Pre-Feasibility Study

Animal Feed Mill

(Inclusive of Urea Molasses Block Preparation)

Small and Medium Enterprise Development Authority

Government of Pakistan

www.smeda.org.pk

HEAD OFFICE
3rd Floor, Aiwan-e-iqbal complex, Egerton Road, Lahore
Tel 042- 111 111 456, Fax 6304926-7 Website www.smeda.org
[email protected]

REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE REGIONAL OFFICE

PUNJAB SINDH NWFP BALOCHISTAN
4th Floor, Aiwan-e-iqbal 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
complex, egerton road Complex II, M.T. Khan Road, State Life Building Chaman Housing Scheme
Lahore, Karachi. The Mall, Peshawar. Airport Road, Quetta.
Tel: (042) 111-111-456 Tel: (021) 111-111-456 Tel: (091) 9213046-47 Tel: (081) 831623, 831702
Fax: (042)6304926-7 Fax: (021) 5610572 Fax: (091) 286908 Fax: (081) 831922
[email protected] [email protected] [email protected] [email protected]

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Table of contents

1 DISCLAIMER……………………………………………………………………………………………………….2

1 DISCLAIMER ........................................................................................................................................ 4

2 EXECUTIVE SUMMARY ....................................................................................................................... 5

3 INTRODUCTION TO SMEDA ............................................................................................................... 6

4 PURPOSE OF THE DOCUMENT ......................................................................................................... 6

5 BRIEF DESCRIPTION OF PROJECT AND PRODUCT ...................................................................... 7

5.1 PROJECT BRIEF .................................................................................................................................. 7

5.2 PROJECT LEGAL STATUS ................................................................................................................. 7

5.3 PROJECT INSTALLED AND OPERATIONAL CAPACITY ................................................................. 7

5.4 PROJECT PROPOSED LOCATION .................................................................................................... 7

5.5 PRODUCTION PROCESS FLOW FOR COMPOUND FEED .............................................................. 8

5.6 PRODUCT RAW MATERIAL REQUIREMENT ............................................................................................................ 8
A) CLASSIFICATION OF FEED INGREDIENTS: .............................................................................................................. 8
B) PROTEIN FEEDSTUFFS: .......................................................................................................................................... 9
C) CARBOHYDRATE/ENERGY FEEDSTUFFS: ............................................................................................................... 9
D) MINERAL SUPPLEMENTS: ....................................................................................................................................... 9
E) FATS AND OILS: ...................................................................................................................................................... 9
F) FEED FORMULA FOR CATTLE/BUFFALOES: ........................................................................................................... 9
5.7 PRODUCT RAW MATERIAL REQUIREMENT (UMB) ......................................................................10
a) Protein Sources: ................................................................................................................................................ 11
b) Carbohydrate Sources: ..................................................................................................................................... 11
c) Mineral supplements: ........................................................................................................................................ 11
5.8 PRODUCTION PROCESS OF UREA MOLASSES BLOCK (UMB) ..................................................12
A) PROCESS FLOW OF UMB .................................................................................................................................... 12
B) PREPARATION OF FEED INGREDIENTS ................................................................................................................. 12
c) Molasses ............................................................................................................................................................. 12
d) Urea ..................................................................................................................................................................... 13
e) Salt....................................................................................................................................................................... 13
f) Cement or quicklime ......................................................................................................................................... 13
g) Bran ..................................................................................................................................................................... 13
h) Equipment for mixing: ....................................................................................................................................... 13
i) Introduction of the Product components ........................................................................................................ 14
j) Molding ............................................................................................................................................................... 14
k) Cutting the blocks .............................................................................................................................................. 15
l) Drying .................................................................................................................................................................. 15
5.9 PRODUCT UTILIZATION GUIDELINES (UMB & FEED) ..................................................................15

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A) SPECIES OF LIVESTOCK ....................................................................................................................................... 16

B) FEEDING PERIOD .................................................................................................................................................. 16
C) MINIMUM ROUGHAGE REQUIREMENTS ............................................................................................................... 16
D) ADAPTATION OF ANIMALS .................................................................................................................................... 16
E) FEEDING SYSTEM ................................................................................................................................................. 16
F) ESTABLISHING PRIORITIES ................................................................................................................................... 17
5.10 PROJECT ESTIMATED TIME FOR COMPLETION ..........................................................................17

5.11 PRODUCT LEGAL REQUIREMENTS................................................................................................17

5.12 PRODUCT PACKAGING COST .........................................................................................................17

6 CRITICAL FACTORS..........................................................................................................................17

7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT .........................................................................18

8 POTENTIAL TARGET CUSTOMERS / MARKETS ...........................................................................18

9 PROJECT COST SUMMARY .............................................................................................................19

9.1 PROJECT ECONOMICS.....................................................................................................................19

9.2 PROJECT FINANCING .......................................................................................................................20

9.3 PROJECT COSTS ..............................................................................................................................20

9.4 LAND REQUIREMENT .......................................................................................................................21

9.5 COVERED AREA REQUIREMENT ....................................................................................................21

9.6 MACHINERY REQUIREMENT ...........................................................................................................22

9.7 FURNITURE & FIXTURES REQUIREMENT ......................................................................................24

9.8 OFFICE EQUIPMENT REQUIREMENT .............................................................................................24

9.9 VEHICLE REQUIREMENTS ...............................................................................................................25

9.10 HUMAN RESOURCE REQUIREMENT ..............................................................................................25

9.11 UTILITIES AND OTHER COSTS ........................................................................................................25

9.12 REVENUE GENERATION ..................................................................................................................26

10 CONTACT DETAILS ...........................................................................................................................26

11 USEFUL WEB LINKS .........................................................................................................................27

12 ANNEXURES ......................................................................................................................................28

12.1 INCOME STATEMENT .......................................................................................................................28

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12.2 BALANCE SHEET ..............................................................................................................................29

12.3 CASH FLOW STATEMENT ................................................................................................................30

13 KEY ASSUMPTION ............................................................................................................................31

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1 DISCLAIMER
This information memorandum is to introduce the subject matter and provide a
general idea and information on the said matter. Although, the material included in
this document is based on data/information gathered from various reliable
sources; however, it is based upon certain assumptions, which may differ from
case to case. The information has been provided on as is where is basis without
any warranties or assertions as to the correctness or soundness thereof. 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, its
employees or agents do not assume any liability for any financial or other loss
resulting from this memorandum in consequence of undertaking this activity. The
contained information does not preclude any further professional advice. The
prospective user of this memorandum is encouraged to carry out additional
diligence and gather any information which is necessary for making an informed
decision; including taking professional advice from a qualified consultant/technical
expert before taking any decision to act upon the information.
For more information on services offered by SMEDA, please contact our website:
www.smeda.org.pk

Document Control

Document No. PREF-85

Revision No. 2
Prepared by SMEDA-Punjab
Revision Date June, 2017
For information [email protected]

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2 EXECUTIVE SUMMARY
Livestock production is an integral part of Pakistan's agriculture sector and plays a
vital role in national economy. At present, livestock is contributing about 52% to
the agricultural sector and 10.9% to the GDP. The role of livestock in rural
economy may be assessed by the fact that 30 to 35 million of the total rural
population is engaged in livestock farming, having 2 to 3 cattle/buffalo and 5 to 6
sheep/goats per family deriving 30 to 40 per cent of income from it. Pakistan's
livestock population is supported by feed resources derived from the crops sector,
rangelands, grazing areas and agro industrial by-products. The type, availability
and utilization of these feed resources vary greatly in the country's different agro
ecological zones.

