HAIR & SHINE
PREFEASIBILITY STUDY SHAMPOO MANUFACTURING
BY NISA ENTERPRISES
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 1
HAIR & SHINE
Presented by: Nadia Shoukat- 23 Saqib Hussain- 35 Syed Arsalan- 28 MBA Finance,4th sem Section A, Morning
Presented to: Mam Fadia Naz Lecturer of Project Appraisal
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 2
HAIR & SHINE
DEDICATION WE DEDICATE THIS HUMBLE EFFORT TO The Holy Prophet “HAZRAT MUHAMMAD” (P.B.U.H) The greatest Social Worker, Whose every tear was for The Cause of humanity And also dedicated to THE UNFATHOMABLE LOVE, UNFLINCHING SUPPORT UNTIRING MIDNIGHT PRAYERS AND STEADFASTNESS OF
“OUR REVERED PARENTS” WHO HAS BEEN A BEACONHOUSE FOR USFOR THE WHOLE OF OUR LIFE, WHO HAS ALWAYS SHOWED US THE RIGHT PATH, THE PATH OF TRUTHFULNESS AND HONESTY AND WHO HAS BEEN ALONG WITH US THROUGHOUT OUR STUDYING CARRIER
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 3
HAIR & SHINE
Acknowledgements God never spoils any effort; every piece of work is rewarded according to the nature of devotion for it. We are extremely thankful to ALLAH ALMIGHTY Who, in spite of numerous difficulties, vicissitudes and acute frustrations enabled us to probe the present study and dissertation. We bow our head to ALLAH ALMIGHTY for the buntings and the blessings that He has bestowed upon us. Who has given us the courage and stamina to come up to the expectations of our revered teachers and ever loving parents and to sum up my maneuverings for the completion of this manuscript. All the respects are for the last Prophet of God, HOLY PROPHET MUHAMMED (Peace Be Upon Him) Who is the greatest scientist of all the ages, whose moral and spiritual teachings enlighten our heart, mind and soul and flourished our thoughts towards achieving higher ideas of life. We deem it utmost pleasure to avail this opportunity to express the heartiest gratitude and deep sense of obligation to our revered Teacher Mam Fadia Naz, Lecturer, Department of Business Management Sciences, Islamia University, Rahim Yar Khan for his skilled guidance, keen interest, constructive criticism, constant encouragement, valuable suggestions and pains taking supervision throughout the course of our study and research work. The work presented in this manuscript is accomplished under his dynamic, skillful, affectionate guidance and generous transfer of knowledge. Whenever we sought help from him, he was the person who was always there bearing a welcoming smile on his face and having the doors of his good offices always opened for us. We have learnt a great deal from him. We have the honor to express our deep sense of gratitude and profound indebtedness to ever affectionate Mam Fadia Naz for his keen interest, encouragement, generous guidance and untiring help at all times. In fact it was not possible to bring this work to fruitful conclusions without his day and night persuasive and sincere efforts. He has guided us at every step that we took throughout our career at postgraduate level. He has always thought right for our betterment and for our success in the professional field. We cannot thank him, as we have no words that can have an idea of the respect we have in my heart for him. THE ISLAMIA UNIVERSITY OF BAHAWALPUR 4
HAIR & SHINE
Table of Contents 1- Project Profile…………...………………………………….2 2- Production Process……………………....……………...…10 3- Annexure…………...……………………………................19 4- Key Assumptions………………………………….……….27 5- Financial Plan.…………………………….……………….38 6- Financial Statements………………………………………40 7- Financial Analysis…………………..……………………...44 8- Ratio Analysis……………………………………………..49
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 5
HAIR & SHINE
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. We do 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 ISLAMIA UNIVERSITY OF BAHAWALPUR 6
HAIR & SHINE
01- PROJECT PROFILE THE ISLAMIA UNIVERSITY OF BAHAWALPUR 7
HAIR & SHINE
1 Project Profile 1.1 Project Brief Name of company: Brand Name: Target Market: Plant Capacity: Legal Status:
NISA Enterprises Hair & Shine Shampoo People of all age group belong to particularly middle class. Rated capacity is 500-15000 liters. Daily production capacity is 10,000 liters/day of 8 hours shift. Partnership firm
1.2 Opportunity Rational The Fast Moving Consumer Goods (FMCG) industry is poised to clock a 16 per cent growth in sales during 2008-09, against a growth rate of 14.5 per cent achieved during 2007 (surveyed by FICCI). Among 28 major items of FMCG sector, shampoo is among those which are expected to achieve a growth of 20% i.e. anti-dandruff shampoo 22%. Major reasons of growth are growing economic fundamentals, increased literacy, rapid urbanization, rising population levels, growing consumer demand and increased affordability of the consumers. These changes are due to various incentives proposed in the Union Budget 2008-09, including the major farm loan waiver scheme worth Rs 60 billion. Consumers’ preference for FMCGs is shifting towards higher lifestyle categories like skin care, shampoos, deodorants, anti-aging solutions, fairness products and men’s products. Traditionally in Pakistan and generally all over the world people prefer to use shampoos rather then soaps for hair solution and this perception is gaining more currency day by day which also adds to the advantage of the shampoo industry. Common people especially young generation and women are now more inclined towards their appearance. Moreover the liberalization of media and introduction of a lot of private channels have made both males and females very conscious about looks and fashion, and looks are incomplete without healthy and shiny hairs. Furthermore, the growing number of MNEs of FMCG’s (Fast Moving THE ISLAMIA UNIVERSITY OF BAHAWALPUR 8
HAIR & SHINE Consumer Goods) have increased the competition in local market and also opened new opportunities through competition. http://www.plunkettresearch.com/Industries/HealthCare/tabid/205/D efault.aspx#IndustryTrends
1.3 Production Process 1.3.1 Developing the Formula: Shampoo, as a specialized cleaning product for the hair, was introduced in the 1930s to accompany commercial hair curlers for home hair care. Using soap on hair creates a dull film that contributes to limp and lifeless hair. Shampoo companies developed this as an argument to use the new commercial shampoo products. The 1930s saw the introduction of synthetic products made from polymers and plastics, and the new shampoo formula used forms of these synthetic detergents. This basic shampoo formula was used until the 1960s, when radical changes were made to the ingredients. Conditioners, exotic fragrances, chemicals and additional dyes were incorporated at that time. Personal care companies develop a shampoo formula, apply for a patent and then advertise the unique properties of the shampoo. The basic elements of all shampoos are water (70 to 80 percent), detergents and preservatives. Most shampoos also include oils (coconut, palm kernel or soy bean), sulfates (sodium lauryl, ammonium lauryl and ether), and alkanolamides (to improve both the texture and the foaming ability of the shampoo). Other chemicals are added to the shampoos in small amounts to improve shine and condition the hair. These include dimethicone, quatemium-80 and guar hydroxypropyltrimonium chloride.
