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Pre-Feasibility Study
BAKERY AND CONFECTIONERY
Small and Medium Enterprises Development Authority
2.11.1 Marketing............................................................................................................................................. 5 2.11.2 Pricing ................................................................................................................................................. 5 2.11.3 New Products development .................................................................................................................. 5
2.12 SWOT ANALYSIS........................................................................................................................................... 5 2.12.1 Strengths and opportunities ................................................................................................................. 6 2.12.2 Weaknesses and threats ....................................................................................................................... 6
3 SECTOR AND INDUSTRY ANALYSIS............................................................................................................ 6 3.1 NATIONAL ANALYSIS..................................................................................................................................... 6
4 PRODUCT............................................................................................................................................................. 7 4.1 RAW MATERIAL ........................................................................................................................................... 10
6 LAND AND BUILDING REQUIREMENT ..................................................................................................... 17 6.1 LAND / COVERED AREA AND CONSTRUCTION COST....................................................................................... 17 6.2 RECOMMENDED MODE OF LAND ACQUISITION............................................................................................ 18 6.3 UTILITIES REQUIREMENT ............................................................................................................................. 18
7 HUMAN RESOURCE REQUIREMENT......................................................................................................... 18 8 FINANCIAL ANALYSIS................................................................................................................................... 20
11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY This particular pre-feasibility is regarding “Bakery & Confectionery”. Major products in this case would be cakes, snacks, sweets, nimko, biscuits, bread and general items. In order to attract a cross section of population, a combination of 2 outlets, one in a low-income area and another in a posh area, is used in this study along with 25% sales to other bakeries at trade discount of 10 %. Project Capacity cannot be based on machinery capacity, as the same oven will be having different capacities for different products. This business segment is labor intensive. The proposed bakery outlet will be working from 6.00 am morning to 12.00 midnight. Number of working days has been taken as 355 with average 2 shifts per day.
Selection and number of outlets would totally depend upon the mix of target population. For example if we start this venture in bigger cities, one might select more sophisticated outlets with the emphasis on best decor and interior design. But in case of smaller cities, one would prefer to go for a mix, which has more traditional products. Any big city with a total population of over 1 million is the ideal location for the project. Ultimately it has to be observed that how to compete and build the name of the Bakery & Confectionery. Areas like Defense, Gulberg, Model Town need heavy investment and areas like Saman Abad, Allama Iqbal Town, Johar Town and Old City needs more traditional varieties of foodstuff. Bakery and confectionery business is emerging as one of the good business ventures in Pakistan as it provides varieties of bakery items. This phenomenon grew rapidly; and today thousands of bakeries exist in the big cities. Over the decades, the bakeries have evolved even further. Now, one sees that offer larger varieties of mock tails and cocktails, sweets and nimko and much more. Marketing and branding of Bakery & Confectionery will play a key role in the mobilization of targeted number of customers. Major marketing options include, site advertisement, cable ads and handbills among other traditional marketing channels. Positioning of the product, cost of developing and manufacturing the product, cost of competitive products and condition of the economy will determine price of the product. A Bakery and Confectionery needs a capital investment estimated at Rs. 18.845 million for construction and purchasing machinery & equipment. In addition to this, an estimated sum of Rs. 1.108 million is required as working capital. The total project cost is estimated at Rs. 19.953 million. Projected IRR, Net Present Value (NPV) and Payback of this project are 29%, Rs. 15.694 million and 3.44 years respectively.
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 2
22 PPRROOJJEECCTT PPRROOFFIILLEE 22..11 PPrroojjeecctt BBrriieeff The proposed project presents an investment opportunity in setting up a Bakery & Confectionery. Major products in this case would be cakes, snacks, sweets, nimko, biscuits, bread and general items. In order to attract a cross section of population, a combination of 2 outlets, one in a low-income area and another in a posh area, is used in this study along with 25% sales to other bakeries at trade discount of 10 %. This combination can however, vary according to the final site selection and amount of investment being incurred by individual investor. Although for this particular project study only Bakery & Confectionery items along with general items are included.
