Pre-Feasibility Studies
Steel Products Welding (Rs.0.67 Million)
Pr e-Feasibility Study
(Steel Products Welding)
Small and Medium Enterprises Development Authority
Ministry of Industr ies & Pr oduction
Gover nment of Pakistan
www.smeda.org.pk
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST
Pre-Feasibility Studies
Steel Products Welding (Rs.0.67 Million)
EXECUTIVE SUMMARY
The proposed business is a Steel Products Welding workshop located in rental
premises along road side or near a truck stand/ bus stand in small towns or cities,
which will operate approximately 8 hours a day with a five men team including
the owner manager.
In Pakistan, domestic as well as commercial construction is being carried out on a
sizeable scale. Construction sector requires welding services for different
operations depending upon the nature and scope of work.
The transport vehicles in Pakistan are generally not in very good shape. As a lot of
wear and tear occurs during operations, the services of welders are required to fulfill
the maintenance requirements of the transport vehicles. A welding shop is usually
a part of the truck / bus of parking stands.
BRIEF DESCRIPTION OF PROJECT & PRODUCT
The project is about setting up a Steel Products Welding Workshop. The project will
have full operational capacity to undertake 162 major jobs, which is equivalent
1000 small jobs annually, of different nature. Initially the workshop will operate for
approximately 8 hours a day, gradually increasing to 2 shifts for 16 hours depending
upon the workload. Initially, the business will provide employment opportunity to
04 individuals directly including the owner
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST
Pre-Feasibility Studies
Steel Products Welding (Rs.0.67 Million)
The business will provide services mainly to construction as well as transport
sectors but can also facilitate manufacturers. The major portion of the capital
investment is consumed in equipment and plant.
All the expenditures that are required to be incurred for setting up of workshop
and purchase of raw material for the start-up are included in cost of the project.
The business will be established in rental premises having covered area of
approximately 300 sq.ft.
GEOGRAPHICAL POTENTIAL FOR INVESTMENT
Main focus of the project is on construction and transport sector, hence it can be
started in rural as well as urban areas of Pakistan including Lahore, Karachi, Quetta,
Peshawar, Gujrat, Sialkot, Gujranwala etc. and in towns and to some extent in rural
areas as well, where there is a sizeable quantum of construction and transportation
activities.
POTENTIAL TARGET MARKETS / CITIES
The potential target market can be anywhere around infrastructure developmental
facilities. It can be started in cities like Lahore, Karachi, Quetta, Peshawar, Gujrat,
Sialkot, Gujranwala etc. and in towns and to some extent in rural areas as well.
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST
Pre-Feasibility Studies
Steel Products Welding (Rs.0.67 Million)
PROJECT COST SUMMARY
A detailed financial model has been developed to analyze the commercial viability
of the project under the Prime Minister’s Youth Business Loan scheme. 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 appendices.
Project Cost
Following requirements have been identified for operations of the proposed
business.
Capital Investment for the Project
Capital Investment
Amount (Rs.)
Plant and Machinery
Building/Infrastructure
Furniture and Office Equipment
Pre-operating Cost
Initial Working Capital
Total Project Cost
300,000
22,500
55,000
78,317
217,441
673,258
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST
Pre-Feasibility Studies
Steel Products Welding (Rs.0.67 Million)
ANNEXURE
Income Statement
Income Statement
Year 1
4,875,000
Year 2
6,187,500
Year 3
7,713,750
Year 4
9,483,375
Year 5
10,980,750
Year 6
12,078,825
Year 7
13,286,708
Year 8
14,615,378
Year 9
16,076,916
Year 10
17,684,608
Cost of sales
Raw Material for Gate
Raw Material for Window
Raw Material for Railing
Consumables
Electricity Expense
Total cost of sales
Gross Profit
780,000
780,000
877,500
243,750
600,000
3,281,250
1,593,750
990,000
990,000
1,113,750
309,375
660,000
4,063,125
2,124,375
1,234,200
1,234,200
1,388,475
385,688
726,000
4,968,563
2,745,188
1,517,340
1,517,340
1,707,008
474,169
798,600
6,014,456
3,468,919
1,756,920
1,756,920
1,976,535
549,038
878,460
6,917,873
4,062,878
1,932,612
1,932,612
2,174,189
603,941
966,306
7,609,660
4,469,165
2,125,873
2,125,873
2,391,607
664,335
1,062,937
8,370,626
4,916,082
2,338,461
2,338,461
2,630,768
730,769
1,169,230
9,207,688
5,407,690
2,572,307
2,572,307
2,893,845
803,846
1,286,153
10,128,457
5,948,459
2,829,537
2,829,537
3,183,229
884,230
1,414,769
11,141,303
6,543,305
General administration & selling expenses
Administration expense
Rent expense
Printing & Stationary
Entertainment
Promotional expense
Depreciation expense
Miscellaneous expense
Subtotal
Operating Income
960,000
180,000
24,000
60,000
15,000
81,700
