ORBIT PETROCHEMICALSFEASIBILITY STUDY FOR SET UP OF MANUFACTURING FACILITY FOR

COOLANT PRODUCTS

Prepared By:Ibn Hyan

Management & Financial Consultants

CONTENTS

1. Introduction1.1 Background1.2 Economic Overview of Oman

2. Executive Summary

3. Promoters & Management

4. Market Analysis4.1 End users of Coolant products4.2 Products & Uses/Services Offered4.3 Quality Aspects4.4 Target Market4.5 Distribution Channel4.6 Market Segments4.7 Major Competitors & their Market Share4.8 Pricing4.9 Promotion4.10 Market Potential4.11 Marketing Strategy4.12 Projected Market Share4.13 SWOT Analysis

5 Technical Analysis5.1 Project Location5.2 Manufacturing Process / Technology5.3 Capacity of Project & Its Utilisation5.4 Building & Civil Works5.5 Machinery & Equipment5.6 Utilities5.7 Manpower5.8 Raw Materials & Its Source5.9 Quality Control Measures5.10 Environmental Issues5.11 Health & Safety5.12 Project Implementation

6 Financial Analysis6.1 Cost of Project6.2 Working Capital6.3 Means of Finance6.4 Financial Analysis6.5 Key Financial Indicators6.6 Key Assumptions Used6.7 Ratio Analysis6.8 Sensitivity Analysis

7 Conclusion

1. Introduction

1.1 Background

Orbit Petrochemicals LLC was established in 2010 to Manufacture, and distributescoolants/antifreeze engines regionally within the Middle East countries, Pakistan, Kazakhstanand Russia. The Company is now planning new manufacturing facilities of 20 million litres perannum.

Orbit started up by importing and distributing a large range of coolants from its business partnerin Australia, Recochem Inc.

Recochem has, since 2007 been an exclusive partner to Shell International Company supplying afull range of coolants/antifreeze products globally under Shell brands names. In 2010 Shelldecided to exit the business and concentrate on more profitable lubricants. Hence Shell handoverto Recochem the coolants/antifreeze business globally.

Recochem Inc used to manufacture the products under shell Brands names in their facilities inCanada and Australia and export it to all shell operating units in the world. This had a negativeimpact on the supply chain and margin as the freight costs were high.

Orbit got an exclusive agent contract with Rechochem Inc. to produce coolants under theRechochem brand name.

Orbit Petrochemicals is proposing to set up a manufacturing facility in Oman. For this purpose,the company will obtain the necessary permits and approvals from concerned authoritiesincluding a 20,000 square metre land on lease. This project is the first of its kind in Oman andtargets to serve the demand for coolant products in Oman and Regional markets.

By being the exclusive agents for the Middle East and the regional market and by setting up amanufacturing facility in Oman, Orbit Petrochemicals Inc will be able to reduce the supply chainissues and manage properly the freight costs and gain a major share in the regional market.Orbit Petrochemicals Inc is planning to export 80% of their production.

The purpose of this Report is to deliver to Orbit Petrochemicals LLC results of the analysis workand to demonstrate the feasibility of producing coolants/antifreeze products in Oman.

1.2 Economic Overview of Oman

The Vision 2020, adopted in 1995 paved the way for the Sultanate for take-off towards selfsustained growth in a private sector and an export oriented economy with diversified sources ofnational income. Market oriented policies and private sector development are deeply rootedeconomic concepts and practices in Oman. The government has always regarded a dynamicprivate sector as the engine of prosperity and growth.

Consecutive Five Year Development Plans have made rapid strides towards the Visionobjectives. Nevertheless, after three decades of development effort, Oman remains at acrossroads confronting a host of challenges stemming mainly from the fact that the economy isstill reliant on oil which is a non-renewable dwindling resource subject to a high degree of pricevolatility. Recognizing this challenge, the Government has initiated a structural adjustmentprocess aimed at laying down a solid foundation for a diversified economic base led by the

private sector. Some of the objectives of the Eighth Five-Year Development Plan (2011-2015)are

Realizing a growth rate of not less than (3%) and low inflation rates.

More attention to the regional and environmental dimensions

Increasing production rates of oil & gas , their reserves and management of deficit in

power resources

Development of tourism , industry , agriculture, fisheries and water sectors

Stimulating domestic and foreign private sectors to investment and development of

small and medium establishments (SME)

Oman GDP is expected to increase 4.37% in 2011.

Real GDP is expected to increase 4.37% in 2011, the increase is accompanied with higheroil prices averaging around USD76/bbl and well above 2010 government budget ofUSD50/bbl. Omani policymakers have been involved strongly to diversify the economythrough new tax laws, new privatization laws, enhancing non-oil sectors and creating amarket-friendly economic environment.

Oman 2011 Budget expects revenues to grow by 14% to reach USD18.9bn.

With a projected USD58/bbl oil price, Oman oil revenues are estimated to reach RO4,956mn in its 2011 budget. Gas revenues are expected to reach RO920mn. Totalhydrocarbon revenues are expected to reach RO5, 876mn which is 21.2% higher than theprevious budget. Non-oil revenue is expected to reach RO1, 404mn. Omani policymakershave been active in efforts to diversify the economy through new tax laws, newprivatization laws, and creating a market-friendly economic environment

Vision 2020 aims to shift crude oil contribution to below 10% of the GDP.

