Pre-Feasibility Study

FAN GUARDS MANUFACTURING UNIT

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk

HEAD OFFICE
Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore
Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756
helpdesk@smeda.org.pk

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH NWFP BALOCHISTAN
Waheed Trade Complex,
1st Floor, 36-Commercial Zone, 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
Phase III, Sector XX, Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Khayaban-e-Iqbal, DHA Lahore. Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042) 5896619, 5899756 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
helpdesk@smeda.org.pk helpdesk-khi@smeda.org.pk helpdesk-pew@smeda.org.pk helpdesk-qta@smeda.org.pk

June, 2006
Pre-Feasibility Study Fan Guards Manufacturing 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 contents of the information memorandum do not bind SMEDA in any legal or other
form.

DOCUMENT CONTROL
Document No. PREF-29
Revision 2
Prepared by SMEDA-Punjab
Approved by PC Punjab
Revision Date June 2006

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1 INTRODUCTION........................................................................................................................... 4
1.1 PROJECT BRIEF .......................................................................................................................... 4
1.2 PROJECT RATIONALE ................................................................................................................. 4
2 PROCESS FLOW SHEET ............................................................................................................. 5

3 PRODUCTION PROCESS FLOW ................................................................................................ 5

4 VIABLE ECONOMIC SIZE .......................................................................................................... 6

5 CURRENT INDUSTRY STRUCTURE ......................................................................................... 7

6 SALES & MARKETING ISSUES.................................................................................................. 8

7 PROJECT INPUTS ........................................................................................................................ 9

7.1 LAND & BUILDING ..................................................................................................................... 9
7.2 MACHINERY & EQUIPMENT ........................................................................................................ 9
7.3 ELECTRICITY LOAD & EXPENSES .............................................................................................. 11
7.4 RAW MATERIALS ..................................................................................................................... 11
7.4.1 WIRE .......................................................................................................................................... 11
7.4.2 OTHER REQUIRED RAW MATERIALS ............................................................................................ 12
7.5 OFFICE EQUIPMENT AND FURNITURE ........................................................................................ 12
7.6 ADMINISTRATION AND LABOR COST ......................................................................................... 13
7.7 PRE-OPERATING COSTS ............................................................................................................ 13
8 FINANCIAL ANALYSIS ............................................................................................................. 14

9 REGULATIONS........................................................................................................................... 14

10 KEY SUCCESS FACTORS...................................................................................................... 14

11 THREATS................................................................................................................................. 14

12 FINANCIAL STATEMENTS................................................................................................... 15
12.1 INCOME STATEMENT .................................................................................................................... 15
12.2 BALANCE SHEET .......................................................................................................................... 16
12.3 CASH FLOW STATEMENT .............................................................................................................. 17
13 ASSUMPTIONS........................................................................................................................ 18
13.1 REVENUE ASSUMPTIONS .............................................................................................................. 18
13.2 EXPENSE ASSUMPTION ................................................................................................................. 18
13.3 ECONOMY RELATED ASSUMPTIONS .............................................................................................. 19
13.4 DEPRECIATION ASSUMPTIONS ...................................................................................................... 19

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1 Introduction
1.1 Project Brief
Fan is a necessity item of summer season. The hot local climate during summer season
makes it mandatory to use. Their main usage is to get rid of extensive heat through air
displacement at a fast rate. Three major types of fans have the maximum demand, which
are Ceiling Fans, Pedestal Fans, and Bracket Fans. All Pedestal and bracket fans have
fan guards as an integral part of the product. The reason is to protect the users from any
harm that could be caused by fast rotating, sharp edged fan blades.
The demand for fans has shown increasing trend over the past few years. Additional
demand was generated locally as well as through exports. Another interesting fact is the
increase in demand for better quality. People are becoming more quality conscious. In
this scenario, the suppliers of spare parts to fan manufacturing units are also under
compulsion to improve their quality.
This pre-feasibility is being prepared by SMEDA and is intended to provide general
information on the opportunity for an investor to set up modern and proper fan guards
manufacturing unit in Gujrat, the home of fan manufacturing industry.

