ContentsPage#

Executive Summary 02Name & Location of Project 04Products, Installed Capacity, Means Of Finance 05Introduction 06Implementation Schedule 08Financial Ratios 09Market Analysis 11Technical analysis 16Machinery Description 18Financial Analysis 22Projected Financial Statements 27SWOT Analysis 30Recommendation 32Conclusion 34

1

Table of Contents

Title: “TEXTILE SPINNING MILL”

Project Assignment:

Each student of M.COM (Finance) 4th semester required preparing a Project Assignment. The Project assignment is given to increase our knowledge about “Project Management”.

Objectives:

1. SWTO analysis of Textile Spinning Mill.2. Identify and list down the all aspects and important points of Textile Spinning Mill.3. What is a Production Process.4. What is Cost of unit, Means of finance, Estimated income statement, Estimated Balance sheet, etc.

Approach to Project:

The Team of project have analyze, summarize, and interpret the data, which are collected different primary and secondary sources.

Data Collection:

Both primary and secondary means of data will be used to collect the Data. Like Books, Internet, personal visits, teacher guidance etc.

2

Executive Summary

Primary Sources:

The Team of Project personally visited the SPINNING MILL for practical view: Unit selected is;‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’

Questionnaire:

Project Team has prepared a Questionnaire that contains 50Questions and exists on 10 pages for Management of‘ALAZHAR TEXTILE SPINNING MILL, BAHAWALPUR’

Data Preparation & Analysis:

After collection of all the data through both primary & secondary means, team will used MS. Word, MS. Excel, MS. Power point etc.

Time Frame:

Time period is allowed is one month 03/05/2010 to 15/06/2010.

Limitation:

Team has visited the various people but the information given by them is just based of approximation.

3

“KSZ SPINNING MILL”

Head office: “P.O. BOX. 1245 Small-Industries Bahawalpur”

Tel: 062-2750337

Fax: +92-62-277653, 277652

Contact Person: ZOHAIB SALEEM ( G.M)

E-mail: kashifnazeer01@yahoo.com

Kashif Nazeer

Branch: 7- BC HASILPUR ROAD BAHAWALPUR.

“ Pakistan- Bahawalpur”

7- BC HASILPUR ROAD BAHAWALPUR.

4

Name of Project

Location of Project

CITY

LOCATION

Cotton Yarn(22 single)

The capacity of projected plant produces161000 Bags at 100% Efficiency per Year.

RS. In (000)

Fixed Cost 611,215

Initial Working Capital + 1 07,276

718,491

Debt 53% Equity 47%

5

PRODUCTS

Installed Capacity

Cost of Project

Means of Finance

United Bank Ltd. Bahawalpur.

A- Kashif Nazeer

B- Salman Khalid

C- Zohaib saleem

Mr. Dilshad Abbasi

Civil Engineer

Shahzad & co. Bahawalpur

Contact # 0313-6800085

6

Names of Lender

Names of Sponsors

Name of Civil Contractor

Trützschler Group(China)

7

Name of MachinerySupplier

Mr. Jorg Hellwig

CEO

Implementation Schedule

Sr.No. Activities Month Year

1Engineering studies and designing of civil works: 2010

Start January 2010

Complete February 2010

2Construction of Building and Civil works: 2010

Start February 2010

Complete September 2010

3 Order for foreign machinery March 2010

4Arrival of foreign machinery at sea port September 2010

5 Arrival of foreign machinery a site October 2010

6 Installation of Machinery October 2010

7 Arrival of local machinery at site September 2010

8 Trial Run Operation November 2010

9 Start Commercial production December 2010

8

Implementation Schedule

Current Ratio

Gross Profit Ratio

G R O S S P R O F I T 34.3% 33.8% 33.6%

Operating Profit Ratio

Net Profit Ratio

Net Profit 11% 14.7% 21%

Current Ratio 1.42 1.26 1.31

OPERATING PROFIT

28.9% 28.4% 28.3%

9

Financial Ratios

Internal Rate of Return

IRR= 39%

Payback Period

2 YEARS.

Sponsor’s Stake

47%

10

INTERNATIONAL MARKET ANALYSIS

Of the total 163 million spindles in the world, 113 million spindles are

installed in Asia. China has the largest number of installed spindles in the world and accounts

for25% of the world and 39% of the Asia. There has been no change in China’s spinning

capacity during the period 1992-96. China is followed by India, which has 32 million spindles

and contributes 20% to the world and 30% to Asian installed spindles. India has increased its

spinning capacity at a growth rate of 3%.Yarn is a $27 billion global market. Two third of the

total global spinning capacity is installed in Asia and as a result Asian exporters account for 40%

of total world exports. Major Asian yarn producing countries are China, India and Pakistan.

