
On time delivery of clothes can leave good impression on the
customers. Technical and efficient labor. There should be
advertisement on local cable and banners. Existing dry cleaners
are
not advertising for their services.
44.. PPRROOJJEECCTT PPRROOFFIILLEE
44..11 PPrroojjeecctt BBrriieeff
The proposed project entails setting up a dry cleaning unit. It
provides a range of services relating to domestic and commercial
sector. These services range from washing, drying and pressing to
more complex services like cleaning sensitive fabric, blankets,
shirwanis and suits etc.
44..22 OOppppoorrttuunniittyy RRaattiioonnaallee
There is an important factor for the entrepreneurs to set up a
dry cleaning business in big cities of Pakistan due to the fact
that it has become difficult for the people to wash all types of
clothes in their houses i.e. Jackets, Sherwanis and other sensitive
clothes.
In Pakistan dry clean industry has grown over the years in small
set-ups, with low quality services, and there is a need for better
service oriented dry clean units. There is a lot of unfilled demand
as can be judged from excessive rush at the existing dry clean
setups.
The business is service-oriented and carries large potential for
profits due to its unique nature and uncontrolled spending of
people, especially on marriages. The life style of the people in
Pakistan has changed over the years. Now days, people are more
conscious about their clothes and the need for dry cleaning has
increased.
44..33 MMaarrkkeett EEnnttrryy TTiimmiinngg
The suitable timings for starting this business would be in
October because this type of business has a busy schedule in
winters. In winter season, people normally wear worm clothes that
are sweaters, jackets, suits etc. and it is also season of
weddings. Due to these activities and wearing pattern the demand
for dry cleaning increases compared to other seasons.
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44..44 PPrrooppoosseedd BBuussiinneessss LLeeggaall
SSttaattuuss
There are three main forms of business: Sole Proprietorship,
Partnership and Company. An enterprise can be a proprietorship or a
partnership and even it can be registered under company law with
corporate law authority. Although selection totally depends upon
the choice of the entrepreneur but this financial feasibility is
based on a private limited company.
For getting information on the formation of type of
firm/company, please refer to the website:
www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html
It is recommended that the proposed project be started as a sole
proprietorship or a partnership because it requires less legal
requirement. Similarly a lower income tax rate of tax is applicable
to sole proprietorship than that of companies.
44..55 PPrroojjeecctt CCaappaacciittyy aanndd
RRaattiioonnaallee
The proposed dry clean will handle 60 kg of clothes per bath.
Details of the project capacity are as follow:
TTaabbllee 44--11:: PPrroojjeecctt CCaappaacciittyyProject Dry
Cleaning
Working hours per day 8 hoursOperating shift per day 1Working
days per annum 300 daysMaximum clothes dry clean per day 395 units
of clothesMaximum weight of clothes per day 320 KgMaximum weight of
clothes per batch 60KgHours utilized per batch (Laundry & Dry
cleaning) 1.5 hours
44..66 PPrroojjeecctt IInnvveessttmmeenntt
Total project cost of the proposed laundry and dry cleaning unit
is Rs. 2.6 million. This includes a fixed cost of Rs. 2.22 million
and a working capital of Rs. 0.35 million.
44..77 PPrrooppoosseedd PPrroodduucctt MMiixx
Following is the product mix of the proposed laundry & dry
cleaning shop:
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TTaabbllee 44--22:: PPrrooppoosseedd PPrroodduucctt
MMiixxAverage Weight
per unit (kg)Average Number of units per day
Average Weight per day (kg)
Trousers 0.35 80.00 28.00Coats (all Kinds)(winter) 2.00 15.00
30.00Shirts 0.18 60.00 10.80Jackets/sweater 2.25 15.00 33.75Dupata
0.05 25.00 1.25Shalwar Qameez 0.45 40.00 18.00Blankets 2.25 10.00
22.50Bed sheets 0.35 80.00 28.00Curtain 1.25 10.00
12.50Others(avg.) 2.25 60.00 135.00Total 11.38 395.00 320The
proposed business is affected through seasonal variations.
