SMEDA Rice Husking - Polishing Unit

Pre-Feasibility Study
MEDICAL STORE
Small and Medium Enterprises Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
6th Floor LDA Plaza Egerton Road, Lahore
Tel (042)111 111 456,
Fax: (042) 36304926-7
helpdesk@smeda.org.pk
REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH KHYBER PAKTUNKHWA BALOCHISTAN
8th Floor LDA Plaza, 5TH Floor, Bahria Complex II, Ground Floor
Bungalow No. 15-A Chamn
Egerton Road, M.T. Khan Road, State Life Building The Mall, Housing Scheme Airport Road,
Karachi. Quetta.
Lahore. Peshawar.
Tel: (021) 111-111-456 Tel: (081) 2831623, 2831702
Tel: (042) 111 111 456, Tel: (091)111 111 456, 9213046-7
Fax: (021) 5610572 Fax: (081) 2831922
Fax: (042) 36370474 Fax: (091) 286908
helpdesk.sindh@smeda.org.pk helpdesk.balochistan@smeda.org.pk
helpdesk.punjab@smeda.org.pk helpdesk.NWFP@smeda.org.pk
December, 2011
Pre-Feasibility Study Medical Store
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. The
prospective user of this memorandum is encouraged to carry out additional diligence and
gather any information he/she feels necessary for making an informed decision.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk
DOCUMENT CONTROL
Document No. PREF-82
Revision 2
Prepared by SMEDA-Punjab
Issue Date August, 2004
Revision Date December, 2011
Issued by Library Officer
PREF-82/December, 2011/Rev2 1
1 EXECUTIVE SUMMARY................................................................................................................. 4
2 INTRODUCTION TO SMEDA......................................................................................................... 5
3 PURPOSE OF THE DOCUMENT ................................................................................................... 5
4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT ..................... 5
5 PROJECT PROFILE ......................................................................................................................... 6
5.1 OPPORTUNITY RATIONALE ............................................................................................................... 6
5.2 PROJECT BRIEF ................................................................................................................................. 6
5.3 MARKET ENTRY TIMING ................................................................................................................... 7
5.4 PROPOSED BUSINESS LEGAL STATUS ................................................................................................ 7
5.5 PROJECT CAPACITY AND RATIONALE ............................................................................................... 7
5.6 PROJECT INVESTMENT ...................................................................................................................... 7
5.7 PROPOSED PRODUCT MIX ................................................................................................................. 8
5.8 PROPOSED LOCATION ....................................................................................................................... 8
5.9 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ................................................................... 8
5.10 STRATEGIC RECOMMENDATIONS ................................................................................................. 9
5.10.1 Product Range counts a lot ................................................................................................ 9
5.10.2 Customer Service ............................................................................................................... 9
5.10.3 Location of the outlet ......................................................................................................... 9
6 SECTOR & INDUSTRY ANALYSIS ............................................................................................... 9
6.1 SECTOR CHARACTERISTICS ............................................................................................................... 9
6.2 SUB SECTOR INFORMATION ..............................................................................................................10
The Pharma Industry has experienced major growth in recent years. As per an estimate the Pharma
industry is growing at 18% annually. The Pakistan’s harsh climate provides more favorable business
opportunities in pharmaceutical business. ............................................................................................10
6.3 LEGAL ISSUES REGARDING INDUSTRY .............................................................................................10
6.4 MAJOR PLAYERS ..............................................................................................................................10
7 MARKET INFORMATION .............................................................................................................10
7.1 MARKET POTENTIAL ........................................................................................................................10
7.2 TARGET CUSTOMERS .......................................................................................................................11
8 PRODUCT ..........................................................................................................................................11
8.1 MAJOR SUPPLIERS ............................................................................................................................12
8.1.1 Products of Multinational Companies ...................................................................................12
8.1.2 Products of National Companies ...........................................................................................12
8.1.3 Herbal Products ....................................................................................................................12
8.1.4 Food Supplements..................................................................................................................12
8.1.5 Eatables .................................................................................................................................12
8.1.6 Toiletries ................................................................................................................................12
8.1.7 Sanitation Products ...............................................................................................................12
8.1.8 Prepaid Cards........................................................................................................................12
8.2 PROFIT MARGINS .............................................................................................................................12
8.3 OTHER INCOME ................................................................................................................................13
9 LAND & BUILDING REQUIREMENT .........................................................................................13
9.1 LAND REQUIREMENT .......................................................................................................................13
9.2 UTILITIES REQUIREMENT .................................................................................................................13
10 OFFICE EQUIPMENT .....................................................................................................................13
11 HUMAN RESOURCE REQUIREMENT .......................................................................................14
12 PROJECT COSTS .............................................................................................................................15

