Pre-Feasibility Study: Flour Mill
Pre-Feasibility Study: Flour Mill
Pre-Feasibility Study: Flour Mill
FLOUR MILL
3rd Floor, Building No. 5TH Floor, Bahria Ground Floor Bungalow No. 15-A
3, Aiwan-e-Iqbal Complex II, M.T. Khan State Life Building Chaman Housing
Complex, Egerton Road Road, The Mall, Peshawar. Scheme
Lahore, Tel: (042) 111- Karachi. Tel: (091) 9213046- Airport Road,
111-456 Tel: (021) 111-111-456 47 Quetta. Tel: (081)
Fax: (042) 36304926-7 Fax: (021) 5610572 Fax: (091) 286908 831623, 831702
helpdesk.punjab@smeda.org.pk helpdesk- helpdesk- Fax: (081) 831922
khi@smeda.org.pk pew@smeda.org.pk helpdesk-
qta@smeda.org.pk
January 2011
DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter
and provide a general idea and information on the said area. All the material included in
this document is based on data/information gathered from various sources and is based
on certain assumptions. Although, due care and diligence has been taken to compile this
document, the contained information may vary due to any change in any of the concerned
factors, and the actual results may differ substantially from the presented information.
SMEDA does not assume any liability for any financial or other loss resulting from this
memorandum in consequence of undertaking this activity. Therefore, the content of this
memorandum should not be relied upon for making any decision, investment or
otherwise. The prospective user of this memorandum is encouraged to carry out his/her
own due diligence and gather any information he/she considers necessary for making an
informed decision. The content of the information memorandum does not bind SMEDA
in any legal or other form.
DOCUMENT CONTROL
Prepared by SMEDA-Balochistan
Approved by Head of Department
Issue Date January 2011
Issued by Library Officer
Pre-feasibility Study Flour Mill
Table of Contents
1-............................................................................................................. INTRODUCTION TO SMEDA
1
2-..................................................................................................... PURPOSE OF THE DOCUMENT.
2
3-............................................................................................................................ PROJECT PROFILE
2
3.1Project Brief........................................................................................................................................ 2
3.2Market Entry Timing...........................................................................................................................2
3.3Opportunity Rationale........................................................................................................................2
3.4Proposed Business Legal Status.....................................................................................................3
3.5Project Capacity.................................................................................................................................3
3.6Working Time.....................................................................................................................................3
3.7Project Investment.............................................................................................................................3
3.8Suitable Location............................................................................................................................... 4
3.9Key Success Factors / Practical Tips for Success..................................................................................4
3.10........................................................................................................................SWOT Analysis
4
4-............................................................................................... CURRENT INDUSTRY STRUCTURE
5
4.1Market Information.............................................................................................................................5
4.2Market Overview & Demand..............................................................................................................6
4.3Demand and supply gap....................................................................................................................6
4.4Target Customers..............................................................................................................................7
4.5Raw Material Requirement................................................................................................................7
4.6International Scenario........................................................................................................................ 7
4.6.1...................................................................................................................Major Producers
7
4.6.2....................................................................................................................Major Exporters
8
4.6.3....................................................................................................................Major Importers
8
4.7Wheat Production in Pakistan...........................................................................................................9
4.7.1......................................................................................................Government wheat policy
9
4.8Public Sectors Involved in Wheat Market.......................................................................................10
4.8.1..............................................................................Ministry of Food Agriculture and Livestock
10
4.8.2.............................................................................................Trading Corporation of Pakistan
10
4.8.3.................................................................................................Provincial Food Departments
11
4.8.4................................................................................................................Seed Corporations
11
4.9Private Sector involved in Wheat Market.......................................................................................11
4.9.1...............................................................................................................................Farmers
11
4.9.2................................................................................................................................Traders
12
4.9.3..................................................................................................................Seed Companies
12
4.9.4............................................................................................................................Flour Mills
12
5-.......................................................................................................... MACHINERY REQUIREMENT.