Following table shows the seasonal distribution of different
clothes/ fabric:
TTaabbllee 44--33 SSeeaassoonnaall VVaarriiaattiioonnss
Description Spring Summer Autumn Winter TotalTrousers 6,000
6,000 6,000 6,000 24,000Coats (all Kinds)(winter) 0 0 0 1,125
1,125Shirts 4,500 4,500 4,500 4,500 18,000Jackets/sweater 0 0 0
1,125 1,125Dupta 1,875 1,875 1,875 1,875 7,500Shalwar Qameez 3,000
3,000 3,000 3,000 12,000Blankets 0 0 0 750 750Bed sheets 6,000
6,000 6,000 6,000 24,000Curtain 750 750 750 750 3,000Others(avg.)
4,500 4,500 4,500 4,500 18,000Total 26,625 26,625 26,625 29,625
109,500
44..88 RReeccoommmmeennddeedd PPrroojjeecctt
PPaarraammeetteerrss
Capacity Human Resource Technology/Machinery Location320 kgs per
day 7 Local Manufacturing
MachinerySee Table 8-3
Financial SummaryProject Cost IRR NPV Payback Period
Rs. 2.6 Million 33.39% Rs. 1.59 Million 3.5 years
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44..99 PPrrooppoosseedd LLooccaattiioonn
Large public sector dry cleaners are concentrated in major
cities of the country. Therefore, it is suggested that new dry
cleaner should be opened up in areas mentioned in table 8-3, where
there is little presence of existing dry cleaning facilities.
55.. SSEECCTTOORR && IINNDDUUSSTTRRYY
AANNAALLYYSSIISS
55..11 SSeeccttoorr CChhaarraacctteerriissttiiccss
The numbers of Dry Cleaners in Pakistan has increased at a slow
pace over the last few years. The size of this sector is still
growing. There are few large dry cleaners operating in commercial
areas of Lahore like Mall Road, Defence and Main Market Gulberg.
They have a created a monopolized situation with less competition.
They are currently four to five large-scale dry cleaners in Lahore
such as Pearl dry cleaners at Barkat Market and Mall Road, British
Kwick dry cleaners at Mall Road, National dry cleaners at Wahdat
Road and Faisal Town and PC dry cleaners. These dry cleaners are
using machines of 60kg capacity in general. Similarly, few large
Dry cleaners have also been operating in prime business locations
in Rawalpindi, Multan, Karachi and Quetta.
66.. MMAARRKKEETT IINNFFOORRMMAATTIIOONN
66..11 MMaarrkkeett PPootteennttiiaall
From 1981 to 2004 the estimated population of Pakistan has grown
from 85 million to 150 million making Pakistan the seventh most
populous country in the world. This growth rate has increased the
demand for various products and services, and one of the services
is the proposed business. People in big cities are now inclined to
use more sophisticated measures to cleaning their clothes. These
people range from middle class to upper class.
66..22 TTaarrggeett CCuussttoommeerrss
The major target market for the dry cleaning services will
depend on the location where dry cleaning business is situated. The
target customers for proposed business will not only be general
public but also the commercial sector i.e. hostels, catering
companies, film industry and hospitals.
77.. PPRROODDUUCCTTIIOONN PPRROOCCEESSSS
77..11 PPrroodduuccttiioonn PPrroocceessss FFllooww
Liquid solvent and small amount of water are added to the
machine. The machine then agitates clothes in a manner similar to a
domestic washing machine to remove dirt, oil, and stains. Once
clean, the clothes are then manually transferred to a dryer
(laundry procedure), then pressed and shaped.
