Pre-Feasibility Study

(Gems Stone Lapidary)

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 Punjab 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 REGIONAL OFFICE Sindh 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 35610572 helpdesk-khi@smeda.org.pk REGIONAL OFFICE Khyber Pakhtunkhwa Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 111-111-456 Fax: (091) 5286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE Balochistan Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk-qta@smeda.org.pk

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Pre-Feasibility Study

Gemstone Lapidary

Table of Contents
1. DISCLAIMER .......................................................................................................................................... 2 2. PURPOSE OF THE DOCUMENT ......................................................................................................... 3 3. INTRODUCTION TO SMEDA .............................................................................................................. 3 4. INTRODUCTION TO SCHEME ........................................................................................................... 4 5. EXECUTIVE SUMMARY ...................................................................................................................... 4 6. BRIEF DESCRIPTION OF PROJECT & PRODUCT ........................................................................ 4 7. CRITICAL FACTORS ............................................................................................................................ 5 8. INSTALLED & OPERATIONAL CAPACITY .................................................................................... 5 9. GEOGRAPHICAL POTENTIAL FOR INVESTMENT/SUITABLE LOCATIONS........................ 5 10. 11. 12. 12.1. 12.2. 12.3. 12.4. 12.5. 12.6. 12.7. 12.8. 12.9. 12.10. 12.11. 13. 14. 14.1. 14.2 14.3 14.2. 14.3. 15. POTENTIAL TARGET MARKETS/CITIES ................................................................................. 6 PRODUCTION PROCESS FLOW .................................................................................................. 7 PROJECT COST SUMMARY ......................................................................................................... 7 PROJECT ECONOMICS ....................................................................................................................... 7 PROJECT FINANCING ........................................................................................................................ 8 PROJECT COST.................................................................................................................................. 8 SPACE REQUIREMENT....................................................................................................................... 8 MACHINERY AND EQUIPMENT .......................................................................................................... 9 RAW MATERIAL REQUIREMENTS ................................................................................................... 10 ROUGH GEMSTONES ....................................................................................................................... 10 LAPIDARY CONSUMABLES ............................................................................................................. 10 HUMAN RESOURCE REQUIREMENT ................................................................................................ 11 REVENUE GENERATION .................................................................................................................. 11 OTHER COSTS................................................................................................................................. 12 CONTACTS...................................................................................................................................... 12 ANNEXURE ..................................................................................................................................... 13 INCOME STATEMENT ...................................................................................................................... 13 STATEMENT OF CASH FLOW .................................................................................................. 14 BALANCE SHEET ....................................................................................................................... 15 USEFUL PROJECT MANAGEMENT TIPS ................................................................................ 16 USEFUL LINKS ........................................................................................................................... 17 KEY ASSUMPTIONS ..................................................................................................................... 19

Pre-Feasibility Study

Gemstone Lapidary

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: www.smeda.org.pk

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Pre-Feasibility Study

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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 Gems Stone Lapidary by providing them 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 its 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 pre-feasibility studies in key areas of investment has been a hallmark of SME facilitation by SMEDA. Concurrent to the pre-feasibility studies, a broad spectrum of business development services is also offered to 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.

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Pre-Feasibility Study

Gemstone Lapidary

4. INTRODUCTION TO SCHEME
Prime Ministers Youth Loans Scheme, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidised financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, by designated financial institutions, initially through National Bank of Pakistan (NBP) and 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
While, Lahore & Karachi with its large Gold and Gem studded jewellery making industry are suitable locations, Gems Stone Lapidary is proposed to be located at Peshawar since major trade/export is taking place in this city. Within Peshawar, Namak Mandi area is preferable, as large Gems Clusters exist here. These jewellery markets are the main customers of cut and polished gemstones. The proposed unit will process rough gemstones, initially semi precious gemstones like Aquamarine, Peridot, Tourmaline etc. These gemstones mainly come from mines in Chitral, Mardan and Gilgit Baltistan in addition to gems from Afghanistan and other nearby locations. Proposed unit will have the capacity to process 3,000 units (Cut & Polished Gemstones, (average 3 carat weight per stone). In the first year of operation, the unit would run on 60% of the total production capacity, which is processing 1,800 pieces. The total cost of the project is Rs. 2.08 million, with capital cost of Rs. 1.19 million and operation cost of Rs. 0.89 million. Given the cost assumptions, IRR and payback are 38 % and two years respectively, thus making the project a profitable venture. The most critical considerations or factors for success of the project are: 1. Awareness about current market trends i.e. the type of stone & type of cut required by customers, which in this case are jewellers. 2. Availability of skilled labour.

