Muhammad Tariq

 Pre – Feasibility Report Shangren Consultants & Testing Services (Pvt) Ltd. (SCTS) Islamabad. July 2020 Table of Contents 1. Executive Summary …………………………………………………………………………………….Page 3 2. Purpose of this Documents…………………………………………………………………………..Page 3 3. Brief Project Description and Products………………………………………………………...Page 3 4. Critical Factor……………………………………………………………………………………………….Page 5 5. Geographical Potential for Investment…………………………………………………………Page 6 6. Potential Target Customer Market……………………………………………………………….Page 6 7. Project Cost Summary………………………………………………………………………………….Page 6 7.1 Project Economics……………………………………………….………………..………..Page 6 7.2 Project Costs………………………………………………………………………….……….Page 7 7.3 Space Requirement…………………………………………………………………..…….Page 8 7.4 Revenue Generation……………………………………………………………….......…Page 9 8. Income Statement………………………………………………………………………………..…….Page 10 9. Balance Sheet……………………………………………………………………………………….…….Page 11 10. Net Present Value……………………………………………………………………………...…..…Page 12 IRR……………………………………………………………………………………………………….Page 12 Payback Period…………………………………………………………………………………….Page 13 11. Lists of Current Operating Testing Services firms……………………………………….Page 13 12. Disclaimer……………………………………………………………………………………………….…Page 13 13. Detail Cost and Revenue Projection (Calculation)……………………………………….Page 13 Capital Budgeting………………..……………………………………………………………….Page 14 Operational Cost…………………………………………………………………………………..Page 17 Year-1 Revenue Projection……………………………………………………………………Page 19 Year-2 Revenue Projection……………………………………………………………………Page 20 Year-3 Revenue Projection……………………………………………………………………Page 21 Year-4 Revenue Projection……………………………………………………………………Page 22 Year-5 Revenue Projection……………………………………………………………………Page 23 1. Executive Summary Testing and assessment services are rampant sector in Pakistan as most of Public and Private Sector recruitment is done through testing services. Testing services are also entrusted with the duty of conducting admission, scholarship and entry test of undergraduate, post graduate, MBBA, BDS, BE, and other related degree. Though, testing services is playing a vital role to bring innovation and transparency in public and private sector to conduct a fair and reliable assessment process. The main objective of testing services firms is to conduct efficient, transparent, and international standard tests in order to assess the competency of candidates for admission, scholarship and recruitment purpose. This is services business and its operation may be carried within a country to conduct outbound tests for recruitment, admission and other assessment tests. The testing services company may need to register as below; Registered with SECP as Private Limited Company. Registered with Provincial Corporate / company registrar (to carry out operation in provincial level). Register with FBR (for NTN & GST). Register with Provincial Taxation Authority (for provincial taxation). 2. Purpose of this Documents. In this study, it is tried to present the project parameter and define the potential solution for undertaking this opportunity. Having brainstorm a variety of potential solution, based on available source of information including current costing information it may permit the project Manager to recommend or reject the approving authority about this opportunity. Project constraints and limitations of expenditure are among the various factors that will determine viability. 3. Brief Project Description and Products. Testing services industry is experiencing a rapid growth in Pakistan as these days public and well know private sector prefer to hire testing services provider to avoid extra operational pressure on staff and meet the criteria of merit, fairness and reliability. There are number of testing Services Company operating in Pakistan so that it is expected that this project may face completion among companies during tender bidding process. For this purpose the new entrant need to develop their system and operational environments more innovative and facilities. Also procure latest hardware to support online testing systems for competitor edge. After registration with all concerned department, the company need to establish the internal staff hierarchy and committee. Staff hierarchy would be explained later and committee is described as follows; 1. Academic Committee consists of eminent university professors responsible for developing the curricula, along with regulating and promoting consistent testing 2. Executive Committee comprises of HODs and nominees that look after the operational affairs. 