SMEDA Medical Store

Pre-Feasibility Study

MEDICAL STORE

Small and Medium Enterprises Development Authority

Government of Pakistan www.smeda.org.pk

HEAD OFFICE

6th Floor LDA Plaza Egerton Road, Lahore

Tel (042)111 111 456,

Fax: (042) 36304926-7

[email protected]

REGIONAL OFFICE

PUNJAB REGIONAL OFFICE

SINDH REGIONAL OFFICE

KHYBER PAKTUNKHWA REGIONAL OFFICE

BALOCHISTAN

8th Floor LDA Plaza,

Egerton Road,

Lahore.

Tel: (042) 111 111 456,

Fax: (042) 36370474

[email protected]

5TH Floor, Bahria Complex II,

M.T. Khan Road,

Karachi.

Tel: (021) 111-111-456

Fax: (021) 5610572

[email protected]

Ground Floor

State Life Building The Mall,

Peshawar.

Tel: (091)111 111 456, 9213046-7

Fax: (091) 286908

[email protected]

Bungalow No. 15-A Chamn

Housing Scheme Airport Road,

Quetta.

Tel: (081) 2831623, 2831702

Fax: (081) 2831922

[email protected]

December, 2011

http://www.smeda.org.pk/

Pre-Feasibility Study Medical Store

PREF-82/December, 2011/Rev2 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-82

Revision 2

Prepared by SMEDA-Punjab

Issue Date August, 2004

Revision Date December, 2011

Issued by Library Officer

http://www.smeda.org.pk/



1 EXECUTIVE SUMMARY................................................................................................................. 4

2 INTRODUCTION TO SMEDA......................................................................................................... 5

3 PURPOSE OF THE DOCUMENT ................................................................................................... 5

4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT ..................... 5

5 PROJECT PROFILE ......................................................................................................................... 6

5.1 OPPORTUNITY RATIONALE ............................................................................................................... 6 5.2 PROJECT BRIEF ................................................................................................................................. 6 5.3 MARKET ENTRY TIMING ................................................................................................................... 7 5.4 PROPOSED BUSINESS LEGAL STATUS ................................................................................................ 7 5.5 PROJECT CAPACITY AND RATIONALE ............................................................................................... 7 5.6 PROJECT INVESTMENT ...................................................................................................................... 7 5.7 PROPOSED PRODUCT MIX ................................................................................................................. 8 5.8 PROPOSED LOCATION ....................................................................................................................... 8 5.9 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ................................................................... 8 5.10 STRATEGIC RECOMMENDATIONS ................................................................................................. 9

5.10.1 Product Range counts a lot ................................................................................................ 9 5.10.2 Customer Service ............................................................................................................... 9 5.10.3 Location of the outlet ......................................................................................................... 9

6 SECTOR & INDUSTRY ANALYSIS ............................................................................................... 9

6.1 SECTOR CHARACTERISTICS ............................................................................................................... 9 6.2 SUB SECTOR INFORMATION ..............................................................................................................10

The Pharma Industry has experienced major growth in recent years. As per an estimate the Pharma

industry is growing at 18% annually. The Pakistan’s harsh climate provides more favorable business

opportunities in pharmaceutical business. ............................................................................................10 6.3 LEGAL ISSUES REGARDING INDUSTRY .............................................................................................10 6.4 MAJOR PLAYERS ..............................................................................................................................10

7 MARKET INFORMATION .............................................................................................................10

7.1 MARKET POTENTIAL ........................................................................................................................10 7.2 TARGET CUSTOMERS .......................................................................................................................11

8 PRODUCT ..........................................................................................................................................11

8.1 MAJOR SUPPLIERS ............................................................................................................................12 8.1.1 Products of Multinational Companies ...................................................................................12 8.1.2 Products of National Companies ...........................................................................................12 8.1.3 Herbal Products ....................................................................................................................12 8.1.4 Food Supplements ..................................................................................................................12 8.1.5 Eatables .................................................................................................................................12 8.1.6 Toiletries ................................................................................................................................12 8.1.7 Sanitation Products ...............................................................................................................12 8.1.8 Prepaid Cards........................................................................................................................12

8.2 PROFIT MARGINS .............................................................................................................................12 8.3 OTHER INCOME ................................................................................................................................13

9 LAND & BUILDING REQUIREMENT .........................................................................................13

9.1 LAND REQUIREMENT .......................................................................................................................13 9.2 UTILITIES REQUIREMENT .................................................................................................................13

10 OFFICE EQUIPMENT .....................................................................................................................13

11 HUMAN RESOURCE REQUIREMENT .......................................................................................14



12 PROJECT COSTS .............................................................................................................................15

