Pre-Feasibility Study

BED LINEN STITCHING UNIT

Small and Medium Enterprises Development Authority

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

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KPK BALOCHISTAN

3rd Floor, Building No. 3,
Aiwan-e-Iqbal Complex,
Egerton Road Lahore,
Tel: (042) 111-111-456
Fax: (042) 36304926-7
helpdesk.punjab@smeda.org.pk
5TH Floor, Bahria
Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
helpdesk-khi@smeda.org.pk
Ground Floor Bungalow No. 15-A
State Life Building Chaman Housing Scheme
The Mall, Peshawar. Airport Road, Quetta.
Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (091) 286908 Fax: (081) 831922
helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk

June 2007
Pre-Feasibility Study Bed Linen Stitching Unit

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 user 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.

DOCUMENT CONTROL
Document No. PREF-52
Revision 2
Prepared by SMEDA-Punjab
Approved by Provisional Chief- Punjab
Revision Date JUNE, 2007
Issued by Library Officer

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1 Introduction .............................................................................................................4
1. 1 Project Brief.....................................................................................................4
1. 2 Opportunity Rat ionale ......................................................................................4
1. 3 Proposed Capacit y ...........................................................................................4
1. 4 Total Project Cost ............................................................................................4
2 Current industry structure ........................................................................................4
3 Production process flow...........................................................................................5
4 Raw material ...........................................................................................................5
4. 1 List of Raw Material ........................................................................................5
5 production ...............................................................................................................6
5. 1 Production Capacit y .........................................................................................6
5. 2 Product Mix .....................................................................................................6
5.3 Production Mix ................................................................................................7
6 Marketing ................................................................................................................7
7 Global Trade of Bed Linen ......................................................................................8
7.1 Major Exporters/Importers of Bed Linen, of Textile or Crochet Materials (In
2006) (HS 2002-630210) .............................................................................................9
7. 2 Major Exporter / Importer of Bed Linen, o f Cotton, Printed not Knit (In 2006)
(HS 2002-630221) .....................................................................................................10
7. 3 Pakistan’s Exports in Bed Linen (In 2006) .....................................................11
8 Machinery requirement.......................................................................................... 11
9 Human resource requirement ................................................................................. 12
10 Land & Building................................................................................................ 13
10.1 Total Land Requirement................................................................................. 13
10.2 Rental Details ................................................................................................ 13
10.3 Suitable Locations .......................................................................................... 14
10.4 Utilit ies Requirements....................................................................................14
11 Project Economics ............................................................................................. 14
12 Key success factors............................................................................................15
13 Threats for the business...................................................................................... 15
14 Financial statements...........................................................................................16
14.1 Projected Income Statement ........................................................................... 16
14.2 Projected Balance Sheet ................................................................................. 17
14.3 Projected Cash Flows .....................................................................................18
15 KEY ASSUMPTIONS.......................................................................................19

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1 INTRODUCTION
1.1 Project Brief
Bed Linen is an important value added sub-sector of Textile sector. The products include
bed sheets, pillow covers, quilts, etc. This project provides information about stitching
unit of Bed Linen.

1. 2 Opportunity Rationale
Bed Linen is among the largest sector in terms of production and exports amongst all the
made ups in Pakistan. Pakistan is a major exporter of Bed Linen in the world and the
basic reason for the development of this industry in Pakistan is the existence of a huge
infrastructure of weaving in formal & informal sectors. The informal sector is also known
as Power Loom sector. Most of the products in Bed Linen are made from low-density
fabrics of wider widths. This fabric can be easily manufactured on Power & Auto Looms,
which forms the major chunk of weaving industry of Pakistan. The competitive edge in
cotton has also played an important role in development of Power Loom industry, as the
staple length of cotton produced in Pakistan is suitable for medium count yarn, which is
used to produce low-density fabrics. The cost of a low-density fabric is low compared to
a fabric meant for garments. Processing of the fabric meant for Bed Linen is done
through printing and dyeing, and Pakistan has an exceptional infrastructure of such
printing and dyeing in Faisalabad, Karachi and Lahore.
All these factors have led to a competitive advantage for Pakistan over other countries in
the Bed Linen industry, resulting in extra-ordinary growth during the past few years. The
projected growth rates in the said sector are also very high and promise good growth
opportunities to new entrants in the industry.

