Pre-Feasibility Study

Transcription

1 () Small and Medium Enterprises Development Authority Ministry of Industries & Production Government of Pakistan HEAD OFFICE 4th Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road, Lahore Tel: (92 42) , Fax: (92 42) REGIONAL OFFICE Punjab 3 rd Floor, Building No. 3, Aiwan-e-Iqbal Complex, Egerton Road Lahore, Tel: (042) Fax: (042) helpdesk.punjab@smeda.org.pk REGIONAL OFFICE Sindh 5 th Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) Fax: (021) helpdesk-khi@smeda.org.pk REGIONAL OFFICE Khyber Pakhtunkhwa Ground Floor State Life Building The Mall, Peshawar. Tel: (091) Fax: (091) helpdesk-pew@smeda.org.pk REGIONAL OFFICE Balochistan Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) , Fax: (081) helpdesk-qta@smeda.org.pk Note: All SMEDA Services / information related to PM's Youth Business Loan are Free of Cost December, 2013

2 Table of Contents 1. DISCLAIMER PURPOSE OF THE DOCUMENT INTRODUCTION TO SMEDA INTRODUCTION TO SCHEME EXECUTIVE SUMMARY BRIEF DESCRIPTION OF PROJECT & PRODUCT CRITICAL FACTORS INSTALLED & OPERATIONAL CAPACITIES GEOGRAPHICAL POTENTIAL FOR INVESTMENT POTENTIAL TARGET MARKETS DAIRY PRODUCTION PROCESS PROJECT COST SUMMARY PROJECT ECONOMICS PROJECT FINANCING PROJECT COST SPACE REQUIREMENT MACHINERY AND EQUIPMENT FURNITURE REQUIREMENT RAW MATERIAL REQUIREMENT HUMAN RESOURCE REQUIREMENT REVENUE GENERATION OTHER COSTS CONTACTS OF SUPPLIERS AND CONSULTANTS ANNEXURE INCOME STATEMENT BALANCE SHEET CASH FLOW STATEMENT USEFUL PROJECT MANAGEMENT TIPS USEFUL LINKS KEY ASSUMPTIONS SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 1

3 1. DISCLAIMER This information memorandum is to introduce the subject matter and provide a general idea and information on the subject. Although, the material included in this document is based on data / information gathered from various reliable sources; however, it is based upon certain assumptions which may differ from case to case. The information has been provided on as is where is basis without any warranties or assertions as to the correctness or soundness thereof. 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, its employees or agents do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The contained information does not preclude any further professional advice. The prospective user of this memorandum is encouraged to carry out additional diligence and gather any information which is necessary for making an informed decision, including taking professional advice from a qualified consultant / technical expert before taking any decision to act upon the information. For more information on services offered by SMEDA, please contact our website: SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 2

4 2. 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, production, marketing, finance and business management. The purpose of this document is to facilitate potential investors in dairy farm by providing them with a general understanding of the business with the intention of supporting potential investors in crucial investment decisions. The need to come up with pre-feasibility reports for undocumented or minimally documented sectors attains greater imminence as the research that precedes such reports reveal certain thumb rules; best practices developed by existing enterprises by trial and error, and certain industrial norms that become a guiding source regarding various aspects of business set-up and it s successful management. Apart from carefully studying the whole document, one must consider critical aspects provided later on, which form basis of any investment decision. 3. INTRODUCTION TO SMEDA The Small and Medium Enterprises Development Authority (SMEDA) was established in October 1998 with an objective to provide fresh impetus to the economy through development of Small and Medium Enterprises (SMEs). With a mission "to assist in employment generation and value addition to the national income, through development of the SME sector, by helping increase the number, scale and competitiveness of SMEs", SMEDA has carried out sectoral research to identify policy, access to finance, business development services, strategic initiatives and institutional collaboration and networking initiatives. Preparation and dissemination of prefeasibility studies in key areas of investment has been a hallmark of SME facilitation by SMEDA Concurrent to the prefeasibility studies, a broad spectrum of business development services is also offered to the SMEs by SMEDA. These services include identification of experts and consultants and delivery of need based capacity building programs of different types in addition to business guidance through help desk services. 4. INTRODUCTION TO SCHEME Prime Minister s Youth Business Loan, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year , is designed to provide subsidized financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 3