The purpose of this document is to facilitate potential investors in for investing in a

“Animal Feed Mill” by providing them with a general understanding of the
business with the intention of supporting potential investors in crucial investment
decisions. This pre-feasibility suggests production of 12,000 tons of animal feed
and 60,000 Urea Molassis Blocks (UMB) annually. However the proposed project
will be started with an initial capacity of 60% i.e. 7,200 tons of animal feed and
36,000 UMB. This production capacity justifies the running cost of the project.

Animal feed and UMB Mill can be designed with a wide range of processing
capacity and product mix depending upon the demand, according to availability of
feed stuffs and their storage capacity. However, it is suggested that the viable
economic unit should have a capacity of preparing 5 tons of compound feed and
25 UMB per hour respectively.

The total project cost is estimated at Rs. 90.42 million including a capital cost &
working capital of Rs. 46.02 million and Rs. 44.40 million respectively. Projected
IRR, NPV and Payback period for the proposed project are 38%, Rs. 213.60
million and 4.10 years respectively.

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3 INTRODUCTION TO SMEDA
The Small and Medium Enterprises Development Authority (SMEDA) was
established in October 1998 with an objective to provide fresh impetus to the
economy through development of Small and Medium Enterprises (SMEs).
With a mission "to assist in employment generation and value addition to the
national income, through development of the SME sector, by helping increase the
number, scale and competitiveness of SMEs", SMEDA has carried out ‘sectoral
research’ to identify policy, access to finance, business development services,
strategic initiatives and institutional collaboration and networking initiatives.
Preparation and dissemination of prefeasibility studies in key areas of investment
has been a successful hallmark of SME facilitation by SMEDA.
Concurrent to the prefeasibility studies, a broad spectrum of business
development services is also offered to the SMEs by SMEDA. These services
include identification of experts and consultants and delivery of need based
capacity building programs of different types in addition to business guidance
through help desk services.

4 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, and production, marketing, finance and business
management.
The purpose of this document is to facilitate potential investors in for investing in
“Animal Feed Mill” by providing them with a general understanding of the
business with the intention of supporting potential investors in crucial investment
decisions.
The need to come up with pre-feasibility reports for undocumented or minimally
documented sectors attains greater imminence as the research that precedes
such reports reveal certain thumb rules; best practices developed by existing
enterprises by trial and error, and certain industrial norms that become a guiding
source regarding various aspects of business set-up and it’s successful
management.
Apart from carefully studying the whole document one must consider critical
aspects provided later on, which form basis of any investment decision.

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5 BRIEF DESCRIPTION OF PROJECT AND PRODUCT

5.1 Project Brief

The proposed project will have a total production capacity of 12,000 tons of
compound animals feed and 60,000 no. of Urea Molasses Block (UMB). This feed
and UMB will be supplemented to livestock in addition to green fodder and libitum
(Freely available to animals) for high production. Different formulae may be used
to prepare compound feed such as calf fattening formula and dairy animal formula
etc. to facilitate the customers nationwide. The proposed business will be
manufacturing compound animal feed and Urea Molasses Block (UMB) for
meeting the demand of dairy and livestock farmers.

5.2 Project Legal Status

The proposed legal structure of the business entity is either sole proprietorship or
partnership. Although selection totally depends upon the choice of the
entrepreneur but this financial feasibility is based on a Sole Proprietorship.

5.3 Project installed and operational Capacity

This pre-feasibility suggests production of 12,000 tons of animal feed and 60,000
UMB annually. However the proposed project will be started with an initial year
capacity of 60% i.e. 7,200 tons of animal feed and 36,000 UMB. This production
capacity justifies the running cost of the project.

5.4 Project Proposed Location

Feed mill should be in an area where there is more product demand e.g. near the
areas where dairy and livestock farming is already being done. These areas
include:
 Karachi
 Lahore
 Rawalpindi
 Multan
 Faisalabad
 Sahiwal
 Jhang
 Okara
 Bahawalpur
 Sargodha
 Gujranwala etc.

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5.5 Production process flow for compound feed

The compound feed preparation process requires:
a) high accuracy and precision of weighing
b) feed ingredient handling and processing
c) crushing / grinding
d) mixing
e) packing
f) labeling

Figure 1 Process Flow Diagram

Feed Feed Analysis Acceptance Separators Crushing by

ingredients in laboratory of feed and conveyors hammer mill
(Trucks) ingredients

Storage Conditioning Mixer Dosage bin

Packing (Molasses, Hoppers (separate for
or Exit
Minerals) each feed)

A liquid storage and a direct-weight system for adding fat, molasses, and water is
required. Grain processing is done through hammer mill grinding. Mixed feed is
delivered in bags or bulk load out to livestock farms.

5.6 Product Raw Material Requirement

Cattle are ruminant animals with four compartment stomach, capable of utilizing
fibrous feedstuffs (forages, roughage, and by product feeds) and Non-Protein
Nitrogen (NPN) source like urea that humans cannot utilize. By producing a high-
quality protein from these resources otherwise unusable by humans, cattle make a
positive contribution to human nutrition in terms of meat and milk.

a) Classification of feed ingredients:

Feeds or feedstuffs are composed of several distinctly different groups of
substances, known as nutrients e.g. proteins, carbohydrates, fats, minerals,
vitamins and water. These have definite functions in body. For intelligent ration
formulation, nutrients, nutrient composition and palatability of feedstuffs are
important. These feedstuffs are grouped as follow,

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b) Protein feedstuffs:
Common protein feedstuffs from plant origin are residues of oilseed after expeller
or solvent extraction or products of wet milling of maize in starch making process.
Nutritive value of protein feedstuffs depend upon their available amino acid
composition, toxic materials and the changes brought during processing if any.

 Rape seed cake/meal

 Canola meal
 Cotton seed cake/meal
 Sunflower cake/meal
 Corn gluten meal (30 or 60%)
 Sesame cake/meal
 Urea
 Milk by products
 Maize oil cake

c) Carbohydrate/energy feedstuffs:
These are the products with less than 20%crude protein and 18% crude fiber.
 Molasses
 Rice polish
 Corn by products such as, Corn glutens; Corn steep liquor and enzose.

d) Mineral supplements:
 Salt (white/black)
 Bone meal
 Dicalcium phosphate (DCP)

e) Fats and oils:

This source of energy can be obtained from meat processing industry, refining of
vegetable oils or vegetable oils itself.

f) Feed Formula for Cattle/Buffaloes:

These feed ingredients when mixed according to feed formula will provide
adequate energy according to type, breed and physiological status of animal.

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Table 1: Details of Raw Material (Feed Compound)

Material Percentage Input in Cost Total Cost
Input Tones (Rs./Kg) (Rs.)
Cottonseed cake / 15% 1,080 24 25,920,000
Maize grain
Corn gluten 20% 1,440 20 28,800,000
Rice Polish 20% 1,440 24 34,560,000
Wheat straw / Rice 22% 1,584 23 36,432,000
bran
Molasses 15% 1,080 11 11,880,000
Urea 2% 144 21 3,024,000
Salt 2% 144 2 288,000
DCP 2% 144 32 4,608,000
Vegetable Oil 2% 144 88 12,672,000
Total 100% 7,200 158,184,000
Wastage 1% 72 1,581,840
Total quantity of 101% 7,272 159,765,840
raw material to
be used

Note: There are seasonal fluctuations in the prices; hence the formula has to be
changed accordingly keeping the feed cost competitive to compete the market.
The information useful here is the composition of the feed ingredients. The feed
mill owner can hire a technical person to formulate a least cost ration, as
formulation of ration is a technical job. The basic feed ingredients can be procured
from local mandies.