Major markets for Cotton Yarn are Hong Kong, China, Japan, Italy, Germany, Korea, UK and

the USA. Cotton yarn is the largest product category within yarn and accounts for around 25% of

total global exports. However 92% of yarn exports from Pakistan are concentrated just in this

one category.

11

Market Analysis

National market analysis

Pakistan is the third largest player in Asia. Pakistan’s spinning capacity is 5% of the total

world and 7.6% of the capacity in Asia. Pakistan’s growth rate has been 6.2% and is second only

to Iran amongst the major players

YearNo. of Units

Installed Spindles

Capacity Rotors

LoomsOperative Spindles

Capacity Rotors

1994-95 277 5568 75 15 4827 67

1995-96 307 6216 81 15 5333 67

1996-97 334 6860 95 14 5520 79

1997-98 471 8419 138 14 6105 82

1998-99 494 8610 132 14 6262 74

1999-00 503 8717 143 13 6458 80

2000-01 440 8230 143 10 6538 87

2001-02 442 8368 149 10 6631 80

2002-03 442 8392 166 10 6671 66

2003-04 443 8477 150 10 6825 66

2004-05 444 8600 145 10 6913 70 2005-06 446 8736 155 08 7011 75 2006-07 449 8922 167 11 7231 69 2007-08 453 9568 171 10 7315 802008-09 521 9768 182 15 7454 85

(Source: APTMA)

12

PRODUCTION OF YARNCotton is required for spinning of yarn. There are about 440 spinning units in the county and the production of yarn is detailed as under:

Year Yarn Produced (000) KGS

1994-95 1,055,228

1995-96 1,118,270

1996-97 1,234,539

1997-98 1,498,948

1998-99 1,413,648

1999-00 1,505,244

2000-01 1,530,855

2001-02 1,540,720

2002-03 1,547,632

2003-04 1,678,532

2004-05 1,720,580

2005-06 1,780,582

2006-07 1,865,680

2007-08 1,921,585

2008-09 1,985,654

(Source: APTMA)

13

ESTIMATED DEMAND AND SUPPLY

Demand of yarn is increasing @ 10% per annum while the supply is

increasing @ 5% per annum.

Cotton yarn is gaining popularity on healthy grounds and also for rapid increase in population

Estimated demand and supply is detailed as under considering 5% increase in production and 10% increase in demand.

Year Supply Demand Gap

1994-95 2320 2547 227

1995-96 2436 2801 365

1996-97 2558 3081 523

1997-98 2686 3390 704

1998-99 2820 3729 909

1999-00 2961 4102 1141

2000-01 3109 4512 1403

2001-02 3264 4963 1699

2002-03 3428 5460 2032

2003-04 3599 6006 2407

2004-05 3779 6606 2827

2005-06 3858 6761 2903

2006-07 3945 6822 2877

2007-08 4051 6921 28702008-09 4175 7055 2880

14

Local market analysis

The area in which we will locate our unit is the cotton belt area and

we have lot of access to raw material market like ginned cotton is available

from the whole of the country in four province particularly.

PunjabSindh

The cotton belt areas in both the provinces are

Multan

Kehrore paka

Lodhran

Vehari

Khan pur

Sahiwal

Bahawal pur

The Demand of Yarn in last few years is increasing because the agriculture sector is now

growing and the demand of Yarn in Textile sector also increasing.

We sale our product directly to weaving sector there is no middle man include but

some time middle man may include.

Present Demand

Distribution Channel

Technical Analysis

THE PROJECT

The project envisages the establishment of a Textile Spinning Unit consisting of 15000 spindles using cotton and as a raw material for the production of yarn.