6. BRIEF DESCRIPTION OF PROJECT & PRODUCT

Technology: This proposed unit with modern processing machines includes faceting, cutting and polishing to produce cut and polished precious and semiprecious gem stones of both calibrated and non-calibrated types.

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Pre-Feasibility Study

Gemstone Lapidary

Location: The unit will be located in or near gems trading clusters such as Namak Mandi in Peshawar, or Lahore and Karachi also, where access to raw gemstones is easy. Product: The unit would initially process semi-precious gem stones like Aquamarine, Tourmaline, Peridot etc. which comes from Chitral and Northern areas. Target Market: An enormous export market for Pakistani gemstones exists in Europe, USA, Middle East, Hong Kong, Taiwan, etc. The Government of Pakistan, recognizing the potential for local value addition has waived off import duty on lapidary equipment. Employment: The proposed project will provide direct employment to 9 people. Profitability: Financial analysis shows the unit shall be profitable from the very first year of operation.

7. CRITICAL FACTORS
The commercial viability of the Gems Stone Lapidary depends, primarily, on regular orders from customers. Following are some other points that have to be ensured to make the business successful: 1. Awareness about current market trends i.e. the type of stone & type of cuts required by customers; which in this case are jewellers. 2. Availability of skilled labour. 3. Timely delivery of orders 4. Availability of raw material (rough, uncut and unpolished gemstones).

8. INSTALLED & OPERATIONAL CAPACITY

The installed capacity shall be 3,000 pieces per year. The project will run with approximately 60% capacity in first year of its operations with annual increase of 3% in production, constraint being skill levels.

9. GEOGRAPHICAL LOCATIONS

POTENTIAL

FOR

INVESTMENT/SUITABLE

The most appropriate location for setting up a Gems Stone Lapidary would be Peshawar, since major trade/export takes place in this city. Within Peshawar, Namak

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Pre-Feasibility Study

Gemstone Lapidary

Mandi area is preferable as large Gem Clusters exist here. Similarly, Lahore & Karachi, with their large Gold and Gem studded jewellery making industry, are other suitable locations. Chitral and Mingora as well as Gilgit and Skardu are also suitable locations for establishment of Gems Stone Lapidary due to proximity to raw material sources.

10.

POTENTIAL TARGET MARKETS/CITIES

Initially the products, mainly semi-precious natural gemstones will be processed by focusing on demand of the jewellery manufactures of Karachi, Lahore and Peshawar. After having reasonable domestic customers base, export market can be targeted, provided export standards are met. The main export markets for Pakistani Gemstone are U.A.E, United Kingdom, Thailand, Canada, Italy, China, Netherlands, Saudi Arabia, USA, Hong Kong and Germany.

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Pre-Feasibility Study

Gemstone Lapidary

11.

PRODUCTION PROCESS FLOW

Delivery to Customers

Raw Stones of Customers

Grading

Cutting

Polishing

Purchase of Raw Stones

Sale to Market

The process of Lapidary includes grading, cutting and polishing of gemstones. Raw stones are either purchased from the market, or provided by the customers (Jewellers). Individual stone is then examined (graded) and cut into smaller stones along its major line of fracture and inclusions. The smaller pieces are then mounted on cutting tools, which are then faceted on faceting machines. The final operation involves polishing of the faceted stones. Polished stones are then delivered to the customers or sold in the market.

12.

PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of Gems Stone Lapidary under the Prime Ministers Youth Business Loan Scheme. Various cost and revenue related assumptions along with results of the analysis are outlined in this section.

12.1.

PROJECT ECONOMICS

A target processing and production of 3000 units (cut & polished gemstones) whereby units processed and produced by Gems Stone Lapidary in year one will be around 1800 units (cut & polished gemstones) running at 60% production capacity. The following table shows internal rates of return and payback period.
Table 1 - Project Economics Description Internal Rate of Return (IRR) Payback Period (years) Net Present Value (NPV) Details

38% 02 4,714,799

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Pre-Feasibility Study

Gemstone Lapidary

Some of the critical factors influencing the commercial viability of this Gems Stone Lapidary are regular orders from customers and supply of rough gems from mines. Apart from this awareness about current market trends i.e. the type of stone & type of cut required by the consumers, delivering orders on time, availability of raw material (gemstones), reliability and contacts with traders, proximity to gem clusters for easy availability of raw material must be taken care off, for smooth operations of the project. A return on the investment and profitability of the project is highly dependent on the above mentioned factors.

