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Pre-Feasibility Study

DIAGNOSTIC LABORATORY

Turn Potential into Profit


Small & Medium Enterprise Development Authority
Government of Pakistan

http://www.smeda.org.pk
Lahore
Small and Medium Enterprise Development Authority, 6st Floor, LDA Plaza Egerton Road,. Lahore 54792, Pakistan
Tel: 92-42-111-111-456 Email: helpdesk@smeda.org.pk
Karachi
Small and Medium Enterprise Development Authority, 5th floor, Bahria Complex-II
Moulvi Tameezuddin Khan Road, Karachi
Tel: 92-21-111-111-456, 5610432, 5610536, 5610459, Fax: 92-21-5610572
Email: helpdesk-khi@smeda.org.pk
Peshawar
Small and Medium Enterprise Development Authority, Ground Floor, Statelife Building, The Mall, Peshawar Cantt.
Tel: 92-91-111-111-456, 92-91-9213046-7 Fax: 92-91-286908, Email: helpdesk-pew@smeda.org.pk
Quetta
Small and Medium Enterprise Development Authority, Bunglow No.15-A Chaman Housing Scheme, Airport Road, Quetta
Tel: 92-81-2831702, 92-81-2831623 Fax: 92-81-2831922, Email: helpdesk-qta@smeda.org.pk

June 2008

BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

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 content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No.

PREF - 12

Prepared by

SMEDA-Balochistan

Approved by

Head of Department

Issue Date

June 2008

Issued by

Library Officer

BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

Table of Contents
1.

PURPOSE OF THE DOCUMENT ........................................................................................................... 1

2.

PROJECT PROFILE .............................................................................................................................. 1


2.1
2.2
2.3
2.4
2.5
2.6

Project Brief ..................................................................................................................................................... 1


Opportunity Rationale...................................................................................................................................... 1
Market Entry Timing......................................................................................................................................... 1
Proposed Business Legal Status .................................................................................................................... 1
Project Capacity............................................................................................................................................... 2
Product mix & Test details............................................................................................................................... 2
2.6.1
Bio Chemistry .......................................................................................................................................... 2
2.6.2
Hematology ............................................................................................................................................. 2
2.6.3
Serology .................................................................................................................................................. 2
2.6.4
Histopythology ......................................................................................................................................... 2
2.6.5
Micro biology ........................................................................................................................................... 2
2.6.6
Chemical Pathology ................................................................................................................................. 2
2.7 Working Time................................................................................................................................................... 4
2.8 Project Investment........................................................................................................................................... 4
2.9 Recommended project parameters. ................................................................................................................ 4
2.9 Suitable Location ............................................................................................................................................. 4
2.10 Key Success Factors / Practical Tips for Success.......................................................................................... 4

3.

MARKET INFORMATION....................................................................................................................... 5
3.1
3.2
3.5

4.

Introduction...................................................................................................................................................... 5
Market Overview & Demand............................................................................................................................. 5
Target Customers ............................................................................................................................................ 5

BASIC REQUIREMENTS ....................................................................................................................... 6


4.1
4.2
4.3
4.4
4.5

5.

Machinery and Equipment requirement .......................................................................................................... 6


Office equipment.............................................................................................................................................. 6
Furniture and Fixture ....................................................................................................................................... 6
Other Equipment Required. ............................................................................................................................. 7
Utilities Requirement ....................................................................................................................................... 7

LAND & BUILDING REQUIREMENT...................................................................................................... 8


5.1
5.2

Land ................................................................................................................................................................. 8
Covered Area Requirement.............................................................................................................................. 8

6.

HUMAN RESOURCE REQUIREMENT................................................................................................... 8

7.

PROJECT ECONOMICS ........................................................................................................................ 9


7.1
7.2
7.3

Project Cost ..................................................................................................................................................... 9


Project Returns ................................................................................................................................................ 9
Project Financing............................................................................................................................................. 9

8. FINANCIAL ANALYSIS............................................................................................................................. 10
8.1
8.2
8.3

Projected Income Statement.......................................................................................................................... 11


Projected Balance Sheet................................................................................................................................ 12
Projected Cash Flow Statement .................................................................................................................... 13

9. KEY ASSUMPTIONS ................................................................................................................................ 14


9.1
9.2
9.3
9.4
9.5

Project Capacity Assumptions ...................................................................................................................... 14


