Pre-Feasibility Study

Prime Minister’s Small Business Loan Scheme

(Gemstone Lapidary)

Small and Medium Enterprises Development Authority

Ministry of Industries & Production
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
4th Floor, Building No. 3, Aiwan e Iqbal, Egerton Road,
Lahore
Tel 92 42 111 111 456, Fax 92 42 36304926-7
helpdesk@smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KPK BALOCHISTAN

3rd Floor, Building No. 3, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Aiwan e Iqbal, Egerton Road Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042)6304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
helpdesk.punjab@smeda.org.pk helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk

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Table of Contents
1. DISCLAIMER .......................................................................................................................................... 2
2. PURPOSE OF THE DOCUMENT ......................................................................................................... 3
3. INTRODUCTION TO SMEDA .............................................................................................................. 3
4. INTRODUCTION TO SCHEME ........................................................................................................... 4
5. EXECUTIVE SUMMARY ...................................................................................................................... 4
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 4
7. CRITICAL FACTORS ............................................................................................................................ 5
8. INSTALLED & OPERATIONAL CAPACITY .................................................................................... 5
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT/SUITABLE LOCATIONS........................ 5
10. POTENTIAL TARGET MARKETS/CITIES ................................................................................. 6
11. PRODUCTION PROCESS FLOW .................................................................................................. 7
12. PROJECT COST SUMMARY ......................................................................................................... 7
12.1. PROJECT ECONOMICS ..................................................................................................................................7
12.2. PROJECT FINANCING ...................................................................................................................................8
12.3. PROJECT COST.............................................................................................................................................8
12.4. SPACE REQUIREMENT..................................................................................................................................8
12.5. MACHINERY AND EQUIPMENT .....................................................................................................................9
12.6. RAW MATERIAL REQUIREMENTS .............................................................................................................. 10
12.7. ROUGH GEMSTONES .................................................................................................................................. 10
12.8. LAPIDARY CONSUMABLES INVENTORY ..................................................................................................... 10
12.9. HUMAN RESOURCE REQUIREMENT ........................................................................................................... 11
12.10. REVENUE GENERATION ............................................................................................................................. 11
12.11. OTHER COSTS............................................................................................................................................ 11
13. CONTACTS ...................................................................................................................................... 12
14. ANNEXURE ..................................................................................................................................... 13
14.1. INCOME STATEMENT ................................................................................................................................. 13
14.2. STATEMENT OF CASH FLOW ............................................................................................................. 14
14.3. BALANCE SHEET .................................................................................................................................. 15
14.4. USEFUL PROJECT MANAGEMENT TIPS ........................................................................................... 16
14.5. USEFUL LINKS ...................................................................................................................................... 17
15. KEY ASSUMPTIONS ..................................................................................................................... 19

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1. DISCLAIMER
This information memorandum is to introduce the subject matter and provide a general
idea and information on the said matter. Although, the material included in this
document is based on data/information gathered from various reliable sources;
however, it is based upon certain assumptions which may differ from case to case. The
information has been provided on as is where is basis without any warranties or
assertions as to the correctness or soundness thereof. 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, its employees or agents do not
assume any liability for any financial or other loss resulting from this memorandum in
consequence of undertaking this activity. The contained information does not preclude
any further professional advice. The prospective user of this memorandum is
encouraged to carry out additional diligence and gather any information which is
necessary for making an informed decision, including taking professional advice from a
qualified consultant/technical expert before taking any decision to act upon the
information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

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2. PURPOSE OF THE DOCUMENT

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, and
production, marketing, finance and business management.
The purpose of this document is to facilitate potential investors in Gemstone Lapidary
by providing them with a general understanding of the business with the intention of
supporting potential investors in crucial investment decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes such
reports reveal certain thumb rules; best practices developed by existing enterprises by
trial and error, and certain industrial norms that become a guiding source regarding
various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects
provided later on, which form basis of any Investment Decision.

3. INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established in
October 1998 with an objective to provide fresh impetus to the economy through
development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the national
income, through development of the SME sector, by helping increase the number, scale
and competitiveness of SMEs" , SMEDA has carried out ‘sectoral research’ to identify
policy, access to finance, business development services, strategic initiatives and
institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment has
been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business development
services is also offered to the SMEs by SMEDA. These services include identification of
experts and consultants and delivery of need based capacity building programs of
different types in addition to business guidance through help desk services.

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4. INTRODUCTION TO SCHEME
Prime Minister’s ‘Small Business Loans Scheme’, for young entrepreneurs, with an
allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide
subsidised financing at 8% mark-up per annum for one hundred thousand (100,000)
beneficiaries, through designated financial institutions, initially through National Bank of
Pakistan (NBP) and First Women Bank Ltd. (FWBL).
Small business loans with tenure upto 7 years, and a debt : equity of 90 : 10 will be
disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber
Pakhtunkhwah, Balochistan, Gilgit Baltistan, Azad Jammu &Kashmir and Federally
Administered Tribal Areas (FATA).

5. EXECUTIVE SUMMARY
While, Lahore & Karachi with its large Gold and Gem studded jewellery making industry
are suitable locations,Gems Lapidaryis proposed to be located at Peshawar since major
trade/export is taking place in this city. Within Peshawar, Namak Mandi area is
preferable as large Gem Cluster exists here. These jewelry markets are the main
customers of the cut and polished gemstones. The proposed unit will process rough
Gemstones, initially semi precious gems stones like Aquamarine, Peridot, Tourmaline
etc. TheseGemstones mainly come from mines in Chitral, Mardan and Gilgit Baltistan in
addition to gems from Afghanistan and other nearby locations.
Proposed unit will have the capacity to process 3,000 units (Cut & Polished Gemstones,
(average 3carat weight per stone). In the first year of operation, the unit would run on
60% of the total production capacity which is processing 1,800 pieces.
The total cost of the project is Rs. 2.08 million, with capital cost of Rs. 1.19 million and
operation cost of Rs. 0.89 million. Given the cost assumptions, IRR and payback are
37% and three yearsrespectively, thus making the project a profitable venture.

The most critical considerations or factors for success of the project are:
1. Awareness about current market trends i.e the type of stone & type of cut
required by the customers, which in this case are jewellers.
2. Availability of skilled labour.
6. BRIEF DESCRIPTION OF PROJECT & PRODUCT
• Technology: This proposed unit with modern processing machines includ
faceting, cutting and polishing will produce cut and polished precious and semi-
precious gem stones of both calibrated and non-calibrated types.

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• Location:The unit will be located in or near gems trading clusters such as

Namak Mandi in Peshawar or Lahore and Karachi also where access to raw
gemstones is easy.
• Product:The unit would initially process semi precious gem stones like
Aquamarine, Tourmaline, Peridot etc which comes from Chitral and Northern
areas.
• Target Market: An enormous export market for the Pakistani gemstones exists
in Europe, USA, Middle East, Hong Kong, Taiwan, etc. It is of significance that
the Gem industry and the Government of Pakistan are recognizing the potential
for the local value addition and consequently import duty on lapidary equipment
has been waived off.
• Employment:The proposed project will provide direct employment to 9 people.
• Profitability: Financial analysis shows the unit shall be profitable from the very
first year of operation.
7. CRITICAL FACTORS
The commercial viability of the Gemstone Lapidary depends primarily on the regular
orders from the customers. Following are some other points that have to be ensured to
make the business successful:
1. Awareness about current market trends i.e the type of stone & type of cuts
required by the customers, which in this case are the jewellers.
2. Availability of skilled labour.
3. Timely delivery of orders
4. Availability of raw material (rough, uncut and unpolished gemstones).
8. INSTALLED & OPERATIONAL CAPACITY
The installed capacity shall be 3,000 pieces per year. The project will run with
approximately 60% capacity in first year of its operations with annual increase of 3% in
production, constraint being skill levels.
9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT/SUITABLE
LOCATIONS
The most appropriate location for setting up a Gem lapidary would be Peshawar since
major trade/export is taking place in this city. Within Peshawar, Namak Mandi area is
preferable as large Gem Cluster exists here. Similarly, Lahore & Karachi with its large
Gold and Gem studded jewellery making industry are other suitable locations. Chitral
and Mingora as well as Gilgit and Skardu are also suitable locations for establishment of
Gems Lapidary due to proximity of raw material sources.