12.2.

PROJECT FINANCING

Following table provides details of the equity required and variables related to bank loan;
Table 2 - Project Financing Description Total Equity (10%) Bank Loan (90 %.) Markup to the Borrower (%age/annum) Tenure of the Loan (Years) Grace Period (Year) Details Rs 208,200 Rs. 1,873,800 8%

8 1

12.3.

PROJECT COST

Following requirements have been identified for operations of the proposed business.
Table 3: Capital Investment for the Project

Cost description Plant and Machinery Furniture/ Fixture Pre-operational Expenses Total Fixed Cost Lapidary Consumables Inventory Raw material inventory Upfront Building Rent (12 Months) Cash Total Project Cost

Total Cost (Rs.) 990,000 150,000 50,000 1,190,000 90,000 300,000 252,000 250,000 2,082,000

12.4.

SPACE REQUIREMENT

The project is proposed to be set-up in a rented building. In this way, the initial capital cost of the project will be far less. The area has been calculated on the basis of space

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Pre-Feasibility Study

Gemstone Lapidary

requirement for processing area and office. The Units operating in the industry do not follow any set pattern. Following table shows calculations for project space requirement.
Table 4: Space Requirement

Space Requirement (in ft.) Cutting & Polishing Room Offices & Strong Room Total Area

Sqft 500 250 750

Monthly rent for the building with covered area of 750 Sft is estimated at Rs. 21,000

12.5.

MACHINERY AND EQUIPMENT

Following combination of machinery is required for cutting and polishing of approximately 3,000 units (cut & polished gemstones, with average weight of 3 carats) per year. Approximate prices for machinery of different origins are given below:
Table 5: List of Machinery and Equipment

Machinery Description Trim Saw Faceting unit Calibrating machines with wheels Dual Grinder Wet belt sander Horizontal Vertical Faceting Accessories Faceting Table Total

Quantity 2 2 1 2 1 1 1 1

Cost Rs/unit 60,000 60,000 350,000 40,000 70,000 80,000 150,000 20,000

Total Rs. 120,000 120,000 350,000 80,000 70,000 80,000 150,000 20,000 990,000

Main equipment for Gems Stone Lapidary is Trim Saw, for initial trimming of rough Gems Stone. After initial trimming, faceting takes place followed by polishing.

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Pre-Feasibility Study

Gemstone Lapidary

12.6.

RAW MATERIAL REQUIREMENTS

Details of Lapidary Consumables and rough (uncut and unpolished) gemstones are given below:

12.7.

ROUGH GEMSTONES
Table 6 Raw Material (Rough Gemstones)

Raw Material Rough Aquamarine Rough Tourmaline Total

Weight (grams) 1,500 1,500 3,000

Carat Weight 7,500 7,500 15,000

Rate/carat 20 20 20

Total Cost (Rs.) 150,000 150,000 300,000

In the first stage, rough gemstones are graded on the basis of quality for further processing. According to industry sources, when 3,000 grams of rough gemstones are processed, almost 30% i.e. 900 grams is not suitable for cutting and polishing and around 70% i.e. 2100 grams can be processed further.

12.8.

LAPIDARY CONSUMABLES

Basic raw material required for cutting and polishing gemstones is Silicon Carbide Paper, which comes in three sizes of 220, 600 and 1,000 meshes. Raw material required for grinding and polishing of precious stones includes Diamond Powder, Cerium Oxide and Chrome Oxide, Expandable Drum and Grinding Wheels etc.
Table 7: Lapidary Consumables

Raw Material Silicon Carbide Paper 220 mesh 600 mesh 1000 mesh Diamond Powder 0.5 micron (Rs.25/carat) 1 micron (Rs.30/carat) 15 micron (Rs.30/carat) Sanding belt 6 X 0.5 220 (70/piece) 600 (70/piece) Sanding disk

Quantity 200 Carats 300 Carats 300 Carats 200 Carats 200 Carats 200 Carats 50pc 50pc

Cost (Rs.) 4,000 8,000 8,000 4,000 6,000 6,000 3,500 3,500

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220 (70/pc) 600 (70/pc) Cerium Oxide (500/lbs) Chrome Oxide (500/lbs) Grinding Wheels (1,000/piece) Expandable Drum 6 X 0.5 (3000/drum) Leather Belt for polishing (1000/belt) Misc./Contingencies Total

50pc 50pc 5 lbs. 10 Kg 12 2 5 -

3,500 3,500 2,500 5,000 12,000 6,000 5,000 9,500 90,000

12.9.

