234 Minerals Feasibility

7/30/2019 234 Minerals Feasibility

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Pre-Feasibility Study

SSttoonnee CCrruusshhiinngg

(((SSSMMMEEEDDDAAA DDDOOOCCCUUUMMMEEENNNTTT)))

Small and Medium Enterprise Development Authority


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S a a d ed u te p se eve op e t ut o ty

Pre-Feasibility Report Stone Crushing

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


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PPRROOJJEECCTT PPRROOFFIILLEE

11..11 OOPPPPOORRTTUUNNIITTYY RRAATTIIOONNAALLEE

Over the last few years, the Construction sector has been registering strong growth ratesin the range of 7-8%1. Housing and construction is one of the major drivers of growth inmore than 40 allied industries including STONE CRUSHING. In addition, for thebuilding of roads, flyovers and bypasses, there is a mass and consistent need of crushedstone across the country. Several projects are in progress and are being commenced

shortly which will have high demand of crushed stone all over the country.

In order to make up the backlog and meet the projected requirements for the next 20years, overall housing construction has to raise 500,000 housing units per annum2. This isthe extent of the annual housing market in Pakistan which positively predicts a stronggrowth in construction sector which reinforces the potential in Stone Crushing segment ofthe industry.

The total length of roads in the country is in excess of 250,000 km, including nineNational Highways and one Motorway (M-2). The construction work on Islamabad-Peshawar Motorway, started in 1998, is in progress. The total length of motorwaysplanned in the country is 2169 k.m. 367 Km Lahore- Islamabad section is completed and208 Km Islamabad Peshawar Motorway (M1) is under construction3.

Karachi Northern Bypass and Makran Coastal Highway are under construction. Totallength of Makran Coastal Highway is 248 Km. The construction of Pakistan Motorwayconnecting the Northern and Southern parts of the country with a link to Gawadar hasbeen initiated. Two additional Motorway projects, Pindi Bhattian Faisalabad (M-3) of52 Km and Karachi Hyderabad (M-9) have been awarded on Built Operate Transfer(BOT) b i Th i K k Hi h (N 35) 735K l i b i i d


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stone used as raw material for various construction activities i.e. construction of roads,bridges, buildings and canals. For building and construction purposes, generally Hard

Lime Stone is used. Though, low quality Granite could also be used, its excavation isdifficult and it is comparatively a high cost option. In addition, it is mostly used fordecorative construction for its beauty and shaded colors. The stone crushing units couldbe seen in the vicinity of almost all major cities and towns of Pakistan.

The mined stone is transported to the crusher sites by road (if crusher is located ondifferent point) through tractor trolleys, dumpers or pay-loaders. The dumpers unload themined stones into storage hoppers located at elevated levels of the crusher sites. These

stones are crushed in a Primary Crusher and sent to a vibratory screen. The oversizestones from the screen is sent for further size reduction in secondary and tertiaryCrushers. From the secondary and/or tertiary Crushers, the crushed stones are sent forscreening. In the screen, products of various sizes get separated which are stored inheaps. Movement of stones from crusher to screen to product piles is done through beltconveyors. The product is generally stored in open areas. The schematic of typical stonecrusher units is given on page 13 of this document under the heading of process flow.

11..33 MMAARRKKEETT EENNTTRRYY TTIIMMIINNGG

Stone Crushing business depends on activity and movement in construction industry.Housing and construction plus government initiated development projects demand massavailability of crushed stone all over the year. Therefore, a crushed stone manufacturingunit could be established at any time of the year.

11..44 PPRROOPPOOSSEEDD BBUUSSIINNEESSSS LLEEGGAALL SSTTAATTUUSS

The legal status of business tends to play an important role in any setup; the proposedStone Crushing Unit is assumed to operate on Sole Proprietorship basis.

11..55 PPRROOJJEECCTT CCAAPPAACCIITTYY AANNDD RRAATTIIOONNAALLEE


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are generally found around the country in all provinces. All mineral resources of Pakistanare managed under the administration of Provincial Mineral Development Authorities

who have the licensing authority for mining and quarrying.

For the procurement of raw stone which is the basic raw material, it would be a prerequisite for the entrepreneur to take a quarry license and land lease holding from theconcerned provincial licensing authorities for mineral development.

In order to obtain quarrying license and lease holding, an entrepreneur first would contactthe concerned provincial mineral department and will identify a location where he is

interest in setting up the crushing unit along with the size of land and its exact location onthe map provided by the department. After geographical identification of the site,entrepreneur submits a lease procurement application.

Provincial licensing authority may grant a mining/quarrying lease in accordance with theProvincial Mining & Quarrying Concession Rules, over the land specified by theapplicant provided they consider the applicant fit for it.