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10. POTENTIAL TARGET MARKETS/CITIES

Initially the products, mainly semi-precious nature gemstones will be processed by
focusing on demand of the jewellery manufactures of Karachi, Lahore and Peshawar.
After having reasonable domestic customers base, export market can be targeted
provided exports standards are met. The main export markets for Pakistani Gemstone
are U.A.E, United Kingdom, Thailand, Canada, Italy, China, Netherlands, Saudi Arabia,
USA, Hong Kong and Germany

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11. PRODUCTION PROCESS FLOW

RawStones of DeliverytoC
Customers ustomers

Grading Cutting Polishing

Purchaseof SaletoMark
RawStones et

The process of Lapidary includes grading, cutting and polishing of Gemstones. Raw
stones are either purchased from the market or provided by the customers (Jewellers).
Individual stone is then examined (graded) and cut into smaller stones along its major
line of fracture and inclusions. The smaller pieces are then mounted on cutting tools,
which are then faceted on faceting machines. The final operation involves polishing of
the faceted stones. Polished stones are then delivered to the customers or sold in the
market.
12. PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability of
Gemstone Lapidary under the Prime Minister’s Small Business Loan Scheme. Various
cost and revenue related assumptions along with results of the analysis are outlined in
this section.

12.1. PROJECT ECONOMICS

A target processing and production of 3000 units (cut & polished gemstones) whereby
units processed and produced by Gemstone lapidary in year one will be around 1800
units (cut & polished Gemstones) running at 60% production capacity.

The following table shows internal rates of return and payback period.

Table 1 - Project Economics

Description Details
Internal Rate of Return (IRR) 37%
Payback Period (yrs) 3 years
Net Present Value (NPV) 4,671,546

Some of the critical factors influencing the commercial viability of this Gemstone
Lapidary depend primarily on the regular orders from the customers and supply of rough
Gems from mines. Apart from this awareness about current market trends i.e. the type
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of stone & type of cut required by the consumers, delivering orders on time, availability
of raw material (gemstones), reliability and contacts with the traders proximity to the
Gem cluster for easy availability of raw material must be taken care off for smooth
running of the project

A return on the investment and profitability of the project is highly dependent on the
above mentioned factors.
12.2. PROJECT FINANCING
Following table provides details of the equity required and variables related to bank
loan;
Table 2 - Project Financing
Description Details
Total Equity (10%) Rs 208,200
Bank Loan (90 %.) Rs. 1,873,800
Markup to the Borrower (%age/annum) 8%
Tenure of the Loan (Years) 7
12.3. PROJECT COST
Following requirements have been identified for operations of the proposed business.

Table 3: Capital Investment for the Project

Cost description Total Cost (Rs.)
Plant and Machinery 990,000
Furniture/ Fixture 150,000
Pre-operational Expenses 50,000
Total Fixed Cost 1,190,000
Lapidary Consumables Inventory 90,000
Raw material inventory 300,000
Upfront Building Rent (12 Months) 252,000
Working Capital 250,000
Total Project Cost 2,082,000
12.4. SPACE REQUIREMENT
The project is proposed to setup in a rented building. In this way, the initial capital cost
of the project will be far less. The area has been calculated on the basis of space
requirement for processing area and office. The Units operating in the industry do not
follow any set pattern. Following table shows calculations for project space requirement.

