Smeda Ice Plant (15 Tons) 4e6e5f

Pre-Feasibility Study

ICE PLANT (15 Tons)

Small and Medium Enterprise Development Authority Government of Pakistan www.smeda.org.pk HEAD OFFICE Waheed Trade Complex, 1 Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756 [email protected] st

REGIONAL OFFICE PUNJAB Waheed Trade Complex, 1st Floor, 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore. Tel: (042) 111-111-456 Fax: (042) 5896619, 5899756 [email protected]

REGIONAL OFFICE SINDH

REGIONAL OFFICE NWFP

REGIONAL OFFICE BALOCHISTAN

5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 [email protected]

Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 [email protected]

Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 831623, 831702 Fax: (081) 831922 [email protected]

November, 2003

Pre-feasibility Study

1

Ice Plant (15 Tons)

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 program.1 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-encoming sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including financial aspects, niche marketing, technology upgradation 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, urban transport and dairy. Whereas the task of SME development at a broader scale still requires more coverage and enhanced reach in 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 business guidance through its 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 a better way. This document is in the continuation of this effort to enable potential investors to make wellinformed investment decisions.

1

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. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form. 1

For more information on services offered by SMEDA, please our website: www.smeda.org.pk

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Ice Plant (15 Tons)

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

3

PROJECT PROFILE 3.1

Project Brief

This project is related to setting up an ice plant of 15-tons capacity per day to cater to the needs of the institutions such as hotels, restaurants, bakeries, dairy, fish seller’s etc. The proposed project will manufacture ice blocks varying from 130 kg to 150 kg in weight. 3.2

Opportunity Rationale

Most of areas of Pakistan have long duration of summer due to which demand for ice is high for more than six months of the year. As Pakistan is a developing country and large portion of the population cannot afford refrigerators for domestic use. Another growing market for ice plants are industries linked to food products i.e. fish, dairy, bakeries, restaurants etc. With this growing demand a large number of ice plants are operating in the country. There are approximately 1,300 ice plants operating in the Punjab, catering to the needs of different institutional and domestic buyers. The total installed capacity of ice plants in Punjab is approximately 432,669-tons of ice blocks per day2. The need of ice blocks is increasing due to economic growth, as major buyers are institutional buyers (dairy, bakery, hotel, etc.), who buy in bulk. 3.3

Market Entry Timing

The ice plant should be started up when the season begins in mid April and closed when it ends up in September. The peak season is of four months i.e. from mid April to mid August. The rest of the period i.e. two months is moderate season. The best time to enter into this business is in the month of April. 3.4

Proposed Business Legal Status

It is recommended that this project should be started as sole proprietorship or partnership as this does not involve heavy investment. Moreover, less complications and costs are involved in forming, istering and running the sole proprietorship or partnership business. The tax rates applicable for sole proprietorship is lower than private or public limited. Most of the ice plants in the country are operating as sole proprietorship or partnership basis.

2

Source: Directory of Punjab Industrial Establishment, 2002-03. 2

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3.5

Ice Plant (15 Tons)

Project Capacity and Rationale

The proposed project has a capacity of producing 300 ice blocks on the basis of 2 shifts of 12 hours. 3.6

Project Investment

The total cost of the project is Rs. 4.79 million. This amount includes the land, machinery, building, water and electricity connection and salt required etc. The cost of land varies from area to area. 3.7

Proposed Product Mix

The facility will produce 250-300 ice blocks of weight 130-150 kg as solid ice blocks in peak season and 100-150 ice blocks in off-season. 3.8

Recommended Project Parameters

Capacity 250 Ice Blocks/Day

Human Resource 14

Project Cost

IRR

4.79 million

25%

3.9

Technology/Machinery Local

Financial Summary NPV Payback Period 1,337,614

4.75

Location Areas close to the cities. Cost of Capital (Wacc) 16.8%

Proposed Location

It is recommended that the proposed project be installed in localities close to cities, so that the ice blocks are accessible to the dealers and institutional buyers. 3.10

Key Success Factors/Practical Tips for Success

•

The location plays an important role, as finished ice blocks should be easily accessible to dealers.

•

It is important that solid ice blocks are produced through proper freezing time utilization as solid ice blocks are much heavier, more transparent and provides higher price in the market.

