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Pre-Feasibility Study

SANITARY WARE MANUFACTURING

Small and Medium Enterprise Development Authority


Government of Pakistan
www.smeda.org.pk
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PUNJAB SINDH NWFP BALOCHISTAN

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March, 2006
Pre-feasibility Study Sanitary Ware Manufacturing

1 PURPOSE OF THE DOCUMENT ............................................................................................... 4

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


2.1 SWOT ANALYSIS ................................................................................................................... 4
2.1.1 STRENGTHS ..................................................................................................................... 4
2.1.2 WEAKNESSES................................................................................................................... 5
2.1.3 OPPORTUNITIES ............................................................................................................. 5
2.1.4 THREATS.......................................................................................................................... 5
2.2 KEY SUCCESS FACTORS / PRACTICAL TIPS FOR SUCCESS .......................................................... 5
3 PROJECT PROFILE.................................................................................................................... 7
3.1 OPPORTUNITY RATIONALE ...................................................................................................... 7
3.2 PROJECT BRIEF ..................................................................................................................... 10
3.3 MARKET ENTRY TIMING ....................................................................................................... 10
3.4 PROPOSED BUSINESS LEGAL STATUS ..................................................................................... 11
3.5 PROJECT CAPACITY AND RATIONALE ..................................................................................... 11
3.6 PROJECT INVESTMENT ........................................................................................................... 11
3.7 PROPOSED LOCATION ............................................................................................................ 12
4 SECTOR AND INDUSTRY ANALYSIS.................................................................................... 12
4.1 EVOLUTION OF SANITARY WARE INDUSTRY IN PAKISTAN..................................... 12
4.2 SANITARY WARE MANUFACTURING UNITS CURRENTLY IN OPERATION IN PAKISTAN .............. 13
4.3 SECTOR CHARACTERISTICS ................................................................................................... 13
5 EU MARKET INFORMATION & MARKET ACCESS REQUIREMENTS........................... 14
5.1 EU MARKET INFORMATION ................................................................................................... 14
5.2 CUSTOMS / STATISTICAL PRODUCT CLASSIFICATION ............................................................... 15
5.2.1 Sanitary ware made of plastics such as baths, showers, washbasins, bidets, lavatory pans,
seats and covers, flushing cisterns of plastics ................................................................................. 15
5.2.2 Ceramic sanitary ware such as sinks, wash basins, wash basin pedestals, baths, bidets,
lavatory pans, flushing cisterns, urinals and similar sanitary fixtures ............................................. 16
5.3 SANITARY-WARE MADE OF IRON OR STEEL SUCH AS BATHS SHOWER BASINS AND WASH BASINS 17
6 PRODUCTION PROCESS......................................................................................................... 20
6.1 PRODUCTION PROCESS FLOW ................................................................................................ 20
6.1.1 Milling Section ................................................................................................................ 20
6.1.2 Casting Section................................................................................................................ 21
6.1.3 Green ware Section.......................................................................................................... 21
6.1.4 Glazing Section................................................................................................................ 21
6.1.5 Kiln Section ..................................................................................................................... 21
6.1.6 Final Inspection & Packing Section ................................................................................. 21
6.2 PROPOSED PRODUCT MIX ...................................................................................................... 22
6.3 RAW MATERIAL REQUIREMENT ............................................................................................. 22
7 TECHNOLOGY AND PROCESSES.......................................................................................... 23
7.1 MACHINERY REQUIREMENT .................................................................................................. 23
7.2 FITTINGS & INSTALLATIONS REQUIREMENT ........................................................................... 23
7.3 OFFICE EQUIPMENTS REQUIREMENT ...................................................................................... 24
7.4 FURNITURE & FIXTURES REQUIREMENT................................................................................. 24
7.5 VEHICLES REQUIREMENT ...................................................................................................... 24
8 LAND & BUILDING REQUIREMENT .................................................................................... 25
8.1 LAND REQUIREMENT ............................................................................................................ 25
8.2 BUILDING REQUIREMENT .............................................................................................. 25
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8.3 UTILITY REQUIREMENTS ....................................................................................................... 26


9 HUMAN RESOURCE REQUIREMENT................................................................................... 26
9.1 HUMAN RESOURCE REQUIREMENTS....................................................................................... 26
10 KEY ASSUMPTIONS................................................................................................................. 28
10.1 PROJECT ASSUMPTIONS ......................................................................................................... 28
10.2 OPERATING ASSUMPTIONS .................................................................................................... 28
10.3 DEPRECIATION RATE ASSUMPTIONS ....................................................................................... 28
10.4 LONG TERM SECURITY DEPOSITS .......................................................................................... 28
10.5 WORKING CAPITAL TURNOVER ASSUMPTIONS ....................................................................... 29
10.6 ADVANCES & PREPAYMENTS ................................................................................................ 29
10.7 LONG TERM LOAN ................................................................................................................ 29
10.8 SALES TAX PAYABLE ............................................................................................................ 29
10.9 REVENUE ASSUMPTIONS – SALES PRICE & PRODUCTION MIX ................................................. 30
10.10 COST OF SALES ..................................................................................................................... 30
10.11 PACKING MATERIAL AND STORES & SPARES.......................................................................... 31
10.12 SALARIES WAGES AND OTHER BENEFITS ............................................................................... 31
10.13 RESEARCH & DEVELOPMENT COST........................................................................................ 31
10.14 OTHER OVERHEAD CHARGES ................................................................................................ 31
10.15 ADMINISTRATIVE E XPENSES ASSUMPTIONS ........................................................................... 31
10.16 MARKETING EXPENSES ASSUMPTIONS ................................................................................... 32
11 FINANCIAL ANALYSIS............................................................................................................ 33
11.1 PROJECT COST ...................................................................................................................... 33
11.2 INCOME STATEMENT ............................................................................................................. 34
11.3 BALANCE SHEET ................................................................................................................... 35
11.4 CASH-FLOW STATEMENT ....................................................................................................... 36

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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-90

Prepared by SMEDA-Punjab

Issue Date March 2006

Issued by Library Officer

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Pre-feasibility Study Sanitary Ware Manufacturing

1 PURPOSE OF THE DOCUMENT


The objective of this proposed Pre-feasibility study is primarily to facilitate potential
entrepreneurs with the Investment information and provide an overview about the
"Sanitary Ware Manufacturing Business". The proposed Pre-feasibility may form the
basis of an important investment decision and in order to serve this objective, the
document covers various aspects of Sanitary Ware Manufacturing Business Concept
Development, Start-up, Production, Marketing, Finance and Business Management.

This 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 "Sanitary Ware Manufacturing Unit ". Before
studying the whole document one must consider following critical aspects, which forms
basis of any Investment Decision.

2 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT


Before making the decision, whether to invest in the Sanitary Ware Manufacturing or not,
one should carefully analyze the associated risk factors. A SWOT analysis can help in
analyzing these factors, which can play important role in making the decision.

2. 1 SWOT Analysis
Before making the decision, whether to invest in the Potato Chips Manufacturing or not,
one should carefully analyze the associated risk factors. A SWOT analysis can help in
analyzing these factors, which can play important role in making the decision.

2.1.1 STRENGTHS
 Continuous availability and easy access to Raw Material. About 60% of the raw
material that mainly comprises clay is available in the surrounding areas of
Gujranwala & Gujrat.
 Availability of Cheaper Labor.
 High quality Kiln installation to produce international quality standard products.
 Tariff cuts under Trade Agreements are anticipated which may result in increase in
the Export market of the Sanitary Ware Products.
 The life style of the people is improving and they are getting more quality conscious.
 The main competitors in the Sanitary Ware manufacturing industry with respect to the
market share is the supply from un-organized sector but the permanent industry has
an edge over these supplies because of quality & standard, which is almost doubled as
compared to un-organized supplies. Market of un-organized sector can be accessed
and captured through automated marketing techniques.
 Serving tough competition in the market through low prices, high quality and heavy
promotional charges.

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2.1.2 WEAKNESSES
 Strict controls over the Labor efficiency need to be observed to reduce the Waste
Production at the minimum level.
 The production process is highly manual and requires high involvement of man
power thus strong controls over the man power is required.
 Expected loss at the initial stages of the project as the operations are partly
automated.

2.1.3 OPPORTUNITIES
 Increasing preference for the high quality products
 Easier access to markets in accession countries.
 Increasing share of developing countries in sanitary ware imports of France, Belgium
& UK and other countries of European Union.
 Demand for Sanitary ware is influenced by the General economic conditions as well
as number of new houses built and old houses renovated.

2.1.4 THREATS
 Low saving and low holding capacity of General Public as a result of which there is
increasing level of poverty.
 Quality of the Sanitary Ware products need to be considered very closely as the
lifestyle of people is improving.
 High Promotional activity by the Competitors and increased competition.
 Chances of price cut from the existing players of the Sanitary ware manufacturers to
keep the new product out of market.