Table 4: Space Requirement

Space Requirement (in ft.) Rs/Sqft Sqft Amount
(Rs.)
Cutting & Polishing Room 26 500 13,000
Offices & Strong Room 28 250 7,000

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Total Area 27 750 21,000

12.5. MACHINERY AND EQUIPMENT
Following combination of machinery is required for cutting and polishing of
approximately 3000 units (cut & polished gemstone, with average weight of 3 carats)
per year. Approximate prices for machinery of different origins are given below:

Table 5: List of Machinery and Equipment

Machinery Replacement Capacity Cost Total
Quantity
Description Year Units/Hr Rs/unit Rs.
Trim Saw 2 60,000 120,000
Faceting unit 2 60,000 120,000
Calibrating machines 1 350,000 350,000
with wheels
Dual Grinder 2 40,000 80,000
Wet belt sander
• Horizontal 1 70,000 70,000
• Vertical 1 80,000 80,000
Faceting Accessories 1 150,000 150,000
Faceting Table 1 20,000 20,000
Total 990,000

Main equipments for Gemstone Lapidary is the Trim saw for initial trimming of rough
Gemstone. After the initial trimming the faceting takes place followed by polishing.

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12.6. RAW MATERIAL REQUIREMENTS

Details of Lapidary Consumables and rough (uncut and unpolished) Gemstones are
given below:
12.7. ROUGH GEMSTONES
Table 6 – Raw material (Rough Gemstones)

Raw Material Weight Carat Weight Rate/carat Total Cost (Rs.)

(grams)
Rough Aquamarine 1,500 7,500 20 150,000
Rough Tourmaline 1,500 7,500 20 150,000
Total 3,000 15,000 20 300,000

In the first stage the rough gemstone are graded on the basis of quality for further
processing. According to industry sources, when 3000 grams of rough Gemstones are
processed almost 30% i.e. 900 grams turns out which are not suitable for cutting and
polishing and around 70% i.e. 2100 grams are process able.
12.8. LAPIDARY CONSUMABLES INVENTORY
Basic raw material required for cutting and polishing gemstones is Silicon Carbide
Paper, which comes in three sizes of 220, 400 and 1000 meshes. Raw material
required for grinding and polishing of precious stones includes Diamond Powder,
Cerium Oxide and Crome Oxide, Expandable Drum and Grinding Wheels etc.

Table 7: Lapidary Consumables Inventory

Raw Material Qty Cost (Rs.)
Silicon Carbide Paper
220 mesh 200 Carats 5,000
600 mesh 300 Carats 9,000
1000 mesh 300 Carats 9,000
Diamond Powder
0.5 micron (Rs.25/carat) 200 Carats 5,000
1 micron (Rs.30/carat) 300 Carats 9,000
15 micron (Rs.30/carat) 300 Carats 9,000
Sanding belt – 6 X 0.5
220 (75/piece) 50pc 3,750
600 (75/piece) 50pc 3,750
Sanding disk
220 (75/pc) 50pc 3,750
600 (75/pc) 50pc 3,750
Cerium Oxide (500/lbs) 5 lbs. 2,500
Crome Oxide (500/lbs) 10 Kg 5,000

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Grinding Wheels (1200/piece) 12 14,400

Expandable Drum 6 X 0.5 (3000/drum) 2 6,000
Leather Belt for polishing (1000/belt) 5 5,000
MISC/Contingencies - 8,300
Total Rs. 90,000

12.9. HUMAN RESOURCE REQUIREMENT

Table 8: Human Resource Requirement
Description No. of Employees Salary per month
Manager/Supervisor 1 35,000
Cutters @10000 5 50,000
Accounts/Administration 1 12,000
Incharge
Helper/Peons 1 10,000
Security Services Fees 1 10,000
Total 9 117,000

12.10. REVENUE GENERATION

In the first year of production, the unit will process 1800 units @60% production
capacity with 3% annual production increase, and process the finished product with an
average weight of 3 carats. Initially semi- precious stones i.e Aquamarine, tourmaline
etc will be processed and later on cutting and polishing of precious stone like emerald
and ruby will be undertaken.