13
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Pre-feasibility Study Flour Mill
5.1Machinery Cost................................................................................................................................. 13
5.2Other fixed assets requirement.......................................................................................................14
5.3Utilities Requirement........................................................................................................................15
5.4Vehicle requirement.........................................................................................................................15
6-............................................................................................. HUMAN RESOURCE REQUIREMENT
15
7-................................................................................................ LAND & BUILDING REQUIREMENT
16
7.1Land and Building Requirement.....................................................................................................16
7.1.1....................................................................................................................................Land
16
7.1.2................................................................................................................................Building
16
7.2Cost of Water Connection...............................................................................................................17
8-PROCESS FLOW.......................................................................................................................17
8.1Process Flow of Flourmill................................................................................................................17
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Pre-feasibility 1 Flour
1-Introduction to SMEDA
Small and Medium Enterprise Development Authority (SMEDA) was established with
the 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 retardant. The all-encompassing sectoral
development strategy involved recommending changes in the regulatory environment
by taking into consideration other important aspects including financial aspects, niche
marketing, technology up gradation and human resource development.
SMEDA has so far successfully formulated strategies for sectors including, fruits and
vegetables, marble and granite, gems and jewelry, marine fisheries, leather and
footwear, textiles, surgical instruments, urban transport and dairy. 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 the continuation of this effort to enable potential investors to make
well-informed investment decisions.
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Pre-feasibility 2 Flour
3-Project Profile
The proposed project is for setting up a Flour Mill. The Mill can be established in any
major city of Pakistan. The document highlights marketing, management and financial
aspects required for the establishment of successful venture. The unit will be using
modern automated machinery for all the processes, ensuring quality check through out the
production process. After processing, the flour will be packed in 3 different packaging
sizes. The unit will produce premium quality flour to be sold in the local market, competing
with existing brands.
Traditionally Atta is made by stone grinding, a process that imparts a characteristic aroma
and taste to the bread. The high bran content of Atta makes it a fiber-rich healthy food
and essential part of the diet. The number of “mini flour mills” grinding atta at capacity of
less than 5 tons /day is estimated to be 8,000 or more. Ninety percent of the mini mills are
located in rural areas, whereas, about 700 small and medium flour mills are operating
around the country with a capacity of 5 – 20 tons/ day.
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Pre-feasibility 3 Flour
Total Investment121,756,249
Initial Financing Rs. in actuals
Debt 60,878,125
Equity 60,878,125
Lease -
Export re-finance facility -
3
Pre-feasibility 4 Flour
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.
STRENGTHS
Continuous availability of raw material, i.e. high quality wheat
Fully automated plant, hence less labor involved
Availability of low cost labor
Product affordable to all income groups
Wide range of target market
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Pre-feasibility 5 Flour
WEAKNESSES
Strict controls over labor efficiency need to be observed to reduce the waste
production to a minimum level
Expected loss at the initial stages of the operation as a result of sales return from the
distributors
Inexperienced technical staff as compared to the units currently in operation
OPPORTUNITIES
Changes in the current eating habits of the people
A large number of people that are not brand loyal can be targeted through marketing
campaign.
About 40% of the Flour Market share comprises of un-branded flour this share can be
gained through heavy marketing campaign
Export opportunity
THREATS
Already established businesses in same industry
Fluctuation in the price of wheat
Quality of the flour is to be monitored very closely as people are more directed
towards health and safety issues
Strong competition and high promotional activity by the competitors
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Pre-feasibility 6 Flour
water shortages is likely take its toll and wheat harvest is estimated to be lower than the
2009-2010 targets of 25.0 million tons.
Table 1 - Area under Wheat Cultivation
6
Pre-feasibility 7 Flour
1
Source: FAO
7
Pre-feasibility 8 Flour
8
Pre-feasibility 9 Flour
1
Source: Ministry of Finance & Competitive support fund
9
Pre-feasibility 1 Flour
distributions and stock build-ups. Wheat grain is provided to the flour millers at an
“issue price” which is often lower than the private market price.
Subsidies often come in the form of financial support for producers to produce higher
volumes and support their incomes.
