Pre-Feasibility Study

LINGERIE STITCHING 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

July, 2001
Pre-Feasibility Study Lingerie Stitching 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-20
Revision 1
Prepared by SMEDA-Punjab
Approved by GM Punjab
Issue Date July 6, 2001
Issued by Library Officer

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Pre-Feasibility Study Lingerie Stitching Unit

1 INTRODUCTION

1.1 Project Brief

The subject pre-feasibility provides details about lingerie manufacturing unit. Lingerie
products constitute a large domestic as well as export market. Major products included in
lingerie are brassiere, panties & nightwear. In addition to these basic lingerie products,
the machine combination suggested in this project proposal can also accommodate
different variations in the products as demanded by changing consumer trends. Total
stitching machines installed at the unit are 18, capable of stitching 25 dozens garments
per day on a single eight hour shift basis. According to our research, this is considered to
be the smallest possible optimal size of a lingerie unit. The above-mentioned production
capacity, however depends on the assumption that larger garments like nightwear will
account for the smaller share in the overall product mix, and production can go down if
nightwear occupies a major size of the product mix as its manufacturing time is higher
than that for the smaller products.
1.2 Project Cost
Total project cost of this particular unit is Rs 2.21 million. Major portion of this cost is
the working capital (Rs 1.34 million). This cost is based on second hand stitching
machinery of Japanese origin, the cost of brand new stitching machinery is however
much higher.

Total Investment (Rs) 2,214,692

Capital Cost 870,730
Working Capital 1,343,962

1.3 Opportunity Rationale

Lingerie is a continuously growing market both locally, as well as globally. The size of
the local market is estimated to be around 83 million pieces per year. The size of the local
market is rising, not only due to increase in population, but also due to increase in per
capita consumption. The export market is also very lucrative and only the Brassiere’
exports are more than $3 billion per annum globally. The growth in export market has
also shown a healthy growth pattern of 12% per annum during the period 1994-98. In the
local market, the stitching of lingerie has been mainly concentrated in the unorganized
sector. In the organized sector, there are only three to four major players catering to this
huge market.

In addition to the existence of high market demand, the project economics are also
healthy portraying a reasonably positive profit margins.

Equity Project
Internal Rate of Return (IRR) 27% 29%
Payback Period (yrs) 4.60 3.84
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1.4 Process Flow

A normal lingerie product goes through at least thirty different operations. Major groups
of operations include pattern making, cutting & stitching, final quality inspection and
packing. A standardized process flow of a typical lingerie garment (Brassiere) is shown
below:

Patterm Making Fabric Cutting Foam Cutting Fabric Stitching

Elastic Stitching & Strap Cutting & Hooks, Eyelets &

Clipping
Attachment Stitching Labels Attachment

Packing Quality Check

2 INDUSTRY STRUCTURE

2.1 Existing Industry Structure

Women intimate garments carry a huge potential in the local market. However, social and
religious taboos have so far hindered the growth of the organized sector in this market.
Advertising on electronic media is not possible and explicit ads in print media are also
not encouraged by the society. Therefore, the bulk of manufacturing for local market is
concentrated in the unorganized sector with little information available about it. Lahore
& Karachi are the major centers of lingerie stitching in the country.

The organized market in this product category is dominated by ‘Triumph’. ‘Triumph’ is

an international brand name and is manufactured and marketed in Pakistan by
International Foundation & Garments (Pakistan) Pvt. Ltd., based in Karachi. ‘Vanity’ is
the second largest player in the Lingerie market in Pakistan. This brand is manufactured
and marketed by Global Garments, also based in Karachi. Lahore based MOONLIGHT
industries is another major player in the lingerie business and markets its product under
the brand name of ‘ESPiCO’ for women lingerie, and Grace for men's briefs.