3. Peer Review Committee consists of eminent university professors solely responsible for quality assurance of test contents and test items. 4. Subject Committee lays down proper standards of curriculum, so as to regulate and promote the standards for testing in a specific subject: numerous test item developers also work under this committee. 5. MCQ Contributors Committee consists of educational experts from primary to professional level faculty members from colleges and universities, who help in building authentic Test Item bank. The company’s operational scope will be as follows Consulting Services Consulting services referred to training, capacity building, technical assistance and other solutions to institutions, private and corporate business and government organizations throughout Pakistan through following ways: Measure knowledge base and skill levels Establishing performance ranking Score reporting Capacity building In addition, following specialized services are provided: Action-oriented research, analysis and training Training and professional development Strategic planning Project Identification, design, monitoring and evaluation Baseline surveys Impact assessment studies Documentation / Reporting Data Processing Services Data Processing Services is a cohesive team dedicated to partnering with clients to provide: Extraordinary data entry support services Consistent quality Timely delivery Cost effectiveness. It adapts to the challenges of continuous evolution in order to meet the ever-changing needs of your business through: Dependable staff Personal services delivered with integrity Monitoring Services Communicating tests progress to the client. Ensuring SOPs are consistent with the real time test environment. Ensuring fool proof methods have been adopted to make the tests transparent. Reporting any inconsistency to the client related to tests. Monitoring the invigilation staff and premises for any inconsistency with the SOPs. Submitting a monitoring report to the client. E-Marking Uses of e-marking software for swift marking system by using OMR technology. This system automates e-marking of forms (answer sheets) and helps efforts in reducing testing and assessment and marking time considerably. 3.1 Installed and operational capacity Bided project may vary project to project. Some may have 1 to 10 posts and some may have 100 to 1000 posts in one project. So project operation load will be different according to application size. Initially we have following capacity to application process. Data Entry Computer 50 Nos Proposed one application process time 2 minutes Application process in one hourper computer30 Application /computer/hour Application process in 16 hours (two shifts) per computer480 /computer / day Total Application process in one day with 100% Capacity24,000 Application /50 computer/ day Total Application process in 30 days with 100% Capacity7200,000 Application / 30 days 4. Critical Factor Testing services business is related to education experts and professional, so management should focused to build social relationship with different professional to strength knowledge bank of company. For paper preparation, MCQs preparation and for quality paper bank, it is necessary to hire services of most competitive universities professor and expert for their input. Company’s management and staff should focused merit and fair practice from start to completion of project so that conducting test will remain authentic and reliable. Dedicated personalized marketing and promotional activities should be carried out daily basis to public and private sector. State of the art operation and latest technology is the key to secure the project from clients. 5. Geographical Potential for Investment Testing services may bid throughout Pakistan in Federal, Provincial and private sector organization. So that operational activity could be spread all over Pakistan depending on the size, regional scope and other reason of the project. For this purpose in further is estimated that new offices may need to be opened on provincial level to ease the operation, approach the clients and testing center to avoid any delay and misshapenness. It also increase the company’s reliability with help to market and promote company smoothly. 