5.7 Product Raw Material Requirement (UMB)

As the name suggests, Urea Molasses Blocks (UMB) are lick blocks containing
urea, molasses, vitamins and minerals. The feeding of the blocks is a convenient
and inexpensive method of providing a range of nutrients required by both the
rumen microbes and the animal, which may be deficient in the diet. The main
justification for using the blocks depends on their convenience for packaging,
storage, transport and ease of feeding.
A standard UMB consists of:
a) Molasses 30-50 %
b) Urea 5-10 %
c) Rice/wheat/maize bran 15-25 %
d) Salt 3-5 %
e) Lime or cement 5-7 %
f) DCP 2-4 %
g) Minerals 1-2 %
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Table 2: Details of Raw Material (UMB)

Description Percentage Input in Kgs Cost Total Cost
Input (Rs./Kg) (Rs.)
Rice / Wheat Bran 25% 45,000 24 1,080,000
Molasses 50% 90,000 11 990,000
DCP 3% 5,400 32 172,800
White Salt 3% 4,500 2 9,000
Black Salt 3% 4,500 5 22,500
Urea 9% 16,200 21 340,200
Cement 7% 12,600 21 264,600
Calcium Oxide 1% 1,800 5 9,000
Total 100% 180,000 2,888,100
Wastage 1% 1,800 28,881
Total Raw 101% 181,800 2,916,981
Material (UMB)
The manufacture of UMB is done in advance of their proposed use. If they are to
be used as a supplement during the dry season, when the quality of forage is very
low, their production should start before this period in order to have sufficient
numbers of blocks available when required. But in view of the hygroscopic nature
of the components, as well as of the blocks, it is better not to start production
before the onset of the dry season and use it maximum after 3 months of their
manufacturing.

a) Protein Sources:
For urea molasses blocks (UMB), these are;
 Cotton seed cake/meal
 Corn gluten meal (30 or 60%)
 Urea

b) Carbohydrate Sources:
These are the products with less than 20% crude protein and 18% crude fiber.
 Molasses
 Corn by products such as corn cobs or other corn by products

c) Mineral supplements:
 Salt (white/black)
 Bone meal
 Dicalcium phosphate (DCP)
 Calcium oxide (CaO)
These feed ingredients when mixed according to UMB formula will provide
adequate energy to livestock. The formula for a UMB is not a fixed one. It has to
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be changed from time to time keeping in view the cost of ingredients used in the
formula. And the cost of feed ingredient is never static.

5.8 Production Process of Urea Molasses Block (UMB)

a) Process Flow of UMB

The requirements are:
a) Accuracy and precision of weighing (the standard scale should be OK)
b) Ingredient handling and processing
c) Premixing of salts
d) Mixing

Figure 2 Process Flow of UMB

Urea-molasses blocks (UMB) may be manufactured either on a small or on a

larger scale depending on the number of uses and the expected length of the
feeding period. Whatever scale of production is applicable the method of
manufacture will be the same; the difference being the quantities of feed
ingredients and the implements used in the manufacturing process. Industry
experience shows that blocks weighing 5 kg are most appropriate for feeding dairy
cattle under smallholder situations. Assuming a daily intake of around 700 g/cow,
each block will last for 7 days. Therefore, blocks can be replaced once a week on
a specific day, making it a regular activity for the farmer.

b) Preparation of feed ingredients

All components should be weighed out before mixing. A standard volume or
weight can be adopted for each component which would correspond with the
weight of the block desired.

c) Molasses
For the molasses no preparation is necessary apart from measuring the quantity.
Even if handling the molasses is a little difficult it should not be diluted with water.
When ordering molasses from the sugar factory specify 'undiluted' molasses and
check the BRIX value when the molasses is received. Molasses can be stored in
the same tank as that used for transporting it. If the quantity of blocks
manufactured is large enough, it might be preferable to have two tanks in order to
avoid running out of stock. Molasses is a thick, viscous material, which is a by-
product of the sugar industry. Being a concentrated by-product, it provides a range
of trace minerals and a complete mixture of vitamins. It is high in soluble
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carbohydrates. Although a cheaper source of energy, it is not commonly used by

farmers due to difficulty in handling. Molasses can be included in ration by mixing
it with other concentrates in the form of licks. Molasses increases the palatability
and consumption of poor quality roughage and is a good carrier for urea as Non-
Protein Nitrogen (NPN) source for livestock (ruminants).

d) Urea
The introduction of urea in the form of lumps in the mixture must be avoided in
order to eliminate chances of urea toxicity in livestock. It may be necessary to
crush the lumps, either by hand or by passing the urea through a hand mill and
sieve. Urea contains 46% nitrogen, which is equivalent to 87% crude protein and
is rapidly digested by ruminants. Urea provides the small amount of extra nitrogen
required, for utilization of the dry matter, in addition to that present in the forage.
The UMB, therefore, provides the nutrient requirements of both the microbes and
the host animal. The ingredients are designed to provide a wide rage of nutrients
to cover all potential deficiencies. But the UMB should be fed only in limited
quantities. The UMB is designed in such a way that animals can only lick it but not
chew it. Because by chewing the animals will eat more urea per unit of time than
they can handle and can result in urea toxicity in the animals

e) Salt
As with the urea it is better to avoid lumps. The salt could be mixed with cement
and then water added to improve the setting of the blocks.

f) Cement or quicklime
Cement should be mixed with water and salt. The quantities are:
 3-4 liters of water
 2.5 kg of salt per 10 kg of cement.
If quicklime is used it should be finely ground and it's reaction to the addition of
water tested.

g) Bran
Bran does not need any preparation. However, bran is replaced by another fiber
source such as peanut hulls or straw, these materials should be ground before
mixing. Experience show that sometimes coarse grinding of fibrous material gives
a better consistency to the block than fine grinding, especially if polishing are
being included. Cereal brans are high in phosphorus, trace minerals and also a
range of vitamins. In addition they provide a slow release amino acid source from
the relatively insoluble proteins to the microbes.

h) Equipment for mixing:

According to the rate of production foreseen and the level of investment, different
types of mixers can be used. If adequate labor is available and only few blocks
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(say 150-200 UMB) are needed then manual mixing is possible. With 2 laborers,
approximately 200 blocks of 5 kg each could be made over a period of 8 hours
shift. However, for producing larger numbers of blocks, a concrete mixer is
recommended. The cylinder of this concrete mixer should turn horizontally and as
slowly as possible, to avoid the molasses, which is highly viscous, sticking to the
side of the mixer. Spillage of the mixture should also be avoided. For bigger units it
is recommended that a horizontal paddle mixer is installed (the ribbon mixer used
in feed manufacture is not suitable) with one or two axles and a discharge valve.

i) Introduction of the Product components

It has been found that the order of introduction of the components plays an
important role in the mixing process. The recommended order is as follows:
 Molasses
 Urea
 Salt, minerals etc.
 Cement or quicklime
 Bran
Following this order a homogenous mixture of the urea, salt and gelling agent in
the molasses is assured. Any other components (e.g., minerals, and drugs) to be
included are introduced together with the salt. When using a concrete mixer the
bran must be introduced in small quantities at a time, in order to ensure a
homogenous mix. After a few minutes, when the mixture appears homogenous
like peanut butter, the mixer is emptied (e.g. into wheelbarrows if large-scale
production is being undertaken) and transported to the molding area.