22..22 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee Project Capacity cannot be based on machinery capacity, as the same oven will be having different capacities for different products. This business segment is labor intensive. The proposed bakery outlet will be working from 6.00 am morning to 12.00 midnight. These outlets determine the factory timing for production. It is proposed that 2 shifts are necessary for production. The interesting fact is that these two shifts include only 3 or 4 pure working hours. Main plant & machinery includes oven in which different items are baked with different temperatures and different baking timings. Industrial ovens are easily available in market. For the proposed project, oven of 7x7x10 feet with 8 rotating stands having 5 trays on each stand is used. So the oven capacity will be:
60-kg biscuits in 30 baking minutes at a temperature of 150 degree centigrade.
120 pieces of large Pizza in 20-25 minutes at a temperature of 150 -180 degree centigrade.
Number of working days has been taken as 355 with average 2 shifts per day.
Initial Capacity of the Bakery & Confectionery is calculated on the basis of total expected sales of items. Maximum sales are expected in festival months and in winter or spring season. However, in order to calculate average monthly sales, potential revenue is estimated by using the potential demand estimates. The estimated combination of sales is as given below: 1. 75% sales to own outlets. 2. 25% sales to other bakeries
It is expected that annual increase in sales would be 5%. Although due diligence is carried out in estimating these numbers, the final outcome will vary depending on the selection of location, pricing, product mix and the marketing strategies.
22..33 PPrroojjeecctt IInnvveessttmmeenntt
Total cost of the project worked out is in the table below:
TTaabbllee 22--11:: PPrroojjeecctt CCoossttss
Capital Investment Rs. 18,844,744Working Capital Requirement Rs. 1,108,113Total Investment Rs. 19,952,857
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 3
The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity (including land). However this composition of debt and equity can be changed as per the requirement of the investor.
TTaabbllee 22--33:: VViiaabbiilliittyy IRR 29%NPV Rs. 15,693,517Pay Back Period (years.) 3.44
22..44 PPrrooppoosseedd PPrroodduucctt MMiixx This pre-feasibility is developed for a project based on a production plant along with 2 outlets and outside sales with a mix of city areas. Selection and number of outlets would totally depend upon the mix of target population. For example if we start this venture in bigger cities, one might select more sophisticated outlets with the emphasis on best decor and interior design. But in case of smaller cities, one would prefer to go for a mix, which has more traditional products. It is also recommended to change the mix of both bakery and general items according to sale trends of a particular outlet. In this study it is assumed that 30% sales will be consisting of general items but this combination would be different in different outlets and according to consumer behaviors.
22..55 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss A bakery business can be started as a sole proprietorship or a partnership and even it can be registered under company law with Securities and Exchange Commission of Pakistan. Although selection totally depends upon the choice of the entrepreneur but this feasibility is based on a Sole ProprietorshipTP
1PT.
22..66 FFiinnaanncciiaall SSuummmmaarryy The financial cost of the project can be surmised as under:
TTaabbllee 22--44:: FFiinnaanncciiaall SSuummmmaarryy Debt Equity Split 50:50Projected Life 10 yearsRepayment of long term loan 5 yearsGrace period for long term loan 1 yearMark up rate for long term loan 16%
TP
1PT For getting information on the formation of type of firm/company, please visit the Website:
22..77 PPrrooppoosseedd LLooccaattiioonn Any big city with a total population of over 1 million is the ideal location for the project. Ultimately it has to be observed that how to compete and build the name of the Bakery & Confectionery. Areas like Defense, Gulberg, Model Town need heavy investment and areas like Saman Abad, Allama Iqbal Town, Johar Town and Old City needs more traditional varieties of foodstuff.