HUMAN RESOURCE REQUIREMENT

Table 8: Human Resource Requirement No. of Employees Salary per month

Description

Manager/Supervisor Cutters @10000 Accounts/Administration Incharge Helper/Peons Security Services Fees Total

1 5 1 1 1 9

35,000 50,000 12,000 10,000 10,000 117,000

12.10.

REVENUE GENERATION

In the first year of production, the unit will process 1800 units @60% production capacity with 3% annual production increase, and process the finished product with an average weight of 3 carats. Initially semi- precious stones i.e Aquamarine, Tourmaline etc. will be processed and later on cutting and polishing of precious stones, such as emerald and ruby will be undertaken.
Table 8: Revenue

Product Category A(Cut & polished Aquamarine &Tourmaline) Category B (Cut & polished Aquamarine &Tourmaline) Category C(Cut & polished Aquamarine &Tourmaline) Total Sales Revenue

Unit 3 carat 3 carat 3 carat

Sales Price (Rs./Unit) 5000 1800 700

First Year Production Units 306 630 864

1800

First Year Sales Revenue (Rs) 1,530,000 1,134,000 604,800 3,268,800

11

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Pre-Feasibility Study

Gemstone Lapidary

12.11.

OTHER COSTS

An essential cost to be borne is the monthly rent @ 20,000 / month and utility charges @ 10,000 / which are projected to increase at the rate of 10% per year. In year 1, the total rent cost amounts to Rs. 240,000. Similarly, electricity expense is estimated to be about 10,000 per month which comes to Rs.120,000 per annum.

13.

CONTACTS

1. Mr. Pervez Ellahi Malik M/S Malik Gems International Namak Mandi Peshawar Ph# 0321-8592517 091-5252517 2. Mr. Afzal Khan Lapidary Instructor Gems and Jewellery Training and Manufacturing Centre (GJTMC) Opp. Imperial Store, Saddar, Cantt. Peshawar Ph# 091-5269253 3. Mr. Naveed Masood Director GGIP, Gems and Gemological Institute of Pakistan Suite # 209, 1st Floor, Benevolent Fund Building, Sadder Road, Peshawar Phone: (+92-91) 9213303, 9213196, 091-9213197, 0333-9155097

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14.

ANNEXURE INCOME STATEMENT

YEAR- 1 YEAR- 2 YEAR- 3 YEAR- 4 YEAR- 5 YEAR- 6 YEAR- 7 YEAR- 8 YEAR- 9 YEAR- 10

14.1.
Projected Income Statement

SALES Gem Stone (Cut & Polished)

272400 COST OF SALES Gem Stone (Cut & Polished)

1,530,000 1,134,000 604,800 3,268,800 390,000 390,000 120,000 1,404,000 57,000 22,800 252,000

1,767,150 1,309,770 698,544 3,775,464 471,900 471,900 132,000 1,544,400 54,150 21,660 264,600

2,041,058 1,512,784 806,818 4,360,661 570,999 570,999 145,200 1,698,840 51,443 20,577 277,830

2,357,422 1,747,266 931,875 5,036,563 690,909 690,909 159,720 1,868,724 48,870 19,548 291,722

2,722,823 2,018,092 1,076,316 5,817,231 836,000 836,000 175,692 2,055,596 46,427 18,571 306,308

3,144,860 2,330,896 1,243,145 6,718,901 1,011,560 1,011,560 193,261 2,261,156 44,106 17,642 321,623

3,632,314 2,692,185 1,435,832 7,760,331 1,223,987 1,223,987 212,587 2,487,272 41,900 16,760 337,704

4,195,322 3,109,474 1,658,386 8,963,182 1,481,024 1,481,024 233,846 2,735,999 39,805 15,922 354,589

4,845,597 3,591,443 1,915,436 10,352,476 1,792,039 1,792,039 257,231 3,009,599 37,815 15,126 372,319

5,596,665 4,148,116 2,212,329 11,957,110 2,168,368 2,168,368 282,954 3,310,559 35,924 14,370 390,935

