1. Motto
Charm Apparel PLC.
Kabulumulla,
Ruwanwella.
Tel: 036-2266220
Requesting for part finance to
construct two storied building
with overall floor area of approx
7000sqft., for the garment
factory.
Charm Apparels PLC
2. ~ 2 ~
Each customer who
patronizes our
establishment while
assisting our
company to maintain
its competitiveness
in the market
becomes a
shareholder in the
company’s
Progress
motto
3. ~ 3 ~
The Business Profile
Globalization is a complex process identified as the increasing integration of
economies around the world through trade and financial flows and transfer of
technology. The costs of living in Sri Lanka are higher than the most of countries
in Asia where Sri Lankan companies/ people pick knitting trade to survive.
Among many industries influenced by globalization Textile & Apparel Industry
stands out.
The apparel production and export accounts for two-third of Sri Lanka’s
industrial product where the three billion dollar industry is the country’s largest
export earner, directly and indirectly supporting one million of the nations and
twenty one million inhabitants. In Sri Lanka, textile and apparel industry is the
leading industrial sub-sector accounting for 67 per cent of total export earnings.
The importance of the industry emerged subsequent to export orientation of the
local economy with the introduction of open economic policies in 1977.
The industry’s contribution to economic and human development has been
significant over the years. Presently, synonymous with the textile & apparel
industry is the challenges of a post quota era.
Globalization of the textile & apparel industry has enabled consumers to source
their textile & apparel preference beyond their national boundaries to benefit
from cost and price differentials.
In this context, Sri Lanka has increased textile & apparel production to benefit
from a wider market to supply its products and the associated increase in
export earnings have benefited the trade account of Sri Lanka.
4. ~ 4 ~
The Company Profile/ management
The Charm Apparel PLC., started in to business in a small town in small scale
with only 10 workers in late April 2011, view of to assist 3 garment factories of
Nellu Fashions, where the previous owners are famous actress Mrs. Geetha
Kumarasinghe and her husband.
The company is presently managing with 50 workers of which 32-machine
operators, 8-helpers, 7 for packing & cleaning, 1-superviser, 1-factory manager
with a mechanic and is managed by 3-directors. Their brief background,
experiences and expertise are stated below;
♣ Mr. A. R. M. C. I. K. B. Ranasinghe who is a landed proprietor and is the
Trustee/ Nilame at the Kabulumulla-Devalaya by legacy who also had been a
building contractor for over a decade or so and has gained a wide experience
over the years where he has built up a sound reputation with certain policies
imposed by him and is mainly engaged in the business of transportation in
addition to the building construction. Mr. Ranasinghe is also the Director of
Transport of the Nelu Fashions where he owns 10 Lorries and supplying fire
wood to Tea & Rubber factories, raw materials to the 03 garment factories of
Nelu fashion by using them.
♣ Mrs. M. M. S. Samarasinghe who is the wife of Mr. Senaka Jayawardena who is
also a landed proprietor and Director of Nelu Fashions and having served over
23 years has gained a wide experience over apparel trade and resides at
Wattala.
♣ Mrs. M. I. Senarath who is the wife of Mr. Crishantha Senarath who is also a
landed proprietor and the Factory Manager of Nelu Fashions and having
served over 20 years has gained a wide experience over apparel trade and
resides at Hanwella.
Since Mr. Jayawardena and Mr. Senarath themselves are still fulltime working at
Nelu Fashions and their main income source comes through the Nelu Fashions
their wives have been nominated and registered as the company directors of the
Charm Apparel PLC., but the factory is managed and closely monitored by
Mr. Jayawardena and Mr. Senerath together with Mr. Ranasinghe whom are all
being very close and are being family friends for decades.
Therefore, the investors/ governors of this project are well qualified and having a
wide experience over 20 years or so in the textiles & apparel industry where they
having ample skills of recourses to managing the business.
5. ~ 5 ~
The Operation Mechanism of the Company
The Charm Apparel PLC., is a company, engaged in the textile & apparel
industry where they costs only for labour and overhead expenses of the sub
quotas.
The company receives everything i.e. Fabrics, Threads, Buttons etc., from the sub-
quota given company of what job requires, except labour force. Presently
cuttings are done at Biyagama and all the knitting works done in the Charm
Apparels which operates with 50 workers in 32 sawing machines where their
current maximum out-put is 1200 pieces per day.
The company is presently assisting to the Nelu Fashions, where the company does
not hold any assets or link to the Nelu Fashions. The company only receives sub-
quotas from them and the payments of same are made independently and
according to the job offered and according to the quality of the work/ final
product.
