Cheema Transport

Services
1st Intra-city Bus Transport System inBahawalpur

“Aapke safar mein saath saath”

CTS
A Business Idea of:

Abdul Wahab Cheema

Mohammad Taha Ataullah
Muhammad Ali Taufiq
Ovais Adil
 CONCEPT
• The rapid growth in the transport sector
worldwide
• The rise of a customer oriented business
environment
• The combination of the above two factors led us
to a new concept

“A highly customer oriented transport service,

targeting specifically those markets where
customers are yet to avail modern
conveyance with comfort and affordability”
Why in Bahawalpur?
 Bahawalpur lacks in such basic service
that is necessary for any modern city
 Present modes of public transport in
Bahawalpur:
• Auto Rikshaws
• Motor Cycle Rikshaws
• Suzuki Pick ups
• Hilux (Daalas)
 Why the vacuum?

 Failure of similar projects in other major

cities like Karachi

 Dearth of entrepreneurial and operational

skills
 Why would we be successful?
 Local entrepreneurship

 Local support

 Support from Government of Punjab

 Support from World Bank

 Entrepreneurial and operational expertise

 Services Offered

 Intra-city bus service for the residents of

Bahawalpur

 Comfortable and decent public transport at

affordable fares
 Unique Selling Points
 Spacious buses
 Air-conditioning
 Clean and Non-smoking buses
 Separate section for women
 Qualified and trained staff
 Safety through speed controls and well
maintained buses
 High frequency of buses on main routes
 Affordable fares
 Environment friendly
Comparative Analyses
 ANALYSIS
Industry Analysis
– The sector forms a large chunk of Pakistan’s GDP and
enjoys a favorable growth rate
– Driving forces of this sector:
• Growth rate of the transport sector
• Growth rate of the market share
– Assistance from the Government of Pakistan
– A total funding of $365 million from the World Bank
 Market Analysis

– A population of 0.8 million and no organized intra-city

transport system available
– Center of trading activities
– Present modes of transport are inconvenient for people
– Consumer base includes students, office lower staff and
farmers
– Majority of the consumer base belongs to the lower and
lower-middle class
 Competitor Analysis
Direct Competitors
• None

Indirect Competitors
• Auto-rickshaws
• Motor-cycle rickshaws
• Hilux single-cabins
• Suzuki pickups
Shortcomings of Existing Transport
Modes

Overcrowding

Uncomfortable

Inconvenience with respect to timings and

routes

Accidents due to over speeding

 Consumer characteristics
Our target customers are those who may:

• Be dependent on transportation for their daily activities

• Not have their own mode of transportation
• Be facing parking problems
• Be Facing financial difficulties in managing their mode
of transportation
• Be desiring a safe and comfortable mode of
transportation
• Be desiring low transportation costs
 Consumer categories

• Students
• Farmers
• Laborers
• Lower office staff
• Shop keepers
• Teachers
• House wives
Route 1
  SOLANG       MULTAN MOD  
             
Bus# Departure Time Arrival in Multan Mod   Bus# Departure Time Arrival in Solang
1 6:00 6:45   4 6:00 6:45
4 7:00 7:45   1 7:00 7:45
2 7:30 8:15   3 7:30 8:15
1 8:00 8:45   4 8:00 8:45
3 8:30 9:15   2 8:30 9:15
4 9:00 9:45   1 9:00 9:45
2 9:30 10:15   3 9:30 10:15
1 10:00 10:45   4 10:00 10:45
3 11:00 11:45   2 11:00 11:45
4 12:00 12:45   1 12:00 12:45
2 12:30 13:15   3 12:30 13:15
1 13:00 13:45   4 13:00 13:45
3 13:30 14:15   2 13:30 14:15
4 14:00 14:45   1 14:00 14:45
2 14:30 15:15   3 14:30 15:15
1 15:00 15:45   4 15:00 15:45
3 16:00 16:45   2 16:00 16:45
4 17:00 17:45   1 17:00 17:45
2 17:30 18:15   3 17:30 18:15
1 18:00 18:45   4 18:00 18:45
3 18:30 19:15   2 18:30 19:15
4 19:00 19:45   1 19:00 19:45
2 20:00 20:45   3 20:00 20:45
Route 2
  KARACHI MOD       DERA BAKHA  
             