1
Competitiveness Support Fund, Discussion Paper on the Wheat-Flour Industry in Pakistan
1
Pre-feasibility 1 Flour
4.9.1 Farmers
Pakistani farmers use mostly traditional storage for grain. The private sector, primarily
wheat traders and flour millers, have less than 1 million metric tons of grain storage
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Pre-feasibility 1 Flour
capacity. The private sector purchases up to 2 million MT of wheat from the farmers each
year. Millers need to hold sufficient grain for 30 to 60 days of milling. The wheat
delivered from the farm at harvest to the village market or to a government department
kept in sheds, houses, large steel bins, concrete silos, or in the holding bins of a flour mill
4.9.2 Traders
Traders play an important role in purchasing and collecting wheat from the farmer at farm
prices above or below the GoP’s support price (depending on the wheat quality and
market parameters) for further sale to public/private sector.
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Pre-feasibility 1 Flour
5-Machinery Requirement
1
Pre-feasibility 1 Flour
4 Boarding/Lodging 120,000
5 Transportation of 500,000
Machinery
Total Cost of Machinery 32,238,500
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Pre-feasibility 1 Flour
1
Pre-feasibility 1 Flour
7.1.1 Land
For above recommended size of Flour Mill, approximately two acres of land is required
one acre of land will be kept open for future expansion and other requirements.
The total cost of the Land is as follows:
7.1.2 Building
The break up of the required area and construction cost of the building is given in the
table below:
Table 11 - Cost of Building
Description Total area (Sq. Ft) Rate/Sq Ft (Rs.) Total Cost (Rs.)
PLANT
Area of ground floor 4,500
Area of 1st floor 4,500
Area of 2 nd
floor 4,500
Area of 3 floor
rd
4,500
Sub total plant 18,000 1,800 32,400,000
Management Building
Power room 400
Godown 2450
Office 225
4 rooms for labor 480
Masjid 400
Guard room 80
7 washrooms 84
Kitchen 64
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Pre-feasibility 1 Flour
8-PROCESS FLOW
Intake hopper is made up of concrete, steel and cement. A pit is dig in the soil below
the ground level about 2 to 2.5 meters depth. It is covered with a net of 10 mm round
steel duly welded with 5 mm round at a particular distance. Around 5,000 Kg. weights
can be placed in this pit at a time.
There is a controlled mechanical system for opening the gate of Intake Hopper to 1st
Elevator. 1st single Bucket Elevator lifts the grain vertically and feeds it in Drum
Sieve machine. It is a rotary drum type sieving machine which can separate out the fine
dust by aspiration system developed by negative pressure whereas thrash, jute sutli, lumps
etc. are separated out by sieving.
After sieving through the Drum Sieve, the grain will feed in vibro-type Seed Cleaner
by gravity. The impurities, which are bigger or smaller than the size of grain, is separated
out by sieving with the help of different size sieves and the light impurities will be
separated out by Aspiration System. These light impurities will be collected in the Dust
Cyclone.
After sieving the material from Seed/Grain cleaner, the raw wheat will go into the 2nd
single Bucket Elevator by gravity. This Elevator will lift the material vertically and feed it
in the Worm Conveyor, which is fitted on the top of 1st & 2nd Concrete Bins. The
cleaned material will go into 1st & 2nd Bins. These bins are designed for multiple hoppers
from the bottom side. The output flow of the material can be controlled with variable pocket
feeder and the wheat can be put in the Worm Conveyor. The Worm Conveyor takes the
wheat from 1st & 2nd Bins to feed it to Elevator No. 3 by gravity.
Elevator No. 3 lifts the material vertically and feeds it to the Gravity Separator Cum
De- stoning machine. In this machine we can separate out heavy metals, stones, glass
pieces and also the light impurities from the wheat. Thereafter, the wheat will go to
scouring machine by gravity. In the scouring machine dust is removed from the upper
layer of wheat by friction. Dust and some part of bran are separated out from the
wheat by
1
Source: SMEDA survey
1
Pre-feasibility 1 Flour
sieving. Aspiration channel is also provided with Scouring machine for further cleaning
of the wheat by negative pressure of air stream.