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The above chart shows two processes separately that are laundry
and dry cleaning. Each process is explained as below:a) Tagging :-
The clothes are firstly tagged with a specific number, mentioned in
the
invoice given to customers. This procedure is used for
identification of clothes once ready for collection by the
customers
b) Washing :- The clothes are washed in a washing machine using
detergent i.e. Surf, washing powder etc. This procedure is only
followed when laundry service is required by the customers.
c) Dry Cleaning: - In this process, the sensitive, expensive and
only dry clean recommended clothes are cleaned. The chemical used
to clean the clothes in this process is called Perclon (see raw
material section for details).
d) Drying :- The clothes washed in a laundry procedure are dried
using dryers.e) Steam Pressing :- In this process both the clothes
either washed or dry cleaned are
pressed and shaped using steam press equipments.f) Packing :-
Once pressed, the clothes are properly hanged and covered in the
plastic
wrap and then tagged so that it can be easily identified.
a) Tagging
b) Washing
d) Drying
e) SteamPressing
Detergent(WashingSoapSimple)
Bleach onwhiteclothes
c) Dry CleanPerclon
(Chemicalused)
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77..22 RRaaww MMaatteerriiaall RReeqquuiirreemmeenntt
Raw material used for the purpose of dry cleaning of clothes is
Perclon chemical by ICI Pakistan. Perchloroethylene, or perclon, is
the dominant chemical solvent used in dry cleaning. Perclon
(Perchloroethylene) is a liquid chemical that consists of 40%
alcohol, 50% kerosene oil and 10% liquid used to save the color
fading of clothes. Perclon (Perchloroethylene) is a clear,
colorless liquid and evaporates quickly.
Bleach is also used especially for white clothes. Detergent is
used for simple washing i.e. washing soap and surf. Following table
shows the raw material costing:
TTaabbllee 77--11 RRaaww MMaatteerriiaall CCoossttiinngg
Chemicals Quantity Required per
day (Liter)
Rate per Liter
Total Cost per
day
Total Cost Per Annum
(Rs.)Perc Lon 20 285 5,700 1,710,000Bleach 2 55 110 33,000Tar
pine Oil 20 30 600 180,000Cost of chemicals per day
1,923,000Packing Cost 548,000Total raw material cost 2,471,000
77..33 RReevveennuueess
The proposed product mix has been given in table 4-2. Sale
prices and the number of clothes processed are listed in the table
below:
TTaabbllee 77--22 SSaallee PPrriiccee
Items Number of units per year
Rate (Rs.) Total sale price (Rs.)
Trousers 24,000 55 1,320,000Coats (all Kinds)(winter) 1,125 100
112,500Shirts 18,000 25 450,000Jackets/sweater 1,125 120
135,000Dupatta 7,500 15 112,500Shalwar Qameez 12,000 45
540,000Blankets 750 190 142,500Bed sheets 24,000 60
1,440,000Curtain 3,000 140 420,000Others(avg.) 18,000 70
1,260,000Total 109,500 5,932,500
77..44 TTeecchhnnoollooggyy aanndd PPrroocceesssseess
There are several manufacturers of dry cleaning machines in
Pakistan. In Lahore, there are approximately 5 to 6 manufactures of
such machines i.e. Abdul Waheed at Canal Park
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Gulberg, Mushtaq Engineering Works at Township, some others are
in Bund Road, Qainchi and Model Town. These machines can also be
imported from the following countries: Italy Germany China
JapanHowever, the prices of imported machinery are 2 to 3 times
higher than local machinery. In terms of quality of cleaning and
capacity, there is no major difference between local and imported
machinery. Therefore, it is advisable to acquire locally
manufacturedmachinery rather than the imported machinery.
77..55 MMaacchhiinneerryy RReeqquuiirreemmeenntt
Total number of different machines required for the proposed
project is as follows:
TTaabbllee 77--33:: MMaacchhiinneerryy
RReeqquuiirreemmeennttDescription No. Cost Per Unit in Rs. Total in
Rs.Washing Machine (60Kg) 1 165,000 165,000Hydro Extractor(25Kg)1 1
38,000 38,000Dryer (60Kg) 1 135,000 135,000Dry Clean Machine (10Kg)
1 550,000 550,000Steam Press with compressor and Boiler 1 310,000
310,000Form Finisher (Recondition ) 1 185,000 185,000Total 6
1,383,000
TTaabbllee 77--44:: CCuussttoommeerr DDeeaalliinngg OOffffiiccee
EEqquuiippmmeenntt RReeqquuiirreemmeennttDescription No. Cost Per
Unit(Rs.) Total(Rs.)Split Unit 1 40,000 40,000Telephone Sets 2 400
800Fire Extinguish 1 4,000 4,000Total 44,800
1 Hydro Extractor spins the clothes before these are passed on
to dryer
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TTaabbllee 77--55:: OOtthheerr EEqquuiippmmeenntt
RReeqquuiirreemmeennttDescription No. Cost Per Unit(Rs.)
