274 tradingfeasibility

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274 tradingfeasibility

  1. 1. Pre-Feasibility Study DEPARTMENTAL STORE Small and Medium Enterprise Development Authority Government of Pakistan www.smeda.org.pk HEAD OFFICE 6th Floor ,LDA Plaza , Egerton Road , Lahore 54000, Pkaistan Tel: (042) 111-111-456, Fax: (042) 6304926-7 helpdesk@smeda.org.pk REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE PUNJAB SINDH NWFP BALOCHISTAN Waheed Trade Complex, 1st Floor, 36-Commercial Zone, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A Phase III, Sector XX, Complex II, M.T. Khan Road, State Life Building Chaman Housing SchemeKhayaban-e-Iqbal, DHA 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) 5896619, 5899756 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922 helpdesk@smeda.org.pk Helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk September , 2006
  2. 2. Pre-Feasibility Study Departmental StoreDISCLAIMERThe purpose and scope of this information memorandum is to introduce the subjectmatter and provide a general idea and information on the said area. All the materialincluded in this document is based on data/information gathered from varioussources and is based on certain assumptions. Although, due care and diligence hasbeen taken to compile this document, the contained information may vary due to anychange in any of the concerned factors, and the actual results may differ substantiallyfrom the presented information. SMEDA does not assume any liability for anyfinancial or other loss resulting from this memorandum in consequence ofundertaking this activity. The prospective user of this memorandum is encouraged tocarry out additional diligence and gather any information he/she feels necessary formaking an informed decision.For more information on services offered by SMEDA, please contact our website:www.smeda.org.pkDOCUMENT CONTROL Document No. PREF-76 Prepared by SMEDA-Punjab Revision 2 Revision Date SEP, 2006 Issued by SMEDA-Punjab 2PREF-76/ Sep, 2006/Rev2
  3. 3. Pre-Feasibility Study Departmental Store1 INTRODUCTION TO SMEDA ......................................................................52 PURPOSE OF THE DOCUMENT .................................................................53 CRUCIAL FACTORS & STEPS IN DECISION MAKING FORINVESTMENT.......................................................................................................5 3.1 SWOT ANALYSIS ........................................................................................5 3.1.1 Strengths and opportunities...................................................................6 3.1.2 Weaknesses and threats.........................................................................64 PROJECT PROFILE ......................................................................................6 4.1 OPPORTUNITY RATIONALE ............................................................................6 4.2 PROJECT BRIEF .............................................................................................6 4.3 PROPOSED BUSINESS LEGAL STATUS..............................................................7 4.4 PROJECT CAPACITY AND RATIONALE ............................................................7 4.5 PROJECT INVESTMENT ..................................................................................7 4.6 PRODUCT MIX ..............................................................................................8 4.7 RECOMMENDED PROJECT PARAMETERS .........................................................8 4.8 PROPOSED LOCATION ...................................................................................8 4.9 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ..................................95 STRATEGIC RECOMMENDATIONS .......................................................10 5.1 MARKETING...............................................................................................10 5.2 PRICING .....................................................................................................10 5.3 STORE LAYOUT AND PRESENTATION............................................................ 10 5.4 USE OF COMPUTER .....................................................................................116 SECTOR AND INDUSTRY ANALYSIS......................................................11 6.1 NATIONAL ANALYSIS ................................................................................. 11 6.2 LEGAL ISSUES REGARDING INDUSTRY ......................................................... 137 MARKET INFORMATION .........................................................................14 7.1 MARKET POTENTIAL...................................................................................14 7.2 TARGET CUSTOMERS ..................................................................................14 7.3 RESOURCE MERCHANDISE........................................................................... 148 ELECTRIC AND OTHER EQUIPMENT REQUIREMENT..................... 15 3PREF-76/ Sep, 2006/Rev2