13 FINANCIAL ANALYSIS ..................................................................................................................16

13.1 PROJECTED INCOME STATEMENT ................................................................................................16 13.2 PROJECTED BALANCE SHEET ......................................................................................................17 13.3 PROJECTED CASH FLOW STATEMENT..........................................................................................18 13.4 REVENUE CALCULATION.............................................................................................................19

14 KEY ASSUMPTIONS .......................................................................................................................20



11 EEXXEECCUUTTIIVVEE SSUUMMMMAARRYY

This SME venture entails setting up a Medical Store in big cities of Punjab i.e. Lahore,

Rawalpindi, Faisalabad, Multan, Sialkot, etc. The outlet would be located in commercial

markets of middle to upper middle income group residential areas, clinics and hospitals.

The product range offered in the proposed Medical Store is blend of both multinational

and national companies’ products and general products (Food Supplements, Toiletries,

Shampoos, Soaps, Diapers (sanitary napkins) and Cellular Prepaid Cards). The proposed

medical store will remain open for 24 hours (3 shifts).

Pakistan has a very vibrant and forward looking Pharma Industry. At the time of

independence in 1947, there was hardly any pharma industry in the country. Today

Pakistan has about 400 pharmaceutical manufacturing units including those operated by

25 multinationals present in the country. The Pakistan Pharmaceutical Industry meets

around 70% of the country's demand of Finished Medicine. The domestic pharma market,

in term of share market is almost evenly divided between the Nationals and the

Multinationals.

The Pakistan Pharmaceutical Industry is a success story, providing high quality essential

drugs at affordable prices to Millions. Technologically, strong and self reliant National

Pharmaceutical Industry is not only playing a key role in promoting and sustaining

development in the vital field of medicine within the country, but is also well set to take

on the international markets.

The total initial project cost for setting up a single outlet is estimated at Rs. 6.679 million.

The project is proposed to be financed through 50% debt and 50% equity. The project

NPV is projected around Rs. 1.060 million, with an IRR of 25.53% and payback period

of 3.44 years. The legal business status of this project is proposed as ‘Sole

Proprietorship’.



22 IINNTTRROODDUUCCTTIIOONN TTOO SSMMEEDDAA

The Small and Medium Enterprises Development Authority (SMEDA) was established

with an 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 recommending changes in 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 industries such as horticulture,

including export of fruits and vegetables, marble and granite, gems and jewellery, marine

fisheries, leather and footwear, textiles, surgical instruments, transport, dairy etc.

Whereas the task of SME development at a broader scale still requires more coverage and

enhanced reach in terms of SMEDA’s 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 business

opportunities for potential SME investors. In order to facilitate these investors, SMEDA

provides business guidance through its 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 a better way.

This document is in continuation of this effort to enable potential investors to make well-

informed investment decisions.

33 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, 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 Medical Store, which comes under

Pharmaceutical sector. Before studying the whole document one must consider following

critical aspects, which forms the basis of any investment decision.

44 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. For starting a medical store



critical factors that should be taken into consideration before launching the project are

listed below:

Number of customers to the Medical Store will determine the financial success of the

project. The entrepreneur should analyze the minimum percentage of population that

it will have to mobilize out of the total population to achieve a steady flow of

customers. In order to do this, the entrepreneur should analyze existing competing

Medical Store businesses in the target vicinity.

Looking at the nature of the products offered on a medical store, it is advised that the

store should be established in a city that has a population to cover the sales concept of

the project.

Another aspect linked with the revenue generating capacity of the project is the

spending pattern of the potential customers in a specific city. Average per capita

income in Pakistan is USD 1,197/yr and increasing concern of people about their

health and fitness show that now people are consuming more medicines. This factor is

very helpful and it is observed in recent days that international multinational

pharmaceutical companies are looking at our country as potential market.

Selection of location for sales outlet is an important factor in the successful running

of any medical store. Areas in the vicinity of a hospital/clinic or the developing areas

are most suitable locations.

Availability of complete product line is another important factor. In addition to this,

provision of other general items, for the customers, also plays a major role in

increasing sales of a medical store.

55 PPRROOJJEECCTT PPRROOFFIILLEE

55..11 OOppppoorrttuunniittyy RRaattiioonnaallee

Pakistan is a very populous country and is ranked as 6th

top populous country in the

World. Pakistan’s population has soared up to 177.10 million1, and at least one-third of it

is living below the poverty level. Majority of population has no access to clean water to

drink or proper sanitation facilities. This poses serious threats to health of masses.