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3 MARKET ANALYSIS

3.1 Local Market

There are no numbers available to determine the exact size of the local market. In-order
to overcome this problem, SMEDA has used its own estimates to determine the
approximate size of the women intimate garments in Pakistan. Since the major product of
the unit is Brassiere, the estimate has been done for this particular product alone. The size
of the local market for Brassiere has thus been estimated by SMEDA to be about 83
million garments per annum. The calculations are shown below:

Total population 137,510,000

Women population (@ 50% of total) 68,755,000
Women above 15 years (@ 60% of total) 41,253,000

Urban population (@ 35% of total) 14,438,550

Rural population (@ 65% of total) 26,814,450

Consumption in urban area @ 3 Brassiere per annum 43,315,650

Consumption in rural area @ 1.5 Brassiere per annum 40,221,675
Total consumption (demand) of Brassiere in Pakistan 83,537,325

3.1.1 Market Segments

According to buying power and purchase patterns, the market for Brassiere can be
broadly classified into three major segments.
Lower segment, which includes Brassiere worn by the women in rural areas and the
women in the urban areas in the lower income households like office staff, labor etc. This
segment accounts for almost 70% of the total market.
Middle segment, which includes women in middle and upper income households in the
urban areas. It accounts for about 20% of the total market.
Upper Segment, which includes the women in the upper income segment of the society
and accounts for 10% of the total.
3.2 Export Market

3.2.1 World Export Market

Total worlds export market for Brassiere was $3.1 billion in 1998. Exports showed a
continuously increasing trend from 1994 to 1997. From 1997 to 1998, the exports
remained constant at $3.1 billion. Average growth rate during the period 1994-1998 was
12.8% whereas the compounded annual growth rate was 9.2%. A growing market like
that of Brassiere poses a good opportunity for the entrepreneurs to venture into the
exports of this product.

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Figure 3-1 : Global Export of Brassieres

Brassieres-World Exports
4.0 3.1
3.1
2.6 2.7
3.0
$ Billion

2.0
2.0

1.0

0.0
1994 1995 1996 1997 1998

3.2.2 Major Exporters and Importers

Looking at the major players in the international market of Brassiere, it can be seen that
China is at the top of the list, with exports of 449 million pieces, worth of $549 million.
China’s share in the total market amounted to 17.7%. USA stood at second position in the
row of exporters with 14.4% share, followed by France with 8.5% share.

Figure 3-1: Major Exporters of Brassieres

Brassieres-Major Exporters
China
Others 17.7%
31.7%
USA
UK 14.4%
3.6%
France
Germany
8.5%
3.7% Mexico
Tunisia Italy Austria
8.1%
3.8% 4.1% 4.5%

Looking at the major buying countries in 1998, USA was the largest importer with 32.6%
share. Total imports into USA market were $1 billion. Germany and Hong Kong were
second and third largest exporters with shares of 12.0% and 12.3% respectively. All the
major importers fall in the category of developed countries with the exception of Mexico.
Mexico is included both in the top ten importers as well as in the top ten exporters. In
1998, total imports into Mexico were $123 million, whereas total exports out of Mexico
were $251. So Mexico is a net exporter of Brassiere. The figures indicate that along with
being a manufacturer/exporter, Mexico is also acting as a trading hub for Brassiere.

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Figure 3-2: Major Importers of Brassiere

Brassieres-Major Importers
Netherlands Belgium Others
Italy 3.5% 3.0% 4.1% USA
3.7%
Mexico 32.6%
3.8%

UK
7.9% Germany
Japan France Hong Kong 12.0%
9.0% 10.0% 10.3%

According to market estimates, the market potential for Brassiere and allied garments is
expected to reach $8,170.72 million by the year 2005. The distribution of the world
market, however, will not be evenly distributed across regions. Europe will be the largest
market with $3,007.7 million or 36.8 percent, followed by North America & the
Caribbean with $2,185.34 million or 26.7 percent, and then Asia with $1,803 million or
22 % of the world market. In essence, if a firm targets these top 3 regions, they cover
some 85 % of the worldwide demand for Brassiere and allied garments.