  4. 4. Pre-Feasibility Study Departmental Store9 LAND AND BUILDING REQUIREMENT .................................................16 9.1 LAND REQUIREMENT..................................................................................16 9.2 CONSTRUCTION COST ................................................................................. 16 9.3 RENT COST .................................................................................................16 9.4 UTILITIES REQUIREMENT ............................................................................1610 HUMAN RESOURCE REQUIREMENT .................................................1711 FINANCIAL ANALYSIS........................................................................... 18 11.1 PROJECTED INCOME STATEMENT .............................................................18 11.2 PROJECTED BALANCE SHEET ...................................................................19 11.3 PROJECTED CASH FLOW STATEMENT .......................................................20 11.4 REVENUE CALCULATION .........................................................................21 11.5 PURCHASES & STOCK CALCULATION.......................................................22 11.6 ADMINISTRATIVE EXPENSES....................................................................2312 KEY ASSUMPTIONS................................................................................24 12.1 OPERATING ASSUMPTIONS ......................................................................24 12.2 ECONOMY RELATED ASSUMPTIONS ......................................................... 24 12.3 CASH FLOW ASSUMPTIONS......................................................................24 12.4 EXPENSE ASSUMPTIONS ..........................................................................24 12.5 FINANCIALS ASSUMPTIONS......................................................................25 4PREF-76/ Sep, 2006/Rev2
  5. 5. Pre-Feasibility Study Departmental Store1 INTRODUCTION TO SMEDAThe Small and Medium Enterprise Development Authority (SMEDA) wasestablished with the objective to provide fresh impetus to the economy through thelaunch of an aggressive SME support program.Since its inception in October 1998, SMEDA had adopted a sectoral SMEdevelopment approach. A few priority sectors were selected on the criterion of SMEpresence. In depth research was conducted and comprehensive development planswere formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved overhauling of the regulatoryenvironment by taking into consideration other important aspects including finance,marketing, technology and human resource development.SMEDA has so far successfully formulated strategies for sectors including, fruitsand vegetables, marble and granite, gems and jewelry, marine fisheries, leather andfootwear, textiles, surgical instruments, transport and dairy. Whereas the task ofSME development at a broader scale still requires more coverage and enhancedreach in terms of SMEDA’s areas of operation.Along with the sectoral focus a broad spectrum of business development services isalso offered to the SMEs by SMEDA. These services include identification of viablebusiness opportunities for potential SME investors. In order to facilitate theseinvestors, SMEDA provides help desk services as well as development of projectspecific documents. These documents consist of information required to make wellresearched investment decisions. Pre-feasibility studies and business plandevelopment are some of the services provided to enhance the capacity of individualSMEs to exploit viable business opportunities in an effective way.2 PURPOSE OF THE DOCUMENTThis particular pre-feasibility is regarding Departmental Store, which comes undertrading sector. The objective of the pre-feasibility is primarily to facilitate potentialentrepreneurs in project identification for investment and in order to serve thisobjective, the document covers various aspects of the project concept development,startup, marketing, and finance and business management.3 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT3.1 SWOT AnalysisA SWOT Analysis is a strategic planning tool used to evaluate the Strengths,Weaknesses, Opportunities, and Threats involved in a project or business venture.Strengths and weaknesses are internal to the company. Opportunities and threatsoriginate from outside the company. A SWOT analysis is usually performed early in 5PREF-76/ Sep, 2006/Rev2