2. 2 Key Success Factors / Practical Tips for Success


The development in the sanitary ware industry in Pakistan is dependent on the quality of
the raw material made available to it. This has been drastically affecting its exports and
even local market. The raw material available for use in the sanitary ware industry has
until recently been of such degraded quality that the sanitary wares made out of them do
not attract quality conscious people. Moreover, the methods followed in the sanitary ware
industry have also led to the bad quality production. Its has been a recent practice that,
material provided to some people of skill and without any awareness to quality standards
and production techniques, sanitary wares were made out of them. The unavailability of
international standard machines also led to not only bad produce but also low production
capacity. The finished products made out of such techniques are not long lasting and
could not face tough/ rugged terrain. These often lost shape and appearance with
increased pressure, and wear and tear in the hot and cold climate of our country. One of
the key success factors for the success of this proposed project is to control and carefully
monitor the entire manufacturing process as it involves the high waste production.

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Another critical success factor of this proposed feasibility is the Marketing and
Promotion of the Sanitary Ware Products in the local as well as Foreign Market. This
involves the dedication and hard work from the marketing personals to supervise the
work of Wall Pasting, Banner affixing and a detailed advertising on the Media along with
the use of other marketing techniques such as Display Stands, Posters and use of Mobiles.
Following are some of the distributing Channels that are available for the promotion of
the products having distinct characteristics.

Table 1: Promotional Channels


Wholesale 1- More players involved in the sales channel
Markets 2- Higher costs
3- Require (national) quality standards
4- Require strong brands
5- Tend to limit suppliers
Do-It- 1- Less emphasis on (national) quality standards
yourself 2- Generally lower prices to consumers
markets
3- Increasing importance in several EU markets
4- Can be targeted through importers, manufacturers or trade associations
European 1- Buys smaller product range to complement its own delivery program,
Producers products need to fit this program.
of sanitary 2- May buy specialty items to offer under own brand
ware
3- Can promote items under own brand name.
4- May open "protective" markets
Importers 1- Able to "reach" the larger number of installers with showroom/shop
2- Will give feed back on price level needed to enter this segment.
3- will lesson the perceived risk from the point of view of the buyer.
E- 1- Rapidly increasing interest of buyers to streamline communication. Also
Commerce used to check on abilities/background of suppliers.
2- even direct selling via B2B portals is possible.

The current Sanitary Ware Market is already led by some of the players as specified in
Section 5.2 of this pre-feasibility. Entering into the market need heavy investment on the
marketing campaign of the product in order to capture the share.

There are many units existing which are in the business of Sanitary Ware Manufacturing
but still they are not successful in catering the demand due to degraded quality of raw
material used, high involvement of man power and un-availability of International
Standard Machines. So there is a potential for new entrepreneurs to enter the market. Key
success factors will be:

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 Use of New Technology and international standard machines


 Temperature & Pressure maintenance.
 High quality of raw material.
 Advance Orders for sale can ensure the success of the Business.
 Technical Quality & competence.
 Responsiveness to Customers' demands and requirements.
 Available for enquiries, designated and known contact persons.
 Low Prices
 Reliability in delivery
 Provision of Customer training.
 Give Guarantees.
 Quality Certifications.
 Conscious of environment.

3 PROJECT PROFILE
3. 1 Opportunity Rationale
The Sanitary wares available in the local market are produced mainly in the Province of
Punjab & Sindh. In addition some niches of the market are also served by imports as
small quantity of some multinational brands is also available in the local market imported
mainly from Spain, Itly UK and USA.

Demand for sanitary ware is influenced by general economic conditions as well as the
number of new houses built and old houses renovated. New housing also presents
opportunities for new kitchens, bath rooms and latrine facilities1.
Table 2: Housing units by kitchen, bathroom & latrine facilities
Administrative Kitchen Bath Rooms Latrines
Units Separate Shared None Separate Shared None Separate Shared None
Pakistan 32.70 19.60 47.70 33.29 23.08 43.63 28.58 20.44 50.98
Rural 27.26 16.52 56.22 26.29 16.70 57.01 8.46 12.29 69.25
Urban 44.59 26.32 29.08 48.57 7.03 14.40 50.68 38.26 11.06
NWFP 33.01 20.79 46.20 34.47 23.77 41.76 24.50 18.17 57.33
Rural 31.70 19.20 49.10 32.88 20.74 46.38 21.09 13.86 65.05
Urban 39.54 28.74 31.72 42.41 38.91 18.69 41.57 39.68 18.74
FATA 56.37 12.05 31.58 62.78 11.61 25.61 36.86 6.99 56.10
Rural 56.13 12.24 31.63 62.50 11.70 25.80 35.98 6.98 57.04
Urban 65.76 4.76 29.47 73.39 8.22 18.39 70.66 7.53 21.81
Punjab 31.48 11.06 57.46 32.08 17.83 50.08 26.52 15.76 57.72

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Source: 1998 Census of Pakistan

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Rural 26.48 8.49 65.03 24.41 11.57 64.00 15.08 7.91 77.01
Urban 42.94 16.95 40.10 49.67 32.16 18.17 52.75 33.75 13.50
Sindh 34.69 32.46 32.85 33.94 31.12 34.94 35.36 30.57 34.08
Rural 24.63 28.50 46.87 22.98 21.92 55.11 24.23 20.08 55.69
Urban 47.90 37.65 14.44 48.34 43.21 8.46 49.97 44.33 5.70
Balochistan 22.72 46.11 31.16 26.56 41.74 31.70 18.58 29.25 52.16
Rural 19.89 44.25 35.86 24.12 38.70 37.19 14.46 23.61 61.92
Urban 34.01 53.49 12.50 36.26 53.81 9.93 34.93 51.70 13.36
Islamabad 62.80 16.46 20.74 58.50 17.11 24.30 55.47 16.92 27.61
Rural 55.76 11.01 33.21 44.09 13.01 42.89 37.37 11.65 50.98
Urban 66.23 19.10 14.66 65.64 19.11 15.24 64.28 19.48 16.23

The housing2 situation in Pakistan has steadily deteriorated over the past many years for a
variety of reasons including ineffective policies, resulting in huge housing backlog.
According to 1998 census, the total number of housing units throughout the country was
19.3 million. The housing backlog, as estimated according to the 1998 census, was 4.30
million units, which is now projected to 6.0 million units. The annual additional
requirement is estimated around 570,000 housing units whereas the annual production is
estimated around 300,000 housing units, resulting in a recurring shortfall of 270,000
housing units annually. It is estimated that in order to address the backlog and to meet the
housing shortfall in the next 20 years the overall housing production will have to be
increased to 820,000 housing units annually.

Recognizing the gravity of the situation and realizing the potentials of housing and
construction as productive sector of the economy, the present Government has declared
Housing and Construction as a priority industry and also formulated a pragmatic and
workable National Housing Policy with a view to (a) Accelerate housing activity and
contribute towards employment generation and economic development, (b) Facilitate
provision of housing inputs including land, finance, building materials, institutional and
legal framework, (c) Analyze the culture of poverty and the forces generating ever-
increasing slums and katchi abadis including political, public, socio-economic,
bureaucratic and environmental forces, (d) Promote ways and means for housing
development by enhancing affordability, saving capacity, human tendencies and
potential, (e) Provide safeguards against malpractices, bureaucratic in-efficiencies,
institutional weaknesses and mafia assaults and (f) Particularly for the low income
groups.

In the fiscal area the measures already implemented include: (a) Tax credit on borrowing
under housing loans from financial institutions has been enhanced from Rs.100,000/- or
25% of the income of the mortgagor, to Rs.500,000 or 40% of the income of the
mortgagor whichever is less, (b) The limit of property income for withholding tax has

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Source : Economic Survey of Pakistan 2004 - 2005

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been raised from Rs.100,000/- to Rs.200,000/-, (c) The rate of withholding tax on
property income has been reduced from 7.5% to 5%, (d) CED on wires and cables has
been withdrawn and excise duty on cement has been reduced by 25% to lessen cost of
construction, (e) Stamp duties and registration fees, which were exceptionally high as
compared to other countries, have been rationalized to enhance registration, improve
documentation and increase revenue receipts and (f) All new construction of housing on
plots, measuring up to 150 sq. yds and flats/apartments having an area of 1000 sq. ft,
have been exempted from all types of taxes for the period of 5 years.