j) Molding
Moulds are necessary to set the blocks in an acceptable shape. Once set, the
frame can be removed for reuse and to allow the drying process to continue.
Moulds can be of different types. The size of the mould(s) will depend on the
preferred size of the block(s). The one recommended by the FAO is made out of 4
wooden planks with slots sawn in order to be able to assemble the frame easily.
The dimensions of the frame can vary depending on the expected rate of
production and size of blocks. The most appropriate for small scale manufacture of
blocks are frames made out of a number of wooden planks with slots cut out to
enable easy assembly and removal. Each compartment measures 12 x 10 x 8
inches.
It can hold a urea-molasses block weighing 4.5-5.0 kg. This type of mould is most
suitable when drying and storage area is limiting. Since the frames are removable
they can be re-used as soon as the urea-molasses mixture has started setting-in.
Small plastic containers have been used successfully in Indonesia for preparing
urea-molasses blocks. They produce blocks with acceptable solidity and are
suitable for use in small units. An advantage of this type of mould is that the block
can be offered to the animal while it is in the plastic container and once the block
has been consumed the container can be re-used.
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k) Cutting the blocks

Turning out and cutting is necessary when using large moulds. The board can be
taken away the day after molding in order to facilitate drying. The cutting will take
place later with a flat spade. The spade should be wetted in a bucket between
each cut to avoid the mixture from sticking to it. With small plastic moulds, the
blocks can be offered to animals while in the mould or the blocks may be removed
simply by turning the containers upside down and tapping on the bottom of the
container.

l) Drying
After removal of the moulds and cutting up, blocks are arranged on a drying area.
Blocks must not be exposed to direct sunlight, but placed under a shade with good
ventilation. After 24 to 72 hours the blocks are dry enough to be transported.

Figure 3: UMB Formula

General UMB Formula

Salt DCP
5% 3%
Cement
7%

Molasses
Rice/Wheat
50%
Bran
25%
Urea
10%

5.9 Product Utilization guidelines (UMB & FEED)

Some important guidelines towards the optimum utilization of UMB as
supplements for forage based diet are described below. Urea molasses blocks
should not be fed alone but only as a supplement. It requires a minimum amount
of roughage to ensure that the animals are not over fed and thereby avoid urea
toxicity.

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a) Species of livestock
Since the blocks contain urea, therefore, these must only be fed to ruminants
(buffalo, cattle, goats and sheep) and never to mono gastric (Single Compartment
Stomach) species like chicken, donkeys, horses, pigs, and rabbits or to young,
especially pre-ruminant calves, kid and lambs.

b) Feeding period
The aim of the UMB is to improve the utilization of low quality roughage, especially
during and at the end of the dry season, when livestock are often dependent on
crop residues or low quality dry season grazing, which are low in crude protein and
high in fiber. Therefore, the production and distribution of UMB should be limited to
these critical periods. There is no advantage in offering blocks when green forage
is available, as during the wet and early dry seasons. To avoid wasting resources
these should not be made available at these times.

c) Minimum Roughage Requirements

Since Urea Molasses Blocks are supplements, therefore, these should not be fed
alone. A minimum quantity of roughage is needed to ensure that the animals do
not consume too much urea, possibly leading to urea toxicity. One should
remember that the purpose of the block is to improve the utilization of roughage
and not to substitute it.

d) Adaptation of animals
The full daily ration of the block (e.g. ±700 g/day per adult cow) should not be
offered as soon as the feeding period starts but should be built up to over a period
of at least 7-10 days. This is particularly important when animals have suffered a
degree of underfeeding, as intake can be more rapid than usual. Animals not used
to urea and also eating rapidly are the most likely to suffer from urea toxicity. After
the adaptation period, animals will adjust their intakes to around those
recommended, i.e., cattle: 700 g/day & small ruminants: 100 g/day. An easy way
to restrict intake during the adaptation period is to limit the amount of time the
blocks are accessible to an animal. A thumb rule is to offer UMB for one hour per
day (about 200g for cattle and 30g for sheep/goat) during the first 3-4 days, then 3
hours per day (about 400 g for cattle and 60 g for sheep/goat) during the next 4-6
days. Thereafter, UMB along with ample supply of drinking water can be offered to
them 24 hrs a day.

e) Feeding system
The distribution of the UMB should be done according to the livestock
management system. Blocks can be offered to the animals in the evening when
they are in their sheds.

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f) Establishing priorities
If a farmer has a limited number of blocks available, he must also establish an
order of priority for feeding his animals. Priority should be given to pregnant,
lactating cows and draught animal.

5.10 Project Estimated Time for Completion

 Three months for completion of initial formalities i.e. formation, registration of
the company etc.
 One year for purchase of land and construction of building.
 Six months for sanction of loan (In case, if financing has to be arranged
through bank)
 5-6 months for purchase of machinery, its installation and testing.
 Thirty days for premises furnishing and Labor / Staff appointments.

5.11 Product Legal Requirements

Compound feed is packed in bags of approximately 50 Kgs per bag capacity. The
label includes following information:
1) Brand name
2) Date of manufacture
3) Particulars of feed additives
4) Nutritive composition of compound feed

On the other hand, one UMB may be of 5 kgs weight with above information
provided on it. It is to be noted that misbranding and adulteration is prohibited
according to ‘The Punjab Animal Compound Feed and Feed Stuff Ordinance,
2002’.

5.12 Product Packaging Cost

A 50 kg bag is sold in the market for compound feed which is easily available at a
price of Rs. 15. Cost of bags for the first year is approximately Rs. 2,160,000.

6 CRITICAL FACTORS
The feed industry should aim at fully utilizing all low cost feed ingredients
available in country such as molasses, urea, by products of edible oil and grain
milling industries, minerals and vitamins. Following are some of the major critical
factors, which contribute towards the success of the Animal Feed Mill. There is a
need to launch programs in following areas to achieve the desired targets.
 Investment in dairy and livestock sector is increasing day by day and
quality feed is a pre requisite in profitable dairy and livestock farming.

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 Feed and Urea Molasses Blocks (UMB) formulation according to modern

techniques with proper utilization of locally available cheaper feedstuffs
leads to success in dairy and livestock farming hence for feed business
too.
 Establishment of Animal feed mill with UMB preparation in feed
ingredients surplus areas such as sugar mills & oil mills to fully utilize the
molasses, oil cakes and other by-products of milling industries to prepare
cheaper feed.
 Introduce the use of urea molasses block feeding for meeting the protein,
energy and mineral requirement of the animal. (This is marketing aspect
of the UMB)
 Formulate the nutritionally balanced but cheaper formula for feeding
animals. This is called Least Cost Ration Formulation.
 The farmers having large number of animals (more than 100 animals) can
prepare compound feed and UMB on their own farms (Optional) but
Animal feed and UMB Mill is an independent enterprise and should not be
linked with livestock farming.
 The agro industrial by products can be better utilized in formulated
compound feed.
 In order to meet the rapidly increasing demand for the various kinds of
livestock products (Milk & meats), the better rations with improved feed
formula are needed to get more meat and milk, for the same feed
supplies. By increasing livestock numbers, rather than their average
weight, the feed requirements are much larger.