•

Weather factor plays an important role, due to seasonal nature of the business i.e. In summers the demand for ice blocks increases, while after mid September the temperature starts changing & demand starts to fall, which means the entrepreneur should reduce the production according to the demand of ice.

•

One of the most important aspects for success of any business is minimizing the cost of production, in case of ice plant this can be achieved by proper training of workers, which would ensure reduction in raw material wastage and better maintenance of machinery etc.

•

It is advisable to run the plant on natural gas, rather than electricity, as the major expense in production of ice is electricity. The use of natural gas instead of electricity will reduce the electricity expense approximately by half.

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3.11

Ice Plant (15 Tons)

Strategic Recommendations

In order to sell the ice blocks, it is recommended to develop a chain of dealers who buy the ice blocks on regular basis. The dealer deposits a guarantee in the shape of cash security, keeping in view the number of blocks to be purchased on daily basis. In case the dealer is unable to pick the agreed number of blocks on a particular day, the amount is deducted from his security.

4

CURRENT INDUSTRY STRUCTURE 4.1

Current Industry Structure

Ice plants are installed with the capacity for daily production of 15, 25, 30 and 50 tons of ice blocks in Pakistan. Mostly ice plants are operating with the production capacity of 15 and 30 tons of ice blocks in the country, while selling price is decided once in a month by the owners of ice plants. There are approximately 1300 ice plants operating in the Punjab, catering to the needs of different institutional and domestic buyers. The details of installed ice plants in the Punjab are given in the table below: Table 4-1

Details of Ice Plants in the Punjab3

City Attock Bahawalpur Chakwal D.G.Khan Faisalabad Gujaranwala Gujrat Hafizabad Jhang Kasur Khanewal Khushab Lahore Layyah Lodhran Mandi Bahauddin Mianwali Multan Muzaffargarh Narowal 3

No .Of Plants 9

Production/Day 200-300 blocks

30 4 31 79 62 19 24 70 102 60 19 40 30 13 29 22 63 74 44

100-327 blocks 150-300 blocks 150-300 blocks 100-600 blocks 100-300 blocks 100-400 blocks 150-400 blocks 100-300 blocks 100-400 blocks 100-480 blocks 150-300 blocks 100-300 blocks 150-180 blocks 200-580 blocks 72-580 blocks 80-200 blocks 150-180 blocks 160-370 blocks 56-360 blocks

Source: Directory of Punjab Industrial Establishment, 2002-03. 4

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Okara Rahim Yar Khan Rajanpur Sahiwal Sargodha Sheikhupura Sialkot Toba Tek Singh Vehari Rawalpindi Jhelum

5

Ice Plant (15 Tons)

39 47 16 45 81 95 11 51 62 24 14

120-550 blocks 220-780 blocks 120-150 blocks 100-320 blocks 100-300 blocks 140-514 blocks 100-360 blocks 117-990 blocks 150-500 blocks 150-300 blocks 100-300 blocks

MARKET INFORMATION 5.1

Target Customers

The target customers for ice plant can be divided into two categories: • Domestic s, such as people living in rural areas & suburbs of cities, where access to refrigerators is difficult due to lower purchasing power. • Second category is institutional buyers, who buy in bulk, such as government organizations, factories, hotels, restaurants, bakeries, fish sellers, dairy plants etc. 5.2

Market Potential

Institutional buyers sell the bulk of the ice block production, in institutions related to food industry. Business sectors, which utilize ice in the country, include the following: 5.2.1 Fish Meat & Allied Products During 2000-2001 about 654,500 Mt tons of over 50 different varieties of fish and 30,000 Mt tons of shrimps were produced. Of this production, share of marine sector was 473,000 Mt tons and inland contribution was 181,500 Mt tons. Out of the total 40% fish was locally consumed, 35% small sized non-edible fish was dried into fish meal to supplement the poultry feed, while 10% fish was salted and dried and another 15% was frozen. 5.2.2 Dairy Plants Pakistan is ranked 5th biggest amongst milk producing countries in the world with annual milk production of 26.28 million tons in 2000-2001. About 75% of the total milk is produced in Punjab, 14% in Sindh, 10% in NWFP and only 1% in Baluchistan. In Pakistan 97.5% milk is distributed through traditional milk seller (Gowala) system. About 58% milk is supplied to urban areas in raw form in most unhygienic conditions but with the growing awareness of hygiene in the public, there has been a gradual improvement in the system. At present only 17 milk plants are in operation, which mean that approximately 3 per cent of total milk production is processed. The processing capacity of these plants in around 0.65 million liters per day. 5 PREF-71/November, 2003/1