Revenue Assumptions................................................................................................................................... 14
Economic Assumptions................................................................................................................................. 14
Expense Assumptions................................................................................................................................... 14
Depreciation Expense Assumptions ............................................................................................................. 14

BAL-PREF-12/June 2008

Pre-feasibility Study
9.6
9.7
9.8

Diagnostic Laboratory

Cost of Goods Sold........................................................................................................................................ 15


Cash flow Assumptions................................................................................................................................. 15
Financing Assumptions................................................................................................................................. 15

BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

Introduction to SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was established
with the objective to provide fresh impetus to the economy through the launch of an
aggressive SME support program.1
Since its inception in October 1998, SMEDA had adopted a sectoral SME development
approach. A few priority sectors were selected on the criterion of SME presence. In depth
research was conducted and comprehensive development plans were formulated after
identification of impediments and retardants. The all-encompassing sectoral development
strategy involved recommending changes in the regulatory environment by taking into
consideration other important aspects including financial aspects, niche marketing,
technology up gradation and human resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits and
vegetables, marble and granite, gems and jewelry, marine fisheries, leather and footwear,
textiles, surgical instruments, urban transport and dairy. Whereas the task of SME
development at a broader scale still requires more coverage and enhanced reach in terms
of SMEDAs areas of operation.
Along with the sectoral focus a broad spectrum of business development services is also
offered to the SMEs by SMEDA. These services include identification of viable business
opportunities for potential SME investors. In order to facilitate these investors, SMEDA
provides business guidance through its help desk services as well as development of
project specific documents. These documents consist of information required to make
well-researched investment decisions. Pre-feasibility studies and business plan
development are some of the services provided to enhance the capacity of individual
SMEs to exploit viable business opportunities in a better way. This document is in the
continuation of this effort to enable potential investors to make well-informed investment
decisions.

For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk

BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

1. 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, and production, finance and
business management.

2. Project p rofile
The proposed project is for setting up a Diagnostic Laboratory. The Laboratory can be
established in any major city of Pakistan, primarily in urban district of Balochistan province.
The document highlights marketing, management and financial aspects required for the
establishment and successful venture.

2.1

Project Brief

This document describes the investment opportunity for setting up a diagnostic laboratory. It
provides a range of services relating to medical tests, which includes the Biochemistry,
Hematology, Serology, Histophythology, Micro Biology and Clinical Pathology. These tests
are based or conducted on the collected sample of blood/urine of the patient. Moreover, due
to this particular nature of business, on an average of 100 tests per day are expected initially.

2.2

Opportunity Rationale

Lack of infrastructure and growing number of population has also increased demand of
medical facilities, which has direct impact on public & private sector health care centers.
Pakistan is a densely populated country, at least one-third of the population is living below
the poverty line, which has no access to clean water and proper sanitation facilities. These
handicaps pose a serious threat to the health of the masses. Moreover, the overlapping and
harsh climate of Pakistan causes major viral diseases through out the year. This creates a
great demand for Diagnostic Laboratories in Pakistan. A big investment opportunity exists in
this sector. Introduction of latest technology, hygienic environment and professional staff
also contribute to the popularity of private sector hospitals and laboratories. Increasing trend
of medical diagnosis through scientific medical tests has increased the need of high capital
investment in this sector. Investment in the private sector can, therefore, exploit this
opportunity and provide latest and dependable diagnostic services on round-the-clock basis.

2.3

Market Entry Timing

As such there is no specific time required for an entry in health sector. As the need is
increasing day by day due to the increase in population and diseases, investment can be made
any time during the year.

2.4

Proposed Business Legal Status

A Diagnostic Laboratory can be started as a sole proprietorship or on partnership basis.


Although the selection depends totally upon the choice of the entrepreneur, but this financial
feasibility is based on a Sole proprietorship. This venture can easily be started. The
entrepreneur must have MBBS degree to have a license and hygiene environment is
mandatory and inspected by the health department from time to time. Moreover, if the
entrepreneur is not a doctor himself, he can hire a doctor for his Laboratory.