7 GEOGRAPHICAL POTENTIAL FOR INVESTMENT

At present, Pakistan has 215 feed mills1, but only few are preparing compound
feed for livestock. Generally, mixed compound feeds are prepared at home by
farmers. Feed accounts for almost 70% of total cost of production of milk or meat.
Hence a balanced feed will positively affect milk and meat production of livestock.
The cake is a by-product from oil mills and is a valuable raw material for animal
feed. Since animal keeping is worldwide, hence animal feeding is an important
component.
Feed mill can be ideally setup in the major surroundings of cities like Multan ,
Lahore, Faisalabad, Rawalpindindi, Khanewal, Karachi, Peshawar, etc.

8 POTENTIAL TARGET CUSTOMERS / MARKETS

Compound animal feed and UMB is used in all class of livestock throughout the
year that the demand never gets affected with seasons. So the proposed business
can be started at any time of the year. At the commencement of the proposed

1
Pakistan feed mills association
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business, it is important that the entrepreneur must have good knowledge of the
production and have contacts with the farmers.

There are few numbers of animal feed mills, which are in operation both in
organized sector and informal sector in Pakistan. Livestock sector is utilizing many
different feed resources of varying quality and availability. Most small-scale
farmers base their livestock enterprises on the use of crop residues, resulting in a
low output of milk and meat per animal. The need to make better use of crop
residues has prompted considerable research and many promising technologies
are now available. New avenues for research and policy development may lie in
the adjustment of livestock types and numbers, increased production of fodder, the
tapping of new or non-conventional feed resources, and the strategic movement of
fodder.
This pre-feasibility study suggests that compound feed bags and UMB will be sold
to livestock farmers. Following are some of the target clients for a manufacturer of
compound feed.
 Dairy farmers
 Calf fattening farmers
 Sheep farmers
 Goat farmers
The price of compound feed per kg and that of one UMB should be lower than that
of simple cakes so that farmer could feel it economical. The cheaper the product
more will be its use in livestock feeding. To avoid risk of price fluctuations, the feed
ingredients should be stored in season of availability.
9 PROJECT COST SUMMARY

9.1 Project Economics

All the figures in this financial model have been calculated for estimated sales of
Rs. 244.80 million in the year one. The capacity utilization during year one is
worked out at 60% with 10% increase in subsequent years up to the maximum
capacity utilization of 100 %.
The following table shows internal rate of return, payback period and net present
value of the proposed venture.

Table 3: Project Economics

Description Details
Internal Rate of Return (IRR) 38%
Payback Period (Yrs.) 4.10
Net Present Value (Rs.) 213,597,595

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9.2 Project Financing

Following table provides details of the equity required and variables related to
bank loan
Table 4: Project Financing
Description Details
Total Equity (50%) Rs. 45,208,702
Bank Loan (50%) Rs. 45,208,702
Markup to the Borrower (%age / annum) 12%
Tenure of the Loan (Years) 5

9.3 Project Costs

Following fixed and working capital requirements have been identified for
operations of the proposed business.

Table 5: Project Cost

Description Total Cost in Rs.
Capital Costs
Land 6,000,000
Building 18,243,072
Machinery & Equipment 10,884,500
Furniture & Fixture 1,372,500
Office Equipment 472,500
Office vehicles 1,312,500
Pre-operating costs2 7,731,000
Total Capital Costs 46,016,072
Working Capital
Raw Material Cost3 40,670,705
Upfront Insurance Payment 609,850
Equipment spare part inventory 45,352
Cash Required for operations 3,075,425

2
These include salaries of administration staff during the period of construction; incorporation charges and
interest accrued during first year.
3
This represents all the ingredients and products used to formulate the feed items, and feed packing
materials.
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Total Working Capital 44,401,332

Total Project Costs 90,417,405

9.4 Land Requirement

The recommended size of Animal Feed & UMB mill is approximately 18,000
square feet (4 kanal) area is required and the Cost of land in the proposed areas is
taken to be Rs. 1,500,000 per Kanal. It is recommended to purchase land on
preferred locations provided already in this pre-feasibility.

Table 6: Land Cost

Description No. of Rate per Kanal Total Cost in
Kanal (Rs.) PKR
Total Land 4 1,500,000 6,000,000

9.5 Covered Area Requirement

Building for the proposed project comprises of two major blocks i.e. office block
and factory block. Areas and construction cost for the said blocks are listed in the
table below:

Table 7: Covered Area Details

Area Description Sq. Ft. Construction Total Cost
Cost Rs./Sq. Ft. (Rs.)
Plant Hall 1500 2,000 3,000,000
Plant Hall for Urea Molasses Blocks 1200 1,500 1,800,000
Meals Store 750 1,500 1,125,000
Store house for Urea Molasses 2250 1,500 3,375,000
Blocks
Processed Feed store 750 1,500 1,125,000
General Store 1200 1,500 1,800,000
Office Block 1000 2,500 2,500,000
Wash rooms 360 2,000 720,000
Staff quarters 504 1,500 756,000
Grounds 8,486 100 848,600
Consultancy charges 1,193,472
Total Construction Cost 18,243,072

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9.6 Machinery Requirement

Following machinery will be required for the proposed project:

Table 8: Machinery Details (Animal Feed Mill)4

Sr. Machinery Description Quantity Total Cost
No. (Rs.)
Grinding Section
1. Hopper Elevator, Sheet Body 3mm 1 25,000
2. Elevator 9"x11"x30" sheet body 3mm Pipe 1 150,000
14G
3. Hammer Mill 16", Sheet Body 10mm 1 250,000
4. Hopper hammer mill, sheet 3mm 2 40,000
5. Packing Wall 1 10,000
6. Hopper Elevator, Sheet 3mm 1 40,000
7. Elevator 12"x9"x45', Sheet Body 4mm Head 1 225,000
Boot
8. Rootry Separator, Sheet Body 6mm x 3mm 1 150,000
Mixing Section 0
9. Hopper Mixer 1 Ton, Sheet Body 3mm 2 140,000
10. Mixer 1 Ton, Sheet Body 4mm x 10mm, Shaft 1 500,000
7", Ribbon 50mm x 12mm
11. Molasses Mixer 16", Sheet Body 4mm Shaft 1 150,000
3"x3" with Conveyor
12. Separator (Mash Feed), Sheet Body 3mm 1 150,000
Shaft 3"
13. Packing Hopper & Value 1 35,000
14. Separator Pelt, Sheet Body 3mm Shaft 3" 1 200,000
15. Hopper Pelt Mill 5 Ton 1 175,000
16. Air Lock 14", Sheet Body 4mm x 5mm 1 40,000
Pelleting Section 0
17. Center Flow Cooler 10 Ton CPM copy, Sheet 1 350,000
Body 3mm with moving grill
18. Crumbles Body 8"x55", Sheet Body 4mm x 1 500,000
6mm with Auto silt

4UNIVERSAL INDUSTRIES, Opp. Al-Rehmat Filling Station, G.T. Road Gujranwala. Contact Person: Mirza
Maqsood Ahmad, Cell: 0300-6400442, Tel: 055-3891318, Fax: 055-3893437.
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19. Fan Low Pressure, Sheet Body 4mm 1 200,000

20. Cyclone 66" x 14', Sheet Body 3mm1 1 150,000
21. Air lock cyclone 1 15,000
22. Pipe line 22'' fan cyclone & cooler sheet 1 80,000
2.5mm
23. Elevator 9'' * 12'' * 45' sheet body 4mm * 1 225,000
2.5mm
24. Micro mixer 250 kg sheet body 3mm * 6mm 1 75,000
25. Molasses pumps 2'' * 2'' 1 15,000
26. Molasses tank sheet body 3mm 1 40,000
27. Fitting charging 1 600,000
Sub total 4,530,000
28. Pellet Machine 5 ton ( China) 1 1,800,000
29. Boiler 400 ht 1 700,000
30. Boiler Fitting & Accessories 400,000
31. Electric Motors 450,000
32. Electric Panel 500,000
33. Power Factor Panel 150,000
34. Generator DENSO 250 KVA 1 1,000,000
35. Design, Consultancy & Installation Charges 989,500
Total Machinery Cost 10,519,500