1.3.2 Testing the Formula: Shampoo is tested at various times in the development and production process. Modern shampoo is evaluated on the cleaning abilities but also the color, odor and texture of the liquid. The first testing is done in the laboratory to evaluate the formula. This may be done on humans, but some companies use small animals to evaluate the harshness of the detergent and the toxicity of the chemicals. Chemical testing is also done to ensure the shampoo qualities remain stable as the product is shipped and stored at the retail outlet and in the consumers' home. Once the product formulation is tested, new shampoos are tested by consumer volunteers. Demographic studies are used to isolate key groups of consumers who are most likely to use and buy the product. Shampoo samples are distributed to test groups and the THE ISLAMIA UNIVERSITY OF BAHAWALPUR 9
HAIR & SHINE subjects are asked to evaluate the product based on smell, cleaning results, texture, color and product packaging. Groups are also asked to evaluate the cost of the product to determine sales success. The results of the test groups are tabulated and changes to the formula are made based on the consumer comments. The new formula (or packaging) is then tested again.
1.3.3 Shampoo Production: Once the test groups and the developers are satisfied with the product, the shampoo is put into large-scale production. The formula is broken down into steps, and the manufacturing plant mixes the ingredients in large vats. Most of the work is done by machinery, but human supervisors observe the process to ensure the shampoo batches are mixed correctly. Some shampoos require refrigeration or heating to create the correct chemical balance and mixing process. The shampoo in each vat is then tested to guarantee the ingredients match the original formula. The amounts of preservatives are also evaluated at this point. Once approval of the ingredients and mixture is given, the shampoo is transferred into machinery to pump the shampoo into the packaging.
1.4 Market Entry Timing FMCG sector enjoys an Evergreen season of demand. Shampoo plant is one of those which can be run 24 hour in all seasons because it is part of fast moving consumer good. So we need not to worry about market entry time. It can be any season of a year. However Hot and dry weather increase the consumption of shampoo and soaps all over the country because usage rate is almost doubled in summer as compare to winter season. Health care products become more attractive and valuable for the general public in metro cities and towns. All these conduce to a mass consumption of FMCG’s in the form of shampoos, conditioners and soaps. People everywhere in general and in northern areas especially are inclined to use shampoo for fresh feeling. This is the most suitable time to enter into market shampoo.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 10
HAIR & SHINE
1.5 Proposed Business Legal Status The legal status of business tends to play an important role in any setup; the proposed Shampoo Manufacturing setup is assumed to operate as a Firm.
1.6 Project Capacity and Rationale 1.6.1 Basis/Rationale: In recommending the plant capacity we have considered the following main factors:
Current and future demand for the products in the local market. Trend of imports by the local market. Availability of raw materials and the seasonal supply. The need to have a medium sized but manageable shampoo processing plant. Discussions with the industry experts and entrepreneurs.
1.6.2 Plant Capacity: The proposed capacity of shampoo plant is 10,000 liters/ day of 8 hour shift. The plant will be operated at 70% capacity utilization for 8 hours a day in the beginning; however, a 10% annual increase in capacity utilization is assumed.
1.6.3 Raw Material Sourcing – Backward Integration In the FMCG sector, nearly all of the ingredients that can be used are classified by the Cosmetic, Toiletry, and Fragrance Association (CTFA) in the governmentally approved collection known as the International Nomenclature of Cosmetic Ingredients (INCI). The more important ingredients in shampoo formulations are water, detergents, foam boosters, thickeners, conditioning agents, preservatives, modifiers, and special additives. To support the production operations, continuous supply of above ingredients play a key role for the success in the shampoo segment of FMCG. Therefore, it is proposed to finalize the buying deal with the supplier six months prior to the commencement of the production THE ISLAMIA UNIVERSITY OF BAHAWALPUR 11
HAIR & SHINE operations because all chemicals have to be exported from thailand, singapoor and malaysia.. A day store is also assumed for keeping daily requirement of raw material.
1.7 Project Investment Total cost of the project is estimated at around Rs. 18,774.012. The working capital requirement is around Rs. 2,807.953 and the rest will be the fixed capital. Annextures are attached at the end.
1.8 Proposed Product Mix In start, we will launch only one variant of shampoo that is AntiDandruff. Around 10% of the total shampoo market is accounted for by 200 ml bottle packaging , 30 % for 100 ml and 60 % for sachet.
1.9 Proposed Site & Location The factors which we consider before selecting site & location are included: 1. Iqbal Abad is a factory area and all faciliteis that required by a factory are already aailable there like well-established infrastructure etc. 2. Iqbal Abad is far away from residential area and the fragrance of shampoo during manufacturing will not affect cililians there. 3. It is near to highway. 4. It is situated near to market. 5. Transportation facility are well-establihed. 6. Water is major component of shampoo and and water conditions are better in Iqbal Abad. 7. Local man power will be easily available. 8. transportation cost is less.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 12
HAIR & SHINE
1.10 Key Success Factors Following are some factors that we will take into consideration in order to compete the competitors and we will use them as tips for success: 1. 2. 3. 4. 5.
BACKWARD INTEGRATION PRODUCT QUALITY DISTRIBUTION NETWORK PRODUCT MARKETING AND EXISTING COMPETITION OTHER MARKETING ASPECTS 5.1-Seasonality of Demand 5.2-Market Characteristics 5.3-Packaging 5.4-Product Distribution.
A typical distribution setup in health care business involves the following hierarchy starting from the manufacturer to the consumer:
SHAMPOO MANUFACTURER Designated Wholesaler
Distribution Agent
Own Field Force
Retailers
1. Departmental Stores 3. Supermarkets 5. Hotels 2. Convenience/Town Shops 4. Bakeries/Staple food stores
We will take the distribution services from AL-RAZAK ASSOCIATES, 11-B Block-Y Ghulshan-e-Usman, Rahim Yar Khan.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 13