1.3 Proposed Capacity

The proposed capacity of the project is based on 8-hour single shift and will produce 990
Bed Linen sets per day with 18 stitching machines.

1.4 Total Project Cost

Total cost of the proposed project is about Rs.5.084 Million.

2 CURRENT INDUSTRY STRUCTURE

A major chunk of the Pakistani Bed Linen industry is in the informal sector. According to
industry sources, there are 150 units producing Bed Linen in the organized sector and the
rest of the units are in the unorganized sector. There is no data available on these units.
The Bed Linen industry may be large or small depending upon the number of operations
carried out by a unit itself. It involves weaving/knitting, processing and stitching. A Bed
Linen manufacturer may be buying fabric from outside and converting it into final
product after processing it in-house. Or the processing is subcontracted and
manufacturers are just cutting, stitching and packing in their own premises. Vertically
integrated units are smaller in number and they operate in relatively upper market
segments since it is easy to control the quality in a vertically integrated operation.
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Another reason for non-availability of data about Bed Linen industry is the nature of data
reporting. The classification of the industry is based on the operations rather than the
products. Moreover, manufacturers also keep on changing products. Major clusters of
Bed Linen are in Karachi, Faisalabad, Lahore, Multan and Hyderabad.

3 PRODUCTION PROCESS FLOW

The major raw material used in the Bed Linen is printed woven fabric, which is
manufactured on Power/Auto Looms or Shuttle-less Looms. Majority of the Bed Linen
manufacturers procures yarn and converts it into woven grey fabric by paying conversion
charges to the looms units.
Figure 3-1 Process flow Diagram

Procurement Inspection of
of Printed Printed Cutting
Fabric Fabric

Threading
Packaging and Final Stitching
Inspection

The grey fabric is provided to printing & processing unit and printing charges are paid to
get printing according to the given designs and colors. The other possible option used in
the market is to directly buy printed fabric from the market and convert it into Bed Linen.
Once the bed sheet is stitched, final inspection is done. All the sheets are checked for any
defective stitching or loose threads and then they are packed in polyethylene bags along
with insert, which is the printed material with brand name etc and card called stiffener.

4 RAW MATERIAL
4.1 List of Raw Material
 Printed Woven Fabric
 Stitching Thread & Other Accessories
 Packaging Material
Stitching thread and packaging material are easily available in the local market.
Packaging material consists of stiffener, which is of cardboard material, an insert, which
is a printed material with company’s name and design and polyetnene bag, which is the
plastic cover.

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5 PRODUCTION
5.1 Production Capacity
The proposed project with 18 machines will produce 990 sets of Bed Linen per day on
the basis of 8-hour single shift. In the first year, the capacity utilization of the project will
be 40%, with annual growth rate of 10%. The maximum capacity utilization of the
project is 95%. The details regarding the capacity of the project are given below:
Table 5-1: -Capacity Details
Description
Working days 312
Per Machine sets 55 per Day
Per Day Number Of Sets (18 Machines) 990
Total Capacity Per Year 308,880
Capacity Utilization First Year (40%) 123,552 Sets

5.2 Product Mix

The proposed stitching unit has been defined to manufacture bed sets. The general
product mix and sizes are defined as follows:
Table 5-2 Product mix
Description No Items Measurement
Twin Set
1 Flat 168x244 cm
1 Fitted 178x230 + 20 cm
1 Pillow 51x76 + 15 cm
Full Set
1 Flat 206x244 cm
1 Fitted 178x230 + 20 cm
2 Pillows 51x76 + 15 cm
Queen Set
1 Flat 229x257 cm
1 Fitted 196x241 + 20 cm
2 Pillows 51x76 + 15 cm
King Set
1 Flat 274x257cm
1 Fitted 244x244 + 20cm
2 Pillows 51x76 + 15 cm