Concerned authority after the scrutiny of the documents and the case, authorize the leaseallotment in a group meeting headed by the concerned Director General. This licensepermits the entrepreneur to setup crushing factory and could excavate raw stone from theland for which he hold the lease license.

11..66 PPRROOJJEECCTT IINNVVEESSTTMMEENNTT

A total of Rs. 21.324 million is estimated to be the cost of the project. The working

capital requirement is estimated around Rs 0.894 million and Rs. 20.43 million would bethe fixed investment.

11..77 PPRROOPPOOSSEEDD PPRROODDUUCCTT MMIIXX


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11..88 RREECCOOMMMMEENNDDEEDD PPRROOJJEECCTT PPAARRAAMMEETTEERRSS

Capacity Human Resource Technology/Machinery Location

70% Capacity Utilisation (basedon 8 working hrs. daily

19 LocalNooriabad,

Sindh

Financial Summary

Project Cost IRR NPV Payback PeriodCost of Capital

(WACC)

Rs. 21.324 million 48% 26,589,958 2 Year 3 Months 15 Days 17.50%

11..99 PPRROOPPOOSSEEDD LLOOCCAATTIIOONN

Proposed location for setting up a stone crushing unit largely depends on the availabilityof raw stone and its transportation to the factory at low cost; however, factors likeavailability of manpower, utilities and easy access to the target markets should also becarefully examined. For this pre-feasibility we propose a location around Karachi

somewhere in Hub, Superhighway, Manghopir, Jhampir or Nooriabad. The reason beingmost of the crushing units are already working in these areas.

The stone crushing units are being operated countrywide; the reason is the demand whichis spread all over the country, though, concentrated around developed cities and townsi.e. Karachi, Lahore, Multan, Faisalabad, Peshawar, Quetta etc.

To set up a unit, quarrying sites are generally preferred. As we have proposed to setup theunit somewhere around Karachi to cater to its massive housing construction needs as wellas government initiated projects i.e. Lyary Express Way, Makran Coastal Highway and a

number of small overhead bridges etc. It is proposed that the unit would be installed atNooriabad Industrial Estate where all necessities are available and market access andtransportation of produce is easy.

1 10 S / S


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1.11.1 Conventional Order Booking Arrangements

As we have discussed earlier, stone crushing is one of the allied sector of constructionindustry. Therefore, all raw material suppliers to the construction industry are consideredto be the part of the distribution network for the crushed stone.

A stone crusher when setting up a crushing unit, initiate and institute contacts with theconstruction material suppliers, retailers and signup a contract in order to appoint themas order booking agents. Generally, construction and building material supplier, who isthe part of the whole chain, links up customer and operator [of stone crushing unit].

Sometimes he has his own delivery vehicles and in most of the cases, keeps arrangementwith the commercial vehicle operators, material manufacturers, and buyer, therebyassuming a significant role in the value chain.

1.11.2 Ordering and Delivery Procedure:

Crusher appoints order booking agents (building material suppliers) with in the city whoentertain the customer. Customers usually send someone or personally go to the booking

office and place the order which includes details indicating quantity, quality, size andtime of delivery etc. Booking agent gets the payment in cash (mostly) and issues an order/ delivery slip to the customer, showing order details.

Buyer hires a truck or loading vehicle and goes to the crush storage site, where heproduces the order slip (in local term called perchi) to the person responsible for thephysical delivery of the crush. That person renders the order as given on the slip. Afterloading the vehicle, he hands over it to the buyer /order booker and here ends the role ofthe crusher.

Crushed stone producers also book direct orders at crushing site office for the


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degree associated with the construction sector. Some of the marketing promotionactivities which should duly be rendered are given below:

Connection development with the building material suppliers, well knownbuilders and contractors.

Update information on civil and construction works initiated by local, provincialand central government.

Draw linkages with material suppliers to the housing industry at town level.

Emphasis on image development and acquaintance across individual contractorswho are serving private sector.

Establish contacts with local civil engineering firms, individuals andprofessionals.