The Prime Minister has also announced “HOUSING FOR ALL” program which
includes:-

 Housing schemes for Government employees will be launched in all the districts of
the country for which provincial governments and ICT will provide (100) acres of
State Land immediately at affordable price.
 Housing schemes for Government employees will be developed on public private
partnership basis in which Banks will participate through appropriate collaboration
with the private sector developers. Such partnership will be secured on competitive
basis through a transparent selection process.
 Federal/Provincial/District Governments should facilitate and provide all necessary
support to Banks/developers with a view to creating an enabling environment.
 Federal Government will ensure provision of trunk infrastructure at project sites from
National Utilities regarding electricity, gas and telephone. If required Banks may
finance extra cost of such infrastructure.
 Provincial/Federal Governments will ensure provision of trunk infrastructure for
housing schemes.
 To facilitate this process, Governments of Sindh, NWFP and Balochistan may
emulate the housing development model recently formulated and adopted by the
Government of Punjab for its employees.
 Provincial Governments should identify lands, wherever available in their
jurisdiction, and make it available for promotion for Government housing sector.
 Provincial Government will rationalize the rates of Registration Fee, Stamp Duty and
Property Tax to promote housing sector.
 Provincial Governments/ICT Administration will ensure effective implementation of
foreclosure laws.
 Provincial Governments will make necessary legislation, if required, for transfer to
state land at realistic/affordable rates for the Government employees housing
schemes.
 Federal/Provincial Governments will submit proposals regarding grant of proprietary
rights to dwellers of Kachi-Abadis located on the Federal Government land for
consideration and decision.

The prime Minister has inaugurated (Phase-V) Housing Scheme for Low Paid F.G.
Employees (BPS 1-16) on 11-4-2005 for construction of 1000 multi-storied flats in
Sector G-11/4, Islamabad. The cost of the flats ranges from Rs.1.2 – 1.8 million. The

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allottee will contribute 40% cost in installments and National Bank of Pakistan will
provide the remaining 60% as loan. Flats will be handed over to the allottees in two years
time. 90% apartments are earmarked for Federal Government employees of the
Ministries/Divisions, Attached Departments and Sub-ordinate offices and the remaining
10% apartments for the Employees of Autonomous Bodies/Corporations and other
Federal Government Organizations. Details of the scheme are given in Table below.

Table 3: Scheme Details


Type BPS Accommodation Area Flats Cost
C 14- Two bedrooms with attached bath, 1100 240 1,800,000
16 Drawing, TV Lounge, kitchen. SQF
D 7-13 Two bedrooms, 2 baths, living Room, 900 SQF 312 1,450,000
kitchen.
D 1-6 Two rooms, living room, one 700 SQF 448 1,200,000
bath/w.c., Kitchen

The demand for sanitary ware is influenced by general economic conditions as well as
number of new houses built and old houses renovated. New housing also presents
opportunities for consumption of sanitary ware. Since the life style of the people are
improving and they are getting more quality conscious, it is recommended to start up the project
at any time during the year.

3. 2 Project Brief
This particular Pre-feasibility is regarding “Sanitary Ware Manufacturing Unit”. The
objective of the Pre-feasibility study is primarily to provide an overview about the
Sanitary Ware Manufacturing business. The proposed Pre-feasibility defines the criteria
on which the investment decision is based. This document covers various aspects of
Sanitary Ware Manufacturing business concept development, Start-up, Production,
Marketing, Finance and Business Management. The Sanitary Ware Products are
classified under following three broad categories on the basis of material type. This
particular pre-feasibility however discusses the sanitary ware made of ceramics.

 Sanitary ware made of Plastics such as baths, showers, washbasins, bidets,


lavatory pans, seats and covers, flushing cisterns of plastics;
 Ceramic sanitary ware such as sinks, wash basins, wash basin pedestals, baths,
bidets, lavatory pans, flushing cisterns, urinals and similar sanitary fixtures;
 Sanitary ware made of iron or steel such as baths shower basins and
washbasins.

3. 3 Market Entry Timing


Various Products and Services have high dependence on their commercialization timing
and delivery to the Customers but the Chips Manufacturing Unit can be started at any

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time during the year due to the availability of Raw Material (Fresh Potatoes) throughout
the year.

3. 4 Proposed Business Legal Status


The said project can be a sole proprietorship or a partnership and even it can be registered
under the Companies Ordinance, 1984 with the Securities & Exchange Commission of
Pakistan. The selection totally depends upon the choice of the entrepreneur. This pre-
feasibility assumes the legal status of a sole proprietorship.

3. 5 Project Capacity and Rationale


Selection of Project Size is really critical. After doing thorough Market Research, it is
decided that the proposed Pre-feasibility will be based upon the Production Capacity of
400 Pieces per day. As it is evident that the standard of living is rising steadily and the
society is getting increasingly brand loving and design conscious, high grade producers
will have heyday in the Sanitary market in future. As a result of high construction
activities carried out all over the world, there is huge demand of high quality sanitary
ware products in and outside Pakistan, thus a sizeable production is required. The
proposed project can always be started with Kiln having Production Capacity of more
than 400 Pieces per day. This particular Pre-feasibility study is however based on the
capacity of 400 Pieces per day which is the minimum viable size for a Sanitary ware
Manufacturing Unit. The project will be working on a single shift basis in all except the
Kiln which will be working on three shift basis.

Table 4: Project Capacity


Hours utilized one day 8
Production Capacity in pieces per day 400

3. 6 Project Investment
Total Project cost is Rs. 81.85 million.

Table 5: Project Parameters

Capacity Human Resource Technology/Machinery Location


400 pieces 146 Local Gujranwala
Financial Summary
Project Cost IRR NPV (Rs.) Payback period
81.85 million 24% 17 million 4.57 Yrs

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Table 6 Total project cost is worked out in the table below:-

Capital Investment 58,011,000


Working Capital Requirement 23,841,082
Total Investment 81,852,082

Table 7: Project Viability

IRR % - age 24 %
NPV @ 20 % Rs. 17,031,714
Pay Back Period 4.5 -Years
3. 7 Proposed Location
The said project can be started in any Industrial Area. It is recommended to establish the
Project in an area where Raw Material is easily available. It may have any Industrial Area
of Lahore, Gujranwala, Karachi or Islamabad. The location of this proposed Pre-
feasibility is recommended at Gujranwala. The availability of main raw material in the
region considerably increases the scope for establishment of the proposed project in the
said region.

4 SECTOR AND INDUSTRY ANALYSIS

4. 1 EVOLUTION OF SANITARY WARE INDUSTRY IN PAKISTAN


This is a story of how the manufacture of sanitary fittings [taps, showers, pipes] started in
a small town called Gujranwala (now in Pakistan), way back in 1934. Situated along the
contours of the old Grand Trunk Road, Gujranwala is famous for its Sanitary Fittings and
Sanitary ware and Electric Fans & Motors.

In 1934 two residents of Gujranwala, Mr. Banarsi Shah and Charan Singh, set up a
sanitary fittings factory near the Gujranwala Railway Station, near Civil Lines. This
factory was to supply entire India with sanitary fittings. Although the houses of these
families can still be seen in Gujranwala, the factory was pulled down a few months ago,
the land which it occupied being about two acres in size and was next to the house of Mr.
Charan Singh. Mr. Rafiq Anwar and Mr. Mohammed Ramzan, [ two brothers ] who later
on went on to build "Anwar Mechanical Works" and "Asia Fans" in Gujranwala, initially
joined this factory in 1934 and worked there as employees. It was here that Mr. Anwar
learnt the trade and manufacture of taps and pipes made from brass and Gun-Metal, both
of which were available as scrap metal. Thus the techniques of polishing, chroming,
electro-plating and sand casting became well established in this small town of
Gujranwala.

In 1943, Mr. Anwar proceeded to form a partnership with a Mr. Ram Gopal Arora to
manufacture sanitary fittings, in a factory called "Prabhat Engineering" in Gujranwala’s
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old city. In 1947 at the time of the partition, Mr. Ram Gopal Arora turned over the
ownership of "Prabhat Engineering" to the name of Mr. Anwar. Mr. Anwar was to settle
all accounts in an orderly manner so that eventual payment of the factory value was
settled in a completely honorable manner. "Prabhat Engineering "was to be renamed as
"Battala Foundry" under the ownership of a Mr. Mohammed Yakub, who was a Muslim
refugee from India.

It was from these few industrious and ethical families of Charan Singh, Banarsi Shah and
Rafiq Anwar that the modern industries of Gujranwala arose and have taken their place in
modern day Pakistan’s industry.