FACILITIES FOR THE PROJECT

PARTICULARS OF LAND

The location of the project is selected after taking into consideration the following

factors.

AVAILABILITY OF RAW MATERIAL

Bahawalpur is cotton growing area; therefore, plenty of raw material is

available.

AVAILABILITY OF MANPOWER

There is no dearth of manpower because there are quite a good number of industries

and the skilled labor is attracted to this region.

Grid Station: Because there is grid station so we selected this land.

LABOUR:

Both skilled and unskilled labour is abundantly in this area and no difficulty is

foreseen in hiring and retaining experienced and efficient workers.

B low Room

Card

List of Machinery

Drawing

Simplex

Ring Frame

Coning

RS in(000)

item unit cost Qty price

Blowroom 8,000,000 3 24,000

Card 7,250,000 15 108,750

Drawing 8,500,000 5 42,500

Simplex 7,500,000 8 60,000

Ring Frame 1,500,000 15 22,500

Autocone 8,500,000 9 76,500

COST OF MACHINARY     334,250

Import Duty 15%   50,138

COST OF MACHINARY     384,388

Cost of Machinery

Brief Description of Finance

In Financial Analysis we see the sources of finance and calculate the ratios

of our project that how much it is profitable for us and also we make financial statements

to know that how much it is feasible for us.

Cost of ProjectThe total cost of project is Rs. 718,4 91,000

Salary Annual per

Month Costa) Administrative Salaries Nos (Rs.) (000)

Chairman 1 40,000 480Chief Executive 1 20,000 240President 1 10,000 120Financial Controller 1 10,000 120Purchase Manager 1 8,000 96Computer Manager 1 8,000 96Personal Manager 1 7,000 84Assistants 3 5,000 180Clerks and Typists 3 4,500 162Driver and Peons 6 4,500 324Sweepers 5 4,000 240 TOTAL 2,142Add: Fringe Benefits @ 10% 214

TOTAL 2,356

Personnel Analysis

Financial Analysis

Means of FinanceIn the sources of finance we take Loan from UBL and the remaining is from the

Sponsors.

CURRENT ASSETS (Rs. in 000 )

Cash 27,533Accounts Receivable @2% of sales 2% 24,151

Raw materials 66,354

Imported components 0

Imported raw material 0

Packaging materials Finished Goods Inventory 5% of production 60,378

Stores & Spares 20,000

Advances & deposits 20,000

Total 218,417CURRENT LIABILITIESAccounts Payable 3% inventory 23,888

Accrued Expenses 3% inventory 23,888Bank Borrowings 50% of inventories 50% 63,366

Total 111,141

INITIAL NET WORKING CAPITAL 107,276

Initial Working Capital

Operating Years : YAER 1 YEAR 2 YEAR 3

Production Effeciency Assumed :

65% 70% 75% b) Porduction of yarn 22 single

104,650

112,700

120,750

Add : Begining Inventory

-

5,233

5,897

Available for sale

104,650

117,933

126,647

Less : End. Inventory 5%

5,233

5,897

6,332

SALE

99,418

112,036

120,314 60% 65% 70%

b) Porduction of WASTE 108,000 117,000 126,000Add : Begining Inventory 0 5,400 6,120 Available for sale 108,000 122,400 132,120Less : End. Inventory 5% 5,400 6,120 6,606SALE 102,600 116,280 125,514

102,600 116,280 125,514 sale in amount

price per bag

22 Single

12,100

1,202,9

52

1,355,6

34 1,455,803

sale of waste 45

4,617

5,233

5,648

Total Sales 1,20

7,569 1,36

0,867 1,46

1,451 sale increase with 15%

Total Net Sales 1,20

7,569 1,56

4,997 1,68

0,669 ending inventory of finished goods 5%

yarn 6 6 7

Estimated Production

0,148 7,782 2,790

waste

231

262

282

a) Cotton bails 49,000 Rs. In (000)