6. Potential Target Customer Market Testing services business opportunity depend on winning of project through tender bidding under PPRA Government of Pakistan in Public Sector. Public sector organization post an ad on daily newspaper to invite testing services provider to participate the tender bidding for providing the testing services. Then desired testing companies purchased a tender document on prescribed payment, then undertake the technical and financial requirement for this project and submit their bid in tender form along with their available technical resources and earnest money pay order. The client receives the bid from testing services companies in sealed envelope and will be opened on prescribed date and time in front of bidders. After evaluating the financial offer and their technical viability the client will announce the winner of tender. The company should assign an official(s) for marketing in public and private corporate sector to secure a project on time so that company operational resource may in use for better productivity. 7. Project Cost Summary 7.1 Project Economics Charged costs in all heads of project is estimated according to current price data available from market. All the figures in sales data is calculated on estimation. It is observered that in first year of company’s inception it is more likely possible that the company could find project of at least 10 post during the whole year. The following are shown the performance indicator of the proposed project. Payback Period2.25 Years IRR65% Net Present ValuePKR. 48,437,318 Company with 100% capacity operation could handle 720,000 application during one year for maximum more than 1000 posts and beyond. But we assuming that first year operational capacity could only be consumed for maximum 100000 application which is 14% utilization of installed capacity and subsequently 2nd year utilization will increase to 30% and in 5th year the operation would be operated on 100% capacity and may need to be enhanced the further operational installation. 7.2 Project Costs Following Fixed and working Capital (Operational) Cost have been identified for the operation of proposed business Description Amount Amount Company Incorporation & Legal Fee 25,500   Office Building Refundable Security 750,000 Office Renovation Cost   1,565,500     IT & Hardware Cost   3,088,400     Electric Appliances and works   1,736,500     Vehicles Costs   2,060,000     Security and Surveillance   338,200     Total Capital Budgeting Costs       9,564,100 Operational Cost         Office Hiring Costs 3,250,000 Operational & Administration Cost 2,334,000 Office & Stationary Costs   595,500     Marketing & Promotional Cost 505,000 Salaries & remuneration 6,528,000 Total Operational       13,212,500 Total Projected Cost in 1st Year       22,776,600 Assumption for Costs Operational Cost Expenses   Inflation   Year-1   Year-2   Year-3   Year-4   Year-5 Office Hiring Costs 5% 3,250,000 3,412,500 3,583,125 3,762,281 3,950,395 Operational & Administration Cost 10% 2,334,000 2,567,400 2,824,140 3,106,554 3,417,209 Office & Stationary Costs   10%   595,500 655,050   720,555   792,611   871,872 Marketing & Promotional Cost 10% 505,000 555,500 611,050 672,155 739,371 Salaries & remuneration 10% 6,528,000 7,180,800 7,898,880 8,688,768 9,557,645 Operational Cost (Sum)       13,212,500   14,371,250 15,637,750   17,022,369 18,536,492 Capital Cost Assumption Depreciation and amortization Straight Line 5 Years Projected Capital Budgeting 9,564,100 Less Office Building Security 750,000 Net Depreciable Assets 8,814,100 Each Year Depreciation and amortization 1,762,820 Head wise Depreciation for 5 Years   Cost year-0   Year-1   Year-2   Year-3   Year-4   Year-5 Company Incorporation & Legal Fee 25,500 20,400 15,300 10,200 5,100 0 Office Building Refundable Security 750,000 750,000 750,000 750,000 750,000 750,000 Office Rennovation Cost   1,565,500 1,252,400 939,300 626,200 313,100 0 IT & Hardware Cost   3,088,400 2,470,720 1,853,040 1,235,360 617,680 0 Electric Appliances and works   1,736,500 1,389,200 1,041,900 694,600 347,300 