The outlets should be centrally and conveniently located within a developing or a newly developed residential town in any of the big cities like Lahore, Islamabad/Rawalpindi, Faisalabad, Sargodha etc. For a heavy competition and proper positioning of the brand name, one has to open outlets in the vicinity of competitors (Gourmet, Shezan Bakers, Rahat Bakers, United Bakery, Cakes & Bakes etc.). This will be a direct marketing of the brand name for the best quality and the best competitive price. Marketers need to determine where the product will be sold and methods of distribution including transportation and storage. Also for taste/enjoyment consumers are demanding a higher standard of food quality. Value for money and choice and exposure to new foods both have resulted in demand for diversity in terms of food varieties and uses. Food safety is a major issue around the world and consumers are looking for fresh and hygienic foods and which are made from natural products (i.e. free of preservatives).
22..88 OOppppoorrttuunniittyy RRaattiioonnaallee The opportunity of setting up the Bakery & Confectionery can be linked with the eating habits of the people. People in Pakistan enjoy the traditional food very well but recently world known food chains have brought cultural change in Pakistan. Now people are ready to eat junk food, while closely observing the trends, Bakery & Confectionery chain can play an important role in this new era as it is the only source which provides not only traditional bakery items but also new lines and varieties of confectionery items. 22..99 MMaarrkkeett EEnnttrryy TTiimmiinngg As the main decisive factors in this case are events and season, the investor will have to match the timings with these two limitations. Especially to open a bakery chain before Eid is advisable. The peaks can be classified as winter/ spring and Off Peaks as summer. 22..1100 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss Some of the Key Success factors that will determine the success of this project include: Products range selection and introduction of sitting areas. Quality and Innovation in products. Selection of location. Pricing strategy. Understanding of target customers, alternative availability (product differentiation). Launching time. Hygienic conditions. There should be regular and sustained marketing through fliers distribution and Cable TV.
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 5
The store should have an ample space for customer car parking. It is advisable to maintain a parking space whereby around 15-20 cars can be parked
The staff hired should be well mannered and well trained in dealing with the customers. Customers free gift schemes and surprise gift, valuable customer dinner can be additional
Marketing and branding of Bakery & Confectionery will play a key role in the mobilization of targeted number of customers. Major marketing options include, site advertisement, cable ads and handbills among other traditional marketing channels. Before launch of the project, it is recommended that a research for understanding the dynamics of the targeted market should also be carried out, to design the products as well as the promotional strategy. The basic principle of marketing is to sell the right product, at the right price and promote it in the right place to the right people. The job of the marketer is to control these 4Ps. However, there are other socioeconomic factors, which also affect the production, selling and consumption of foods. The success of marketing is often determined by the extent to which various socio-economic factors are considered. Market research is a useful tool for assessing the attitudes and behavior of potential consumers.
22..1111..22 PPrriicciinngg
The following factors determine the price of the product: Positioning of the product Cost of developing and manufacturing the product. Cost of competitive products. Condition of the economy.
22..1111..33 NNeeww PPrroodduuccttss ddeevveellooppmmeenntt Food manufacturers develop new products to maintain and improve their market position. New products can include: New varieties and flavors - these are called “line extensions” where different varieties or
flavors of the same product are produced.
Quality improvement of an existing product, either functional or nutritional.
Copying a competitor's product.
Developing a new, innovative product resulting from new ingredients, new packaging.
22..1122 SSWWOOTT AAnnaallyyssiiss A TSWOT AnalysisT is a strategic planning tool used to evaluate the TStrengths T, TWeaknesses T, TOpportunities T, and TThreatsT involved in a project or business venture. Strengths and weaknesses are internal to the company. Opportunities and threats originate from outside the company. A SWOT analysis is usually performed early in the project development process, and helps organizations evaluate the environmental factors and internal situation facing a project.