5 through designated financial institutions, initially by the National Bank of Pakistan (NBP) and the First Women Bank Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 1 year grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries+ across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA). 5. EXECUTIVE SUMMARY This pre-feasibility is about setting up a dairy farm in which cows and buffaloes are kept primarily for milk production in conventional housing system. The animals are fed green fodder and roughage at 8-10% of live body weight in addition to nutritionally balanced formulated feed and bred by Artificial Insemination method to gain optimum milk yields in lactation cycle of average 300 days. Dairy farming involves housing, breeding, feeding, watering, disease control and hygienic production of milk on farm. A dairy farm with 12 animals (80% cows and 20% buffaloes) needs a total investment estimated at Rs million out of which the capital cost of the project is Rs.2.01 million with working capital of Rs million. It is assumed that starting from 12 animals in year 1, the herd of animals would be increased to approximately 50 animals till 10 th year of business, keeping mortality rate and culling rate each at 5%. The Internal Rate of Return (IRR), payback period and Net Present Value (NPV) of the project are estimated to be 48%, 4.26 years and Rs million respectively. The farm will provide employment opportunity to 02 individuals. The legal status of the project is proposed as sole proprietorship. 6. BRIEF DESCRIPTION OF PROJECT & PRODUCT The proposed dairy farm would be established on leased land with purpose built shed constructed on conventional housing system. The farm would start the operations with 12 animals (10 cows and 2 buffaloes having daily per animal milk production of 13 and 8 litres respectively) to achieve milk production of 34,560 liters by the end of first year, excluding the milk consumed by suckling calves. The breeding of animals would be planned through Artificial Insemination method. Female calves would be given special attention and raised as heifers and male calves would be sold for fattening purpose. The milk will be primarily sold to bulk buyers at the rate of average Rs.60 per liter. The farm will also offer milk sale to domestic individual consumers. 7. CRITICAL FACTORS Background knowledge and related experience of the entrepreneur in dairy farm operations. SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 4

6 Application of good husbandry practices such as timely feeding, watering and vaccination to ensure animal s health and disease-free environment. Awareness about the supply and demand of milk in the market as demand of milk is relatively higher in summer as compared to winter season. Efficient marketing of the project and bulk supply to wholesalers. 8. INSTALLED & OPERATIONAL CAPACITY In the proposed study, initially twelve (12) animals, preferably 80% cows and 20% buffaloes, are recommended to obtain optimum milk production in the first year of project. It is assumed that on average, 70-80% animals would be in lactation on farm. The female heifers born at farm would be added in milking herd; hence the number of animals would be 50 at 10 th year of project. The male calves would be sold for meat. Although, buffaloe milk has higher fat content (9-10%) as compared to cow s milk (3-6%) but total milk production of cows in average lactation period of 300 days is higher as compared to buffaloes. The dairy farm will have the capacity to sale 34,560 liters of milk, primarily directly to consumers and then milk contractors and processors in its first year of operation. 9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT Dairy farming is a viable business proposition for both rural and peri-urban areas of Pakistan. There is almost equal demand for milk in rural and peri urban areas around the major cities such as Lahore, Faisalabad, Jhang, Sahiwal, Pakpattan, Jehlum, Peshawar, Charsadda, D.I. Khan, Quetta, Zhob, Lasbela, Karachi, Hyderabad, Sakkar etc. across the country; hence, from the demand point of view, the said project offers good investment opportunities for small scale investment in all provinces of country. 10. POTENTIAL TARGET MARKETS Apart from Lahore, Sialkot, kasur, Gujranwala, Bahawalpur, Okara, Dadu, Lasbela, D. I. Khan etc., dairy farming in rural and peri-urban locations around all major cities are the primary markets for dairy farming. The target clients for a dairy farm business include; domestic consumers, milk contractors and suppliers, milk collection and processing companies and dairyproducts manufacturing companies. 11. DAIRY PRODUCTION PROCESS Selection of good dairy buffalo breeds namely, Nili-Ravi and Kundi and cattle breeds such as Sahiwal, Red Sindhi and Cholistani. Crossbred cows (cross of local non-descript cows with semen of exotic breeds e.g. Holstein, Friesian and Jersey) may also be considered. SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 5