1.2 Project Rationale

Fan guard manufacturing is a feasible and profitable project if handled in a proper
manner. Incorporating new manufacturing technology gives an advantage that translates
into more business and consequently more profits. Demand for fan guards is ample. The
only requirement is high and consistent technology and regular supply ability.
An approximate 5 to 6 million fans are manufactured in Pakistan every year. According
to industry sources about 30% of total production is Pedestal Fans and about 7% is
bracket fans. So the approximate market for fan guards is roughly 1.8 million to 2
million units. Although there are certain existing players in the market, only one or two
has the capacity to supply high quality product on consistent basis, leaving a big gap for
new players to enter this sector.
This project requires a considerable amount of investment, considering that it is an SME,
but the demand-supply gap and expected profits attract attention towards it. Besides, all
the machinery is available locally at very reasonable rates.

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2 Process flow Sheet

Strip cutting Flower Making Welding jigsaw Bending press

Spot welding of Outer ring welding

rings to the guard Fan guard ready Pickling
for finishing

Roller machine to Ring welding

make rings
Water rinsing

Electroplating tank
Hard chrome Nickel Plating with temperature
plating tank control

FINISHED PRODUCT

3 Production Process Flow

The basic raw material required in the manufacturing of fan guards is ‘Rolled Wires’ of
different gauge, ranging between 8 and 14 gauge. In addition to rolled wire, certain
chemicals are used for polishing and pickling activities to give the product its final finish.
The complete process of fan guard manufacturing would be as follows:
To start the process, first of all the wire, which is purchased from the market is polished
in the polishing section. Washing Soda (Sodium Carbonate) is used for this process. The
polishing cleans the wires of any rust and smoothes its surface. The importance of this
process is manifested when a complete fan guard is taken for powder coating or
electroplating process. Rust free wire helps give a longer life and smoothed out surface is
essential for proper pickling or powder coating process.
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After polishing, the wire would be taken to an automatic cutter to cut the wire into pieces
of required length (which is equal to the radius of the fan guard). The cut pieces of wire
would automatically be fed to the circular jigsaw-welding machine. This machine would
weld the cut pieces of wire onto the inner most ring of the fan guard.
Once the wire pieces are welded onto the main inner ring the guard would be taken
manually to the bending press and given the required shape using different bending dies.
Keeping the guard in the die and applying the required pressure bends the guard at a
certain distance from the edge, thereby, giving it a certain basic shape. Even at this stage
one end of the wire is welded to the inner ring while the other end is still loose. It is after
taking shape in bending press, the guard would be taken for spot welding of rings of
different sizes on the guard. This would put a ring at the loose ends of the wires and at
different places where wires are bending. In spot welding two pieces of metal that are to
be joined together are placed under the welding machine and then a high amperage
electric current is passed through these wires, increasing the temperature to the level
where they melt for a fraction of a second and then join together. More than one ring is
required on one fan guard because the length of the wire from the center right to the outer
ring is between 12 to 18 inches and different rings are required to strengthen the guard.
Once in a while wires, cut in different shapes, are welded onto the guard in place of a ring
but this is rare and mostly circular rings are used.
While the fan guards is taking its initial shape and then going through the bending press,
circular rings are being made separately on a ring-making machine. This is a separate
process and runs parallel to the main process. The ring-making machine rolls the wire
and makes circular rings according to required sizes, which are fed in its program. These
are the rings, which are then welded onto the fan guard to complete the product.
The last function is trimming of any residual pieces of wire, which are longer than the
required length and go out of the outer most rings. After this process fan guard would be
checked for any defects in the wire or the spot welds before sending it for finishing.
Electroplating would give the fan guards its final finish. General market demand
determines what finish be given to the product. At present more than 85% of the demand
is for electroplated fan guards. Electroplating gives a cosmetic effect to the final product.
Besides beautifying the product, it also helps increase its life.

4 Viable Economic Size

To arrive at a viable economic size for this project, certain aspects have to be considered.
These aspects include demand-supply gap of high quality fan guards, seasonal demand
pattern, and total cost of plant and machinery. Taking into account all these factors,
viable economic size of the project is production capacity of 175,000 fan guards/year,
based on 275 days/year. The actual production capacity utilization comes out to be 78%
(136,500 fan guards), taking into account the seasonal demand pattern and production
schedule.
Production mix is 90% 3 kg fan guards (used mostly for pedestal fans) and 10% 1.5 kg
fan guards (used mostly for bracket fans). 100% of the units would be electroplated for
giving them the final finish.
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The project would be set up in Gujrat City, where more than 90% of the fan industry is
concentrated. There would be three sections of the project 1) Fan Guard Manufacturing
Section 2) Polishing Section, and 3) Pickling Section