Moreover the variable and harsh climate of Pakistan causes major viral diseases through

out the year. This creates a great demand for Pharmaceutical Products in Pakistan. As the

major source of retail sales of Pharma Products is through medical stores, a big

investment opportunity exists in this sector.

55..22 PPrroojjeecctt BBrriieeff

The proposed project is a well built medical store with all of the product range in stock

for sales. The proposed Size of the medical store should be around 800 sq. feet, with

electricity and 2 telephone lines. The proposed project is based on well-established

Pharmaceutical Retail Chains of Pakistan.

1 http://www.mopw.gov.pk/PopulationDynamicsByProvince.aspx

http://www.mopw.gov.pk/PopulationDynamicsByProvince.aspx



55..33 MMaarrkkeett EEnnttrryy TTiimmiinngg

As such there is no specific time required for the entry time in pharmaceutical sector. As

the need is increasing day by day due to the increase in population and diseases,

investment in this sector can be made any time in the year.

55..44 PPrrooppoosseedd BBuussiinneessss LLeeggaall SSttaattuuss

A medical store 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 financial

feasibility is based on a Sole Proprietorship. For getting information on the formation of

type of firm/company, please visit the Website:

www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html.

http://www.secp.gov.pk/Guides/PromotersGuide.pdf

55..55 PPrroojjeecctt CCaappaacciittyy aanndd RRaattiioonnaallee

The product range offered on a Medical Store is blend of both multinational and national

companies’ products and General Products (Food Supplements, Toiletries, Shampoos,

Soaps, Diapers (sanitary napkins) and Cellular Prepaid Cards). The proposed medical

store will remain open for 24 hours (3 shifts). It is recommended to start with one retail

outlet and expand the operation by one outlet after every 3 years.

55..66 PPrroojjeecctt IInnvveessttmmeenntt

The total cost of the project is around Rs. 6.679 million.

TTaabbllee 55--11 PPrroojjeecctt CCoossttss

Capital Investment Rs. 2,895,000

Working Capital Requirement Rs. 3,784,828

Total Investment Rs. 6,679,828

The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.

However this composition of debt and equity can be changed as per the requirement of

the investor.

TTaabbllee 55--22 PPrroojjeecctt FFiinnaanncciinngg

Debt 50% 3,339,914

Equity 50% 3,339,914

Total project Investment Rs. 6,679,828

TTaabbllee 55--33 VViiaabbiilliittyy

IRR % 25.53

NPV @25% Rs. 1,060,853

Pay Back Period (year) Yrs. 3.44

http://www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html

http://www.secp.gov.pk/Guides/PromotersGuide.pdf



55..77 PPrrooppoosseedd PPrroodduucctt MMiixx

The proposed medical store will be offering a blend of different products. Percentage

quantity of each item offered on the store is based on survey of distribution companies.

Following is the list of products, which are to be offered on medical store.

TTaabbllee 55--44 PPrroodduucctt MMiixx

Product Category Percentage In Total Sales

Products of Multinational Companies 36.5

Products of National Companies 44.7

Herbal Products 5.1

Food Supplements 3.6

Eatables 3.0

Toiletries 2.0

Sanitation Products 2.0

Pre Paid Cards 3.0

55..88 PPrrooppoosseedd LLooccaattiioonn

A medical store should be easily accessible and should have considerable population

concentration. It is proposed that the outlets may be opened in the big cities of Punjab i.e.

Lahore, Faisalabad, Multan, Rawalpindi, Sialkot, etc. But specifically in this pre-

feasibility study some locations are proposed in Lahore. Considering the spread of new

well developed residential areas some of the suitable locations in Lahore are:

Main Boulevard Allama Iqbal Town

Near Akbar Chowk, Faisal Town

Johar Town Near Doctors Hospital

DHA

EME Colony

Tech Society

Jail Road

Mughal Pura

Chowk Chauburji

Or any locations near any new hospital or emerging clinics.

55..99 KKeeyy SSuucccceessss FFaaccttoorrss//PPrraaccttiiccaall TTiippss ffoorr SSuucccceessss

Some of the Key Success factors that will determine the success of this project include:

Availability of complete product range

Availability of regular medicine supplies.

A well trained Pharmacist

Reasonable and competitive prices.

Inventory control to avoid any pilferage.



55..1100 SSttrraatteeggiicc RReeccoommmmeennddaattiioonnss

55..1100..11 PPrroodduucctt RRaannggee ccoouunnttss aa lloott

Variety and availability are the key factors in retail business. As far as the Pharma

business is concerned, this is the most crucial factor. Almost all major manufacturers of

pharmaceutical products offer same drugs with different names (Company Names). So

availability of all major brands is crucial.