7 Selection of animals with excellent body condition and udder health: average daily milk production of 8 liters or above for buffaloes and 12 liters or above for cows in 2 nd or 3 rd lactation, essentially with no disease history. Housing: Good housing leads to good management practices and ultimately optimum production. Generally, housing should be; i. Less expensive ii. Well ventilated, comfortable and dry with hygienic environment iii. Equipped with easy drainage system and mechanism for removal of dung urine and waste material iv. Protected from extreme environmental conditions v. Having maximum sun exposure: axis of length to be east to west vi. Available with feed and water for 24 hours vii. Planned so that future expansion may be possible when required Feeding: Milking animal should be fed 1 kg of concentrate feed per 3 litres of milk produced; hence animal with 10 litres of milk production would be offered kg of concentrate. Green fodder should be 8-10% of body weight to the animals. Additionally, urea molasses blocks and salt blocks can help in better milk production. New born calves should be fed colostrum and 8-10% of body weight for first month of age. After that, green fodder should be added to its feeding plan Watering: Supply of clean drinking water in clean troughs i.e. 50 to 80 liters of water consumption/adult animal/day round the clock maintains the milk production capacity of the animal. Breeding: Efficient and timely Artificial Insemination (AI) of good genetic worth is a key to success in good breeding programs of herd. The detection of heat in buffaloes should be given special attention as they do not show signs of heat (silent heat). Calving: Pregnant animals should be given special attention in third trimester of pregnancy and should be separated in pregnancy pens, if possible. Veterinary assistance should be sought out in case of emergency. Calf care and heifer management is very important in maintaining dairy farm production. Udder health: Hygienic and clean milking twice a day (morning/ evening) lowers the chances of mastitis as udder health and hygiene is most important in dairy animals. Storage: Proper storage of milk should be done preferably at temperature of 4 O c. Disease management: De-worming for endoparasitic infestations is necessary in calves born at farm. Timely vaccination against infectious diseases should be done as a prophylactic measure. At a well managed farm, mortality should not exceed 2- SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 6

8 3% per annum. The sick animals should be separated from rest of the animals and kept in quarantine. Following is a tentative vaccination schedule; Table 1: Tentative Vaccination Schedule Disease Vaccine Time for vaccination Dose/ Administration Foot & Mouth Disease (FMD) FMD (VRI) February/March & September/October 5 ml sub cut. Black Quarter BQ March/April 5 ml sub cut. Haemorrhagic Septicemia (HS) HS (VRI) May/June & November/December 5 ml / 300 kg body wt sub cut. Anthrax Anthrax August 1 ml sub cut. Brucella Abortus BA Once in life for heifers (4-12 months of age) (VRI: Veterinary Research Institute, Lahore) 1ml sub cut. Record keeping: The animals should be ear-tagged having information of animal such as breed, age, date of birth / purchase, number of lactations, vaccination etc. The records for daily milk yields, weight, Artificial Inseminations (AI), calving, vaccination and medication etc. are also important. Culling: Good productive animals should be selected and uneconomical animals should be culled. Care: Regular technical assistance from the livestock professionals and experts. Returns on the scheme and its profitability are highly dependent on the efficiency of above mentioned factors. In case dairy farm is not able to attain its target milk production or implement effective husbandry practices, it will not be able to cover the potential market and recover payments; hence, cost of operating the business will increase. 12. PROJECT COST SUMMARY A detailed financial model has been developed to analyze the commercial viability of dairy farm project under the Prime Minister s Youth Business Loan. Various cost and revenue related assumptions along with results of the analysis are outlined in this section. The projected Income Statement, Cash Flow Statement and Balance Sheet are attached as annexure Project Economics The following table shows Internal Rate of Return (IRR), payback period and Net Present Value (NPV) of the proposed project; SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 7