5 Current Industry Structure

Fan guard manufacturing sector is not an organized sector. This sector is mostly made up
of small units that are established in small premises. The involvement of technology in
manufacturing process or for that matter in any process is minimal. Variation in quality
is a consistent feature.
There are no exact figures available as to what is the total number of units, how many are
operational, what is the total installed capacity, and what the operational capacity is.
According to the industry sources (including manufacturers and vendors) there is a
substantial demand for quality stuff on a large scale. Also, there is room for new entrants
who want to manufacture quality product, using the latest technology.
The industry is concentrated in Gujranwala and Gujrat. There used to be many fan guard
manufacturers in Gujranwala, but now only one major manufacturer is left. The reason is
that this manufacturer has a modern and completely integrated manufacturing facility,
which others did not use. The result is that it is the only major supplier catering to the
demand in Gujranwala City. Gujrat is now the major center as far as fan manufacturing
is concerned. In Gujrat, there are more than 50 fan-guards manufacturing units. But only
4 or 5 can qualify as proper units. All other units are mini or micro units with production
capacity of about 40 pieces per day, using primitive manufacturing techniques and
technology.
There are two reasons why small units are closing down. First reason is the lack of use
of modern manufacturing machines and techniques due to unavailability of enough
capital, thereby, being unable to afford this change. Second reason is the increase in the
size of credit cycle for these small units. The payments come back after two or four
weeks. Only those manufacturers have survived who have enough capital.
Large size fan guard’s manufacturers are filling in the gap that is being created due to
closure of small units. These manufacturers have installed new machines and some are
even producing 1000 to 1200 pieces per day depending on the size of fan guard. Overall
demand for high quality fan guards is increasing, especially since exports have picked up
for the last three years.
Fan guard manufacturers, as a vending sub-sector of fan manufacturing sector, are
concentrated in two main cities of Gujrat and Gujranwala. Only one major
manufacturing unit is left in Gujranwala. The other one is too small to have any
significance. Gujrat has the largest number of fan guard manufacturing units. It is
assessed that there are more than 50 fan guards manufacturing units working in Gujrat.
There used to be one unit in Shahdara, Lahore.

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6 Sales & Marketing Issues

Fan guard is an essential and integral part for all pedestal fans, bracket fans, TCP (Table
cum pedestal) fans, baby fans, and railway fans. None of these fans would be complete
without a guard. From this point of view, it is a necessary product for manufacturers of
above-mentioned fan categories. Some air cooler manufacturers also use fan guard in
their product.
Fan guard is an industrial product and, therefore, its target market cannot be defined in
terms of gender, age bracket, profession, etc. The factors involved in defining the target
market for fan guard would be the size of the fan manufacturing unit, the quality of fan it
produces, and the price the customer is willing to pay for the product.
Based on these factors, the major target market segment for the proposed project would
be medium size fan manufacturers and those small size units, which produce above
15,000 fans/year. The large size fan manufacturing units have their own fan guard
manufacturing units, therefore, they are not generally considered as the target market.
Yet they do outsource their fan guard requirement at times. The proposed project would
have the capacity and the quality to fulfill this demand as well.
The proposed project would manufacture fan guards for different varieties of fans. These
varieties are:
• Pedestal Fans
• Bracket Fans
• Circo Fans
• TCP (Table cum pedestal) Fans
• Baby Fans
• Railway Fans
• Air Coolers
There are different sizes of fan guards, measured in terms of their weights. These sizes
vary with the variety of fan it would be used for. The most common fan guard used in
the industry weighs 3 kg on average, with a diameter of approximately 26-inch. This
would be the main product to be produced by the proposed project.
As fan guard is an essential part of pedestal, bracket, TCP, and other such fans, therefore,
it is sold to the fan manufacturers directly. Gujrat and Gujranwala are the main markets
for fan guard manufacturers, as these two cities are producing more than 90% of total
fans manufactured in Pakistan. Gujrat is the main target market for the proposed project.
Another interesting fact is that about 5% to 10% of the total production is sold directly to
shops that sell pedestal and bracket fans. These shops sell the fan guard as replacement
spare part. They cater to the demand, which originates as a result of accidental damage to
the fan guard or through rusting & old age. The main market for this segment is South
Punjab, Interior Sind and Karachi.