65% 70% 75%

I II III

a) Cotton bails 31,850 34,300 36,750

31,850 39,445 42,263

raw material inc. by 15%

1- COST OF RAW MATERIALS Rs. In (000)

a) cotton @ Rs.25000per bail 796,250 986,125

1,056,563

TOTAL 796,250 986,1251,056,5

63Beginning inventory of raw material 0 23887.5 29583.75ending inventory of raw material 3% 23888 29584 31697

material used794,81

7980,42

91,054,4

49

Raw Material Requirement

  Rs. in ( 000 ) COST OF THE PROJECT LOCAL FOREIGN TOTAL        

- Project Land & Its Development 30,400  

30,400

- Building & Civil Works 113,775  

113,775

-Foreign Machinery      

(UBL)   384,388

384,388

-Insurance & clearance 107  

107

- Engineering /Technical Fees 2,000  

2,000

- Erection & Installation 3,844  

3,844

- Furniture & Fixture 1,239  

1,239

- Vehicles 2,500  

2,500

- Mark-up during Construction 61,334  

61,334

- Pre-production Expenses 11,430  

11,430

- Contingencies 200  

200

TOTAL FIXED COST: 226,828

384,388

611,215

- Initial Net Working Capital 107,276 -

107,276

TOATL COST OF THE PROJECT:

334,104

384,388

718,491

MEANS OF FINANCE       D e b t      

UBL GUARANTEE 0 384,388

384,388

TOTAL DEBT:   384,388

384,388

E q u i t y     -

- Paid-up Capital (Sponsors) 334,104 -

334,104

TOTAL EQUITY     334,104

TOTAL DEBT & EQUITY 334,104

384,388

718,491

Cost of Project

  ( Rs. in 000 )  

For the year ending Sept. 30,   I II IIIEfficiency Assumed :   65% 70% 75%  

SALES  1,207,5

691,564,9

971,680,66

9COST OF GOODS SOLD :        - Raw Materials   794,817 980,429 1,054,449- Labour   18,720 20,592 22,651- Manufacturing Expenses   6,457 6,699 6,941- Excise Duty \ Sales tax        -Royalty fee        - Depreciation 37,002 37,002 37,002 Cost of Goods Manufactured  

856,995

1,044,721

1,121,043

Add: Beginning Inventory   0 63,313 71,349Less: Ending Inv. 5% 63,313 71,349 76,621

Cost of Goods Sold :  793,68

21,036,6

851,115,7

71         

G R O S S P R O F I T  413,88

7528,31

1564,89

8OPERATING EXPENSES        - Admin & General Expenses   4,791 5,031 5,282- Selling Expenses   60,378 78,250 84,033 Total Operating Expenses   65,170 83,281 89,316

OPERATING PROFIT 348,71

7445,03

1475,58

2OTHER INCOME   10,761 74,129 246,803NON OPERATING EXPENSES        - Financial Expenses 59,952 53,953 47,651Amortization 1,143 1,143 1,143workers welfare fund 9% 31,385 40,053 42,802workers participation fund 9% 31,385 40,053 42,802Sub-Total 123,864 135,202 134,399P R E - T A X P R O F I T 235,614 383,958 587,986

Income Statements

Provision for Taxes 40% 94,246 153,583 235,194N E T P R O F I T 141,368 230,375 352,792 RETAINED EARNINGS 141,368 230,375 352,792

(Rs. in 000)

As on Sept. 30, Construction. I II IIIASSETSCash 27,533 248,607 1,046,299 1,284,657

Marketable Securities 0 117,922 5,560 6,050

Accounts Receivables 24,151 277,741 359,949 386,554

Finished Goods Inventory 60,378 63,313 71,349 76,621

Raw Material Inventory 66,354 23,888 29,584 31,697

Stores & Spares 20,000 132,969 150,433 160,000

Advances & Deposits 20,000 44,323 50,144 60,000

Total Current Assets 218,417 908,7621,713,3

182,005,5

79Fixed Assets at cost 599,785 599,785 599,785 599,785Less: Accumulated Depreciation. 37,002 74,003 111,005Net Fixed Assets: 599,785 562,783 525,782 488,780Preliminary Expenses: 11,430 10,287 9,144 8,001

Total Assets: 829,6321,481,8

332,248,2

442,502,3

60LIABILITIES & EQUITYCurrent Liabilities- Accounts Payable 23,888 35,910 547,749 588,234