From the Scourer Aspiration channel the wheat goes to Intensive Dampner through
Bucket Dampner by gravity system with the help of Bucket Dampner where measured
quantity of water will be added in the wheat. Water will be mixed immediately with the
help of Intensive Dampner. From Intensive Dampner wheat will go to single Bucket
Elevator No. E1- 4 by gravity.
Elevator No. 4 lifts the material vertically and feeds it into Worm conveyor No. W3 and
feeds the wheat in Bin No. III, IV, V & VI for conditioning. The wheat is kept in the
conditioning for 16-24 hours depending upon the variety of wheat and atmospheric
temperature.
After conditioning, the wheat is taken out from the multiple hoppers. This wheat is feeded
in the Elevator No. E1-5 through Worm Conveyor W4. Elevator E1-5 lifts the material
vertically and puts it in the second Intensive Dampner through Bucket Dampner.
Desired moisture is added here and the material is put in Bin No. VII & VIII for about 4
to 6 hours.
Material is taken out from the Bin No. VII & VIII through the conveyor and is feeded into
the Elevator E1-6 by gravity.
Elevator E1-6 lifts the material vertically and feeds it into the Scouring/Brush Machine,
so that the bran could be removed from the upper layer of wheat. This bran is separated
by sieving and aspiration channel. Then this material goes to final Seed cleaner by
gravity. The Seed cleaner finally performs the cleaning of the seed and keeps the
material in Worm conveyor and then it goes to Elevator E1-7.
Bucket Elevator E1-7 lifts the material vertically and feeds it into Milling Bin. From
Milling Bin it goes to 1st break of Roller Mill. In Roller Mill material is grind with the
help of Chilled Cast Iron Rolls. After grinding, the material is lifted vertically by
pneumatic conveying system and feeded into the Plan Sifter through Pneumatic cyclone
and air Lock.
In the Plan Sifter (sieve) we can sieve the material into many segments. The final product
goes to Worm conveyor and then packed. Intermediate product goes to Purifier
machine for further purification. Desired quantity of Sujji is taken out for packing and
the remaining material goes to Roller Mill for further grinding and sieving. Coarse
material also goes to further grinding and sieving. This process is continued in sequence
up-to- desired product.
In the whole process we grind the wheat in grooved rolls softly, so that purest form of
Bran can be obtained. In this process by separating the bran we can get Samolina, Sujji in
the purest form. In the intermediate product where we cannot separate out the bran from
Semoline, the Semoline obtained at this stage is called ‘Atta’.
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Pre-feasibility 1 Flour
1
Pre-feasibility 2 Flour
Revenue 859,950,000 1,018,710,000 1,200,622,500 1,408,730,400 1,646,453,655 1,917,634,257 2,109,397,683 2,320,337,451 2,552,371,196 2,807,608,316
Cost of goods sold 787,471,251 891,012,884 1,003,118,974 1,124,408,116 1,255,541,763 1,397,227,240 1,469,281,097 1,545,155,487 1,625,063,086 1,709,229,351
Gross Profit 72,478,749 127,697,116 197,503,526 284,322,284 390,911,892 520,407,017 640,116,586 775,181,964 927,308,110 1,098,378,964
Other income 178,381 753,935 1,939,611 3,777,003 6,196,341 10,070,683 15,226,350 20,738,477 26,858,513 38,778,109
Gain / (loss) on sale of assets - - - - 659,200 - - - - -