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An extensive distribution network would not be required to sell this product. The
complete actual production would usually be against pre-placed orders. Therefore, there
is no need for establishing any distribution channel. Once the order is ready, it is packed
and sent to the buyers either on donkey cart or pickup.
The orders from fan selling shops in South Punjab, Interior Sind, and Karachi would be
booked by train and sent directly to them. These orders are either direct purchase request
and/or generated by sales agent of the company.
Sampling is an integral part of the sale process in the vending industry. Samples are
made according to customers’ requirements and given to them for testing. If the results
are satisfactory, order is placed and a business relationship is built.

7 Project Inputs
Following inputs are required:

7.1 Land & Building

Total area required for the project is about 7,000 ft2. This translates into approximately
26 marlas (272 ft2/marla). The land would be purchased. Approximate rate/ ft2 in the
area, which is at a reasonable distance from most of the fan manufacturing units in Gujrat
City, is estimated at Rs 460/ ft2. Based on this, total cost of land would approximately
come out to be Rs 3,220,000.
A proper building would be constructed to house this fan guards manufacturing unit. The
building would consist of a main processing hall, a management room, and a storeroom.
The main processing hall would have an area of 4200 ft2 and would house fan guard
manufacturing section, polishing section, and pickling (electroplating) section. The main
processing hall has extra space, which can be utilized for any future expansion The
management room would have an area of 10’x15’ and the storeroom would have an area
of 10’x10’. The total covered area would come out to be 4450 ft2. The whole building
would be a RBC structure. The average construction cost would be Rs 650/ ft2.Besides
covered area of 4450 ft2, approximately 2550 ft2 area would be open space. This area
would be leveled and approximate cost of leveling would be Rs 5/ ft2. Total cost of
leveling would be Rs 12,750.Total cost of the construction would come out to be Rs
2,973,250.

The complete premises would be encircled with a boundary wall. A 340 feet boundary
wall would be constructed for this purpose. Construction rate for boundary wall is Rs
200/linear foot. Total cost of boundary wall would be Rs 68,000.

7.2 Machinery & Equipment

Local machinery would be used for this project. The total cost of machinery is estimated
at Rs 3,142,000/-. Besides cost of machinery and equipment, an additional Rs 150,000


Reinforced Brick Concrete
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would be paid as installation and transportation cost. Complete list of machinery and
estimated prices are as follows:

Table 1:Plant and Machinery 1

Machinery Description Number Unit Total
Price amount
Fan Guards Manufacturing Section
Flower Making Machine 3 130,000 390,000
Hydraulic Press, capacity 40 ton 2 150,000 300,000
Roller machine to make rings 2 100,000 200,000
Spot welding with fixtures (for assembly of 8 40,000 320,000
guards)
Welding transformer 2 70,000 140,000
Strip cutting machine 2 18,000 36,000
Power Press (15 ton) 2 40,000 80,000
Ring welding machine 2 40,000 80,000
Grinder 1 5,000 5,000
Cutting press 2 10,000 20,000
Miscellaneous 1,00,000

Sub total 1,671,000

Polishing Section
Polishing machines bench type double spindle 2 22,000 44,000

Flexible lead type polishing machine 1 40,000 40,000

Sub total 1,755,000

Pickling Section
Acid tank with rubber lining 2 100,000 200,000
1)Electro plating tank with stirring system, Price of these 800000
temperature control and heating system (1000 machines Varies
Amp) Total accumulated
cost of these
2)Nickel Plating tank temperature control and Machines is Rs.
stirring system (3000 Amp rectifier) 800,000.

3)Chrome plating tank inside lead lining

Stirring system with rectifier (1000 Amp)
Sub Total 2,775,000
Miscellaneous
1
Source: Jamil Guard Makers, Shahdola Road, Noor Pur, Gujrat
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Electric Control Panels, Main Switches, Cables & Distribution Board 200,000
Transformer* and Connection Cost 300,000

Installation and transportation Cost 100,000

Subtotal 600,000
Total 3,355,000

To give this project a cutting edge in the fan guards manufacturing sector, a conveyer
system can also be used. The use of conveyer system would improve the production
capacity of the unit and reduce the labor cost at the same time. The cost of putting up a
conveyer system would be about Rs 250,000.
There is no major machinery maintenance involved. A provision of Rs. 1,000 per month
has been made for machinery oiling expense.

7.3 Electricity Load & Expenses

Total electrical load of the project, including rectifiers: 93HP (93x0.746/0.80) = 87 kW
(Per Day). Overhead electricity expenses are estimated to be Rs 92,655/year. These
include electricity charge for management room (2 watts/ft2), processing hall (1
watts/ft2), storeroom (1 watts/ft2), open area (0.5 watts/ft2), and fixed charges for
installed kW.