• Easy availability of resources(manpower/salesmen) • Growing population • Expanding cities • High bakery items consumption habits of people in Pakistan
• Government polices • Heavy taxes in the form of sales tax and income tax on retail business • High competition • Credibility factor in the initial phase, as suppliers do not give credit to newly entrants 33 SSEECCTTOORR AANNDD IINNDDUUSSTTRRYY AANNAALLYYSSIISS 33..11 NNaattiioonnaall AAnnaallyyssiiss Bakery and confectionery business is emerging as one of the good business ventures in Pakistan as it provides varieties of bakery items. This phenomenon grew rapidly; and today thousands of bakeries exist in the big cities. Over the decades, the bakeries have evolved even further. Now, one sees that offer larger varieties of mock tails and cocktails, sweets and nimko and much more. Bakery stores business falls under retail sector. This sector has shown a significant growth over the last few years. In 20010-11 this sector showed a growth of 3.9%.TP
2PT This sector’s contribution
towards GDP in the year 20010-11 is 17.2% TP
3PT. The following table shows the contribution of retail
and wholesale sector towards GDP for the last 6 years at constant factor cost.
2004-2005 18.7 12.0 2005-2006 17.2 -2.4 2006-2007 17.1 5.8 2007-2008 17.3 5.3 2008-2009 17.5 3.1 2009-2010 17.0 4.6 2010-2011 17.2 3.9 Gross fixed capital formation (Investment in fixed assets) in this industry by private sector has also shown a progressive trend. In year 2005-2006 growth in gross fixed capital formation by private
TP
2 Source: Economic Survey of Pakistan 2009-10
P
3 Source: Economic Survey of Pakistan 2009-10
P
4 Source: Economic Survey of Pakistan 2009-10
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 7
sector has shown an increase of 17.2%TP
5PT. The following table shows gross fixed capital formation
Year Retail and wholesale sector Rs. M 2004-2005 15,165 2005-2006 18,123 2006-2007 22,578 2007-2008 23,816 2008-2009 23,059 2009-2010 23,968
There are thousands of bakery stores in Islamabad, Lahore, Rawalpindi, Faisalbad, Multan, Gujranwala and this number is increasing day by day. Although in Pakistan the retail business is not providing employment at a large scale directly, but indirectly it is contributing in the employment growth. As more and more retail outlets are opening and consumer buying has shifted towards packaged/branded products. Companies are coming with top quality products and with the increase in production level the employment also increases. 44 PPRROODDUUCCTT The proposed bakery will be offering a large variety of quality products at competitive prices. The product line will be including different types of fresh cream cakes, dry cakes, snacks, sweets, nimko, biscuits, etc. As the production will depend on the sales potential, the sales are estimated depending upon the industry norms. The project will be having two sales outlets of its own and the rest of the production will be sold to other bakeries. It is hereby assumed that sales to other bakeries will at a trade discount of 10%. Out of the total sales 25% will be sold to other bakeries while 75% of the total sales will be sold on bakery’s own outlets. Proposed sales for the first year are as under:
TTaabbllee 44--11:: EEssttiimmaatteedd SSaalleess
Percentage SalesSales on outlets 75%Sales to other bakeries 25%Total Estimated Sales 100%
Total sales incorporated for profit estimates include 5% safety margins. The detail of expected annual sales of different items is given in the table below:
P
5 Source: Economic Survey of Pakistan 2009-10
P
6 Source: Economic Survey of Pakistan 2009-10
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 8
TTaabbllee 44--22:: AAnnnnuuaall SSaalleess
Items Quantity to be sold
Outlets Other Bakeries
Total Quantity
Sales Price per
Unit in Rs.