BAL-PREF-12/June 2008

Pre-feasibility Study

2.5

Diagnostic Laboratory

Project Capacity

The proposed capacity of this diagnostic laboratory is 150 tests per day. This project is
recommended to be established in urban districts at far flange areas from major cities to
facilitate the locals in their diagnosis. Furthermore, timely identification of diseases will also
reduce motility rate and will also support the public hospital/local doctors for appropriate
treatment as per diseases. Patients who at present take great pains to go to other developed
cities to have their tests will find the laboratories at hand. Thus, it will generate great business
opportunities for the entrepreneur.

2.6

Product mix & Test details

The diagnostic laboratory is capable of conducting six categories of chemistry tests,


additionally common test under these six categories are as following;

2.6.1 Bio Chemistry


This category includes Sugar/Glucose, Uric Acid, Urea and Cholesterol identification tests.

2.6.2 Hematology
Hematology includes CBC, Co-ebullition Profile and platelets identification tests.

2.6.3 Serology
It comprises of Hepatitis A, Hepatitis B & Hepatitis C, HIV, Venereal Disease Research
Laboratories, Remitted Arthritis Factor and Anti Setuctolycin O Titer tests.

2.6.4 Histopathology
This includes Biopsies, Pap smear, Malignant Cell and Cytology tests.

2.6.5 Micro biology


All kinds of Culture and Sensitivity tests are included in microbiology.

2.6.6 Chemical Pathology


The category includes Urine DR, Stool DR and Pregnancy tests.
Average market cost and sale for conducting these tests are described as following;
Bio Chemistry
S. No. Description
1
2
3
4
5
6
7
8

Average Fee Rs.

Sugar Glucose
Uric Acid
Urea
Creatinine
Cholesterol
Triglyceride
High density Lepo protein
Cholesterol
Low density Lepo protein
Cholesterol

BAL-PREF-12/June 2008

80
100
100
100
150
100
550

Average
Cost/Test
40
50
50
50
70
50
250

Average
Tests/Month
240
100
50
60
70
40
50

550

250

60

Pre-feasibility Study

9
10

Diagnostic Laboratory

Lever function tests


Cardiac enzymes

150
250

70
120

70
100

Average Fee Rs.

Average
Cost/Test
70
70
70
25
70
70
70

Average
Tests/Month
40
50
60
60
50
50
40

200
150
150
300
200
150
150
150

Average
Cost/Test
80
70
70
150
80
70
70
70

Average
Tests/Month
140
80
80
120
100
110
110
40

150

70

70

Average Fee Rs.

Average
Cost/Test
350
200
200
150

Average
Tests/Month
50
30
30
40

Average
Cost/Test
150
150
150

Average
Tests/Month
100
160
200

Average
Cost/Test
70
40
50

Average
Tests/Month
200
100
60

Hematology
S. No. Description
1
2
3
4
5
6
7

Cells related tests


CBC
CP
ESR
Platelets
Co-egolations profile
Peripheral smear

150
150
150
50
150
150
150

Serology
S. No. Description
1

2
3
4
5
6
7

Average Fee Rs.

Hepatitis A
Hepatitis B
Hepatitis C
HIV
VDRL
Typhoid
Vidal
Remitted Arthritis factor (RA
Factor)
ASO Titer

Histophysiologies
S. No. Description
1
2
3
4

Biopsies
Pap smear
Malignant cell
Cytology

800
400
400
300

Micro Biology
S. No. Description
1
2
3

Average Fee Rs.

Culture and Sensitivity


Blood
Urine

300
300
300

Chemical Pathology
S. No. Description
1
2
3

Average Fee Rs.

Urine D.R
Stool D.R
Pregnancy tests

BAL-PREF-12/June 2008

150
80
100

Pre-feasibility Study

2.7

Diagnostic Laboratory

Working Time

As per nature of business recommended timings would be 16hrs per day, and 25 days per
month. Therefore two shifts would be necessary for smooth operations of tasks/obligations
Project
Working shifts
Working hours per day
Per month working
Per annum working

2.8

Diagnostic Laboratory
2 Shifts (1 Shift = 8 hours)
16
25 days (Excluding holidays) 400 hrs
per month
300 Days, 12000 hours.

Project Investment

Total Project cost is Rs. 4.156 million. This includes capital cost of Rs. 3.9 million and
working capital cost of Rs. 0.25million

2.9

Recommended project parameters.