  6. 6. Pre-Feasibility Study Departmental Storethe project development process, and helps organizations evaluate the environmentalfactors and internal situation facing a project.3.1.1 Strengths and opportunities Easy availability of resources(manpower/salesman) Growing population Expanding cities Status symbol to shop from big stores Popularity of variety shopping under single roof3.1.2 Weaknesses and threats Government polices Heavy taxes in the form of sales tax and income tax on retail business High competition Credibility factor in the initial phase, as suppliers do not give credit to newly entrants4 PROJECT PROFILEDepartmental store is a large retail store organized into departments offering avariety of merchandize, commonly part of retail chain under one roof.4.1 Opportunity rationaleIn Pakistan concept of departmental store has gained popularity in late eighties afterthe emergence of UTILITY STORES by the government. Though due to lack ofproper management and planning but private sector made it one of the successfulbusinesses in Pakistan. Public has liked this concept due to the availability of allbasic utilities under one roof which saves their time about which people are moreconscious these days. The factors that make this project viable in Pakistan are: Easy access to wholesale markets Plentiful availability of resources/salesman No process/transformation involve No specialized/technical knowledge required for entrepreneur Variety of goods under one roof Margin for innovation Easy diversification towards new product mix4.2 Project briefThe proposed departmental store will provide variety of goods ranges from groceryto garments and alike to customers under one roof. The proposed project is a singlefloor departmental store on an area of approximately 3000 sq. ft. The project willoffer following broad categories of goods to its customers: 6PREF-76/ Sep, 2006/Rev2
  7. 7. Pre-Feasibility Study Departmental Store Groceries and food items Baby garments and baby products Crockery and plastic items Soaps detergents and chemicals Ice-cream and beverages Stationery, greeting cards and gifts Cosmetics and artificial jewellery Watches and clocks Electronics/electrical products General items4.3 Proposed business legal statusLegal status is recommended to be a sole proprietorship/partnership because itrequires less legal requirement to start with than a company. Similarly a lowerincome tax rate of tax is applicable to sole proprietorship than that of companies.4.4 Project Capacity and RationaleThe proposed departmental store will have an area of 3000 sqft havingcovered/indoor shopping facilities. The store will operate for 12 to 15 hours frommorning to midnight. Operating time depend on localities requirements.4.5 Project investment Sr.# Description Rupees 1. Capital cost 9,679,000 2. Working capital/Cash in Hand 2,361,395 Total 12,040,395 7PREF-76/ Sep, 2006/Rev2
  8. 8. Pre-Feasibility Study Departmental Store4.6 Product mixThe store will offer the following broad categories of goods to its customer: Category of item Proportion Avg Gross Margin Groceries and food items 55% 10% Baby garments and baby products 10% 35% Crockery and plastic items 8% 30% Soaps detergents and chemicals 3% 10% Ice-cream and beverages 10% 25% Stationery, greeting cards and gifts 3% 10% Cosmetics and artificial jewellery 2% 20% Watches and clocks 2% 30% Electronics/electrical products 3% 30% General items 4% 15%4.7 Recommended project parameters Capacity Human resource Technology Location Rs. 300,000 per day1 18 Local Metropolitan Financial Summary Project cost IRR NPV Payback period Rs. 12.04 Million 38% Rs. 8.4 Million 3.7 Years4.8 Proposed LocationLocation of stores is of primary concern with any retail organization. Spending timeand money wisely in the process of site selection is of primary importance. Someretailers open shop in a location simply because it is the only vacant space within astones throw of their home or office. Knowledgeable retailers make a thoroughexamination of possible locations before investing their money and dreams.The departmental store should be centrally and conveniently located within adeveloping or a newly developed residential town in any of the big cities like LahoreIslamabad/Rawalpindi, Faisalabad Sargodha etc.1 Assumption taken that store is situated in a town where there are 4,500 families/houses and eachhouse shop for Rs. 2,000 every month from the proposed store 8PREF-76/ Sep, 2006/Rev2
  9. 9. Pre-Feasibility Study Departmental StoreTable 4.8.1:Location City AreasLahore Mustafa Town Johar Town Wapda Town Nespak PIA ColonyIslamabad/Rwalpindi Chack Lala F-10 G-9 G-8 Abpara MarketFaisalabad D Ground Peoples Colony Batala Colony Muslim TownSurgodha University Road Shaheen Park Umer ParkThe proposed departmental store is feasible in any area where there are 4,500houses/family units..4.9 Key success factors/Practical Tips for success Retail/departmental store is full of opportunities for success, but that success is reserved for those who are prepared to commit themselves to everlasting change. To obtain a good average of profits it is necessary to provide state of art facilities to customers. There should be regular and sustained marketing through fliers distribution and Cable TV. 9PREF-76/ Sep, 2006/Rev2
