274 tradingfeasibility

Pre-Feasibility Study

DEPARTMENTAL STORE

Small and Medium Enterprise Development Authority
Government of Pakistan
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September , 2006

Pre-Feasibility Study Departmental Store

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-76

Prepared by SMEDA-Punjab

Revision 2

Revision Date SEP, 2006

Issued by SMEDA-Punjab

2

PREF-76/ Sep, 2006/Rev2


1 INTRODUCTION TO SMEDA ......................................................................5

2 PURPOSE OF THE DOCUMENT .................................................................5

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

3.1 SWOT ANALYSIS ........................................................................................5
3.1.1 Strengths and opportunities...................................................................6
3.1.2 Weaknesses and threats.........................................................................6
4 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 ..................................9
5 STRATEGIC RECOMMENDATIONS .......................................................10

5.1 MARKETING...............................................................................................10
5.2 PRICING .....................................................................................................10
5.3 STORE LAYOUT AND PRESENTATION............................................................ 10
5.4 USE OF COMPUTER .....................................................................................11
6 SECTOR AND INDUSTRY ANALYSIS......................................................11

6.1 NATIONAL ANALYSIS ................................................................................. 11
6.2 LEGAL ISSUES REGARDING INDUSTRY ......................................................... 13
7 MARKET INFORMATION .........................................................................14

7.1 MARKET POTENTIAL...................................................................................14
7.2 TARGET CUSTOMERS ..................................................................................14
7.3 RESOURCE MERCHANDISE........................................................................... 14
8 ELECTRIC AND OTHER EQUIPMENT REQUIREMENT..................... 15

3



9 LAND AND BUILDING REQUIREMENT .................................................16

9.1 LAND REQUIREMENT..................................................................................16
9.2 CONSTRUCTION COST ................................................................................. 16
9.3 RENT COST .................................................................................................16
9.4 UTILITIES REQUIREMENT ............................................................................16
10 HUMAN RESOURCE REQUIREMENT .................................................17

11 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....................................................................23
12 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

4



1 INTRODUCTION TO SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was
established with the objective to provide fresh impetus to the economy through the
launch of an aggressive SME support program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME
development approach. A few priority sectors were selected on the criterion of SME
presence. In depth research was conducted and comprehensive development plans
were formulated after identification of impediments and retardants. The all-
encompassing sectoral development strategy involved overhauling of the regulatory
environment by taking into consideration other important aspects including finance,
marketing, technology and human resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits
and vegetables, marble and granite, gems and jewelry, marine fisheries, leather and
footwear, textiles, surgical instruments, transport and dairy. Whereas the task of
SME development at a broader scale still requires more coverage and enhanced
reach in terms of SMEDA’s areas of operation.
Along with the sectoral focus a broad spectrum of business development services is
also offered to the SMEs by SMEDA. These services include identification of viable
business opportunities for potential SME investors. In order to facilitate these
investors, SMEDA provides help desk services as well as development of project
specific documents. These documents consist of information required to make well
researched investment decisions. Pre-feasibility studies and business plan
development are some of the services provided to enhance the capacity of individual
SMEs to exploit viable business opportunities in an effective way.

2 PURPOSE OF THE DOCUMENT
This particular pre-feasibility is regarding Departmental Store, which comes under
trading sector. The objective of the pre-feasibility is primarily to facilitate potential
entrepreneurs in project identification for investment and in order to serve this
objective, 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
INVESTMENT

3.1 SWOT Analysis

A 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 threats
originate from outside the company. A SWOT analysis is usually performed early in

5



the project development process, and helps organizations evaluate the environmental
factors 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 roof

3.1.2 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
entrants

4 PROJECT PROFILE
Departmental store is a large retail store organized into departments offering a
variety of merchandize, commonly part of retail chain under one roof.