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5.3 Production Mix

The proposed project will produce the products on the basis of following proportion:
Table 5-3 Production Mix Production Details
Description Production Percentage
Twin Set 12.5%
Full Set 50%
Queen 25%
King 12.5%

6 MARKETING
Pakistan’s textile industry ranks amongst the top in the world. Pakistan is world's fourth
largest producer of cotton and the third largest consumer of the same. Cotton based
textiles contribute over 60% to the total exports, accounts for 46% of the total
manufacturing and provide employment to 38% manufacturing labor force. The
availability of cheap labor and basic raw cotton as raw material for textile industry has
played the principal role in the growth of the Cotton Textile Industry in Pakistan. With
the advent of the quota free global imperative for a rapidly developing country like
Pakistan to further explore potential new markets both in its neighboring territories as
well as distant ones. In this context, Pakistan has signed a Free Trade agreement (FTA)
with China. This FTA is predicted to bring around $5 billion increase in our trade volume
with China which is going to consist mostly of textile related commodities
Pakistan’s textile industry had proven its strength in global market during the last four
decades. It has proved its strength even in post quota era (2005) by not only sustaining its
position but also showing growth of 5% over 2005.
The current scenario posses challenges firstly to sustain its global positioning and
secondly to increase its market share by both increase in volume as well as increase in
unit values. The unit value can be increased only through marked improvement in
quality, market tie-up, image building and change in business philosophy. This requires
up gradation in resource development both in manufacturing and marketing.
The focus should be on R & D, technical innovation, product development on one hand
and brand & market development on other with the goal of moving up in the global
textile value chain. The performance of textile industry during the last five years has been
satisfactory. The market was responsive, the Government policy was supportive and
inputs were viable. The industry made profits and re-invested in new machinery for
balancing, modernizing, and restructuring (BMR) and expansion. The industry made an
investment of approx. $ 6.0 Billion during the period 1999-2006. Textile Machinery
worth $.0.8 billion has been imported during 2005-06 .The major investment has been
made in spinning, weaving, Textile Processing and making up sectors. Approx. 454,000
new direct jobs have been created and industry has been able to make increase production
and exports. Import of textile regime spear headed by the WTO it has become machinery,

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which is the single largest item in the machinery group, accounted for $ 771.500 million
in 2005-06.

7 GLOBAL TRADE OF BED LINEN1

Bed Linen is an important value-added sub-sector of textile sector. Bed Linen products
include bed sheets, pillow covers, quilts, etc. In made ups, Bed Linens sub-sector is the
second largest in terms of production and exports.
Table 7-1 World Wide Imports in Recent Years (Trade value in millions$)
Years 2003 2004 2005 2006
Bed Linen, Of Textile Knit Or Crochet 562,652 672,465 623,142 417,480
Materials
Bed Linen, Of Cotton, Printed ,Not 1,351,865 1,569,697 1,804,811 1,228,173
Knitted

Table 7-2 World Wide Exports in Recent Years (Trade value in million $)
Years 2003 2004 2005 2006
Bed Linen, Of Textile 474,483 580,054 607,342 470,254
Knit Or Crochet Materials
Bed Linen, Of Cotton, 1,173,274 1,278,179 1,496,379 704,484
Printed ,Not Knitted

1
www.Comtrade.un.org
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7.1 Major Exporters/Importers of Bed Linen, of Textile or Crochet Materials (In

2006) (HS 2002-630210)

To p Ex po rte rs
Belg ium.
4% Den mark.
Ch in a. 2%
10%
Germa n y . Pakis tan .
10% 74%