Following machinery will be required for the preparation of UMB:

Table 9: Machinery Details (UMB)

Sr. Machinery Description Quantity Total Cost
No. (Rs.)
1 Mixer Machine 1 80,000
2 Molasses Pump 1 20,000
3 Molasses Pipeline 1 20,000
4 Motor 1 15,000
5 Donkey Pump 1 15,000
6 Flat Spades 4 32,000
7 Moulds with Branding Details 7 7,000
8 Molasses Mixer 1 20,000
9 Trolleys, drums, bins 3 36,000
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10 Molasses Tank 1 120,000

Total cost 365,000

9.7 Furniture & Fixtures Requirement

To furnish the admin block, and other areas of Animal feed mill, the following
furniture and fixtures is required:

Table 10: Furniture & Fixture Details

Description No. Unit Cost Total Cost
(Rs) (Rs.)
Tables with Chairs 5 30,000 150,000
Chairs for visitors 15 7,500 112,500
Sofa set for office 2 35,000 70,000
Energy savers for store, Plant hall 300 500 150,000
and parking area
Electric fittings and installation 250,000 250,000
Security cameras with DVR 30 10,000 300,000
recording + installation
Sign board for outside 1 30,000 30,000
Ceiling fans 20 3,500 70,000
Air conditioners (1.5 ton) 4 60,000 240,000
Total 1,372,500

9.8 Office Equipment Requirement

Following is detail of office equipment required for the Animal Feed Mill:

Table 11: Office Equipment

Description No. Unit Cost Total Cost
(Rs) (Rs.)
Lap Tops 01 125,000 125,000
Computers 05 40,000 200,000
UPS for computers 05 12,500 62,500
Printers 02 15,000 30,000
Scanner 01 10,000 10,000
Telephones 10 2,500 25,000
Fax machines 01 20,000 20,000
Total 472,500

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9.9 Vehicle Requirements

Along with the above mentioned machinery and equipment, the proposed Animal
feed mill will also be using following vehicle for marketing the feed.

Table 12: Vehicle Requirements

No. Unit Cost Total Cost
Sr. No Description
(Rs) (Rs.)
Shehzor Truck with
1 1 1,312,500 1,312,500
registration fees

9.10 Human Resource Requirement

For the proposed size of Animal feed mill, the following manpower is required:

Table 13: Human Resource Requirement

Employee No. of No. of Monthly Annual
Designation Employees Shifts Salary (Rs.) Salary (Rs.)
CEO 1 1 200,000 2,400,000
General Manager 1 1 150,000 1,800,000
Production 1 1 100,000 1,200,000
Manager
Mechanic / 1 1 40,000 480,000
Technician
Electrician 1 1 40,000 480,000
Sales officer 6 1 30,000 2,160,000
Accounts officer 2 1 30,000 720,000
Supervisor 1 1 30,000 360,000
Labors 20 1 18,000 4,320,000
Driver 1 1 16,000 192,000
Security Guard 4 16,000 768,000
Sweepers 3 1 15,000 540,000
Total 42 15,420,000

9.11 Utilities and other costs

An essential cost to be borne by the project is the cost of electricity, water and
gas. The electricity expenses are estimated to be around Rs. 3.6 million per
annum, whereas, gas and water expenses are estimated to be Rs. 3.0 million and
Rs 0.6 million / Annum respectively. Furthermore, promotional expense being

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essential for marketing of Animal feed mill is estimated as 1% of feed sales

revenue.

9.12 Revenue Generation

Based on the Animal Feed mill capacity utilization of 60%, with the feed sales
annual growth rate of 10 % the sales revenue during the first year of operations is
estimated as Rs 250.20 million.

10 CONTACT DETAILS
In order to facilitate potential investors, contact details of Animal Feed Mill
Machinery & Equipment manufacturers / suppliers relevant to the proposed project
be given.
Table 14: Major Civil Contractor of Feed Mill Construction

Name of Contractor Address of Supplier Contact Person

Zurr Engineering HNO:20, St # 39, G 13/2, M. Zaka ullah (Chief
Islamabad Tel: (051) 2323600, Executive)
0333-5179844

Table 15: Major Suppliers of Machinery5

Name of Supplier Address Contact Person

Universal Opp. Al-Rehmat Filling Station, Mirza Maqsood Ahmad

Industries G.T. Road Gujranwala. Tel: 055- (CEO)
3891318, Fax: 055-3893437

Jadeed group of 53-C Satelite Town, Murree. Mian Jan Muhammad

companies Tel: 092-51-4927471-7, Javed
Fax: +92- 51-4927480
[email protected]
www.jadeedgroup.com
Hanan Hexie Address： Jicheng Industrial
machinery co.Ltd Zone, Xinxiang, Henan, China
TEL： 0086-371-55932562
Email： [email protected]

5 www.jamals.com , www.lcci.com.pk
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11 USEFUL WEB LINKS

Small & Medium Enterprises Development Authority www.smeda.org.pk

(SMEDA)
Government of Pakistan www.pakistan.gov.pk

Ministry of Industries & Production www.moip.gov.pk

Ministry of Education, Training & Standards in Higher http://moptt.gov.pk

Education
Government of Punjab www.punjab.gov.pk

Government of Sindh www.sindh.gov.pk

Government of Khyber Pakhtunkhwa www.khyberpakhtunkhwa.gov.pk

Government of Balochistan www.balochistan.gov.pk

Government of Gilgit Baltistan www.gilgitbaltistan.gov.pk

Government of Azad Jamu Kashmir www.ajk.gov.pk

Trade Development Authority of Pakistan (TDAP) www.tdap.gov.pk

Security Commission of Pakistan (SECP) www.secp.gov.pk

Federation of Pakistan Chambers of Commerce and Industry www.fpcci.com.pk

(FPCCI)
State Bank of Pakistan (SBP) www.sbp.org.pk

Punjab Small Industries Corporation www.psic.gop.pk

Sindh Small Industries Corporation www.ssic.gos.pk
Jadeed Group of companies www.jadeedgroup.com
Punjab Vocational Training Council (PVTC) www.pvtc.gop.pk
Technical Education and Vocational Training Authority www.tevta.org
(TEVTA)
Lahore Industry Poultry Feed www.lahoreindustry.com
Sharif Group of Companies www.sharifgroup.com.pk
Pakistan Poultry Association www.pakistanpoultrycentral.com
Cattle Feed Mills www.pakdairyinfo.com.pk/feedmills

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12 ANNEXURES

12.1 Income Statement

Income Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue from Feed 244,800,000 314,160,000 394,944,000 488,743,200 597,352,800 657,088,080 722,796,888 795,076,577 874,584,234 962,042,658
Revenue from UMB 5,400,000 6,930,000 8,712,000 10,781,100 13,176,900 14,494,590 15,944,049 17,538,454 19,292,299 21,221,529
Total Revenue 250,200,000 321,090,000 403,656,000 499,524,300 610,529,700 671,582,670 738,740,937 812,615,031 893,876,534 983,264,187