9 Table 2: Project Economics Description Details Internal Rate of Return (IRR) 48% Payback Period (Year) 4.26 Net Present value (NPV) Rs. 5,852, Project Financing Following table provides details of the equity required and variables related to bank financing; Table 3: Project Financing Description Details Total Equity (10%) Rs. 218,736 Bank Loan (90%) Rs. 1,968,626 Markup to the Borrower (%age/annum) 8% Tenure of the Loan (Years) 8 Grace Period (Years) Project Cost Following table shows the operational requirements identified for the proposed business; Table 4: Capital Investment for the Project Capital Investment Amount (Rs.) Building/ Infrastructure 373,068 Cows and buffaloes cost 1,460,000 Furniture and fixture 10,000 Machinery & equipment 97,800 Pre-operating costs 72,065 Total Capital Costs 2,012,933 Raw material inventory 54,429 Cash in hand 100,000 Upfront land lease for 1/2 acres per year 20,000 Total Working Capital 174,429 Total Project Cost 2,187, Space Requirement Following table shows calculations for project space requirement; SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 8

10 Table 5: Space Requirement in Year 1 Description Area per Total Required Area animal (Sqft) Sq.ft. (year 1-3) Shed space for cows Open paddock for cows Shed space for buffalos Open paddock for buffalos Shed space for calves younger than 1 year Open paddock for calves younger than 1 year Shed space for calves older than one year Open paddock for calves older than one year Stores for fodder, concentrate & machine Pregnancy/ Calving pen Store for milk and utensils Servant washroom - 80 Total space requirements 3,355 Total investment in construction of building and infrastructure is estimated to be approximately Rs million. Since, farm space would be increased as the number of animals increases in herd; hence shed is constructed keeping in view the expected expansion in the start of year 4. Considering expansion in herd size, total land requirement is estimated at 4 Kanals (0.5 acres). It is proposed that 4 Kanals land be acquired on lease at the start of the project and Rs. 20,000 is appropriated as annual lease expense Machinery and Equipment Following table provides list of machinery and equipment required for the proposed dairy farm; Table 6: List of Machinery and Equipment Description Unit Rate (Rs.) No. Cost (Rs.) Calf feeder 1, ,800 Teat dip cup ,000 Fodder cutter 20, ,000 Water pump 20, ,000 Freezer 22, ,000 Hand carts 5, ,000 Miscellaneous 20,000 Lump sum 20,000 SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 9

11 (Milk utensils, buckets etc.) Total 97, Furniture Requirement Table 7: Furniture Requirements Description Qty Rate (Rs.) Cost (Rs.) Furniture and fixture Lump sum 10,000 10,000 Total 10, Raw Material Requirement Following tables show raw material requirement to run the proposed dairy farm in first year of production; Table 8: Daily Feeding Requirements for One Cow* Description Kg/ Animal/ Day** Rs./ Kg Amount (Rs.) Green fodder % of body weight) Silage/ wheat straw Concentrate (@1 kg for 3 liters of milk) Total daily feed * Average. weight of cow is assumed to be 400 kg with 13 liters of daily milk production for 300 days lactation period ** Figures are rounded off at two decimal places. Table 9: Daily Feeding Requirements for One Buffalo* Description Kg/ Animal/ Day** Rs./ Kg Amount (Rs.) Green fodder (@8-10 % of body weight) Wheat straw Concentrate (@1 kg for 3 liters of milk) Total * Average weight of buffalo is assumed to be 500 kg with average 8 liters of daily milk production for 300 days lactation period ** Figures are rounded off at two decimal place. SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 10

12 Table 10: Daily Feeding Requirements of One Calf* (younger than 1 year) Description Kg/ Animal/ Day** Rs./ Kg Amount (Rs.) Green fodder Wheat straw Total * Average weight of calf younger than one year is assumed to be 80 kg. ** Figures are rounded off at two decimal place. Table 11: Daily Feeding Requirements of One Calf* (older than 1 year) Description Kg/ Animal/ Day** Rs./ Kg Amount (Rs.) Green fodder Wheat straw Total * Average weight of calf older than one year is assumed to be 180 kg. ** Figures are rounded off at two decimal place. Table12: Total Cost of Feeding in Year 1 Description No. of Animals Cost in Year 1 (Rs.) Cows ,368 Buffaloes 2 169,330 Female calves older than 1 year 6 127,568 Male calves younger than 1 year 6 51,026 Total 1,306, Human Resource Requirement Table 13: Human Resource Requirement Description No. Monthly Salary Annual Salary (Rs.) (Rs.) Owner/ Farm supervisor 01 15, ,000 Farm worker 01 10, ,000 Total ,000 One trained farm worker will be required to assist the owner for husbandry practices and farm operations. SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 11