Earnings Before Interest & Taxes 24,874,061 73,547,845 136,365,322 215,654,231 314,607,260 435,090,920 551,284,335 682,307,008 830,027,101 1,001,423,131
Tax 6,699,016 27,690,506 53,932,026 87,004,649 128,229,829 178,387,277 226,026,577 279,745,873 340,311,111 410,583,484
NET PROFIT/(LOSS) AFTER TAX 9,640,047 39,847,314 77,609,500 125,201,812 184,525,851 256,703,643 325,257,758 402,561,135 489,715,990 590,839,647
Balance brought forward 9,640,047 24,743,681 51,176,591 88,189,201 136,357,526 196,530,584 260,894,171 331,727,653 410,721,821
Total profit available for appropriation 9,640,047 49,487,361 102,353,181 176,378,403 272,715,052 393,061,169 521,788,342 663,455,306 821,443,643 1,001,561,468
Dividend - 24,743,681 51,176,591 88,189,201 136,357,526 196,530,584 260,894,171 331,727,653 410,721,821 500,780,734
Balance carried forward 9,640,047 24,743,681 51,176,591 88,189,201 136,357,526 196,530,584 260,894,171 331,727,653 410,721,821 500,780,734
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Pre-feasibility 2 Flour
Assets
Current assets
Cash & Bank 500,000 3,464,018 13,290,104 29,812,372 54,121,027 83,575,445 140,217,506 198,145,828 262,709,215 334,146,639 527,589,111
Accounts receivable - 23,560,274 25,735,068 30,401,815 35,744,560 41,851,836 48,823,122 55,164,821 60,681,303 66,749,434 73,424,377
Finished goods inventory - - - - - - - - - - -
Equipment spare part inventory 46,365 55,049 65,027 76,471 89,579 104,570 115,289 127,106 140,134 154,498 -
Raw material inventory 31,850,000 37,815,750 44,669,855 52,531,749 61,536,019 71,834,253 79,197,264 87,314,984 96,264,769 106,131,908 -
Pre-paid annual land lease - - - - - - - - - - -
Pre-paid building rent - - - - - - - - - - -
Pre-paid lease interest - - - - - - - - - - -
Pre-paid insurance 1,451,940 1,298,506 1,145,072 991,638 838,204 817,476 653,981 490,486 326,990 163,495 -
Total Current Assets 33,848,305 66,193,597 84,905,126 113,814,045 152,329,389 198,183,581 269,007,161 341,243,225 420,122,412 507,345,975 601,013,488
Fixed assets
Land 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000
Building/Infrastructure 38,700,000 37,152,000 35,604,000 34,056,000 32,508,000 30,960,000 29,412,000 27,864,000 26,316,000 24,768,000 23,220,000
Machinery & equipment 34,238,500 30,814,650 27,390,800 23,966,950 20,543,100 17,119,250 13,695,400 10,271,550 6,847,700 3,423,850 -
Furniture & fixtures 206,000 185,400 164,800 144,200 123,600 103,000 82,400 61,800 41,200 20,600 -
Office vehicles 1,648,000 1,318,400 988,800 659,200 329,600 2,654,120 2,123,296 1,592,472 1,061,648 530,824 -
Office equipment 6,392,000 5,752,800 5,113,600 4,474,400 3,835,200 3,196,000 2,556,800 1,917,600 1,278,400 639,200 -
Total Fixed Assets 86,184,500 80,223,250 74,262,000 68,300,750 62,339,500 59,032,370 52,869,896 46,707,422 40,544,948 34,382,474 28,220,000
Intangible assets
Pre-operation costs 1,723,445 1,378,756 1,034,067 689,378 344,689 - - - - - -
Legal, licensing, & training costs - - - - - - - - - - -
Total Intangible Assets 1,723,445 1,378,756 1,034,067 689,378 344,689 - - - - - -
TOTAL ASSETS 121,756,249 147,795,602 160,201,192 182,804,173 215,013,578 257,215,951 321,877,057 387,950,647 460,667,360 541,728,448 629,233,488
Other liabilities
Lease payable - - - - - - - - - - -
Deferred tax - 6,699,016 7,018,893 7,018,893 7,018,893 7,018,893 5,615,114 4,211,336 2,807,557 1,403,779 -
Long term debt 60,878,125 37,562,652 30,148,721 21,548,561 11,572,375 - - - - - -