22.. SSEECCTTOORR && IINNDDUUSSTTRRYY AANNAALLYYSSIISS

22..11 SSEECCTTOORR CCHHAARRAACCTTEERRIISSTTIICCSS AANNDD OOVVEERRVVIIEEWW

Pakistan has enormous wealth of Non-metallic mineral deposits round the country. Itmainly consists of building stones, marble, onyx, gemstone etc. In the following table wehave provided a brief account of the non-metallic mineral products4 of Pakistan:

MINERAL/COMMODITYRESERVES (IN

TONNES)LOCATION QUALITY

Cement Raw Material Very Large DepositsAll provinces of

PakistanV. Good

Very Large Deposits Chagai Balochistan V. GoodMarble/Aragonite

Noushehra - NWFP

Rock Salt Very Large Deposits Salt Range Punjab V Good


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MINERAL/COMMODITYRESERVES (IN

TONNES)LOCATION QUALITY

5-6 billion Tonnes Salt Range, D.G.Khan Punjab

Good

Gypsum and AnhydriteSpintangi - Balochistan,

Dadu - Sindh

100,000,000Kala Chitta and Salt

Range - PunjabGood

Fire Clay

Meting Jhimpir - Sindh

Clays (including China

Clay) 34,000,000 NWFP - Punjab - Sindh Good

30,000,000Lasbela, Khuzdar

Balochistan

Mostlydrilling mud

typeBarite

Hazara - NWFP

Phosphate 22,000,000 Kakul - NWFPMedium tolow grade

12,000,000 Abbottabad NWFP Medium

Magnesite Muslimbagh, Wad -Balochistan

Sulphur 800,000Koh-i-Sultan -Balochistan

Medium tolow grade

Soap Stone 600,000 Parachinar - NWFP Good

185,173 MillionTonnes

Sindh, Balochistan,Sindh, N.W.F.P.

Lignite A toBituminous A

Coal

Mianwali, Attock -Punjab

Fluorite 100,000 Kalat Good

Gemstone Not Estimated Northern Areas Good


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S.No.

Stone Type DepositsProduction (000

tonnes)

1 Aragonite/Marble Large 497,317

2 Basalt Large 217

3 Building stone Large 16,011

4 Conglomerate Large 276

5 Ebry stone Medium 209

6 Granite Large 5,676

7 Gravel Large 19,684

8 Onyx marble Large 28,780

9 Ordinary stone Large 1,887

10 Sand / Bajri Large 92,670

11 Sandstone Large 2,255

12 Serpentine Large 4,204

13 Slate stone Large 108,182

Source: Sector Profile, Board of Investment, Pakistan 2002-03

22..22 SSUUBB SSEECCTTOORR IINNFFOORRMMAATTIIOONN

2.2.1 Hard Lime Stone and Granite5

For crushed stone manufacturing purpose, majority of the crushing units use Hard LimeStone, the reason lies in its extreme hardness and it also gives maximum strength to thebuilding structure. Another reason is that it is easily available across the country in largequantities; however, granite could also be used for this purpose, as it is used by many


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The reserves of Hard Lime Stone in Pakistan have not been specifically estimated, yetbroad figure of tens of billions of tonnes is generally quoted.

2.2.2 Stone Crushing Units in Pakistan

Cumulative figures on province wise distribution of stone crushing units and theirproduction are not available from formal sources; however, in Balochistan, there are 75-80 stone crushers working only in the Dhadar and Mach sub-divisions run by the privatesector, except for one which is run by the National Logistics Cell (NLC).

Based on our discussions with the industry experts and entrepreneurs, it is estimated thatin Sindh, more than 30 stone crushing units are working. In case of Punjab, the workingunits are estimated at more than double to that of the units working in Sindh, whereas inNWFP, around 15 units are reportedly operational.

22..33 LLEEAASSEE RREENNTTAALL AANNDD TTAAXX SSTTRRUUCCTTUURREE

Other than the sales tax which is 15%, there will be a fixed amount of Rs. 10,000,

payable at the time of submission of quarry land lease application (This amount has beenbuilt in preliminary expenses). Besides, there is another sum of around Rs. 70,000 to100,000 on account of annual lease rental, payable at the beginning of the year.Aforementioned figures are based on the assumption that the size of leased land would beof around 200-250 acre.

22..44 EENNVVIIRROONNMMEENNTTAALL && PPRROOTTEECCTTIIOONN AASSPPEECCTTSS

Persistent exposure to asbestos which is a natural fiber found in the dust particles ofcrushed stone, are produced in stone-crushing factories during the crushing process. Toavoid its harmful effect on human health, it is suggested to follow complete instructionsand procedures provided by the provincial agency of environment protection.


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The enclosures should be, complete from all four sides and roof. There should not beopen windows/ openings etc. The gaps should be sealed using gaskets or wool type

packing etc.

The Dust Suppression System should comprise of a covered water storage tank, apump, an online water filter, connecting GI pipes, spray nozzles each fitted with flowregulating valves.

Volume and strength reduction of the effluent is to be achieved by preventing mixingof waters from washing activities and processing activities

Liquid effluent is to be treated by sedimentation process meaning subjecting theeffluent to flow through settling tanks

Effluent is to be treated by coagulation, i.e. adding any coagulant to the settling tanks.Though this treatment is expensive as compared to the sedimentation process, it isreportedly more efficient.