Total(Rs.)Fan(56) 4 1,400 5,600Exhaust Fan 1 500 500Water Cooler 1
8,500 8,500Lighting Appliances 1 6,000 6,000Total 20,600
TTaabbllee 77--66:: FFuurrnniittuurree,, FFiixxttuurree aanndd
vveehhiiccllee RReeqquuiirreemmeenntt
Description No. Cost Per Unit(Rs.) Total(Rs.)Wardrobes 2(
10ftx3ft) 12,000 24,000Sofa set 2 seater 1 2,000 2,000Counter Table
1 3,500 3,500Chairs 3 500 1,500Stole 3 150 450Suzuki Loader2 1
450,000 450,000Total 481,450
TTaabbllee 77--77:: TToottaall CCoosstt ooff
IInnffrraassttrruuccttuurree
Description Cost (Rs.)Machinery Cost 1,383,000Customer dealing
Office Equipments 44,800Other Equipments 20,600Furniture, Fixture
and vehicle 481,450Total 1,929,850
77..66 MMaacchhiinnee MMaaiinntteennaannccee
Routine inspection of machinery is essential for long life of
the machinery. One lubricant is used twice in a year before peak
season.
2 Suzuki Loader is used to provide pick and drop service to
commercial sectors i.e. hotels, hospitals etc.
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88.. LLAANNDD && BBUUIILLDDIINNGG
RREEQQUUIIRREEMMEENNTT
88..11 LLaanndd RReeqquuiirreemmeenntt
For the recommended machinery, office, furniture & fixture
and other equipments, approximately 1,125 square feet area is
required.
88..22 CCoovveerreedd AArreeaa RReeqquuiirreemmeenntt
Following is the covered area requirement split into various
sections. It is recommended that customer dealing office area
should be separate from the machine and working area.
TTaabbllee 88--11 CCoovveerreedd AArreeaa
Sections Area Total Area (sq. ft.)Customer Dealing Office Area
22.50 x 20 450Working & Machine Area 27 x 25 675Total Covered
Area 1,125
TTaabbllee 88--22 CCoonnssttrruuccttiioonn CCoosstt
Cost Area is Sq ft. Cost per Sq ft. (Rs.)
Total Cost (Rs.)
Customer Dealing Office Area 450 600 270,000Working and
Machinery Area 675 300 202,500Total 472,500
88..33 RReeccoommmmeennddeedd MMooddee
It is suggested that for proposed dry cleaning business, area
should be rented. The rent cost for the business depends on the
area where the business is situated. Starting the dry cleaning in a
rented area would significantly reduce the initial capital cost of
the project. A shop having 1,125 square feet area can be rented for
approximately Rs. 20,000 per month in commercial areas of large
cities of the country.
88..44 UUttiilliittiieess RReeqquuiirreemmeenntt
Electricity Telephone Gas Water88..55 SSuuiittaabbllee
LLooccaattiioonn
The dry cleaner is supposed to be in a location that is easily
accessible and has considerable population concentration.