Table 7-3 Major Exporters of Bed Linen, Of Textile or Crochet Materials

Countries Trade Value (In Millions)
Pakistan $313,933
Germany $44,292
China $44,236
Belgium $19,374
Denmark $10,308

Top Importe rs

Ireland
Ausria
5%
6%
Belgium
8% Germany
USA 46%
35%

Table 7-4 Major Importers of Bed Linen of Textile or Crochet Materials

Countries Trade Value (In Millions)
Germany $171,548
USA $129,584
Belgium $28,832
Austria $22,328
Ireland $17,319

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7.2 Major Exporter / Importer of Bed Linen, of Cotton, Printed not Knit (In 2006)
(HS 2002-630221)

Top Exporters
Romania
8%
Germany
11%
China
Belgium
52%
12%
Pakistan
17%

Table 7-5 Major Exporter of Bed Linen, of Cotton, Printed Not Knit
Countries Trade Value (In Millions)
China $273,065
Pakistan $87,040
Belgium $60,114
Germany $56,723
Romania $43,412

Top Importer
Sweden
A ust ria 6%
7%
Belgium
8% USA
Germ an y 55%
2 4%

Table 7-6 Major Importer of Bed Linen, of Cotton, Printed Not Knit
Countries Trade Value (In Millions)
USA $544,692
Germany $233,842
Belgium $82,607
Austria $68,026
Sweden $54,836

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7.3 Pakistan’s Exports in Bed Linen (In 2006)

Table 7-7Pakistan Exports in Bed Linen of Cotton, Printed, Not Knit

Trading Partners Trade Quantity(in tons) Trade Value (In Millions)
World 16,532 87,040
USA 6,310 34,958
Germany 2,586 12,645
Italy 1,245 6,394
UK 724 3,735
Spain 598 3,481

Table 7-8Pakistan Exports in Bed Linen of Textile Knit or Crochet Materials

Trading Partners Trade Quantity(in tons) Trade Value (In Millions)
World 37,705 202,681
USA 22,114 122,436
Germany 4,168 20,147
Netherlands 2,113 12,171
UK 1,345 7,324
France 6,836 1,286

8 MACHINERY REQUIREMENT
Table 8-1 Machinery Details2
Plant and Machinery Machines Cost/Machine Total Cost
Required (Rs) (Rs)
Machines
Stitching Machines 18 26,000 468,000
Safety Lock Machines 2 85,000 170,000
Cutting Machines 1 75,000 75,000
Finishing Iron 2 7,000 14,000
Total 727,000

Above quoted prices are of Juki brand. All the required stitching machinery is easily
available in the market. The stitching machinery is available in quite a diversified range
of suppliers & origins, i.e. Japanese, Italian, Chinese, Korean and Taiwanese origin.
There is a substantial difference between their prices. European and Japanese machinery

2
Aalmurtaza Machinery Co. (Pvt) Ltd. 63/1-c, Model Town, Jail Road, Faisalabad.
Tel: 041-2636830-31, 041-2648955 Fax: 041-2644961 website: www.almurtaza.com

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is 2 to 3 times more expensive as compared to Chinese or Far Eastern machinery. Second

hand machinery of different origins is also available in the local market.

Table 8-2 Other Equipment Details

Office Equipment No Per Unit Cost Total Cost
Computers P4 5 25,000 125,000
Printer 1 12,000 12,000
External Modem 1 5,000 5,000
Switch D-Link 1 10,000 10,000
Split Air-conditioner 2 Ton 2 30,000 60,000
Mini Telephone Exchange 1 20,000 20,000
Telephone Sets 10 500 5,000
Fax Machine 1 10,000 10,000
Furniture and Fixture
Work Stations 10 6,500 65,000
Chairs 30 600 18,000
Sofa Set 1 5,500 5,500
Cutting Tables 2 8,000 16,000
Net Working & Electrification 1 50,000 50,000
Total Office Equipment 401,500