4. 2 Sanitary Ware Manufacturing Units Currently in Operation in Pakistan

The main sanitary ware units currently in operation in Pakistan are reproduced below:
Table 8: Major players of the market
No. COMPANY NAME ADDRESS
1- A.M Industries Mohallah Chah talianwala, Jinnah Road, Link
Nowshera Road, Gujranwala Tel # (0431)
220497
2- Anwar Mechanical Works G.T Road, Gujranwala Tel # (0431) 220497
3- Faisal Sanitary Fittings Ind. G.T. Road, PO Box 93, Gujranwala. Twl #
(Pvt.) ltd. (0431) 271243/271245, Fax (0431) 271650
4- Master Industries G.T.Road, Gujranwala Tel # (0431)
272770/272779, Fax (0431) 272127
5- Sonex Industries 6 Shamasabad, Gujranwala Tel # (0431) 219537.
Fax (0431) 219535
6- Pak Sanitary Engineering 97 Ferozepur Road, Ichhra, Lahore Tel # (042)
Works 7596544/7572340
7- Karaiz International 425-K, Model Town, Lahore – 54700. Tel #
(042) 561425/5880372 Fax (042) 5830284
According to the Census Bulletin - 1998 there are 35 units of sanitary ware in Gujranwala
with the installed capacity of 1,627 Lac Rupees.

4. 3 Sector Characteristics
Thangadh is a small town located some 70 kilometers from Rajkot and about 370
kilometers from Gandhinagar, Gujarat's capital. Despite being a small town having
population of about 50,000, this region has both a religious and an industrial importance.
It is said that King Drupad established his kingdom here and it was this place where
Draupadi's Swayamvara was held. But today, the town has acquired fame for its
sanitaryware business. There are about 200 small and medium scale units producing
about 150 types of sanitaryware items. Of the total sanitaryware exports of the country,
Thangadh alone accounts for an over 65 percent share.

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Providing employment to about 30,000 people, majority of the items produced here are
exported. Last year the total sanitary ware exports were of Rs .800/- million of which
items worth Rs. 550/- million were from Thangadh alone to UAE, Africa and other
middle east countries.

One of the main reasons why ceramic and sanitary ware units have developed here is
because of easy excess to raw material. About 60 percent of the raw material that mainly
comprises of clay is available in excess in the surrounding area.

However, unlike other industry, this industry too has a tough competition with China.
Currently, the units make use of fuel to bake the wares on high fire. This fuel itself
accounts for about 40 percent of the total cost. Units are now demanding supply of gas,
which is low in cost. Though the state government has made promise for Gas grid
pipeline within a year, the manufacturers are left with no option but to wait for the Gas
supply. Again in terms of policy matters and Government support, China has far more
transparent and liberal policy for exporters.

The industry has huge potential for both domestic and international market, provided it
gets proper government support, believes Suresh Sompura, the President of Federation of
Ceramic Industries in Thangadh.

Apart from exports, the domestic market for sanitary ware itself is very large. Currently
only 10 percent population of the country makes use of sanitary ware items. According to
the manufacturers, if proper policy are designed and implemented by the government for
improving public sanitation, the industry could grow in leaps and bound providing
employment to lakhs of people.

The recommendation of setting up the project in Gujranwala is also supported by the fact
that in addition of having easy acces to the raw material in this region, gas is also
available that may result in production of high quality and low cost sanitary ware
products.

5 EU MARKET INFORMATION & MARKET ACCE S S


REQUIREMENTS
5. 1 EU Market Information

According to EU Market Survey - 2004, Special attention is paid to market developments


in the Netherlands, Austria, Belgium, the United Kingdom, Germany and France.
Although these countries do not necessarily represent the markets with the highest
consumption levels in the EU (consumption is higher in Italy and Spain), they do form
the top six importers of sanitary ware in the EU and also have the largest sales in the Do

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It Yourself (DIY) segment of the market. These countries, therefore, appear to present the
best market opportunities for exporters from developing countries.

According to Eurostat data, the total value of EU consumption in 2002 of sanitary ware
amounted to € 4,852 million. The largest markets for sanitary ware in the EU are Italy,
Spain, Germany, the United Kingdom and France.

In 2002, total EU imports of sanitary ware and ceramic tiles reached a volume of 5,960
thousand tonnes, which represented a value of € 5,134 million. Germany is the largest EU
importer of sanitary ware and ceramic tiles, with imports valued at € 1,090 million. The
most important developing countries in supplying EU imports, after Turkey, are China,
Egypt, South Africa, Morocco, Thailand, Tunisia and Croatia.

In the period 2000 - 2002, imports of sanitary ware have increased by 25 percent in value
and by six percent in volume. Approximately one-third of imports came from outside the
EU, with developing countries accounting for approximately 20 percent of total EU
imports of sanitary ware. The segment of ceramic sanitary products constituted the
largest share of EU imports of sanitary articles, followed by the group of plastic sanitary.

5. 2 Customs / statistical product classification


On January 1, 1988 a unified coding system was introduced to harmonise the trading
classification systems used worldwide and to allow for improved international
comparability of foreign trade statistics. This system, the Harmonised System (HS), is
based on a ten digit product classification.

A six-digit list of the product groups is presented below. These product groups can be
further divided into sub-groups on a ten digits basis.

5.2.1 Sanitary ware made of plastics such as baths, showers, washbasins, bidets,
lavatory pans, seats and covers, flushing cisterns of plastics
Baths, showers and washbasins, of plastics 392210
Lavatory seats and covers, of plastics 392220
Bidets, lavatory pans, flushing cisterns and similar sanitary or hygiene products, of
plastics 392290

Examples of sanitary ware products made of plastics are:

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5.2.2 Ceramic sanitary ware such as sinks, wash basins, wash basin pedestals, baths,
bidets, lavatory pans, flushing cisterns, urinals and similar sanitary fixtures

Ceramic sinks, wash basins, wash basin pedestals, baths, bidets, lavatory pans, flushing
cisterns, urinals and similar sanitary fixtures of porcelain or china (excl. soap dishes,
sponge holders, tooth-brush holders, towel hooks and toilet paper holders) 691010

Ceramic sinks, wash basins, wash basin pedestals, baths, bidets, lavatory pans, flushing
cisterns, urinals and similar sanitary fixtures (excl. of porcelain or china, soap dishes,
sponge holders, ooth-brush holders, towel hooks and toilet paper holders) 691090

Examples of ceramic sanitary ware products are:

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5. 3 Sanitary-ware made of iron or steel such as baths shower basins and wash
basins

Sinks and wash basins of stainless steel 732410


Baths of cast iron 732421
Baths of steel sheet 732429
Sanitary ware, including parts thereof (excl. cans, boxes and
similar containers of heading 7310, small wall cabinets for
medical supplies or toiletries and other furniture of chapter 94,
and fittings, complete sinks and wash basins, of stainless steel,
complete baths and fittings
732490

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IMPORTS

In 2002, total EU imports of sanitary ware and ceramic tiles reached a volume of 5,960
thousand tonnes, which represented a value of € 5,134 million. An overview of EU
imports of sanitary ware and ceramic tiles is presented in figure.
Overview of EU imports in million €, 2000 – 2002

Between 2000 and 2002, the value of EU imports increased by 7 percent while its volume
decreased by 10 percent. Changes in volume and value of imports were very different for
the respective EU Member States, however.

Differences across product groups with respect to changes in volume and value between
EU Member States will be discussed in this section for Germany, France, United
Kingdom, Austria, Belgium and the Netherlands. An overview of the largest EU
importers of sanitary ware and ceramic tiles is provided in figure the following

Largest EU importers of sanitary ware & ceramic tiles, 2002

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As shown in figure 5.2, Germany is the largest EU importer of sanitary ware and ceramic
tiles, with imports valued at € 1,090 million in 2002. Since 2000, its share in total EU
imports declined by 13 percent. France, the second largest EU importer (€ 1,046 million),
slightly increased its share of imports between 2000 and 2002. The United Kingdom is
Europe’s third largest importer followed by Belgium, Austria, the Netherlands, Italy and
Spain.

In 2002, intra-EU imports accounted for most of total EU imports (80 percent in value
and 81 percent in volume originated from within the EU). Developing countries
accounted for 10 percent of total value and 12 percent of total volume of EU imports.
Turkey, which accounted for 4 percent of total EU imports, is the largest non-EU country
supplying the EU market.

The most important developing countries in supplying EU imports, after Turkey (€ 219
million), are China (€ 88 million), Egypt (€ 54 million), South Africa (€ 21 million),
Morocco (€ 21 million), Thailand (€ 21 million) and Tunisia (€ 15 million).

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6 PRODUCTION PROCESS
6. 1 Production Process Flow
The following figure shows the production process flow of Sanitary Ware:

Milling & Slip


preparation Casting Green ware
Section Section Section

Final Inspection
& Packing Kiln Section Glazing
Section Section

6.1.1 Milling Section


Material in Raw shape is mixed in a standard composition and put in Ball milling
machines for grinding. The composition of raw material mix is stated below along with
the usage requirement of these material based on the production capacity of 400 pieces
per day that requires the per day slip consumption of 12 tons:

Table 9: Raw Material Composition


Qty In Tons %age
Pottery Clay 35 5
Quartz – Natural Silicon 17.5 2.5
Grinding Stone 3.5 0.5
Feldspar Stone 14 2
70 10
Water 30 4.29
Total 100 14.29

The Raw Material requirement in tons is determined based on industry general trends and
visits to various Sanitary ware manufacturing units.