Considering the spread of new residential area some of the suitable
areas are:
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TTaabbllee 88--33:: SSuuiittaabbllee LLooccaattiioonnssCity
Location
Lahore Main Road Johar Town PCSIR Canal Area Valencia Wapda Town
Punjab Co-operative Society Sabza Zar Eden City
Islamabad Aabpara Market Super Market Blue Area Karachi
Company
Karachi Gulshan Iqbal Defence Phase 1 to 111 Tariq Road Sadar
Federal B Area
Quetta Cantonment Area Liaqat Bazar Saryab Road Satelite Town
Jinnah Road
Faisalabad Satelite Town Madina Town Railway Road Peoples
Colony(D Ground) Satiana Road
Multan Cantonment Area New Multan
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99.. HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT
For the proposed size of dry cleaning, following manpower is
required:
TTaabbllee 99--11:: HHRR RReeqquuiirreemmeennttPosition Required
Salary Per
Month(Rs.)Salary Per
Annum(Rs.)Supervisor 1 8,000 96,000Machine Operators 3 5,000
180,000Semi Skilled Workers 3 3,000 108,000Total 7 32,000
384,000
99..11 EEssttiimmaatteedd TTiimmee FFoorr PPrroojjeecctt
CCoommpplleettiioonn
1. 20 days for completion of initial formalities, i.e.,
selection of suitable location and renting of building etc.
2. 1 month for sanction of loan (in case, if financing has to be
arranged through bank).3. 1.5 month for purchase of machinery and
equipments.4. 1 month for furnishing and staff appointments.5. This
project can take-off within 2 months, as some of the activities
will be in progress
simultaneously.
1100.. PPRROOJJEECCTT CCOOSSTT
TTaabbllee 1100--11:: PPrroojjeecctt CCoossttDescription Total
Cost (in 000Rs.)Plant & Machinery (Local) 1,383Pre-production
expenses 145Furniture, fixture, equipment and vehicle 547Erection
and Installation (5% of machinery cost) 69Contingencies 75Total
fixed cost 2,219Initial working capital 373Project cost 2,592
TTaabbllee 1100--22:: FFiinnaanncciinngg PPllaannDescription %
Amount (in 000Rs.)Debt 50 1,296Equity 50 1,296Total 2,592
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1111.. FFIINNAANNCCIIAALL AANNAALLYYSSIISS
1111..11 PPrroojjeecctt CCoossttss
Laundry and Dry CleaningPROJECT COST Rs in 1000
DESCRIPTION Total Cost
Plant & Machinery (Local) 1,383 Pre-production expenses 145
Furniture, fixture, equipment and vehicle 547 Erection and
Installation 69 Contingencies 75 Total fixed cost 2,219 Initial
working captial 354
Project cost 2,573
Means of Finance
Debt 50% 1,287 Equity 50% 1,287
Project ReturnsIRR % 33.39%Pay Back period Yrs. 3.48 NPV Rs.
1,593
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1111..22 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt
Laundry and Dry CleaningPROJECTED INCOME STATEMENT Rs. in
1,000
YEAR 1 2 3 4 5 6 7 8 9 10
Sales 2,966 3,433 3,927 4,458 5,029 5,651 6,359 7,109 7,902
8,742 Less: cost of sales 1,975 2,170 2,378 2,604 2,848 3,112 3,396
3,699 4,025 4,374
Gross profit 991 1,263 1,549 1,854 2,181 2,539 2,963 3,410 3,877
4,368 33 37 39 42 43 45 47 48 49 50
Less: operating expensesAdministrative 575 614 657 704 757 788
854 926 1,004 1,090
575 614 657 704 757 788 854 926 1,004 1,090
Operating profit 416 649 892 1,150 1,424 1,751 2,109 2,484 2,873
3,278 Less:Financial expenses 122 96 71 45 19 - - - - - Profit
Before Taxation 294 553 821 1,105 1,405 1,751 2,109 2,484 2,873