Fresh Cream Cakes
Fresh cream (lbs.) 14,200 3,550 17,750 160
Fresh fruit (lbs.) 14,200 3,550 17,750 160
Chocolate Cakes (lbs.) 15,620 3,905 19,525 160
Butter cream cakes (lbs.) 8,520 2,130 10,650 160
Special ice cream cake (lbs.) 7,100 1,775 8,875 180
Chicken pizza medium (Pcs.) 10,650 2,663 13,313 140
Chicken pizza small (Pcs.) 14,200 3,550 17,750 70
Chicken bread (Pcs.) 5,680 1,420 7,100 304
Chicken drum stick (Pcs.) 24,850 6,213 31,063 40
P
7 It is assumed that bread items worth Rs. 1,002,400 per year will be sold.P
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 9
Chicken leg piece (Pcs.) 24,850 6,213 31,063 72
Chicken shami (Pcs.) 14,200 3,550 17,750 18
Chicken sandwitch (Pcs.) 7,100 1,775 8,875 36
Chicken patties (Pcs.) 28,400 7,100 35,500 22
Chicken bread roll (Pcs.) 8,520 2,130 10,650 24
Sweets & Nimko
Nimko (Kg.) 710 1,065 1,775 296
Jaman (Kg.) 1,065 1,598 2,663 296
Chum Chum (Kg.) 1,065 1,598 2,663 296
Kalakand (Kg.) 1,065 1,598 2,663 296
Burfi(Kg.) 1,065 1,598 2,663 296
Moti Choor (Kg.) 1,065 1,598 2,663 296
Piteesa (Kg.) 1,065 1,598 2,663 296
Biscuits
Cake Rusk (Kg.) 2,840 4,260 7,100 224
White Biscuits (Kg.) 533 799 1,332 224
Coconut Biscuits (Kg.) 533 799 1,332 224
Macaroon Coconut (Kg.) 533 799 1,332 224
Almond Macaroon (Kg.) 533 799 1,332 224
Cheese Finger (Kg.) 533 799 1,332 224
Salty Zeera Plus (Kg.) 533 799 1,332 224
Plain Khatai (Kg.) 533 799 1,332 224
Baker Khani (Kg.) 533 799 1,332 224
Finger (Kg.) 533 799 1,332 224
Jam Wafer (Kg.) 533 799 1,332 224
Special Biscuit (Kg.) 533 799 1,332 224
Chocolate Biscuits (Kg.) 533 799 1,332 224
Round Almond Biscuit (Kg.) 533 799 1,332 224
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 10
44..11 RRaaww MMaatteerriiaall As the proposed bakery is going to offer a variety of products, a number of ingredients will be used for manufacturing bakery items. Some ingredients for basic items are listed below:
TTaabbllee 44--33:: PPllaaiinn CCaakkeess
Ingredients Unit of Measure
%age Ingredients
Cost in Rs. Quantity Total Cost
in Rs.
Butter Kg 21.73% 240 1,750 419,982
Sugar Kg 3.86% 70 311 21,777
Maida Kg 28.97% 39 2,333 90,996
Baking powder Kg 0.97% 60 78 4,666
Eggs Pcs 34.77% 7 72,482 507,373
Flavour Ltr. 0.05% 450 4 1,750
Cream+Honey Kg 9.66% 280 778 217,768
Total 100.00% 1,046,544
TTaabbllee 44--44:: Plain Fruit Cakes
Ingredients Unit of Measure
%age Ingredients
Cost in Rs. Quantity Total Cost
in Rs.
Butter Kg 24.50% 240 1,973 473,505
Sugar Kg 3.92% 70 316 22,097
Maida Kg 24.50% 39 1,973 76,945
Baking powder Kg 0.98% 60 79 4,735
Fruit Chuncks Kg 29.40% 43 2,368 101,804
Sougi Kg 4.90% 98 395 38,670
Eggs Pcs 11.76% 7 24,161 169,124
Flavour Ltr. 0.05% 450 4 1,776
Total 100.00% 888,655
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 11
TTaabbllee 44--55:: DDrryy CCaakkeess
Ingredients Unit of Measure
%age Ingredients
Cost in Rs. Quantity Total Cost
in Rs.