13 12.9. Revenue Generation Table 14: Revenue Generation Description Units Quantity Rate (Rs./Unit) Other Costs An essential cost to be borne by the farm is electricity cost which is assumed to be Rs. 60,000 per annum. The cost of vaccination & medication for adult animals and young calves is taken as Rs. 550 and Rs. 200 per annum respectively, hence in year 1, the total cost is Rs. 7,800. The Artificial Insemination (AI) cost is assumed to be Rs. 2,000 per animal; hence, it would be Rs. 24,000 per annum respectively. The communication expense is Rs. 12,000 per annum. The travelling expense is estimated to be 1% of total revenue hence Rs. 21,186 in year one. 13. CONTACTS OF SUPPLIERS AND CONSULTANTS Dr. M. Sarwar Dean, Faculty of Animal Husbandry University of Agriculture, Faisalabad Ph: Dr. Muhammad Abdullah Dean, Faculty of Animal Production University of Veterinary & Animal Sciences, Lahore Ph: Table 15: List of Suppliers and Consultants Consultants Feed Suppliers ICI Pakistan Cattle Feed 63-Mozang Road Lahore Ph: Doctor s Dairy Feeds 203/7, UC-3, Cattle colony, Bin Qasim, Karachi. Prof. Dr. Muhammad Younas Faculty of Animal Husbandry University of Agriculture, Faisalabad Ph: Dr. Nawaz Saeed Director General (Extension) Livestock & Dairy Development Department (L&DD), Govt. Of Punjab, 16-Cooper Road, Lahore, Ph: AI / Semen Suppliers Annual Revenue in Year 1 (Rs.) Milk sales Liters 34,560 60* 2,073,600 Sale of male calves Calf 3 15,000 45,000 Total 2,118,600 * Average sale price of milk is estimated at Rs. 60. Al - Haiwan Sires, 5-Km, Pakpattan Road, Sahiwal Ph: Altaf & Company, Altaf & Co Plaza, 16/1, Out Fall Road, Lahore. Ph: SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 12

14 Ph: Alhalal Wanda Al-Halal Livestock Concern Company Super High Way Jahania Ph: Machinery Suppliers Kurdson Industries Sabri Road, Angoori Scheme, Baghbanpura, Lahore Ph: Ghazi Brothers B-35 KDA Scheme no 1, Mian Muhammad Shah Road, Karachi. Ph: Milk Contractors/ Processors Nestle Pakistan 308, Upper Mall, Lahore Ph: UAN Nestle, Engro, Gourmet, etc. Gourmet Pvt. Ltd. 73-F, Quid-e- Azam Industrial estate, Kot lakhpat Lahore Ph: Livestock Mandies The animals may be procured from local livestock breeders and livestock mandies scheduled in different districts such as Pattoki, Okara, Bahawalnagar, Lodhran, Vehari, Khanewal, Arifwala, Pakpattan etc. scheduled by Livestock and Dairy Development Department, Govt. of The Punjab Lahore. Free Landline: , SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 13