0 Vehicles Costs   2,060,000 1,648,000 1,236,000 824,000 412,000 0 Security and Surveillance   338,200 270,560 202,920 135,280 67,640 0 Value after Depreciation 9,564,100 7,801,280 6,038,460 4,275,640 2,512,820 750,000 7.3 Space Requirement The space requirement for the office of Saif Testing Services (Pvt) Ltd. is estimated considering various facilities including management office, secrecy room, staff room, receptionist area with waiting hall, conference rooms, record room, store room, data entry hall, Photocopier Room, kitchen with dining space and open space, etc. It is compulsory to have a house of 1 kanals with two floor for smooth process of testing services. Client normally check the location of building, security and other factor in their evaluation. The Details of space requirement related to land & building is given below: Space Description Proposed Size Area in Sq. Ft. Executive Room 15”X 20” 300 Secretary Cabin / Office 10” X 12” 120 Project Coordinator Office 15” X 15” 225 Admin Manager Cabin / Office 10” X 12” 120 Accountant Office 15” X 15” 225 IT Office with server and other equipment installation 15” X 15” 225 Secrecy Room 20” X 20” 400 Staff Room (Extra Staff during Project) 15” X 15” 225 Reception Area with waiting hall 15”X 20” 300 Conference Room 20” X 20” 400 Record Room (Archive Room) 20” X 20” 400 Store Room (For equipment and stationary storage) 20” X 20” 400 Data Entry Hall – 1 20” X 30” 600 Data Entry Hall -2 20” X 20” 400 Kitchen with Dining Space 20” X 20” 400 Open Hall for current project stationary and logistic 20” X 30” 600 Photocopier Room 20” X 20” 400 Total Space Requirement 5740 7.4 Revenue Generation It is expected after establishment of company offices and installation of operational capacity, the company can secure a project as low as 10 posts and subsequent year it will increased its revenue. Following is the proposed revenue for five year. Description Year-1 (For 10 Posts Project) Year-2 (For 50 Posts Project) Year-3 (For 100 Post Project) Year-4 (For 500 Posts Project) Year-5 (For 1000 Post Porject) Total Receipts from Bidding and Applicants 31,507,000 38,527,500 55,055,000 110,550,000 152,350,000 Less: Total Direct / Variable Costs of Projects 12,567,000 14,771,400 18,365,200 41,404,000 60,004,000 Gross Profit (of Project) 18,940,000 23,756,100 36,689,800 69,146,000 92,346,000 8. Income Statement Description Year-1 (For 10 Posts Project) Year-2 (For 50 Posts Project) Year-3 (For 100 Post Project) Year-4 (For 500 Posts Project) Year-5 (For 1000 Post Project) Total Receipts from Bidding and Applicants   31,507,000   38,527,500   55,055,000   110,550,000   152,350,000 Less: Total Direct / Variable Costs of Projects   12,567,000   14,771,400   18,365,200   41,404,000   60,004,000 Gross Profit (of Project)   18,940,000   23,756,100   36,689,800   69,146,000   92,346,000 Office Hiring Costs   3,250,000   3,412,500   3,583,125   3,762,281   3,950,395 Operational & Administration Cost   2,334,000   2,567,400   2,824,140   3,106,554   3,417,209 Office & Stationary Costs   595,500   655,050   720,555   792,611   871,872 Marketing & Promotional Cost   505,000   555,500   611,050   672,155   739,371 Salaries & remuneration   6,528,000   7,180,800   7,898,880   8,688,768   9,557,645 Depreciation and Amortization of Fixed Assets & Preliminary Costs   1,762,820   1,762,820   1,762,820   1,762,820   1,762,820 Total Operating Cost   14,975,320   16,134,070   17,400,570   18,785,189   20,299,312 Operating Profits before Taxation   3,964,680   7,622,030   19,289,230   50,360,811   72,046,688 Income Tax   248,752   861,369   3,802,330   12,734,233   19,649,546 Profit After Tax   3,715,928   6,760,661   15,486,900   37,626,578   52,397,142 Balance B/F       3,715,928   10,476,589   25,963,489   63,590,067 Profit Available for Appropriate   3,715,928   6,760,661   15,486,900   37,626,578   52,397,142 Balance C/F   3,715,928   10,476,589   25,963,489   63,590,067   115,987,210 9. Balance Sheet Description Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Assets Current Assets             Cash & Bank 11,712,500 17,667,478 2,896,561 23,949,389 62,517,247 115,673,110 Advance Payment 1,500,000 1,762,820 2,825,640 2,738,460 3,560,000 4,564,100 Total Current Assets 13,212,500 19,430,298 5,722,201 26,687,849 66,077,247 120,237,210 Fixed