Pre-feasibility Study

Ice Plant (15 Tons)

5.2.3 Other Institutional Buyers (Bakeries, Motels & Hotels etc.) Other potential institutional buyers of ice are bakeries, confectioners, hotels which buy ice blocks in bulk. There are approximately 70 different leading chain bakeries in different cities of Pakistan, while approximately 145 fish retail outlets are operating in different major cities of Pakistan, while more than 520 motels and hotels are operating in different areas of Pakistan.

6

PRODUCTION PROCESS 6.1

Production Process Flow Cleaning of Sheet Steel Ice Containers

Placing of Containers in Water Tank containing Nacl

Filling of Sheet Steel Ice Containers with water while vertically floating in Nacl Tank Temp Reduced to –17°C to –20°C

Extracting of Ice Blocks from Sheet Steel Containers

Movement of Ice Blocks by hooks

Delivery of Ice Blocks

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6.2

Ice Plant (15 Tons)

Product Mix Offered

The proposed project will produce Ice blocks weighing from 130-150kg. 6.3

Raw Material Requirement

The basic raw material required for producing ice blocks is water, common salt. These raw materials are readily available in the local market. Replenishment needed during maintenance are ammonia gas and compressor oil.

7

MACHINERY REQUIREMENT

The main equipment required for running the ice plant is compressor, capacitor, condenser, and electric motors, WAPDA connection power transformer etc. Table 7-1

Machinery Requirement Details

Description Qty Cost/Unit Total Amount Ammonia Compressor 7x7 marked Javed, driven wheels and 1 98,000 98,000 all lines fitted Ammonia Condenser atmosphere type with 2" pipe, 1200 ft 6 27,500 165,000 seamless from Grade-1 material pipe(Toyota Made Patta) Electric motor 75 HP, 1450 RFM CHINA 1 65,000 65,000 Brine Tank suitable for 240 Ice Cans, 4 mm Pak made sheets, 1 198,000 198,000 ed by eagle iron without sawdust. Cooling Coil V-type 4" pipe & 1500 ft. pipe 1" (Toyota Patta) 1 145,000 145,000 Brine Agitator 18" fan Matal with imported shaft and pulley 1 15,000 15,000 Accumulator for parallel supply of ammonia 1 15,000 15,000 Crane & Trolley universal type with railing channel & girder 1 38,000 38,000 Ammonia Valves for complete plant. 1 27,000 27,000 Ammonia Pipes for complete plant. 1 28,000 28,000 Oil Separator buffer type. 1 16,000 16,000 4 gauge suction, discharge, oil pressure 1 4,000 4,000 Wood Work for Ice Cans, Tank Cover 240 229 55,000 Ice Cans of 1.5 mm British gauge welded size 11" x 22" x 48" 240 1,100 264,000 Nut, bolts & washers complete with foundation, bolt etc. 1 30,000 30,000 Receiver fittings with all safety measure ammonia inspection 1 35,000 35,000 glass and oil drain device. Bends, Union, Nipples, Tee, & flange different size complete 1 25,000 25,000 with Motor Sliding Rail, Motor Pulley & V-Belt etc. Blower no. 59 complete with pipe line and fittings 1 20,000 20,000 Rubber pipes, brass valves 1 10,000 10,000 Water fitting pipes complete 1 20,000 20,000 Electric motors 7.5 H.P (J.E.C. Pak made). 2 10,000 20,000 7 PREF-71/November, 2003/1

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Ice Plant (15 Tons)

China Switch Gunz starters and switchboard with local cable complete switchboard open type etc. Centrifugal Pump size 2.5" x3" with 7.5 H.P electric motor Erection Charges for complete plant and machinery Grand Total Table 7-2