  10. 10. Pre-Feasibility Study Departmental Store The store should have an ample space for customer car parking. It is advisable to maintain a parking space whereby around 15-20 cars can be parked The staff hired should be well mannered and well trained in dealing with the customers.5 STRATEGIC RECOMMENDATIONS5.1 MarketingRegular and sustained marketing is required for a successful business ofdepartmental store. The important marketing channels would be flyer distribution,billboards, banners, Cable TV, etc. Regular advertisement expense should be at least0.5% to 1% of sales in the departmental store business. Some marketing andpromotional tips are as under: Existing customers are best referrals. Know customers’ needs. Introduce home delivery services. Frequent clearance sales5.2 PricingEvery retailer has a basic philosophy towards pricing their product. What isimportant is that they create and stick to a strategy for pricing so as to convey a clearmessage to the consumer. The market has certainly created the need for all retailers,even those at the higher end, to become more value oriented. That is not to suggestthat you necessarily need to compete on price, only that you be aware of providingconsumer perceived value.Some value pricing strategies are as follows: Provides the consumer with an incentive to become a repeat customer by offering a future discount. Frequent clearance sales Include a gift with purchase, buy one get one free. Feature your discounted prices predominantly.5.3 Store layout and presentationToday’s successful retailer is the one making the most profitable use of every squarefoot of space in the store and in the warehouse. Because space is costly, retailersneed to take a strategic approach to its use. Floor patterns, location of merchandise,amounts of merchandise and the appropriate displays are critical in determiningspace. Misuse of space can be as detrimental to success as poor buying. It is veryimportant for every store to create a suitable atmosphere and appealing presentationsin order to trigger the consumer’s buying decision. In a world where one can findidentical merchandise in more than one store, layout and presentation becomes akey-differentiating factor. 10PREF-76/ Sep, 2006/Rev2
  11. 11. Pre-Feasibility Study Departmental StoreThe proposed store should be air-conditioned. Goods should be properly arranged inshelves categorically having ample passage between the shelves for service trolleysand customers. There should be proper arrangement of lightening.5.4 Use of computerThe computer is an invaluable aid in processing the large number of transactions andvast amounts of information involved in managing a retail operation. The amount ofdata needed for merchandise planning would require hundreds of man-hours toproduce, whereas a well-designed computer system can perform the task in seconds.Software for inventory and sales recording and management should be used to haveupdated data at all the times. This software not only records each and every salestransaction but also updates stock and cash position after every transaction. This costaround Rs. 20,000/-6 SECTOR AND INDUSTRY ANALYSIS6.1 National AnalysisDepartmental stores business is emerging as one of the good business ventures inPakistan as it provides all the basic merchandise under one roof.In late eighties a paradigm shift in grocery store science occurred. The concept of the"Self-Serving Store" was started. Customers entered the revolutionary store andwalked through a narrow maze of shelves containing groceries. They selected theirgoods as they continued through the maze to a cashier.This phenomenon grew rapidly; and today thousands of stores exist in the big cities.These stores also began to offer products beyond the normal scope of the dry-goodgrocery store. They added meat, dairy, fruit and vegetables, and breads to theirofferings (which had formerly been offered by individual stores such as butchers,bakeries, and the "milk man").Over the decades, the departmental stores have evolved even further. Now, one seesthat offer greeting cards, flowers, video rental, fast food, childcare, and much more.Departmental stores business falls under retail sector. This sector has shown asignificant growth over the last few years. In 2005-2006 this sector showed a growthof 9.9%.2 This sector’s contribution towards GDP in the year 2005-2006 is 19.2% 3.The following table shows the contribution of retail and wholesale sector towardsGDP for the last 6 years at constant factor cost.2 Source: FBS3 Source: FBS 11PREF-76/ Sep, 2006/Rev2