13 FINANCIAL ANALYSIS ..................................................................................................................16
13.1 PROJECTED INCOME STATEMENT ................................................................................................16
13.2 PROJECTED BALANCE SHEET ......................................................................................................17
13.3 PROJECTED CASH FLOW STATEMENT..........................................................................................18
13.4 REVENUE CALCULATION.............................................................................................................19
14 KEY ASSUMPTIONS .......................................................................................................................20
1 EXECUTIVE SUMMARY
This SME venture entails setting up a Medical Store in big cities of Punjab i.e. Lahore,
Rawalpindi, Faisalabad, Multan, Sialkot, etc. The outlet would be located in commercial
markets of middle to upper middle income group residential areas, clinics and hospitals.
The product range offered in the proposed Medical Store is blend of both multinational
and national companies’ products and general products (Food Supplements, Toiletries,
Shampoos, Soaps, Diapers (sanitary napkins) and Cellular Prepaid Cards). The proposed
medical store will remain open for 24 hours (3 shifts).
Pakistan has a very vibrant and forward looking Pharma Industry. At the time of
independence in 1947, there was hardly any pharma industry in the country. Today
Pakistan has about 400 pharmaceutical manufacturing units including those operated by
25 multinationals present in the country. The Pakistan Pharmaceutical Industry meets
around 70% of the country's demand of Finished Medicine. The domestic pharma market,
in term of share market is almost evenly divided between the Nationals and the
Multinationals.
The Pakistan Pharmaceutical Industry is a success story, providing high quality essential
drugs at affordable prices to Millions. Technologically, strong and self reliant National
Pharmaceutical Industry is not only playing a key role in promoting and sustaining
development in the vital field of medicine within the country, but is also well set to take
on the international markets.
The total initial project cost for setting up a single outlet is estimated at Rs. 6.679 million.
The project is proposed to be financed through 50% debt and 50% equity. The project
NPV is projected around Rs. 1.060 million, with an IRR of 25.53% and payback period
of 3.44 years. The legal business status of this project is proposed as ‘Sole
Proprietorship’.
2 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was established
with an objective to provide fresh impetus to the economy through the launch of an
aggressive SME support program.
Since its inception in October 1998, SMEDA had adopted a sectoral SME development
approach. A few priority sectors were selected on the criterion of SME presence. In depth
research was conducted and comprehensive development plans were formulated after
identification of impediments and retardants. The all-encompassing sectoral development
strategy involved recommending changes in the regulatory environment by taking into
consideration other important aspects including finance, marketing, technology and
human resource development.
SMEDA has so far successfully formulated strategies for industries such as horticulture,
including export of fruits and vegetables, marble and granite, gems and jewellery, marine
fisheries, leather and footwear, textiles, surgical instruments, transport, dairy etc.
Whereas the task of SME development at a broader scale still requires more coverage and
enhanced reach in terms of SMEDA’s areas of operation.
Along with the sectoral focus a broad spectrum of business development services is also
offered to the SMEs by SMEDA. These services include identification of viable business
opportunities for potential SME investors. In order to facilitate these investors, SMEDA
provides business guidance through its help desk services as well as development of
project specific documents. These documents consist of information required to make
well-researched investment decisions. Pre-feasibility studies and business plan
development are some of the services provided to enhance the capacity of individual
SMEs to exploit viable business opportunities in a better way.
This document is in continuation of this effort to enable potential investors to make well-
informed investment decisions.
3 PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project pre-feasibility may form the basis of
an important investment decision and in order to serve this objective, the document/study
covers various aspects of project concept development, start-up, marketing, finance and
business management. The document also provides sectoral information, brief on
government policies and international scenario, which have some bearing on the project
itself.
This particular pre-feasibility is regarding Medical Store, which comes under
Pharmaceutical sector. Before studying the whole document one must consider following
critical aspects, which forms the basis of any investment decision.
4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Before making any investment decision, it is advisable to evaluate the associated risk
factors by taking into consideration certain key elements. For starting a medical store
critical factors that should be taken into consideration before launching the project are
listed below:
 Number of customers to the Medical Store will determine the financial success of the
project. The entrepreneur should analyze the minimum percentage of population that
it will have to mobilize out of the total population to achieve a steady flow of
customers. In order to do this, the entrepreneur should analyze existing competing
Medical Store businesses in the target vicinity.
 Looking at the nature of the products offered on a medical store, it is advised that the
store should be established in a city that has a population to cover the sales concept of
the project.
 Another aspect linked with the revenue generating capacity of the project is the
spending pattern of the potential customers in a specific city. Average per capita
income in Pakistan is USD 1,197/yr and increasing concern of people about their
health and fitness show that now people are consuming more medicines. This factor is
very helpful and it is observed in recent days that international multinational
pharmaceutical companies are looking at our country as potential market.
 Selection of location for sales outlet is an important factor in the successful running
of any medical store. Areas in the vicinity of a hospital/clinic or the developing areas
are most suitable locations.
 Availability of complete product line is another important factor. In addition to this,
provision of other general items, for the customers, also plays a major role in
increasing sales of a medical store.
5 PROJECT PROFILE
5.1 Opportunity Rationale
Pakistan is a very populous country and is ranked as 6th top populous country in the
World. Pakistan’s population has soared up to 177.10 million1, and at least one-third of it
is living below the poverty level. Majority of population has no access to clean water to
drink or proper sanitation facilities. This poses serious threats to health of masses.
Moreover the variable and harsh climate of Pakistan causes major viral diseases through
out the year. This creates a great demand for Pharmaceutical Products in Pakistan. As the
major source of retail sales of Pharma Products is through medical stores, a big
investment opportunity exists in this sector.
5.2 Project Brief
The proposed project is a well built medical store with all of the product range in stock
for sales. The proposed Size of the medical store should be around 800 sq. feet, with
electricity and 2 telephone lines. The proposed project is based on well-established
Pharmaceutical Retail Chains of Pakistan.
1
http://www.mopw.gov.pk/PopulationDynamicsByProvince.aspx
5.3 Market Entry Timing
As such there is no specific time required for the entry time in pharmaceutical sector. As
the need is increasing day by day due to the increase in population and diseases,
investment in this sector can be made any time in the year.
5.4 Proposed Business Legal Status
A medical store can be started as a sole proprietorship or a partnership and even it can be
registered under company law with Securities and Exchange Commission of Pakistan.
Although selection totally depends upon the choice of the entrepreneur but this financial
feasibility is based on a Sole Proprietorship. For getting information on the formation of
type of firm/company, please visit the Website:
www.saarcnet.org/newsaarcnet/govtpolicies/Pakistan/settingbusiness.html.
http://www.secp.gov.pk/Guides/PromotersGuide.pdf
5.5 Project Capacity and Rationale
The product range offered on a Medical Store is blend of both multinational and national
companies’ products and General Products (Food Supplements, Toiletries, Shampoos,
Soaps, Diapers (sanitary napkins) and Cellular Prepaid Cards). The proposed medical
store will remain open for 24 hours (3 shifts). It is recommended to start with one retail
outlet and expand the operation by one outlet after every 3 years.
5.6 Project Investment
The total cost of the project is around Rs. 6.679 million.