4.1 Opportunity rationale

In Pakistan concept of departmental store has gained popularity in late eighties after
the emergence of UTILITY STORES by the government. Though due to lack of
proper management and planning but private sector made it one of the successful
businesses in Pakistan. Public has liked this concept due to the availability of all
basic utilities under one roof which saves their time about which people are more
conscious 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 mix

4.2 Project brief

The proposed departmental store will provide variety of goods ranges from grocery
to garments and alike to customers under one roof. The proposed project is a single
floor departmental store on an area of approximately 3000 sq. ft. The project will
offer following broad categories of goods to its customers:

6



 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 items

4.3 Proposed business legal status

Legal status is recommended to be a sole proprietorship/partnership because it
requires less legal requirement to start with than a company. Similarly a lower
income tax rate of tax is applicable to sole proprietorship than that of companies.

4.4 Project Capacity and Rationale

The proposed departmental store will have an area of 3000 sqft having
covered/indoor shopping facilities. The store will operate for 12 to 15 hours from
morning 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

7



4.6 Product mix

The 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 Years

4.8 Proposed Location

Location of stores is of primary concern with any retail organization. Spending time
and money wisely in the process of site selection is of primary importance. Some
retailers open shop in a location simply because it is the only vacant space within a
stones throw of their home or office. Knowledgeable retailers make a thorough
examination of possible locations before investing their money and dreams.
The departmental store should be centrally and conveniently located within a
developing or a newly developed residential town in any of the big cities like Lahore
Islamabad/Rawalpindi, Faisalabad Sargodha etc.

1
Assumption taken that store is situated in a town where there are 4,500 families/houses and each
house shop for Rs. 2,000 every month from the proposed store
8



Table 4.8.1:Location

City Areas
Lahore Mustafa Town
Johar Town
Wapda Town
Nespak
PIA Colony
Islamabad/Rwalpindi
Chack Lala
F-10
G-9
G-8
Abpara Market
Faisalabad
D Ground
Peoples Colony
Batala Colony
Muslim Town
Surgodha
University Road
Shaheen Park
Umer Park
The proposed departmental store is feasible in any area where there are 4,500
houses/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.
9



 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 RECOMMENDATIONS

5.1 Marketing

Regular and sustained marketing is required for a successful business of
departmental store. The important marketing channels would be flyer distribution,
billboards, banners, Cable TV, etc. Regular advertisement expense should be at least
0.5% to 1% of sales in the departmental store business. Some marketing and
promotional tips are as under:
 Existing customers are best referrals.
 Know customers’ needs.
 Introduce home delivery services.
 Frequent clearance sales

5.2 Pricing

Every retailer has a basic philosophy towards pricing their product. What is
important is that they create and stick to a strategy for pricing so as to convey a clear
message 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 suggest
that you necessarily need to compete on price, only that you be aware of providing
consumer 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 presentation

Today’s successful retailer is the one making the most profitable use of every square
foot of space in the store and in the warehouse. Because space is costly, retailers
need to take a strategic approach to its use. Floor patterns, location of merchandise,
amounts of merchandise and the appropriate displays are critical in determining
space. Misuse of space can be as detrimental to success as poor buying. It is very
important for every store to create a suitable atmosphere and appealing presentations
in order to trigger the consumer’s buying decision. In a world where one can find
identical merchandise in more than one store, layout and presentation becomes a
key-differentiating factor.
10



The proposed store should be air-conditioned. Goods should be properly arranged in
shelves categorically having ample passage between the shelves for service trolleys
and customers. There should be proper arrangement of lightening.

5.4 Use of computer

The computer is an invaluable aid in processing the large number of transactions and
vast amounts of information involved in managing a retail operation. The amount of
data needed for merchandise planning would require hundreds of man-hours to
produce, whereas a well-designed computer system can perform the task in seconds.
Software for inventory and sales recording and management should be used to have
updated data at all the times. This software not only records each and every sales
transaction but also updates stock and cash position after every transaction. This cost
around Rs. 20,000/-

6 SECTOR AND INDUSTRY ANALYSIS

6.1 National Analysis

Departmental stores business is emerging as one of the good business ventures in
Pakistan 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 and
walked through a narrow maze of shelves containing groceries. They selected their
goods 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-good
grocery store. They added meat, dairy, fruit and vegetables, and breads to their
offerings (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 sees
that offer greeting cards, flowers, video rental, fast food, childcare, and much more.
Departmental stores business falls under retail sector. This sector has shown a
significant growth over the last few years. In 2005-2006 this sector showed a growth
of 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 towards
GDP for the last 6 years at constant factor cost.