  12. 12. Pre-Feasibility Study Departmental StoreTable 6.1.14: Contribution of retail and whole sale sector towards GDP Year Share Growth %age %age1999-2000 17.5 4.52000-2001 17.9 2.82001-2002 17.8 5.92002-2003 18.0 8.42004-2005 18.6 11.12005-2006 19.2 9.9Gross fixed capital formation (Investment in fixed assets) in this industry by privatesector has also shown a progressive trend. In year 2005-2006 growth in gross fixedcapital formation by private sector has shown an increase of 17.9%5. The followingtable shows gross fixed capital formation by the private sector for the last five years:Table 6.1.26: Gross fixed capital formation by private sector in wholesale andretail sector at constant prices (Rupees in Million) Year Retail and wholesale sector Rs. M 1999-2000 7,111 2000-2001 8,369 2001-2002 9,925 2002-2003 11,692 2004-2005 15,163 2005-2006 17,875There are thousands of departmental stores in Rawalpinidi, Faisalbad , Multan,Gujranwala and this number is increasing day by day. In Lahore there are about 85to 100 big departmental stores, some of these are:Table 6.1.3: Major Industry Players of Lahore Name Location PACE Gulberg Value Mart Gulberg, Allama.Iqbal.Town etc Decent Wahdat Rd., Johar Town Akbari store Allama Iqbal Town H Karim Bukhsh Gulberg, The Mall etc4 Source: FBS5 Source: FBS6 Source: FBS 12PREF-76/ Sep, 2006/Rev2
  13. 13. Pre-Feasibility Study Departmental Store Pot Pouri Fortress, DHA etc ARY cash and carry Jail Road Gulberg Best Mart Shadman Europa DHA Al Fatah Liberty Gulberg Naimat Khana The Mall CSD Stores Cavalry Ground Raheem store Allama Iqbal TownAlthough in Pakistan the retail business is not providing employment at a large scaledirectly, but indirectly it is contributing in the employment growth. As more andmore retail outlets are opening and consumer buying has shifted towardspackaged/branded products. Companies are coming with top quality products andwith the increase in production level the employment also increases.6.2 Legal issues regarding industry7In order to fulfill its liabilities under Income Tax Ordinance, 2001 and Sales TaxAct, 1990, a sole proprietor, firm or company doing only retail business asdepartmental store shall obtain NTN and Sales tax registration number fromconcerned departments.Under Sales Tax Act, 1990, a retailer whose annual turnover from supplies,whatsoever taxable or otherwise, made in any tax period during the last twelvemonths ending any tax period if exceeds rupees five million are required to registerwith sales tax department.A registered retailer shall issue invoice and charge and collect sales tax at the rate ofthree percent (two percent sales tax and one percent income tax) of the value oftaxable supplies at the time of supplies thereof, which shall be paid on monthly basiswith return by the 15th day of the month following the tax period in which suppliesare made.Retailers shall not be entitled to adjustment of any input tax or claim refund of salestax or income tax. However, one third of tax paid by the company shall be adjustableagainst the final income tax liability.For the year 2006-07 rate of tax for a small company is 20% of taxable income,while 35% income tax rate shall be applicable on all other companies.For the year 2006-2007, income up to Rs100, 000/- of a retailer (sole proprietor andfirm whose supplies are exempt from sales tax) in a year is exempt from income tax.Income acceding Rs.100, 000/- shall be charged to tax in various slabs ranging from0.50% to 25%.7 All information only relates to retail business under departmental store 13PREF-76/ Sep, 2006/Rev2
  14. 14. Pre-Feasibility Study Departmental Store7 MARKET INFORMATION7.1 Market potentialThe market for departmental stores industry in Pakistan has been developing steadilyover the last decade and a mushroom growth of large stores observed in all big cities.Still a good potential is available for new stores as population of big cities increasingday by day and new societies are being developed. New residential towns are beingdeveloped. Location and amenities are some of the most vital factors in the successof a store.7.2 Target customersThe target customer for departmental stores is the population/family units of bigcities. Population of urban areas of Pakistan is 33% of total population. Totalestimated current population of Pakistan is 150,863,000 8(151 million).7.3 Resource merchandisePakistan is one of those countries where abundance of grocery merchandise isavailable in wholesale markets of every city. Suppliers normally hesitate to supplygoods on credit to new stores but after confidence building process a reasonablecredit period of 15 days to one month is available to purchasers. The majorwholesale markets in Lahore are: Shahalam Market/Rang Mahal Akbari Mandi Hall Road Urdu Bazar Abid Market Temple Road Moochi Gate8 Source: FBS 14PREF-76/ Sep, 2006/Rev2
  15. 15. Pre-Feasibility Study Departmental Store8 ELECTRIC AND OTHER EQUIPMENT REQUIREMENTFollowing is the detail of equipment required for this project.Table 7.3.1: Detail of Equipment Sr. Description No. Cost per Total Cost Availability No. of unit Rs. Rs. Units 1 Split Air Conditioners 4 25,000 180,000 Local 2 Refrigerator and deep 2 15,000 30,000 Local freezers9 3 Computers 2 28,000 56,000 Local 4 Software (sales and 1 20,000 20,000 Local stock management) 5 Printer 1 12,000 12,000 Local 6 Fax machine, Phone 1 16,000 16,000 Local connections 7 Signboard 1 60,000 60,000 Local 8 Motor cycle with 1 60,000 60,000 Local delivery cabin 9 Electric Fittings and 100,000 100,000 Local installation 10 Generator 10 KW 1 85,000 85,000 Local 11 Service Trolleys 15 4,000 60,000 Local 13 Shelves & Counters 450,000 Local Total 1,129,0009 Total of 5 refregerators are required , 2 out of them will be purchased ,rest ones canbe easly obtained through Beverage & Ice cream companies. 15PREF-76/ Sep, 2006/Rev2