Table 5-1 Project Costs
Capital Investment Rs. 2,895,000
Working Capital Requirement Rs. 3,784,828
Total Investment Rs. 6,679,828
The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.
However this composition of debt and equity can be changed as per the requirement of
the investor.
Table 5-2 Project Financing
Debt 50% 3,339,914
Equity 50% 3,339,914
Total project Investment Rs. 6,679,828
Table 5-3 Viability

IRR % 25.53
NPV @25% Rs. 1,060,853
Pay Back Period (year) Yrs. 3.44
5.7 Proposed Product Mix
The proposed medical store will be offering a blend of different products. Percentage
quantity of each item offered on the store is based on survey of distribution companies.
Following is the list of products, which are to be offered on medical store.
Table 5-4 Product Mix
Product Category Percentage In Total Sales
Products of Multinational Companies 36.5
Products of National Companies 44.7
Herbal Products 5.1
Food Supplements 3.6
Eatables 3.0
Toiletries 2.0
Sanitation Products 2.0
Pre Paid Cards 3.0
5.8 Proposed Location
A medical store should be easily accessible and should have considerable population
concentration. It is proposed that the outlets may be opened in the big cities of Punjab i.e.
Lahore, Faisalabad, Multan, Rawalpindi, Sialkot, etc. But specifically in this pre-
feasibility study some locations are proposed in Lahore. Considering the spread of new
well developed residential areas some of the suitable locations in Lahore are:
 Main Boulevard Allama Iqbal Town
 Near Akbar Chowk, Faisal Town
 Johar Town Near Doctors Hospital
 DHA
 EME Colony
 Tech Society
 Jail Road
 Mughal Pura
 Chowk Chauburji
 Or any locations near any new hospital or emerging clinics.
5.9 Key Success Factors/Practical Tips for Success
Some of the Key Success factors that will determine the success of this project include:
 Availability of complete product range
 Availability of regular medicine supplies.
 A well trained Pharmacist
 Reasonable and competitive prices.
 Inventory control to avoid any pilferage.
5.10 Strategic Recommendations
5.10.1 Product Range counts a lot