33.. MMAARRKKEETT IINNFFOORRMMAATTIIOONN

33..11 MMAARRKKEETT PPOOTTEENNTTIIAALL

Stone Crushing units across the country are working mostly as unorganized sector and noreliable data is available for the installed capacity and the number of operational units.However, since it is an allied industry of the construction sector, growth in constructionsector may be considered as proxy for the growth in stone crushing sector, i.e. around 7-8%.

33..22 EEXXPPOORRTTSS AANNDD IIMMPPOORRTTSS OOFF CCRRUUSSHHEEDD SSTTOONNEE7

Crushed stone has a very minor share among the exports of non-metallic mineral


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33..33 PPRROOBBLLEEMM//TTHHRREEAATTSS TTOO TTHHEE SSTTOONNEE CCRRUUSSHHIINNGG SSEECCTTOORR88

Local customs and traditions, non-availability of infrastructure facilities like roadsand electricity are the major hurdles in the development of the sector.

Poor law and order situation particularly in geologically promising areas.

Non-availability of modern machinery in local market at cheaper rates.

Lack of reliable and comprehensive geological data base/ mapping.

Non-availability of latest and modern exploration techniques/ machinery.

Non development oriented Mineral Concession Rules

Lack of investment friendly environment created by the relevant governmentagencies.

Lack of coordination among various mineral sector agencies.

44.. PPRROODDUUCCTTIIOONN PPRROOCCEESSSS

44..11 SSTTOONNEE CCRRUUSSHHIINNGG -- PPRROODDUUCCTTIIOONN PPRROOCCEESSSS FFLLOOWW

The main machinery involved in the stone crushing industry is Hammer Crusher, Screen,Conveyers etc. The process involved is to feed the stone in to the Hammer Crushers tomake it further smaller in size as required by the customer. In the hammer crusher, thestone is crushed. The crushed stone is screened to separate the produce in different sizesby the separator. The crushed stone is conveyed by the conveyors to trucks for transportto the market place or storage area.

Process flowchart of a stone crushing unit has been given on the following page.


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SSttoonnee CCrruusshhiinngg

PPrroocceessss FFllooww

MinedStone

Primary

Raw MaterialHo er

Primary Vibratory

Tertiary Crusher Secondary Crusher

Product to Stockpile

Secondary VibratoryScreen

Product to Stockpile


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44..22 RRAAWW MMAATTEERRIIAALL RREEQQUUIIRREEMMEENNTT

Hard Lime Stone will be used as raw material for manufacturing crushed stone. Rawstone could be purchased directly from the excavator (quarry lease holder) or crushermay hold his own quarry lease to produce raw stone. For the purpose of this pre-feasibility, it is proposed to obtain a quarry lease holding to avoid any possible threat inprocuring raw stone as well as to keep the project economically stable.

For the proposed project, a total of 15,000 C.ft. of Hard Lime Stone would be the dailyrequirement. This requirement could sufficiently be fulfilled from the obtained quarry site

over a period of years.

44..33 MMAACCHHIINNEERRYY RREEQQUUIIRREEMMEENNTT

Machinery required for the crushing / processing of stone is available from both local andimported sources. Local machinery reportedly gives good quality output. Followingmachinery will be required for setting up a Stone Crushing Unit:

S.No Name of the Machine Specification No Total Costin Rs.

1 Hammer Crusher 110 hp 1 1,200,000

2 Feed Conveyers 1 240,000

3 Vibrating Screen 25 hp 1 200,000

4 Delivery Conveyers (4)* 1 880,000

5 Pumps and motors 680,0006 Erection 200,000

7 Support structure 600,000


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The proposed setup would require three to four vehicles (new machinery has beenconsidered for the proposed project) to carryout excavation/quarry operations and shiftingof mined stone to the crushing site. Besides, dumping and loading vehicles for thetransportation of finished product to the piling points as well as for delivery to theprospective customer (only for bulk supplies) would be a pre-requisite. Details ofrequired vehicles have been provided in the following table:

S.No.

Name ofVehicle/Machine

Purpose of the Machine No. of UnitsRequired/Proposed

Total Cost(Rs.)

1 Bulldozer Excavation 1 6,000,000

2 Shovel Loads Stone Loading 1 4,000,000

3 Dumper Material Transportation 1 (Preferably 2) 4,000,000

4 Other Tools & Equipment 40,000

Total 14,040,000

*Machinery costs depend on model and may vary

During the discussions with the market experts and entrepreneurs, it was observed that,though the above machinery/vehicle could also be hired on rent, yet, the incremental costdifference between rented and purchased machinery would be very close over a long

period of time. Therefore it would be preferred to acquire own machinery rather thanobtaining rented.