HAIR & SHINE
1.11 Type of project It is a NEW project for Nisa Enterprises.
1.12 Sponsors i) NADIA SHOUKAT Qualification: N.I.C #: E-Mail Adresse:
MBA (Finance) 31303-3538390-2
[email protected]
ii) SAQIB HUSSAIN Qualification: N.I.C #: E-Mail Adresse:
MBA (Finance) 31303-7523648-2
[email protected]
iii) SYED ARSALAN SHAH Qualification: MBA (Finance) N.I.C #: 31303-1254795-0 E-Mail Adresse:
[email protected]
1.14 Current industry Structure Major brands and Players are: Shampoo Brand Pantene Head Shoulder Pert Plus Sunsilk
Company Nmae Proctor Gamble & Proctor Gamble Proctor Gamble Unilever
Dabur Vatika Dabur Bioamla Kala Kola
Ctagory & Shiny hairs & AntiDandruff & Silky hairs Shiny hairs Medicated Medicated
Available in Markat packaging Share 200ml 200ml
50% by P &G
200ml 100ml, 200ml 300ml 100ml, 200ml
28% 12% 10%
The flood of imported shampoos at the wholesale and retail outlets in the local markets has posed a serious threat to the local shampoo manufacturers. THE ISLAMIA UNIVERSITY OF BAHAWALPUR 14
HAIR & SHINE The customs duty on finished goods and raw material is the same, which is encouraging imports of brand names which are manufactured locally as well,” said Yaqoob Karim, chairman, Pakistan Soap Manufacturers Association. There are no guidelines for the import of such items, and any one can import them without any approval, he said. Total market share of imported and smuggled shampoos is about 29 percent.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 15
HAIR & SHINE
02- PRODUCTION PROCESS
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 16
HAIR & SHINE
2- PRODUCTION PROCESS New shampoos are initially created by cosmetic chemists in the laboratory. These scientists begin by determining what characteristics the shampoo formula will have. They must decide on aesthetic features such as how thick it should be, what color it will be, and what it will smell like. They also consider performance attributes, such as how well it cleans, what the foam looks like, and how irritating it will be. Consumer testing often helps determine what these characteristics should be. Once the features of the shampoo are identified, a formula is created in the laboratory. These initial batches are made in small beakers using various ingredients. In the personal care industry, nearly all of the ingredients that can be used are classified by the Cosmetic, Toiletry, and Fragrance Association (CTFA) in the governmentally approved collection known as the International Nomenclature of Cosmetic Ingredients (INCI). The more important ingredients in shampoo formulations are water, detergents, foam boosters, thickeners, conditioning agents, preservatives, modifiers, and special additives.
Ingredients of Shampoo Water The primary ingredient in all shampoos is water, typically making up about 70-80% of the entire formula. Deionized water, which is specially treated to remove various particles and ions, is used in shampoos. The source of the water can be underground wells, lakes, or rivers.
Detergents The next most abundant ingredients in shampoos are the primary detergents. These materials, also known as surfactants, are the cleansing ingredients in shampoos. Surfactants are surface active ingredients, meaning they can interact with a surface. The chemical nature of a surfactant allows it to surround and trap oily materials from surfaces. One portion of the molecule is oil compatible (soluble) while the other is water soluble that has little calcium and magnesium. When a shampoo is applied to hair or textiles, the oil soluble portion aligns with the oily materials while the water soluble portion aligns in the water layer. When a number of surfactant molecules line up like this, they form a structure known as a micelle. This micelle has oil trapped in the middle and can be washed away with water, thus giving the shampoo its cleansing power. THE ISLAMIA UNIVERSITY OF BAHAWALPUR 17
HAIR & SHINE
Surfactants are derived from compounds known as fatty acids. Fatty acids are naturally occurring materials which are found in various plant and animal sources. The materials used most often to make the surfactants used in shampoos are extracted from coconut oil, palm kernel oil, and soy bean oil. Most • • • • •
commonly used raw material is: Ammonium Chloride Ammonium Lauryl Sulfate Glycol Sodium Laureth Sulfate Sodium Lauryle Sulfate
These detergents work best in water that has little calcium and magnesium, as these elements bind to the detergent and make an insoluble scum. So tetrasodium EDTA is used to sequester the calcium and magnesium from the detergent, while keeping them soluble, so they rinse away without scum. The detergent cocamidopropyl betaine is added for several of its special properties. It is milder on the skin than the benzine sulfonates, so adding it to the mix reduces the amount of the harsher detergents needed. It is thicker than the other ingredients, so it can be added to make the mix have the right viscosity. It has anti-static properties, so the hair doesn't generate an electric charge and jump to the plastic combs and brushes used when drying the hair. It is a humectants, attracting moisture from the air, thus keeping hair from drying out. Lastly, it has antibiotic properties that can prevent spoiling of the shampoo. The surfactant ammonium xylenesulfonate is a hydro trope, a compound that makes it easier for water to dissolve other molecules. It is added as a thickener, and to help keep some of the odd ingredients added for marketing effect in solution, including perfumes. Glycerol stearate is another emulsifier used for this purpose. Fungicides will be added for anti-dandruff solution.
Foam boosters In addition to cleansing surfactants, other types of surfactants are added to shampoos to improve the foaming characteristics of the formulation. These materials, called alkanolamides, help increase the amount of foam and the size of the bubbles. Like primary THE ISLAMIA UNIVERSITY OF BAHAWALPUR 18
HAIR & SHINE detergents, they are also derived from fatty acids and have both water soluble and oil soluble characteristics. Cocamide DEA (or MEA or TEA) is used as a foaming agent, to make the lather.
The other surfactants will generate a certain amount of suds, but this foaming agent is added to get the amount just right. Besides its foam stabilizing effects, it is also a viscosity booster.
Thickeners To some extent, the alkanolamides i.e Cocamide DEA (or MEA or TEA) that make shampoos foam also make the formulations thicker..
Preservatives Since shampoos are made from water and organic compounds, contamination from bacteria and other microbes is possible. Preservatives are added to prevent such growth. Preservatives used are: DMDM hydantoin and imidazolidinyl urea . These are added to shampoos, to prevent fungal and bacterial spoilage. They release formaldehyde to kill germs.
Modifiers Other ingredients are added to shampoo formulas to modify specific characteristics. Opacifiers are added to make the formula opaque and give it a pearly look. Materials known as sequestering agents are added to offset the dulling effects of hard water. Acids or bases such as citric acid or sodium hydroxide are added to adjust the pH of a shampoo so the detergents will provide optimal cleaning.
Special additives One of the primary factors that influence the purchase of a shampoo is its color and odor. To modify these characteristics, manufacturers add fragrance oils and governmentally approved and certified FD&C dyes. Other special additives can also have a similar effect. Natural materials such as botanical extracts, natural oils, proteins, and vitamins all impart special qualities and help sell shampoos. Additives such as zinc pyrithione are included to address the problem of dandruff. Other additives are dyes which can color the hair.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 19
HAIR & SHINE
Manufacturing Process After a shampoo formula is developed, it is tested to ensure that its qualities will minimally change over time. This type of testing, called stability testing, is primarily used to detect physical changes in such things as color, odor, and thickness.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 20
HAIR & SHINE
It can also provide information about other changes, like microbial contamination and performance differences. This testing is done to ensure that the bottle of shampoo that is on the store shelves will perform just like the bottle created in the laboratory. The manufacturing process can be broken down into two steps. First a large batch of shampoo is made, and then the batch is packaged in individual bottles.
Compounding 1 Large batches of shampoo are made in a designated area of the manufacturing plant. Here workers, known as compounders, follow THE ISLAMIA UNIVERSITY OF BAHAWALPUR 21
HAIR & SHINE the formula instructions to make batches that can be 3,000 gal (11,000 1) or more. Raw materials, which are typically provided in drums as large as 55 gal (200 1) or in 50-lb (23-kg) bags, are delivered to the compounding area via forklift trucks. They are poured into the batch tank and thoroughly mixed. 2 Depending on the formula, these batches can be heated and cooled as necessary to help the raw materials combine more quickly. Some raw materials such as water or the primary detergents are pumped and metered directly into the batch tank.