Variety and availability are the key factors in retail business. As far as the Pharma
business is concerned, this is the most crucial factor. Almost all major manufacturers of
pharmaceutical products offer same drugs with different names (Company Names). So
availability of all major brands is crucial.
5.10.2 Customer Service
Outlet must have a proper temperature and proper outlook to attract the customers. If we
take a look at major players in Pharma retail business, like Fazal Din’s, Zaka’s Pharmacy,
Clinix Plus, Servaid, all of them have well-organized outlets all around the city. Not only
the outlets for the proposed medical store should be well organized, also the service
provided to the customers should be very quick and efficient.
5.10.3 Location of the outlet
The investment in better location pays in the long run. The Pharma retails business is
highly dependent upon the easy access for the buyers. This includes all areas near any
major hospital or popular clinics.
6 SECTOR & INDUSTRY ANALYSIS

6.1 Sector Characteristics
The review of Pakistani pharmaceutical market shows that there are around 450
companies, which are registered with the Ministry of Health. Out of some 350
manufacturing units operating in the country include dozens of multinationals.
Multinational pharmaceutical companies have played a vital role to provide the base for
the growth of the pharmaceutical industry since the emergence of Pakistan. They have
been enjoying the bulk of the business and are still enjoying after so many years, though
their collective market share has dropped significantly during last 18 years. In 1985, the
MNCs enjoyed 65 per cent of the market share while the national companies had 35 per
cent of it. The national pharmaceutical companies have improved their market share by
an average of 1.2 per cent every year. This percentage share increased up to a level of
53% in the year 2000 and this 18 per cent gain has come at the cost of MNCs whose
collective share has dropped by an equal percentage to 47 per cent during the same
period. Thus in 2000, the share of national companies stood at 53 per cent, 6 per cent
more than that of the MNCs.
6.2 Sub sector Information
The Pharma Industry has experienced major growth in recent years. As per an estimate
the Pharma industry is growing at 18% annually. The Pakistan’s harsh climate provides
more favorable business opportunities in pharmaceutical business.
6.3 Legal Issues Regarding Industry
The medical store must be registered under Drugs Act 1976 with respective District
Health Officer (DHO). The registration fee for obtaining license is Rs. 1,200/- and license
will be renewed after every 2 years. The office of Executive Director Health is located at
24-Cooper Road, Lahore. A form is duly filled and submitted along with all the required
documents. The said form is available at the same office. After that a physical survey is
conducted by the health department and only after that license is issued.
Purchase and sale of drugs of narcotics and steroid nature will be maintained in the stock
register. All the purchase invoices and stock register will be kept for 5 years.
6.4 Major Players
The pharmaceutical industry is growing in Pakistan day by day. Out of the national and
multinational companies operating in Pakistan the major players in this sector are:
Table 6-1 Major Players
Name of the Company No. of retail stores in Lahore
Fazal Din & Sons (Pvt.) Ltd. 2
Fazal Din Pharma Plus 15
Zaka Pharmacy 11
Clinix 15
Servaid 15
Guardian 10
7 MARKET INFORMATION
7.1 Market Potential2
The review of Pakistani pharmaceutical market shows that there are around 450
companies which are registered with the Ministry of Health, some 350 manufacturing
units operating in the country including dozens of multinationals. Healthcare in Pakistan
is still in the early stages of development. Widespread poverty and a weak health system
underlie the poor health status of the population. Government funding continues to be
minimal, equal to around 3% of GDP and achieves little more than maintaining the status
quo, while the problems of poor nutrition and sanitation are compounded by Pakistan's
large and fast growing population. However as the economy improves, the level of
spending may well begin to rise. Other issues at the heart of the problem include the
2
http://www.ppma.org.pk/PPMAIndustry.aspx
continuing prevalence of communicable diseases, low health manpower levels and the
under- utilization of primary health facilities.
The National pharma industry has shown a progressive growth over the years,
particularly over the last one decade. The industry has invested substantially to upgrade
itself in the last few years and today the majority industry is following Good
Manufacturing Practices (GMP), in accordance with the domestic as well as international
Guidance. Currently the industry has the capacity to manufacture a variety of product
ranging from simple pills to sophisticated Biotech, Oncology and Value Added Generic
compounds.
Although Pakistan 's pharmaceutical and healthcare sectors are expanding and evolving
rapidly, about half the population has no access to modern medicines. Clearly this
presents an opportunity, but much more work needs to be done by the government and
industry's stakeholders. The value of pharmaceuticals sold in 2007 exceeded US$1.4bn,
which equates to per capita consumption of less than US$ 10 per year and value of
medicines sold is expected to exceed US$2.3 B by 2012.
Pakistan is a developing pharmaceutical market, with a large population and economic
progress evident, but per capita drug spending was rather low at around US$9.30 in 2007.
Private spending accounts for 65% of total healthcare expenditure sourced through out-of
pocket payments, international aid and religious or charitable institutions. Pharmaceutical
spending accounts for less than 1% of the country's GDP, comparable to levels in some
neighboring countries but above that in some of the South Asian countries. The forecast
period is likely to witness the marginal strengthening of the generics sector, albeit more
in terms of volumes than values. The share of generics is also likely to increase further as
major drugs come off-patent in the near term, to the likely benefit of the generics-
dominated local industry.
The Pakistan pharma industry is relatively young in the international markets with an
export turnover of over US$ 100 Million as of 2007. Pakistan Pharma Industry boasts of
quality producers and many units are approved by regulatory authorities all over the
world. Like domestic market the sales in international market have gone almost double
during last five years. The pharma industry is focusing to an Export Vision of USD 500
Million by 2013. In the meantime, exports are also likely to be boosted by new regional
and global opportunities.
7.2 Target Customers
The major target market for the facility consists of residential areas in the vicinity of the
medical store.
8 PRODUCT
The proposed medical store will be offering a blend of different pharmaceuticals. Along
with pharmaceutical products, it will also be providing approximately 10% general items.
These general items include herbal products, eatables, food supplements and toiletries.
8.1 Major suppliers
8.1.1 Products of Multinational Companies