44..55 PPLLAANNTT AANNDD MMAACCHHIINNEERRYY MMAAIINNTTEENNAANNCCEE


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for setting up the crushing unit. Heavy machinery and vehicles i.e. dumper, bulldozer,shovel loads etc. would be used which require open space for the movement as well as

there will be frequent movement of heavy transportation and delivery vehicles.Moreover, the space would also be used for machinery installation, storage and vehicleparking and different services necessary for the project.

55..22 LLAANNDD && BBUUIILLDDIINNGG RREEQQUUIIRREEMMEENNTTSS FFOORR CCRRUUSSHHIINNGG FFAACCTTOORRYY

Land and building requirements for the crushing factory would be as follows:

DetailsSize/Area

(Sq. Ft.)

Civil Works/Construction

Cost/Sq. Ft.

TotalConstruction

Cost

Factory / Covered Area

Stone Crushing Hall 5,000 300 1,500,000

Factory Office 50 300 15,000

Factory / Open Space

Storage Area (Crushed Stone) - -

1 inch crush Not limited - - inch crush Not limited - -

inch crush Not limited - -

Stone Powder Not limited * - -

Storage Area (Raw Stone) Not limited - -

Other Services (water plant, tool shop etc.) 50 300 15,000

Total Covered Area 5100 1,530,000Factory construction, land costs and the rental values are subjected to the site location, therefore could vary as the location would change

Source for Quarry Land Lease: Based on discussions with industry experts and entrepreneurs* Stone Powder will be piled in open space and be kept covered with tarpaulin to avoid any possibility of dust emission and health hazard.

The factory would be located at Nooriabad, Sindh. The reason for the selection is that


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Total approximate manpower required for the business operations along with the

respective salaries are given in the table below:(Pak. Rs.)

Staff Title No of Persons

Monthly

Salary

Annual

Salary

1. Business Unit Manager/Owner

Production Staff (Quarry/Excavation Site)

2. Bulldozer Operator 1 10,000 120,000

3. Shovel Load Operator 1 10,000 120,000

4. Dumper Driver 2 16,000 192,000

5. Helper/Laborer 3 15,000 180,000

Production Staff (Crushing Factory)

6. Crushing Incharge /Plant Operator 1 8,000 96,000

7. Assistant Crushing Plant Operator 1 5,000 60,000

8. Factory Workers 8 40,000 480,000

Total Production Staff 17 104,000 1,248,000

General Administration/ Selling Staff

9. Office Assistant 1 5,000 60,000

10. Driver 1 5,000 60,000

Total G A /S Staff 2 10,000 120,000


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that preference should be given to literate persons so that they could understand thesignificance of undertaking health and safety measures.

77.. FFIINNAANNCCIIAALL AANNAALLYYSSIISS && KKEEYY AASSSSUUMMPPTTIIOONNSS

The project cost estimates for the proposed Stone Crushing Business have beenformulated on the basis of discussions with industry stakeholders and experts. Theprojections cover the cost of land, machinery and equipment including office equipment,fixtures etc. Assumptions regarding machinery have been provided, however, the specificassumptions relating to individual cost components are given as under.

77..11 LLAANNDD && BBUUIILLDDIINNGG

Land for setting up the proposed stone crushing unit would be acquired on lease for aperiod of 30 years. Lease concession would be granted by the Mineral DevelopmentAuthority of the concerned province. One time payment of Rs. 10,000 as initial chargeswill be payable with lease application (this amount has been included in preliminaryexpenses). In addition, a recurring amount of around Rs. 100,000 would also be payableon account of annual lease charges.

Construction and renovation of crushing site will cost around Rs. 800,000/- which hasbeen assumed to depreciate at 10% per annum using diminishing balance method. Totalinitial outflow for acquisition of land on lease would be as follows:

Description Cost

Lease Holding Period 30 Years

Total Size of Land 200-250 AcreAnnual Lease Charges of Land 100,000

Total 100,000


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Item Number Total Cost

Table & Chair for Owner 1 5,000

Tables & Chairs for Admin. Staff 1 3,000

Waiting Chairs 4 6,000

Curtains & Interior Decoration for office - 5,000

Chairs for Workers/Labor 6 5,000

Electrical Fittings & Lights - 30,000

Others - 6,000

Total 60,000

77..44 DDEEPPRREECCIIAATTIIOONN TTRREEAATTMMEENNTT

The treatment of depreciation would be on a diminishing balance method at the rate of10% per annum on the following. The method is also expected to provide accurate taxtreatment.