3,278 Income Tax (23) 68 161 261 366 487 612 743 880 1,021
Net profit After Taxation 317 485 660 844 1,039 1,264 1,497
1,741 1,993 2,257 Retained earnings - 317 802 1,462 2,306 3,345
4,609 6,106 7,847 9,840 Net profit transferred to Balance sheet 317
802 1,462 2,306 3,345 4,609 6,106 7,847 9,840 12,097
Opening balance - 317 802 1,462 2,306 3,345 4,609 6,106 7,847
9,840 Profit for the year 317 485 660 844 1,039 1,264 1,497 1,741
1,993 2,257
Profit for appropriation 317 802 1,462 2,306 3,345 4,609 6,106
7,847 9,840 12,097
Drawings - - - - - - - - -
Closing balance 317 802 1,462 2,306 3,345 4,609 6,106 7,847
9,840 12,097
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Pre-Feasibility Study Laundry & Dry Cleaning
PREF-78/ Oct, 2004/Rev1
17
1111..33 PPrroojjeecctteedd BBaallaannccee SShheeeett
Laundry and Dry CleaningPROJECTED BALANCE SHEET Rs. in 1,000
YEAR 0 1 2 3 4 5 6 7 8 9 10CAPITAL & RESERVES:Share capital
1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287 1,287
Retained earnings - 317 802 1,462 2,306 3,345 4,609 6,106 7,847
9,840 12,097
1,287 1,604 2,089 2,749 3,593 4,632 5,896 7,393 9,134 11,127
13,384 LOANS AND DEFERRED LIABILITIES:Term Loan 1,287 771 513 255 -
- - - - - -
1,287 771 513 255 - - - - - - - CURRENT LIABILITIES:Current
portion of long term liability 258 258 258 255 A/C Payable - 32 33
38 42 47 53 59 65 72 79 Accrued Exp. 50 52 55 58 61 65 68 72 76 80
Tax Payable - (23) 68 161 261 366 487 612 743 880 1,021
- 317 411 512 616 474 605 739 880 1,028 1,180 2,574 2,692 3,013
3,516 4,209 5,106 6,501 8,132 10,014 12,155 14,564
FIXED ASSETS: - Fixed Assets 2,074 1,874 1,674 1,474 1,274 1,074
874 674 474 274 74
2,074 1,874 1,674 1,474 1,274 1,074 874 674 474 274 74
Pre-Operation Expenses 145 116 87 58 29 - CURRENT ASSESTS:Advance
rent 120 Store & Spares Inventory 1 2 2 2 2 2 2 2 2 2 - Raw
material inventory 124 141 160 180 201 224 249 276 304 334 - A/C
Receivable - 69 80 92 104 117 132 148 166 184 204 Cash/Bank 110 490
1,010 1,710 2,599 3,689 5,244 7,032 9,068 11,361 14,286
355 702 1,252 1,984 2,906 4,032 5,627 7,458 9,540 11,881
14,490
2,574 2,692 3,013 3,516 4,209 5,106 6,501 8,132 10,014 12,155
14,564
- - - - - - - - - - -
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Pre-Feasibility Study Laundry & Dry Cleaning
PREF-78/ Oct, 2004/Rev1
18
1111..44 PPrroojjeecctteedd CCaasshh FFllooww
SSttaatteemmeenntt
Laundry and Dry CleaningPROJECTED CASH FLOW STATEMENT Rs. in
1000
YEAR 0 1 2 3 4 5 6 7 8 9 10
Operating activitiesNet profit 317 485 660 844 1,039 1,264 1,497
1,741 1,993 2,257 Amortization (Pre-operational Expenses) 29 29 29
29 29 - - - - - Depreciation 200 200 200 200 200 200 200 200 200
200 Raw Material Inventory (124) (17) (19) (20) (21) (23) (25) (27)
(28) (30) 334 Store & Spare Inventory (1) (1) - - - - - - - - 2
Accounts receivable - (69) (11) (12) (12) (13) (15) (16) (18) (18)
(20) Accounts payable - 32 1 5 4 5 6 6 6 7 7 Tax Payable - (23) 91
93 100 105 121 125 131 137 141 Salaries & Other Expense Payable
- 50 2 3 3 3 4 3 4 4 4 Building rent prepayments (120) Prepaid
Payments 120 Cash provided by operations (245) 638 778 958 1,147
1,345 1,555 1,788 2,036 2,293 2,925 Financing activitiesLong term
debt principal repayment (258) (258) (258) (258) (255) Addition to
Long Term Debt 1,287 Owner's investment 1,287 - - - - - - - - - -
-