Total Long Term Liabilities 60,878,125 44,261,668 37,167,614 28,567,454 18,591,268 7,018,893 5,615,114 4,211,336 2,807,557 1,403,779 -
Shareholders' equity
Paid-up capital 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125 60,878,125
Retained earnings - 9,640,047 24,743,681 51,176,591 88,189,201 136,357,526 196,530,584 260,894,171 331,727,653 410,721,821 500,780,734
Total Equity 60,878,125 70,518,172 85,621,805 112,054,715 149,067,326 197,235,651 257,408,709 321,772,296 392,605,778 471,599,946 561,658,859
TOTAL CAPITAL AND LIABILITI 121,756,249 147,795,602 160,201,192 182,804,173 215,013,578 257,215,951 321,877,057 387,950,647 460,667,360 541,728,448 629,233,488
Note: Total assets value will differ from project cost due to first installment of leases paid at the start of year 0
- - - - - 0 - 0 (0) 0 (0)
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Pre-feasibility 2 Flour
- - - - - - - - 0 (0) 0
Operating activities
Net profit - 9,640,047 39,847,314 77,609,500 125,201,812 184,525,851 256,703,643 325,257,758 402,561,135 489,715,990 590,839,647
Add: depreciation expense - 5,961,250 5,961,250 5,961,250 5,961,250 5,961,250 6,162,474 6,162,474 6,162,474 6,162,474 6,162,474
amortization expense - 344,689 344,689 344,689 344,689 344,689 - - - - -
Deferred income tax - 6,699,016 319,877 - - - (1,403,779) (1,403,779) (1,403,779) (1,403,779) (1,403,779)
Accounts receivable - (23,560,274) (2,174,795) (4,666,747) (5,342,745) (6,107,276) (6,971,286) (6,341,699) (5,516,482) (6,068,130) (6,674,943)
Finished good inventory - - - - - - - - - - -
Equipment inventory (46,365) (8,684) (9,978) (11,445) (13,108) (14,991) (10,718) (11,817) (13,028) (14,364) 154,498
Raw material inventory (31,850,000) (5,965,750) (6,854,105) (7,861,894) (9,004,270) (10,298,234) (7,363,011) (8,117,720) (8,949,786) (9,867,139) 106,131,908
Pre-paid building rent - - - - - - - - - - -
Pre-paid lease interest - - - - - - - - - - -
Advance insurance premium (1,451,940) 153,434 153,434 153,434 153,434 20,728 163,495 163,495 163,495 163,495 163,495
Accounts payable - 33,015,762 4,396,011 4,770,231 5,172,980 5,606,424 5,891,826 3,113,781 3,287,010 3,470,698 (1,150,095)
Other liabilities - - - - - - - - - - -
Cash provided by operations (33,348,305) 26,279,490 41,983,698 76,299,019 122,474,042 180,038,441 253,172,644 318,822,494 396,291,040 482,159,246 694,223,206
Financing activities
Change in long term debt 60,878,125 (23,315,472) (7,413,931) (8,600,160) (9,976,186) (11,572,375) - - - - -
Investing activities
Capital expenditure (87,907,945) - - - - (2,654,120) - - - - -
Acquisitions - - - - - - - - - - -
Cash (used for) / provided by investing a (87,907,945) - - - - (2,654,120) - - - - -
NET CASH 500,000 2,964,018 34,569,767 67,698,859 112,497,856 165,811,945 253,172,644 318,822,494 396,291,040 482,159,246 694,223,206
Cash balance brought forward 500,000 3,464,018 13,290,104 29,812,372 54,121,027 83,575,445 140,217,506 198,145,828 262,709,215 334,146,639
Cash available for appropriation 500,000 3,464,018 38,033,784 80,988,962 142,310,228 219,932,972 336,748,090 459,039,999 594,436,868 744,868,461 1,028,369,845
Dividend - - 24,743,681 51,176,591 88,189,201 136,357,526 196,530,584 260,894,171 331,727,653 410,721,821 500,780,734
Cash carried forward 500,000 3,464,018 13,290,104 29,812,372 54,121,027 83,575,445 140,217,506 198,145,828 262,709,215 334,146,639 527,589,111
2
Pre-feasibility 2 Flour