55..1100..22 CCuussttoommeerr SSeerrvviiccee

Outlet must have a proper temperature and proper outlook to attract the customers. If we

take a look at major players in Pharma retail business, like Fazal Din’s, Zaka’s Pharmacy,

Clinix Plus, Servaid, all of them have well-organized outlets all around the city. Not only

the outlets for the proposed medical store should be well organized, also the service

provided to the customers should be very quick and efficient.

55..1100..33 LLooccaattiioonn ooff tthhee oouuttlleett

The investment in better location pays in the long run. The Pharma retails business is

highly dependent upon the easy access for the buyers. This includes all areas near any

major hospital or popular clinics.

66 SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

66..11 SSeeccttoorr CChhaarraacctteerriissttiiccss

The review of Pakistani pharmaceutical market shows that there are around 450

companies, which are registered with the Ministry of Health. Out of some 350

manufacturing units operating in the country include dozens of multinationals.

Multinational pharmaceutical companies have played a vital role to provide the base for

the growth of the pharmaceutical industry since the emergence of Pakistan. They have

been enjoying the bulk of the business and are still enjoying after so many years, though

their collective market share has dropped significantly during last 18 years. In 1985, the

MNCs enjoyed 65 per cent of the market share while the national companies had 35 per

cent of it. The national pharmaceutical companies have improved their market share by

an average of 1.2 per cent every year. This percentage share increased up to a level of

53% in the year 2000 and this 18 per cent gain has come at the cost of MNCs whose

collective share has dropped by an equal percentage to 47 per cent during the same

period. Thus in 2000, the share of national companies stood at 53 per cent, 6 per cent

more than that of the MNCs.



66..22 SSuubb sseeccttoorr IInnffoorrmmaattiioonn

The Pharma Industry has experienced major growth in recent years. As per an estimate

the Pharma industry is growing at 18% annually. The Pakistan’s harsh climate provides

more favorable business opportunities in pharmaceutical business.

66..33 LLeeggaall IIssssuueess RReeggaarrddiinngg IInndduussttrryy

The medical store must be registered under Drugs Act 1976 with respective District

Health Officer (DHO). The registration fee for obtaining license is Rs. 1,200/- and license

will be renewed after every 2 years. The office of Executive Director Health is located at

24-Cooper Road, Lahore. A form is duly filled and submitted along with all the required

documents. The said form is available at the same office. After that a physical survey is

conducted by the health department and only after that license is issued.

Purchase and sale of drugs of narcotics and steroid nature will be maintained in the stock

register. All the purchase invoices and stock register will be kept for 5 years.

66..44 MMaajjoorr PPllaayyeerrss

The pharmaceutical industry is growing in Pakistan day by day. Out of the national and

multinational companies operating in Pakistan the major players in this sector are:

TTaabbllee 66--11 MMaajjoorr PPllaayyeerrss

Name of the Company No. of retail stores in Lahore

Fazal Din & Sons (Pvt.) Ltd. 2

Fazal Din Pharma Plus 15

Zaka Pharmacy 11

Clinix 15

Servaid 15

Guardian 10

77 MMAARRKKEETT IINNFFOORRMMAATTIIOONN

77..11 MMaarrkkeett PPootteennttiiaall22

The review of Pakistani pharmaceutical market shows that there are around 450

companies which are registered with the Ministry of Health, some 350 manufacturing

units operating in the country including dozens of multinationals. Healthcare in Pakistan

is still in the early stages of development. Widespread poverty and a weak health system

underlie the poor health status of the population. Government funding continues to be

minimal, equal to around 3% of GDP and achieves little more than maintaining the status

quo, while the problems of poor nutrition and sanitation are compounded by Pakistan's

large and fast growing population. However as the economy improves, the level of

spending may well begin to rise. Other issues at the heart of the problem include the

2 http://www.ppma.org.pk/PPMAIndustry.aspx

http://www.ppma.org.pk/PPMAIndustry.aspx



continuing prevalence of communicable diseases, low health manpower levels and the

under- utilization of primary health facilities.

The National pharma industry has shown a progressive growth over the years,

particularly over the last one decade. The industry has invested substantially to upgrade

itself in the last few years and today the majority industry is following Good

Manufacturing Practices (GMP), in accordance with the domestic as well as international

Guidance. Currently the industry has the capacity to manufacture a variety of product

ranging from simple pills to sophisticated Biotech, Oncology and Value Added Generic

compounds.