These materials are added simply by pressing a button on computerized controls. These controls also regulate the mixing speeds and the heating and cooling rates. Depending on the size and type of shampoo, making a 3,000-gal (11,000-1) batch can take anywhere from one to four hours.
Quality control check 3 After all the ingredients are added to the batch, a sample is taken to the Quality Control (QC) lab for testing. Physical characteristics THE ISLAMIA UNIVERSITY OF BAHAWALPUR 22
HAIR & SHINE are checked to make sure the batch adheres to the specifications outlined in the formula instructions. The QC group runs tests such as pH determination, viscosity checks, and appearance and odor evaluations. They can also check the amount of detergent that is in the formula and whether there is enough preservative. If the batch is found to be "out of spec," adjustments can be made. For instance, acids or bases can be added to adjust the pH, or salt can be added to modify the viscosity. Colors can also be adjusted by adding more dye. 4 After a batch is approved by QC, it is pumped out of the main batch tank into a holding tank where it can be stored until the filling lines are ready. From the holding tank it gets pumped into the filler, which is made up of a carousel of piston filling heads.
Filling 5 At the start of the filling line, empty bottles are put in a large bin called a hopper. Here, the bottles are physically manipulated until they are correctly oriented and standing upright. They are then moved along a conveyor belt to the filling carousel, which holds the shampoo. 6 The filling carousel is made up of a series of piston filling heads that are calibrated to deliver exactly the correct amount of shampoo into the bottles. As the bottles move through this section of the filling line, they are filled with shampoo. 7 From here the bottles move to the capping machine. Much like the bin that holds the empty bottles, the caps are also put in a hopper and then correctly aligned. As the bottles move by the caps are put on and twisted tight. 8 After the caps are put on, the bottles move to the labeling machines (if necessary). Depending on the type of labels, they can either be stuck on using adhesives or heat pressed. Labels are stuck to the bottles as they pass by. 9 From the labeling area, the bottles move to the boxing area, where they are put into boxes, typically a dozen at a time. These boxes are then stacked onto pallets and hauled away in large trucks to distributors. Production lines like this can move at speeds of about 200 bottles a minute or more.
Flow Chart
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 23
HAIR & SHINE
Water (80Cº) + Salt+ Cabopol + Jug war
T SPADD is used to Melting and Inject through vessel
Solution Add Anti dandruff
Color Added, Dye, Fertilizer Perfume + Caustic at low temperature
Yogert Amala and Fertilizer Garnishing
Water + Salt
Anti Bacterial Add To Save Shampoo from Bacteria
80º C THE ISLAMIA UNIVERSITY OF BAHAWALPUR 24
HAIR & SHINE + Cabopolo + Low PH dissolve + Jug war High PH dissolves
The Filling Process Sensor
Hopper
Rappers
Blade Storter
Packing in Boxes
Quality Control In addition to the initial checks to make sure the product meets specifications, other quality control checks are made. For example, line inspectors watch the bottles at specific points on the filling line to make sure everything looks right. They notice things like fill levels, label placement, and whether the cap is on correctly. The product is also routinely checked to see if there has been any microbial contamination. This is done by taking a bottle off the filling line and sending it to the QC lab. Here, a small amount of the shampoo product is smeared onto a plate and inoculated with bacteria and other organisms to see if they grow. Additionally, the packaging is also checked to see if it meets specifications. Things such as bottle thickness, appearance, and bottle weight are all checked.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 25
HAIR & SHINE
03- ANNEXTURES
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 26
HAIR & SHINE
01- FIXED COST OF THE PROJECT ANNEXTURE IHAIR & SHNE SHAMPOO Estimated Cost of Land The shampoo plant is estimated to require a total area 5 KANAL. This area will give ample space in the beginning for sitting buildings and different services necessary for the project i.e. shampoo processing and filling machinery installation, cold storage for chemicals, day store for keeping daily requirement of raw material along with godown for raw material, management offices and vehicle parking area, etc. Sr .
Description
Area in Marla
Unit cost (Rs.)
Total cost (Rs.) 000’s
1
Land
100
50,000
5000
2
Stamp Duty @ 2%
100
1000
100
3
Capital Value Tax (CVT) @ 4%
100
2000
200
4
Registry Fees @ 1%
100
500
50
5
Municipal Tax @ 1%
100
500
50
6
Misc. Charges @ 0.5%
100
2500
25
56,500
5,425
Total Cost of Land
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 27
HAIR & SHINE
ANNEXTURE II HAIR & SHNE SHAMPOO Estimated Cost of Civil Works
Sr .
Nomenclature
1
Main factory building
2
Chowky
3
Guest room
4
Masjid
5
Office
Type of constructio n Cemented, Bricks & MS Sheet Cemented & Bricks Cemented & Bricks Cemented & Bricks Cemented & Bricks
Unit of measureme nt (sq.feet)
Cost/sq.fe et ( Rs )
Total cost (Rs. 000)
80*110=88 00
180
1,548
20*10=200
400
80
20*20=400
500
200
20*30=600
700
420
600
1,080
150
180
150
180
60*30=180 0 40*30=120 0 40*30=120 0
6
Material stores
Ms Sheet
7
Store rooms
Ms Sheet
8
Grounds
Grassy
30*30=900
60
54
9
Other Services ( water plant, roads, boundary wall, tool shop. boiler)
-
12,000
100
120
Total
-
27,100
-
3,862
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 28
HAIR & SHINE
ANNEXTURE III HAIR & SHNE SHAMPOO Estimated cost of Plant & Machinery
Sr.
1
2
Item
Automatic Oral Liquid Process Equipment
Specification
quantit y
Pipes, pipe fittings and valves are of SS 316, seamless, internally electro polished with DIN standard unions and silicon Gaskets. 5000-15000 liters
1
Cost/uni t (Rs. 000)
1000
Installation & Trial run expenses @ 10%
Total Cost
Totalcos t (Rs. 000)
1000
100 1100
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 29
HAIR & SHINE
THE FACILITY CONSISTS OF : Shampoo Syrup Vessel Online shampoo syrup pre filter Manufacturing Vessel Storage Vessel Vacuum system for transfer of shampoo syrup Filter press / Inline Homogenizer Product piping Control panels
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 30
HAIR & SHINE
UNIQUE FEATURES OF THE FACILITY: • •
• • •
• •
The plant is designed to be operated by one operator and one helper, saving on precious man-power costs. Shampoo syrup and manufacturing vessels are provided with limpet coils for heating and cooling, designed for internal vacuum to facilitate transfer of syrup directly from stores to sugar syrup vessel. Shampoo syrup is transferred to manufacturing vessel through online shampoo syrup pre filter by vacuum. Entry of all propeller agitators is from bottom through a specially designed cartridge mechanical seal with TC/TC seal face. The advantage of the bottom propeller agitator over the conventional agitator is that there are no vibrations of shaft, no couplings in the drive assembly, leading to lower maintenance cost. Pipes, pipe fittings and valves are of SS 316, seamless, internally electro polished with DIN standard unions and silicon Gaskets. Manhole of all the vessels is equipped with davit fitting and the cover of the manhole instead of being lifted.
