Our Project
Introduction:
Starting business of Dairy Farm its feasibilty
report is given below.
Twelve animals (6
cows and 6 buffaloes) are raised on specific feed to gain high
milk yields. Dairy
farming business involves housing, breeding, feeding, watering,
disease control and
hygienic production of milk on farm.
A dairy farm with a
herd of 12 animals (6 cows and 6 buffaloes) needs a total
investment estimated
at Rs. 2.06 million out of which the capital cost of the project
is Rs.1.96 million
for animal purchase and building construction. The rest is used to
meet the working
capital requirement.
The project is
expected to achieve revenue of Rs. 2.10 million in the first year with
projected IRR and
Payback of project being 34% and 3.54 years respectively. The
farm will provide
employment opportunity to 01 individual other than the owner /
manager. Legal status of the project is
proposed as sole proprietorship.
BRIEF DESCRIPTION OF
PROJECT & PRODUCT
A dairy farm is
proposed to be established on a rented land, with a constructed
structure having
total area of 3,174 sq.ft. The proposed model involves 12 animals
(6 cows and 6
buffaloes) to achieve milk production of 35,040 liters by the end of
first year. Milk will
be primarily sold to bulk buyers at the rate of Rs.60 per liter with
an annual price
increase of 10%. However, the farm will also offer sale to domestic
individual consumers.
CRITICAL
FACTORS
1.
Background knowledge and related experience of the entrepreneur in dairy
farm
operations.
2. Application
of good husbandry practices such as;
• Selection of dairy breed: good local dairy
buffalo breeds namely Nili-Ravi
and Kundi
and cattle breeds such as Sahiwal, Red Sindhi, Tharparkar
and
Cholistani. Crossbred cattle may also be considered as
crossbreeding
is recommended for non-descript cattle with semen of
local
high producing breeds like Sahiwal, Cholistani, Red Sindhi etc. or
exotic
breeds like Holstein Friesian, Jersey etc.
• Selection of good dairy animals with
excellent body condition and udder
health:
average daily milk production of 10 liters or above for buffaloes
and 12
liters or above for cows in 2nd or 3rd
lactation, essentially with no
disease
history.
• Housing should be dry, comfortable and airy
with proper drainage of
dung,
urine and waste material.
• Feeding: Animal should be fed 1 kg of
concentrate feed per 3 litres of
milk
produced, hence animal with 10 litres of milk production would be
offered
3-3.5 kg of concentrate. Additionally, urea molasses blocks and
salt
blocks can help in better milk production.
• Watering: Supply of clean drinking water in
clean troughs i.e. 50 to 80
liters of
water consumption/animal/day round the clock maintains the milk
production
capacity of the animal.
• Breeding: Efficient and timely Artificial
Insemination (AI) of good genetic
worth is
a key to success in good breeding programs of herd.
• Disease management: Hygienic and clean
milking twice a day (morning/
evening)
lowers the chances of mastitis as udder health and hygiene is
most
important in dairy animals. Follow the recommended vaccination
schedule
especially for Foot and Mouth Disease.
• Female calf care and heifer management as it
is very important in
maintaining
dairy farm production.
• Selection of good productive animals and
culling of uneconomical
animal.
• Record keeping for milk production, calving,
AI, vaccination etc.
• Proper storage of milk preferably at
temperature of 4 Oc and transported
at 11 Oc temperatures.
INSTALLED &
OPERATIONAL CAPACITIES
Production capacity
is based on project size. The Pre-feasibility study suggests
an initial herd size
of twelve (12) animals which is economical to justify the
overhead cost.
Initially, herd mix of 50% cows and 50% buffaloes is
recommended to obtain
maximum milk production round the year. The dairy farm
will have the capacity to produce 35,040
liters of milk per annum.
GEOGRAPHICAL
POTENTIAL FOR INVESTMENT
Dairy farm is a
viable business proposition for both rural and peri-urban areas of
Pakistan. There is
almost equal demand for milk in both developed and semideveloped
cities across the
country, hence, from the demand point of view the said
project offers good
investment opportunities for small scale investment in all
provinces of country.
POTENTIAL TARGET
MARKETS
Domestic consumers,
milk processors, dairy companies, milk collection companies
and contractors are the major clients of
dairy farms.
PROJECT COST SUMMARY
A detailed financial
model has been developed to analyze the commercial viability
of dairy farm project
under the Prime Minister’s Youth Business Loan. Various cost
and revenue related
assumptions along with results of the analysis are outlined in
this section.
The projected Income
Statement, Cash Flow Statement and Balance Sheet are
attached as annexure.
Project Economics
All the figures in
the financial model have been calculated for 12 dairy animals
consisting of cows
and buffalos in equal proportion.