The Ball section machinery keeps the raw material in constant rotation. After being
grinded the machine converts the raw material in the form of slury mixture. There is no
waste production at this stage of the process. The slury mixture is then further stirred and
undisolved material is separated from the slury mixture for further refining. This Slury in
liquid form ( called slip ) is then transferred to overhead tanks through piping for further
supply to casting section.

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6.1.2 Casting Section


The slip is then put in the moulds and then left for 2 to 3 hours for dryness. In the casting
section there should be a heating system to keep the temperature a bit higher to facilitate
the drying process. This requires the use of Gas heaters, extra heat of Kiln scetion can
also be utilised through the use of piping system. After 2 to 3 hours the unfinished
product ( Green ware ) is taken out from the moulds and kept in the open areas for further
2 to 3 days for hardness. About 20% of the Production is wasted which is recycled.

The moulds of required design and dimensions are prepared from the mother moulds.
These mould are made from Plaster of Paris for final reshaping of the required product.
Plaster of paris is mixed in water to prepare a slury mixture which is then put in the
mother moulds for 1 to 2 hours. The heating system helps to facilitate the drying process.
These sample moulds are taken out from the mother moulds and then sent to the Casting
department.

6.1.3 Green ware Section


The Green ware is then stored in the green ware section ( the storage section )
temporarily with the heating system for continuous dryness. These pieces are then
inspected, the defected pieces if any are rejected for recycling while the approved pieces
are then forwarded to the Glazing Section.

6.1.4 Glazing Section


The green ware pieces after being successful inspection are transferred to Glazing section
where the glaze of required color is sprayed on the green ware pieces for color & painting
through pump machines in the glaze booths. The glaze is manufactured for the purpose of
shining the sanitary ware products. This is manufactured using different chemicals, some
of which are listed in section 8.10, and required coloring schemes.

6.1.5 Kiln Section


In the Kiln Section, the glazed pieces are then moved into the Kiln through the Kiln cars .
The size of the Kiln should be 75 Meter Long with a capacity of 34 Kiln Cars ( 7.4" long
and containing on average 15 pieces per car ) in the kiln at a time. The Kiln is made up of
slabs imported from china and fire resisting cement. The Kiln car passes through the kiln
where the temperature increases phase by phase up to a maximum of 1125 degree celcius.
The temperature then reduces to normal and the green ware in finished sanitary ware
form comes out of the kiln. It takes a time of 32 hours for the green ware piece to remain
in the kiln to be transformed into the fininshed sanitary ware piece. The Kiln section
requires a complete heating system with industrial fans, gas station and burners.

6.1.6 Final Inspection & Packing Section


The finished sanitary ware pieces are then inspected for final finishing and then
categorized as Grade A, B and C. These are then sent to the packing department for

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packaging into cartons while the defected pieces, about 15% of total production, are
scrapped out.

6. 2 Proposed Product Mix


The proposed project will be producing the Branded Ceramic Sanitary ware items in
different Packing sizes as have been mentioned in section 6.2.2 of this pre-feasibility
report.

Table 10: Product Mix


Sanitary Ware Production Mix %age
Bath Tub including legs 5%
Shower Tray 5%
Wash Basin 25 %
Wash Stand 25 %
Toilet combination 20 %
Wall Toilets 5%
Bidet 4%
One piece Toilet 7%
Urinal 4%
100 %

6. 3 Raw Material Requirement


The Raw Material involved in the manufacturing process is detailed below:

Table 11: Raw Material Requirements


Sr. No. Description
1. Pottery Clay locally available from Mianwali & Attock
2. Feldspar ( Stone) locally available from Mansehra & Abbotabad
3. Quartz available from Frontier
4. K.D 7 & K.D10 Stone locally available
5. Lime Stone Lcallay Avaiable
6. Chemicals & Colors
a) - Zarconium Silicate available from America & Italy as it is not available locally.
b) - Zinc Oxide locally available.
c) - Barium Carbonate locally available.
d) - Clay available from China.
e) - Coloring available from England.
f) CMC Available from Germany

The Raw Material Mix is presented in Section 8.1 (Production Process) of this pre-
feasibility report.
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7 TECHNOLOGY AND PROCESSES

7. 1 Machinery Requirement
Following table shows the plant & machinery requirement for setting up a Sanitary ware
Manufacturing Unit.
Table 12: Machinery Detail
Machine Description Make No. of Cost Total
Units per unit Cost
Rupees Rupees
Slip Section Machine
- Ball Mill Machines Capacity 10 Tons Local 2 450,000 900,000
- Stirrers Local 2 200,000 400,000
- Slip Pumps 7.5 H.P Local 2 70,000 140,000
- Compressor for slip storage Local 2 58,000 116,000
Glazing Section Machine Local 4 100,000 400,000
Kiln Local 1 2,500,000 2,500,000
Accessories Local 1,000,000
TOTAL 5,456,000

7. 2 Fittings & Installations Requirement


Following fittings & installations are required for factory and management offices.
Table 13: Fittings & Installations
Items No. Cost per Total
of unit Cost
Items Rupees Rupees
Air Conditioners 4 20,000 80,000
Water Tank with a capacity of about 20,000 Litres 1 50,000 50,000
Power House
Generator 165 KVA - Local 2 1,000,000 2,000,000
also available from England, FG Wilson Engeering (Pvt)
Limited, Old Glenaran Road, BT 40 IEJ, U.k Tel # : (01574)
261000
Pannel – Local 1 200,000 200,000
Transformer 1 450,000 450,000
Electric Installations and Heating System 1,500,000
Slip Storage Tanks 2 50,000 100,000
Water Pump ( 7.5 H.P ) including boaring 400 ft. 1 250,000
TOTAL 4,630,000

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7. 3 Office Equipments Requirement


Following office equipments are required for factory and management offices.
Table 14: Office Equipment
Items No. of Cost per Total Cost
Items unit
Rupees Rupees
Computers 10 30,000 300,000
Printers 3 25,000 75,000
Photocopy Machine 2 100,000 200,000
Fax Machine 2 10,000 20,000
Telephone Sets 15 500 7,500
TOTAL 602,500

7. 4 Furniture & Fixtures Requirement


Following furniture & fixtures are required for factory and management offices.
Table 15: Furniture & Fixture
Items Cost Total
Cost
Rupees Rupees
Office Furniture - including tables, chairs, cabinets, almarahs 800,000 800,000
etc.

7. 5 Vehicles Requirement
The proposed project will also be using two cars costing Rs. 1,000,000/-, two Loader
truck for transportation purposes, four motor cycles costing 55,000, five cycles costing
3,500. The schedule is presented below:
Table 16: Vehicle Requirements
Items Cost Total Cost
Rupees Rupees
Cars 2 1,000,000 2,000,000
Loader Trucks 2 1,100,000 2,200,000
Motor Cycles 4 55,000 220,000
Cycles 5 3,500 17,500
TOTAL 4,437,500

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8 LAND & BUILDING REQUIREMENT


8. 1 Land Requirement
Land for the proposed business can be acquired on rent but it is recommended that it
should be purchased or built as machinery will be installed. Total land required for the
Sanitary Ware Manufacturing Unit is approximately 21 Kannals. Land price per kanal is
taken to be Rs. 250,000 per Kannal (Gujranwala).
Table 17: Land Details
Total Kanals Cost per Kanal Rs. Total Land cost in Rs.
Total Land Cost 21 250,000 5,250,000

- including acquisition & documentation charges

8. 2 BUILDING REQUIREMENT

Table 18: Building & Civil Works


Building & Civil works Space Construction Total Cost
Require Cost Per Sq.
d in Sq. Ft.
ft
Rupees Rupees
Milling & Slip Section 4,500 800 3,600,000
Basement of the Section 3,000 800 2,400,000
Casting Halls 25,000 450 11,250,000
Green ware storage 10,000 450 4,500,000
Kiln Hall 6,000 600 3,600,000
Glaze Section 1,400 450 630,000
Mould & Dying Section 2,000 500 1,000,000
Work Shop 600 500 300,000
Power House 1,000 700 700,000
Finished Goods Store ( Semi-open ) 20,000 300 6,000,000
Raw Material Store - Open Plot Area 6,750 - -
Air Compressor Room 500 600 300,000
Management Office 1,500 750 1,125,000
Accessories Store 200 600 120,000
Toilets 200 550 110,000
Loading, unloading Bay - - Open Plot 2,250 - -
Area
Grounds & Tracks - - Open Plot Area 9,500 - -
Total Space Requirement (sq.ft) 94,400 35,635,000

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Boundary wall 12,000 100 1,200,000


Total Infrastructure Cost 36,835,000

8. 3 Utility Requirements
Utilities required for a Sanitary ware manufacturing unit are; Electricity, Telephone, Gas
and Water.