PROCESS CONTROL:
Values like current, product temperature are displayed digitally on the electrical control panel. The mechanical seal is equipped with a water circulating system and has a water detection sensor which trips the motor, if the water circulation to the seal is interrupted.
CAPACITIES AVAILABLE: 500 liters to 15000 liters
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 31
HAIR & SHINE
ANNEXTURE IV HAIR & SHNE SHAMPOO Net Initial Working Capital
A- Current assets:
Rs. (000)
Inventories: Raw material (30 days) Finished goods (10% of production-dep) Spares & Stores
4,530 5051.812 50
Total inventories 9631.812 Advances & Deposits Account receivables
100 ----
Cash
300
Total current assets 10031.812
B- Current liabilities: Less: Bank borrowings (7223.859) Net initial working capital 2807.953
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 32
HAIR & SHINE
ANNEXTURE V HAIR & SHNE SHAMPOO Total Estimated Cost of the Project
Sr
Items 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 .
Total cost
Estimated cost of land Estimated cost of civil works Estimated cost of P & E Fire Insurance Generator Technical know how charges Project examination fees Pre Operation expenses Vehicles
(Rs. 000) 5,425 3,862 1100 50 2000 20 100 100 1850
Furniture and fixtures
1146
Total Production charges/ contingencies (2% of total) Total fixed cost of the project Add: Initial working capital Total cost of the project
15,653 313.06 15,966.06 2,807.953 18,774.012
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 33
HAIR & SHINE
04- KEY ASSUMPTIONS
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 34
HAIR & SHINE
4.1 – Assumptions regarding Production & Sales Rated Capacity of plant is 5000 to 15000 liters per day. Production capacity of plant is 10,000 liters daily in 8 hours shift The product is 100ml and 200ml bottles, and 5ml sachet of shampoo. Daily production is 1000 liters. Annul production is (1,000ltr X 300 days = 300,000ltr) Operating efficiency of the project is assumed at 70% for the first year operations, 80% for the second and 90% for the third year. Year end inventory is assumed at 10% of production of that particular year. 100% sales are assumed to be local. Selling prices are assumed in accordance with the prevailing rates in the local market.
A-Production: Description
Production + opening inventory (10%) Available for sale
2010 (in liters) 000’s
2011 (in liters) 000’s
2012 (in liters) 000’s
70%
80%
80%
300
330
330
---
30
36
300
360
366
- ending inventory
(30)
(36)
(36)
Quantity sold
270
324
330
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 35
HAIR & SHINE
B-Sales Revenue: Sales revenue = quantity sold x price Type I product 200ml: (270 thousand liter x 0.10) /0.20 liter bottle = bottles 135 thousand bottles X Rs. 105 thousand
135 thousand =
Type II product 100ml (270 thousand liter x 0. 30) /0.10 liter bottle= bottles 810 thousands bottles x Rs. 45 thousand Type III product sachet (5ml) (270 thousand liter x 0. 60) /0.005 liter bottle= bottles 32,400 thousands bottles x Rs. 3 thousand
Local sales Sachet 100 ml 200 ml Total sales revenue
Rs. 14175
810 thousands =
Rs. 36,450
32,400 thousands =
Rs. 97,200
2010
2011
2012
(Rs. 000) 70% 141,75 36,450 97,200
(Rs. 000) 80% 15,592.5 40,095 106,920
(Rs. 000) 80% 17,151.75 44,104.5 117,612
147,825
162,607.5
178,868.25
A 10% increase is expected in sales revenue per year.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 36
HAIR & SHINE
4.2– Assumptions regarding Cost of Production 1.
Raw material cost:
Raw material requirement =total number of unit produce X per unit material Total # of sachet produced (5 ml): annual production/0.005 liter : (300,000 x 0.60)/ 0.005 liter : 36,000 thousand sachet 1. Raw material required: 36,000 thousand sachets X Rs. 0.90 : Rs. 32,400 thousand
Total # of bottles produced (100ml): annual production/0.1 liter : (300,000.x 0.30)/ 0.1 liter : 900 thousand bottles 2. Raw material required: 900 thousand bottles X Rs. 9 : Rs. 8,100 thousand Total # of bottles produced (200ml): annual production/0.2 liters : (300,000 x 0.10)/ 0.2liters : 150 thousand bottles 3. Raw material required: Rs.4800 thousand Sizes
50 thousand bottles X Rs. 32 =
2010
(Rs. 2011
(Rs. 2012
000)
000)
000)
Sachet
32,400
35,640
35,640
100 ml
8,100
8,910
8,910
200 ml
4,800
5,280
5,280
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 37
(Rs.
HAIR & SHINE
Total
raw
material 45,300
49,830
49,830
cost •
10% increase in material cost annually
B- Labor cost: Sr.
NO. of persons
Staff Title
Monthly Salary (Rs. 000)
Annual Salary (Rs.000)
Production Staff (Factory) 1 . 2. 3. 4. 5. 6.
Factory Manager (Technical Manager)
02
50
1200
Processing Supervisors
02
25
600
Filling area Supervisors
02
25
600
Engineer
02
30
720
Helpers or Shift men
08
12
1152
Packaging Staff
02
10
240
Total
•
18
4512
Fringe benefits at 50%
2256
Total Labor Cost
6768
10% increase in labor cost annually
Labor cost
2010 (Rs.000) 6768
2011 (Rs.000) 7444.8
2012 (Rs.000) 8189.28
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 38
HAIR & SHINE
C- Manufacturing Overhead cost: 1- Fixed cost Fixed Costs
Total monthly cost (Rs.000)
Total annual cost (Rs.000)
Electricity
40
480
Gas and Lubricants etc
10
120
Water
5
60
Stores & spars
50
Insurance (15966.06 x .05)
798.303
Repair & Maintenance: •
Machinery @ 5% of installation cost of P&M (1,000,000x.05)
50
•
Building @ 3% construction cost
of
115.88
•
Vehicles vehicles
of
92.5
@
5%
cost
Total
1766.683
2. Variable cost It is expected to increase @ 10% p.a. THE ISLAMIA UNIVERSITY OF BAHAWALPUR 39
HAIR & SHINE
Rs. Electricity (Rs.250/hr x 8 hrs x 300 days) 600,000 Generator Diesel (Rs. 73/ltr x 10ltr/hr x 3 hrs x 300 days) 657,000 Total variable cost =12,57,000
2010 (Rs. 000)
2011 (Rs. 000)
2012 (Rs.000)
1766.683
1766.683
1766.683
Total variable cost
1257
1382.7
1382.7
Total Overhead Cost
3023.683
3149.383
3149.383
Total Overhead Cost Total fixed cost
D- Depreciation cost: Depreciation Rate (per annum) Plant and machinery @ of 10% Building @ 5% Furniture and fixture @ 8% Vehicles @ 10%
Cost of asset (Rs. 000)
Depreciatio n cost
1000
100
3862
193.1
1146
91.68
1850
185
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 40
= =
HAIR & SHINE
Total depreciation cost
569.78
Straight line method of depreciation is used here.