Cost of sales
Cost of Raw Material used for Feed 159,765,840 205,032,828 257,755,555 318,972,500 389,855,277 428,840,805 471,724,885 518,897,374 570,787,111 627,865,823
Cost of Raw Material used for UMB 2,916,981 3,743,459 4,706,063 5,823,753 7,117,920 7,829,712 8,612,683 9,473,951 10,421,346 11,463,481
Packing Cost of Feed 2,160,000 2,772,000 3,484,800 4,312,440 5,270,760 5,797,836 6,377,620 7,015,382 7,716,920 8,488,612
Packing Cost for UMB 210,000 269,500 338,800 419,265 512,435 563,679 620,046 682,051 750,256 825,282
Labor wages 6,210,000 7,068,575 7,762,588 8,523,320 9,376,058 10,311,538 11,315,484 12,417,175 13,626,129 14,952,788
Machinery Repair & Maintenance 1,088,450 1,197,295 1,317,025 1,448,727 1,593,600 1,752,960 1,928,256 2,121,081 2,333,189 2,566,508
Electricity Cost 3,600,000 4,620,000 5,808,000 7,187,400 8,784,600 9,663,060 10,629,366 11,692,303 12,861,533 14,147,686
Generator Cost 1,792,800 2,300,760 2,892,384 3,579,325 4,374,731 4,812,204 5,293,424 5,822,767 6,405,043 7,045,548
Water Cost 600,000 660,000 726,000 798,600 878,460 966,306 1,062,937 1,169,230 1,286,153 1,414,769
Gas Cost 3,000,000 3,300,000 3,630,000 3,993,000 4,392,300 4,831,530 5,314,683 5,846,151 6,430,766 7,073,843
Total cost of sales 181,344,071 230,964,417 288,421,214 355,058,329 432,156,141 475,369,628 522,879,383 575,137,465 632,618,447 695,844,338
Gross Profit 68,855,929 90,125,583 115,234,786 144,465,971 178,373,559 196,213,042 215,861,554 237,477,566 261,258,086 287,419,849

General administration & selling expenses

Administration expense 8,940,000 9,810,411 10,765,567 11,813,717 12,963,918 14,226,103 15,611,176 17,131,103 18,799,011 20,629,309
Administration benefits expense 268,200 294,312 322,967 354,412 388,918 426,783 468,335 513,933 563,970 618,879
Electricity expense 360,000 396,000 435,600 479,160 527,076 579,784 637,762 701,538 771,692 848,861
Water expense 90,000 99,000 108,900 119,790 131,769 144,946 159,440 175,385 192,923 212,215
Gas expense 60,000 66,000 72,600 79,860 87,846 96,631 106,294 116,923 128,615 141,477
Travelling expense 894,000 981,041 1,076,557 1,181,372 1,296,392 1,422,610 1,561,118 1,713,110 1,879,901 2,062,931
Communications expense (phone, fax, mail, internet, etc.) 1,341,000 1,471,562 1,614,835 1,772,058 1,944,588 2,133,915 2,341,676 2,569,665 2,819,852 3,094,396
Office vehicles running expense 1,200,000 1,260,000 1,323,000 1,389,150 1,458,608 1,531,538 1,608,115 1,688,521 1,772,947 1,861,594
Office expenses (stationary, entertainment, janitorial services, etc.) 1,788,000 1,962,082 2,153,113 2,362,743 2,592,784 2,845,221 3,122,235 3,426,221 3,759,802 4,125,862
Promotional expense 2,448,000 3,141,600 3,949,440 4,887,432 5,973,528 6,570,881 7,227,969 7,950,766 8,745,842 9,620,427
Insurance expense 609,850 542,303 474,755 407,208 339,660 377,802 302,242 226,681 151,121 75,560
Professional fees (legal, audit, consultants, etc.) 244,800 314,160 394,944 488,743 597,353 657,088 722,797 795,077 874,584 962,043
Depreciation expense 2,447,604 2,447,604 2,447,604 2,447,604 2,447,604 2,607,862 2,607,862 2,607,862 2,607,862 2,607,862
Amortization of pre-operating costs 1,546,200 1,546,200 1,546,200 1,546,200 1,546,200 - - - - -
Bad debt expense 2,448,000 3,141,600 3,949,440 4,887,432 5,973,528 6,570,881 7,227,969 7,950,766 8,745,842 9,620,427
Subtotal 24,685,654 27,473,874 30,635,521 34,216,880 38,269,769 40,192,045 43,704,991 47,567,550 51,813,965 56,481,843
Operating Income 44,170,275 62,651,708 84,599,265 110,249,091 140,103,790 156,020,997 172,156,563 189,910,016 209,444,121 230,938,005

Gain / (loss) on sale of office vehicles - - - - 525,000 - - - -

Earnings Before Interest & Taxes 44,170,275 62,651,708 84,599,265 110,249,091 140,628,790 156,020,997 172,156,563 189,910,016 209,444,121 230,938,005

Interest on short term debt 1,113,540 1,113,540 - - - - - - - -

Interest expense on long term debt (Project Loan) 2,568,689 2,115,553 1,604,948 1,029,585 381,252 - - - - -
Interest expense on long term debt (Working Capital Loan) 1,469,361 - - - - - - - - -
Subtotal 5,151,591 3,229,093 1,604,948 1,029,585 381,252 - - - - -
Earnings Before Tax 39,018,685 59,422,615 82,994,317 109,219,506 140,247,538 156,020,997 172,156,563 189,910,016 209,444,121 230,938,005

Tax 12,879,039 20,020,415 28,270,510 37,449,326 48,309,138 53,829,848 59,477,296 65,691,005 72,527,942 80,050,801
NET PROFIT/(LOSS) AFTER TAX 26,139,646 39,402,201 54,723,807 71,770,180 91,938,401 102,191,149 112,679,267 124,219,011 136,916,179 150,887,204

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12.2 Balance Sheet

Balance Sheet

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current assets
Cash & Bank 3,075,425 - 581,548 25,039,932 59,152,165 115,250,174 184,302,152 261,671,863 345,612,273 436,588,298 798,104,089
Accounts receivable 20,120,548 22,970,959 29,141,260 36,315,912 44,634,082 51,552,365 56,707,601 62,378,362 68,616,198 75,477,817
Finished goods inventory 7,884,525 9,681,143 12,080,470 14,862,907 18,046,081 19,807,068 21,786,641 23,964,061 26,359,102 28,993,514
Equipment spare part inventory 45,352 52,382 60,501 69,878 80,710 93,220 107,669 124,357 143,633 165,896 -
Raw material inventory 40,670,705 54,803,775 72,340,983 93,998,065 120,630,851 139,328,632 160,924,570 185,867,879 214,677,400 247,952,397 -
Pre-paid insurance 609,850 542,303 474,755 407,208 339,660 377,802 302,242 226,681 151,121 75,560 -
Total Current Assets 44,401,332 83,403,532 106,109,889 160,736,813 231,382,204 317,729,991 416,996,065 526,385,023 646,926,849 779,757,451 902,575,421

Fixed assets
Land 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000 6,000,000
Building/Infrastructure 18,243,072 17,330,919 16,418,765 15,506,611 14,594,458 13,682,304 12,770,151 11,857,997 10,945,843 10,033,690 9,121,536
Machinery & equipment 10,884,500 9,796,050 8,707,600 7,619,150 6,530,700 5,442,250 4,353,800 3,265,350 2,176,900 1,088,450 -
Furniture & fixtures 1,372,500 1,235,250 1,098,000 960,750 823,500 686,250 549,000 411,750 274,500 137,250 -
Office vehicles 1,312,500 1,050,000 787,500 525,000 262,500 2,113,794 1,691,036 1,268,277 845,518 422,759 -
Office equipment 472,500 425,250 378,000 330,750 283,500 236,250 189,000 141,750 94,500 47,250 -
Total Fixed Assets 38,285,072 35,837,469 33,389,865 30,942,261 28,494,658 28,160,849 25,552,986 22,945,124 20,337,261 17,729,399 15,121,536