Table 2 Electricty
Kw required Per Day Variable 87
Kw per month Variable 12,041
Electricity Tariff Schedule
Energy Charges per Kw 6.90 83,084
GST 15% 13,579
Income Tax 2,000
Variable electricity expense per unit of production 8.67
Total Variable Expense for the year 98,663
Kw per month Overhead 1077
Energy Charges per Kw 6.90 7431
Total Electricity Expense 106,094

7.4 Raw Materials

7.4.1 Wire
Rolled wires of different grades are required as raw material for the manufacturing of fan
guards of different sizes and shapes. Most commonly, 8-14-gauge wires would be used
for manufacturing the basic body of a fan guard. Similarly, the rings that are welded onto
the main body of fan guard for giving it strength and aesthetic looks are also made using
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wires ranging from 8-14 gauge. Production mix is 90% 3 kg fan guards and 10% 1.5 kg
fan guards. The wire is readily available in the market at an average cost of 42 Rs./kg.
Weighted average cost of wire per unit comes out to be Rs 126.

7.4.2 Other Required Raw Materials

The other raw materials required include the acids, salts, soda, and solutions for
electroplating, and polishing. The details are as follows:
• Sulphate (Nickel)
• Chloride
• Borax (Boric Acid)
• Chrome salt
• Caustic Soda
• Brightener
• Washing Soda (Sodium Carbonate)
• Copper salt
Out of these different chemicals, Washing Soda is used for polishing and rests of the
chemicals are all used in electroplating process. Weighted average cost of chemicals per
unit (Both 3 Kg and 1.5 Kg) comes out to be Rs. 3.
The production wastage is estimated at 5 % per fan guard.

7.5 Office Equipment and Furniture

The office equipment will consist of a computer, printer, facsimile machine and two
telephone sets for extensions (these sets will be in addition to the set provided by PTCL
along with telephone connection). The office furniture consists of chairs, sofa sets, tables,
carpet for management room and a file rack. The total cost of office equipment and
furniture is estimated as follows:

Table 3: Office Equipments

Equipment Number Cost /unit Total Cost
Computers 1 25,000 25,000
Computer printer (s) 1 12,000 12,000
Telephones 2 750 1,500
Fax machines 1 12,000 12,000
Total Office Equipment 50,500

Table 4: Office Furniture

Furniture Number Cost /unit Total Cost
Table For Manager 1 4,000 4,000
Chair for Manager 1 2,500 9,000
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Table 6 1,500 2,500

Chair 12 1,000 12,000
File Cabinet 1 10,000 10,000
Sofa set 1 12,000 12,000
Carpeting (sq.ft.) 150 30 4,500
Total Furniture & Fixtures 54,000

7.6 Administration and Labor Cost

The owner, a plant manager, and an accountant will handle the day to day administration
of the business. A supervisor will look after purchase and sales matters with two
assistants, a salesman and a purchaser. Other staff includes one gatekeeper.
20 skilled workers along with estimated 10 unskilled workers are required (as number of
unskilled labor is adjusted according to the season) would also be the part of human
resource but not as permanent staff because piece rate system is being practiced in the
industry. Approximately Rs. 4 per unit is charged under piece rate system. This cost is
included into the “Cost of Goods sold” head rather then labor cost. Same has been
adopted in the feasibility. One foreman would supervise these workers. The
administration cost for year 1 is as follows:

Table 5:Payroll
Designation Salary/Month Employees Total
Owner/Manager 20,000 1 240,000
Plant Manager / Foreman 12,000 1 144,000
Purchaser 8,500 1 102,000
Accountant 7,500 1 90,000
Office Boy 4,000 1 48,000
Gate Keeper 3,500 1 42,000
Sweeper 2,500 1 30,000
Total 7 696,000

Wages are assumed to grow at a rate of 10% per annum.

7.7 Pre-Operating Costs

Pre-operating costs include the hiring of management team before the actual
commencement of operations. The other component of pre-operating costs is the accrued
interest for the debt used in the completion of civil works and purchase of machinery.
The total pre-operating costs amount to Rs. 250,887.