Project Parameters

Capacity

Human
Resource

Technology/
Machinery

Location

Local / Foreign

Area close to the


hospitals

150 tests/ day (45,000 tests/year)

Financial Summary
Project Cost

IRR

NPV

Payback Period

Cost of Capital (WACC)

4,156,316

66%

21,253,430

2.0 Yrs

12%

2.9

Suitable Location

A Diagnostic Laboratory should be established at a location that is easily accessible and has
population concentration or the appropriate place would be near private or public hospitals.

2.10 Key Success Factors / Practical Tips for Success


The commercial viability of the proposed diagnostic Laboratory depends on the following
factors:
Location of the project is of prime importance.
Selection of technical / skilled staff would be very crucial decision to be made by the
management.
Continuous efforts should be made for up-gradation of the technology.
The most important factor for the success of the project is the quality of service provided
to the patients and clean environment.

BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

3. Market Info rmation


3.1

Introduction

Pakistan is the seventh populous country in the world. According to the census of 1998, the
population of Pakistan was 132.35 million which rose to 158.70 million (estimated for 2007).
This growth rate is a tremendous challenge to the existing infrastructure, which has resulted
in high level of environmental pollution, and especially, it affects the health care system in
the country. This has given rise to demand of private sector health care facilities.

3.2

Market Overview & Demand

The demand for diagnostic laboratory is rising in accordance with the increase in population
and diseases. The number of existing laboratories is not as high to meet the growing demand
of tests. Government of Pakistan has developed an elaborate system of public health care in
the country. This infrastructure consists of Hospitals, Basic Health Units, Rural Health
Centers and Dispensaries. In addition to this Specialized Medicare Centers like Maternity &
Child Health and TB Centers are also established in the country.
The details of various medical & health facilities establishment for the year 2006 are given
below.
National medical and health Establishment;
Hospitals

Dispensaries

Rural
health
centers

TB Clinics

Basic
Health
Units

924

4712

560

288

5336

Maternity
& Child
Health
Centers
906

Total Beds

Population
/ Bed

102073

1522

It is evident from the above figures that the high population growth rate has rendered the
existing health facilities as insufficient to meet the requirement of the existing population.
Moreover, rapid technological advances have revolutionized the diagnostic techniques in the
medical field. High technology and computerized diagnostic machines are now playing
increasing role in overall medical treatment. These technologies are new and therefore,
expensive as well. As a result not many public sector hospitals have been able to acquire
these new technologies, whereas trend of consulting private sector hospitals, laboratories and
medical treatment is on higher side.
There are number of diagnostic laboratories, which operate in an organized manner by private
sector in Pakistan. However, this industry has not yet been developed to any sizeable extent
in the country and as such it is not capable enough to meet the demand of the growing
population.

3.5

Target Customers

The major target market of the facility consists of residential areas in the vicinity of the
laboratory. The basic services that will be provided will also be determined by the need of the
locality and its adjacent areas.

BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

4. Basic R equirements
4.1

Machinery and Equipment requirement

The major cost involved in establishing a Diagnostic Laboratory is the cost of machinery and
equipment. The proposed Laboratory would be providing diagnostic services to the patients.
The following requirement is estimated for running the laboratory.
Description
Blood Analyzer
Binocular Microscope
Clinical Water bath
Incubator
ELISA for hormone Analysis
Centrifuge Machine
Photoclorimeter / Chemistry
analyzer
Miscellaneous Lab Equipment
Total

4.2

Number
1
2
1
1
1
1
1

Cost per unit


400,000
90,000
6,500
450,000
60,000
25,000
325,000
20,000

Total
400,000
180,000
6,500
450,000
60,000
25,000
325,000
20,000
1,466,500

Office equipment

It includes computers, air conditioners, telephone and fax etc. An amount of Rs. 178,400 has
been provided for acquiring the required office equipment. Following are the details of office
equipment;
Description
Air conditioner
Refrigerators
Water Cooler
Computers
Printers
Scanner
Telephone sets
Fax Machine
Total

4.3

Number
2
1
1
2
1
1
2
1

Cost per unit


27,000
18,000
8,000
30,000
12,000
4,000
1,200
20,000

Total
54,000
18,000
8,000
60,000
12000
4,000
2,400
20,000
178,400

Furniture and Fixture

Furniture and fixture mainly include Sofa set, tables, chairs, fans & lights, curtain and fire
extinguishers. The details are as under;
Description
Sofa Set 3 seat
Counter desk
Waiting sofas

Number
2
1
2

BAL-PREF-12/June 2008

Cost per unit


15,000
10,000
12000
6

Total
30,000
10,000
24,000

Pre-feasibility Study

Office Table
Total

4.4

Diagnostic Laboratory

10,000

10,000
74,000

Other Equipment Required.