Very recently the company joined hands with the Omega Line at Biyagama, who
is the leading and one of giants in the textile and apparel industry in Sri Lanka,
where they have agreed to give sub-quotas continuously.
6. ~ 6 ~
The Project
There are countless definitions of sustainability where many are based on the
3-pillar model i.e. economic, ecological and social factors, which most of cases can
be measured only by subjectively but when trying to bring these into lasting
balance where we often seen it is very difficult to achieve practically.
But even then the company directors are trying their best to produce notable
achievement where certain aspects of which will be even exemplary once the
final wing is constructed of the proposed building which will create over 300
additional direct job opportunities and nearly 500 indirect job opportunities,
when the country beset by Tsunami and Civil-war despite many resources much
have been done with this proposed building to enhance its sustainability profile.
The interest and well being of workers, paid special attention of the investors
where they concerned particularly the agreeable environment, outdoor-views,
thermal comforts, fresh air and illumination i.e. lighting/ task lighting since they
believe that if the worker with having their basic needs taken care of, they are
freer to concentrate on the work at hand which lead to bring out their best.
The proposed two building of which is approx 3500sqft., in a single floor where
on the upper floor, over 150 sawing machines will be lay-over initially and the
cutting, washing, ironing, packing will be done at the ground floor which also
includes a large dining hall with toiletries.
The production spaces and the ventilation aspect of the proposed building are
being more concerned which facilitate the indoor air is not re-circulated, but
extracted by exhaust fans to ensure effective moisture and heat removal.
There is a huge tube-well will be constructed and free meals and medical care
will be supplied to ensure the health of the all workers.
Only the construction cost of the proposed building estimated to be approx
LKR.31.00 Mio., where the company directors plan to have all segments available
in a textile & apparel industry in future which includes washing, printing etc.
When the business become more profitable, a part of revenue will be utilised to
enhance such segments and thereby will be create more job opportunities
additionally.
7. ~ 7 ~
Proposed Facilities
The company requires financial assistance of LKR.25.00 Mio., as a one-off loan
with a grace period to complete the constructions of the proposed building
repayable over 8-years under SME where the Central Bank offers financial
assistance at low interest rate for entrepreneurs in view of to create new
capacities or enhance the existing capacities in the economy to product more
goods and services through the investment in SME projects.
Total estimated capital requirement/ cost & value of the proposed business
expansion will be approx LKR.50.00 Mio., as detailed given below;
♠ Proposed building LKR. 31.00 Mio. < Part finance necessary through a bank
♠ 150 sawing machines LKR. 8.00 Mio. < Already financed through equity
♠ Washing plant LKR. 6.00 Mio. < Finance through equity
♠ Generator/ Tube well/
Irons/ Ironing & Cutting
tables Others
LKR. 5.00 Mio. < Already financed through equity
Total costs & value of the existing business venture is approx LKR.30.00 Mio., as
detailed given below;
♠ Existing land/ buildings LKR. 25.00 Mio.< Already financed through bank &
equity
♠ 50 sawing machines LKR. 3.00 Mio. < Already financed through equity
♠ Other Fixture & fittings’ LKR. 2.00 Mio. < Already financed through equity
Bankers
Presently, the Charm Apparel PLC is exclusively banking with Seylan Bank PLC at
Ruwanwella branch and the subject property of the proposed building
construction is taken place is the same property where the existing registered
business location and is mortgaged to the Seylan Bank PLC at Ruwanwella.
Further, one of investors/ directors of the company are also one of prime clients
of Seylan Bank PLC at Ruwanwella, whom is banking with since 2002.
8. ~ 8 ~
Statement of projected financials for the
next 3-years
Profit & l0ss statements All figures in LKR.’000
year’12 year’13 year’14
Turnover 86,400 95,040 108,000
Direct Production Cost (66,875) (66,875) (66,875)
Gross Profit 19,525 28,165 _ 41,125
Overheads (_5,760) (_5,760) (__5,760)
Net Profit before Finance Cost 13,765 22,405 _ 35,365
Finance Cost (_5,701) (_5,701) (__5,701)
Net Profit for the Year _ 8,064 16,704 _29,664
Balance sheets All figures in LKR.’000
year’12 year’13 year’14
Assets
Non Current Assets
Property/ Plants & Equipments 60,058 60,243 61,608
Current Assets
Cash & Cash Ebullient ___ 975 _ 7,399 16,039
Total Assets 61,033 67,642 77,647
owner’s Equity
Financed by Partners 22,500 22,500 22,500
Projected Profits for the Year _ 8,006 16,704 29,664
Current liabilities
Long term & Medium term debts 30,527 28,438 25,483
Total liabilities 61,033 67,642 77,647
10. ~ 10 ~
Cash – flow notes
Investment
In-flow : Investors contribution as at date approx for LKR.22.500 Mio.