  16. 16. Pre-Feasibility Study Departmental Store9 LAND AND BUILDING REQUIREMENT9.1 Land RequirementThe proposed departmental store requires an area of approx 3000 sq ft. it isrecommended that departmental store should be started at owned place rather onrented premises. The main investment in this business is of land and building, whichis very high due to very expensive land in the proposed locations and highconstruction cost. The cost of required land will be ranging from Rs. 4,000,000 toRs. 6,000,000. In this pre feasibility the cost of 3000 sqft land taken Rs. 6.00 million.Following table shows the covered area requirement for a departmental store:Table 9.1.1: Area UtilizationDescription Sq ft. Units AreaOwner’s Office 120 1 120Accounts & Admin. Office 120 1 120Warehouse 225 1 225Display/shopping area/Till 2,535 1 2,535Total 3,0009.2 Construction costCurrent construction cost of departmental stores is approximately Rs. 800 per sq. ft.Total construction cost of 3000 sq. ft area will be Rs. 2,400,000/-9.3 Rent costIf the required land acquired on rent, it will cost around Rs. 100,000 to Rs. 150,000per month in different proposed areas of Lahore.9.4 Utilities requirementThe necessary utilities are Electricity, telephone and water. A three-phasecommercial electricity connection is required. Current rate of electricity for theseconnections is Rs 8.8 per kilowatt-hour. At least two telephone connections arerequired; one solely used for home delivery service calls. 16PREF-76/ Sep, 2006/Rev2
  17. 17. Pre-Feasibility Study Departmental Store10 HUMAN RESOURCE REQUIREMENTSkilled salesmen are easily available at competitive wage rates. Number of workersrequired for each department is given below:Table 9.4.1: Human resource required Positions Number Salary/month Annual salary (Rs.) Store Manager 1 15,000 180,000 Salesmen 10 4,500 540,000 Cashiers 2 8,000 192,000 Helpers/Cleaners 2 4,000 96,000 Accounts officer 1 8,000 96,000 Security Guard 1 4,500 54,000 Total 17 1,158,000 17PREF-76/ Sep, 2006/Rev2
  18. 18. Pre-Feasibility Study Departmental Store11 FINANCIAL ANALYSIS11.1 Projected Income Statement9.4 Projected Profit and Loss Rupees (000) Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XSales/Revenue 43,200 50,371 55,408 60,949 67,044 73,748 81,123 89,236 98,159 103,032Cost of Sales: Add opening stock 1,612 1,612 1,973 2,171 2,388 2,626 2,889 3,178 3,496 3,845 Purchases 35,856 43,899 48,288 53,117 58,429 64,272 70,699 77,769 85,546 89,792 Less closing stock 1,612 1,973 2,171 2,388 2,626 2,889 3,178 3,496 3,845 4,036 Sales tax (2,858) (3,552) (3,907) (4,297) (4,727) (5,200) (5,720) (6,292) (6,921) (7,265) 32,998 39,985 44,184 48,603 53,463 58,809 64,690 71,159 78,275 82,337Gross Profit 10,202 10,386 11,224 12,346 13,581 14,939 16,433 18,076 19,884 20,695Operating Expenses: 3,257 3,400 3,700 4,032 4,401 4,789 5,240 5,738 6,288 6,821Operating Profit 6,945 6,986 7,524 8,314 9,180 10,150 11,193 12,338 13,596 13,874 Financial Charges 787 653 500 324 121 - - - - -Profit before Taxation 6,158 6,332 7,024 7,990 9,059 10,150 11,193 12,338 13,596 13,874 Taxation 2,029 2,090 2,333 2,671 3,045 3,427 3,792 4,192 4,632 4,730Profit after Taxation 4,129 4,242 4,692 5,320 6,014 6,724 7,401 8,146 8,963 9,144Acc. Profit b/f - 4,129 8,371 13,063 18,382 24,397 31,120 38,522 46,668 55,631Un-appropriated Profit c/f 4,129 8,371 13,063 18,382 24,397 31,120 38,522 46,668 55,631 64,775 18PREF-76/ July, 2004/Rev1
  19. 19. Pre-Feasibility Study Departmental Store11.2 Projected Balance Sheet9.3 Projected Balance Sheet Rupees (ooo) Year - 0 Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XTangible Fixed Assets 9,579 9,341 9,121 8,917 8,728 8,553 8,391 8,240 8,100 7,969 7,848Preoperational expenses 100 80 60 40 20 - - - - - -Current Assets: Stocks 1,612 1,612 1,973 2,171 2,388 2,626 2,889 3,178 3,496 3,845 4,036 Cash in Hand / Bank 750 5,736 9,164 12,885 17,040 21,672 28,539 36,070 44,333 53,401 62,652 2,361 7,348 11,138 15,055 19,428 24,298 31,428 39,248 47,828 57,246 66,688 12,040 16,769 20,319 24,012 28,176 32,852 39,819 47,488 55,928 65,215 74,536Owners Equity: Capital 6,020 6,020 6,020 6,020 6,020 6,020 6,020 6,020 6,020 6,020 6,020 Accumulated Profit - 4,129 8,371 13,063 18,382 24,397 31,120 38,522 46,668 55,631 64,775Long Term Loan 6,020 5,126 4,099 2,918 1,560 0 - - - - -Current Liabilities: Current Portion of Long Term Loan - - - - - - - Accounts Payable 1,494 1,829 2,012 2,213 2,435 2,678 2,946 3,240 3,564 3,741 - 1,494 1,829 2,012 2,213 2,435 2,678 2,946 3,240 3,564 3,741 12,040 16,769 20,319 24,012 28,176 32,852 39,819 47,488 55,928 65,215 74,536 19PREF-76/ July, 2004/Rev1