9 HUMAN RESOURCE REQUIREMENT


9. 1 Human Resource Requirements

Following table shows the requirements of Human Recourses in the Sanitary ware
Manufacturing unit.

Table 19: Human Resource


Description Number Per Month Annual
of Salary Salary
Employees Rupees
PRODUCTION STAFF
Production Manager 1 40,000 480,000
Ceramic Engineer 1 20,000 240,000
Sections Incharge 6 9,000 648,000
Quality Incharge 1 12,000 144,000
Store Supervisor 1 9,000 108,000
Electric Foreman 1 8,000 96,000
Work Shop Foreman 1 8,000 96,000
Machine Operators 12 6,500 936,000
Skilled Labor 65 4,500 3,510,000
Un-skilled Labor ( helpers ) 25 3,500 1,050,000
Total Direct Labor 7,308,000
Admin. Manager 1 30,000 360,000
Finance Manager 1 25,000 300,000
Accounts Officer 2 8,000 192,000
Purchase Officer 1 10,000 20,000
Purchasers 3 6,000 216,000
Office Boys 3 3,000 108,000
Driver 4 4,500 216,000
Security Guard, Gate Keepers 1 4,500 54,000
Sweeper 4 3,500 168,000

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Total Administrative Salaries 1,566,000


MARKETING COST
Marketing Manager 1 50,000 600,000
Senior Sales Officer 3 20,000 720,000
Assistant Sales Officer 2 8,000 192,000
Sales Representatives 6 5,000 360,000
Total Marketing Salaries 1,872,000

Factory Wages 7,308,000


*Other Benefits 1,827,000
9,135,000
Administrative Cost 1,566,000
Other Benefits 391,500
1,957,500
Marketing Cost 1,872000
Other Benefits 468,000
2,340,000

Other benefits include EOBI, Social Security, Gratuity, Medical and Other welfare
expenses

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10 KEY ASSUMPTIONS

10. 1 Project Assumptions


Projected life of the Project 10 Years
Sponsor’s Equity 50%
Debt Finance 50%
Annual Mark up rate 15%
Debt Tenure in Years 5 Years
General Inflation rate 5%

10. 2 Operating Assumptions


Total no. of days in one Year 365
Total no. of month in one Year 12
Total no. of working days in one Year 300
No. of Shifts
Kiln 3
Milling section 1
Casting section 1
Working Hours per shift 8
Installed production capacity 400 Pieces per day
Initial Year capacity utilization 70%
Capacity Growth rate 5%
Maximum capacity utilization 95%

10. 3 Depreciation rate Assumptions


Land 5% of written down value
Building 10% of written down value
Plant & Machinery 10% of written down value
Fitting & Installations 10% of written down value
Office Equipments 10% of written down value
Furniture & Fixtures 10% of written down value
Vehicles 20% of written down value

10. 4 Long Term Security Deposits


Electricity 2 Months Bill
Sui Gas 2 Months Bill

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10. 5 Working Capital Turnover Assumptions


Raw material inventory 30 Days raw material consumption
Work in process (60% completed) 15 days expected production
Finished goods 30 days goods available for sale
Packing material 30 days goods available for sale
Stores & Spares 30 days stores & spares consumptions
Accounts Receivables 45 days
Accounts Payables
Purchases 45 days
Expenses 30 days

10. 6 Advances & Prepayments


Advance to Staff 20 % of one month salary
Loans to Staff 10 % of total annual salary
Advances against expenses 5 % of traveling, entertainment, repair,
vehicle running, sale promotion and other
general expenses
Advance to suppliers 5 % of raw material purchases
Advance Income Tax
Electricity 2,000 Per month
Telephone (6 telephone sets) 300 Per month
On import of raw material 6 % of raw material imports
Prepaid insurance 90 Days insurance cost

10. 7 Long Term Loan


Terms 5 Years
Total installments 10 bi – annually
Installments 2 per year
Mark Up 15 % Per year

10. 8 Sales Tax Payable


Sales Tax 1 month’s annual Sales Tax

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10. 9 Revenue Assumptions – sales Price & Production Mix

Items Expected Item Production Ex – Factory Final rice to


Weight Mix Price Including Retailer
Sals Tax
Rupees Rupees
Bath Tub Including 80 Kg 5% 7600 9900
Legs
Shower Tray 25 Kg 5% 3300 4400
Wash Basin 25 Kg 25 % 1250 1650
Wash Stand 25 Kg 25 % 650 880
Toilet Combination 60 Kg 20 % 2500 3300
Wall Toilets 25 Kg 5% 1600 2090
Bidets 15 Kg 4% 1000 1320
One Piece Toilet 25 Kg 7% 2000 2640
Urinal 15 Kg 4% 350 440
Sales Tax Rate pon Supply 15 %
Estimated Margin on Sales Price 25 %

10. 10 Cost of Sales

Raw Material
Raw Meterial cost during the 1st Year of operation & consumption Requirments

Cost Per Kg
Rupees
Pottery Clay 10
Feldspar (stone) 13
Quartz 14
Grinding Stone 11
Chemicals & Colors ( 10% of Slip
Production)
Zarconium Silicate ( 10 % of Total 20
consumption)
Zinc Oxide ( 10 % of Total 15
consumption)
Barium Carbonate ( 10 % of Total 45
consumption)
Clay ( 65 % of Total 12.5
consumption)

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Coloring ( 5 % of Total 500


consumption)

10. 11 Packing Material and Stores & Spares


Items Rupees
Cartons 15 Per carton
Other packing Materials 8 Per item
Stores & Spares 15 % of Raw Material Consumed

10. 12 Salaries Wages and Other Benefits


Salaries & Wages Section 10 of this Pre – Feasibility
Other Benefits 25 % of the Salaries & Wages

10. 13 Research & Development Cost


Research Cost 1% of the Turnover
Cost Per Unit No. of Units
Moulds & Dyes 5,000 1,000
Stands 500 1,000

70 % Reduction for Succeeding Year and then constant with impact of inflation.

10. 14 Other Overhead Charges


Carriage & Freight 3 % of cost of raw material consumed
Repair & Maintenance 5 % of the Cost
Machinery & Equipment Insurance I% of W D V of Machinery & Equipment
Others 2 % of total cost of goods manufactured
10 % Growth rate for repair & maintenance after three years

10. 15 Administrative Expenses Assumptions


Salaries & Wages Section 10 of this pre-feasibility
Other Benefits 25 % of total salaries & wages
Traveling & Conveyance 1 % of cost of goods manufactured
Printing & stationery 0.5 % of cost of goods manufactured
Consultancy charges
Audit fee Rs. 50,000
Out of pocket expenses Rs, 5,000

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Policy manual Rs. 300,000


Income & sales tax consultancy Rs. 200,000
Inflation rate of consultancy charges 10 %
Entertainment 0.5 % of cost of goods manufactured
Telephone fax & postage 0.75 % of cost of goods manufactured
Utility charges 0.4 % of cost of goods manufactured
Office vehicle insurance rate 4 % of written down value
Insurance rate of raw material Work in 3.5 % of cost of stock in trade
process & finish goods
Repair & maintenance 10 % of the cost
Repair & maintenance growth rate after 10 % of repair & maintenance cost
three years

10. 16 Marketing Expenses Assumptions


Salaries & Wages Section 10 of this pre-feasibility
Other benefits 25 % of total salaries & wages
VEHICLE RUNNING EXPENSES
Consumption per Rate per liter Traveling per Annual
liter day tours
2 loader trucks 5 km per liter Diesel 35 300 km per day 150
2 cars 10 km per liter Diesel 35 50 km per day 250
4 motor cycles 50 km per liter Petrol 57 50 km per day 300
PROMOTIONAL EXPENSES
Quantity Per unit
Book lets 2500 150
Banners 500 300
Sign boards 2000 100
Newspaper advertisement 24 50,000
TV/Cable advertisement (6 regions 3 months) per month 150,000
cost
OTHERS
Other Income – including profit on bank deposits and 0.25 % of turnover
scrap sale
Bank charges 0.15 % of turnover
Other charges WPPF 5 % of profit before tax
Income tax rate 35 % of profit before taxation

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11 FINANCIAL ANALYSIS

11. 1 Project Cost

- ESTIMATED PROJECT COST & PROPOSED FINANCING


RUPEES
Fixed Capital Expenditure
Land 5,250,000
Buildings 36,835,000
Plant & Machinery 5,456,000
Fittings & Installations 4,630,000
Office Equipments 602,500
Furnitures & Fixtures 800,000
Vehicles 4,437,500
Total Fixed Assets 58,011,000

