PRE-FESIBILITY STUDY

(GoatFattening)

PAKISTAN AGRICULTURE RESEARCH COUNCIL ISLAMABAD

MINISTRY OF NATIONAL FOOD SECURITY AND RESEARCH

Government of Pakistan

January 2014

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CONTENTS

1. DISCLAIMER...... 1

2. PURPOSE OF THE DOCUMENT...... 2

3. INTRODUCTION TO SCHEME...... 2

4. EXECUTIVE SUMMARY...... 2

5. BRIEF DESCRIPTION OF PROJECT...... 3

  • Selection of suitable breed………….……………………………………………….3
  • Location……………………………….……………………………………………...3
  • Target Markets………………………………….…………………………………….3
  • Employment Generation……………………………………….…………………….3

6. CRITICAL FACTORS...... ….3

7. OPERATIONAL CAPACITIES...... 4

8. POTENTIAL TARGET MARKET...... 4

9. PRODUCTION PROCESS FLOW...... 4

10. BREED SELECTION...... 4

11. PROJECT COST SUMMARY...... 4

11.1 Project Economics……………………………………………………………………..4

11.2 Project Financing……………………………………………………………………….5

11.3 Project Cost……………………………………………………………………………..5

11.4 Space Requirement……………………………………………………………………..5

11.5 Machinery and Equipment……………………………………………………………..6

11.6 Human Resource Requirement…………………………………………………………6

11.7 Revenue Generation…………………………………………………………………….6

12. CONTACTS – SUPPLIERS, EXPERTS / CONSULTANTS...... ………...... 6

13. USEFUL LINKS...... 7

14. ANNEXURES...... 11

15. KEY ASSUMPTIONS...... 13

LIST OF TABLES

Table 1: Project Economics 4

Table 2: Project Financing 5

Table 3: Project Cost 5

Table 4:Space Requirement 5

Table 5: List ofMachinery and Equipment 6

Table 6:Human Resource Requirement6

Table 7: Revenue Generation6

LIST OFANNEXURES

14.1. Income Statement11

14.2. Cash Flow Statement12

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  1. DISCLAIMER

This information memorandum is to introduce the subject matter and provide a general idea and information on the subject. Although, the material included in this document is based on data / information generated from experiments and field testing by a team of relevant scientists; however, it is based upon certain assumptions which may differ from case to case. The contained information may vary due to any change in any of the concerned factors, and the actual results may differ accordingly from the presented information. The PARC and its employees do not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. The prospective user of this memorandum is encouraged to contact qualified consultant/technical expert, especially designated focal person(s) of this enterprise for reaching to an informed decision.

  1. PURPOSE OF DOCUMENT

The purpose of this document is to facilitate potential investors in Goat Fatteningby providing them with a general understanding of the business, with the intention of supporting potential investors in crucial investment decisions. 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, production, finance, and business management. 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, certain industrial norms and well established research findings 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 the basis of investment decisions.

  1. INTRODUCTION TO SCHEME

Prime Minister’s Youth Business Loan Program, for young entrepreneurs, with an allocated budget of Rs. 5.0 Billion for the year 2013-14, is designed to provide subsidized financing at 8% mark-up per annum for one hundred thousand (100,000) beneficiaries, through designated financial institutions, initially through National Bank of Pakistan (NBP) and First Women Bank Ltd. (FWBL). Loans from Rs. 0.1 million to Rs. 2.0 million with tenure up to 8 years inclusive of 1 year grace period, and a debt: equity of 90: 10 will be disbursed to SME beneficiaries across Pakistan, covering; Punjab, Sindh, Khyber Pakhtunkhwa, Balochistan, Gilgit-Baltistan, Azad Jammu & Kashmir and Federally Administered Tribal Areas (FATA).

  1. EXECUTIVE SUMMARY

Goat Fattening Farm is proposed to be located at any suitable areas of Pakistan. Theproject is related to Goat fattening purposes, the total capacity is 50 goats. Project Cost Estimate isRs. 0.64 Million with fixedinvestment of Rs.0.07Million.The costassumptions, IRR 20% and payback 5.83yearsof goats.