  20. 20. Pre-Feasibility Study Departmental Store11.3 Projected Cash flow Statement 9.5 Projected Cash Flow Rupees (ooo) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Profit before Financial Charges & Taxation - 4,129 4,242 4,692 5,320 6,014 6,724 7,401 8,146 8,963 9,144 Amortization 20 20 20 20 20 - - - - - Depreciation - 238 220 204 189 175 162 151 140 130 121 - 4,387 4,482 4,916 5,529 6,210 6,886 7,552 8,286 9,094 9,265 Working Capital Change - 1,494 (26) (14) (16) (17) (19) (21) (23) (26) (14) Cash form other Sources Owners 6,020 - - - - - - - - - - Bank Finance 6,020 - - - - - - - - - - 12,040 - - - - - - - - - - Total Sources 12,040 5,881 4,456 4,901 5,513 6,192 6,867 7,531 8,263 9,068 9,251 Applications: Fixed Assets 9,579 - - - - - - - - - - Preoperational Expenses 100 - Working Capital 2,361 - Re -Payment of Loan - 894 1,028 1,181 1,357 1,560 - - - - - Tax - - - - - - - - - - - 12,040 894 1,028 1,181 1,357 1,560 - - - - - Cash Increase/(Decrease) - 4,987 3,428 3,720 4,155 4,632 6,867 7,531 8,263 9,068 9,251 Opening Balance 750 750 5,736 9,164 12,885 17,040 21,672 28,539 36,070 44,333 53,401 Closing Balance 750 5,736 9,164 12,885 17,040 21,672 28,539 36,070 44,333 53,401 62,652 20PREF-76/ July, 2004/Rev1
  21. 21. Pre-Feasibility Study Departmental Store11.4 Revenue Calculation Optimum Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XProjection 100% 40.00% 44.00% 48.40% 53.24% 58.56% 64.42% 70.86% 77.95% 85.74% 90.00%Projected Revenue (Rupees) 108,000,000 43,200,000 50,371,200 55,408,320 60,949,152 67,044,067 73,748,474 81,123,321 89,235,653 98,159,219 103,032,000(Rs. 300,000 per day)*Sale Price growth rate 6% 6% 6% 6% 6% 6% 6% 6% 6%Purchase price growth rate 5% 5% 5% 5% 5% 5% 5% 5% 5%Revenue (Rupees): Proportion 1 Groceries and food items 55% 23,760,000 27,704,160 30,474,576 33,522,034 36,874,237 40,561,661 44,617,827 49,079,609 53,987,570 56,667,600 2 Baby garments and baby products 10% 4,320,000 5,037,120 5,540,832 6,094,915 6,704,407 7,374,847 8,112,332 8,923,565 9,815,922 10,303,200 3 Crockery and plastic items 8% 3,456,000 4,029,696 4,432,666 4,875,932 5,363,525 5,899,878 6,489,866 7,138,852 7,852,738 8,242,560 4 Soaps detergents and chemicals 3% 1,296,000 1,511,136 1,662,250 1,828,475 2,011,322 2,212,454 2,433,700 2,677,070 2,944,777 3,090,960 5 Cosmetics and artificial jewellery 10% 4,320,000 5,037,120 5,540,832 6,094,915 6,704,407 7,374,847 8,112,332 8,923,565 9,815,922 10,303,200 6 Ice cream and Beverages 3% 1,296,000 1,511,136 1,662,250 1,828,475 2,011,322 2,212,454 2,433,700 2,677,070 2,944,777 3,090,960 7 Stationery and greeting cards/gifts 2% 864,000 1,007,424 1,108,166 1,218,983 1,340,881 1,474,969 1,622,466 1,784,713 1,963,184 2,060,640 8 Watches and Clocks 2% 864,000 1,007,424 1,108,166 1,218,983 1,340,881 1,474,969 1,622,466 1,784,713 1,963,184 2,060,640 9 Electronic and electrical appliances 3% 1,296,000 1,511,136 1,662,250 1,828,475 2,011,322 2,212,454 2,433,700 2,677,070 2,944,777 3,090,960 10 General items 4% 1,728,000 2,014,848 2,216,333 2,437,966 2,681,763 2,949,939 3,244,933 3,569,426 3,926,369 4,121,280 43,200,000 50,371,200 55,408,320 60,949,152 67,044,067 73,748,474 81,123,321 89,235,653 98,159,219 103,032,000 21PREF-76/ July, 2004/Rev1
  22. 22. Pre-Feasibility Study Departmental Store11.5 Purchases & Stock CalculationGross margin % of Sales : 1 Groceries and food items 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 2 Baby garments and baby products 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 3 Crockery and plastic items 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 4 Soaps detergents and chemicals 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 5 Cosmetics and artificial jewellery 25% 25% 25% 25% 25% 25% 25% 25% 25% 25% 6 Ice cream and Beverages 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 7 Stationery and greating cards/gifts 20% 20% 20% 20% 20% 20% 20% 20% 20% 20% 8 Watches and Clocks 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 9 Electronic and electrical appliances 30% 30% 30% 30% 30% 30% 30% 30% 30% 30% 10 General items 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%Purchases (Rupees): 1 Groceries and food items 21,384,000 24,933,744 27,427,118 30,169,830 33,186,813 36,505,495 40,156,044 44,171,648 48,588,813 51,000,840 2 Baby garments and baby products 2,808,000 3,274,128 3,601,541 3,961,695 4,357,864 4,793,651 5,273,016 5,800,317 6,380,349 6,697,080 3 Crockery and plastic items 2,419,200 2,820,787 3,102,866 3,413,153 3,754,468 4,129,915 4,542,906 4,997,197 5,496,916 5,769,792 4 Soaps detergents and chemicals 1,166,400 1,360,022 1,496,025 1,645,627 1,810,190 1,991,209 2,190,330 2,409,363 2,650,299 2,781,864 5 Cosmetics and artificial jewellery 3,240,000 3,777,840 4,155,624 4,571,186 5,028,305 5,531,136 6,084,249 