9 HUMAN RESOURCE REQUIREMENT

The stitching operators will be paid on piece rate basis. The rates given in the below
table:
Table 9-1: -Stitching Charges
Description Rate
Stitching Operators Rs.10 Per Set
Table 9-2: -Human Resource Requirement
Description No. Per Month Annually
Administrative Salaries
Chief Executive 1 35,000 420,000
Manager Finance & Admin. 1 25,000 300,000
Accounts Officer 1 15,000 180,000
Marketing Manager 1 18,000 216,000
Computer Operator 1 8,000 96,000
Peon 1 4,500 54,000
Gardener 1 3,500 42,000
Security Guards 2 5,000 120,000
Driver 1 5,000 60,000
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Total 1,488,000
Production Staff
Production In charge 1 15,000 180,000
Stitching Supervisor 1 10,000 120,000
Cutting Master 1 15,000 180,000
Cutting Helper 2 4,600 110,400
Finishing Supervisor 1 10,000 120,000
Rowing Inspector 2 5,000 120,000
Clippers 3 4,600 165,600
Packaging Staff 3 4,600 165,600
Final table Inspector 2 4,600 165,600
Technician/Electrician 1 10,000 120,000
Total 1,447,200

10 L A N D & B U I L D I N G
10.1 Total Land Requirement
The standard size for stitching machine table is defined to be 5.5x7.5ft.In cutting area 2
tables will be placed of size 24x9ft for cutting sheets and 24x8ft for cutting pillow.
Details regarding the area required for a Bed Linen unit are given below:
Table 10-1 Covered Area Requirement
Description Required Area (sq. ft)
Production 1600
Cutting Area 500
Inspection room/packing room 1,600
Raw material store 400
Finished goods store 400
Management building 300
Free space 700
Total 5,500

10.2 Rental Details

It is recommended that this project should be started in a rented building, as this will
reduce the initial capital cost of the project. An appropriate premise is generally available
in many commercial/industrial areas of the main clusters of Bed Linen.
Table 10-2 Rent Cost
Rent Cost Monthly Rent (Rs)
Building Rent Cost (per 5,500 sq. ft) 55,000
Annual Rent (Rs) 660,000
3 Months Rent As Security 165,000
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6 Months Advance Rent 33,0000

10.3 Suitable Locations

The clusters of Bed Linen stitching industry exist predominantly in Karachi, Faisalabad,
Lahore and Multan. Most of the Bed Linen manufacturers are based in these major cities,
so it is recommended that such unit should be started in these areas. The basic criteria for
the selection of location within these clusters should be the accessibility of skilled
manpower and easy accessibility of raw material. Also, basic utilities like electricity,
water and public transport are a must for the establishment of such sort of unit.

10.4 Utilities Requirements

 Electricity
 Telephone
 Water

11 PROJECT ECONOMICS
Table 11-1 Project Cost
Description Rupees
Furniture& Fixtures 154,500
Office Equipment 247,000
Plant & Machinery 727,000
Vehicle 669,000
Preliminary Expenses 165,000
Sub Total 1,962,500
Working Capital3 3,121,935
Total Project Cost 5,084,435

Table 11-2 Financed By

Sponsors Equity 60% 3,050,661
Bank Finance 40% 2,033,774
Total Finance 5,084,435

Table 11-3 Project Returns

Internal Rate of Return In Percentage 31
Payback Period In years 6
Net Present Value In Millions 1.986

3
Working Capital includes 26 days raw material and 6 months advance rent of the premise
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12 KEY SUCCESS FACTORS