15 14. ANNEXURE Income Statement Statement Summaries Income Statement SMEDA Rs. in actuals Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Revenue 2,118,600 2,328,810 2,894,986 3,557,465 4,348,831 5,453,588 7,304,459 10,607,147 16,538,134 22,759,469 Cost of goods sold (Feed, vaccine, medication, AI, electricity etc) 1,398,092 1,545,725 1,731,681 2,068,111 2,417,994 3,071,041 3,807,597 5,196,041 7,167,419 9,276,570 Gross Profit 720, ,085 1,163,305 1,489,354 1,930,838 2,382,548 3,496,862 5,411,107 9,370,715 13,482,899 General administration & selling expenses Administration expense 300, , , , , , , , , ,384 Rental expense p 20,000 22,000 24,200 26,620 29,282 32,210 35,431 38,974 42,872 47,159 Communications expense (phone, fax, etc.) 12,000 13,200 14,520 15,972 17,569 19,326 21,259 23,385 25,723 28,295 Transportation Cost 21,186 23,288 28,950 35,575 43,488 54,536 73, , , ,595 Depreciation expense 29,433 29,433 29,433 29,433 69,146 69,146 69,146 69, , ,768 Amortization expense 7,207 7,207 7,207 7,207 7,207 7,207 7,207 7,207 7,207 7,207 Subtotal 389, , , , , , , ,398 1,004,028 1,137,408 Operating Income 330, , , ,247 1,324,915 1,716,969 2,759,306 4,581,708 8,366,687 12,345,491 Other income Earnings Before Interest & Taxes 330, , , ,247 1,324,915 1,716,969 2,759,306 4,581,708 8,366,687 12,345,491 Interest expense 163, , , ,794 90,513 67,465 42,504 15, Earnings Before Tax 167, , , ,453 1,234,403 1,649,505 2,716,802 4,566,237 8,366,687 12,345,491 Taxable earnings for the year 167, , , ,453 1,234,403 1,649,505 2,716,802 4,566,237 8,366,687 12,345,491 Tax ,455 52, , , , ,371 2,150,840 3,543,421 NET PROFIT/(LOSS) AFTER TAX 167, , , ,435 1,126,742 1,472,104 2,315,102 3,673,866 6,215,848 8,802,070 Balance brought forward 167, , ,749 1,735,184 2,861,926 4,334,030 6,649,132 10,322,998 16,538,846 Total profit available for appropriation 167, , ,749 1,735,184 2,861,926 4,334,030 6,649,132 10,322,998 16,538,846 25,340,915 Dividend Balance carried forward 167, , ,749 1,735,184 2,861,926 4,334,030 6,649,132 10,322,998 16,538,846 25,340,915 SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 14

16 14.2. Balance Sheet Statement Summaries Balance Sheet SMEDA Rs. in actuals Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Assets Current assets Cash & Bank 100, , , ,370 1,269,336 2,260,676 3,636,481 6,014,078 10,171,832 18,512,951 31,594,505 Raw material inventory 54,429 63,133 74,127 93, , , , , , ,930 - Pre-paid annual land lease 20,000 22,000 24,200 26,620 29,282 32,210 35,431 38,974 42,872 47,159 - Total Current Assets 174, , , ,185 1,412,871 2,445,938 3,871,059 6,338,517 10,628,377 19,122,040 31,594,505 Fixed assets Land Building/Infrastructure 373, , , , , , , ,534 1,495,842 1,407,423 1,319,005 Animals (original herd) 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 1,460,000 Revaluation Surplus/ (loss) - 144, , , ,350 1,328,205 2,140,494 3,445,536 4,421,057 5,434,699 - Net value of animals 1,460,000 1,604,600 1,778,180 1,945,566 2,394,350 2,788,205 3,600,494 4,905,536 5,881,057 6,894,699 1,460,000 Machinery & equipment 97,800 88,020 78,240 68, , , ,217 91, , , ,009 Furniture & fixtures 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - Office vehicles Office equipment Total Fixed Assets 1,940,868 2,056,034 2,200,181 2,338,133 3,462,872 3,787,581 4,530,723 5,766,619 7,568,608 8,462,481 2,908,014 Intangible assets Pre-operation costs 72,065 64,859 57,652 50,446 43,239 36,033 28,826 21,620 14,413 7,207 - Training costs Total Intangible Assets 72,065 64,859 57,652 50,446 43,239 36,033 28,826 21,620 14,413 7,207 - TOTAL ASSETS 2,187,362 2,499,249 2,662,584 3,157,764 4,918,982 6,269,552 8,430,609 12,126,757 18,211,398 27,591,728 34,502,519 Liabilities & Shareholders' Equity Current liabilities Accounts payable Export re-finance facility Short term debt Other liabilities Total Current Liabilities Other liabilities Lease payable Deferred tax ,455 68, , , ,234 1,647,605 3,798,445 7,341,866 Long term debt 1,968,626 1,968,626 1,750,014 1,513,258 1,256, , , , Total Long Term Liabilities 1,968,626 1,968,626 1,750,014 1,529,713 1,325,324 1,155,296 1,031,961 1,107,964 1,647,605 3,798,445 7,341,866 Shareholders' equity Paid-up capital 218, , , , , , , ,125 1,819,738 1,819,738 1,819,738 Gain/ (Loss) on revaluation of animals - 144, , , ,350 1,328,205 2,140,494 3,445,536 4,421,057 5,434,699 - Retained earnings - 167, , ,749 1,735,184 2,861,926 4,334,030 6,649,132 10,322,998 16,538,846 25,340,915 Total Equity 218, , ,570 1,628,051 3,593,658 5,114,256 7,398,648 11,018,793 16,563,793 23,793,283 27,160,653 TOTAL CAPITAL AND LIABILITIES 2,187,362 2,499,249 2,662,584 3,157,764 4,918,982 6,269,552 8,430,609 12,126,757 18,211,398 27,591,728 34,502,519 SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 15

