c



The objective of the study is to appraise the setting of a textile unit ³GULAHMED´ in Pakistan
which will be producing and exporting home textile, throughout this study we will be looking at
various aspects that are to be considered while setting up a textile unit.


c 
The scope of the study is to undertake, need assessment, technical evaluation, assessment of
management structure, financial and economic evaluation of the project, on the basis of which
recommendations are to be made about setting up the project.


 
 
  


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The methodology used while making this report is as under:

‡ The primary data was collected from visit to GulAhmed textile mills limited, discussions with
the experts in textile mill regarding various aspects of the industry.

‡ Secondary data was collected from government publications, journals and magazines, internet
and other sources.

‡ Prices of machinery and technical know-how were again obtained from GulAhmed textile mills
limited.
 '(()  ( * 

Pakistan¶s textile industry ranks amongst the top in the world. Pakistan is world¶s fourth largest
producer of cotton, the third largest consumer of the same, sixth largest importer of raw cotton
and first class exporter of cotton yarn.
Pakistan textile sector is by far the most important sector of the economy contributing 57% to
export earnings and engaging 38% of labor force, accounts for 46% of the total manufacturing.
The availability of cheap labor and basic raw cotton as raw material for textile industry has
played the principal role in the growth of the Cotton Textile Industry in Pakistan At present it
comprised of 521 textile units (50 composite units and 471 spinning units) with installed capacity
of 10.0 million spindles and 114 thousand rotors. Pakistan has third largest spinning capacity in
Asia with spinning capacity of 5% of the total world and 7.6% of the capacity in Asia. The entire
value chain represents production of cotton, ginning, spinning, weaving, dyeing, printing and
finally garments manufacturing.

Pakistan has emerged as one of the major cotton textile product suppliers in the world with a
market share of about 28% in world yarn trade and 8% in cotton cloth. The value addition in the
sector accounts for over 9% of GDP and its weight age in the quantum index of large-scale
manufacturing are estimated at one-fifth.
Based on abundant supply of indigenous cotton, textile is the leading sector of industrial
manufacturing and depends on agriculture for supply of raw material. Therefore, whatever
happens to cotton crop is likely to affect the performance of textile sector.
Textile production is comprised of cotton ginning, cotton yarn, cotton fabric, fabric processing
(grey dyed- printed), home textiles, towels, hosiery & knitwear and readymade garments. These
components are being produced both in the large scale organized sector as well as in unorganized
cottage/small and medium units
An anti-dumping of 5.8% has been imposed on Pakistan by the European Union, which has put
Pakistan in a desperate position to match competitors like Bangladesh, India, China, Sri-Lanka
and Vietnam.
 , ( )  
* -,

/003204
/001203
5
267
Share in Total
61.1 53.8
Exports
Share in
45 46
manufacturing
Share in employment 38 39
Share in GDP 8.5 8.5
Textile exports $ 6.6 billion $ 6.3 billion
Investment in textile $ 6.4 billion $ 7.0 billion

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The objectives of sponsors may vary from one kind to other. Sponsor in our project provided
sponsorship, while keeping several objectives in mind to accomplish. One of the prime
objectives was to grow its monetary resources by investing funds in a beneficial project that
yields back more funds according to its expectations in order to attain better financial status. If
sponsors would have found objectives unattainable; then s/he wouldn¶t have invested in it.
Therefore before investing in this project, sponsor analyzed complete and detailed estimates of
costs, benefits and risks.

9 <$c;#cc! c%c&:

There are different qualities that makes one a good sponsor. These qualities are experience in the
field i.e. how much time of his life has been devoted to this field, how good or bad his overall
performance has been in this field ?, his managerial ability to perform tasks, his decision taking
power, leadership qualities, how sharp minded, learned and erudite he is, his ability to look into
the future through economic and financial forecasting, how he carries the process of optimization
i.e. (cost minimization, profit maximization, and output maximization), should be smart enough
to negotiate in case of loans price bargaining plus the way he analyzes projects. These all
qualities do exist in our projects¶ sponsor.
 &c c!%#%&;;&

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The business of the company is to be managed under the directions of the board of directors. The
board will be responsible for establishing broad corporate policies and for the overall
performance of the company. The core responsibility of the director is to exercise their business
judgment and act in what they reasonably believe to be the best interest of the company.

The board¶s corporate governance committee reviews the principles and rules regularly in the
light of prevailing best practices and forwards suggestion for improvement to the full board for
approval.

The boards corporate governance committee is responsible for considering matters of social
responsibility and matters of significance in areas related to corporate public affairs and the
company¶s employees and stockholders.