The commercial viability of this Bed Linen stitching unit depends on the regular export
orders, which means a very effective marketing of the product in the international market.
One of the important factors in success of this business is procurement of raw material,
especially the grey woven fabric which is manufactured in a huge quantity. Due to which,
there is a huge fluctuation in the price of grey fabric. With better information regarding
quality manufactures and lower prices, a high profit margin can be attained.
Another aspect, which is mostly over-looked in this sector, is R&D. If the company has
an effective R&D department, it can come up with new designs, color schemes or
innovative packaging. This will increase the sales and also help in building high quality
image of the product, hence moving the product to upper tiers & quality conscious
market segment, resulting in higher profit margins.
Following are some of the points that have to be ensured to make this business
successful:
 Assurance of high consistent quality
 Surety of products delivery on time
 Competitive Rates
 Cost efficiency through better managerial techniques
 Better services to customers, i.e. claim settlement, etc.

13 THREATS FOR THE BUSINESS

Due to the low capital requirement of the business there has been an increase in the
number of commercial Bed Linen stitching units, which has resulted in an increase in
competition internationally.
The elimination of quotas in 2004 will make it harder to compete. This might decrease
the profit margins in international market. Competition will be based on product quality
and competitive prices.

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14 FINANCIAL STATEMENTS
14.1 Projected Income Statement

(ooo)
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Sales/Revenue 39,827 46,000 53,130 61,365 70,877 81,863 94,552 109,207 126,134 145,685
Cost of Sales
Operation Salaries 1,447 1,592 1,751 1,926 2,119 2,331 2,564 2,820 3,102 3,412
Cost of bed sheets 35,170 40,621 46,917 54,189 62,589 72,290 83,495 96,437 111,384 128,649
Electricity Chg. 366 402 443 487 536 589 648 713 784 862
Other Utilities 300 330 363 399 439 483 531 585 643 707
Consumable Store 50 55 61 67 73 81 89 97 107 118
Repair & Maintenance 29 24 19 15 12 10 8 6 5 4
Plant Insurance 20 5 4 3 2 2 2 1 1 1
Depreciation 344 277 223 180 145 117 94 76 62 50
Amortization of Prelmn.Exp 17 15 13 12 11 10 9 8 7 6
37,743 43,320 49,793 57,278 65,926 75,912 87,439 100,743 116,096 133,810
Gross Profit 2,084 2,680 3,337 4,087 4,951 5,951 7,112 8,464 10,039 11,875
Operating Expenses:
Administrative Expenses
Administrative Salaries 1,488 1,815 1,997 2,196 2,416 2,657 2,923 3,215 3,395 3,735
Printing & Stationary 60 66 73 80 88 97 106 117 129 141
Consultancy Charges & Audit Fee 20 22 24 27 29 32 35 39 43 47
Entertainment 60 66 73 80 88 97 106 117 129 141
Telephone Fax and Postage 72 79 87 96 105 116 128 140 154 170
1,700 2,048 2,253 2,478 2,726 2,999 3,299 3,629 3,850 4,235
Rent 660 726 799 878 966 1,063 1,169 1,286 1,415 1,556

Operating Profit (276) (94) 285 730 1,259 1,889 2,645 3,549 4,774 6,084
Financial Charges 270 214 157 100 43 - - - - -
Profit before Taxation (546) (308) 129 631 1,216 1,889 2,645 3,549 4,774 6,084
Taxation 20% (109) (62) 26 126 243 378 529 710 955 1,217
Profit after Taxation (437) (246) 103 505 973 1,512 2,116 2,839 3,819 4,867

Accumulated. Profit b/f - (437) (683) (580) (76) 897 2,409 4,524 7,364 11,183

Accumulated Profit c/f (437) (683) (580) (76) 897 2,409 4,524 7,364 11,183 16,050

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14.2 Projected Balance Sheet

"000"
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X

Tangible Fixed Assets 1,453 1,177 954 774 630 513 418 342 280 230
Preliminary Expenses 149 134 120 108 97 88 79 71 64 58
Current Assets:
Accounts Receivable 1,328 1,533 1,771 2,046 2,363 2,729 3,152 3,640 4,204 4,856
Cash in Hand / Bank 3,684 3,483 3,600 4,103 5,071 6,994 9,541 12,844 17,170 22,598