4.3– Assumptions regarding Operating Expenses A- Administrative Expenses Sr . 1. 2. 3. 4. 5. 6. 7. 8. 9. 1 0.
General Administrative Staff
#
Monthly Annual Salary Salary (Rs. 000) (Rs.000)
M.D
01
40
480
Finance Manager
01
30
360
Marketing head
01
25
300
Selling & Distribution In charge
01
20
240
Selling & Distribution Officers
02
15
360
Accountant/Cashiers
01
20
240
Store Keepers
02
8
192
Purchase Officer
01
15
180
Drivers
01
12
144
Guards
02
8
192
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 41
HAIR & SHINE 1 1.
Sweepers
02
5
120
1 2.
Office Boys
02
8
192
17
206
3000
Total Fringe Benefits @ 50%
1500
Total Admin Expenses
4500
These expenses are assumed to be increased @ 10% p.a.
B- General expenses: These expenses are assumed to be increased @ 10% p.a. General Expenses
2010 (Rs.000)
2011 (Rs.000)
2010 (Rs.000)
Printing and stationary
100
110
121
Telephone, fax and postage expenses
50
55
60.5
500
550
605
Miscellaneous
250
275
302.5
Total General expenses
900
990
1089
2010 (Rs.000)
2011 (Rs.000)
2010 (Rs.000)
Entertainment
C- Selling expenses Selling Expenses
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 42
HAIR & SHINE Advertisement exp. 10% of sales 14,782.5
16,260.75
17,886.82 5
Commission of sale agents 5% of sales 7,391.25
8,130.375
8,943.413
24,391.12 5
26,830.2 38
Total selling expenses
22,173.7 5
Distribution and R & D expenses will be 5% of sales each year.
4.4- Land & Building As we have given above, factory land would be purchased and factory building would be constructed. Total initial outflow for acquisition of land and factory building would be as follows:
Land for factory
Purchased
Rs.
5,000,000
Construction
Rs.
3,862,000
Total
Rs.
8,862,000
Vehicles for Transportation The proposed setup would require two vehicles to carryout all factory and office activities and to cater delivery requirements. The cost of vehicles is assumed to be Rs. 1,850,000.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 43
HAIR & SHINE
Description
Cost/ vehicle
Total Cost
(Rs. 000)
(Rs.000)
1
1,100
1,200
1
650
650 1,850
Unit
Delievery Truck(Second Hand) Hyundai Shehzor Total
4.6- Factory office Furniture, Fixtures & Equipments Description
Unit
Office Furniture & Fixture AC 5 Electrical 1 Fittings Furniture 1 Total Office Equipment Computers 10 Printers 2 Fax 2 Scanners 1 Total 22 Grand Total
Cost per Unit
Total cost
(Rs. 000)
(Rs. 000)
50 200
250 200
350 600
350 800
28 18 10 10 660
280 3 20 10 346 1146
4.4 Power Generator THE ISLAMIA UNIVERSITY OF BAHAWALPUR 44
HAIR & SHINE
Operations can be stopped and delieveries can be delayed due to power failure/non-availability. Therefore to cover up this risk, a power generator with 200 KVA capacities will be purchased. A generator of this capacity will cost around Rs. 2,000,000/-.
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 45
HAIR & SHINE
05- FINANCIAL PLAN
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 46
HAIR & SHINE
NISA ENTERPRISES FINANCIAL PLAN (in Rs. 000’s) Years
Interest
Principal
0 1 2 3 4 5 6 7 8 9 10
0 1,802.305 1,622.075 1,441.844 1,261.613 1,081.383 901.152 720.923 540.691 360.461 180.231
0 1,126.441 1,126.441 1,126.441 1,126.441 1,126.441 1,126.441 1,126.441 1,126.441 1,126.441 1,126.441
Installemen t 0 4,132.936 2,748.516 2,568.285 2,388.054 2,207.824 2,027.593 1,847.364 1,667.132 1,486.902 1,306.672
Total loan amount 11,264.407
10,137.966 9,011.525 7,885.084 6,758.643 5,632.202 4,505.761 3,379.32 2,252.879 1,126.441 0.00
PMT = Total Loan Amount / 10 = 11,264.407 / 10 = 1,126.441
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 47
HAIR & SHINE
06- FINANCIAL STATEMENTS
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 48
HAIR & SHINE
NISA Enterprises
ANNEXTURE VI
Estimated Income Statement Year ending September 30, Sales Less Cost of Sales: Raw Material Labor Manufacturing Overheads Depreciation Total Cost of Manufacture Inventory Adjustment – Less Cost of sales Gross Profit
Rs. In ‘000 2011 2012 2013 147,825 162,607.5 178,868.2 5 45,300 49,830 6,768 7444.8 3,023.683 3149.383 569.78 569.78 55,661.46 60,993.96 3 3 (5,566.14 (533.250) 6) (50,095. (60,460. 317) 713) 97,729.6 102,146. 83 787
49,830 8189.28 3149.383 569.78 61,738.44 3 (74.448) (61,663. 995) 117,204. 255
Operating Expenses General & Administration 5,589 6,147.9 6,762.69 Expenses Selling Expenses 22,173.75 24,391.12 26,830.23 5 8 Distribution Charges (5% of 7,391.25 8,130.375 8943.413 sales) Total Operating Expenses (35,154) (38,669. (42,536. 4) 341) Operating Profit / EBI 62,575.6 63,477.3 74,667.9 83 87 15 Other Expenses Financial Charges on: Alfalah Loan @ 16% 1,802.305 1,622.075 1,441.844 Bank Borrowings @ 20% 400 0 0 Amortization of pre-production 33 33 34 expenses R & D (5% of sales) 7391.25 8130.375 8943.413 Total Other Expenses Profit before Tax & Worker’s Fund Worker’s Fund (10% of PBT&WF)
(9,626.5 55) 52,949.1 28 (5,294.9 13)
(9785.45 ) 53,691.9 37 (5369.19 4)
(10,419. 257) 64,248.6 58 (6,424.8 66)
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 49
HAIR & SHINE Profit/ (Loss) before Tax
47,654.2 15 0 47,654.2 15
Tax Provision Net Profit
48,322.7 46 0 48,322.7 46
57,823.7 92 0 57,823.7 92
ANNEXTURE VII NISA Enterprises Estimated Balance Sheet
Year Ending September 30, ASSETS CURRENT ASSETS: Cash and Bank Balance Short Term Investment Accounts Receivable Inventories: Raw Material Finished Goods Stores and Spares Advances, Deposits and Prepayments Total Current Assets FIXED ASSETS: Fixed Assets at Cost Less: Accumulated Depreciation Fixed Assets Net Intangibles Total Fixed Assets