17 14.3. Cash Flow Statement Statement Summaries Cash Flow Statement SMEDA Rs. in actuals Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Operating activities Net profit - 167, , , ,435 1,126,742 1,472,104 2,315,102 3,673,866 6,215,848 8,802,070 Add: depreciation expense - 29,433 29,433 29,433 29,433 69,146 69,146 69,146 69, , ,768 amortization expense - 7,207 7,207 7,207 7,207 7,207 7,207 7,207 7,207 7,207 7,207 Deferred income tax ,455 52, , , , ,371 2,150,840 3,543,421 Raw material inventory (54,429) (8,704) (10,994) (19,068) (21,058) (38,799) (46,095) (86,318) (128,209) (148,256) 561,930 Cash provided by operations (54,429) 195, , , ,035 1,271,956 1,679,763 2,706,837 4,514,381 8,345,406 13,034,396 Financing activities Change in long term debt 1,968,626 - (218,611) (236,756) (256,407) (277,688) (300,736) (325,697) (352,730) - - Change in short term debt Change in export re-finance facility Add: land lease expense - 20,000 22,000 24,200 26,620 29,282 32,210 35,431 38,974 42,872 47,159 Land lease payment (20,000) (22,000) (24,200) (26,620) (29,282) (32,210) (35,431) (38,974) (42,872) (47,159) - Lease principal repayment Issuance of shares 218, , , Purchase of (treasury) shares Cash provided by / (used for) financing ac 2,167,362 (2,000) (220,811) (239,176) 446,320 (280,616) (303,957) (329,240) 538,986 (4,287) 47,159 Investing activities Capital expenditure (2,012,933) (705,388) (895,613) - - Acquisitions Cash (used for) / provided by investing ac (2,012,933) (705,388) (895,613) - - NET CASH 100, ,222 13, , , ,340 1,375,806 2,377,596 4,157,754 8,341,119 13,081,555 Cash balance brought forward 100, , , ,370 1,269,336 2,260,676 3,636,481 6,014,078 10,171,832 18,512,951 Cash available for appropriation 100, , , ,370 1,269,336 2,260,676 3,636,481 6,014,078 10,171,832 18,512,951 31,594,505 Dividend Cash carried forward 100, , , ,370 1,269,336 2,260,676 3,636,481 6,014,078 10,171,832 18,512,951 31,594,505 SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 16

18 14.4. Useful Project Management Tips Technology List of Machinery & Equipment: (As per Section 12.5) Animal Selection: Selection of disease free animals with good breed characteristics, body conditions and health. Feed, Vaccination, Medication, AI Services: Should be procured from reputed and reliable sources. Energy Requirement: Should not be overestimated or installed in excess and alternate source of energy for critical operations be arranged in advance Machinery Suppliers: Should be asked for after sales services under the contract with the machinery suppliers Quality Assurance & Standards: Quality standards need to be defined and a system of record keeping should be developed to check quality standards to improve credibility Marketing Advertisement and Promotion: Business promotion and dissemination through banners and launch events is highly recommended. Product broachers from good quality service providers Sales & Distribution Network: Local contacts and relationship building with farmers and dairy farms is important for developing business. Human Resources List of Human Resource: (As per Section 12.8) Adequacy & Competencies: Skilled and experienced staff should be hired for the project. Performance Based Remuneration: Employees should be paid and rewarded on the basis of their performance. Training & Skill Development: Encouraging training and skill development of self & employees through experts and exposure of best practices can be an asset for the business. Least cost options for Training and Skill Development (T&SD) may be linked with compensation benefits and awards. SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 17