Butter Kg 22.17% 240 3,571 856,928
Sugar Kg 3.94% 70 635 44,433
Maida Kg 27.09% 39 4,364 170,195
Backing powder Kg 0.99% 60 159 9,521
Eggs Pcs 35.47% 7 144,964 1,014,746
Flavour Ltr. 0.49% 450 79 35,705
Cream + Honey Kg 9.85% 280 1,587 444,333
Total 100.00% 2,131,530
TTaabbllee 44--66:: NNiimmkkoo
Ingredients Unit of Measure
%age Ingredients
Cost in Rs. Quantity Total Cost
in Rs.
Baison Kg 68.29% 78 1,212 94,551
Dry Fruit Kg 19.51% 128 346 44,332
Channey Kg 9.76% 98 173 16,971
Nimko masala Kg 2.44% 123 43 5,325
Total 100.00% 161,179
TTaabbllee 44--77:: SSwweeeettss
Ingredients Unit of Measure
%age Ingredients
Cost in Rs. Quantity Total Cost
in Rs.
Khoya Kg 33.82% 190 5,402 1,026,413
Maida Kg 21.74% 39 3,473 135,440
Eggs Kg 15.46% 7 10,650 74,550
Ghee Kg 14.49% 160 2,315 370,435
Sugar syrup or Sugar Kg 14.49% 780 2,315 1,805,870
55 TTEECCHHNNOOLLOOGGYY AANNDD PPRROOCCEESSSSEESS The proposed project will be using local machinery or 2P
ndP hand imported machinery available
locally. Local machinery and installations are quite competitive in price in comparison to the foreign equipment and installations. Additionally, it is linked with the viability of the project as the foreign new machinery and installation would not be feasible due to the high costs involved. Major suppliers of Local and used imported machinery are:
P
8P It is assumed that 70% of the Product Sales price is taken as its Raw Material Cost.
55..11 RReessoouurrccee MMeerrcchhaannddiissee Pakistan is one of those countries where abundance of merchandise is available in wholesale markets of every city. Suppliers normally hesitate to supply goods on credit to new stores but after confidence building process a reasonable credit period of 15 days to one month is available to purchasers. The major wholesale markets in Lahore and Rawalpindi are:
• Shahalam Market/Rang Mahal • Akbari Mandi • Metro • Macro • Cosmo Cash and Carry • Hall Road • Urdu Bazar • Abid Market Temple Road • Moochi Gate • Anwari Gate Rawalpindi • Matro Islamabad • Cosmo Cash and Carry Rawalpindi • CSD Rawalpindi • Raja Bazaar, Rawalpindi • Nankari Bazar, Rawalpindi
55..22 MMaacchhiinneerryy RReeqquuiirreemmeenntt Plant and Machinery for the proposed project are stated below. The required machinery is easily available in the market. Used and new machinery can be purchased from different markets in Lahore and Gujranwala.
55..33 RReeppaaiirr && MMaaiinntteennaannccee Annual Repair & Maintenance of the plant and machinery is expected to be 1 % from Year 1 – 4 and 1.5 % from Year 5 – 10 of the total machinery cost. 55..44 EErreeccttiioonn && IInnssttaallllaattiioonn Erections and installation cost is assumed to be 10% of the total cost of machinery. 55..55 FFuurrnniittuurree aanndd FFiixxttuurreess Following furniture and fixtures will be required for factory and sales outlets:
55..66 MMoottoorr VVeehhiicclleess Along with the above mentioned machinery and equipment the proposed business will also be using two pick ups and one motorcycle. Each pick up will be costing around Rs. 900,000 while the motorcycle will be acquired for Rs. 68,000.