Table 8: Revenue

First Year
Sales First Year
Sales
Product Unit Price Production
Revenue
(Rs./Unit) Units
(Rs)
Category A(Cut & polished 3 carat 5000 306 1,530,000
Aquamarine&Tourmaline)
Category B(Cut & polished 3 carat 1800 630 1,134,000
Aquamarine&Tourmaline)
Category C(Cut & polished 3 carat 700 864 604,800
Aquamarine&Tourmaline)
Total Sales Revenue 1800 3,268,800
12.11. OTHER COSTS
An essential cost to be borne is the monthly rent @ 20,000/month and utilities charges
@ 10,000/ which are projected to increase at the rate of 10% per year. In year one the
total rent cost amounts to Rs. 240,000. Similarly, electricity expense is estimated to be
about 10,000 per month which comes to Rs.120,000 per annum.
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13. CONTACTS
1. Mr. Pervez Ellahi Malik
M/S Malik Gems International
Namak Mandi Peshawar
Ph# 0321-8592517
091-5252517
2. Mr. Afzal Khan
Lapidary Instructor
GJTMC, Peshawar
Ph# 091-5269253
3. Mr. Naveed Masood
Director GGIP,
Peshawar
Ph# 091-9213197
0333-9155097

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14. ANNEXURE
14.1. INCOME STATEMENT
Projected Income Statement

YEAR- 1 YEAR- 2 YEAR- 3 YEAR- 4 YEAR- 5 YEAR- 6 YEAR- 7 YEAR- 8 YEAR- 9 YEAR- 10

ALES
Gem Stone (Cut &
Polished) 1,530,000 1,767,150 2,041,058 2,357,422 2,722,823 3,144,860 3,632,314 4,195,322 4,845,597 5,596,665
1,134,000 1,309,770 1,512,784 1,747,266 2,018,092 2,330,896 2,692,185 3,109,474 3,591,443 4,148,116
604,800 698,544 806,818 931,875 1,076,316 1,243,145 1,435,832 1,658,386 1,915,436 2,212,329
- - - - - - - - - -

272400 3,268,800 3,775,464 4,360,661 5,036,563 5,817,231 6,718,901 7,760,331 8,963,182 10,352,476 11,957,110

OST OF SALES
Gem Stone (Cut &
Polished) 390,000 471,900 570,999 690,909 836,000 1,011,560 1,223,987 1,481,024 1,792,039 2,168,368
- - - - - - - - - -
- - - - - - - - - -
- - - - - - - - - -

OST OF GOODS SOLD 390,000 471,900 570,999 690,909 836,000 1,011,560 1,223,987 1,481,024 1,792,039 2,168,368

ectricity Expanse 120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231 282,954
ayroll Expanse (All Staff) 1,404,000 1,544,400 1,698,840 1,868,724 2,055,596 2,261,156 2,487,272 2,735,999 3,009,599 3,310,559
eprecition Expanse 57,000 54,150 51,443 48,870 46,427 44,106 41,900 39,805 37,815 35,924
achine Maintenance Expanse 22,800 21,660 20,577 19,548 18,571 17,642 16,760 15,922 15,126 14,370
ent Expanse 252,000 264,600 277,830 291,722 306,308 321,623 337,704 354,589 372,319 390,935

mortization of Preliminary Expanses 10,000 10,000 10,000 10,000 10,000 - - - - -

OTAL OPERATING EXPANSES 1,865,800 2,026,810 2,203,890 2,398,584 2,612,594 2,837,788 3,096,223 3,380,161 3,692,089 4,034,741

ARNINGS BEFORE INTEREST & TAXES 1,013,000 1,276,754 1,585,772 1,947,071 2,368,637 2,869,554 3,440,121 4,101,997 4,868,347 5,754,001

INANCIAL EXPENSES
nancial Charges on Long term loan 149,904 133,104 114,960 95,364 74,201 51,345 26,660 - - -

OTAL FINANCIAL EXPENSES 149,904 133,104 114,960 95,364 74,201 51,345 26,660 - - -

ROFIT BEFORE TAX 863,096 1,143,650 1,470,813 1,851,706 2,294,437 2,818,209 3,413,461 4,101,997 4,868,347 5,754,001

INCOME TAX 51,964 94,048 143,122 217,841 306,387 427,052 575,865 753,099 983,004 1,248,700

ROFIT AFTER TAX 811,132 1,049,603 1,327,691 1,633,865 1,988,049 2,391,157 2,837,596 3,348,898 3,885,343 4,505,301

etained Earnings at the beginning of year - 811,132 1,455,168 2,258,058 3,228,078 4,399,194 5,796,327 7,438,344 9,368,444 11,579,338

ividend 405,566 524,801 663,845 816,933 994,025 1,195,579 1,418,798 1,674,449 1,942,672

etained Earnings at the end of year 811,132 1,455,168 2,258,058 3,228,078 4,399,194 5,796,327 7,438,344 9,368,444 11,579,338 14,141,967