Out-flow : Existing land & building is LKR.25.00 Mio. Land & Building
Proposed Building estimated LKR.31.00 Mio. LKR.56.000 Mio.
200 sawing Machines worth LKR.11.00 Mio. Machines & Equip.
Other fixture & fittings worth LKR.08.00 Mio. LKR.19.000 Mio.
Office furniture Equipments estimated for LKR.05.000 Mio.
Total Out-flow for the Year 2011 LKR.80.000 Mio.
============
In 2012 Vehicle needed for goods transportation LKR.07.500 Mio.
Office-cubicles/ Machines & Equip for 3-Directors LKR.02.500 Mio.
Total Out-flow for the Year 2011 LKR.10.000 Mio.
============
operating
In-flow : Sales Proceeds - TCW (1200 Pics. @ US$.2.00) = 2400 @ LKR.100/-
LKR.00.240 Mio.
Sales Proceeds - TCW (1300 Pics. @ US$.1.00) = 1300 @ LKR.100/-
LKR.00.130 Mio.
Sales Proceeds - TCW (3300 Pics. @ US$.1.05) = 3465 @ LKR.100/-
LKR.00.347 Mio.
Omega Line (1200 Pics. per day @ US$.0.60) = 720 x 162 days @
LKR.100/-
LKR.11.664 Mio.
Total In-flow for the Year 2011 LKR.12.381 Mio.
============
In 2012 (yearly prod. 864,000/- @ LKR.100/-) = LKR.86.400 Mio.
(4800 Pics. per days x 300 days per year @ US$.0.60 = 864,000/-)
In 2013 (yearly prod. 864,000/- @ LKR.110/-) = LKR.95.040 Mio.
(US$ rated @ LKR.110/- due to mitigate inflation in the year’13)
In 2014 (yearly prod. 864,000/- @ LKR.125/-) = LKR.108.00 Mio.
(US$ rated @ LKR.125/- due to mitigate inflation in the year’14)
11. ~ 11 ~
Out-flow : Salaries & Wages paid for Apr’11 & May’11 = LKR.00.540 Mio.
Salaries from Jun-Dec’11 (LKR.0.90 Mio. x 7) = LKR.06.300 Mio.
Electricity: Apr’11 (10 Machins @ LKR.1,700/-) = LKR.00.017 Mio.
Electricity: May’11 (30 Machins @ LKR.1,700/-) = LKR.00.051 Mio.
Electricity: Jun-Dec’11 (50 Machins x 7 months) = 350 @LKR.1,700/-
LKR.00.595 Mio.
Overheads & others (LKR.35,000/- x 9 months) = LKR.00.315 Mio.
Admin & Est. (LKR.250,000/-x 3 dir x 7 months)= LKR.05.250 Mio.
Total Out-flow for the Year 2011 LKR.13.068 Mio.
============
Year ’12 – Year’14, Electricity for 200 Machines = LKR.04.080 Mio.
(200 Machins @ LKR.1,700/- per year)
Year ’12 – Year’14, Overheads for 200 Machines = LKR.01.680 Mio.
(200 Machins @ LKR.8,400/- per year)
Year ’12 – Year’14, Admin fees for 3 directors = LKR.18.000 Mio.
(LKR.500,000/- per month x 3 x 12 months)
debt/ equity
In-flow : Proposed finance through SME = LKR.25.000 Mio.
Part finance for a Vehicle in Year ’12 = LKR.03.000 Mio.
Out-flow : Proposed SME rate @ 9% p.a. for 8-years = LKR.00.636 Mio.
(Int. per month is LKR.105,838/42 x 6 months)
Proposed SME rate @ 9% p.a. for 8-years = LKR.01.270 Mio.
(Int. per month is LKR.105,838/42 x 12months)
Proposed SME rate @ 9% p.a. for 8-years = LKR.00.233 Mio.
(Int. per month is LKR.105,838/42 x 6 months) .
Total Out-flow from Year’12 – Year’14 LKR.01.503 Mio.
============
Assumptions:
♣ Projected sales considered, only the businesses expected from Omega-Line
due to affect safe projections.
♣ For the year 2013 & 2014, higher US$-LKR conversion rate calculated due to
inflation and it has not being considered for the 2012 due to safe projections.
♣ Administration fees from Apr – May ’11 not being taken.