Electrical nature of equipment, uniform supply is essential therefore, Generator, Stabilizer is


mandatory. Following are the recommended equipments;
Description
Electricity Generator
Stabilizer
Weight Machine
Light and Electricity Appliances
Miscellaneous
Total

4.5

Number
1
3
1

Utilities Requirement
Electricity
Telephone
Gas
Water
Waste Disposal

BAL-PREF-12/June 2008

Cost per unit


40,000
10,000
2,000

Total
40,000
30,000
2,000
50,000
5,000
127,000

Pre-feasibility Study

Diagnostic Laboratory

5. Land & B uilding Requirement


5.1

Land

Keeping in view the proposed capacity, approximately 772 square feet is sufficient to set up
the diagnostic center. An amount of Rs. 926,400 has been allocated for the acquisition of
land. However, cost of land may vary according to location.

5.2

Covered Area Requirement

The covered area requirement for diagnostic laboratory is about 772 sq. feet. The table given
below gives a sketch of the area requirement.

Section

Number

Reception hall &


1
partitioned
waiting room
Wash room
2
Diagnostics Lab
1
Store Room
1
Total covered area cost
Total cost of land

Area
14x18

5*6
20x18
10x10

Total Area
(sq. ft.)
252

Cost per Sq. ft.

60
360
100
772
800

1200
1,200
1,200
1,200
Rs. 1,350 per
Sq.ft

1200

Total land and building / Construction cost

Cost (Rs)
302,400

72,000
432,000
120,000
926,400
1,080,000
2,006,400

6. Human Resource Requirement


Total staff of 7 persons is required for a diagnostic laboratory project. Human resource
requirement, along with annual cost of salaries for diagnostic unit on the basis of two shifts is
given below.
Position
Chief Executive
(Manager)/Doctor
Lab Technicians
Receptionist/ accountant
Sweepers
Total

BAL-PREF-12/June 2008

Persons

Monthly
Salary/person
20,000

1
4
1
1
7

6,000
8,000
1,500

Total Salary/
annum.
240,000
288,000
96,000
18,000
642,000

Pre-feasibility Study

Diagnostic Laboratory

7. Project Economics
7.1

Project Cost

Description
Land
Building & Infrastructure
Machinery & Equipment
Furniture & Fixtures
Office Equipment
Pre-operating costs
Total Capital Cost
Working Capital
Raw Material Inventory
Upfront Insurance Payment
Cash
Total Working Capital

Amount in (Rs.)
1,080,000
926,400
1,593,500
74,000
178,400
53,500
3,905,800
70,841
79,675
100,000
250,516

Total Project Cost

7.2

4,156,316

Project Returns

Description

IRR
MIRR
Pay Back Period (Yrs)
Net Present Value (NPV)

7.3

Equity

Project

79%
35%
1.77
16,935,436

66%
31%
2.05
21,253,430

Project Financing

Description
Debt Financing
Equity Financing
Total

BAL-PREF-12/June 2008

Percentage
30%
70%

Amount in Rs
1,249,856
2,906,460
4,156,316

Pre-feasibility Study

Diagnostic Laboratory

8. Financial Anal ysis

Financial Evaluation of Pre-Feasibility Diagnostic Laboratory


Key Variables
Total Investment in Project
Equity
Debt
Lease
Interest Rate
Debt Tenure
Total Number of Employees

Free Cash Flow to Equity (FCFE)


Free Cash Flow to Firm (FCFF)
Profit margin on sales
ROE
Times interest earned

Internal Rate of Return (IRR)


Modified Internal Rate of Return (MIRR)*
Payback Period (yrs)
Net Present Value (NPV)