COST OF GOODS SOLD Electricity Expanse Payroll Expanse (All Staff) Deprecition Expanse Machine Maintenance Expanse Rent Expanse

Amortization of Preliminary Expanses TOTAL OPERATING EXPANSES EARNINGS BEFORE INTEREST & TAXES FINANCIAL EXPENSES Financial Charges on Long term loan TOTAL FINANCIAL EXPENSES PROFIT BEFORE TAX INCOME TAX PROFIT AFTER TAX Retained Earnings at the beginning of year Dividend Retained Earnings at the end of year

10,000 1,865,800 1,013,000 149,904 149,904 863,096 51,964 811,132 811,132

10,000 2,026,810 1,276,754 137,912 137,912 1,138,842 93,326 1,045,516 811,132 405,566 1,451,082

10,000 2,203,890 1,585,772 122,456 122,456 1,463,317 141,998 1,321,319 1,451,082 522,758 2,249,643

10,000 2,398,584 1,947,071 105,763 105,763 1,841,308 215,762 1,625,546 2,249,643 660,660 3,214,529

10,000 2,612,594 2,368,637 87,735 87,735 2,280,902 303,680 1,977,222 3,214,529 812,773 4,378,978

2,837,788 2,869,554 68,265 68,265 2,801,289 422,822 2,378,467 4,378,978 988,611 5,768,834

3,096,223 3,440,121 47,237 47,237 3,392,884 570,721 2,822,163 5,768,834 1,189,233 7,401,764

3,380,161 4,101,997 24,527 24,527 4,077,470 745,741 3,331,729 7,401,764 1,411,081 9,322,411

3,692,089 4,868,347 4,868,347 983,004 3,885,343 9,322,411 1,665,864 11,541,890

4,034,741 5,754,001 5,754,001 1,248,700 4,505,301 11,541,890 1,942,672 14,104,519

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14.2 STATEMENT OF CASH FLOW

Projected Cash Flow Statement YEAR- 0 OPERATING ACTIVITIES Net Profit Add: Depreciation Amortization (Pre-operational Expenses) Net profit before working capital changes Working Capital changes Raw materials stock W.I.P Finished goods stock Accounts payable Accounts receivable Working capital changes (50,000) (50,000) (440,000) (440,000) Cash provided by/ used in operations FINANCING ACTIVITIES Long term loan Owner equity Dividend paid Cash provided by/ used in Financing activities INVESTING ACTIVITIES Capital Expenditure Cash provided by/ used in Investing activities Net Cash Flow Cash balance B/ F Cash balance C/ F (490,000) 1,873,800 208,200 2,082,000 (1,140,000) (1,140,000) 452,000 452,000 (149,904) YEAR- 1 863,096 57,000 10,000 930,096 351,536 (1,278) (8,750) 32,500 (272,400) 101,608 (51,964) 979,739 (149,904) YEAR- 2 1,138,842 54,150 10,000 1,202,992 (8,077) (268) (1,838) 6,825 (42,222) (45,580) (93,326) 1,064,086 (193,201) YEAR- 3 1,463,317 51,443 10,000 1,524,759 (9,774) (325) (2,223) 8,258 (48,766) (52,830) (141,998) 1,329,932 (208,657) YEAR- 4 1,841,308 48,870 10,000 1,900,178 (11,826) (393) (2,690) 9,992 (56,325) (61,242) (215,762) 1,623,174 (225,350) YEAR- 5 2,280,902 46,427 10,000 2,337,329 (14,310) (475) (3,255) 12,091 (65,056) (71,005) (303,680) 1,962,644 (243,378) YEAR- 6 2,801,289 44,106 2,845,395 (17,315) (575) (3,939) 14,630 (75,139) (82,338) (422,822) 2,340,234 (262,848) YEAR- 7 3,392,884 41,900 3,434,784 (20,951) (696) (4,766) 17,702 (86,786) (95,497) (570,721) 2,768,566 (283,876) YEAR- 8 4,077,470 39,805 4,117,275 (25,351) (842) (5,767) 21,420 (100,238) (110,778) (745,741) 3,260,756 (306,586) YEAR- 9 4,868,347 37,815 4,906,162 (30,674) (1,019) (6,978) 25,918 (115,774) (128,528) (983,004) 3,794,630 YEAR- 10 5,754,001 35,924 5,789,925 (37,116) (1,233) (8,443) 31,361 (133,719) (149,151) (1,248,700) 4,392,074 -