Although Pakistan 's pharmaceutical and healthcare sectors are expanding and evolving

rapidly, about half the population has no access to modern medicines. Clearly this

presents an opportunity, but much more work needs to be done by the government and

industry's stakeholders. The value of pharmaceuticals sold in 2007 exceeded US$1.4bn,

which equates to per capita consumption of less than US$ 10 per year and value of

medicines sold is expected to exceed US$2.3 B by 2012.

Pakistan is a developing pharmaceutical market, with a large population and economic

progress evident, but per capita drug spending was rather low at around US$9.30 in 2007.

Private spending accounts for 65% of total healthcare expenditure sourced through out-of

pocket payments, international aid and religious or charitable institutions. Pharmaceutical

spending accounts for less than 1% of the country's GDP, comparable to levels in some

neighboring countries but above that in some of the South Asian countries. The forecast

period is likely to witness the marginal strengthening of the generics sector, albeit more

in terms of volumes than values. The share of generics is also likely to increase further as

major drugs come off-patent in the near term, to the likely benefit of the generics-

dominated local industry.

The Pakistan pharma industry is relatively young in the international markets with an

export turnover of over US$ 100 Million as of 2007. Pakistan Pharma Industry boasts of

quality producers and many units are approved by regulatory authorities all over the

world. Like domestic market the sales in international market have gone almost double

during last five years. The pharma industry is focusing to an Export Vision of USD 500

Million by 2013. In the meantime, exports are also likely to be boosted by new regional

and global opportunities.

77..22 TTaarrggeett CCuussttoommeerrss

The major target market for the facility consists of residential areas in the vicinity of the

medical store.

88 PPRROODDUUCCTT

The proposed medical store will be offering a blend of different pharmaceuticals. Along

with pharmaceutical products, it will also be providing approximately 10% general items.

These general items include herbal products, eatables, food supplements and toiletries.



88..11 MMaajjoorr ssuupppplliieerrss

88..11..11 PPrroodduuccttss ooff MMuullttiinnaattiioonnaall CCoommppaanniieess

Abbott, GSK, Aventis, Novartis, Pfizer, ICI, Squib, Schering, Lilly, Rackitt & Benckiser,

BD, Searl, Hilton, Roche, Park Davis, Up John (Pharmacia)

88..11..22 PPrroodduuccttss ooff NNaattiioonnaall CCoommppaanniieess

Sami, Getz, Highmount, Wythe Schazoo, Eferoze, Reko, Atco, Nabi Qasim, Highnoon,

Woodwards, Servier

88..11..33 HHeerrbbaall PPrroodduuccttss

Hamdard, Qurshi, Ajmal, TT, Marhaba

88..11..44 FFoooodd SSuupppplleemmeennttss

Nestle Cereals, Nido, Meji, Slim up, Set point diet, Mead Johnson

88..11..55 EEaattaabblleess

Cadburys, Union, Mitchell’s, Coca Cola, Pepsi, Nestle

88..11..66 TTooiilleettrriieess

Rose Petal, Flying, Lever Bros. Etc.

88..11..77 SSaanniittaattiioonn PPrroodduuccttss

Pampers, Always, Baby Wipes, Adult Dipers, Trust, Baby Master, Huggies

88..11..88 PPrreeppaaiidd CCaarrddss

Jazz, UFone, Warid, Telenor, Zhong

88..22 PPrrooffiitt MMaarrggiinnss

The sales prices charged for each item would be competitive and will only be earning a

certain percentage of revenue. Percentage margin charged on each type of product is as

under:

TTaabbllee 88--11 PPrrooffiitt MMaarrggiinnss

Item Profit Margin

Margin on Multinational Sales 10%

Margin on National Sales 15%

Margin on Herbal Products 30%

Margin on Food Supplements 30%

Margin on Eatables 10%

Margin on Toiletries 10%

Margin on Sanitation products 10%

Margin on Mobile Cards 3.5%



Total amount of sales is based on survey and observation. Total sales assumed for the

first year are as under:

TTaabbllee 88--22 EEssttiimmaatteedd SSaalleess33

Product Category Expected Sales Amount (Rs.)

Products of Multinational Companies 12,960,000

Products of National Companies 15,840,000

Herbal Products 1,800,000

Food Supplements 1,260,000

Eatables 1,080,000

Toiletries 720,000

Sanitation Products 720,000

Pre Paid Cards 1,080,000

Total sales for the first year 35,460,000

Above mentioned sales are assumed for the first year on the basis of survey. Annual

growth rate in sales is taken as 10%.

88..33 OOtthheerr IInnccoommee

Other income includes revenues from diabetes tests, blood pressure checking and any sort

of intra muscular injections. Such income is taken as 1% of the total annual revenues.