12. ~ 12 ~
Capital budgeting—Return-On-Investment (ROI) analysis
ROI is the one of the most popular and widely recognised traditional method of
evaluating investment projects and is indentified as the number of years
required to recover the initial investment in a project
All figures in LKR.’000
Cash flow and ROI statement
Benefit Drivers Year-0 Year-1 Year-2 Year-3
Greater margin driven by higher production capacity 86,400 95,040 108,000
Improved cycle time benefits:
Reduced energy cost due to less running time 125 125 125
Reduced labour cost due to less running time 100 100 100
Fewer accidents, resulting in less workers'
compensation
100 100 100
Improved quality benefits:
Fewer defects, resulting in less rework 100 125 150
Fewer customer returns, resulting in less reprocessing
costs
25 50 75
Reduced time spent handling customer complaints 25 50 75
Total annual benefits 86,875 95,590 108,625
Implementation filter 75% 85% 90%
Total benefits realized 65,156 81,252 97,763
Costs Year 0 Year 1 Year 2 Year 3
Total 50,450 54,635 54,635 54,635
Benefits Year 0 Year 1 Year 2 Year 3
Annual benefit flow (50,450) 10,521 26,617 43,128
Cumulative benefit flow (50,450) (39,929) (13,312) 29,815
Discounted benefit flow Year 0 Year 1 Year 2 Year 3
Discounted costs 50,450 47,509 41,312 35,923
Discounted benefits 0 56,658 61,438 64,280
Total discounted benefit flow (50,450) 9,149 20,126 28,357
Total cumulative discounted benefit flow (50,450) (41,301) (21,175) 7,182
Initial investment Year 0 Year 1 Year 2 Year 3
Initial investment 50,000 0 0 0
Implementation costs 400 0 0 0
Ongoing support costs 0 48,875 48,875 48,875
Training costs 50 25 25 25
Other costs 0 5,735 5,735 5,735
Total costs 50,450 54,635 54,635 54,635
ROI measures
Cost of capital 15%
Net present value 7,182
Return on investment 58% 85% 104%
Payback (in years) 2.31 => 2-Years & 4-Months
13. ~ 13 ~
Viability & Feasibility of the project
Marketability
In the enchanting apparel industry where garments are a prized obsession in the
fashion world, there are serious constraints in terms of diversifying the industry
into the international market where the Sri Lanka’s premier marketable products
are niche items like lingerie, high value dresses, high performance apparel and
value added products.
The country’s strengths are being world-class manufacturers, highly
complainants and ethicalness, environmental friendliness, reliability, good
quality, logistic excellence and innovativeness while the weaknesses are poor
backward integration, costs, distance to market and general lack of productivity
while the opportunities were mainly branding and the threats to the industry
were bilateral and multi lateral agreements between trading blocks and labour
shortages.
The industry is focussing on targeting new export markets like Japan, China,
Russia and India towards converting the product portfolio into a high end
product.
However, the textile & apparel industry in Sri Lanka should be cautious because
the economic recovery is not at full strength. Making the ‘Made in Sri Lanka’ label
synonymous with quality, reliability and social and environmental accountability
in the global context is been given top priority.
The proposed business is located in close proximity of Nelu Fashions at
Kabulumulla on the Avissawella–Hatton main road and it is expected that the
Nelu Fashions garment’s sub quotas will be given continuously and that can be
assure since the proposed company’s true governors of which are also the key
players in the Nelu Fashions.
Even at present one of the giants in the Sri Lankan textile & apparel industry, the
‘Omega Line’ signed agreement with that they will be given sub quotas/ business
to the Charm Apparels continuously starting from 16th June 2011 where they are
much concerned and impressed by the quality of the finished goods.
Thus, there would be a high demand and market for the proposed project of
which that they aim to finish 4,800 pieces per day @ US$.0.60 per piece with full
swing in early January 2012 after finalise the proposed construction and under
above circumstances this would not be a dream.
14. ~ 14 ~
Technicality
All specialised personals/ workers required for this project to perform who are
commonly and cheaply available in this vicinity and this project does not involves
any high valued sophisticated machines and equipments where skilled personal/
worker should attend to.
Financially
Even at present the company joined hands with one of Sri Lanka’s biggest
company in the textile & apparel industry, Omega Line to give business
continuously in addition to the sub quotas given from the Nelu Fashions.
Furthermore, this project makes LKR.7.182 million annual net profit in present
value terms with ROI rate of 2.31, therefore this project is financially viable.
Objective of the report
The objective of this report is to explain in detail of the project and to evaluate
the project in 4 different aspects i.e. marketability, technicality, managerial and
financial feasibility of the above project to expand the business locally &
internationally by providing infrastructure facilities to human resource thereby
giving rise to job opportunities in the country.