(405,566) (598,767) 465,319 1,281,835 1,747,154

(522,758) (731,415) 598,517 1,747,154 2,345,670

(660,660) (886,009) 737,165 2,345,670 3,082,835

(812,773) (1,056,151) 906,493 3,082,835 3,989,328

(988,611) (1,251,459) 1,088,775 3,989,328 5,078,103

(1,189,233) (1,473,109) 1,295,457 5,078,103 6,373,560

(1,411,081) (1,717,667) 1,543,089 6,373,560 7,916,649

(1,665,864) (1,665,864) 2,128,766 7,916,649 10,045,415

(1,942,672) (1,942,672) 2,449,402 10,045,415 12,494,817

829,835 452,000 1,281,835

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14.3
Projected Balance Sheet ASSETS Current Assets Cash & Bank Balance Raw materials stock W.I.P Finished goods stock Receivables

BALANCE SHEET
YEAR-0 YEAR - 1 YEAR - 2 YEAR - 3 YEAR - 4 YEAR - 5 YEAR - 6 YEAR - 7 YEAR - 8 YEAR - 9 YEAR - 10

250,000 390,000 640,000

1,301,739 38,464 1,278 8,750 272,400 1,622,632

2,039,012 46,542 1,546 10,588 314,622 2,412,310

2,630,924 56,315 1,871 12,811 363,388 3,065,310

3,406,117 68,142 2,264 15,501 419,714 3,911,738

4,352,080 82,452 2,740 18,756 484,769 4,940,797

5,481,883 99,766 3,315 22,695 559,908 6,167,568

6,820,050 120,717 4,011 27,461 646,694 7,618,934

7,926,649 146,068 4,853 33,228 746,932 8,857,731

10,075,415 176,742 5,873 40,206 862,706 11,160,942

12,544,817 213,858 7,106 48,649 996,426 13,810,856

TOTAL CURRENT ASSETS Fixed Assets At Cost less: Acc. Depreciation Intangible Assets Upfront Insurance Pre-operational Expenses Worth TOTAL ASSETS LIABILITIES AND EQUITY Current Liabilities Current maturity of long term loan Accounts Payable TOTAL CURRENT LIABILITIES Non current Liabilities Long term Loan EQUITY Paid up Capital Retained Earnings Total Equity TOTAL LIABILITIES & EQUITY

1,140,000 252,000 50,000 2,082,000

1,083,000 180,000 40,000 2,925,632

1,028,850 160,000 30,000 3,631,160

977,408 140,000 20,000 4,202,718

928,537 120,000 10,000 4,970,275

882,110 100,000 5,922,907

838,005 80,000 7,085,573

796,105 60,000 8,475,039

756,299 40,000 9,654,030

718,484 20,000 11,899,426

682,560

14,493,416

1,873,800 208,200 208,200 2,082,000 -

32,500 32,500 1,873,800 208,200 811,132 1,019,332 2,925,632 -

208,657 39,325 247,982 1,723,896 208,200 1,451,082 1,659,282 3,631,160 -

225,350 47,583 272,933 1,471,942 208,200 2,249,643 2,457,843 4,202,718 -

243,378 57,576 300,954 1,246,592 208,200 3,214,529 3,422,729 4,970,275 -

262,848 69,667 332,515 1,003,214 208,200 4,378,978 4,587,178 5,922,907 -

283,876 84,297 368,173 740,366 208,200 5,768,834 5,977,034 7,085,573 -

306,586 101,999 408,585 456,490 208,200 7,401,764 7,609,964 8,475,039 -

123,419 123,419 208,200 9,322,411 9,530,611 9,654,030 -

149,337 149,337 208,200 11,541,890 11,750,090 11,899,426 -

180,697 180,697 208,200 14,104,519 14,312,719 14,493,416 -

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14.2.
Technology

USEFUL PROJECT MANAGEMENT TIPS

Required Spare Parts & Consumables: Suppliers credit agreements and availability, as per schedule of maintenance be ensured before start of operations. Energy Requirement: Should not be overlooked and alternate source of energy for critical operations be arranged in advance. Machinery Suppliers: Should be asked for training and after sales services under the contract with the machinery suppliers. They must be communicated about the timely availability of machinery with clear mutual understanding of the required time period. Quality Assurance Equipment & Standards: Product & service quality standards need to be defined on the packaging and a system to check them, instituted. This improves credibility.