Qty 1 1 1

1 1

20,000 20,000

20,000 20,000 1,398,000

Cost/Unit 800,000 350,000 300,000

Total Cost 800,000 350,000 300,000 1,450,000

Qty 4 8 4 12 1 3

Cost/Unit 1,500 1,000 1,500 250 8,000 5000

Total Cost 6,000 8,000 6,000 3,000 8,000 15000 46,000

Office Vehicle Details

Description Suzuki Pick-up Motorcycle (Pak Hero) Bicycle (Chinese) Total Vehicle Cost 7.1

65,000

Furniture & Fixture Details

Description Tables Chairs Fans Lights Fax Machine Telephone Total Furniture & Fixtures Table 7-4

65,000

Other Equipment Details

Other Equipment Details Generator 100 KVA Transformer 100 KVA Water Bore Diameter 3” – 4” Total Equipment Cost Table 7-3

1

Qty 1 1 1

Cost/Unit 395,000 41,000 3,200

Total Cost 395,000 41,000 3,200 439,200

Technology and Processes

7.1.1 Technology/Process Options The machinery used for the ice plant is local. It includes compressor, condenser, water tank suitable for 250-300 ice cans, brine agitator, accumulator for parallel supply of ammonia, crane and trolley, oil separator, ice cans of size 11” x 22” x 48”, electric motor 75 HP etc. 7.1.2 Merits & demerits of a particular technology The local machinery is readily available in the market at a very reasonable price. One of the benefits of using locally manufactured machinery is availability of spare parts and it’s easier to find operators to operate these machines.

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7.2

Ice Plant (15 Tons)

Machine Maintenance

The maintenance process starts after mid of October. Normally, it takes one month for the overhauling of plant, during which the plant is closed for one month.

8

HUMAN RESOURCE REQUIREMENT

The manpower required for operating the ice plant during the peak season is as follows: Table 8-1

Direct Labor Requirement Details

Description Foreman Machine Operator Labor Total Direct Labor Cost Table 8-2

Qty

1 1 2 1 1

Salary Total Monthly Salary 15,000 15,000 4,000 4,000 2,000 4,000 2,500 2,500 1,500 1,500 27,000

istrative Staff Details

Description Owner/CEO s Officer Security Guard Driver Office Boy istrative Staff

9

1 1 6

Salary Total Monthly Salary 6,000 6,000 5,000 5,000 3,500 21,000 32,000

Qty

LAND & BUILDING REQUIREMENT 9.1

Land Requirement

The land requirement for the proposed ice plant having 15-ton capacity is 4,500 sq. ft (1 Kanal). 9.2

Covered Area Requirement

The covered area detail for the proposed project and construction cost detail is given in table below: Table 9-1

Covered Area Requirement Details

Description Office Area Machine Room Main Hall Free Area Total Building Cost

No. 1 1 1

9 PREF-71/November, 2003/1

Sq .ft 144 320 3,240 796 4,500

Rs/Sq. ft 250 250 200

Total Cost 36,000 80,000 648,000 764,000

Pre-feasibility Study

9.3

Ice Plant (15 Tons)

Recommended Mode

It is recommended that land should be acquired for the project, as it would be difficult to setup such a project at a rented place due to high machinery & installation cost. 9.4

Suitable Location

It is recommended that the proposed project be installed in localities close to cities or in industrial areas, so that the ice blocks are easily accessible to the dealers and institutional buyers. Such a project can also be a viable project in the smaller cities. 9.5

Utilities and Infrastructure Requirement

Basic utilities like electricity, gas and water are required for operating the ice plant. The plant must be closed to a metal led road

10 PROJECT ECONOMICS 10.1

Project Cost

Description Land Cost Building/Infrastructure Machinery & Equipment Office Equipment & Furniture Vehicle Pre-operating Costs Total Capital Expenditure Working Capital Raw Material Inventory Equipment Spare parts Inventory Cash Total Working Capital Total Project Cost 10.2

Amount in (Rs.) 500,000 764,000 2,848,000 54,000 439,200 65,000 4,670,200 10,742 4,851 100,000 115,593 4,785,792

Project Returns

Description NPV IRR Pay Back Period 10.3

Details 1,337,614 25% 4.75

Project Financing

Description Equity Financing Debt Financing Total

Percentage 50% 50% 10

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Amount in Rs 2,392,896 2,392,896 4,785,792