1. Plant & machinery2. Land & Building Construction and Renovation3. Vehicles4. Furniture and Fixtures etc.

77..55 UUTTIILLIITTIIEESS && FFUUEELL FFOORR HHEEAAVVYY VVEEHHIICCLLEE OOPPEERRAATTIIOONNSS

Stone crushing plant will be operated using electricity for production purposes; thiswould draw considerable amount of electricity. Heavy vehicles i.e. bulldozer, dumper,Shovel Loads, etc. would require huge quantity of fuel for which diesel will be used. The


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77..66 WWOORRKKIINNGG CCAAPPIITTAALL RREEQQUUIIRREEMMEENNTTSS

It is estimated that an additional amount of one million rupees (approximately) will berequired as cash in hand to meet the working capital requirements. These provisions havebeen estimated based on the following assumptions for the proposed business.

Description Amount in Rs.

First Three Months Salaries (Production staff) 312,000

First Three Months Utilities Charges (Other then fuel/diesel) 124,500

Fuel Inventories (Diesel) - 15 Operational Days 343,000

First Three Months Misc. Expenses 15,000

Annual Quarry Lease Charges for first year 100,000

Total 894,500

77..77 PPLLAANNTT && MMAACCHHIINNEERRYY IINNSSTTAALLLLAATTIIOONN

Plant and machinery installation and trial run expenses has been assumed to be aroundRs. 100,000/-. It has been included in the plant and machinery cost.

77..88 VVEEHHIICCLLEE FFOORR SSUUPPPPOORRTT AANNDD MMAAIINNTTEENNAANNCCEE SSEERRVVIICCEESS

An additional light loading vehicle would be required for providing services for themaintenance, communication of machinery spare parts, labor etc. For this purpose atransportation vehicle has been proposed and an amount of Rs. 400,000 is assumed to be


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agents. These arrangements would entail some cost to the business for which an amountequivalent to 2% of the annual sales has been assumed which also covers the distribution

cost of bulk supplies, entertained directly by the crusher.

77..1111 MMIISSCCEELLLLAANNEEOOUUSS EEXXPPEENNSSEESS

Miscellaneous expenses of running the business are assumed to be Rs. 5,000 per month.These expenses include various items like office stationery, daily consumables, travelingallowances etc. and are assumed to increase at a nominal rate of 10% per annum.

77..1122 FFUUEELL IINNVVEENNTTOORRYY -- DDIIEESSEELL

Diesel is the major cost factor of the stone crushing process and production cycle can notbe completed without generous availability of diesel. It has been assumed that fuelinventory would be maintained for 15 days operations. Increase in diesel prices has beenassumed 5% per annum.

77..1133 FFIINNIISSHHEEDD GGOOOODDSS IINNVVEENNTTOORRYY

The proposed setup is assumed to maintain a Finished Goods Inventory of 15 days of thetotal annual production.

77..1144 RREEVVEENNUUEE PPRROOJJEECCTTIIOONNSS

For the revenue projections, crushed stone is assumed to be produced with one, half and

inch sizes. Initial price of the stone with one inch and inch is assumed to be Rs. 8 percubic feet. Whereas, stone crushed in half inch size would be sold at Rs. 6 per cubic feet.Sales price for Stone powder is assumed to be Rs. 2/C.ft. Prices of all products willi b 2% ll P di ib i f h l d i h b


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production of crushed stone has been estimated with 70% capacity utilization. Annualincrease of 3% in capacity utilization is assumed over the projection period. All

projections are based on 8 working hrs a day with 22 days a month.Based on our discussions with the industry experts and entrepreneurs it is assumed that

the sales price will increase with a nominal rate of 5% on all product categories during

the projected period.

77..1155 AACCCCOOUUNNTTSS RREECCEEIIVVAABBLLEESS

Considering the industry norm, particular to the construction sector and all of its allied

industries, it has been assumed that 70% of the sales will be on cash. Whereas, remaining30% sales will be on credit to the builders and construction contractors. A collectionperiod of 60 days is assumed for credit sales.

These assumptions are based on our findings during the discussions with the industryexperts and stakeholders. A provision for bad debts has been assumed equivalent to 2%of the annual credit sales.

77..1166 FFIINNAANNCCIIAALL CCHHAARRGGEESS

It is assumed that long-term financing for 5 years will be obtained in order to finance theproject investment cost. This leasing facility would be required at a rate of 15%(including 1% insurance premium) per annum with 60 monthly installments over a periodof five years. The installments are assumed to be paid at the end of every month.