Working Capital
Current Assets:
Stock in Trade 15,718,673
Stores & Spares 778,396
Advances, Deposits & Other Receivables 6,711,654
Accounts Receivable 16,079,962
39,288,685
Current Liabilities:
Accounts Payable 7,643,853
Accrued Charges 4,344,455
Sales Tax Payable 1,417,678
Provision for Taxation 2,041,617
15,447,603
Total Working Capital Requirment 23,841,082
Total Investment 81,852,082

Financed By:
Sponsors' Equity 40,926,041
Debt Financing 40,926,041

Total Investment 81,852,082

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PREF-90/Mar, 2006/ Rev 1


Pre-feasibility Study Sanitary Ware Manufacturing

11. 2 Income Statement


10.4 -Projected Profit and Loss
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES RUPEES

Sales - Net of Sales Tax 10.11


113,414,222 139,401,587 158,292,079 174,914,162 192,877,137 212,650,002 234,446,882 250,019,094 262,852,298 276,023,586

Cost of Sales 10.129 1,924,509 104,946,728 113,913,411 123,707,398 134,308,125 145,929,490 158,692,994 173,180,825 182,551,485 192,062,541

Gross Profit 21,489,713 34,454,859 44,378,668 51,206,764 58,569,012 66,720,512 75,753,888 76,838,269 80,300,813 83,961,045

Operating Expenses: 18.95 24.72 28.04 29.28 30.37 31.38 32.31 30.73 30.55 30.42

Administrative Expenses 10.13 7,712,026 7,565,524 7,770,672 8,092,200 8,478,410 8,928,484 9,442,490 10,001,811 10,593,327 11,247,526

Marketing Expenses 10.14 7,750,900 4,502,408 3,760,011 4,077,999 4,424,884 4,803,413 5,216,596 5,667,740 6,160,472 6,698,776

15,462,926 12,067,931 11,530,683 12,170,199 12,903,294 13,731,896 14,659,086 15,669,551 16,753,799 17,946,301

Operating Profit 6,026,787 22,386,928 32,847,985 39,036,565 45,665,718 52,988,616 61,094,802 61,168,718 63,547,014 66,014,744

Other Income 283,536 348,504 395,730 437,285 482,193 531,625 586,117 625,048 657,131 690,059

6,310,323 22,735,432 33,243,715 39,473,850 46,147,911 53,520,241 61,680,919 61,793,765 64,204,145 66,704,803

Financial & Other Charges

Mark up on Long Term Loans - 5,831,961 4,604,180 3,376,398 2,148,617 920,836 - - - -

Bank Charges 170,121 209,102 237,438 262,371 289,316 318,975 351,670 375,029 394,278 414,035

Other Charges 307,010 834,718 1,420,105 1,791,754 2,185,499 2,614,021 3,066,462 3,070,937 3,190,493 3,314,538

477,131 6,875,782 6,261,723 5,430,524 4,623,432 3,853,832 3,418,133 3,445,965 3,584,772 3,728,574

Profit before Taxation 5,833,192 15,859,650 26,981,993 34,043,327 41,524,479 49,666,408 58,262,786 58,347,800 60,619,373 62,976,229

Taxation 2,041,617 5,550,877 9,443,697 11,915,164 14,533,568 17,383,243 20,391,975 20,421,730 21,216,781 22,041,680

Profit after Taxation 3,791,575 10,308,772 17,538,295 22,128,162 26,990,911 32,283,165 37,870,811 37,926,070 39,402,593 40,934,549

Accumulated Profits - brought forward - 3,791,575 14,100,347 31,638,642 53,766,804 80,757,716 113,040,881 150,911,692 188,837,762 228,240,355

Accumulated Profits - carried forward 3,791,575 14,100,347 31,638,642 53,766,804 80,757,716 113,040,881 150,911,692 188,837,762 228,240,355 269,174,904

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Pre-feasibility Study Sanitary Ware Manufacturing

11. 3 Balance Sheet


10.3 - Projected Balance Sheet
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - V II Year - V III Year - IX Year - X
RUPEES RUPEES RUPEES RUPEES RUPEES RU PEES RUPEES RUPEES RUPEES RUPEES
Tangible Fixed Assets 10.654,132,900 50,639,273 47,478,525 44,607,543 41,990,145 39,595,834 37,398,779 35,377,003 33,511,708 31,786,740

Long Term Deposits


Electric ity 384,000 384,000 384,000 384,000 384,000 384,000 384,000 384,000 384,000 384,000
Sui Gas 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000 2,400,000
2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000 2,784,000
Curre nt Assets:
Stock in Tra de 10.715,718,673 17,892,024 19,863,220 21,854,705 24,024,526 26,413,141 29,044,778 31,372,660 32,973,098 34,636,307
Stores & Spare s 10.8 778,396 872,020 963,731 1,059,938 1,165,451 1,281,586 1,409,455 1,541,522 1,615,389 1,692,635
Advances, D eposits & Other Receivable s10.9 6,711,654 6,805,248 7,332,227 7,980,736 8,693,436 9,476,611 10,337,191 11,277,615 11,892,637 12,546,253
Accounts Receivable 16,079,962 19,764,472 22,442,781 24,799,474 27,346,279 30,149,692 33,240,072 35,447,913 37,267,415 39,134,851
C ash in Hand / B ank 4,885,674 11,348,641 23,098,647 38,080,916 57,509,979 81,833,355 119,745,152 156,029,626 195,237,261 235,782,461
44,174,360 56,682,404 73,700,607 93,775,768 118,739,670 149,154,384 193,776,648 235,669,336 278,985,800 323,792,507
101,091,260 110,105,677 123,963,131 141,167,311 163,513,816 191,534,218 233,959,427 273,830,339 315,281,508 358,363,248

Owners Equity:
C apital Introduced 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041 40,926,041
Accum ula ted Pro fits 3,791,575 14,100,347 31,638,642 53,766,804 80,757,716 113,040,881 150,911,692 188,837,762 228,240,355 269,174,904
44,717,616 55,026,388 72,564,683 94,692,846 121,683,757 153,966,922 191,837,733 229,763,803 269,166,396 310,100,945

Long Term Loan 10.10


32,740,833 24,555,625 16,370,416 8,185,208 - - - - - -

Curre nt Liabilities:
C urre nt Portion of Long Term Loan 10.108,185,208 8,185,208 8,185,208 8,185,208 8,185,208 - - - - -
Accounts Payable 7,643,853 8,440,382 9,307,683 10,257,567 11,304,405 12,458,299 13,730,225 15,119,301 15,870,267 16,658,656
Accrued C harges 4,344,455 3,842,169 3,964,175 4,210,163 4,475,078 4,760,683 5,068,907 5,400,266 5,742,411 6,111,672
M ark - up payable - 2,762,508 2,148,617 1,534,727 920,836 306,945
Sales Tax Payable 1,417,678 1,742,520 1,978,651 2,186,427 2,410,964 2,658,125 2,930,586 3,125,239 3,285,654 3,450,295
Pro vision for Taxation 2,041,617 5,550,877 9,443,697 11,915,164 14,533,568 17,383,243 20,391,975 20,421,730 21,216,781 22,041,680
23,632,811 30,523,664 35,028,032 38,289,257 41,830,059 37,567,295 42,121,694 44,066,535 46,115,113 48,262,303

101,091,260 110,105,677 123,963,131 141,167,311 163,513,816 191,534,218 233,959,427 273,830,339 315,281,508 358,363,248

35

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Pre-feasibility Study Sanitary Ware Manufacturing

11. 4 Cash-flow Statement

P ro je c te d C a s h F lo w
Ye a r - I Y e a r - II Y e a r - III Y e a r - IV Yea r - V Year - VI Y e a r - V II Y e a r - V III Y e a r - IX Year - X
RU PEES RU PEES RU PEES RUPEES RU PEES RU PEES RU PEES RUPEES R U P E ES RU PEES
P ro fit b e fo re Ta x a t io n 5 ,8 3 3 ,1 9 2 1 5 ,8 5 9 ,6 5 0 2 6 ,9 8 1 ,9 9 3 3 4 ,0 4 3 ,3 2 7 4 1 ,5 2 4 ,4 7 9 4 9 ,6 6 6 ,4 0 8 5 8 ,2 6 2 ,7 8 6 5 8 ,3 4 7 ,8 0 0 6 0 ,6 1 9 ,3 7 3 6 2 ,9 7 6 ,2 2 9
D e p re c ia t io n 3 ,8 7 8 ,1 0 0 3 ,4 9 3 ,6 2 8 3 ,1 6 0 ,7 4 8 2 ,8 7 0 ,9 8 2 2 ,6 1 7 ,3 9 7 2 ,3 9 4 ,3 1 1 2 ,1 9 7 ,0 5 4 2 ,0 2 1 ,7 7 6 1 ,8 6 5 ,2 9 5 1 ,7 2 4 ,9 6 8
9 ,7 1 1 ,2 9 2 1 9 ,3 5 3 ,2 7 7 3 0 ,1 4 2 ,7 4 0 3 6 ,9 1 4 ,3 0 9 4 4 ,1 4 1 ,8 7 6 5 2 ,0 6 0 ,7 2 0 6 0 ,4 5 9 ,8 4 0 6 0 ,3 6 9 ,5 7 6 6 2 ,4 8 4 ,6 6 8 6 4 ,7 0 1 ,1 9 7