4 RAW MATERIALS

4.1 Raw Materials

Manufacturing a typical Lingerie product requires the following raw materials:
4.1.1 Fabric
Fabric is the primary raw material required for manufacturing garments. Lingerie
manufacturing may utilize different kinds of fabrics, depending on the model and class of
the garment. However, there are certain types of fabrics that are most commonly used.
These include Net, 100% Cotton, Chicken, Silk, Nylon and Jersey. These fabrics are
easily available in the local market. On an average, fabric constitutes 18% of the total
cost of the raw material of Brassiere, 55% in case of Briefs and 70% in Nightwear. As a
rule of thumb, the more expensive the Brassiere, lesser is the share of the fabric in its
total cost. However, the rule does not apply in case of Briefs and NightWear.
4.1.2 Elastic
Elastic is used in most of the Lingerie products except for Nightwear and certain models
of Brassiere, where the fabric itself provides support to the body. Elastic constitutes
highest share in the cost of a lingerie product, especially Brassiere. On average, elastic is
40% of the total cost of Brassiere. The quality of elastic manufactured locally is not
satisfactory for lingerie; therefore most of the units in the organised sector use imported
elastic. Imported elastic is easily available locally through commercial traders and
importers.
4.1.3 Lace And Net
Lace and Net are two other major raw materials required for lingerie stitching.

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4.1.4 Accessories
Major accessories used in manufacturing of undergarments are Fusing, Eyehooks, Buckle
and Rings, Foam, 1Kingri Elastic, Strip, Thread and Lining material. All of these
accessories except eye hook and ring buckle are imported.

5 MACHINERY DETAILS

5.1 Machinery List

Following combination of stitching machines is required for manufacturing 25 dozen
units per day on an eight hour shift basis.

This is the price of second hand Japanese machinery not more than ten years old and in a
good operational condition.

Table 5-1: Machinery List

Number Cost/Machine Total Cost
Stitching Machines
Lock Stitch Single Needle 4 17,000 68,000
Lock Stitch (Double Needle) 6 60,000 360,000
OverLock 1 35,000 35,000
Flat Lock 1 90,000 90,000
Zig Zag 2 35,000 70,000
3-Step 2 30,000 60,000
Embroidery 1 17,000 17,000
Edge Making 1 35,000 35,000
Total Stitching Machines 18 735,000

Table 5-2: Other Equipment

Number Cost/Machine Total Cost
Cutting Machines 1 23,000 23,000
Irons 3 1,000 3,000
Scissors 18 100 1,800
Stitching Stool/machine 18 200 3,600
Wooden box/machine 18 150 2,700
Tables
Cutting Tables 16 150 2,400
Pressing Iron Table 16 150 2,400
Inspection Tables 16 150 2,400
Installation & Wiring cost/machine 300 5,400
Total (Rs) 46,700

1
An elastic with a lace
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Total Cost of Machinery & Equipment (Rs) 781,700

5.2 Other Options Available for Machinery

In addition to Japanese Stitching machinery, Taiwan & Korean stitching machines are
also available in the market at much cheaper prices2. However Japanese-stitching
machines has a proven track record in Pakistan. The Japanese technology is very well
assimilated in the local market with easy availability of spare parts, machine operators
and machine technicians.

6 HUMAN RESOURCE REQUIREMENTS

Following personnel are required to run the proposed lingerie manufacturing and
marketing business.

Position Number Pay per month Total Salary

Manager 1 10,000 10,000
Designer 1 6,000 6,000
Shift Incharge 1 6,000 6,000
Designing/Cutting Master 1 6,000 6,000
Cutting Helpers 1 2,000 2,000
Purchaser 1 3,000 3,000
Store Keeper 1 2,500 2,500
Machine Mechanic 1 2,000 2,000
Piece Inspector 1 2,000 2,000
Packer 1 4,000 4,000
Accountant 1 4,000 4,000
Sales Man 1 3,000 3,000
Sales Woman 1 3,000 3,000
Office Boy 1 1,500 1,500
Security Guard 1 2,500 2,500
Total 15 57,500

In addition to this administrative & sales staff, the unit also has to hire machine men or
stitchers. Normally there is one machine operator working at each machine unless a
specific garment does not require a particular stitching process. These stitchers can be
hired under various arrangements. These include, piece rate, monthly salary or
contracting through a contractor. The rate of these stitchers varies from Rs 75 to Rs 120
per dozen for Brassiere, Rs 65-Rs 75 for briefs and Rs 130-Rs 150 for nightwear.