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14.2. STATEMENT OF CASH FLOW

Projected Cash Flow Statement

YEAR- 0 YEAR- 1 YEAR- 2 YEAR- 3 YEAR- 4 YEAR- 5 YEAR- 6 YEAR- 7 YEAR- 8 YEAR- 9 YEAR- 10
OPERATING ACTIVITIES
Net Profit - 586,077 1,118,677 1,724,100 2,400,777 3,161,409 4,015,038 4,971,636 6,042,197 7,208,850 8,512,545

Add:
Depreciation - 9,125 8,669 8,235 7,824 7,432 7,061 6,708 6,372 6,054 5,751

Amortization (Pre-operational Expenses) (9,000) 4,500 4,500 - - - - - - - -

Net profit before working capital changes (9,000) 599,702 1,131,846 1,732,335 2,408,601 3,168,841 4,022,099 4,978,344 6,048,569 7,214,904 8,518,296

Working Capital changes

Raw materials stock (1,590,840) 960,797 (24,842) (25,835) (26,869) (27,944) (29,061) (30,224) (31,433) (32,690) (33,998)

W.I.P - (20,635) (825) (858) (893) (928) (966) (1,004) (1,044) (1,086) (1,130)

Finished goods stock - (141,277) (5,651) (5,877) (6,112) (6,357) (6,611) (6,875) (7,150) (7,436) (7,734)

Accounts payable - 524,744 20,990 21,829 22,703 23,611 24,555 25,537 26,559 27,621 28,726

Accounts receivable - (660,201) (66,020) (72,622) (79,884) (87,873) (96,660) (106,326) (116,959) (128,655) (141,520)

Working capital changes (1,590,840) 663,428 (76,349) (83,364) (91,056) (99,491) (108,743) (118,892) (130,027) (142,246) (155,655)

- (58,608) (90,302) (192,320) (327,655) (512,852) (727,011) (1,013,991) (1,337,269) (1,745,598) (2,201,891)

Cash provided by/ used in operations (1,599,840) 1,204,522 965,196 1,456,651 1,989,890 2,556,498 3,186,345 3,845,461 4,581,273 5,327,060 6,160,750

FINANCING ACTIVITIES
Long term loan 1,951,664 (218,728) (236,226) (255,124) (275,534) (297,577) (321,383) (347,093) - - -

Owner equity 216,852

Dividend paid - (263,735) (514,188) (765,890) (1,036,561) (1,324,278) (1,644,013) (1,978,823) (2,352,464) (2,731,626)

Cash provided by/ used in Financing activities 2,168,516 (218,728) (499,961) (769,312) (1,041,424) (1,334,137) (1,645,661) (1,991,107) (1,978,823) (2,352,464) (2,731,626)

INVESTING ACTIVITIES
Capital Expenditure (182,500) - - - - - - - - -

Cash provided by/ used in Investing activities (182,500) - - - - - - - - - -

Net Cash Flow 386,176 985,794 465,235 687,339 948,466 1,222,361 1,540,684 1,854,354 2,602,450 2,974,596 3,429,124

Cash balance B/ F - 386,176 1,371,970 1,837,206 2,524,545 3,473,011 4,695,372 6,236,056 8,090,410 10,692,860 13,667,456

Cash balance C/ F 386,176 1,371,970 1,837,206 2,524,545 3,473,011 4,695,372 6,236,056 8,090,410 10,692,860 13,667,456 17,096,580

Cash Balance from BS 215,176 1,380,970 1,846,206 2,533,545 3,482,011 4,704,372 6,245,055 8,099,409 10,701,859 13,676,455 17,105,579