Marketing Product Development & Packaging: Expert's help may be engaged for product/service and packaging design & development. Sales & Distribution Network: Networking with gems trader and jewellers should be strengthen. Price - Bulk Discounts, Cost plus Introductory Discounts: Price should never be allowed to compromise quality. Price during introductory phase may be lower and used as a promotional tool. Product cost estimates should be carefully documented before price setting. Government controlled prices shall be displayed, if applicable.

Human Resources Adequacy & Competencies: Skilled and experienced staff should be considered an investment and be retained by offering better term, if necessary. Performance Based Remuneration: Attempt to manage human resource cost should be focused through performance measurement and performance based compensation. Training & Skill Development: Encouraging training and skill of self & employees through experts and exposure to best practices is a route to success. Least cost options for Training and Skill Development (T&SD) may be linked with compensation benefits and awards.

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Pre-Feasibility Study Gemstone Lapidary

14.3.

USEFUL LINKS

Prime Ministers Office www.pmo.gov.pk Small & Medium Enterprises Development Authority (SMEDA) www.smeda.org.pk National Bank of Pakistan (NBP) www.nbp.com.pk First Women Bank Limited (FWBL) www.fwbl.com.pk Government of Pakistan www.pakistan.gov.pk Ministry of Industries & Production www.moip.gov.pk Ministry of Education, Training & Standards in Higher Education http://moptt.gov.pk Government of Punjab www.punjab.gov.pk Government of Sindh www.sindh.gov.pk Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk Government of Balochistan www.balochistan.gov.pk Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk Government of Azad Jammu &Kashmir www.ajk.gov.pk Trade Development Authority of Pakistan (TDAP)

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Pre-Feasibility Study Gemstone Lapidary

www.tdap.gov.pk Securities & Exchange Commission of Pakistan (SECP) www.secp.gov.pk Federation of Pakistan Chambers of Commerce and Industry (FPCCI) www.fpcci.com.pk State Bank of Pakistan (SBP) www.sbp.org.pk Pakistan Institute of Fashion Design (PIFD) www.pifd.edu.pk Pakistan Fashion Design Council (PFDC) www.pfdc.org Pakistan Gems and Jewellery Development Company www.pgjdc.org

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Pre-Feasibility Study Gemstone Lapidary

15.

KEY ASSUMPTIONS

KEY ASSUMPTIONS
PRODUCTION ASSUMPTIONS Maximum Capacity Utilization Maximum Capacity Utilization (Year-1) At 100% capacity, the following will be the per day production break-up; Gem Stone (Cut & Polished) Total production per day Gem Stone (Cut & Polished) 100% 60%

100%

10

10

100%

3,000 3,000 3,000 1,800 1.03 8 26 312 1.1 1.1

Per Annum OPERATING ASSUMPTIONS Annual Production Capacity(Gem Stone (Cut & Polished)) year 1 Total Production Capacity (Year 1) Growth Rate in Production (3%) OR (times) Hours operational per day Days operational per month Days operational per year ECONOMY-RELATED ASSUMPTIONS Electricity growth rate (10%) OR (times) Pay roll growth (10%) OR (times)

CASH FLOW ASSUMPTIONS Accounts receivable cycle (in days) Accounts payable cycle (in days) WIP (Days) Finished Goods (Days) Raw Materials Inventory (Days) Cash on Hand 30 30 1 7 30 260,000

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Pre-Feasibility Study Gemstone Lapidary

REVENUE ASSUMPTIONS

Sales price per unit in year 1 Gem Stone (Cut & Polished)

1800

Sale price growth rate (5%)

EXPENSES ASSUMPTIONS Electricity Expenses Per/Year(RS)

OR (times)

1.05

120,000 2% 1.03 252,000 390,000 5% 5%

Machine maintenance Cost /year (% of total machinery cost) Growth in maintenance cost 3 %) OR (times) Pre-paid land rent (12 months) Cost of Rough Gem Stones Raw material cost growth rate Rent growth rate

COST OF GOODS SOLD ASSUMPTIONS

COGS Year 1

Gem Stone (Cut & Polished)

216.67

COGS Growth Rate (4%)

OR (times)

1.04

Financial Assumptions Project Life (Years) Debt Equity Interest Rate on Long term debt Debt Tenure (Years) Debt payment per years Grace Period (Year) 10 90% 10% 8% 8 12 1

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