SMEDA

4,156,316
2,906,460
1,249,856
15%
5
7

70%
30%
0%

Year 1
1,512,198
1,843,804
21%
33%
8.85

@ 16%

Year 2
1,811,934
2,149,657
26%
45%
15.78

Equity
79%
35%
1.77
16,935,436

Year 3
2,620,285
2,965,044
30%
55%
27.90

34%
65%
53.13

Project
66%
31%
2.05
21,253,430

@ 12%

10
BAL-PREF-12/June 2008

Year 4
3,609,925
3,962,773

Year 5
4,487,586
4,849,738
36%
70%
123.04

Year 6
5,545,901
5,545,901
39%
72%
-

Year 7
6,350,169
6,350,169
40%
75%
-

Year 8
7,243,387
7,243,387
42%
78%
-

Year 9
8,236,314
8,236,314
43%
80%
-

Rs. in actuals
Year 10
9,658,110
10,959,557
45%
83%
-

Pre-feasibility Study

8.1

Diagnostic Laboratory

Projected Income Statement


SMEDA
Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Rs. in actuals
Year 10

Revenue
Cost of goods sold
Gross Profit

5,495,980
3,175,654
2,320,326

7,053,174
3,854,047
3,199,128

8,866,848
4,593,181
4,273,666

10,972,724
5,397,512
5,575,212

12,740,552
5,979,086
6,761,466

14,014,607
6,298,899
7,715,708

15,416,068
6,636,693
8,779,375

16,957,675
6,993,559
9,964,116

18,653,442
7,370,660
11,282,782

20,518,786
7,769,238
12,749,548

General administration & selling expenses


Administration expense
Utilities expense
Travelling & Comm. expense (phone, fax, etc.)
Office expenses (stationary, etc.)
Promotional expense
Insurance expense
Professional fees (legal, audit, etc.)
Depreciation expense
Amortization expense
Subtotal
Operating Income

354,000
15,700
12,390
17,700
27,480
79,675
27,480
138,615
10,700
683,740
1,636,586

388,466
16,642
13,596
19,423
35,266
75,691
35,266
138,615
10,700
733,666
2,465,462

426,288
17,641
14,920
21,314
44,334
71,708
44,334
138,615
10,700
789,853
3,483,813

467,791
18,699
16,373
23,390
54,864
67,724
54,864
138,615
10,700
853,019
4,722,193

513,336
19,821
17,967
25,667
63,703
63,740
63,703
138,615
10,700
917,251
5,844,215