  1. BRIEF DESCRIPTION OF PROJECT

The following parameters must be addressed as per pre-feasibility study,

  • Selection of suitableGoatbreed

In Punjab, Beetal, Teddy goat breeds are most suitable. In Sindh, Kamori, Pateri, Kacchan, Jattan goat breeds are most suitable. In KPK, Damani goat breeds are most suitable most suitable breeds.

  • Location:

The farm can be established in goat rearing areas of country where range grazing is available. In Punjab, the suitable areas to establish thegoat farming are Southern Punjab (Thal, Cholistan) and also pothowar areas. In SindProvince, goat fattening is profitable in their respective ecological zones like Thar and Indus basin. Districts of Sukkur, Tando Muhamamd Khan, Sanghar, Dadu etc in Sind province.

  • Targets Market

In addition to major cities such as Lahore, Multan, Karachi, Hyderabad and Islamabad, there is demand of Pakistani mutton in Middle East and Malaysia countries.

  • Employment Generation: The proposed project will provide direct employment to two individuals. Financial analysis shows the profitability of proposed business within first year of its operation.
  1. CRITICAL FACTORS

The following are critical factors for the successful commercial goat farming.

  • Strict vaccination and deworming program for successful operation may be followed.
  • Good feeding and management practice will give the success in the business. Fresh water will be available all the time. In the concentrate; minerals may also be included.
  • Establishment of the farm in areas where cheap land is available, but it should not be far away from the market.
  • The farming should be done on scientific grounds taking care of Vaccination, Medicine etc.
  • Healthy and quality male stock should be selected for fattening.
  • New feeding techniques including concentrate feeding and preparation of mixed ration will give the good results.
  • Well-trained / experienced staff adding to the efficiency of the farm.
  1. OPERATIONAL CAPACITY

The farm will start production with 50goats. The limit of 50 goats has been imposed on the farm because a very large flock would bedifficult to manage. The farm would focus on rearing of young stock for fattening andmarketing. Goat from aged less than 1 year of age will be purchased and resold in themarket after a fattening period of 120 days.

  1. POTENTIAL MARKETS

Target market would be the areas where breeding is being undertaken as well as majorcities like Karachi, Lahore, Rawalpindi, Islamabad, Peshawar etc. In addition to localmarkets there is an enormous export potential to Middle Eastern countries.

  1. PRODUCTION PROCESS FLOW

Animals selected for fattening should be of less than 1 year of age. During this age the daily weight-gain capacity is also better particularly in goat.

  1. BREED SELECTION

The farmers should not only select good quality breed which can bring better results for fattening but also select most suitable animals from the selected breed. Through bettermanagement, the weight gain of these selected breeds would be higher.

  1. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of Goat Fattening Farm. Various cost and revenue related assumptions along with results of the analysis are outlined in this section.

11.1Project Economics

All the figures in this financial model have been calculated for 50goatfor total area of around 21,00 sq.ft, that would be used for different functions of the farm. The following table shows internal rates of return and payback period.

Table 1. Project Economics

Description / Goat
Internal Rate of Return (IRR) / 20 %
Payback Period (yrs) / 5.83
Net Present Value (NPV) / 552,121

11.2Project Financing

Following table provides details of the equity required and variables related to bank loan;

Table 2.Project Financing

Description / Goat
Total Equity (@ 10%) / Rs. 642177
Bank Loan (@ 90%) / Rs. 71353
Markup to the Borrower (%age/annum) / 8%
Tenure of the Loan (Years) / 8
Grace Period (Year) / 1

11.3Project cost

Following requirements have been identified for operations of the proposed business.

Table 3. Project cost

Project Investment / Amount (Rs.)
Building / 330000
Machinery & Equipment / 90000
Total Capital Cost / 420000

11.4 Space Requirement

Details of the area required are given below:

Table 4. Space Requirement

Description / Space per animal sq ft / Total space sq ft / Cost per sq ft / Total cost (Rs.)
Shed for 50 kids (covered) / 12 / 600 / 300 / 180000
Open paddock for 50 kids / 24 / 1200 / 50 / 60000
Isolation Pen for 5 kids (covered) / 12 / 60 / 300 / 18000
Stores for ration & machinery (12x20) / - / 240 / 300 / 72000
Total / 330000

11.5Machinery and Equipment

Following table provides list of machinery and equipment required for Goat Fattening Farm working for Livestock sector.