Pre-feasibility Study

Ice Plant (15 Tons)

11 FINANCIAL ANALYSIS 11.1

Project Cost

SMEDA

Project Cost Project Cost Land Cost Building/Infrastructure Machinery & Equipment Office Equipment & Furniture Vehicle Pre-operating Costs Total Capital Expenditure

500,000 764,000 2,848,000 54,000 439,200 65,000 4,670,200

WORKING CAPITAL Raw Material Inventory Equipment Spare parts Inventory Cash

10,742 4,851 100,000

Total Working Capital

115,592

Total Capex

4,785,792

Financing Detail Equity Financing Debt Financing Total

2,392,896 2,392,896 4,785,792

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11.2

Ice Plant (15 Tons)

Projected Income Statement

SMEDA

Projected Income Statement Revenue

Year 1 5,335,875

Year 2 5,497,018

Year 3 5,719,659

Year 4 6,010,829

Year 5 6,379,991

Year 6 6,839,543

Year 7 7,069,485

Year 8 7,210,874

Year 9 7,355,092

Year 10 7,502,194

Net Revenue

5,335,875

5,497,018

5,719,659

6,010,829

6,379,991

6,839,543

7,069,485

7,210,874

7,355,092

7,502,194

COST OF GOOD SOLD Raw Material Cost Direct Labor (Production Staff) Direct Electricity

236,313 321,000 1,773,129

250,482 353,100 1,861,786

268,695 388,410 1,954,875

291,749 427,251 2,052,619

320,785 469,976 2,155,250

357,440 516,974 2,263,012

387,329 568,671 2,376,163

418,839 625,538 2,494,971

460,235 688,092 2,619,719

518,689 756,901 2,750,705

Total

2,330,442

2,465,367

2,611,980

2,771,619

2,946,011

3,137,426

3,332,163

3,539,348

3,768,046

4,026,295

Gross Profit

3,005,433

3,031,651

3,107,679

3,239,210

3,433,980

3,702,118

3,737,322

3,671,526

3,587,045

3,475,898

324,000 53,359 81,627 12,960 372,320 6,500

356,400 54,970 85,708 14,256 372,320 6,500

392,040 57,197 89,993 15,682 372,320 6,500

431,244 60,108 94,493 17,250 372,320 6,500

474,368 63,800 99,218 18,975 372,320 6,500

521,805 68,395 104,178 20,872 372,320 6,500

573,986 70,695 109,387 22,959 372,320 6,500

631,384 72,109 114,857 25,255 372,320 6,500

694,523 73,551 120,600 27,781 372,320 6,500

763,975 75,022 126,630 30,559 372,320 6,500

850,765

890,154

933,731

981,915

1,035,181

1,094,071

1,155,847

1,222,425

1,295,274

1,375,006

Operating Income (Earning Before Interest & Taxes)

2,154,668

2,141,497

2,173,948

2,257,295

2,398,800

2,608,046

2,581,474

2,449,101

2,291,771

2,100,893

Interest expense on long term debt Earning Before Taxes

287,148 1,867,520

241,948 1,899,549

191,324 1,982,624

134,625 2,122,670

71,123 2,327,677

2,608,046

2,581,474

2,449,101

2,291,771

2,100,893

Taxes Net Profit After Taxes

527,632 1,339,888

538,842 1,360,707

567,918 1,414,705

616,935 1,505,736

688,687 1,638,990

786,816 1,821,230

777,516 1,803,958

731,185 1,717,916

676,120 1,615,651

609,312 1,491,580

1,339,888

2,700,595 2,700,595

4,115,300 4,115,300

5,621,036 5,621,036

7,260,026 7,260,026

9,081,256 9,081,256

10,885,214 10,885,214

12,603,130 14,218,781 12,603,130 14,218,781

15,710,361 15,710,361

GENERAL ISTRATION & SELLING EXPENSE istration Staff Machine Maintenance Cost Fixed Electricity Expense Communication Expense (Telephone, Fax, Internet etc.) Depreciation expense Amortization of pre-operating costs Total Operating Expenses

Balance brought forward Total profit available for appropriation

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11.3

Ice Plant (15 Tons)