The following table
shows internal rates of return and payback period;
Project
Economics
Description Details
Internal Rate of
Return (IRR) 34%
Payback Period (Year)
3.54
NPV Rs.3,631,914
Returns on the scheme
and its profitability are highly dependent on the efficiency of
above mentioned
critical factors. In case dairy farm project is not able to attain its
target milk
production or implement effective husbandry practices, it will not be able
to cover the
potential market and recover payments; hence, cost of operating the
business will
increase.
Project Financing
Following table
provides details of the equity required and variables related to bank
financing;
Project Financing
Description Details (Rs.)
Total Equity (10%) 205,696
Bank Loan (90%) 1,851,265
Markup to the
Borrower (%age/annum) 8%
Tenure of the Loan
(Years) 8
Grace Period (Years) 1
Project Cost
Following operational
requirements have been identified for the proposed business.
Capital Investment for
the Project
Capital Investment Amount (Rs.)
Land 79,752
Building/Infrastructure
210,000
Cows and Buffalos 1,500,000
Machinery &
Equipment 66,300
Pre-Operating Costs 100,909
Total Capital Costs 1,956,961
Cash in Hand 100,000
Total Project Cost 2,056,961
Space Requirement
The area has been
calculated on the basis of space requirement for shed area,
open paddock, servant
rooms and stores. Following table shows calculations for
project space
requirement;
Space Requirement
Description Area Sq.ft
Shed for Cows 600
Open Paddock for Cows
600
Shed for Buffalos 600
Open Paddock for
Buffalos 600
Stores for Fodder,
Concentrate & Machine 150
Utensils & Milk
Storage 150
Servant Room,
Washroom 90
Silage Bunker 384
Total 3174
Total investment in
building and infrastructure is calculated to be approximately Rs.
0.21 million.
Machinery and
Equipment
Following table
provides list of machinery and equipment required for the proposed
dairy farm:
List of Machinery and
Equipment
Description Unit Rate (Rs.) QtyCost (Rs.)
Calf Feeder 1,200
3 3,600
Teat Dip Cup 350 2 700
Maize Cutter 20,000 1 20,000
Water Pump 20,000 1 20,000
Freezer 22,000 1 22,000
Total 66,300
In addition to above,
other equipment, such as fodder cutter, water pump and some
buckets etc. are
required.
Raw Material
Requirement
Following tables show
raw material requirement to run the proposed dairy farm;
Feeding Requirements
for Cows
Description Kgs
per animal per day Rs per Kg Amount (Rs.)
Silage 25.00 6.00 150.00
Concentrate 4.62 35.00 161.70
Total 311.70
Feeding Requirements
for Buffaloes
Description Kgs per animal per day Rs per Kg Amount (Rs.)
Silage 25.00 6.00 150.00
Concentrate 5.00 35.00 175.00
Total 325.00
Human Resource
Requirement
One milkman will be
required for milking and taking care of animals, whereas owner
/ manager will look
after the overall business operations.
Revenue Generation
Revenue Generation Description
Units Annual Production Rate(Rs/Unit)Annual
Revenue(Rs)
Milk Sales Liters 35,040 60
2,102,400
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 sale of milk 2,102,400 2,417,760 2,780,424
3,197,488 3,064,259 3,523,898 3,241,986 2,796,213 3,215,645 3,697,992
|
Other Income - - 72,600 159,720 73,205 161,051 248,019 58,462
128,615 212,215
|
Total 2,102,400 2,417,760 2,853,024 3,357,208 3,137,464
3,684,949 3,490,005 2,854,674 3,344,260 3,910,207
|
Cost of sales
|
Cost of goods sold 1 1,394,373 1,533,810 1,687,191 1,855,910
1,701,251 1,871,376 1,646,811 1,358,619 1,494,481 1,643,929
|
Medicine, Vaccination & Insemination Charges 30,600 37,026
44,801 54,210 54,662 66,140 64,024 58,102 70,303 85,067
|
Operating costs 3 (direct electricity & fuel charges)
120,000 132,000 145,200 159,720 175,692 193,261 212,587 233,846 257,231
282,954
|
Total cost of sales 1,544,973 1,702,836 1,877,193 2,069,840
1,931,605 2,130,778 1,923,422 1,650,567 1,822,015 2,011,950
|
Gross Profit 557,427 714,924 975,831 1,287,367 1,205,859
1,554,171 1,566,582 1,204,107 1,522,245 1,898,257
|
General administration & selling expenses
|