Table 5 List of Machinery and Equipment

Farm supplies / Unit Cost (Rs) / Total Cost (Rs)
Feeding mangers 5 / 3000 / 15000
Chaff cutter / 50000 / 50000
Water pump / 20000 / 20000
Other farm equipment / - / 5000
Total cost / 90000

11.6Human resource requirement

The table above provides details of human resource required for goat fattening farm.

Table 6 Human Resource Requirement

Description / No. of Employees / Salary per month
Worker / 1 / 10,000

11.7Revenue Generation

Table 7. Revenue Generation

Product / Sales
Price
(Rs./Unit) / Average weight per kg live weight / First Year
Production / First Year
Sales
Revenue (Rs)
Sale of Live Goats / 350 kg / 45 / 50 / 787500
Total Sales Revenue / 787500
  1. CONTACTS – SUPPLIERS, EXPERTS / CONSULTANTS
  1. Dr. M. FatehUllah Khan

Animal Sciences Institute (ASI), NARC

Email: , Phone: 051-8443944

  1. USEFUL LINKS
  • Prime Minister’s Office,
  • Government of Pakistan,
  • Ministry of Industries & Production,
  • Small & Medium Enterprises Development Authority (SMEDA),
  • Ministry of Education, Training & Standards in Higher Education
  • Government of Punjab,
  • Government of Sindh,
  • Government of Khyber Pakhtunkhwa,
  • Government of Balochistan,
  • Government of Gilgit Baltistan,
  • Government of Azad Jammu & Kashmir,
  • Trade Development Authority of Pakistan (TDAP),
  • Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
  • State Bank of Pakistan (SBP),
  • National Bank of Pakistan (SBP),
  • First Women Bank Limited (FWBL),
  • Ministry of National Food Security & Research,
  • Ministry of Education, Training & Standards in Higher Education,
  • Securities & Exchange Commission of Pakistan (SECP),
  • Punjab Board of Investment & Trade (PBIT), 23-Aikman Road, GOR-I,Lahore
  • Tel. 042-99205201,
  • Sindh Board of Investment (SBI), 1st Floor, Tower B, Finance & Trade
  • Center, Shahra-e-Faisal, Karachi, Tel. 021-99207512-4,
  • All Pakistan Meat Exporters and Processors Association, Lahore,
  • Punjab Agriculture and Meat Company (PAMCO), Lahore,
  • Pakistan Agricultural Research Council (PARC), Islamabad, Tel. 0519203966
  • National Agricultural Research Centre (NARC), Islamabad, Tel. 0519255061,
  • National Veterinary Laboratory, NARC, Islamabad, Tel. 051-9255108
  • Balochistan Agricultural Research Centre (BARC), Quetta, Tel: 081-

9213286-7,

  • Southern-zone Agricultural Research Centre (SARC), Karachi, Tel: 021-

99261661, 99261561,

  • Arid Zone Research Institute (AZRI), Bahawalpur, Tel: 0622-876833,
  • Punjab Livestock & Dairy Development Board (PLDDB), 11- Shami Road,
  • Lahore Cantt. Tel. 042-36676821,
  • Faculty of Animal Husbandry, University of Agriculture, Faisalabad,
  • Faculty of Veterinary Sciences, University of Agriculture, Faisalabad,
  • Faculty of Veterinary and Animal Sciences, Lasbela University of Agriculture, Water & Marine Sciences, Lasbela,
  • Faculty of Veterinary Sciences and Animal Husbandry, Sindh Agriculture

University, Tondojam,

  • Gomal College of Veterinary Sciences, Dera Ismail Khan,
  • KPKAgriculturalUniversity, Peshawar,
  • PirMehrAliShahAridAgriculturalUniversity, Rawalpindi,
  • UniversityCollege of Veterinary & Animal Sciences, IslamiaUniversity

Bahawalpur (IUB),

  • University of Veterinary & Animal Sciences (UVAS), Out Fall Road, Lahore,
  • College of Veterinary & Animal Sciences, Jhang,
  • Bahauddin Zakariya University (BZU), Multan,
  • Animal Husbandry In-Service Training Institute (AHITI), Peshawar, Tel.