19 14.5. Useful Links Prime Minister s Office, Government of Pakistan, Ministry of Industries & Production, Ministry of National Food Security & Research, Ministry of Education, Training & Standards in Higher Education, Government of Punjab, Government of Sindh, Government of Khyber Pakhtunkhwa, Government of Balochistan, Government of Gilgit Baltistan, Government of Azad Jammu & Kashmir, Trade Development Authority of Pakistan (TDAP), Securities & Exchange Commission of Pakistan (SECP), Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Punjab Board of Investment & Trade (PBIT), 23-Aikman Road, GOR-I, Lahore Tel , Sindh Board of Investment (SBI), 1st Floor, Tower B, Finance & Trade Center, Shahra-e-Faisal, Karachi, Tel , State Bank of Pakistan (SBP), National Bank of Pakistan (NBP), First Women Bank Limited (FWBL), Pakistan Agricultural Research Council (PARC), Islamabad, Tel National Agricultural Research Centre (NARC), Islamabad, Tel , National Veterinary Laboratory, NARC, Islamabad Tel Balochistan Agricultural Research Centre (BARC), Quetta, Tel: , Southern-zone Agricultural Research Centre (SARC), Karachi, Tel: , , Arid Zone Research Institute (AZRI), Bahawalpur, Tel: , Punjab Livestock & Dairy Development Board (PLDDB), 11- Shami Road, Lahore Cantt. Tel , University of Agriculture, Faisalabad, Lasbela University of Agriculture, Water & Marine Sciences, Lasbela, Sindh Agriculture University, Tondojam, SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 18

20 Gomal College of Veterinary Sciences, Dera Ismail Khan, KPK Agricultural University, Peshawar, Pir Mehr Ali Shah Arid Agricultural University, Rawalpindi, University College of Veterinary & Animal Sciences, Islamia University Bahawalpur (IUB), University of Veterinary & Animal Sciences (UVAS), Out Fall Road, Lahore, Bahauddin Zakariya University (BZU), Multan, Nestle Sarsabz Training Institute, Renala Khurd, Okara c/o Nestle Lahore, Tel: Animal Husbandry In-Service Training Institute (AHITI), Peshawar, Tel , Veterinary Research Institute (VRI), Ghazi Road, Lahore Cantt., Tel Al - Haiwan Sires Training Institute, Jogi Chowk, Sahiwal, Tel , , Altaf & Co Livestock Training Institute, Altaf & Co Plaza,16/1,Out Fall Road, Lahore, Tel: , Solve Agri Pak Ltd, F-6/2, Main Link Road, Model Town, Lahore, Tel: Dairy & Rural Development Foundation (DRDF), Lahore, Agribusiness Support Fund (ASF), Lahore, Directorate of Livestock Farms, L&DD, Lahore, Tel: Directorate of Small Holder Dairy Development, Gujranwala, Tel: , Buffalo Research Institute Bhunikey, District Pattoki, Tel: , Livestock Experiment Station (LES), Dera Chahl Lahore, L&DD, Punjab, Tel: , Research Centre for Conservation of Sahiwal Cattle (RCCSC), Jhang, Tel: , , Directorate of Livestock Training Centre (LSTC), Bahadurnagar, Okara, Tel: Livestock & Fisheries Department, Government of Sindh, Agriculture & Livestock Department, Government of KPK, Livestock & Dairy Development, Government of Balochistan, SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 19

21 15. KEY ASSUMPTIONS Table 16: Key Assumptions Description Details Milk sale price (cow) Rs. 60 Milk sale price (buffalo) Rs. 60 Milk sale price growth rate (%) 10 Capacity utilization (%) 100 Cow: Buffalo ratio in the herd 80:20 Average lactation length of herd (days) 300 Purchase price of a cow (Rs.) 120,000 Purchase price of a buffalo (Rs.) 130,000 Sale price of a low yielder cow (Rs.) 60,000 Sale price of a low yielder buffalo (Rs.) 60,000 Sale price of one year male calf (Rs.) 15,000 Milk yield per cow / day (liters) 13 Milk yield per buffalo / day (liters) 8 SMEDA Services / Information related to PM s Youth Business Loan are FREE OF COST - 20