77..1177 TTAAXXAATTIIOONN

The business is assumed to be run as a sole proprietorship; therefore, tax rates applicableon the income of an individual tax payer are used for income tax calculation of thebusiness


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77..1199 OOWWNNEERRSS WWIITTHHDDRRAAWWAALL

It is assumed that the owner will draw funds from the business once the desiredprofitability is reached from the start of operations. The amount would depend onbusiness sustainability and availability of funds for future growth.

77..2200 AANNNNEEXXUURREESS

77.. 2200..11 PPrroojjeecctteedd IInnccoommee SSttaatteemmeenntt77.. 2200..22 PPrroojjeecctteedd BBaallaannccee SShheeeett77.. 2200..33 PPrroojjeecctteedd CCaasshh FFllooww SSttaatteemmeenntt


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PREF-8/Mar, 2005/Rev1

PROJECT INCOME STATEMENT

Projected Income Statement (Rs.) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Net (Adjusted Sales)

20,894,133 23,128,189 25,033,455 27,073,537 29,279,872 31,666,007 34,246,595 37,037,481 40,055,803 43,320,095

Cost of Sales 7,783,992 8,437,695 9,146,795 9,916,028 10,750,539 11,655,916 12,638,232 13,704,085 14,860,641 16,115,689

Fuel & Electricity Consumed DuringProducti on 6,41 5,992 6,93 8,8 95 7,50 4,415 8,116,0 25 8,77 7,4 81 9,49 2,846 10 ,26 6,513 11 ,103,2 34 12,008,1 47 12 ,98 6,811Labor (Production Staff) 1,248,000 1,372,800 1,510,080 1,661,088 1,827,197 2,009,916 2,210,908 2,431,999 2,675,199 2,942,719Other Utilities 120,000 126,000 132,300 138,915 145,861 153,154 160,811 168,852 177,295 186,159

Gross Profit

13,110,141 14,690,493 15,886,660 17,157,509 18,529,333 20,010,091 21,608,362 23,333,396 25,195,162 27,204,406

General Administrative & Selling

ExpensesSalaries 120,000 1 32,000 1 45,200 1 59,720 1 75,692 1 93,261 2 12,587 2 33,846 2 57,231 2 82,954Lease Charges of Land - Quarry /

Excavation 100,000 103,000 106,090 109,273 112,551 115,927 119,405 122,987 126,677 130,477Factory/Office Miscellaneous

Expenses 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477Amortization of Preliminary Expenses 60,000 60,000 60,000 60,000 60,000 - - - - -

Depreciat ion Expense 2,013,000 1,811,700 1,630,530 1,467,477 1,320,729 1,196,306 1,076,676 969,008 872,107 784,897Maintenance Expense 544 ,200 544,200 544,200 544,200 544,200 544 ,200 544,200 544,200 544 ,200 544,200Selling & Distribution 417,883 462,564 500,669 541,471 585,597 633,320 684,932 740,750 801,116 866,402

Subtotal

3,315,083 3,179,464 3,059,289 2,962,000 2,886,616 2,779,646 2,744,094 2,727,714 2,729,946 2,750,406

Operating Income

9,795,059 11,511,030 12,827,371 14,195,509 15,642,718 17,230,445 18,864,268 20,605,682 22,465,216 24,454,000

Financial Charges (15% Per Annum) 1,495,762 1,246,902 958,038 622,737 233,535 - - - - -

Earnings Before Taxes

8,299,297 10,264,127 11,869,333 13,572,772 15,409,183 17,230,445 18,864,268 20,605,682 22,465,216 24,454,000Tax 2,777,254 3 ,464,945 4,026,767 4 ,622,970 5 ,265,714 5 ,903,156 6 ,474,994 7,084,489 7 ,735,326 8 ,431,400

Net Profit

5,522,043 6,799,183

7,842,566 8,949,802 10,143,469 11,327,289 12,389,274 13,521,193 14,729,890 16,022,600

Monthly Profit After Tax

460,170 566,599 653,547 745,817 845,289 943,941 1,032,440 1,126,766 1,227,491 1,335,217


26/27



PROJECTED BALANCE SHEET

Projected Balance Sheet

(Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

AssetsCurrent AssetsCash & Bank Balance 551,248 4,706,455 10,397,513 15,686,057 20,571,422 24,523,925 30,347,380 36,096,686 40,352,377 43,700,520 46,156,718Fuel Inventory (Diesel) 343,125 267,333 289,121 312,684 338,168 365,728 395,535 427,771 462,635 500,339 541,117Finished GoodsInventory 0 416,545 472,255 512,187 555,518 602,539 653,566 708,944 769,047 834,281 905,087Accounts Receivable 0 1,051,013 1,156,409 1,251,673 1,353,677 1,463,994 1,583,300 1,712,330 1,851,874 2,002,790 2,166,005