091-2960109, 9210309

  • Veterinary Research Institute (VRI), Ghazi Road, Lahore Cantt., Tel. 042-

99220140

  • Agribusiness Support Fund (ASF), Lahore,
  • Directorate of Livestock Farms, L&DD, Lahore, Tel: 042-99201126-7
  • Govt. Livestock Farm (GLF) Kallurkot District Bhakkar, Tel: 0453-200928
  • Livestock Experiment Station (LES), Rakh Ghulaman, District Bhakkar, Tel:

0453-446134

  • Livestock Experiment Station (LES), Khizarabad, District Sargodha, Tel:

048-3019835

  • Research & Development Centre, Rakh Khairewala, District Layyah
  • Livestock Experiment Station (LES), Khushab, Tel: 0454-215543
  • Livestock Experiment Station (LES), Chak Katora, District Bahawalpur, Tel:

062-2442589

  • Livestock Experiment Station (LES), Haroonabad, District Bahawalnagar,

Tel: 063-2252960

  • Directorate of BLPRI, Kherimurat (Attock), L&DD, Punjab, Tel: 057-

2213422, 2212130, 2210781

  • Directorate of Small Ruminants, Multan, L&DD, Punjab, Tel: 061-9210417
  • Directorate of Livestock Training Centre (LSTC), Bahadurnagar, Okara, Tel:

044-2661393

  • Livestock Training Centre (LSTC), Sheikhupura, Tel: 056-9200056
  • Livestock & Fisheries Department, Government of Sindh,
  • Agriculture & Livestock Department, Government of KPK,
  • Livestock Research Station, Jaba, Mansehra, (Jaba Goat and Goat Farm), Tel: 0997-301866
  • Livestock & Dairy Development, Government of Balochistan,
  • Bhagnari Cattle Cum Balochi Goat Farm Usta Muhammad, Dera Allah Yar

c/o L&DD Quetta, Tel: 081-9202564

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  1. ANNEXURES

14.1Income Statement

Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6 / Year 7 / Year 8 / Year 9 / Year 10
Revenue / 826,875 / 888,891 / 955,557 / 1,027,224 / 1,104,266 / 1,187,086 / 1,276,117 / 1,371,826 / 1,474,713 / 1,585,317
Feed & Vaccination Cost / 252,500 / 265,125 / 278,369 / 292,312 / 306,938 / 322,280 / 338,374 / 355,307 / 373,070 / 391,704
Cost of Calves / 375,000 / 393,750 / 413,438 / 434,109 / 455,815 / 478,606 / 502,536 / 527,663 / 554,046 / 581,748
Direct Labor / 60,000 / 66,000 / 72,600 / 79,860 / 87,846 / 96,631 / 106,294 / 116,923 / 128,615 / 141,477
Repair & Maintenance / 4,900 / 5,145 / 5,402 / 5,672 / 5,956 / 6,254 / 6,566 / 6,895 / 7,240 / 7,602
Utilities / 29,400 / 32,340 / 35,574 / 39,131 / 43,045 / 47,349 / 52,084 / 57,292 / 63,022 / 69,324
Total Cost of Sales / 723,800 / 764,460 / 807,588 / 853,401 / 902,030 / 953,671 / 1,008,534 / 1,066,894 / 1,128,947 / 1,194,957
Gross Profit / 103,075 / 124,431 / 147,970 / 173,824 / 202,236 / 233,415 / 267,584 / 304,932 / 345,766 / 390,360
General administration & selling expenses-Travelling & Comm. expense (phone, fax, etc.) / 6,000 / 6,300 / 6,615 / 6,946 / 7,293 / 7,658 / 8,041 / 8,443 / 8,865 / 9,308
Depreciation expense / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000
Amortization expense / 9,726 / 9,726 / 9,726 / 9,726 / 9,726 / - / - / - / - / -
Subtotal / 69,726 / 70,626 / 71,571 / 72,563 / 73,605 / 64,973 / 66,122 / 67,328 / 68,594 / 69,924
Operating Income / 33,349 / 53,805 / 76,399 / 101,260 / 128,631 / 168,442 / 201,462 / 237,604 / 277,172 / 320,436
Earnings Before Interest & Taxes / 33,349 / 53,805 / 76,399 / 101,260 / 128,631 / 168,442 / 201,462 / 237,604 / 277,172 / 320,436
Interest expense / 53,300 / 48,797 / 42,878 / 36,468 / 29,526 / 22,007 / 13,865 / 5,047 / - / -
Earnings Before Tax / (19,951) / 5,008 / 33,521 / 64,793 / 99,105 / 146,434 / 187,597 / 232,557 / 277,172 / 320,436
NET PROFIT/(LOSS) AFTER TAX / (19,951) / 5,008 / 33,521 / 64,793 / 99,105 / 146,434 / 187,597 / 232,557 / 277,172 / 320,436
Balance brought forward / (19,951) / (14,944) / 18,577 / 83,370 / 182,475 / 328,909 / 516,506 / 749,064 / 1,026,235
Total profit available for appropriation / (19,951) / (14,944) / 18,577 / 83,370 / 182,475 / 328,909 / 516,506 / 749,064 / 1,026,235 / 1,346,672
Balance carried forward / (19,951) / (14,944) / 18,577 / 83,370 / 182,475 / 328,909 / 516,506 / 749,064 / 1,026,235 / 1,346,672