2
A price list of new stitching machines from Japan & China/Taiwan is included in the appendix.
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7 LAND & BUILDING

Total land required for setting up a unit of this size is approximately 6 Marla or around
1300 square feet. The actual requirement is shown in the following table.
7.1 Land / Building Requirement
Factory
Description Square ft
Store 79
*Stitching Area 450
Area for cutting tables 16
Area for pressing 16
Inspection area 16
Packaging area 16
**Aisle ways 129
Total Production area requirement 721
(sq. ft)
***Office Requirement 500
Total Space Required 1,221
*25 sq. ft per stitching machine
**25% of total factory space
*** 100 square ft. per person

7.2 Arrangement
It is recommended that this project should be started in a rental building. Because of
rented building the initial capital cost of the project will be far less. An appropriate
premises is normally available in many commercial/industrial areas of all major cities.
7.3 Suitable Locations
The clusters of stitching industry exist predominantly in Lahore, Karachi, and Faisalabad.
Most of the garment manufactures are based in these major cities, so it is recommended,
that such unit should be started in these cities. Basic raw material i.e. cotton fabric is also
conveniently available in these cities.
7.4 Utilities Requirements
Electricity
Telephone

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8 FINANCIAL ANALYSIS

8.1 Project Cost

Capital cost of the project is based on the prices of second hand Japanese machinery. The
detail of the capital investment is given below, while the detail of machinery is given
earlier in the machinery section.

Table 8-1: Capital Investment

Capital Investment Rs
Machinery & equipment 781,700
3
Furniture & fixtures 44,930
Telephone Set 500
4
Pre-operating costs 43,600
Total Capital Costs 870,730

Working capital is the other component of the total project cost. Raw material inventory
for at-least 30days' production contributes the major component of working capital.

Table 8-2: Working Capital

Working Capital Rs
Equipment spare part inventory 994
Raw material inventory 655,597
Upfront building rent 148,286
Upfront insurance payment 39,085
Cash 500,000
Total Working Capital 1,343,962

Total Investment 2,214,692

8.2 Financing Arrangement
The project is based on the assumption that the debt to equity ratio of 1:1. The debt part
of the project is further divided into two portions; the immediate need of cash is financed
through short-term loan facility at 14% interest rate while long-term debt is financed at
16% annual interest rate.

3
Furniture & fixture includes lighting, Carpeting, fans, visitors' chairs & gun for the security guard.
4
Pre-Operating costs include salaries of 1 Manager and Security Guards hired before the final operations
starts and utilities expense of one month before operations.
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Initial Financing Rs
Lon term Debt 607,346
Short term debt 500,000
Equity 1,107,346

8.3 Project Economics

A comprehensive financial analysis & 5projections of the project shows that the project
has a potential to bring healthy positive returns to the investors. At present, the project is
based exclusively on local market and any export venture can increase the attractiveness
of the project further. Return on Investment in the project is around 26% while return on
equity is around 30% over the first three years

Equity Project
IRR 27% 29%
Payback Period (yrs) 4.60 3.84

9 KEY SUCCESS FACTORS

Success of the project depends on many factors including technical as well as distribution
and marketing. Some of these factors are outlined below.

The machine combination is expected to handle a range of lingerie products.

However as the product line is expanded, it is extremely important that the machine
layout is re-arranged in order to ensure optimum utilization of all available
machinery.

Most of the raw material required for production, including imported accessories is
available locally. In order to minimize investment in raw material, it is advised that a
reliable source be maintained that can provide consistent supply of raw material
without long lead times.

Understanding the dynamics and requirement of local market will eventually

determine the success of this venture. The entrepreneur should be engaged in a
continuous market for determining demand for different sizes, colors and various
fabrics. It is very likely that a large inventory is piled up with slow moving products
if this research is not carried out. Introducing new products according to the changing
trends can also make the product stand out.

5
Complete financial details can be seen in the projected financial statements. (Attached in appendix).

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9.1 THREATS FOR THE BUSINESS

For a new entrant to the business, working without credit in the local market can be very
difficult. However, it is advised that credit sales should be kept to the minimum
preferably none. Selling at credits can result in high outstanding receivables that will
eventually force the business out of viable production. Instead of credit sales, discounts
on cash purchases can be a much better option. Another method of checking the credit
sales is to lift from retailer all unsold items after a specified time (suggested time period
is two weeks)

10 APPENDIX

10.1 List of Machines for Lingerie with Prices

The prices of new Japanese & Far Eastern stitching machines are given below:
Table 10-1: 6Prices of new Japanese Machines
Machine Rs
Lock Stitch Single Needle 34,000
Lock Stitch Double Needle 110,000
Overlock 63,500
Flat Lock 233,000
Zig Zag 220,000
3-Step 220,000
Embroidery 150,000
Edging 150,000