99 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTT

99..11 LLaanndd RReeqquuiirreemmeenntt

Approximately 800 sq. ft. will be required for a medical store. It is recommended that the

area should be acquired for rent. Rent cost for the proposed areas will be ranging between

Rs. 80,000 to Rs. 100,000. Rent cost incorporated for financial analysis is Rs.100,000.

Advance rent of six months is also to be paid.

99..22 UUttiilliittiieess RReeqquuiirreemmeenntt

Electricity

Telephone

1100 OOFFFFIICCEE EEQQUUIIPPMMEENNTT

The following equipment and furniture will be required for the offices:

TTaabbllee 1100--11 DDeettaaiillss ooff OOffffiiccee EEqquuiippmmeenntt

Office Equipment Quantity Price (Rs.) Total (Rs.)

Refrigerator 2 40,000 80,000

Split Units 4 40,000 160,000

3 details given in financial analysis (Revenue Calculation)



Computers 2 25,000 50,000

UPS 2 20,000 40,000

Printers (Epson small) 2 7,500 15,000

Software 1 100,000 100,000

Chairs 6 1,500 9,000

Counter & Show cases 1,243,500 1,243,500

Gluco meter & BP

apparatus

1 8,800 8,800

Fax 1 15,000 15,000

Total 1,720,000

1111 HHUUMMAANN RREESSOOUURRCCEE RREEQQUUIIRREEMMEENNTT

Medical Store will run for 24 hours in three shifts (i.e. 8 hours per shift). Shift timing will

be:

TTaabbllee 1111--11 SShhiifftt SScchheedduulleess

Shift 1 8:00 am to 4:00 pm

Shift 2 4:00 pm to mid night

Shift 3 midnight to 8:00 am

The staff will include Pharmacist who will have B-Pharmacy degree. Accounts officer

must be B. Com and having two to three years experience in related field. Computer

operator will be one year diploma holder having knowledge of proper inventory control.

Human resource requirement for the proposed project is as under:

TTaabbllee 1111--22 SSttaaffff RReeqquuiirreemmeenntt ((33 sshhiiffttss))

Positions Number Salary/month

(Rs.)

Annual salary

(Rs,)

ADMINISTRATIVE STAFF:

Owner 1 50,000 600,000

Accounts officers 2 15,000 360,000

Pharmacist 1 20,000 240,000

Sales man 13 8,000 1,248,000

Cashier 2 8,000 192,000

Security Guards 3 8,500 306,000

Grand Total: 22 2,946,000



1122 PPRROOJJEECCTT CCOOSSTTSS

The breakdown of total project cost is in the table below:

TTaabbllee 1122--11 PPrroojjeecctt CCoossttss

Capital Costs Rs.

Office Equipment 1,720,000

Preliminary Expenses 75,000

Pre-operational Expenses4 1,100,000

Total Capital Costs 2,895,000

Working Capital

Inventory 3,823,000

Accounts Payable (37,697)

Total Working Capital 3,784,828

Project Cost 6,679,828

4 Pre-operational Expenses include advance rent of six months


PREF-82/December, 2011/Rev2

16

1133 FFIINNAANNCCIIAALL AANNAALLYYSSIISS

1133..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt

Projected Income StatementRs. in Thousands

Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Sales/Revenue 35,460 39,006 42,907 47,197 51,917 57,109 62,820 69,102 76,012 83,613

Cost of Sales:

Add opening stock - 3,823 3,854 4,240 4,664 5,130 5,643 6,208 6,828 7,511

Operating expenses 32,519 32,931 36,185 39,763 43,696 48,021 52,776 58,004 63,752 70,073

Less closing stock 3,823 3,854 4,240 4,664 5,130 5,643 6,208 6,828 7,511 8,262

28,696 32,899 35,800 39,339 43,230 47,508 52,212 57,383 63,070 69,322

Gross Profit 6,764 6,107 7,107 7,858 8,687 9,601 10,608 11,718 12,942 14,291

Operating Expenses:

Administrative Expenses 3,437 3,733 4,064 4,434 5,960 6,511 7,137 7,828 8,590 9,430

Marketing Expenses 100 95 90 86 81 77 74 70 66 63

Operating Profit 3,227 2,279 2,953 3,339 2,646 3,012 3,398 3,820 4,285 4,797

Financial Charges 508 401 294 187 80 - - - - -

L C Charges - - - - - - - - - -

Other Income 355 390 429 472 519 571 628 691 760 836

Profit before Taxation 3,074 2,269 3,088 3,624 3,085 3,583 4,026 4,511 5,046 5,633