2
Source: FBS
3
Source: FBS
11



Table 6.1.14: Contribution of retail and whole sale sector towards GDP
Year Share Growth
%age %age
1999-2000 17.5 4.5
2000-2001 17.9 2.8
2001-2002 17.8 5.9
2002-2003 18.0 8.4
2004-2005 18.6 11.1
2005-2006 19.2 9.9
Gross fixed capital formation (Investment in fixed assets) in this industry by private
sector has also shown a progressive trend. In year 2005-2006 growth in gross fixed
capital formation by private sector has shown an increase of 17.9%5. The following
table 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 and
retail 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 17,875
There are thousands of departmental stores in Rawalpinidi, Faisalbad , Multan
,Gujranwala and this number is increasing day by day. In Lahore there are about 85
to 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 etc

4
Source: FBS
5
Source: FBS
6
Source: FBS
12



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 Town
Although in Pakistan the retail business is not providing employment at a large scale
directly, but indirectly it is contributing in the employment growth. As more and
more retail outlets are opening and consumer buying has shifted towards
packaged/branded products. Companies are coming with top quality products and
with the increase in production level the employment also increases.

6.2 Legal issues regarding industry7

In order to fulfill its liabilities under Income Tax Ordinance, 2001 and Sales Tax
Act, 1990, a sole proprietor, firm or company doing only retail business as
departmental store shall obtain NTN and Sales tax registration number from
concerned 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 twelve
months ending any tax period if exceeds rupees five million are required to register
with sales tax department.
A registered retailer shall issue invoice and charge and collect sales tax at the rate of
three percent (two percent sales tax and one percent income tax) of the value of
taxable supplies at the time of supplies thereof, which shall be paid on monthly basis
with return by the 15th day of the month following the tax period in which supplies
are made.
Retailers shall not be entitled to adjustment of any input tax or claim refund of sales
tax or income tax. However, one third of tax paid by the company shall be adjustable
against 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 and
firm 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 from
0.50% to 25%.

7
All information only relates to retail business under departmental store
13



7 MARKET INFORMATION

7.1 Market potential

The market for departmental stores industry in Pakistan has been developing steadily
over 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 increasing
day by day and new societies are being developed. New residential towns are being
developed. Location and amenities are some of the most vital factors in the success
of a store.

7.2 Target customers

The target customer for departmental stores is the population/family units of big
cities. Population of urban areas of Pakistan is 33% of total population. Total
estimated current population of Pakistan is 150,863,000 8(151 million).

7.3 Resource merchandise

Pakistan is one of those countries where abundance of grocery merchandise is
available in wholesale markets of every city. Suppliers normally hesitate to supply
goods on credit to new stores but after confidence building process a reasonable
credit period of 15 days to one month is available to purchasers. The major
wholesale markets in Lahore are:
 Shahalam Market/Rang Mahal
 Akbari Mandi
 Hall Road
 Urdu Bazar
 Abid Market Temple Road
 Moochi Gate

8
Source: FBS
14



8 ELECTRIC AND OTHER EQUIPMENT REQUIREMENT
Following 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 1,129,000

9
Total of 5 refregerators are required , 2 out of them will be purchased ,rest ones can
be easly obtained through Beverage & Ice cream companies.
15



9 LAND AND BUILDING REQUIREMENT

9.1 Land Requirement

The proposed departmental store requires an area of approx 3000 sq ft. it is
recommended that departmental store should be started at owned place rather on
rented premises. The main investment in this business is of land and building, which
is very high due to very expensive land in the proposed locations and high
construction cost. The cost of required land will be ranging from Rs. 4,000,000 to
Rs. 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 Utilization
Description Sq ft. Units Area
Owner’s Office 120 1 120
Accounts & Admin. Office 120 1 120
Warehouse 225 1 225
Display/shopping area/Till 2,535 1 2,535
Total 3,000

9.2 Construction cost

Current 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 cost

If the required land acquired on rent, it will cost around Rs. 100,000 to Rs. 150,000
per month in different proposed areas of Lahore.