Abbott, GSK, Aventis, Novartis, Pfizer, ICI, Squib, Schering, Lilly, Rackitt & Benckiser,
BD, Searl, Hilton, Roche, Park Davis, Up John (Pharmacia)
8.1.2 Products of National Companies
Sami, Getz, Highmount, Wythe Schazoo, Eferoze, Reko, Atco, Nabi Qasim, Highnoon,
Woodwards, Servier
8.1.3 Herbal Products
Hamdard, Qurshi, Ajmal, TT, Marhaba
8.1.4 Food Supplements
Nestle Cereals, Nido, Meji, Slim up, Set point diet, Mead Johnson
8.1.5 Eatables
Cadburys, Union, Mitchell’s, Coca Cola, Pepsi, Nestle
8.1.6 Toiletries
Rose Petal, Flying, Lever Bros. Etc.
8.1.7 Sanitation Products
Pampers, Always, Baby Wipes, Adult Dipers, Trust, Baby Master, Huggies
8.1.8 Prepaid Cards
Jazz, UFone, Warid, Telenor, Zhong
8.2 Profit Margins
The sales prices charged for each item would be competitive and will only be earning a
certain percentage of revenue. Percentage margin charged on each type of product is as
under:
Table 8-1 Profit Margins
Item Profit Margin
Margin on Multinational Sales 10%
Margin on National Sales 15%
Margin on Herbal Products 30%
Margin on Food Supplements 30%
Margin on Eatables 10%
Margin on Toiletries 10%
Margin on Sanitation products 10%
Margin on Mobile Cards 3.5%
Total amount of sales is based on survey and observation. Total sales assumed for the
first year are as under:
Table 8-2 Estimated Sales3
Product Category Expected Sales Amount (Rs.)
Products of Multinational Companies 12,960,000
Products of National Companies 15,840,000
Herbal Products 1,800,000
Food Supplements 1,260,000
Eatables 1,080,000
Toiletries 720,000
Sanitation Products 720,000
Pre Paid Cards 1,080,000
Total sales for the first year 35,460,000
Above mentioned sales are assumed for the first year on the basis of survey. Annual
growth rate in sales is taken as 10%.
8.3 Other Income
Other income includes revenues from diabetes tests, blood pressure checking and any sort
of intra muscular injections. Such income is taken as 1% of the total annual revenues.
9 LAND & BUILDING REQUIREMENT

9.1 Land Requirement
Approximately 800 sq. ft. will be required for a medical store. It is recommended that the
area should be acquired for rent. Rent cost for the proposed areas will be ranging between
Rs. 80,000 to Rs. 100,000. Rent cost incorporated for financial analysis is Rs.100,000.
Advance rent of six months is also to be paid.
9.2 Utilities Requirement
Electricity
Telephone
10 OFFICE EQUIPMENT
The following equipment and furniture will be required for the offices:
Table 10-1 Details of Office Equipment
Office Equipment Quantity Price (Rs.) Total (Rs.)
Refrigerator 2 40,000 80,000
Split Units 4 40,000 160,000
3
details given in financial analysis (Revenue Calculation)
Computers 2 25,000 50,000