Taxation 769 567 772 906 771 896 1,006 1,128 1,261 1,408 Profit after Taxation 2,306 1,702 2,316 2,718 2,314 2,688 3,019 3,384 3,784 4,225

Acc. Profit b/f - 2,306 4,007 6,323 9,041 11,355 14,042 17,062 20,445 24,229

Un-appropriated Profit c/f 2,306 4,007 6,323 9,041 11,355 14,042 17,062 20,445 24,229 28,454



17

1133..22 PPrroojjeecctteedd BBaallaannccee SShheeeett

Projected Balance SheetRs. In Thousands

Year - 0 Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Tangible Fixed Assets 1,720 1,525 1,355 1,205 1,072 956 853 762 681 609 545

Preliminary Expenses 75 60 45 30 15 - - - - - -

Current Assets:

Stock in hand 3,823 3,823 3,854 4,240 4,664 5,130 5,643 6,208 6,828 7,511 8,262

Accounts Receivable - - - - - - - - - - -

Pre-paid rent 600 - - - - - - - - - -

Cash in Hand / Bank 500 3,716 4,705 6,340 8,251 9,431 11,838 14,499 17,470 20,782 24,473

4,923 7,538 8,559 10,580 12,915 14,562 17,481 20,707 24,298 28,293 32,735

6,718 9,124 9,959 11,815 14,002 15,518 18,334 21,469 24,979 28,902 33,280

Owners Equity:

Capital 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340

Accumulated Profit - 2,306 4,007 6,323 9,041 11,355 14,042 17,062 20,445 24,229 28,454

Long Term Loan 3,340 2004 1336 668 - - - - - - -

Current Liabilities:

Current Portion

of Long Term Loan - 668 668 668 668 - - - - - -

Tax provision - 769 567 772 906 771 896 1,006 1,128 1,261 1,408

Accounts Payable 38 37.697 41 44 48 52 56 61 66 71 77

38 1,474 1,276 1,484 1,622 823 952 1,067 1,194 1,333 1,486

6,718 9,124 9,959 11,815 14,002 15,518 18,334 21,469 24,979 28,902 33,280



18

1133..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt

Projected Cash Flow Statement

Rs. in Thousands

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Net Profit - 3,074 2,269 3,088 3,624 3,085 3,583 4,026 4,511 5,046 5,633

Amortization - 15 15 15 15 15 0 0 0 0 0

Depreciation - 195 171 150 132 117 103 91 81 72 64

- 3,284 2,454 3,253 3,771 3,217 3,687 4,117 4,592 5,117 5,697

Working Capital Change - 600 (29) (382) (420) (462) (509) (560) (616) (677) (745)

Cash form other Sources

Owners 3,340 - - - - - - - - - -

Bank Finance 3,340 - - - - - - - - - -

6,680 - - - - - - - - - -

Total Sources 6,680 3,884 2,426 2,871 3,351 2,754 3,178 3,557 3,977 4,440 4,952

Applications:

Fixed Assets 1,720 - - - - - - - - - -

Preliminary Expanses 75 -

Preoperational Expenses 1,100 -

Working Capital 3,785 -

Re -Payment of Loan - 668 668 668 668 668 - - - - -

L C Charges - - - - - - - - - - -

Tax - - 769 567 772 906 771 896 1,006 1,128 1,261

6,680 668 1,436 1,235 1,440 1,574 771 896 1,006 1,128 1,261

Cash Increase/(Decrease) - 3,216 989 1,635 1,911 1,180 2,407 2,661 2,970 3,312 3,691

Opening Balance 500 500 3,716 4,705 6,340 8,251 9,431 11,838 14,499 17,470 20,782

Closing Balance 500 3,716 4,705 6,340 8,251 9,431 11,838 14,499 17,470 20,782 24,473



19

1133..44 RReevveennuuee CCaallccuullaattiioonn

Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Sales Growth Rate 10% 10% 10% 10% 10% 10% 10% 10% 10%

Purchase Price Growth Rate 10% 10% 10% 10% 10% 10% 10% 10% 10%

Revenue (Rupees): Proportion

Multinational 36.5 12,960,000 14,256,000 15,681,600 17,249,760 18,974,736 20,872,210 22,959,431 25,255,374 27,780,911 30,559,002

National 44.7 15,840,000 17,424,000 19,166,400 21,083,040 23,191,344 25,510,478 28,061,526 30,867,679 33,954,447 37,349,891

Herbal 5.1 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306

Food Supliments 3.6 1,260,000 1,386,000 1,524,600 1,677,060 1,844,766 2,029,243 2,232,167 2,455,384 2,700,922 2,971,014