Assets             Company Incorporation & Legal Fee 25,500 20,400 15,300 10,200 5,100 0 Office Building Refundable Security 750,000 750,000 750,000 750,000 750,000 750,000 Office Rennovation 1,565,500 1,252,400 939,300 626,200 313,100 0 IT & Hardware Equipments 3,088,400 2,470,720 1,853,040 1,235,360 617,680 0 Electric Appliances and works 1,736,500 1,389,200 1,041,900 694,600 347,300 0 Vehicle Cost 2,060,000 1,648,000 1,236,000 824,000 412,000 0 Security and Surveillance 338,200 270,560 202,920 135,280 67,640 0 Total Fixed Costs 9,564,100 7,801,280 6,038,460 4,275,640 2,512,820 750,000 Total Assets 22,776,600 27,231,578 11,760,661 30,963,489 68,590,067 120,987,210 Liabilities& Shareholder Equity             Current Liabilities             Account Payable 2,776,600 3,515,650 -       Long Term Liabilities             Loan from Director 15,000,000 15,000,000 -       Total Liabilities 17,776,600 18,515,650 0 0     Shareholder's Equity             Paid up Capital 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 5,000,000 Retained Earning   3,715,928 6,760,661 25,963,489 63,590,067 115,987,210 Total Share Holders's Equity 5,000,000 8,715,928 11,760,661 30,963,489 68,590,067 120,987,210 Total Capital & Liabilities 22,776,600 27,231,578 11,760,661 30,963,489 68,590,067 120,987,210 10. Net Present Value It is assumed Project that projects receipts would be in cash through candidate fee into bank and client payment check and it is also assumed that expenditure would be carried on cash basis. The Net Present Value would be as below; Cash inflow Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Proceeds   31,507,000 38,527,500 55,055,000 110,550,000 152,350,000               Cash Flows   31,507,000 38,527,500 55,055,000 110,550,000 152,350,000   Cash outflow Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Intial Investment (22,776,600)           Direct Project Cost   12,567,000 14,771,400 18,365,200 41,404,000 60,004,000 Office Hiring Costs   3,250,000 3,412,500 3,583,125 3,762,281 3,950,395 Operational & Administration Cost   2,334,000 2,567,400 2,824,140 3,106,554 3,417,209 Office & Stationary Costs   595,500 655,050 720,555 792,611 871,872 Marketing & Promotional Cost   505,000 555,500 611,050 672,155 739,371 Salaries & remuneration   6,528,000 7,180,800 7,898,880 8,688,768 9,557,645 Income Tax   248,752 1,762,820 3,802,330 12,734,233 19,649,546 Total Cash Outflow (22,776,600) 26,028,252 30,905,470 37,805,280 71,160,602 98,190,038 Net Cash Flows (22,776,600) 5,478,748 7,622,030 17,249,720 39,389,398 54,159,962 DCF 15%- Present Value (22,776,600) 4,766,511 5,762,255 11,350,316 22,530,736 26,917,501 Net Present Value 48,550,718           IRR IRR 65% For (-) NPV 70%  -   (22,776,600) 3,221,504 2,637,222 3,518,943 4,726,728 3,791,197   -4,881,006             lower Discount Rate + Positive NPv X Diff. in Disc. Rate         (+) NPV - (-) NPV   15     48,550,718 X 55         53,370,224       15   + 50   65 Payback Period 2.25 Year   22,776,600 5,478,748 7,622,030 17,249,720 39,389,398 54,159,962   5,478,748 13,100,778 4,197,074     -   Payback Period 2.24           11. Current Operating Testing services Firm in Pakistan Here is the list of notable Testing Services in Pakistan. NTS - National Testing ServicesPTS - Pakistan Testing Services OTS - Open Testing ServicesSTS - Sindh Testing Services CTS - Candidate Testing ServicesITS - Interior Testing Services BTS - Baluchistan Testing ServiceJTS - Job Testing Services STS - SIBA Testing ServicesFTS - Fair Testing Service CTA - Careers Testing AgencyGTS - Global Testing Service CTSP - Career Testing Services PakistanUTS - Universal Testing Services ATS - Allied Testing ServicesSTS - Success Testing Services GTS - Genius Testing ServicesDTS - Direct Testing Services ITS - Islamabad Testing ServicesFTS - Fast Testing Services QTS - Quality Testing ServicesNTS - Nokri Testing Services MTS - Multi Testing ServicesLTS - Leads Testing Services HRTS - HR Testing ServicesRTS - Roots Testing Services UES - United Examination ServiceIAI - Induction and Assessment Initiative 12. 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 sources; however, it is based upon certain assumptions, which may differ from case to case. 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. 13. Detail Cost and Revenue Projection (Calculation)