UPS 2 20,000 40,000
Printers (Epson small) 2 7,500 15,000
Software 1 100,000 100,000
Chairs 6 1,500 9,000
Counter & Show cases 1,243,500 1,243,500
Gluco meter & BP 1 8,800 8,800
apparatus
Fax 1 15,000 15,000
Total 1,720,000
11 HUMAN RESOURCE REQUIREMENT

Medical Store will run for 24 hours in three shifts (i.e. 8 hours per shift). Shift timing will
be:
Table 11-1 Shift Schedules
Shift 1 8:00 am to 4:00 pm
Shift 2 4:00 pm to mid night
Shift 3 midnight to 8:00 am
The staff will include Pharmacist who will have B-Pharmacy degree. Accounts officer
must be B. Com and having two to three years experience in related field. Computer
operator will be one year diploma holder having knowledge of proper inventory control.
Human resource requirement for the proposed project is as under:
Table 11-2 Staff Requirement (3 shifts)

Positions Number Salary/month Annual salary
(Rs.) (Rs,)
ADMINISTRATIVE STAFF:
Owner 1 50,000 600,000
Accounts officers 2 15,000 360,000
Pharmacist 1 20,000 240,000
Sales man 13 8,000 1,248,000
Cashier 2 8,000 192,000
Security Guards 3 8,500 306,000
Grand Total: 22 2,946,000
12 PROJECT COSTS
The breakdown of total project cost is in the table below:
Table 12-1 Project Costs
Capital Costs Rs.
Office Equipment 1,720,000
Preliminary Expenses 75,000
Pre-operational Expenses4 1,100,000
Total Capital Costs 2,895,000
Working Capital
Inventory 3,823,000
Accounts Payable (37,697)
Total Working Capital 3,784,828
Project Cost 6,679,828
4
Pre-operational Expenses include advance rent of six months
13 FINANCIAL ANALYSIS
13.1 Projected Income Statement
Projected Income Statement

Rs. in Thousands
Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X
Sales/Revenue 35,460 39,006 42,907 47,197 51,917 57,109 62,820 69,102 76,012 83,613
Cost of Sales:
Add opening stock - 3,823 3,854 4,240 4,664 5,130 5,643 6,208 6,828 7,511
Operating expenses 32,519 32,931 36,185 39,763 43,696 48,021 52,776 58,004 63,752 70,073
Less closing stock 3,823 3,854 4,240 4,664 5,130 5,643 6,208 6,828 7,511 8,262
28,696 32,899 35,800 39,339 43,230 47,508 52,212 57,383 63,070 69,322
Gross Profit 6,764 6,107 7,107 7,858 8,687 9,601 10,608 11,718 12,942 14,291
Operating Expenses:
Administrative Expenses 3,437 3,733 4,064 4,434 5,960 6,511 7,137 7,828 8,590 9,430
Marketing Expenses 100 95 90 86 81 77 74 70 66 63
Operating Profit 3,227 2,279 2,953 3,339 2,646 3,012 3,398 3,820 4,285 4,797
Financial Charges 508 401 294 187 80 - - - - -
L C Charges - - - - - - - - - -
Other Income 355 390 429 472 519 571 628 691 760 836
Profit before Taxation 3,074 2,269 3,088 3,624 3,085 3,583 4,026 4,511 5,046 5,633
Taxation 769 567 772 906 771 896 1,006 1,128 1,261 1,408
Profit after Taxation 2,306 1,702 2,316 2,718 2,314 2,688 3,019 3,384 3,784 4,225
Acc. Profit b/f - 2,306 4,007 6,323 9,041 11,355 14,042 17,062 20,445 24,229
Un-appropriated Profit c/f 2,306 4,007 6,323 9,041 11,355 14,042 17,062 20,445 24,229 28,454
16
PREF-82/December, 2011/Rev2
13.2 Projected Balance Sheet
Projected Balance Sheet