6
Machinery Cost obtained from:
Almurtaza Machinery Co Pvt. Ltd., Rex Market, 6 Allama Iqbal Road, Lahore. Tel: 6306798, 6365975.
Japanese Machinery Dealer (9th April 2001).
• Rex Machinery Pvt. Ltd. Rex Market, Allama Iqbal Road, Lahore. Dealer of Taiwan and Chinese
Machinery (9th April 2001).
• Al-Tawakal Machinery, Basement Rex Market, 6-Allama Iqbal Road, Lahore. Tel: 6375522.
Dundal Dealers.
• Samad Apparel Machinery, Basement Rex Market, 6-Allama Iqbal Road, Lahore. Tel: 6362298.
2nd Hand Machinery (9th April 2001).
• Subhan Apparel Machinery, Rex Market
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Table 10-2: Prices of New Taiwanese & Chinese Machines

Machine Model Price (Rs)
Lock Stitch Single Needle Taking TK-5550 18,500
Lock Stitch Double Needle Taking B842-3 68,000
Overlock Toyota EK1-3 56,000
Flat Lock W561/FT/MD 110,000
Zig Zag Taiwan 120,000
Zig Zag Chinese 28,000
3-Steps Taiwan 120,000
3-Step Chinese 35,000
Embroidery Taiwanese 120,000
Embroidery Chinese 28,000
Edging Taking TK 6302 W 95,000

10.2 Major Assumptions

10.2.1 Product Mix

Product mix Local price (ex factory)
Brassiere Model 1 10% 148
Brassiere Model 2 10% 170
Brassiere Model 3 10% 113
Brassiere Model 4 10% 121
Brassiere Model 5 10% 115
Brassiere Model 6 10% 106
Brassiere Model 7 10% 64
Brief 20% 56
Nighties A 5% 504
Nighties B 5% 327

10.2.2 Financial Assumptions

Project Life 10 Years
Debt: Equity Ratio 50:50
Interest Rate 16%
Loan Tenure 5 Years
Grace Period 1 Year
Debt Payments per Year 1
Short Term Debt Rate 14%
Short Term Debt payments per year 12
Tax Rate 35%

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10.2.3 Cash Flow Assumptions

Description Days
Equipment spare part inventory 15
Raw material inventory 30
Finished goods inventory 15
Accounts receivable cycle (in days) 30
Accounts receivable cycle for export (in days) 90

10.2.4 Operating Expenses Assumptions

Hours operational / day 8
Hours / shift 8
Days operational / year 300
Days operational / month 25
Days/year 365
Production capacity utilization 90%
Production capacity utilization growth rate 5%
Maximum capacity utilization 95%

10.2.5 Economy Related 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%

10.2.6 Other Assumptions

Defected garment rate 1%
Local sales price growth rate 3%
Export sales price growth rate 5%
Production capacity utilization 90%
Production capacity utilization growth rate 5%
Maximum capacity utilization 95%

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10.3 Financial Statements

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 10,941,926 11,896,305 12,253,194 12,620,790 12,999,413 13,389,396 13,791,077 14,204,810 14,630,954 15,069,883
Cost of goods sold 8,597,958 9,357,424 9,651,608 9,959,006 10,280,517 10,617,123 10,969,888 11,339,971 11,728,636 12,137,255
Gross Profit 2,343,968 2,538,881 2,601,585 2,661,784 2,718,896 2,772,273 2,821,190 2,864,838 2,902,318 2,932,627