14.2 CASHFLOW STATEMENT

Operating activities / Year 0 / Year 1 / Year 2 / Year 3 / Year 4 / Year 5 / Year 6 / Year 7 / Year 8 / Year 9 / Year 10
Net profit / - / (19,951) / 5,008 / 33,521 / 64,793 / 99,105 / 146,434 / 187,597 / 232,557 / 277,172 / 320,436
Add: depreciation expense / - / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000 / 42,000
amortization expense / - / 9,726 / 9,726 / 9,726 / 9,726 / 9,726 / - / - / - / - / -
Equipment inventory / (1,633) / (167) / (185) / (203) / (224) / (247) / (273) / (301) / (331) / (365) / 3,931
Raw material inventory / (209,167) / (21,440) / (23,633) / (26,069) / (28,736) / (31,675) / (34,915) / (38,509) / (42,448) / (46,790) / 503,381
Accounts payable / - / 35,540 / 2,278 / 2,444 / 2,624 / 2,817 / 3,025 / 3,253 / 3,500 / 3,766 / (18,929)
Cash provided by operations / (210,800) / 45,708 / 35,195 / 61,418 / 90,182 / 121,725 / 156,272 / 194,040 / 235,278 / 275,782 / 850,819
Financing activities- Change in long term debt / 642,177 / - / (71,312) / (77,231) / (83,641) / (90,583) / (98,102) / (106,244) / (115,062) / - / -
Issuance of shares / 71,353 / - / - / - / - / - / - / - / - / - / -
Cash provided by / (used for) financing activities / 713,530 / - / (71,312) / (77,231) / (83,641) / (90,583) / (98,102) / (106,244) / (115,062) / - / -
Investing activities- Capital expenditure / (468,630) / - / - / - / - / - / - / - / - / - / -
Cash (used for) / provided by investing activities / (468,630) / - / - / - / - / - / - / - / - / - / -
NET CASH / 34,100 / 45,708 / (36,117) / (15,813) / 6,541 / 31,142 / 58,170 / 87,795 / 120,215 / 275,782 / 850,819
Cash balance brought forward / 34,100 / 79,808 / 43,690 / 27,877 / 34,418 / 65,560 / 123,730 / 211,526 / 331,741 / 607,523
Cash available for appropriation / 34,100 / 79,808 / 43,690 / 27,877 / 34,418 / 65,560 / 123,730 / 211,526 / 331,741 / 607,523 / 1,458,342
Cash carried forward / 34,100 / 79,808 / 43,690 / 27,877 / 34,418 / 65,560 / 123,730 / 211,526 / 331,741 / 607,523 / 1,458,342
  1. Key Assumptions

Particulars / Assumption
Sales Price Growth Rate / 5 % per year
Capacity Utilization Growth Rate / 10 % per year
Increase in Cost of Raw Materials / 5 % per year
Increase in Staff Salaries / 10 % per year
Increase in Utilities (Electricity / Water / Gas) / 10 % per year
Debt / Equity Ratio / 90 : 10
Depreciation
PlantBuilding / 10 % per annum
Machinery / 10 % per annum
Office Furniture & Equipment / 10 % per annum
Loan Period / 8 Years (inclusive of 1 year grace period)
Loan Installments / Quarterly

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