Total Current Assets 894,373 6,441,346 12,315,299 17,762,601 22,818,785 26,956,186 32,979,781 38,945,731 43,435,933 47,037,930 49,768,927Fixed AssetsPlant Machinery &Facility 18,140,000 16,326,000 14,693,400 13,224,060 11,901,654 10,711,489 9,640,340 8,676,306 7,808,675 7,027,808 6,325,027Factory Construction 1,530,000 1,377,000 1,239,300 1,115,370 1,003,833 979,950 881,955 793,759 714,383 642,945 655,150Furniture & Fixtures 60,000 54,000 48,600 43,740 39,366 35,429 31,886 28,698 25,828 23,245 20,921

Vehicle 400,000 360,000 324,000 291,600 262,440 236,196 212,576 191,319 172,187 154,968 139,471Total Fixed Assets 20,130,000 18,117,000 16,305,300 14,674,770 13,207,293 11,963,064 10,766,757 9,690,082 8,721,073 7,848,966 7,140,569

Intangible Assets

Preliminary Expenses 300,000 240,000 180,000 120,000 60,000 - - - - - -Total Assets 21,324,373 24,798,346 28,800,599 32,557,371 36,086,078 38,919,249 43,746,539 48,635,813 52,157,006 54,886,896 56,909,496

Owner's Equity 10,662,187 15,684,230 21,483,412 27,325,979 33,275,781 38,919,249 43,746,539 48,635,813 52,157,006 54,886,896 56,909,496Long Term Liability 10,662,187 9,114,116 7,317,186 5,231,392 2,810,297 0 0 0 0 0 0Total Equity &Liabilities 21,324,373 24,798,346 28,800,599 32,557,371 36,086,078 38,919,249 43,746,539 48,635,813 52,157,006 54,886,896 56,909,496


27/27



PROJECTED CASH FLOW STATEMENT

Projected Statement of Cash

Flows (Rs.) Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Cash Flow From OperatingActivities

Net Profit 0 5,522,043 6,799,183 7,842,566 8,949,802 10,143,469 11,327,289 12,389,274 13,521,193 14,729,890 16,022,600

Add: Depreciation Expense 0 2,013,000 1,811,700 1,630,530 1,467,477 1,320,729 1,196,306 1,076,676 969,008 872,107 784,897Amortization Expense 0 60,000 60,000 60,000 60,000 60,000 - - - - -(Increase) / decrease in

Receivables - (1,051,013) (105,397) (95,263) (102,004) (110,317) (119,307) (129,029) (139,544) (150,916) (163,215)(Increase) / decrease in

RM - Fuel Inventory - 75,792 (21,788) (23,563) (25,484) (27,561) (29,807) (32,236) (34,863) (37,705) (40,778)(Increase) / decrease in FG Inventory (416,545) (55,710) (39,932) (43,331) (47,021) (51,028) (55,378) (60,103) (65,234) (70,806)

Net Cash Flow From Operations 0 6,203,277 8,487,988 9,374,338 10,306,460 11,339,300 12,323,455 13,249,306 14,255,691 15,348,143 16,532,698

Cash Flow From Financing

ActivitiesReceipt of Long Term Debt 10,662,187Repayment of Long Term Debt (1,548,070) (1,796,930) (2,085,794) (2,421,095) (2,810,297) - - - - -

Owner's Equity 10,662,187 (500,000) (1,000,000) (2,000,000) (3,000,000) (4,500,000) (6,500,000) (7,500,000) (10,000,000) (12,000,000) (14,000,000)Net Cash Flow From FinancingActivities 21,324,373 (2,048,070) (2,796,930) (4,085,794) (5,421,095) (7,310,297) (6,500,000) (7,500,000) (10,000,000) (12,000,000) (14,000,000)

Cash Flow From Investing

ActivitiesCapital Expenditure (20,070,000) (76,500) (76,500)

Factory/Office Furniture (60,000)Preliminary Operating Expenses (300,000)Raw Material Inventory (15 Days) (343,125)

Net Cash Flow From Investing

Activities (20,773,125) 0 0 0 0 (76,500) 0 0 0 0 (76,500)

NET CASH FLOW 551,248 4,155,207 5,691,058 5,288,544 4,885,365 3,952,503 5,823,455 5,749,306 4,255,691 3,348,143 2,456,198

Cash at the Beginning of the

Period 0 551,248 4,706,455 10,397,513 15,686,057 20,571,422 24,523,925 30,347,380 36,096,686 4 0,352,377 43,700,520

Cash at the End of the Period 551,248 4,706,455 10,397,513 15,686,057 20,571,422 24,523,925 30,347,380 36,096,686 40,352,377 43,700,520 46,156,718

Date post:	04-Apr-2018
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