End of Con. 2010
Rs. in ‘000 Operating Years 2011
2012
2013
127.952 0 0
860.445 42,000 3,695.625
1,904.139 87,000 4,065.188
2,761.826 144,000 4,471.706
4,530 0
4530 5,108.79
4,983 6,099.396
4,983 6,173.844
50
55
60.5
66.5
100
110
121
133.1
4,807.95 2
56,359.8 6
104,233. 223
162,590. 026
15,866.06 0
15,866.06 569.78
15,866.06 1,139.56
15,866.06 1,709.34
15,866.0 6 100 15,966.06
15,296.2 8 67 15,363.28
14,726.5 6 34 14,760.5
14,156.7 2 0 14,156.72
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 50
HAIR & SHINE Total Assets
20,774.0 12
LIABILITIES AND EQUITY CURRENT LIABILITIES Bank Borrowings Worker’s Payable Current Maturity Fund Payable Total Current Liabilities LONG TERM DEBTS: Alfalah FCY Loan Total Long Term Debt EQUITY: Paid up capital Retained Earnings
71,723.1 4
118,993. 473
176,746. 746
2,000 0 0
0 5294.913 1126.441
0 5,369.194 1,126.441
0 6,424.866 1,126.441
2,000
6421.354
6,495.63 5
7,551.30 7
11,264.40 7 11,264.4 07
101,37.96 6 101,37.9 66
9,011.525
7,885.084
9,011.52 5
7,885.08 4
7,509.605 0
7,509.605 47,654.21 5 55,163.8 2 71,723.1 4
7,509.605 95,976.95 8 103,486. 563 118,993. 473
7,509.605 153,800.7 5 161,310. 355 176,746. 746
Total Equity Total Liabilities & Equity
7,509.60 5 20,774.0 12
ANNEXTURE VIII NISA Enterprises Estimated Cash Flow Statements
Year Ending September End of Const. 30,
2010
SOURCES OF FUNDS Operating Profit Add back: Depreciation Total Funds from Operations Other Sources: Alfalah loan @ 16% Bank Borrowings
Rs. in ‘000 Operating Years 2011
0 62,575.68 3 0 569.78 0 63,145.4 63 11,264.4 07 2,000
2012
2013
63,477.3 74,667.9 87 15 569.78 569.78 64,.047. 75,237.6 167 95
0
0
0
0
0
0
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 51
HAIR & SHINE Paid up Capital Total Sources of Funds APPLICATION OF FUNDS Investment in Fixed Assets R & D charges Pre-production Expenses Repayment of: Alfalah Loan Bank Borrowings Financial Charges on: Long-term Loans @ 16% Bank Borrowings @ 20% PAYMENT OF: Worker’s Fund Short term investments Increase in Current Assets (other than cash) Total Application of funds
7509.60 5 20,774. 012
0 63,145.4 63
0
64,.047. 75,237.6 167 95
15,866.0 6 0
0
0
0
7391.25
0
100
0
8,130.37 5 0
0
0
0
2000
1,126.44 1 0
1,126.44 1 0
1,622.07 5 0
1,441.84 4 0
0 1,802.305 0
400
0
0
0 40,000 4680 8,819.415 20,646. 06
62,412.9 7
127.952
732.493
Cash at beginning of year
0
127.952
Cash at the end of year
127.952
860.445
Cash Surplus
0
0
5,294.91 5,369.19 3 4 45,000 57,000 1,829.66 499.116 9 63,003. 74,380.0 473 08 1,043.69 857.687 4 860.445 1,904.13 9 1,904.1 2,761.82 39 6
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 52
HAIR & SHINE
07- FINANCIAL ANALYSIS
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 53
HAIR & SHINE
ANNEXTURE IX NISA Enterprises Weighted Average Cost of Funds Sources
Weights
Debt
0.60
Equity Total
0.40
Rates (%) 16(1-0.40)= 9.6 15
WACF (%) 5.76 6 11.76
Profit sharing ratio is 15% and it will be given from 4th year.
ANNEXTURE X NISA Enterprises Calculation of Internal Financial Rate of Return (IFRR) In (000’s) Capital
Y
Ope.
outlay
Income
0
206,460.
0
1
06 8,819.41
2
Dep.
0
W.Fund
Tax
Net cash returns
Net cash inflows
0
0
0
(20,646.0
62,575.6 569.
0
0
6) 63,145.4 54,326.0
5 1,829.66
83 78 63,477.3 569.
6,257.56 0
63 48 57,789.5 55,959.9
3
9 499.116
87 78 74,667.9 569.
8 6,347.73 0
69 00 68,889.9 68,390.8
4
0
15 78 74,667.9 569.
9 7,466.79 0
56 4 67,770.9 67,770.9
5
0
15 78 74,667.9 569.
2 7,466.79 0
03 03 67,770.9 67,770.9
6
1,850
15 78 74,667.9 569.
2 7,466.79 0
03 03 67,770.9 65,920.9
7
0
15 78 74,667.9 569.
2 03 03 7,466.79 26,880.4 40,890.4 40,890.4
8
0
15 78 74,667.9 569.
2 49 54 54 7,466.79 26,880.4 40,890.4 40,890.4
9
0
15 78 2 49 54 54 74,667.9 569. 7,466.79 26,880.4 40,890.4 40,890.4 THE ISLAMIA UNIVERSITY OF BAHAWALPUR 54
HAIR & SHINE 15 78 74,667.9 569.
1
(9,968.15
0
3) 15 209,490.
78
2 49 54 574 14,933.5 53,760.9 6,543.24 16,511.3 38
17
93 498,676.
107
19
PVIFA = Capital Outlay / Ave. Net Inflows = 209,490.107 / 49,867.619 = 4.201 or 11%
Assumptions: i. ii. iii. iv.
The economic life of the asset would be 10 years. The entire capital outlay would be incurred one year before the commencement of commercial operations. Vehicles would be replaced after every 5 years. Salvage value at the end of the project would represent recovery of working capital, salvage value of building, office furniture & fixtures and origional value of land ( as it is assumed to be remain constant within 10 years). In (000’s)
years 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Tot al
Inflows 54,326.048 55,959.900 68,390.84 67,770.903 67,770.903 65,920.903 40,890.454 40,890.454 40,890.4574 16,511.393
24% 43,811.329 36,394.316 35,870.124 28,665.303 23,117.179 18,133.976 9,071.313 7,315.575 5,899.657 1,921.175 210,199.947
24.5% 43,635.380 36,102.579 37,148.126 28,207.582 22,656.693 17,701.376 8,819.348 7,083.814 5,689.810 1,845.399 208,8910.10 7
Capital outlay = 209,490.107 24% = 210,199.947 24.5% = 208,890.107 R1 = DCF @ 24% - Capital Outlay = 210,199.947 – 209,490.107 THE ISLAMIA UNIVERSITY OF BAHAWALPUR 55
HAIR & SHINE = 709.84
R2 = DCF @ 24% - DCF @ 24.5% = 210,199.947 – 208,890.107 = 1,309.84 D1= 24.5% - 24% = 0.50% R3 = D1 x R1 = 0.50% x 709.84 = 354.92 = R3 / R2 = 354.92 / 1,309.84 = 0.2710 IFRR = 24% + 0.2710 = 24.2710% Since IFRR (24.2710) is greater than WACF (11.76%). So, project is attractive and viable.