Rs. In Thousands
Year - 0 Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X
Tangible Fixed Assets 1,720 1,525 1,355 1,205 1,072 956 853 762 681 609 545
Preliminary Expenses 75 60 45 30 15 - - - - - -
Current Assets:
Stock in hand 3,823 3,823 3,854 4,240 4,664 5,130 5,643 6,208 6,828 7,511 8,262
Accounts Receivable - - - - - - - - - - -
Pre-paid rent 600 - - - - - - - - - -
Cash in Hand / Bank 500 3,716 4,705 6,340 8,251 9,431 11,838 14,499 17,470 20,782 24,473
4,923 7,538 8,559 10,580 12,915 14,562 17,481 20,707 24,298 28,293 32,735
6,718 9,124 9,959 11,815 14,002 15,518 18,334 21,469 24,979 28,902 33,280
Owners Equity:
Capital 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340 3,340
Accumulated Profit - 2,306 4,007 6,323 9,041 11,355 14,042 17,062 20,445 24,229 28,454
Long Term Loan 3,340 2004 1336 668 - - - - - - -
Current Liabilities:
Current Portion
of Long Term Loan - 668 668 668 668 - - - - - -
Tax provision - 769 567 772 906 771 896 1,006 1,128 1,261 1,408
Accounts Payable 38 37.697 41 44 48 52 56 61 66 71 77
38 1,474 1,276 1,484 1,622 823 952 1,067 1,194 1,333 1,486
6,718 9,124 9,959 11,815 14,002 15,518 18,334 21,469 24,979 28,902 33,280
17
13.3 Projected Cash Flow Statement
Projected Cash Flow Statement

Rs. in Thousands
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Net Profit - 3,074 2,269 3,088 3,624 3,085 3,583 4,026 4,511 5,046 5,633
Amortization - 15 15 15 15 15 0 0 0 0 0
Depreciation - 195 171 150 132 117 103 91 81 72 64
- 3,284 2,454 3,253 3,771 3,217 3,687 4,117 4,592 5,117 5,697
Working Capital Change - 600 (29) (382) (420) (462) (509) (560) (616) (677) (745)
Cash form other Sources
Owners 3,340 - - - - - - - - - -
Bank Finance 3,340 - - - - - - - - - -
6,680 - - - - - - - - - -
Total Sources 6,680 3,884 2,426 2,871 3,351 2,754 3,178 3,557 3,977 4,440 4,952
Applications:
Fixed Assets 1,720 - - - - - - - - - -
Preliminary Expanses 75 -
Preoperational Expenses 1,100 -
Working Capital 3,785 -
Re -Payment of Loan - 668 668 668 668 668 - - - - -
L C Charges - - - - - - - - - - -
Tax - - 769 567 772 906 771 896 1,006 1,128 1,261
6,680 668 1,436 1,235 1,440 1,574 771 896 1,006 1,128 1,261
Cash Increase/(Decrease) - 3,216 989 1,635 1,911 1,180 2,407 2,661 2,970 3,312 3,691
Opening Balance 500 500 3,716 4,705 6,340 8,251 9,431 11,838 14,499 17,470 20,782
Closing Balance 500 3,716 4,705 6,340 8,251 9,431 11,838 14,499 17,470 20,782 24,473
18
13.4 Revenue Calculation