Projected Balance Sheet

SMEDA

Project Balance Sheet Const. Year CURRENT ASSETS Cash in Bank Raw Material Inventory Machine Spareparts Inventory s Recievable Total Current Asset FIXED ASSETS Land Cost Building & Infrastructure Machinery & Equipment Office Equipment & Furniture Vehicle Total Fixed Assets INTANGIBLE ASSETS Pre-Operational Costs Total Intangible Assets TOTAL ASSETS CURRENT LIABILITIES s Payable Total Current Liabilities OTHER LIABILITIES Long Term Debt Total Long Term Liabilities

Year 1

Year 2

Year 3

Year 4

Year 5

100,000 10,742 4,851 115,592

1,203,725 11,386 4,997 242,540 1,462,648

2,513,333 12,213 5,200 249,864 2,780,610

3,823,323 13,261 5,464 259,984 4,102,033

5,164,290 14,581 5,800 273,220 5,457,891

6,571,162 16,247 6,218 290,000 6,883,627

500,000 764,000 2,848,000 54,000 439,200 4,605,200

500,000 725,800 2,563,200 48,600 395,280 4,232,880

500,000 687,600 2,278,400 43,200 351,360 3,860,560

500,000 649,400 1,993,600 37,800 307,440 3,488,240

500,000 611,200 1,708,800 32,400 263,520 3,115,920

65,000 65,000

58,500 58,500

52,000 52,000

45,500 45,500

4,785,792

5,754,028

6,693,170

-

5,013 5,013

2,392,896 2,392,896

2,392,896

-

Year 7

Year 8

8,749,533 17,606 6,427 310,888 9,084,454

10,920,933 19,038 6,555 321,340 11,267,866

13,009,897 20,920 6,686 327,767 13,365,270

14,995,901 23,577 6,820 334,322 15,360,620

500,000 573,000 1,424,000 27,000 219,600 2,743,600

500,000 534,800 1,139,200 21,600 175,680 2,371,280

500,000 496,600 854,400 16,200 131,760 1,998,960

500,000 458,400 569,600 10,800 87,840 1,626,640

500,000 420,200 284,800 5,400 43,920 1,254,320

39,000 39,000

32,500 32,500

26,000 26,000

19,500 19,500

13,000 13,000

6,500 6,500

-

7,635,773

8,612,811

9,659,727

11,481,734

13,286,326

15,004,910

16,621,440

18,114,260

5,313 5,313

5,700 5,700

6,189 6,189

6,805 6,805

7,582 7,582

8,216 8,216

8,884 8,884

9,763 9,763

11,002 11,002

2,016,231 2,016,231

1,594,366 1,594,366

1,121,877 1,121,877

592,690 592,690

0 0

0 0

0 0

0 0

0 0

0 0

2,392,896 2,700,595 5,093,491

2,392,896 4,115,300 6,508,197

2,392,896 5,621,036 8,013,932

2,392,896 7,260,026 9,652,922

2,392,896 9,081,256 11,474,152

2,392,896 10,885,214 13,278,110

2,392,896 12,603,130 14,996,026

2,392,896 14,218,781 16,611,677

2,392,896 15,710,361 18,103,258

6,693,170

7,635,773

8,612,811

9,659,727

11,481,734

13,286,326

15,004,910

16,621,440

18,114,260

SHAREHOLDER'S EQUITY Paid-up Capital Retained Earnings Total Equity

2,392,896

2,392,896 1,339,888 3,732,784

TOTAL CAPITAL & LIABILITIES

4,785,792

5,754,028

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Year 6

Year 9

Year 10 16,891,251 341,009 17,232,260

500,000 382,000 (0) 882,000

Pre-feasibility Study

11.4

Ice Plant (15 Tons)

Projected Cash Flow Statement

SMEDA

Projected Cash Flows Year-0 Operating activities Net profit Add: depreciation expense amortization of pre-operating costs Raw material inventory Machine Spareparts Inventory s Recievables s payable Cash provided by operations Financing activities Long Term Debt Repayment Additions of New Long Term Debt Issuance of shares Cash provided by / (used for) financing activitie