Eatables 3.0 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

Toiletries 2.0 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722

Sanitation Products 2.0 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722

Pre-paid Cards 3.0 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

35,460,000 39,006,000 42,906,600 47,197,260 51,916,986 57,108,685 62,819,553 69,101,508 76,011,659 83,612,825

35,460,000 39,006,000 42,906,600 47,197,260 51,916,986 57,108,685 62,819,553 69,101,508 76,011,659 83,612,825

Diseases

ALLOPATHIC

Infection 23% 6,624,000 7,286,400 8,015,040 8,816,544 9,698,198 10,668,018 11,734,820 12,908,302 14,199,132 15,619,046

Health care products 7% 2,016,000 2,217,600 2,439,360 2,683,296 2,951,626 3,246,788 3,571,467 3,928,614 4,321,475 4,753,623

Cardic 10% 2,880,000 3,168,000 3,484,800 3,833,280 4,216,608 4,638,269 5,102,096 5,612,305 6,173,536 6,790,889

Diabetics 20% 5,760,000 6,336,000 6,969,600 7,666,560 8,433,216 9,276,538 10,204,191 11,224,610 12,347,072 13,581,779

ENT 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

B.P. / Relaxation 10% 2,880,000 3,168,000 3,484,800 3,833,280 4,216,608 4,638,269 5,102,096 5,612,305 6,173,536 6,790,889

Skin / Allergies 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

Kidney 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

Gyne 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

Muscullar 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

Ortopadeic 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445

100% 28,800,000 31,680,000 34,848,000 38,332,800 42,166,080 46,382,688 51,020,957 56,123,052 61,735,358 67,908,894

Multinational 45% 12,960,000 14,256,000 15,681,600 17,249,760 18,974,736 20,872,210 22,959,431 25,255,374 27,780,911 30,559,002

National 55% 15,840,000 17,424,000 19,166,400 21,083,040 23,191,344 25,510,478 28,061,526 30,867,679 33,954,447 37,349,891

100% 28,800,000 31,680,000 34,848,000 38,332,800 42,166,080 46,382,688 51,020,957 56,123,052 61,735,358 67,908,894

Herbal

Qurshi 40% 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722

Hamdard 60% 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

100% 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306

Food Suppliments

Slim up 40% 504,000 554,400 609,840 670,824 737,906 811,697 892,867 982,153 1,080,369 1,188,406

Others 60% 756,000 831,600 914,760 1,006,236 1,106,860 1,217,546 1,339,300 1,473,230 1,620,553 1,782,608

100% 1,260,000 1,386,000 1,524,600 1,677,060 1,844,766 2,029,243 2,232,167 2,455,384 2,700,922 2,971,014

Eatables 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

Toiletries 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722

Sanitation Products 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722

Pre-paid Cards

Mobile 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584

1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584


PREF-82/December, 2011/Rev 2 20

1144 KKEEYY AASSSSUUMMPPTTIIOONNSS

TTaabbllee 1144--11 OOppeerraattiinngg AAssssuummppttiioonnss

Hours operational per day 24 hours

Days operational per month 30 days

Day operational per year 360 days

TTaabbllee 1144--22 RReevveennuuee AAssssuummppttiioonnss

Revenue assumption Survey of Distribution companies &

Pharmacy

Revenue classification On the basis of diseases

Sales growth rate 10%

Other Income (%age of revenues) 1%

TTaabbllee 1144--33 EExxppeennssee AAssssuummppttiioonnss

Printing & Stationary 1% of Revenue

Entertainment 0.1 % of Revenue

Communication Expense 0.1% of Revenue

Consultancy Charges and Audit (Annual) Rs. 20,000

Electricity cost growth rate 10%

Electricity rate / unit Rs. 15

Kilo Watts Consumed per day 5.7

Depreciation Method Written Down Value

Depreciation Rate on Furniture 10%

Depreciation Rate on Electric Equipment 10%

Computers and printers 20%

TTaabbllee 1144--44 CCaasshh FFllooww AAssssuummppttiioonnss

Accounts payable cycle 7 days

Inventory 45 days

TTaabbllee 1144--55 FFiinnaanncciiaall AAssssuummppttiioonnss

Project Life 10 Years

Debt 50%

Equity 50%

Debt Tenure 5 Years

Interest rate 16%

Income tax rate 25%

Discount rate (weighted avg. cost of capital for NPV) 25%

Minimum Cash Balance Rs. 0.5 Million

SMEDA Medical Store

Documents

favorable business opportunities

cellular prepaid cards

pakistans harsh climate

experienced major growth

national companies products

multinational companies products

product range offered

proposed medical store