66 LLAANNDD AANNDD BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT 66..11 LLaanndd // ccoovveerreedd aarreeaa aanndd ccoonnssttrruuccttiioonn ccoosstt The proposed factory will be consisting of 23 Marlas of land whereas the shop areas will be 900 sq. ft for each outlet. The rate of land is taken as Rs. 200,000 per marla The development charges are taken to be 10% of the land cost. Double story building is recommended, sweets, fresh cream and dry cake rooms are proposed to be on first floor. The details of the building and civil works is as below:
Factory 1 Sweets production room 600 800 480,000 480 2 Fresh cream cake production room 400 800 320,000 320 3 Dry cake production room 400 800 320,000 320 4 Biscuits production room 400 800 320,000 320 5 Snacks production room 600 800 480,000 480
Pre-Feasibility Study Bakery & Confectionery
PREF-77/May, 2011/Rev3 18
6 Frying & Oven room 1,200 800 960,000 960 7 Dispatch & ware house 1,200 800 960,000 960 8 Raw material / store spares store 1,500 800 1,200,000 1,200 9 Admin block 200 1,000 200,000 200 6,500 5,240,000 5,240
Area required 5,100 Note: Double story building is recommended, sweets, fresh cream and dry cake rooms are proposed to be on first floor
66..22 RReeccoommmmeennddeedd MMooddee ooff LLaanndd AAccqquuiissiittiioonn It is recommended to purchase land & building for the factory. The total cost of acquisition of land has been included in fixed assets. Where as the land for outlets will be acquired on rent. Approximately 900 square feet area is desirable for the outlet, which is easily available at about Rs.30, 000 to Rs 40,000 per month. In this feasibility study we have taken Rs. 40, 000 per month as shop rent.
66..33 UUttiilliittiieess RReeqquuiirreemmeenntt Main utilities would be gas, power and water. Distribution transformer station, loading capacity averaging 10 KW, 3-phase industrial meter is estimated to fulfill the requirement of power. B-1 category is advisable for electric consumption. Monthly gas consumption is estimated at 46 HM3 on average for the project. Water supply would be through local municipality.
77 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT For the bakery business, following direct labor will be required for the factory.
% age TotalLand 5,060 Building and Civil Works 5,240 Plant and Machinery 3,280 Erection, installation & commissioning charges and duties 328 Furniture, fixture and office equipment 2,339 Motor vehicles 1,868 Total Fixed Cost 18,115 Preliminary & preproduction expenses 451 Contingencies* 278 Total Capital Cost 18,845 Net initial working capital 1,108 Total Investment Required 19,953 Debt Equity Ratio
Debt 50% 9,976 Equity 50% 9,976
19,953 Project Returns
IRR % 29%Pay Back Period Yrs 3.44 NPV Rs. 15,694
* Contingencies are taken as 1.5% of the total Fixed cost and preliminary expenses
99 KKEEYY AASSSSUUMMPPTTIIOONNSS TTaabbllee 99--11:: OOppeerraattiinngg AAssssuummppttiioonnss No of Working Days in One Year 355No. of Working Hours in One Day 8No. of Shifts 2No. of Outlets 2Working Hours of Outlets 16
Sales growth rate 10%Salaries, wages growth rates (as %age of annual Salaries and Wages) 5%Other Production Overheads Repairs and Maintenance (as %age of Machinery Cost) 1.5% Building Repair and Maintenance (as %age of Building Cost) 1.0% Packing Material (as %age of sales) 2.5%Fuel & Power Gas Avg. annual units consumed 549 Rate per Unit Rs. 645 Annual rate Increase % 5% Power & water Avg. annual units consumed (aprox) 240,000 Rate per Unit Rs. 15 Annual rate of Increase % 5%Shop Rent per month Rs. (000) 40 Shop rent growth rate 10%
STOCK LEVELS Raw Material Inventory 15 daysPacking Material Inventory 15 daysStores and Spares Inventory 15 daysFinished goods inventory 3 daysAccounts Payable 15 daysAccounts Receivable and Advances Accounts Receivable 7 daysAdvances to suppliers 5 days
TTaabbllee 99--55:: OOtthheerr EExxppeennssee AAssssuummppttiioonnss Administrative Expenses(as %age of sales) 0.50%Selling and Related Expenses Annual rent of 2 shops Rs.960,000 Others (as %age of sales) 3%Amortization in Years 5Other Income(as %age of sales) 2%