6,692,674 7,361,941 7,727,400 6 Ice cream and Beverages 1,166,400 1,360,022 1,496,025 1,645,627 1,810,190 1,991,209 2,190,330 2,409,363 2,650,299 2,781,864 7 Stationery and greeting cards/gifts 691,200 805,939 886,533 975,186 1,072,705 1,179,976 1,297,973 1,427,770 1,570,548 1,648,512 8 Watches and Clocks 604,800 705,197 775,716 853,288 938,617 1,032,479 1,135,726 1,249,299 1,374,229 1,442,448 9 Electronic and electrical appliances 907,200 1,057,795 1,163,575 1,279,932 1,407,925 1,548,718 1,703,590 1,873,949 2,061,344 2,163,672 10 General items 1,468,800 1,712,621 1,883,883 2,072,271 2,279,498 2,507,448 2,758,193 3,034,012 3,337,413 3,503,088 35,856,000 43,898,501 48,288,351 53,117,186 58,428,905 64,271,795 70,698,975 77,768,872 85,545,759 89,792,388Stocks (Rupees) 1 Groceries and food items 415,800 484,823 533,305 586,636 645,299 709,829 780,812 858,893 944,782 991,683 2 Baby garments and baby products 234,000 272,844 300,128 330,141 363,155 399,471 439,418 483,360 531,696 558,090 3 Crockery and plastic items 201,600 235,066 258,572 284,429 312,872 344,160 378,575 416,433 458,076 480,816 4 Soaps detergents and chemicals 48,600 56,668 62,334 68,568 75,425 82,967 91,264 100,390 110,429 115,911 5 Cosmetics and artificial jewellery 270,000 314,820 346,302 380,932 419,025 460,928 507,021 557,723 613,495 643,950 6 Ice cream and Beverages 9,720 11,334 12,467 13,714 15,085 16,593 18,253 20,078 22,086 23,182 7 Stationery and greating cards/gifts 57,600 67,162 73,878 81,266 89,392 98,331 108,164 118,981 130,879 137,376 8 Watches and Clocks 100,800 117,533 129,286 142,215 156,436 172,080 189,288 208,217 229,038 240,408 9 Electronic and electrical appliances 151,200 176,299 193,929 213,322 234,654 258,120 283,932 312,325 343,557 360,612 10 General items 122,400 142,718 156,990 172,689 189,958 208,954 229,849 252,834 278,118 291,924 1,611,720 1,973,229 2,170,552 2,387,607 2,626,368 2,889,004 3,177,905 3,495,695 3,845,265 4,036,150 22PREF-76/ July, 2004/Rev1
  23. 23. Pre-Feasibility Study Departmental Store11.6 Administrative Expenses Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - XAdministrative Salaries 1,158,000 1,326,600 1,459,260 1,605,186 1,765,705 1,942,275 2,136,503 2,350,153 2,585,168 2,843,685legal & Audit Fee 30,000 33,000 36,300 39,930 43,923 48,315 53,147 58,462 64,308 70,738Entertainment - - - - - - - - - -Telephone, Fax and Postage 129,600 151,114 166,225 182,847 201,132 221,245 243,370 267,707 294,478 309,096Electricity 951,350 1,046,485 1,151,134 1,266,247 1,392,872 1,532,159 1,685,375 1,853,913 2,039,304 2,243,234Advertisement 432,000 251,856 277,042 304,746 335,220 368,742 405,617 446,178 490,796 515,160Repair of building and equip 43,200 50,371 55,408 60,949 67,044 73,748 81,123 89,236 98,159 103,032Fuel for generator anddelivery delivery motorcycle 77,760 90,668 99,735 109,708 120,679 132,747 146,022 160,624 176,687 185,458Insurance stocks 64,469 78,929 86,822 95,504 105,055 115,560 127,116 139,828 153,811 161,446Travelling conveyance 77,760 90,668 99,735 109,708 120,679 132,747 146,022 160,624 176,687 185,458Printing and stationery 34,560 40,297 44,327 48,759 53,635 58,999 64,899 71,389 78,527 82,426Depreciation 237,900 220,110 203,799 188,834 175,095 162,472 150,868 140,192 130,363 121,307Amortization 20,000 20,000 20,000 20,000 20,000 - - - - - 3,256,599 3,400,099 3,699,787 4,032,420 4,401,040 4,789,012 5,240,061 5,738,304 6,288,286 6,821,039 23PREF-76/ July, 2004/Rev1
  24. 24. Pre-Feasibility Study Departmental Store12 KEY ASSUMPTIONS12.1 Operating AssumptionsHours operational per day 14 hoursDays operational per year 360 days Stock inventory remain in store Category of item No of days  Groceries and food items 07  Baby garments and baby products 30  Crockery and plastic items 30  Soaps detergents and chemicals 15  Ice-cream and beverages 03  Stationery, greeting cards and gifts 30  Cosmetics and artificial jewellery 30  Watches and clocks 60  Electronics/electrical products 60  General items 3012.2 Economy Related AssumptionsElectricity cost growth rate 10%Wage growth rate 10%Markup rate on long-term loan 14%Tax rates 35%12.3 Cash Flow AssumptionsAccounts receivable (average) 0 daysAccounts payable average 15 days12.4 Expense AssumptionsTelephone Expenses (% of Revenue) 0.3%Repair and maintenance (% of revenue) 0.1%Insurance of stocks (% of stock) 4%Annual sales growth 10%Amortization of deferred cost 20%Advertisement % of sales 0.5% to 1%Electricity growth rate 10%Traveling and conveyance % of sales 0.3%Printing and stationery % of sales 0.08%Proportion of sales tax taxable sales and purchases 70%Revenue price growth rate 6% 24PREF-76/ July, 2004/Rev1
  25. 25. Pre-Feasibility Study Departmental StorePurchase price growth rate 4%12.5 Financials AssumptionsProject life (Years) 10Debt 50%Equity 50%Interest rate on long-term debt 14%Debt tenure (Years) 5Debt payments per year 12 25PREF-76/ July, 2004/Rev1

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