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8 Financial Analysis
Table 6: Financial Analysis
Total Investment 11,594,803
Total Capital Investment 10,188,455
Total Working Capital 1,406,348
Project IRR 26%
Payback Period 4.03 yrs
NPV 5,867,774

9 Regulations
There are no specific government regulations for this business. The firm would have to
be properly registered as a business entity with registrar of firms. Afterwards, the firm
has to be registered with tax authorities. Besides these two registrations, the firm would
also be registered with labor authorities under the Labor Act. Once registered, it would
have to follow the requirements of Social Security Department and EOBI.

10 Key Success Factors

The proposed project would have a number of competitive advantages:
• It would fulfill the demand-supply gap for high quality fan guards.
• It would be able to fulfil orders in time due to mechanized production facility.
• Due to its high quality standard, the project would be able to get premium price for its
products.

11 Threats
Threats over longer period of time include market saturation due to excessive number of
new entrants, demand shrinkage due to fall in demand for pedestal and/or bracket fans,
decline in exports of fans, and any change in the design of fans that might eliminate the
use of fan guard.
But overall the situation is very conducive for establishing the proposed project.


For detail information please refer to attached financial statements at the end of the report.

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12 Financial Statements

12.1 Income Statement

Statement Summaries SMEDA
Income Statement

Rs. in actuals
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Revenue 21,805,000 24,166,170 26,762,355 29,615,801 32,750,789 36,193,821 39,973,813 44,122,315 48,673,742 53,665,630
Cost of goods sold 17,476,269 19,614,765 21,999,003 24,656,153 27,616,310 30,912,804 34,582,542 38,666,382 43,209,552 48,262,103
Gross Profit 4,328,731 4,551,405 4,763,352 4,959,648 5,134,480 5,281,017 5,391,271 5,455,932 5,464,190 5,403,527

General administration & selling expenses

Administration expense 568,560 623,916 684,661 751,321 824,470 904,742 992,829 1,089,492 1,195,567 1,311,969
Rental expense - - - - - - - - - -
Utilities expense 92,655 101,921 112,113 123,324 135,657 149,222 164,144 180,559 198,615 218,476
Travelling & Comm. expense (phone, fax, etc.) 82,800 90,862 99,708 109,416 120,068 131,759 144,587 158,664 174,112 191,063
Office vehicles running expense - - - - - - - - - -
Office expenses (stationary, etc.) 27,600 30,287 33,236 36,472 40,023 43,920 48,196 52,888 58,037 63,688
Promotional expense 21,805 24,166 26,762 29,616 32,751 36,194 39,974 44,122 48,674 53,666
Insurance expense - - - - - - - - - -
Professional fees (legal, audit, etc.) 65,415 72,499 80,287 88,847 98,252 108,581 119,921 132,367 146,021 160,997
Depreciation expense 519,613 519,613 519,613 519,613 519,613 519,613 519,613 519,613 519,613 519,613
Amortization expense 57,141 57,141 57,141 57,141 57,141 - - - - -
Property tax expense - - - - - - - - - -
Miscellaneous expense - - - - - - - - - -
Subtotal 1,435,589 1,520,403 1,613,521 1,715,749 1,827,975 1,894,030 2,029,263 2,177,705 2,340,638 2,519,471
Operating Income 2,893,142 3,031,001 3,149,831 3,243,899 3,306,505 3,386,987 3,362,007 3,278,228 3,123,552 2,884,056

Other income 83,801 88,801 115,500 127,050 139,755 153,731 169,104 186,014 204,615 225,077
Gain / (loss) on sale of assets - - - - - - - - - -
Earnings Before Interest & Taxes 2,976,943 3,119,803 3,265,331 3,370,949 3,446,260 3,540,717 3,531,111 3,464,242 3,328,168 3,109,132

Interest expense 811,636 575,668 306,664 - - - - - - -

Earnings Before Tax 2,165,307 2,544,135 2,958,667 3,370,949 3,446,260 3,540,717 3,531,111 3,464,242 3,328,168 3,109,132

Tax 412,061 487,827 570,733 653,190 668,252 687,143 685,222 671,848 644,634 600,826
NET PROFIT/(LOSS) AFTER TAX 1,753,246 2,056,308 2,387,934 2,717,759 2,778,008 2,853,574 2,845,889 2,792,393 2,683,534 2,508,306