- Accrued Expenses 23,888 277,741 359,949 386,554

- Workers Participation. Fund 0 31,385 40,053 42,802

-Workers Welfare Fund 0 31,385 40,053 42,802

- Dividends Payable

- Taxes Payable 94,246 153,583 235,194

- Bank Borrowings 63,366 170,527 215,649 231,588

- Cur. Mat. of L T Debt

Total Current Liabilities: 111,141 641,1921,357,0

361,527,1

75Long-term Liabilities 384,388 365,168 326,729 288,291Total Long-term Liabilities 384,388 365,168 326,729 288,291EQUITYsponsor’s 334,104 334,104 334,104 334,104

- Un-appropriated Profit 0 141,368 230,375 352,792

Balance Sheet

Total Equity: 334,104 475,472 564,478 686,895Total Liabilities & Equity: 829,632

1,481,833

2,248,244

2,502,360

     (Rs. in 000)  

  Const. Year I II IIISOURCES        Operating Profit 0 348,717 445,031 475,582Add Back: Depreciation 0 37,002 37,002 37,002 Amortization   1,143 1,143 1,143

Funds from Operations 0 386,862 483,175513,72

7paid up capital (sponsor’s) 334,104 0 0 0UBL GUARANTEE 384,388     0- Custom Debentures        Accrued Expenses 23,888      account payable 23,888      Increase in Current Liabilities. 0 530,051 715,844 170,139Increase in Bank Borrowings 63,366 -107,161 45,122 15,938

TOTAL SOURCES 829,632 809,7521,244,14

1699,80

4APPLICATION OF FUNDS        Investment in Fixed Assets: 599,785 0 0 0-Preliminary Exp 11,430 1,143 1,143 1,143Financial Expenses 0 59,952 53,953 47,651Repayment of :        UBL loan 0 19,219 38,439 38,439Workers Participation Fund 0 31,385 40,053 42,802-Workers Welfare Fund   31,385 40,053 42,802Taxes 0 94,246 153,583 235,194Dividend 0 0 0 0Increase in current Assets: 190,884 351,350 119,226 53,413

TOTAL 802,099 588,678 446,449461,44

5Surplus/(Deficit) 27,533 221,074 797,692 238,359

Cash Balance - Opening 0 27,533 248,6071,046,2

99

Cash Balance - Ending 27,533 248,607 1,046,2991,284,6

57

Cash Flows

SWOT ANALYSIS

STRENGTHS:This is high where there a few, large players in a market e.g. the large grocery chainIf there are a large number of undifferentiated, small suppliers e.g.

small farming businesses supplying the large grocery chains.

The cost of switching between suppliers is low e.g. from one fleet

supplier of trucks to another.

The power of suppliers tends to be a reversal of the power of buyers

WEAKNESSES

Shortage of Electricity in Pakistan cut down the Business.

Highly dependent on cotton production.

Opportunities:A developing market such as quality yarn production

Mergers, joint ventures or strategic alliances

Moving into new market segments that offer improved profits

A new international market

A market vacated by an ineffective competitor

Threats

A new competitor in your home marketprice wars with competitorsA competitor has a new, innovative product or service

Firm has opportunity to operate successfully in emerging markets by using its great strengths.

Strong competition in current market and also desire to make rapid growth, Market development has become favorable strategy for current situation.

As company is doing good business and there is strong financial position as mentioned from ratio analysis so there is chance of innovation and high profits can be earned.

Company should try to expand its market share by providing quality products at low price and by attracting customer’s attention through stylish and improved design and outlook of packing.

We conclude that on the basis of survey of spinning Mill that the

Yarn is necessary product so its demand increases day by day.

There is no chance to decrease the demand of Yarn. Pakistan is an

agricultural country and it plays a very important role in our

economy. Availability of raw material is very easy. So, conclusion

is that the spinning Mill is a profit motive business because no

chance of decrease of demand.

Our recommendation to new investors is that they must

invest in spinning Mill. So, they take step forward to come

and invest or to start this business, and also contribute in the

economic as well as social growth of Pakistan.

Conclusion