Commercial BreakEven Point: ANNEXTURE XI (In Rs 000’s) Items Material Labor FOH Depreciation Selling Expense Admin & Gen. Interest on loan Interest on bank borrowing
Variable cost 45,300 6,768 1,257
Total
83,290.055
Fixed Cost
1,766.683 569.78
22,173.75 5,589 1,802.305 400
2,336.463
Total Cost 45,300 6,768 3,023.683 569.78 22,173.75 5,589 1,802.305 400
85,626.518
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 56
HAIR & SHINE
Commercial BE =Fixed Cost /( Sales value of production– Variable cost)xO.E = 2,336.463 / (147,825 – 83,290.055) x 70% = 2.54 %
Cash Break- Even Ratio: ANNEXTURE XII (In Rs 000’s) Items Material Labor FOH Selling Expense Admin & Gen. Interest on loan Loan installemnet Worker’s fund Total
Variable cost 49,830 8,189.28 1,520.97 26,830.238 6,762.69 1,441.844 1,126.441 6,424.860 102,126.323
Fixed Cost
1,766.683
1,766.683
Total Cost 49,830 8,189.28 3,287.653 26,830.238 6,762.69 1,441.844 1,126.441 6,424.860 103,893.006
Cash BE = Fixed Cost/ [( Sales – A/R – Variable Cost ] x OE = 1,766.683 / [( 17,8868.25 – 4,471.706) – 102,126.323] x 80 % = 1.96 %
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 57
HAIR & SHINE
08- RATIO ANALYSIS THE ISLAMIA UNIVERSITY OF BAHAWALPUR 58
HAIR & SHINE
8.1- Profitability Ratios 8.1.1- Gross Profit Ratio GROSS PROFIT RATIO= Years 2011 2012 2013
Gross profit 97,729.683 102,146.787 117,204.255
GROSS PROFIT/NET SALES Sales 147,825 162,607.5 178,868.25
GP Ratio % 66 62.81 65.52
66% 65% 2011
64%
2012 63%
2013
62% 61%
8.1.2- OPERATING PROFIT RATIO Years 2011 2012 2013
Ope. profit 62575.683 63477.387 74667.915
Sales 147,825 162,607.5 178,868.25
Ratio % 42.33 39.03 41.75
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 59
HAIR & SHINE
43.00% 42.00% 41.00%
2011
40.00%
2012
39.00%
2013
38.00% 37.00%
8.1.3- NET PROFIT RATIO Years 2011 2012 2013
Net profit 47654.215 48322.746 57823.792
Net Sales 147,825 162,607.5 178,868.25
NP Ratio % 32.23 29.71 32.23
32.50% 32.00% 31.50% 31.00% 30.50% 30.00% 29.50%
2011 2012 2013
29.00% 28.50% 28.00%
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 60
HAIR & SHINE
8.2- Short Term Solvency Ratio 8.2.1 - CURRENT RATIO Years
Current Assets
2011 2012 2013
56359.36 118993.473 176746.746
Current Liab.
Current
6421.354 6495.635 7551.307
% 8.77 18.31 23.40
Ratio
25.00% 20.00% 2011 2012 2013
15.00% 10.00% 5.00% 0.00%
8.2.2
QUICK RATIO
Quick Ratio=CASH EQUILANTS+MARKETABLE SEURITIES+NET RECEIVEABLES/CURRENT LIAB. Years 2011 2012 2013
Most Liquid
Current
Current Assets 46,556.07 92,969.327 151,233.532
Liabilities 6421.354 6495.635 7551.307
Quick Ratio % 7.25 14.32 20.02
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 61
HAIR & SHINE
25.00% 20.00% 2011
15.00%
2012 10.00%
2013
5.00% 0.00%
8.3- Long Term Solvency Ratio 8.3.1- DEBT RATIO Debt ratio =T .LIABILTIES/T.ASSETS Years 2011 2012 2013
Total liabilities 16559.32 15507.16 15436.391
Total Assets 71723.14 118993.473 176746.746
Debt Ratio % 23.08 13.0 8.73
25.00% 20.00% 15.00% 10.00%
2011 2012 2013
5.00% 0.00%
8.3.2- DEBT EQUITY RATIO THE ISLAMIA UNIVERSITY OF BAHAWALPUR 62
HAIR & SHINE
Years 2011 2012 2013
Total liabilities 16559.32 15507.16 15436.391
Total Equity 161310.355 103486.563 55163.82
D/E Ratio % 30.01 14.98 9.56
35.00% 30.00% 25.00% 2011
20.00%
2012
15.00%
2013
10.00% 5.00% 0.00%
8.4- Turnover Ratios 8.4.1- Inventory turnover Ratio Inventory turnover =CGS/AVG. INVENTRY Years
Inventory turnover
2011 2012 2013
Ratio (times) 18 20 202
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 63
HAIR & SHINE
2013 2012.5 2012
East
2011.5
West North
2011 2010.5 2010
8.4.2- Account Receivable Turnover Ratio A/R turnover =NET SALES/AVG. GROSS RECIEVEBLES Years
A/R turnover Ratio
2011 2012 2013
(%) 40 40 40
40% 35% 30% 25%
2011
20%
2012
15%
2013
10% 5% 0%
8.4.3- Assets Turnover Ratio Assets Turnover = NET SALES /AVG TOTAL SALES
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 64
HAIR & SHINE Years 2011 2012 2013
Assets turnover (%) 2.06 1.36 1.01
2.50% 2.00% 2011
1.50%
2012 1.00%
2013
0.50% 0.00%
8.4.4- FIXED ASSETS Years
Net Sales
Fixes Assets
2011 2012 2013
147825 162607.5 178868.25
14156.72 1460.5 15363.28
Fixed Assets Ratio % 9.62 11.015 12.63
14.00% 12.00% 10.00% 8.00% 6.00% 4.00%
2011 2012 2013
2.00% 0.00%
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 65
HAIR & SHINE
REFRENCES •
http://www.plunkettresearch.com/Industries/HealthCare/tabid/ 205/Default.aspx#IndustryTrends
•
www.sameda.gov.pk
THE ISLAMIA UNIVERSITY OF BAHAWALPUR 66