Intangible assets
Pre-operation costs 7,731,000 6,184,800 4,638,600 3,092,400 1,546,200 - - - - - -
Legal, licensing, & training costs - - - - - - - - - - -
Total Intangible Assets 7,731,000 6,184,800 4,638,600 3,092,400 1,546,200 - - - - - -
TOTAL ASSETS 90,417,405 125,425,801 144,138,354 194,771,475 261,423,062 345,890,840 442,549,051 549,330,146 667,264,110 797,486,850 917,696,957

Liabilities & Shareholders' Equity

Current liabilities
Accounts payable 17,969,378 23,208,910 29,412,048 36,736,154 44,218,245 49,270,333 54,925,320 61,258,639 68,355,611 52,758,560
Short term debt - 17,560,262 - - - - - - - - -
Total Current Liabilities - 35,529,640 23,208,910 29,412,048 36,736,154 44,218,245 49,270,333 54,925,320 61,258,639 68,355,611 52,758,560

Other liabilities
Deferred tax (887,299) (5,230,157) (10,987,317) (18,317,988) (27,510,341) (38,095,366) (49,648,525) (62,266,891) (76,057,303) (91,137,349)
Long term debt (Project Loan) 23,008,036 19,435,113 15,409,053 10,872,388 5,760,361 - - - - - -
Long term debt (Working Capital Loan) 22,200,666 - - - - - - - - - -
Total Long Term Liabilities 45,208,702 18,547,813 10,178,896 (114,929) (12,557,627) (27,510,341) (38,095,366) (49,648,525) (62,266,891) (76,057,303) (91,137,349)

Shareholders' equity
Paid-up capital 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702 45,208,702
Retained earnings 26,139,646 65,541,846 120,265,653 192,035,833 283,974,233 386,165,382 498,844,649 623,063,660 759,979,839 910,867,043
Total Equity 45,208,702 71,348,348 110,750,548 165,474,355 237,244,535 329,182,935 431,374,084 544,053,351 668,272,362 805,188,542 956,075,746
TOTAL CAPITAL AND LIABILITIES 90,417,405 125,425,801 144,138,354 194,771,475 261,423,062 345,890,840 442,549,051 549,330,146 667,264,110 797,486,850 917,696,957

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12.3 Cash flow Statement

Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net profit 26,139,646 39,402,201 54,723,807 71,770,180 91,938,401 102,191,149 112,679,267 124,219,011 136,916,179 150,887,204
Add: depreciation expense 2,447,604 2,447,604 2,447,604 2,447,604 2,447,604 2,607,862 2,607,862 2,607,862 2,607,862 2,607,862
amortization of pre-operating costs 1,546,200 1,546,200 1,546,200 1,546,200 1,546,200 - - - - -
amortization of training costs - - - - - - - - - -
Deferred income tax (887,299) (4,342,858) (5,757,160) (7,330,671) (9,192,353) (10,585,025) (11,553,159) (12,618,366) (13,790,412) (15,080,046)
Accounts receivable (20,120,548) (2,850,411) (6,170,301) (7,174,652) (8,318,170) (6,918,283) (5,155,236) (5,670,760) (6,237,836) (6,861,620)
Finished goods inventory (7,884,525) (1,796,618) (2,399,326) (2,782,437) (3,183,174) (1,760,987) (1,979,573) (2,177,420) (2,395,041) (2,634,412)
Equipment inventory (45,352) (7,030) (8,119) (9,378) (10,831) (12,510) (14,449) (16,689) (19,275) (22,263) 165,896
Raw material inventory (40,670,705) (14,133,070) (17,537,208) (21,657,082) (26,632,785) (18,697,782) (21,595,938) (24,943,308) (28,809,521) (33,274,997) 247,952,397
Advance insurance premium (609,850) 67,548 67,548 67,548 67,548 (38,142) 75,560 75,560 75,560 75,560 75,560
Accounts payable 17,969,378 5,239,532 6,203,139 7,324,106 7,482,091 5,052,088 5,654,987 6,333,319 7,096,973 (15,597,052)
Other liabilities - - - - - - - - - -
Cash provided by operations (41,325,907) 5,137,903 22,167,869 28,995,049 39,224,260 63,972,165 69,051,977 77,369,711 83,940,410 90,976,025 361,515,791

Financing activities
Project Loan - principal repayment (3,572,924) (4,026,060) (4,536,665) (5,112,027) (5,760,361) - - - - -
Working Capital Loan - principal repayment (22,200,666) - - - - - - - - -
Short term debt principal repayment - (17,560,262) - - - - - - - -
Additions to Project Loan 23,008,036 - - - - - - - - - -
Additions to Working Capital Loan 22,200,666 - - - - - - - - - -
Issuance of shares 45,208,702 - - - - - - - - - -
Purchase of (treasury) shares
Cash provided by / (used for) financing activities 90,417,405 (25,773,590) (21,586,322) (4,536,665) (5,112,027) (5,760,361) - - - - -

Investing activities
Capital expenditure (46,016,072) - - - - (2,113,794) - - - - -
Acquisitions
Cash (used for) / provided by investing activities (46,016,072) - - - - (2,113,794) - - - - -

NET CASH 3,075,425 (20,635,687) 581,548 24,458,385 34,112,232 56,098,010 69,051,977 77,369,711 83,940,410 90,976,025 361,515,791

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13 KEY ASSUMPTION
OPERATING ASSUMPTIONS
Working days in a year 300
Shifts Operational 1
Shifts Operational for UMB 1
Hours per shift 8
Initial year Capacity utilization 60%
Production Capacity of Animal Feed (Tons per Hour) 5
Annual Production Capacity of Animal Feed (Tons) 12,000
Production Capacity for UMBs (Kgs per Hour) 125
Production Capacity for UMBs (Blocks per Hour) 25
Capacity Utilization growth rate 10%
Maximum Capacity utilization 100%

REVENUE ASSUMPTIONS
Sales Price per kg (Animal Feed Mill) Rs. 34
Sales Price per 5 kg Block Rs. 150
Sales Price growth rate 10%

COST OF SALES ASSUMPTIONS

Raw Material Cost growth rate 10%
Wastage 1%
Packing Cost for Animal Feed (Rs./Bag) 15
Packing Cost for Polythene Bags (Rs per Block) 5
Cost for boxes (Rs. Per Dozen) 10
Electricity Growth rate 10%
Salaries Growth rate 10%
Repair and Maintenance (as percentage of machinery) 10%
Repair and Maintenance Growth Rate 10%
Depreciation on Plant and Machinery 10%
Depreciation on Land and Building 5%
Depreciation on Furniture and Fixture 10%
Depreciation on Motor Vehicle (Straight Line method) 20%

OPERATING ASSUMPTIONS
Communication Expense (% of Admin Expense) 15%
Administrative Expense growth rate 10%
Traveling & conveyance (per month) Rs. 74,500
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Promotional Expenditures (% of Revenue) 1%

Amortization of pre-operating expenses yrs. 5

TURNOVER ASSUMPTIONS
Raw Material Inventory days 90
Finished Goods Inventory days 15
Accounts Payable days 30
Accounts Receivable days 30
Cash days 30

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