215,176 1,380,970 1,846,206 2,533,545 3,482,011 4,704,372 6,245,055 8,099,409 10,701,859 13,676,455 17,105,579

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14.3. BALANCE SHEET

PROJECTIONS

Projected Balance Sheet

YEAR-0 YEAR - 1 YEAR - 2 YEAR - 3 YEAR - 4 YEAR - 5 YEAR - 6 YEAR - 7 YEAR - 8 YEAR - 9 YEAR - 10

ASSETS

Current Assets

Cash & Bank Balance 250,000 1,091,738 1,547,543 2,134,100 2,857,207 3,748,040 4,818,379 6,093,555 7,972,682 10,112,863 12,582,265

Raw materials stock 390,000 38,464 46,542 56,315 68,142 82,452 99,766 120,717 146,068 176,742 213,858

W.I.P - 1,278 1,546 1,871 2,264 2,740 3,315 4,011 4,853 5,873 7,106

Finished goods stock - 8,750 10,588 12,811 15,501 18,756 22,695 27,461 33,228 40,206 48,649

Receivables 272,400 314,622 363,388 419,714 484,769 559,908 646,694 746,932 862,706 996,426

640,000 1,412,630 1,920,841 2,568,485 3,362,828 4,336,757 5,504,064 6,892,438 8,903,763 11,198,390 13,848,304
TOTAL CURRENT ASSETS
Fixed Assets

At Cost less: Acc. Depreciation 1,140,000 1,083,000 1,028,850 977,408 928,537 882,110 838,005 796,105 756,299 718,484 682,560

Intangible Assets

Upfront Insurance 252,000 180,000 160,000 140,000 120,000 100,000 80,000 60,000 40,000 20,000

Pre-operational Expenses Worth 50,000 40,000 30,000 20,000 10,000

TOTAL ASSETS 2,082,000 2,715,630 3,139,691 3,705,893 4,421,365 5,318,867 6,422,069 7,748,543 9,700,062 11,936,875 14,530,864

LIABILITIES AND EQUITY

Current Liabilities

Current maturity of long term loan 226,801 244,945 264,541 285,704 308,561 333,246 - - - -

Accounts Payable - 32,500 39,325 47,583 57,576 69,667 84,297 101,999 123,419 149,337 180,697

TOTAL CURRENT LIABILITIES - 259,301 284,270 312,124 343,280 378,227 417,542 101,999 123,419 149,337 180,697

Non current Liabilities

Long term Loan 1,873,800 1,436,997 1,192,052 927,511 641,806 333,246 - - - - -

EQUITY

Paid up Capital 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200 208,200

Retained Earnings - 811,132 1,455,168 2,258,058 3,228,078 4,399,194 5,796,327 7,438,344 9,368,444 11,579,338 14,141,967

Total Equity 208,200 1,019,332 1,663,368 2,466,258 3,436,278 4,607,394 6,004,527 7,646,544 9,576,644 11,787,538 14,350,167

TOTAL LIABILITIES & EQUITY 2,082,000 2,715,630 3,139,691 3,705,893 4,421,365 5,318,867 6,422,069 7,748,543 9,700,062 11,936,875 14,530,864

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14.4. USEFUL PROJECT MANAGEMENT TIPS

Technology
• Required spare parts & consumables:Suppliers credit agreements and
availability as per schedule of maintenance be ensured before start of
operations
• Energy Requirement: Should not be overestimated or installed in excess and
alternate source of energy for critical operations be arranged in advance
• Machinery Suppliers: Should be asked for training and after sales services
under the contract with the machinery suppliers. They must be communicated
about the timely availability with clear mutual understanding of the required
time period.
• Quality Assurance Equipment & Standards:Whatever means required
products quality standards need to be defined on the packaging and a system
to check them instituted, this improves credibility
Marketing
• Product Development & Packaging:Expert's help may be engaged for
product/service and packaging design & development
• Sales & Distribution Network:Strong contacts with the civil works contractors
focusing upon house constructions for middle class people and owners of retail
shops.
• Price - Bulk Discounts, Cost plus Introductory Discounts:Price should
never be allowed to compromise quality. Price during introductory phase may
be lower and used as promotional tool. Product cost estimates should be
carefully documented before price setting. Government controlled prices shall
be displayed.
Human Resources
• Adequacy & Competencies: Skilled and experienced staff should be
considered an investment even to the extent of offering share in business
profit.
• Performance Based Remuneration:Attempt to manage human resource cost
should be focused through performance measurement and performance based
compensation.
• Training & Skill Development:Encouraging training and skill of self &
employees through experts and exposure of best practices is route to success.