General administration & selling expenses

Administration expense 690,000 757,179 830,899 911,797 1,000,571 1,097,988 1,204,889 1,322,199 1,450,930 1,592,195
Rental expense 148,286 163,115 179,426 197,369 217,106 238,816 262,698 288,967 317,864 349,651
Utilities expense 71,801 78,981 86,879 95,567 105,124 115,636 127,200 139,920 153,912 169,303
Communications expense (phone, fax, etc.) 109,419 118,963 122,532 126,208 129,994 133,894 137,911 142,048 146,310 150,699
Office expenses (stationary, etc.) 13,800 15,144 16,618 18,236 20,011 21,960 24,098 26,444 29,019 31,844
Promotional expense 54,710 59,482 61,266 63,104 64,997 66,947 68,955 71,024 73,155 75,349
Insurance expense 39,085 40,035 35,641 31,247 26,852 22,458 18,063 13,669 9,275 4,880
Professional fees (legal, audit, etc.) 54,710 59,482 61,266 63,104 64,997 66,947 68,955 71,024 73,155 75,349
Depreciation expense 82,713 92,431 92,431 92,431 92,431 92,431 92,431 92,431 92,431 92,431
Amortization expense 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360
Subtotal 1,268,884 1,389,171 1,491,318 1,603,422 1,726,443 1,861,436 2,009,560 2,172,086 2,350,409 2,546,061
Operating Income 1,075,084 1,149,710 1,110,267 1,058,362 992,453 910,837 811,629 692,752 551,909 386,566

Other income 25,000 999 7,432 13,487 13,613 14,803 16,088 14,409 11,275 25,683
Earnings Before Interest & Taxes 1,100,084 1,150,709 1,117,700 1,071,849 1,006,067 925,640 827,717 707,161 563,184 412,250

Interest expense 72,248 147,636 90,475 64,666 34,728 - - - - -

Earnings Before Tax 1,027,837 1,003,073 1,027,225 1,007,183 971,338 925,640 827,717 707,161 563,184 412,250

Taxable earnings for the year 1,027,837 1,003,073 1,027,225 1,007,183 971,338 925,640 827,717 707,161 563,184 412,250
Tax 219,743 211,076 219,529 212,514 199,968 183,974 149,701 142,048 146,310 150,699
NET PROFIT/(LOSS) AFTER TAX 808,094 791,998 807,696 794,669 771,370 741,666 678,016 565,113 416,875 261,551

Balance brought forward 808,094 1,520,194 1,813,197 2,043,601 2,290,181 2,372,393 2,422,823 2,462,814 2,502,799
Total profit available for appropriation 808,094 1,600,092 2,327,890 2,607,866 2,814,971 3,031,847 3,050,409 2,987,936 2,879,689 2,764,350
Dividend - 79,898 514,693 564,265 524,790 659,454 627,586 525,122 376,890 1,677,786
Balance carried forward 808,094 1,520,194 1,813,197 2,043,601 2,290,181 2,372,393 2,422,823 2,462,814 2,502,799 1,086,564

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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 500,000 - 19,974 128,673 141,066 131,198 164,863 156,897 131,280 94,222 419,446
Accounts receivable - 899,336 977,778 1,007,112 1,037,325 1,068,445 1,100,498 1,133,513 1,167,519 1,202,544 1,238,620
Finished goods inventory - 358,248 389,893 402,150 414,959 428,355 442,380 457,079 472,499 488,693 505,719
Equipment spare part inventory 994 1,156 1,275 1,406 1,550 1,708 1,884 2,077 2,289 2,524 -
Raw material inventory 655,597 744,786 801,576 862,696 928,476 999,273 1,075,467 1,157,472 1,245,729 1,340,716 -
Pre-paid building rent 148,286 163,115 179,426 197,369 217,106 238,816 262,698 288,967 317,864 349,651 -
Pre-paid insurance 39,085 40,035 35,641 31,247 26,852 22,458 18,063 13,669 9,275 4,880 -
Total Current Assets 1,343,962 2,206,677 2,405,563 2,630,652 2,767,334 2,890,252 3,065,854 3,209,673 3,346,455 3,483,230 2,163,786

Fixed assets
Machinery & equipment 781,700 800,705 712,818 624,930 537,043 449,155 361,268 273,380 185,493 97,605 9,718
Furniture & fixtures 44,930 40,437 35,944 31,451 26,958 22,465 17,972 13,479 8,986 4,493 -
Office equipment 500 450 400 350 300 250 200 150 100 50 -
Total Fixed Assets 827,130 841,592 749,162 656,731 564,301 471,870 379,440 287,009 194,579 102,148 9,718