Administration expense 240,000 264,000 290,400 319,440 351,384
386,522 425,175 467,692 514,461 565,907
|
Depreciation expense 6,630 6,630 6,630 6,630 6,118 6,630 6,630
6,630 6,630 6,630
|
Amortization of pre-operating costs 10,091 10,091 10,091 10,091
10,091 10,091 10,091 10,091 10,091 10,091
|
Subtotal 256,721 280,721 307,121 336,161 367,592 403,243 441,896
484,413 531,182 582,628
|
Operating Income 300,706 434,203 668,710 951,206 838,267
1,150,927 1,124,687 719,694 991,063 1,315,629
|
Earnings Before Interest & Taxes 300,706 434,203 668,710
951,206 838,267 1,150,927 1,124,687 719,694 991,063 1,315,629
|
Interest on short term debt - - - - - - - - - -
|
Interest expense on long term debt (Debt facility : Bank 1)
153,654 140,672 123,609 105,130 85,117 63,443 39,970 14,549 - -
|
Interest expense on long term debt (Debt facility : Bank 2) - -
- - - - - - - -
|
Subtotal 153,654 140,672 123,609 105,130 85,117 63,443 39,970
14,549 - -
|
Earnings Before Tax 147,052 293,531 545,101 846,077 753,150
1,087,485 1,084,717 705,146 991,063 1,315,629
|
Taxable earnings for the year 147,052 293,531 545,101 846,077
753,150 1,087,485 1,084,717 705,146 991,063 1,315,629
|
Tax - - 14,510 49,411 35,472 85,623 85,207 30,515 71,159 119,844
|
NET PROFIT/(LOSS) AFTER TAX 147,052 293,531 530,591 796,665
717,678 1,001,862 999,509 674,631 919,904 1,195,785
|
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
|
Current
assets
|
Cash
& Bank 100,000 263,773 368,446 707,627 1,329,304 1,837,528 2,658,926
3,454,083 3,844,248 4,852,032 6,184,381
|
Total
Current Assets 100,000 263,773 368,446 707,627 1,329,304 1,837,528 2,658,926
3,454,083 3,844,248 4,852,032 6,184,381
|
Fixed
assets
|
Land
79,752 79,752 79,752 79,752 79,752 79,752 79,752 79,752 79,752 79,752 79,752
|
Building/Infrastructure
210,000 210,000 210,000 210,000 249,930 249,930 249,930 249,930 249,930
249,930 249,930
|
Animals
1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000
1,500,000 1,500,000 1,500,000 1,500,000
|
Revaluation
Surplus/ (loss) - - (250,000) (250,000) (500,000) (750,000) (750,000)
(750,000) (750,000) -
|
Net
value of animals 1,500,000 1,500,000 1,500,000 1,250,000 1,250,000 1,000,000
750,000 750,000 750,000 750,000 1,500,000
|
Machinery
& equipment 66,300 59,670 53,040 46,410 39,268 33,150 26,520 19,890
13,260 6,630 -
|
Total
Fixed Assets 1,856,052 1,849,422 1,842,792 1,586,162 1,618,950 1,362,832
1,106,202 1,099,572 1,092,942 1,086,312 1,829,682
|
Intangible
assets
|
Pre-operation
costs 100,909 90,818 80,727 70,636 60,545 50,454 40,364 30,273 20,182 10,091
-
|
Total
Intangible Assets 100,909 90,818 80,727 70,636 60,545 50,454 40,364 30,273
20,182 10,091 -
|
TOTAL
ASSETS 2,056,961 2,204,013 2,291,965 2,364,425 3,008,799 3,250,815 3,805,492
4,583,928 4,957,372 5,948,435 8,014,063
|
Current
liabilities
|
Accounts
payable - - - - - - - - - -
|
Total
Current Liabilities - - - - - - - - - - -
|
Other
liabilities
|
Deferred
tax - - 14,510 63,922 99,394 185,016 270,224 300,738 371,898 491,742
|
Long
term debt (Debt facility : Bank 1) 1,851,265 1,851,265 1,645,686 1,423,044
1,181,924 920,790 637,982 331,702 - - -
|
Long
term debt (Debt facility : Bank 2) - - - - - - - - - - -
|
Total
Long Term Liabilities 1,851,265 1,851,265 1,645,686 1,437,555 1,245,845
1,020,184 822,999 601,925 300,738 371,898 491,742
|
Shareholders'
equity
|
Paid-up
capital 205,696 205,696 205,696 205,696 245,114 245,114 245,114 245,114
245,114 245,114 245,114
|
Gain/
(Loss) on revaluation of animals - - (250,000) (250,000) (500,000) (750,000)
(750,000) (750,000) (750,000) -
|
Retained
earnings 147,052 440,583 971,174 1,767,840 2,485,517 3,487,379 4,486,889
5,161,520 6,081,423 7,277,208
|
Total
Equity 205,696 352,748 646,279 926,870 1,762,953 2,230,631 2,982,493
3,982,002 4,656,633 5,576,537 7,522,322
|
TOTAL
CAPITAL AND LIABILITIES 2,056,961 2,204,013 2,291,965 2,364,425 3,008,799
3,250,815 3,805,492 4,583,928 4,957,372 5,948,435 8,014,063
|
Liabilities
& Shareholders' Equity
Assets
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