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Least cost options for Training and Skill Development (T&SD) may be linked
with compensation benefits and awards.

14.5. USEFUL LINKS

Prime Minister’s Office
www.pmo.gov.pk
Small & Medium Enterprises Development Authority (SMEDA)
www.smeda.org.pk
National Bank of Pakistan (NBP)
www.nbp.com.pk
First Women Bank Limited (FWBL)
www.fwbl.com.pk
Government of Pakistan
www.pakistan.gov.pk
Ministry of Industries & Production
www.moip.gov.pk
Ministry of Education, Training & Standards in Higher Education
http://moptt.gov.pk
Government of Punjab
www.punjab.gov.pk
Government of Sindh
www.sindh.gov.pk
Government of Khyber Pakhtoonkhwa
www.khyberpakhtunkhwa.gov.pk
Government of Balochistan
www.balochistan.gov.pk
Government of Gilgit Baltistan
www.gilgitbaltistan.gov.pk
Government of Azad Jammu &Kashmir
www.ajk.gov.pk

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Trade Development Authority of Pakistan (TDAP)

www.tdap.gov.pk
Security Exchange Commission of Pakistan (SECP)
www.secp.gov.pk
Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
www.fpcci.com.pk
State Bank of Pakistan (SBP)
www.sbp.org.pk
Pakistan Institute of Fashion Design(PIFD)
www.pifd.edu.pk
Pakistan Fashion Design Council (PFDC)
www.pfdc.org

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15. KEY ASSUMPTIONS

KEY ASSUMPTIONS
PRODUCTION ASSUMPTIONS
Maximum Capacity Utilization 100%
Maximum Capacity Utilization (Year-1) 60%
At 100% capacity, the following will be the per day production break-up;

Gem Stone (Cut &

Polished) 100% 10
Total production per day 10

Gem Stone (Cut &

Polished) 100% 3,000
3,000

Per Annum 3,000

OPERATING ASSUMPTIONS
Annual Production Capacity(Gem Stone (Cut & Polished)) year 1 1,800
Total Production Capacity (Year 1)
Growth Rate in Production (3%) OR (times) 1.03
Hours operational per day 8
Days operational per month 26
Days operational per year 312
ECONOMY-RELATED ASSUMPTIONS
Electricity growth rate (10%) OR (times) 1.1

Pay roll growth (10%) OR (times) 1.1

CASH FLOW ASSUMPTIONS

Accounts receivable cycle (in days) 30

Accounts payable cycle (in days) 30
WIP (Days) 1
Finished Goods (Days) 7
Raw Materials Inventory (Days) 30
Cash on Hand 260,000

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REVENUE ASSUMPTIONS

Sales price per unit in year 1

Gem Stone (Cut &
Polished) 1800

Sale price growth rate (5%) OR (times) 1.05

EXPENSES ASSUMPTIONS

Electricity Expenses Per/Year(RS) 120,000

Machine maintenance Cost /year (% of total machinery cost) 2%

Growth in maintenance cost 3 %) OR (times) 1.03
Pre-paid land rent (12 months) 252,000
Cost of Rough Gem Stones 390,000

Raw material cost growth rate 5%

Rent growth rate 5%

COST OF GOODS SOLD ASSUMPTIONS

Gem Stone (Cut

COGS Year 1 & Polished) 216.67

COGS Growth Rate (4%) OR (times) 1.04

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FINANCIAL ASSUMPTIONS

Project Life (Years) 10

Debt 90%
Equity 10%
Interest rate on long term loan 8%
Debt tenure (years) 7
Debt payments per year 1

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