Bus# Departure Time Arrival in Dera Bakha   Bus# Departure Time Arrival in Karachi Mod
5 6:00 7:00   6 6:00 7:00
7 7:00 8:00   8 7:00 8:00
6 7:30 8:30   5 7:30 8:30
9 8:00 9:00   10 8:00 9:00
8 8:30 9:30   7 8:30 9:30
5 9:00 10:00   6 9:00 10:00
10 9:30 10:30   9 9:30 10:30
7 10:00 11:00   8 10:00 11:00
6 11:00 12:00   4 11:00 12:00
9 12:00 13:00   10 12:00 13:00
8 12:30 13:30   7 12:30 13:30
5 13:00 14:00   6 13:00 14:00
10 13:30 14:30   9 13:30 14:30
7 14:00 15:00   8 14:00 15:00
6 14:30 15:30   5 14:30 15:30
9 15:00 16:00   10 15:00 16:00
8 16:00 17:00   7 16:00 17:00
5 17:00 18:00   6 17:00 18:00
10 17:30 18:30   9 17:30 18:30
7 18:00 19:00   8 18:00 19:00
6 18:30 19:30   5 18:30 19:30
9 19:00 20:00   10 19:00 20:00
8 20:00 21:00   7 20:00 21:00
 Marketing Strategy
 Promotion through
• News papers
• Radio announcements
• Banners
• Billboards
 Inauguration by high government functionary
 Promotional products
• Loyalty cards
 Target audience
• People from all income groups
 Company Image
• Service for the whole family
 Revenue Generation
 Through operations
Main revenue generation will be through fares that
will be charged to the passengers.

 Through sponsors
Revenue can also be generated through
advertisements on our buses
 Financial Analysis
To be discussed:
• Initial investment
• Growth rate for the company
• Expenses
• Net Profit Graph
• Lease Rental Payment
• Sensitivity Analysis
• Scenario Analysis
 Initial Investment
Assets:
Down Payment on Vehicle to the leasing Company 78,00,000
Fixtures and Fittings 446,000
Computers and Accessories 30,000
Registration Fees 39,00,000
Cash 824,000
Capital Employed 13,000,000

Financed by:
Shares to Partner 1 3,250,000
Shares to Partner 2 3,250,000
Shares to Partner 3 3,250,000
Shares to Partner 4 3,250,000
Total 13,000,000
 Financial Analysis

Assumptions:
•The inflation rate is taken to be 7.92% (according to the CPI).
•For all the years we have assumed the rate of inflation to be constant.
•All Revenues and Expenses are Adjusted with Inflation
Revenues      

(Predicted for the first year)    

         

Bus # Average fare Average no. of passengers/ one way trip No. of trips revenue generated per year

1 11 50 6 1188000

2 11 50 6 1188000

3 11 50 6 1188000

4 11 50 6 1188000

5 15 50 4 1080000

6 15 50 4 1080000

7 15 50 4 1080000

8 15 50 4 1080000

9 15 50 4 1080000

10 15 50 4 1080000

Total       11232000

Average Fare of the Buses is based Upon:

1. Routes- 11 rupees for Route 1 and 15 rupees for Route 2
2. Density of population and Important Urban Centers on each Route
3. Length of each Route- Route 1 is 16km long and Route 2 is 22km in length.
 Assumptions for Industry Model

 Revenue growth rates are based upon

• growth rates of the transport sector
• the company’s market share

 Both of these growth rates are in turn based upon the

increase in the average number of passengers.

 Weightage given:
• transport sector= 30%
• Growth in market share=70%

 The market share growth rate – as is evident

from the figures mentioned - has a dominating
impact on the total growth rate for CTS.
 Revenue

25,000,000

20,000,000
Revenue (Rupees)

15,000,000
Revenue
10,000,000

5,000,000

0
2007 2008 2009 2010 2011 2012 2013
Years
 Expenses

Expenses are divided into three components:

• Operating Expense
– Fuel Consumption
– Maintenance
– Salaries and Wages of Workers
• Administration Expenses
– Rent on Land
– Insurance Premium (Atlas Insurance)
– Wages and Salaries of Staff
• Depreciation
(every calculations are based on market research)
 Net Profit

4,500,000
4,000,000
3,500,000
Net Profit (Rupees)

3,000,000
2,500,000
Net Profit
2,000,000
1,500,000
1,000,000
500,000
0
2007 2008 2009 2010 2011 2012 2013
Years
 Lease Rental Payment
  Calculation of Lease Rental Payments
       
For the First 5 years    
  Net Financed Amount= Cost of Buses – Down-payment (Deposit)
       