S to c k in Tr a d e (1 5 ,7 1 8 ,6 7 3 ) (2 ,1 7 3 ,3 5 0 ) (1 ,9 7 1 ,1 9 6 ) (1 ,9 9 1 ,4 8 5 ) (2 ,1 6 9 ,8 2 1 ) (2 ,3 8 8 ,6 1 5 ) (2 ,6 3 1 ,6 3 7 ) (2 ,3 2 7 ,8 8 2 ) (1 ,6 0 0 ,4 3 8 ) (1 ,6 6 3 ,2 0 9 )
S to r e s & S p a r e s (7 7 8 ,3 9 6 ) (9 3 ,6 2 4 ) (9 1 ,7 1 1 ) (9 6 ,2 0 7 ) (1 0 5 ,5 1 3 ) (1 1 6 ,1 3 5 ) (1 2 7 ,8 7 0 ) (1 3 2 ,0 6 7 ) (7 3 ,8 6 7 ) (7 7 ,2 4 6 )
A d v a n c e s, D e p o sit s & O t h e r R e c e iv a b le s (6 ,7 1 1 ,6 5 4 ) (9 3 ,5 9 4 ) (5 2 6 ,9 7 9 ) (6 4 8 ,5 0 8 ) (7 1 2 ,7 0 0 ) (7 8 3 ,1 7 5 ) (8 6 0 ,5 8 1 ) (9 4 0 ,4 2 4 ) (6 1 5 ,0 2 2 ) (6 5 3 ,6 1 6 )
A c c o u n t s R e c e iv a b le (1 6 ,0 7 9 ,9 6 2 ) (3 ,6 8 4 ,5 1 0 ) (2 ,6 7 8 ,3 1 0 ) (2 ,3 5 6 ,6 9 2 ) (2 ,5 4 6 ,8 0 5 ) (2 ,8 0 3 ,4 1 3 ) (3 ,0 9 0 ,3 8 0 ) (2 ,2 0 7 ,8 4 1 ) (1 ,8 1 9 ,5 0 2 ) (1 ,8 6 7 ,4 3 6 )
A c c o u n t s P a y a b le 7 ,6 4 3 ,8 5 3 7 9 6 ,5 2 9 8 6 7 ,3 0 1 9 4 9 ,8 8 4 1 ,0 4 6 ,8 3 8 1 ,1 5 3 ,8 9 4 1 ,2 7 1 ,9 2 6 1 ,3 8 9 ,0 7 6 7 5 0 ,9 6 6 7 8 8 ,3 8 9
A c c r u e d C h a rg e s 4 ,3 4 4 ,4 5 5 (5 0 2 ,2 8 6 ) 1 2 2 ,0 0 6 2 4 5 ,9 8 9 2 6 4 ,9 1 4 2 8 5 ,6 0 6 3 0 8 ,2 2 4 3 3 1 ,3 5 9 3 4 2 ,1 4 5 3 6 9 ,2 6 1
M a rk - u p p a y a b le - 2 ,7 6 2 ,5 0 8 (6 1 3 ,8 9 1 ) (6 1 3 ,8 9 1 ) (6 1 3 ,8 9 1 ) (6 1 3 ,8 9 1 ) (3 0 6 ,9 4 5 ) 0 0 0
S a le s Ta x P a y a b le 1 ,4 1 7 ,6 7 8 3 2 4 ,8 4 2 2 3 6 ,1 3 1 2 0 7 ,7 7 6 2 2 4 ,5 3 7 2 4 7 ,1 6 1 2 7 2 ,4 6 1 1 9 4 ,6 5 3 1 6 0 ,4 1 5 1 6 4 ,6 4 1
(2 5 ,8 8 2 ,6 9 9 ) (2 ,6 6 3 ,4 8 6 ) (4 ,6 5 6 ,6 4 8 ) (4 ,3 0 3 ,1 3 4 ) (4 ,6 1 2 ,4 4 0 ) (5 ,0 1 8 ,5 6 8 ) (5 ,1 6 4 ,8 0 1 ) (3 ,6 9 3 ,1 2 7 ) (2 ,8 5 5 ,3 0 2 ) (2 ,9 3 9 ,2 1 7 )
C a s h fo rm o th e r S o u rc e s

S p o n so rs' E q u it y 4 0 ,9 2 6 ,0 4 1 - - - - - - - - -
D e b t F in a n c in g 4 0 ,9 2 6 ,0 4 1 - - - - - - - - -
8 1 ,8 5 2 ,0 8 2 - - - - - - - - -

To t a l S o u rc e s 6 5 ,6 8 0 ,6 7 5 1 6 ,6 8 9 ,7 9 2 2 5 ,4 8 6 ,0 9 2 3 2 ,6 1 1 ,1 7 4 3 9 ,5 2 9 ,4 3 6 4 7 ,0 4 2 ,1 5 2 5 5 ,2 9 5 ,0 4 0 5 6 ,6 7 6 ,4 4 9 5 9 ,6 2 9 ,3 6 5 6 1 ,7 6 1 ,9 8 0
A p p lic a tio n s:

F ixe d A sse ts 5 8 ,0 1 1 ,0 0 0 - - - - - - - - -
L o n g Te rm D e p o sits 2 ,7 8 4 ,0 0 0
R e -P a y m e n t o f L o a n - 8 ,1 8 5 ,2 0 8 8 ,1 8 5 ,2 0 8 8 ,1 8 5 ,2 0 8 8 ,1 8 5 ,2 0 8 8 ,1 8 5 ,2 0 8 - - - -
Ta xa tio n - 2 ,0 4 1 ,6 1 7 5 ,5 5 0 ,8 7 7 9 ,4 4 3 ,6 9 7 1 1 ,9 1 5 ,1 6 4 1 4 ,5 3 3 ,5 6 8 1 7 ,3 8 3 ,2 4 3 2 0 ,3 9 1 ,9 7 5 2 0 ,4 2 1 ,7 3 0 2 1 ,2 1 6 ,7 8 1
6 0 ,7 9 5 ,0 0 0 1 0 ,2 2 6 ,8 2 5 1 3 ,7 3 6 ,0 8 6 1 7 ,6 2 8 ,9 0 6 2 0 ,1 0 0 ,3 7 3 2 2 ,7 1 8 ,7 7 6 1 7 ,3 8 3 ,2 4 3 2 0 ,3 9 1 ,9 7 5 2 0 ,4 2 1 ,7 3 0 2 1 ,2 1 6 ,7 8 1

C a s h In c re a s e / ( D e c re a se ) 4 ,8 8 5 ,6 7 4 6 ,4 6 2 ,9 6 6 1 1 ,7 5 0 ,0 0 6 1 4 ,9 8 2 ,2 6 9 1 9 ,4 2 9 ,0 6 3 2 4 ,3 2 3 ,3 7 6 3 7 ,9 1 1 ,7 9 7 3 6 ,2 8 4 ,4 7 4 3 9 ,2 0 7 ,6 3 5 4 0 ,5 4 5 ,2 0 0

O p e n in g B a la n c e - 4 ,8 8 5 ,6 7 4 1 1 ,3 4 8 ,6 4 1 2 3 ,0 9 8 ,6 4 7 3 8 ,0 8 0 ,9 1 6 5 7 ,5 0 9 ,9 7 9 8 1 ,8 3 3 ,3 5 5 1 1 9 ,7 4 5 ,1 5 2 1 5 6 ,0 2 9 ,6 2 6 1 9 5 ,2 3 7 ,2 6 1

C lo sin g B a la n c e 4 ,8 8 5 ,6 7 4 1 1 ,3 4 8 ,6 4 1 2 3 ,0 9 8 ,6 4 7 3 8 ,0 8 0 ,9 1 6 5 7 ,5 0 9 ,9 7 9 8 1 ,8 3 3 ,3 5 5 1 1 9 ,7 4 5 ,1 5 2 1 5 6 ,0 2 9 ,6 2 6 1 9 5 ,2 3 7 ,2 6 1 2 3 5 ,7 8 2 ,4 6 1

36

PREF-90/Mar, 2006/ Rev 1

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