Balance brought forward 1,753,246 3,655,308 5,580,328 5,353,036 5,168,803 5,090,349 5,066,877 5,105,605 5,214,751
Total profit available for appropriation 1,753,246 3,809,554 6,043,242 8,298,088 8,131,044 8,022,377 7,936,238 7,859,270 7,789,139 7,723,057
Dividend - 154,245 462,914 2,945,051 2,962,241 2,932,028 2,869,361 2,753,665 2,574,389 4,353,021
Balance carried forward 1,753,246 3,655,308 5,580,328 5,353,036 5,168,803 5,090,349 5,066,877 5,105,605 5,214,751 3,370,035

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Pre-Feasibility Study Fan Guards Manufacturing Unit

12.2 Balance sheet

Statement Summaries SMEDA
Balance Sheet

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 1,000,000 676,026 1,100,000 1,210,000 1,331,000 1,464,100 1,610,510 1,771,561 1,948,717 2,143,589 2,357,948
Accounts receivable - 896,096 944,613 1,046,477 1,158,455 1,281,505 1,416,670 1,565,088 1,728,003 1,906,768 2,102,864
Finished goods inventory - - - - - - - - - - -
Equipment spare part inventory - - - - - - - - - - -
Raw material inventory 406,348 478,738 563,608 663,059 779,541 915,912 1,075,495 1,262,167 1,480,437 1,735,557 -
Pre-paid annual land lease - - - - - - - - - - -
Pre-paid building rent - - - - - - - - - - -
Pre-paid lease interest - - - - - - - - - - -
Pre-paid insurance - - - - - - - - - - -
Total Current Assets 1,406,348 2,050,860 2,608,221 2,919,535 3,268,997 3,661,517 4,102,675 4,598,816 5,157,156 5,785,914 4,460,811

Fixed assets
Land 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000 3,220,000
Building/Infrastructure 2,973,250 2,824,588 2,675,925 2,527,263 2,378,600 2,229,938 2,081,275 1,932,613 1,783,950 1,635,288 1,486,625
Machinery & equipment 3,605,000 3,244,500 2,884,000 2,523,500 2,163,000 1,802,500 1,442,000 1,081,500 721,000 360,500 -
Furniture & fixtures 54,000 48,600 43,200 37,800 32,400 27,000 21,600 16,200 10,800 5,400 -
Office vehicles - - - - - - - - - - -
Office equipment 50,500 45,450 40,400 35,350 30,300 25,250 20,200 15,150 10,100 5,050 -
Total Fixed Assets 9,902,750 9,383,138 8,863,525 8,343,913 7,824,300 7,304,688 6,785,075 6,265,463 5,745,850 5,226,238 4,706,625

Intangible assets
Pre-operation costs 285,705 228,564 171,423 114,282 57,141 - - - - - -
Legal, licensing, & training costs - - - - - - - - - - -
Total Intangible Assets 285,705 228,564 171,423 114,282 57,141 - - - - - -
TOTAL ASSETS 11,594,803 11,662,561 11,643,168 11,377,729 11,150,438 10,966,204 10,887,750 10,864,278 10,903,006 11,012,152 9,167,436

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 - - - - - - - - - - -
Long term debt 5,797,401 4,111,914 2,190,459 - - - - - - - -
Total Long Term Liabilities 5,797,401 4,111,914 2,190,459 - - - - - - - -

Shareholders' equity
Paid-up capital 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401 5,797,401
Retained earnings - 1,753,246 3,655,308 5,580,328 5,353,036 5,168,803 5,090,349 5,066,877 5,105,605 5,214,751 3,370,035
Total Equity 5,797,401 7,550,647 9,452,709 11,377,729 11,150,438 10,966,204 10,887,750 10,864,278 10,903,006 11,012,152 9,167,436
TOTAL CAPITAL AND LIABILITIES 11,594,803 11,662,561 11,643,168 11,377,729 11,150,438 10,966,204 10,887,750 10,864,278 10,903,006 11,012,152 9,167,436

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Pre-Feasibility Study Fan Guards Manufacturing Unit