563,315
21,010
19,716
28,166
70,073
59,756
70,073
138,615
970,725
6,744,984

618,161
22,271
21,636
30,908
77,080
55,773
77,080
138,615
1,041,523
7,737,852

678,346
23,607
23,742
33,917
84,788
51,789
84,788
138,615
1,119,593
8,844,523

744,390
25,023
26,054
37,220
93,267
47,805
93,267
138,615
1,205,641
10,077,141

816,865
26,525
28,590
40,843
102,594
43,821
102,594
138,615
1,300,448
11,449,100

Income from Cash at Bank


Earnings Before Interest & Taxes

22,763
1,659,349

53,622
2,519,084

79,255
3,563,068

108,586
4,830,779

139,635
5,983,850

174,586
6,919,570

213,654
7,951,506

253,115
9,097,638

294,643
10,371,783

345,599
11,794,700

Interest expense
Earnings Before Tax

187,478
1,471,871

159,672
2,359,411

127,696
3,435,372

90,922
4,739,857

48,633
5,935,217

6,919,570

7,951,506

9,097,638

10,371,783

11,794,700

Tax
NET PROFIT/(LOSS) AFTER TAX

323,812
1,148,059

519,070
1,840,341

755,782
2,679,590

1,042,769
3,697,089

1,305,748
4,629,469

1,522,305
5,397,264

1,749,331
6,202,174

2,001,480
7,096,158

2,281,792
8,089,991

2,594,834
9,199,866

Balance brought forward


Total profit available for appropriation
Dividend
Balance carried forward

1,148,059
574,030
574,030

574,030
2,414,370
1,207,185
1,207,185

1,207,185
3,886,775
1,943,388
1,943,388

1,943,388
5,640,476
2,820,238
2,820,238

2,820,238
7,449,707
3,724,854
3,724,854

3,724,854
9,122,118
4,561,059
4,561,059

4,561,059
10,763,233
5,381,617
5,381,617

5,381,617
12,477,774
6,238,887
6,238,887

6,238,887
14,328,878
7,164,439
7,164,439

7,164,439
16,364,305
8,182,152
8,182,152

11
BAL-PREF-12/June 2008

Pre-feasibility Study

8.2

Diagnostic Laboratory

Projected Balance Sheet


SMEDA
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

100,000
70,841
79,675
250,516

1,038,168
91,120
75,691
1,204,979

1,642,917
114,811
71,708
1,829,435

2,319,815
142,401
67,724
2,529,940

3,109,501
165,720
63,740
3,338,961

3,872,233
182,706
59,756
4,114,695

4,857,075
201,433
55,773
5,114,280

5,825,628
222,080
51,789
6,099,496

6,830,127
244,843
47,805
7,122,776

7,902,003
269,940
43,821
8,215,763

9,377,961
9,377,961

Fixed assets
Land
Building/Infrastructure
Machinery & equipment
Furniture & fixtures
Office equipment
Total Fixed Assets

1,080,000
926,400
1,593,500
74,000
178,400
3,852,300

1,080,000
880,080
1,513,825
70,300
169,480
3,713,685

1,080,000
833,760
1,434,150
66,600
160,560
3,575,070

1,080,000
787,440
1,354,475
62,900
151,640
3,436,455

1,080,000
741,120
1,274,800
59,200
142,720
3,297,840

1,080,000
694,800
1,195,125
55,500
133,800
3,159,225

1,080,000
648,480
1,115,450
51,800
124,880
3,020,610

1,080,000
602,160
1,035,775
48,100
115,960
2,881,995

1,080,000
555,840
956,100
44,400
107,040
2,743,380

1,080,000
509,520
876,425
40,700
98,120
2,604,765

1,080,000
463,200
796,750
37,000
89,200
2,466,150

Intangible assets
Pre-operation costs
Total Intangible Assets
TOTAL ASSETS

53,500
53,500
4,156,316

42,800
42,800
4,961,464

32,100
32,100
5,436,605

21,400
21,400
5,987,795

10,700
10,700
6,647,501

7,273,920

8,134,890

8,981,491

9,866,156

10,820,528

11,844,111

240,392
240,392

294,743
294,743

354,072
354,072

418,042
418,042

463,251
463,251

487,202
487,202

512,431
512,431

539,011
539,011

567,018
567,018

572,073
572,073

1,249,856
1,249,856

176,099
1,064,483
1,240,582

176,913
851,304
1,028,217

177,727
606,148
783,875

178,541
324,219
502,760

179,355
179,355

180,169
180,169

180,983
180,983

181,797
181,797

182,611
182,611

183,425
183,425

Shareholders' equity
Paid-up capital
2,906,460
Retained earnings
Total Equity
2,906,460
TOTAL CAPITAL AND LIABILITIES 4,156,316

2,906,460
574,030
3,480,490
4,961,464

2,906,460
1,207,185
4,113,646
5,436,605

2,906,460
1,943,388
4,849,848
5,987,795

2,906,460
2,820,238
5,726,699
6,647,501

2,906,460
3,724,854
6,631,314
7,273,920

2,906,460
4,561,059
7,467,519
8,134,890

2,906,460
5,381,617
8,288,077
8,981,491

2,906,460
6,238,887
9,145,348
9,866,156

2,906,460
7,164,439
10,070,899
10,820,528

2,906,460
8,182,152
11,088,613
11,844,111

Assets
Current assets
Cash & Bank
Raw material inventory
Pre-paid insurance
Total Current Assets

Liabilities & Shareholders' Equity


Current liabilities
Accounts payable
Total Current Liabilities
Other liabilities
Lease payable
Deferred tax
Long term debt
Total Long Term Liabilities

12
BAL-PREF-12/June 2008

(0)

(0)

Pre-feasibility Study

8.3

Diagnostic Laboratory

Projected Cash Flow Statement


-

(0)

(0)

SMEDA
Year 0
Operating activities
Net profit
Add: depreciation expense
amortization expense
Deferred income tax
Raw material inventory
Advance insurance premium
Accounts payable
Cash provided by operations

(70,841)
(79,675)
(150,516)

Financing activities
Change in long term debt
1,249,856
Issuance of shares
2,906,460
Purchase of (treasury) shares
Cash provided by / (used for) financing activities
4,156,316
Investing activities
Capital expenditure
(3,905,800)
Acquisitions
Cash (used for) / provided by investing activities
(3,905,800)