19,200
1,354,900
238,850
1,056,000
198,000
25,200
63,000
13,500
81,700
21,120
1,473,520
650,855
1,161,600
217,800
26,460
66,150
12,150
81,700
23,232
1,604,092
1,141,096
1,277,760
239,580
27,783
69,458
10,935
81,779
25,555
1,747,850
1,721,069
1,405,536
263,538
29,172
72,930
9,842
81,779
28,111
1,905,908
2,156,970
1,546,090
289,892
30,631
76,577
8,857
85,564
30,922
2,068,532
2,400,633
1,700,699
318,881
32,162
80,406
7,972
85,655
34,014
2,259,788
2,656,294
1,870,768
350,769
33,770
84,426
7,174
85,655
37,415
2,469,979
2,937,711
2,057,845
385,846
35,459
88,647
6,457
85,655
41,157
2,701,067
3,247,392
2,263,630
424,431
37,232
93,080
5,811
85,761
45,273
2,955,217
3,588,088
Other income (interest on cash)
Earnings Before Interest & Taxes
238,850
650,855
1,141,096
1,721,069
2,156,970
2,400,633
2,656,294
2,937,711
3,247,392
3,588,088
Interest on short term debt
Interest expense on long term debt (Project Loan)
Subtotal
Earnings Before Tax
107,077
107,077
131,773
98,030
98,030
552,825
86,140
86,140
1,054,956
73,262
73,262
1,647,807
59,315
59,315
2,097,654
44,212
44,212
2,356,422
27,854
27,854
2,628,440
10,139
10,139
2,927,572
3,247,392
3,588,088
Tax
NET PROFIT/(LOSS) AFTER TAX
131,773
15,282
537,542
80,743
974,213
177,061
1,470,746
267,031
1,830,624
318,784
2,037,638
379,610
2,248,830
454,393
2,473,180
534,348
2,713,045
619,522
2,968,566
Revenue
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST -
Pre-Feasibility Studies
Steel Products Welding (Rs.0.67 Million)
Statement of Cash Flow
Cash Flow Statement
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Operating activities
Net profit
Add: depreciation expense
amortization expense
Deferred income tax
Accounts receivable
Finished good inventory
Equipment inventory
Raw material inventory
Pre-paid building rent
Pre-paid lease interest
Advance insurance premium
Accounts payable
Other liabilities
Cash provided by operations
(72,188)
(15,000)
(87,188)
161,045
37,750
15,663
(1,500)
212,958
314,515
37,750
15,663
(10,622)
(1,650)
355,657
430,612
37,750
15,663
(12,024)
(1,815)
470,186
554,686
37,750
15,663
(13,601)
(1,997)
592,502
697,556
37,750
15,663
(15,373)
(2,196)
733,400
866,936
37,750
(17,363)
(2,416)
884,907
963,120
37,750
(14,117)
(2,657)
984,096
1,068,873
37,750
(15,529)
(2,923)
1,088,171
Financing activities
Change in long term debt
Change in short term debt
Change in export re-finance facility
Add: land lease expense
Land lease payment
Change in lease financing
Issuance of shares
Purchase of (treasury) shares
Cash provided by / (used for) financing a
605,932
67,326
673,258
-
(67,287)
(67,287)
(72,872)
(72,872)
(78,921)
(78,921)
(85,471)
(85,471)
(92,565)
(92,565)
(100,248)
(100,248)
(108,568)
(108,568)
Investing activities
Capital expenditure
Acquisitions
Cash (used for) / provided by investing a
(455,817)
(455,817)
-
-
-
-
-
-
NET CASH
130,254
212,958
288,369
397,314
513,581
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST -
647,929
792,342
883,848
Year 8
979,603
Year 9
1,181,555
37,750
(17,082)
(3,215)
1,199,008
Rs. in actuals
Year 10
1,301,165
37,750
(18,790)
35,369
1,355,494
-
-
-
-
1,199,008
1,355,494
Pre-Feasibility Study
Steel Products Welding (Rs.0.67 Million)
Balance Sheet
Balance Sheet
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Rs. in actuals
Year 10
Assets
Current assets
Cash & Bank
Pre-paid building rent
Total Current Assets
130,254
15,000
217,441
343,211
16,500
431,899
631,581
18,150
732,540
1,028,895
19,965
1,143,693
1,542,476
21,962
1,672,872
2,190,405
24,158
2,338,370
2,982,746
26,573
3,150,491
3,866,594
29,231
4,051,113
4,846,196
32,154
5,049,168
6,045,205
35,369
6,268,473
7,400,699
7,607,388
Fixed assets
Furniture & fixtures
Office equipment
Total Fixed Assets
54,000
1,000
377,500
48,600
900
339,750
43,200
800
302,000
37,800
700
264,250
32,400
600
226,500
27,000
500
188,750
21,600
400
151,000
16,200
300
113,250
10,800
200
75,500
5,400
100
37,750
Intangible assets
Pre-operation costs
Total Intangible Assets
TOTAL ASSETS
78,317
78,317
673,258
62,654
62,654
834,303
46,990
46,990
1,081,530
31,327
31,327
1,439,270
15,663
15,663
1,915,035
2,527,120
3,301,491
4,164,363
5,124,668
6,306,223
Liabilities & Shareholders' Equity
Current liabilities
Total Current Liabilities
-
-
-
-
-
-
-
-
Other liabilities
Deferred tax
Long term debt
Total Long Term Liabilities
605,932
605,932
605,932
605,932
538,645
538,645
465,773
465,773
386,852
386,852
301,381
301,381
208,816
208,816
108,568
108,568
Shareholders' equity
Paid-up capital
Retained earnings
Total Equity
TOTAL CAPITAL AND LIABILITIE
67,326
67,326
673,258
67,326
161,045
228,370
834,303
67,326
475,560
542,886
1,081,530
67,326
906,172
973,498
1,439,270
67,326
1,460,858
1,528,183
1,915,035
67,326
2,158,413
2,225,739
2,527,120
67,326
3,025,349
3,092,675
3,301,491
67,326
3,988,469
4,055,795
4,164,363
SMEDA Services / Information related to PM’s Youth Business Loan are FREE OF COST -
-
7,607,388
-
-
-
-
-
-
67,326
5,057,342
5,124,668
5,124,668
67,326
6,238,897
6,306,223
6,306,223
67,326
7,540,062
7,607,388
7,607,388