2,574 (258) (258) (258) (258) (255) - - - - - Investing
activitiesCapital expenditure (2,219)
(2,219) - - - - - - - - - -
Net Cash 110 380 520 700 889 1,090 1,555 1,788 2,036 2,293 2,925
Cash balance brought forward 110 490 1,010 1,710 2,599 3,689 5,244
7,032 9,068 11,361 Cash carried forward 110 490 1,010 1,710 2,599
3,689 5,244 7,032 9,068 11,361 14,286
Cash provided by/ (used for) financing activities
Cash (used for)/ provided by investing activities
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Pre-Feasibility Study Laundry & Dry Cleaning
PREF-78/ Oct, 2004/Rev1
19
1122.. FFIINNAANNCCIIAALL AASSSSUUMMPPTTIIOONNSS
TTaabbllee 1122--11 OOppeerraattiinngg
AAssssuummppttiioonnss
Annual production capacity (No. of units) 118,500Operating Shift
per day 1Operating hours per shift 8Days operational per year
300No. of Batches 5.33Hours consumed for one batch 1.50
TTaabbllee 1122--22 MMaacchhiinneerryy
AAssssuummppttiioonnss
Number of Machines Installed 6Initial year capacity 50%
Maximum capacity 95%
Annual capacity growth rate 5%Depreciation rate on machinery
(Straight Line Method) 10%
TTaabbllee 1122--33 RReevveennuuee AAssssuummppttiioonnss
Sales prices Industry normsSales price growth rate 4-5%
TTaabbllee 1122--44 FFiinnaanncciiaall
AAssssuummppttiioonnss
Project life (Years) 10Debt 50%Equity 50%Interest rate on long
term debt 10%Debt tenure (Years) 5Principal debt repayments per
year 130,000No. of installments in a year 2Amortization (years)
5
TTaabbllee 1122--55 CCoosstt ooff ssaalleess
AAssssuummppttiioonnss
Raw Material cost growth rate 5%Wage and salaries growth rate
5%Fringe Benefits 5%Power, fuel and water per month Rs.
5,083Variable Charges growth rate 5%Repair and maintenance (%age of
cost of machinery) 1%Repair and maintenance growth rate 5%Insurance
of Plant and Machinery 4.50%
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Pre-Feasibility Study Laundry & Dry Cleaning
PREF-78/ Oct, 2004/Rev1
20
Insurance of Vehicle 3.00% Insurance of Stock 2.00%Insurance of
Stores and Spares 5.00%Depreciation (straight line method) 10%
TTaabbllee 1122--66 OOppeerraattiinngg
AAssssuummppttiioonnss
Telephone Expense per year Rs. 34,000Printing & stationery
per year Rs. 12,000Legal & professional charges per year Rs.
12,000Entertainment per year Rs. 48,000Shop rent per year
Rs.240,000Advertisement per year3 Rs. 60,000Traveling &
conveyance per year Rs. 43,000Repair and maintenance of vehicle per
year Rs. 18,000Miscellaneous expenses per year Rs.
24,000Administrative expense growth rate 10%Income Tax (percentage
of Net Profit) 35%
TTaabbllee 1122--77 CCoonnttiinnggeennccyy EExxppeennssee
AAssssuummppttiioonnss
Erection and Installation 5%Machinery 3%Furniture and Fixture
1%Pre-operating Expenses 5%Vehicles 5%
TTaabbllee 1122--88 CCaasshh FFllooww AAssssuummppttiioonnss
Accounts Receivable in days 7Accounts Payable in days 7Raw
Material Inventory (days) 30Stores and Spares Inventory (days)
30Salaries and other expenses payable 30Minimum Cash Required
Rs.109,000Advance rent 6 months
TTaabbllee 1122--99 PPrree--ooppeerraattiioonnaall
EExxppeennsseess
Appraisal fee & Legal Documentation Rs.25,000Trial run
expenses Rs.50,000Other pre-operating overheads4 Rs.70,000
3 No growth in advertisement expenditure is assumed4Pre
operating expenses include salaries & wages, traveling, and
other expenses