12.3 Cash Flow Statement

Statement Summaries SMEDA
Cash Flow Statement

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 - 1,753,246 2,056,308 2,387,934 2,717,759 2,778,008 2,853,574 2,845,889 2,792,393 2,683,534 2,508,306
Add: depreciation expense - 519,613 519,613 519,613 519,613 519,613 519,613 519,613 519,613 519,613 519,613
amortization expense - 57,141 57,141 57,141 57,141 57,141 - - - - -
Deferred income tax - - - - - - - - - - -
Accounts receivable - (896,096) (48,517) (101,863) (111,979) (123,050) (135,165) (148,418) (162,914) (178,766) (196,096)
Finished good inventory - - - - - - - - - - -
Equipment inventory - - - - - - - - - - -
Raw material inventory (406,348) (72,390) (84,870) (99,451) (116,483) (136,370) (159,584) (186,671) (218,270) (255,121) 1,735,557
Pre-paid building rent - - - - - - - - - - -
Pre-paid lease interest - - - - - - - - - - -
Advance insurance premium - - - - - - - - - - -
Accounts payable - - - - - - - - - - -
Other liabilities - - - - - - - - - - -
Cash provided by operations (406,348) 1,361,513 2,499,675 2,763,373 3,066,051 3,095,341 3,078,438 3,030,412 2,930,821 2,769,260 4,567,380

Financing activities
Change in long term debt 5,797,401 (1,685,487) (1,921,455) (2,190,459) - - - - - - -
Change in short term debt - - - - - - - - - - -
Change in export re-finance facility - - - - - - - - - - -
Add: land lease expense - - - - - - - - - - -
Land lease payment - - - - - - - - - - -
Lease principal repayment - - - - - - - - - - -
Issuance of shares 5,797,401 - - - - - - - - - -
Purchase of (treasury) shares - - - - - - - - - - -
Cash provided by / (used for) financing activities
11,594,803 (1,685,487) (1,921,455) (2,190,459) - - - - - - -

Investing activities
Capital expenditure (10,188,455) - - - - - - - - - -
Acquisitions - - - - - - - - - - -
Cash (used for) / provided by investing activities
(10,188,455) - - - - - - - - - -

NET CASH 1,000,000 (323,974) 578,219 572,914 3,066,051 3,095,341 3,078,438 3,030,412 2,930,821 2,769,260 4,567,380

Cash balance brought forward 1,000,000 676,026 1,100,000 1,210,000 1,331,000 1,464,100 1,610,510 1,771,561 1,948,717 2,143,589
Cash available for appropriation 1,000,000 676,026 1,254,245 1,672,914 4,276,051 4,426,341 4,542,538 4,640,922 4,702,382 4,717,978 6,710,969
Dividend - - 154,245 462,914 2,945,051 2,962,241 2,932,028 2,869,361 2,753,665 2,574,389 4,353,021
Cash carried forward 1,000,000 676,026 1,100,000 1,210,000 1,331,000 1,464,100 1,610,510 1,771,561 1,948,717 2,143,589 2,357,948

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Fan Guards Manufacturing Unit

13 Assumptions

13.1 Revenue Assumptions

Table 7: Sales Price

Sale price per unit in year 1
Product Production Price Weighted Average
Units with 3kg (Electroplated) 90% 182 164
Units with 1.5kg (Electroplated) 10% 142.00 14
Weighted average cost 178
Table 8: Other Revenue assumption
Sale price growth rate 7.75%
Production capacity utilization 70%
Production capacity utilization growth rate 2%
Maximum capacity utilization 95%

13.2 Expense assumption

Table 9:Expense Assumptions

Description Cost
/Rate
Per Unit Labor Charges
Rate Charged by the labor in Piece rate system 4
Wire Cost growth rate 9.18%
Chemical cost growth rate 5.0%
Machinery maintenance 12,000
Operating costs 3 (direct electricity) 8.67
Operating costs growth rate (% of administration expense) 5.0%
Administration benefits expense (% of administration expense) 3.0%
Traveling expense (% of administration expense) 5.0%
Communication expense (% of administration expense) 10.0%
Office vehicles running expense (% of vehicles cost) 3.0%
Office expenses (stationary, entertainment, janitorial services, etc.) % of 5.0%
administration expense
Promotional expense % of revenue 0.1%
Office vehicles insurance rate 5.0%
Professional fees (legal, audit, consultants, etc.) % of revenue 0.3%

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Pre-Feasibility Study
Fan Guards Manufacturing Unit

13.3 Economy Related Assumptions

Table 10: Economic Assumptions

Description Cost / Rate
Inflation rate 10%
Electricity growth rate 10%
Water price growth rate 10%
Gas price growth rate 10%
Wage growth rate 10%
Office equipment price growth rate 5%
Office vehicles price growth rate 10%

13.4 Depreciation Assumptions

Table 11: Depriciation

Description Cost / Rate
Land 0%
Building 5%
Machinery 10%

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