Year 1 -

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

(10,742) (4,851) -

1,339,888 372,320 6,500 (644) (146) (242,540) 5,013

1,360,707 372,320 6,500 (828) (202) (7,325) 301

1,414,705 372,320 6,500 (1,048) (265) (10,120) 386

1,505,736 372,320 6,500 (1,320) (336) (13,235) 489

1,638,990 372,320 6,500 (1,666) (418) (16,780) 616

1,821,230 372,320 6,500 (1,359) (209) (20,889) 778

1,803,958 372,320 6,500 (1,432) (129) (10,452) 634

1,717,916 372,320 6,500 (1,882) (131) (6,427) 668

1,615,651 372,320 6,500 (2,657) (134) (6,555) 878

1,491,580 372,320 6,500 23,577 6,820 (6,686) 1,240

(15,592)

1,480,390

1,731,473

1,782,479

1,870,154

1,999,562

2,178,371

2,171,400

2,088,964

1,986,003

1,895,351

2,392,896 2,392,896 4,785,792

Investing activities Capital expenditure (4,670,200) Cash (used for) / provided by investing activities (4,670,200)

(376,665)

(421,865)

(472,489)

(529,187)

(592,690)

-

-

-

-

-

(376,665)

(421,865)

(472,489)

(529,187)

(592,690)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

NET CASH

100,000

1,103,725

1,309,608

1,309,990

1,340,967

1,406,872

2,178,371

2,171,400

2,088,964

1,986,003

1,895,351

Cash balance brought forward Cash available for appropriation

100,000

100,000 1,203,725

1,203,725 2,513,333

2,513,333 3,823,323

3,823,323 5,164,290

5,164,290 6,571,162

6,571,162 8,749,533

8,749,533 10,920,933

10,920,933 13,009,897

13,009,897 14,995,901

14,995,901 16,891,251

14 PREF-71/November, 2003/1

Pre-feasibility Study

Ice Plant (15 Tons)

12 KEY ASSUMPTIONS 12.1

Production Assumptions

No. of Days Operational No. of Days (Peak Season) No. of Days (Off-season) No. of Hours Per Shift No. of Shift Per Day No. of Shift Per Day (Peak Season) No. of Shift Per Day (Off-season) Weight/Ice Block (In Kgs) Maximum Capacity Per Shift (Ice Blocks) Maximum Capacity Per Shift (Ice Blocks) Peak Season Maximum Capacity Per Shift (Ice Blocks) Off-season Maximum Attainable Capacity in Percentage Capacity Utilization (1st Year) Maximum Attainable Capacity in Units Growth in Capacity 12.2

Raw Material Usage Assumptions

Ammonia (NH3) Consumption (Pound)/ Ice Block NACL usage in Kg/ Ice Block (kgs) NACL replenishment charges Ice Blocks per Compressor Oil Drum Price Growth Rate of Raw Material Wastage Rate 12.3

0.08 50 10% 15,000 5% 5%

Raw Material Price

Price Per NH3 Pound (Rs) Price Per Kg NACL (Salt) (Rs) Compressor Oil Per Drum (Rs) 12.4

330 200 130 12 2 2 1 150 150 150 75 100% 85% 69,750 1%

30 1 18,000

Cash flow Assumptions

Raw Material Inventory Cycle (In Days) Machine Spare parts Inventory Cycle (In Days) s Receivables Cycle (In Days) s Payable Cycle (In Days) Initial Cash in Bank

15 30 15 15 100,000

15 PREF-71/November, 2003/1

Pre-feasibility Study

12.5

Ice Plant (15 Tons)

Expense Assumptions

Communication Expense (% of . Exp.) Machine Maintenance (% of Sale) Pre-Operational Expense Pre-Ops (Discount Period) Wages Growth Rate Electricity Rate per kW Electricity Tariff Growth Rate 12.6

4% 1% 65,000 10 10% 6.6 5%

Depreciation Expense

Building Depreciation Rate Plant & Machinery Depreciation Rate Furniture & Fixtures Depreciation Rate Vehicle Depreciation Rate 12.7

5% 10% 10% 10%

Financing Assumption

Debt Equity Interest Rate on Long Term Debt Debt Tenure Payment Per Year Return on Equity WACC (Weighted Average Cost of Capital) Tax Rate

50% 50% 12.0% 5 1 25% 16.8% Sole Proprietorship

16 PREF-71/November, 2003/1