The board¶s job should be to create and maintain a structure that will ensure harmony and
cooperation between management and the employees in pursuing the goals and objectives of the
organization rather than simply rubber stamping the actions of management.

The paramount duty of the board of directors is to select chief executive officer and to oversee
the CEO and the other senior management for the competent and the ethical operation of the
company.

The board should identify and periodically update the qualities and characteristics necessary for
an effective CEO of the company. With these principles in mind, the board should periodically
monitor and review the development and progression of potential internal candidates against
these standards.

The CEO is in the charge of day to day management operations, and is responsible for ensuring
that the management and company¶s functions are organized, run and developed in accordance
with the law, articles of association and decision adopted by the board, and the annual general
meetings of the shareholders.

The given below is the proposed management structure, characterized by clear assignment of
responsibilities as well as reduced number of interfaces.


ORGANIZATION CHART?
?

CEO

Director Director Director

Finance Marketing Production

Export
Chief Financial Finance Marketing Production
Co-Secratary
Officer Manager Manager Manager

Assistant Process Stiching Store

Finance Department Depatment Manager
Manager Manager Manager

Process Packing Stock

supervisor Incharge Incharge

Machine
Store
Operators and Packing Staff
Assistants
assistants

?
:
&< &"

Industry sources have reported a major growth rate in the country͛s home
textiles, attracting new buyers. The linen industry has directly benefited as more
companies have entered the sector.

Cotton spinning companies were also wooed towards home textiles seeing
further growth. Most of companies were operating at full capacity. Countries
operating at full capacity would increase their capacity if there was no change in
the situation.

Pakistani companies have managed to grab a huge share in the world market
thanks to latest efficient high-end technology. Lots of the other companies would
like to acquire the new and latest machines. This would give the Pakistani home
textiles a further boost, says Fazal Ahmad Sheikh, chairman of the Pakistan Bed
sheet and Upholstery Manufacturers Association (PBUMA). "There is immense
scope for home textile exports from Pakistan, but only if we can manufacture the
right products,͟ he added.

A number of companies were adding basic home products like bed linen and
towels to their belt. Bed linen exports supposedly fetched foreign exchange of $
1.2 billion last year.

Turkey has been processing and converting loads of grey fabric imported from
Pakistan into home furnishings and other similar goods, exporting them to Europe
at high profit margins, claims an exporter, Muhammad Javed Khan.

|
 
 



 





 

 



 








  

 



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China continues to be the leading supplier of home textiles in the world,
with exports projected to exceed US$9.5 billion by the end of 2008,
increasing by a robust 15 percent from the previous year.

Suppliers are dealing with the challenges in a variety of ways. While

some are trying to cut their operating costs, others are attempting to
move up the value chain to improve their profits.

China's US$8 billion home textile industry continues to register steady

growth since Global Sources first analyzed the line in August 2005.

While North America and Europe still take up the bulk of shipments,
exports to emerging destinations such as Eastern Europe and the Middle
East are gathering pace.
  %" &"
.

The most appropriate location for setting up Gul Ahmed Textile would be Landhi in Karachi,
since major trade/export is taking place in this city and with its large textile making industry and
availability of sea port for assisting the export that is our main objective. Faisalabad being as an
alternative, due to large number of textile units being there, Lahore can be another alternative for
establishing this unit.


"cc%"%"$

The Textile Unit at Landhi in Karachi is proposed for setting up for the following reasons:

@ A market for the sale and purchase of grey (Raw Material) already exists in Karachi.

@ Many suppliers of grey available in the Karachi market to help in the production of Home
textiles.

@ Infrastructure for export like international airport already exists.

@ Karachi is Pakistan¶s largest and most metropolitan city which makes it easier for
foreigners to work and stay in Karachi.

@ Karachi is well connected to different parts of the country.

@ Trained and experienced management is readily available in Landhi, Karachi.

@ Skilled labour is already available in Karachi.

Process Layout

In order to maintain effectiveness of our project study Our textile unit will be composed of
processing and stitching unit only whereas the spinning and weaving department will be
outsourced due to infancy stage.

Assumptions

@ Capacity of plant: 4 million meters for home textile

s million meters
for home textile
per month

2.5 million 0.5 million

1 million meter
meter for meter for white
for dyeing
printing fabric

1.5 million fror

meters pigment

1 millon meters
for reactive
pigment

@ Expected production: 75000 sets of home textile per month.

@ Fabric used
-180 thread counts (mean point) equals to 120 grams per square meter
@ Plant working width: 3.2 meters width
 6%%" &"

   ,+Estimated to be 1 years

(  + 60% Debt 40% Equity
Since both short and long term debt are assumed same at KIBOR(6 months) plus 2% i.e. 12.36 +
2% = 14.36% ,debt financing is done via long term debt to be paid off in 8 years.