6,613 6,326 6,445 7,031 8,161 10,323 13,190 16,897 21,718 27,742

Owners Equity:
Capital 3,051 3,051 3,051 3,051 3,051 3,051 3,051 3,051 3,051 3,051
Accumulated Profit (437) (683) (580) (76) 897 2,409 4,524 7,364 11,183 16,050

Long Term Loan 1,627 1,220 814 407 0 0 0 0 - -

Current Liabilities:
Accounts Payable 2,372 2,739 3,161 3,650 4,213 4,864 5,615 6,483 7,485 8,642

6,613 6,326 6,445 7,031 8,161 10,323 13,190 16,897 21,718 27,742

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14.3 Projected Cash Flows

(000)
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 (276) (94) 285 730 1,259 1,889 2,645 3,549 4,774 6,084
Amortization 17 15 13 12 11 10 9 8 7 6
Depreciation 344 277 223 180 145 117 94 76 62 50
85 197 521 922 1,414 2,016 2,748 3,633 4,843 6,140
Working Capital Change 1,045 160 185 214 247 285 329 379 438 505

Cash from other Sources

Owners 3,051 - - - - - - - - -
Bank Finance 2,034 - - - - - - - - -
5,084 - - - - - - - - -

Total Sources 6,214 358 706 1,136 1,661 2,301 3,076 4,012 5,280 6,645
Applications:
Fixed Assets 1,798 - - - - - - - - -
Preliminary Expenses 165
Re -Payment of Loan 677 620 563 506 449 - - - - -
L C Charges - - - - - - - - - -
Tax - 109 - 62 26 126 243 378 529 710 955 1,217
2,531 559 589 633 693 378 529 710 955 1,217

Cash Increase/(Decrease) 3,684 (201) 117 503 968 1,923 2,547 3,303 4,326 5,429
.
Opening Balance - 3,684 3,483 3,600 4,103 5,071 6,994 9,541 12,844 17,170

Closing Balance 3,684 3,483 3,600 4,103 5,071 6,994 9,541 12,844 17,170 22,598

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Pre-Feasibility Study Bed Linen Stitching Unit

15 KEY ASSUMPTIONS

Table 15-1 Operating Related Assumptions

Hours operational per day 8
Days operational per month 26
Days operational per year 312
Table 15-2 Production Related Assumptions
Annual production capacity 308,880 Sets
Capacity utilization (1st Year) 40%
Capacity growth rate (yearly) 10%
Maximum Capacity utilization 95%
First Year production utilization 123,552 Sets
Table 15-3 Economic Related Assumptions
Electricity growth rate 10%
Wages growth rate 10%
Machine maintenance growth rate 2.5%
Table 15-4 Cash Flow Related Assumptions
Accounts Receivable cycle (in days) 30
Accounts Payable cycle (in days) 15
Table 15-5 Revenue Related Assumptions
Products Sale Price In Rs.
Growth Rate in Sale Price 5%
Twin Set 302
Full Set 298
Queen 325
King 435
Table 15-6 Basic Raw Material Related Assumptions
Description (Req. For Full Set) Cost in Rs.
Fabric Cost4 223.75
Stitching Cost 10
Packing Cost 20.2
Wastages 3% of Fabric cost
Freight 5.56

4
Fabric quantity and cost will vary according to the type of bed sheet
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PREF-52/June, 2007/Rev2
Pre-Feasibility Study Bed Linen Stitching Unit

Table 15-7 Depreciation Related Assumptions

Plant & Machinery 20%
Office equipment 20%
Furniture & Fixtures 10%
Vehicle 20%
Table 15-8 Financial Related Assumptions
Project life (Years) 10
Equity 60%
Debt 40%
Interest rate on short term debt 14%

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PREF-52/June, 2007/Rev2