Year 1

Year 2

Year 3

Year 4

Year 5

1,148,059
138,615
10,700
176,099
(20,278)
3,984
240,392
1,697,571

1,840,341
138,615
10,700
814
(23,691)
3,984
54,350
2,025,113

2,679,590
138,615
10,700
814
(27,590)
3,984
59,329
2,865,441

3,697,089
138,615
10,700
814
(23,318)
3,984
63,971
3,891,854

4,629,469
138,615
10,700
814
(16,986)
3,984
45,208
4,811,804

(185,373)
(185,373)

(213,179)
(213,179)

(245,156)
(245,156)

(281,929)
(281,929)

(324,219)
(324,219)

Year 6

5,397,264
138,615
814
(18,727)
3,984
23,951
5,545,901

Year 7

6,202,174
138,615
814
(20,647)
3,984
25,229
6,350,169

Year 8

7,096,158
138,615
814
(22,763)
3,984
26,580
7,243,387

Year 9

8,089,991
138,615
814
(25,096)
3,984
28,007
8,236,314

Rs. in actuals
Year 10

9,199,866
138,615
814
269,940
43,821
5,055
9,658,110

NET CASH

100,000

1,512,198

1,811,934

2,620,285

3,609,925

4,487,586

5,545,901

6,350,169

7,243,387

8,236,314

9,658,110

Cash balance brought forward


Cash available for appropriation
Dividend
Cash carried forward

100,000
100,000

100,000
1,612,198
574,030
1,038,168

1,038,168
2,850,102
1,207,185
1,642,917

1,642,917
4,263,202
1,943,388
2,319,815

2,319,815
5,929,739
2,820,238
3,109,501

3,109,501
7,597,087
3,724,854
3,872,233

3,872,233
9,418,134
4,561,059
4,857,075

4,857,075
11,207,244
5,381,617
5,825,628

5,825,628
13,069,015
6,238,887
6,830,127

6,830,127
15,066,442
7,164,439
7,902,003

7,902,003
17,560,113
8,182,152
9,377,961

13
BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

9. Key Assu mptions


9.1

Project Capacity Assumptions

Description

Calculation

Maximum Number of Tests/Day

150

Assumed total No. of Business Days in a Year

300

Total Assumed Capacity

150 * 300 = 45,000 Units

Capacity Utilization 1st Year

60%

Growth in Capacity Utilization

10%

Maximum Attainable Capacity

95%

9.2

Revenue Assumptions

Description

Calculation

Weighted Average Fee / Test

Rs. 203.55

Fee Growth Rate / Year

10%

Capacity Utilization in 1st Year (@60%)

27,000 Tests

st

Total Revenue in 1 Year

9.3

27,000 * 203.55 = Rs. 5,495,980

Economic Assumptions

Electricity Price Growth Rate

6%

Gas Price Growth Rate

6%

Water Price Growth Rate

6%

Salary Growth Rate

10%

9.4

Expense Assumptions

Communication Expense

3.5% of administration expense

Office Expense

5% of administration expense

Promotional Expense

0.5% of revenue

Professional Fee (Legal, Audit etc)

0.5% of revenue

Operating Cost Growth Rate

5%

Machinery & Equipment Insurance Rate

5%

9.5

Depreciation Expense Assumptions

Depreciation Method

Straight Line

Building & Infrastructure

5%

Machinery & Equipment

5%

14
BAL-PREF-12/June 2008

Pre-feasibility Study

Diagnostic Laboratory

Furniture & Fixtures

5%

Office Equipment

5%

9.6

Cost of Goods Sold

All the direct costs that directly affect the revenue of any project are called Cost of Goods Sold (COGS). For a
diagnostic laboratory, following are the components and estimated value of COGS in the first year:
Description

Weighted Avg. Cost of Sales/Test


in 1st year

Daily Cost

Total 1st Year Direct Cost in Rs.

104.95

104.95 * 27,000 = 2,833,654

Direct Labor Cost

288,000

Direct Electricity Cost

27,000

Direct Gas Cost

27,000

Total COGS

9.7

3,175,654

Cash flow Assumptions

Accounts Receivables Cycle (In Days)

Accounts Payable Cycle (In Days)

30

Initial Cash in Bank

100,000

9.8

Financing Assumptions

Debt

30%

Equity

70%

Long Term Debt Interest Rate

15%

Tax Treatment

Sole proprietorship

Discount Rate for NPV (WACC)

12

15
BAL-PREF-12/June 2008