9.4 Utilities requirement

The necessary utilities are Electricity, telephone and water. A three-phase
commercial electricity connection is required. Current rate of electricity for these
connections is Rs 8.8 per kilowatt-hour. At least two telephone connections are
required; one solely used for home delivery service calls.

16



10 HUMAN RESOURCE REQUIREMENT
Skilled salesmen are easily available at competitive wage rates. Number of workers
required 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

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11 FINANCIAL ANALYSIS

11.1 Projected Income Statement

9.4 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 - X

Sales/Revenue 43,200 50,371 55,408 60,949 67,044 73,748 81,123 89,236 98,159 103,032
Cost 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 82,337

Gross Profit 10,202 10,386 11,224 12,346 13,581 14,939 16,433 18,076 19,884 20,695

Operating Expenses: 3,257 3,400 3,700 4,032 4,401 4,789 5,240 5,738 6,288 6,821

Operating 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 4,730
Profit after Taxation 4,129 4,242 4,692 5,320 6,014 6,724 7,401 8,146 8,963 9,144

Acc. Profit b/f - 4,129 8,371 13,063 18,382 24,397 31,120 38,522 46,668 55,631

Un-appropriated Profit c/f 4,129 8,371 13,063 18,382 24,397 31,120 38,522 46,668 55,631 64,775

18

PREF-76/ July, 2004/Rev1


11.2 Projected Balance Sheet

9.3 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 - X

Tangible Fixed Assets 9,579 9,341 9,121 8,917 8,728 8,553 8,391 8,240 8,100 7,969 7,848

Preoperational 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 74,536

Owners 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 64,775

Long 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

19



11.3 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

20



11.4 Revenue Calculation
Optimum Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Projection 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

21



11.5 Purchases & Stock Calculation
Gross 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 89,792,388

Stocks (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

22



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

Administrative 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 2,843,685
legal & Audit Fee 30,000 33,000 36,300 39,930 43,923 48,315 53,147 58,462 64,308 70,738
Entertainment - - - - - - - - - -
Telephone, Fax and Postage 129,600 151,114 166,225 182,847 201,132 221,245 243,370 267,707 294,478 309,096
Electricity 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 2,243,234
Advertisement 432,000 251,856 277,042 304,746 335,220 368,742 405,617 446,178 490,796 515,160
Repair of building and equip 43,200 50,371 55,408 60,949 67,044 73,748 81,123 89,236 98,159 103,032
Fuel for generator and
delivery delivery motorcycle 77,760 90,668 99,735 109,708 120,679 132,747 146,022 160,624 176,687 185,458
Insurance stocks 64,469 78,929 86,822 95,504 105,055 115,560 127,116 139,828 153,811 161,446
Travelling conveyance 77,760 90,668 99,735 109,708 120,679 132,747 146,022 160,624 176,687 185,458
Printing and stationery 34,560 40,297 44,327 48,759 53,635 58,999 64,899 71,389 78,527 82,426
Depreciation 237,900 220,110 203,799 188,834 175,095 162,472 150,868 140,192 130,363 121,307
Amortization 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

23



12 KEY ASSUMPTIONS

12.1 Operating Assumptions
Hours operational per day 14 hours
Days 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 30

12.2 Economy Related Assumptions
Electricity cost growth rate 10%
Wage growth rate 10%
Markup rate on long-term loan 14%
Tax rates 35%

12.3 Cash Flow Assumptions
Accounts receivable (average) 0 days
Accounts payable average 15 days

12.4 Expense Assumptions
Telephone 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%
24



Purchase price growth rate 4%

12.5 Financials Assumptions
Project life (Years) 10
Debt 50%
Equity 50%
Interest rate on long-term debt 14%
Debt tenure (Years) 5
Debt payments per year 12

25


274 tradingfeasibility

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