  Purchase Price of each Bus 3900000

  Down-payment (20% of Cost price of the bus) 780000

  Remaining amount to be paid by leases 3120000
  per bus    
  Remaining amount to be paid by leases 31200000
  for all the buses    
 Lease Rental Payments
  Lease Rental Payment (Orix Leasing Company) (per month per bus) 74,224  
  Terms   12  
  Total Lease Rental Payment per year per bus   890,688  
  Total Lease Rental Payment over 5 years   4,453,440  
  per bus      
  Number of Buses   10  
  Total Lease Rental Payment over 5 years   44,534,400  
  for all buses      
  Initially remaining amount to be paid by leases 31,200,000  
  for all buses      
  Interest to the Leasing Company   13,334,400  
  Initial remaining amount to be paid by leases   6,240,000  
  each year for all buses      
  Initial remaining amount to be paid by leases each year for all buses will add up the amount to the existing vehicle
  Fixed Assests--Vehicles will increase each year by 6240000rupees    
         
  interest to the leasing company for all buses each year   2,666,880
         
  interest to the leasing company for all buses each year   2,666,880
  Capital expenditure on vehicles each year     6,240,000
  Total amount paid to the leasing company for all buses each year   8,906,880
 Calculations
NPV 7,505,127
Payback Period 2 Years 11 months
IRR 29.15%
Scenario and Situation Analysis
 Situation Analysis
Situation One

• doubling market share growth rate, by increasing it to 20%.

• Effect: total growth increases from 9.31% to 16.31%,
increasing the total revenues accordingly.
• Targeted market share captured well before the time.
 Situation Two

• Decreasing market share growth rate by 25%, to make it 7.5%.

• Effect: total growth decreases from 9.31% to 7.56%,
decreasing the total revenue accordingly.
Comparison of Situations to
Normal Circumstances

NPV Payback Period IRR

Normal Situation 7,505,127 2 years 11 months 29.15%
Situation 1 10,038,159 2 years 8 months 32.49%
Situation 2 19,143,981 3 years 27.50%
 Comparing Sensitivity

Sensitivity Sensitivity

25,000,000
4,500,000
4,000,000
20,000,000
3,500,000

Revenues (Rupees)
3,000,000 Normal
Net Profit (Rupees)

15,000,000 Normal
2,500,000
Situation 1 Situation 1
2,000,000
Situation 2 10,000,000 Situation 2
1,500,000
1,000,000
5,000,000
500,000
0
0
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
Years Years
 Scenario Analysis
Scenario One

• In 2008, the terminal on Karachi mod catches fire.

• Damage: entire infrastructure as well as the three buses –
number 5, 7 and 10 - parked at the concerned terminal.
• Atlas Insurance takes three months to compensate CTS for the
vehicles lost.
 EFFECTS

• Deficiency of buses leads to three months of lost revenue.

• Increase in capital expenditure – four benches and a shed – of
Rs.104, 000.
 Scenario Two

• In return of a reduction in fares from 11 to 10 rupees for

shorter routes and 15 to 13 rupees for longer routes, the
government offers us a tax rate of 15%
 Effects

• Decrease in fares increases the average number of

passengers, stimulating demand and revenues in turn.
• Market Share growth rate increases to 20%.
• 80% of the Bahawalpur market captured.
• Net income increases when the increase in EBT is
combined with the decrease in taxes.
 Comparison of Scenarios to Normal
Circumstances

NPV Payback Period IRR

Normal Situation 7,505,127 2 years 11 months 29.15%
Scenario 1 7,164,860 3 years 1 month 28.61%
Scenario 2 5,062,008 3 years 30.16%
 Comparing Sustainability

Sustainability Sustainability

25,000,000 4,500,000
4,000,000
20,000,000 3,500,000
Normal 3,000,000 Normal
15,000,000
2,500,000

Net Profit (Rupees)

Revenues(Rupees)

Scenario 1 Scenario 1
2,000,000
10,000,000 Scenario 2 Scenario 2
1,500,000
5,000,000 1,000,000
500,000
0 0
2007 2008 2009 2010 2011 2012 2013 2007 2008 2009 2010 2011 2012 2013
Years Years
 SWOT Analysis
Strengths Weaknesses
Air-Conditioned
•Spacious buses
•Customer mindset about previous
•Cleanliness and Safe
modes of transport
•Affordable fares
•Personalized services offered by
•High frequency of buses on main auto rickshaws
routes
• Environment friendly

Opportunities Threats
•No direct competitor •New direct competitors
•Support from government in form •CNG Rikshaws
of subsidies
 Countering the Threats
 Reducing the fares (in case of new
entrant)

 Discount on prepaid and student cards

 Excessive advertisements
 Future Products

• Prepaid cards for frequent travelers

• Prepaid students discount cards

• Senior citizens discount cards

 Future Prospects
• Introduction of new routes
• Induction of more buses on old routes
• Introduction of tourist bus
• Expansion into other cities which still need
better intra-city transport services with
potential market
• Expansion into tourism industry