+
The total manpower requirement for our textile unit is 641 as illustrated below:

%= !'  %,

1 CEO 1
2 Directors 3
3 Managers & Assistants 12
4 Technical supervisors 10
5 Skilled labor 500
6 Semi Skilled 100
7 Security staff 15

  1>?

























 +As per technical analysisassertion, following combination of machinery
will be needed:


 &@ *  A
  
Singeing Machine 1 Germany 6400000 6400000
Bleaching Machine 1 Germany 20000000 20000000
Mercerizing Machine 2 Japan 12000000 24000000
Thermo sole 1 Germany 21000000 21000000
Pad Steam 1 Japan 60000000 60000000
Washing Range 1 Germany 36000000 36000000
Pad Batch 1 Germany 4000000 4000000
Rotary printing machine 2 Japan 20000000 40000000
Flat bed printing 1 Japan 7000000 7000000
Stantors 5 Germany 5000000 25000000
Calender 1 Germany 5000000 5000000
Synforizing 1 Germany 10000000 10000000
Generator (2Mw) 4 Japan 32000000 128000000
Boiler (10-12 tons) 2 Germany 3000000 6000000
Sewing Machine 500 Germany 12500 6250000
Cutting Machine 24 Germany 18000 432000
Cutting Table 40 Pakistan 24000 960000

c" >000>/000
&, +
Basic raw material required for producing home textiles (bed sheets, curtains, pillows) is Grey. It
can purchased from market at Rs 87/metre.

"B'@, +
Total land required for this project is 6 Acres.

Almost one third area of the total land i.e 2 acres would be utilized for processing, stitching
storage and offices and the remaining area would be left for further expansion and for free
movement of transport. The land would cost Rs 165000000

c
@, +
All utilities i.e. water ,gas and electricity are required, gas and water are easily available where as
electricity would be self generated through gas generators which will require 460800 cubic meter
gas per month required for 2 mw operation per generator and it will cost Rs 10.80 per cubic
meter. Total cost of electricity produced would be Rs 6 per unit.

  +
The total cost of the project, including net initial working capital, is estimated at Rs. 3350000
    
!   

Land 165000000
Building 200000000
Vehicles, Furniture/ Fixture & Equipment 12500000
Machinery 400042000
Utilities 60000000
Pre-operational Expenses* 6000000
|
 

   


 

 

 
  
Total Project Cost ?1>CD>/000

Å 

   

 










   , 
!   A, 

Gray Fabric 87
Dyeing 27
Printing 38
Stitching 12
Packing 11
|


  
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,,
,
 17,337,344.36
total of 96.00 monthly payments 1,664,385,058.20
total interest paid 678,019,858.20

", 

''    '
1 986,365,200.00 137,092,290.55 70,955,841.72 915,409,358.28
2 915,409,358.28 126,204,923.98 81,843,208.30 833,566,149.98
3 833,566,149.98 113,647,014.88 94,401,117.40 739,165,032.58
4 739,165,032.58 99,162,237.51 108,885,894.76 630,279,137.82
5 630,279,137.82 82,454,935.87 125,593,196.41 504,685,941.41
6 504,685,941.41 63,184,088.88 144,864,043.39 359,821,898.02
7 359,821,898.02 40,956,349.69 167,091,782.58 192,730,115.44
8 192,730,115.44 15,318,016.83 192,730,115.44 0.00









<$; c%

Selling price per set: Rs 10750 5Average price)
Cost per set : Rs 9333
Sales growth : 6% yearly
Sales price growth rate: EF
Year 1 capacity utilization: 30F
Maximum capacity utilization: ?00F
Total production in meters per day at 70% capacity: 93333 meters
Total production in meters per day at 100% capacity: 133333 meters
Total Production in meters per year at full capacity: 48000000 meters per year
Total production in sets (53.3 meters/set) per day at 70% capacity: 1751 sets
Total production in sets (53.3 meters/set) per day at 100% capacity: 2501 sets
Total production in sets (53.3 meters/set) per year at 70% capacity: 630392 sets
Total production in sets (53.3 meters/set) per year at 100% capacity: 900563 sets
Days operational per month: C0
Day operational per year: C10
Gray Fabric Cost (Year 1): 4802400000 
Cost of production growth: >F
Depreciation:?0F
Amortization:?0F
Administrative expenses (includes payroll cost as well): >F(


KEY FINANCIAL ASSUMPTIONS

Project life: ?0

Interest rate on Short Term debt: ?>C1F
Interest rate on Long Term debt: ?>C1F
Debt payments per year: ?
Tenure of debt: 4
Discount rate for NPV: ?EF


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