Intangible assets
Pre-operation costs 43,600 39,240 34,880 30,520 26,160 21,800 17,440 13,080 8,720 4,360 -
Total Intangible Assets 43,600 39,240 34,880 30,520 26,160 21,800 17,440 13,080 8,720 4,360 -
TOTAL ASSETS 2,214,692 3,087,509 3,189,605 3,317,903 3,357,794 3,383,923 3,462,733 3,509,762 3,549,754 3,589,739 2,173,503

Liabilities & Shareholders' Equity

Current liabilities
Short term debt 500,000 467,548 - - - - - - - - -
Total Current Liabilities 500,000 467,548 - - - - - - - - -

Other liabilities
Deferred tax - - (3,401) (6,802) (10,203) (13,605) (17,006) (20,407) (20,407) (20,407) (20,407)
Long term debt 607,346 704,521 565,466 404,163 217,050 - - - - - -
Total Long Term Liabilities 607,346 704,521 562,065 397,360 206,847 (13,605) (17,006) (20,407) (20,407) (20,407) (20,407)

Shareholders' equity
Paid-up capital 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346 1,107,346
Retained earnings - 808,094 1,520,194 1,813,197 2,043,601 2,290,181 2,372,393 2,422,823 2,462,814 2,502,799 1,086,564
Total Equity 1,107,346 1,915,440 2,627,540 2,920,543 3,150,947 3,397,527 3,479,739 3,530,169 3,570,160 3,610,145 2,193,910
TOTAL CAPITAL AND LIABILITIES 2,214,692 3,087,509 3,189,605 3,317,903 3,357,794 3,383,923 3,462,733 3,509,762 3,549,754 3,589,739 2,173,503

18

PREF-20/October 29, 2001/1

Pre-Feasibility Study Lingerie Stitching Unit

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 - 808,094 791,998 807,696 794,669 771,370 741,666 678,016 565,113 416,875 261,551
Add: depreciation expense - 82,713 92,431 92,431 92,431 92,431 92,431 92,431 92,431 92,431 92,431
amortization expense - 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360 4,360
Deferred income tax - - (3,401) (3,401) (3,401) (3,401) (3,401) (3,401) - - -
Accounts receivable - (899,336) (78,442) (29,333) (30,213) (31,120) (32,053) (33,015) (34,005) (35,026) (36,076)
Finished good inventory - (358,248) (31,644) (12,258) (12,808) (13,396) (14,025) (14,699) (15,420) (16,194) (17,026)
Equipment inventory (994) (163) (119) (131) (144) (159) (175) (193) (213) (235) 2,524
Raw material inventory (655,597) (89,189) (56,790) (61,120) (65,781) (70,796) (76,195) (82,004) (88,257) (94,987) 1,340,716
Pre-paid building rent (148,286) (14,829) (16,311) (17,943) (19,737) (21,711) (23,882) (26,270) (28,897) (31,786) 349,651
Advance insurance premium (39,085) (950) 4,394 4,394 4,394 4,394 4,394 4,394 4,394 4,394 4,880
Cash provided by operations (843,962) (467,548) 706,475 784,696 763,770 731,972 693,120 619,619 499,505 339,832 2,003,010

Financing activities
Change in long term debt 607,346 97,175 (139,055) (161,304) (187,112) (217,050) - - - - -
Change in short term debt 500,000 (32,452) (467,548) - - - - - - - -
Issuance of shares 1,107,346 - - - - - - - - - -
Cash provided by / (used for) financing activ 2,214,692 64,723 (606,603) (161,304) (187,112) (217,050) - - - - -

Investing activities
Capital expenditure (870,730) - - - - - - - - - -
Cash (used for) / provided by investing activ (870,730) - - - - - - - - - -

NET CASH 500,000 (402,825) 99,872 623,392 576,657 514,922 693,120 619,619 499,505 339,832 2,003,010

Cash balance brought forward 500,000 97,175 117,150 225,849 238,241 228,373 262,039 254,072 228,456 191,398
Cash available for appropriation 500,000 97,175 197,048 740,542 802,506 753,163 921,493 881,658 753,577 568,287 2,194,408
Dividend - - 79,898 514,693 564,265 524,790 659,454 627,586 525,122 376,890 1,677,786
Cash carried forward 500,000 97,175 117,150 225,849 238,241 228,373 262,039 254,072 228,456 191,398 516,622

19

PREF-20/October 29, 2001/1