Year - I Year - II Year - III Year - IV Year - V Year - VI Year - VII Year - VIII Year - IX Year - X
Sales Growth Rate 10% 10% 10% 10% 10% 10% 10% 10% 10%
Purchase Price Growth Rate 10% 10% 10% 10% 10% 10% 10% 10% 10%
Revenue (Rupees): Proportion
Multinational 36.5 12,960,000 14,256,000 15,681,600 17,249,760 18,974,736 20,872,210 22,959,431 25,255,374 27,780,911 30,559,002
National 44.7 15,840,000 17,424,000 19,166,400 21,083,040 23,191,344 25,510,478 28,061,526 30,867,679 33,954,447 37,349,891
Herbal 5.1 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306
Food Supliments 3.6 1,260,000 1,386,000 1,524,600 1,677,060 1,844,766 2,029,243 2,232,167 2,455,384 2,700,922 2,971,014
Eatables 3.0 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584
Toiletries 2.0 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722
Sanitation Products 2.0 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722
Pre-paid Cards 3.0 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584
35,460,000 39,006,000 42,906,600 47,197,260 51,916,986 57,108,685 62,819,553 69,101,508 76,011,659 83,612,825
35,460,000 39,006,000 42,906,600 47,197,260 51,916,986 57,108,685 62,819,553 69,101,508 76,011,659 83,612,825
Diseases
ALLOPATHIC
Infection 23% 6,624,000 7,286,400 8,015,040 8,816,544 9,698,198 10,668,018 11,734,820 12,908,302 14,199,132 15,619,046
Health care products 7% 2,016,000 2,217,600 2,439,360 2,683,296 2,951,626 3,246,788 3,571,467 3,928,614 4,321,475 4,753,623
Cardic 10% 2,880,000 3,168,000 3,484,800 3,833,280 4,216,608 4,638,269 5,102,096 5,612,305 6,173,536 6,790,889
Diabetics 20% 5,760,000 6,336,000 6,969,600 7,666,560 8,433,216 9,276,538 10,204,191 11,224,610 12,347,072 13,581,779
ENT 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445
B.P. / Relaxation 10% 2,880,000 3,168,000 3,484,800 3,833,280 4,216,608 4,638,269 5,102,096 5,612,305 6,173,536 6,790,889
Skin / Allergies 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445
Kidney 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445
Gyne 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445
Muscullar 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445
Ortopadeic 5% 1,440,000 1,584,000 1,742,400 1,916,640 2,108,304 2,319,134 2,551,048 2,806,153 3,086,768 3,395,445
100% 28,800,000 31,680,000 34,848,000 38,332,800 42,166,080 46,382,688 51,020,957 56,123,052 61,735,358 67,908,894
Multinational 45% 12,960,000 14,256,000 15,681,600 17,249,760 18,974,736 20,872,210 22,959,431 25,255,374 27,780,911 30,559,002
National 55% 15,840,000 17,424,000 19,166,400 21,083,040 23,191,344 25,510,478 28,061,526 30,867,679 33,954,447 37,349,891
100% 28,800,000 31,680,000 34,848,000 38,332,800 42,166,080 46,382,688 51,020,957 56,123,052 61,735,358 67,908,894
Herbal
Qurshi 40% 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722
Hamdard 60% 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584
100% 1,800,000 1,980,000 2,178,000 2,395,800 2,635,380 2,898,918 3,188,810 3,507,691 3,858,460 4,244,306
Food Suppliments
Slim up 40% 504,000 554,400 609,840 670,824 737,906 811,697 892,867 982,153 1,080,369 1,188,406
Others 60% 756,000 831,600 914,760 1,006,236 1,106,860 1,217,546 1,339,300 1,473,230 1,620,553 1,782,608
100% 1,260,000 1,386,000 1,524,600 1,677,060 1,844,766 2,029,243 2,232,167 2,455,384 2,700,922 2,971,014
Eatables 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584
Toiletries 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722
Sanitation Products 720,000 792,000 871,200 958,320 1,054,152 1,159,567 1,275,524 1,403,076 1,543,384 1,697,722
Pre-paid Cards
Mobile 1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584
1,080,000 1,188,000 1,306,800 1,437,480 1,581,228 1,739,351 1,913,286 2,104,614 2,315,076 2,546,584
19
14 KEY ASSUMPTIONS
Table 14-1 Operating Assumptions
Hours operational per day 24 hours
Days operational per month 30 days
Day operational per year 360 days
Table 14-2 Revenue Assumptions
Revenue assumption Survey of Distribution companies &
Pharmacy
Revenue classification On the basis of diseases
Sales growth rate 10%
Other Income (%age of revenues) 1%
Table 14-3 Expense Assumptions
Printing & Stationary 1% of Revenue
Entertainment 0.1 % of Revenue
Communication Expense 0.1% of Revenue
Consultancy Charges and Audit (Annual) Rs. 20,000
Electricity cost growth rate 10%
Electricity rate / unit Rs. 15
Kilo Watts Consumed per day 5.7
Depreciation Method Written Down Value
Depreciation Rate on Furniture 10%
Depreciation Rate on Electric Equipment 10%
Computers and printers 20%
Table 14-4 Cash Flow Assumptions
Accounts payable cycle 7 days
Inventory 45 days
Table 14-5 Financial Assumptions
Project Life 10 Years
Debt 50%
Equity 50%
Debt Tenure 5 Years
Interest rate 16%
Income tax rate 25%
Discount rate (weighted avg. cost of capital for NPV) 25%
Minimum Cash Balance Rs. 0.5 Million
20
PREF-82/December, 2011/Rev 2

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Pre-Feasibility Study

Small and Medium Enterprises Development Authority

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

Issue Date August, 2004

Revision Date December, 2011

Issued by Library Officer

12 PROJECT COSTS .............................................................................................................................15

3 PURPOSE OF THE DOCUMENT

4 CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

5.3 Market Entry Timing

The total cost of the project is around Rs. 6.679 million.

Table 5-3 Viability

5.7 Proposed Product Mix

5.8 Proposed Location

5.9 Key Success Factors/Practical Tips for Success

5.10 Strategic Recommendations

5.10.1 Product Range counts a lot

6 SECTOR & INDUSTRY ANALYSIS

6.2 Sub sector Information

8.1 Major suppliers

8.1.1 Products of Multinational Companies

9 LAND & BUILDING REQUIREMENT

Computers 2 25,000 50,000

11 HUMAN RESOURCE REQUIREMENT

Human resource requirement for the proposed project is as under:

Table 11-2 Staff Requirement (3 shifts)

Projected Income Statement

13.2 Projected Balance Sheet

Projected Balance Sheet

13.3 Projected Cash Flow Statement

Projected Cash Flow Statement

13.4 Revenue Calculation

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