Oman is expected to be a non-oil dependent country as it increases the measures ofdiversification into the services, industrial and financial sectors. Due to the fact thatOman is highly dependent on hydrocarbon for its revenue and growth. Oil’s share of totalGDP is expected to drop to 9% in 2020 as compared to 41% in 2009. Oman focus onindustrial sector is evident in the Vision 2020 as it plans to increase its share in GDP to29% in 2020 as compared to 18.5% in 2009. . In addition, Vision 2020 aims to shift crudeoil contribution to below 10% of the GDP and increase natural gas and industrialcontribution to above 10% and 20% respectively.

Muscat Securities Market recorded a 6.1% gain in 2010.

All these factors encourage the private sector to venture into new Projects GDP andincrease natural gas and industrial contribution to above 10% and 20% respectively.

2 EXECUTIVE SUMMARY

Company name: Orbit Petrochemicals LLC

Project: Setting up of manufacturing facility of coolant products in Oman.

Products: Multiroad coolant 1 ltr, Multiroad coolant 5ltr, HD Premium 50%, HD Premium30%

Cost of the project: RO. 4,011,611

Means of financeo Term loan – RO. 1,000,000o Own source – RO. 3,011,611

Repayment term : Repayment is made in annual installments in 10 years

Interest rate : 3%

Payback period : 8 years

Key ratios for the first year of operationo Gross profit ratio 37%o Debt Equity ratio .30: 1o IRR 15.17%o Net Profit ratio (1st year of operation) 21%

3 PROMOTERS AND MANAGEMENT

Orbit Petrochemicals is registered as a limited liability company, with the following personsholding shares and key management positions:

Nasser Rashid Saif Al Rajhi 50%Mahmood Rashid Saif Al Rajhi 50%

The copy of the Registration Documents of the company is attached as Annexure 1 to the Report

A brief write-up of the promoters is attached as Annexure 3.

4 MARKET ANALYSIS

4.1 End users of Coolant products

Primary target for the coolant/Antifreeze products manufacturing by the unit will be the exportmarket.

The size of the Omani local market for coolant/Antifreeze is very small with an estimatedvolume of roughly 6 Million litres per year. However, this market can offer attractive dividendscatering to high economic growth, vehicles increase, the construction sector booming and formalcorporate sector.

Currently, the Global market is rapidly expanding by 4-5% per year, as the coolants/Antifreezemarket in highly linked to passenger cars, light and heavy-duty trucks, buses, industrial, andconstruction sectors movements. The Sector wise consumption of the product in Target market isas under.

Total Target Market Sectors Estimate volume (ML Litres 2010) %

Passenger cars 72.1 41%Light and heavy-duty trucks 43.3 25%Buses 20.8 12%Industrial sector 13.6 8%Construction 24.5 14%Total 174.3 100%

4.2 Products Offered

The company intends to enter the market for coolant products by manufacturing them anddistributing them at a reasonable price. The company intends to commence the manufacture ofproducts such as Multiroad coolant and HD Premium coolant.The Company with its already established strong service oriented culture will have a dedicatedteam who will ensure timely production to meet market demand.

4.3 Quality Aspects

Great emphasis is placed on quality of the product and the quality levels of services. Rigorousprocedures will be put in place to ensure production of high quality products and to ensure thatthe product is distributed on a timely and consistent basis, meeting 100% customer satisfaction.

The facility should have current accreditation to a minimum of an ISO9001:2008 quality system.This system may be audited by Recochem prior to awarding the business. Details of measures toensure quality are given in Section 5.9

4.4 Target Market

Currently, there are no manufacturing facilities for coolant products in Oman. Regional marketfor coolants/Anti-freeze products is very fragmented and dominated by local independents smallplayers. The company is proposing to make the products locally and hence reduce import anddistribution costs thereby gaining a competitive advantage over others.

Based on the import export market statistics, the current total volume of the coolant market inOman is approximately 6 million litres. The project intends to capture approximately 6% marketshare of Oman in the first year of operation. The coolants/antifreeze market is very fragmentedwith no clear leader in the market. Small local companies supply poor quality products, themarket is mainly driven by prices. The remaining 80% of the target market include exports toGCC countries along with Iran, Iraq, Kazakhstan, Russia and Pakistan. Details of targetedmarket share are given in Annexure 4.

4.5 Distribution Channel

The main channels for the distribution of coolants/Anti Freeze in the region are service stations,OEM-franchised workshops, oil shops and independent roadside service centres.

The estimated volume of indirect commercial automotive coolants/Anti Freeze by channel inOman for 2009 is shown below:

Distribution channel % Of totalHigh street shops dealers 45Fuel service stations 25OEM franchised workshops 15Independent oil change repair shops 15Total 100

Locals oil companies and international oil companies have a fuel retail stations networks indifferent countries throughout the region. Consequently, those companies products are the onlyones sold from service station forecourts. OEM-franchised garages and workshops sell consumerand commercial coolants/Anti Freeze as part of their service and maintenance packages. Largenumbers of roadside oil shops and service centres, particularly in major cities, sell significantquantities of automotive coolants/Anti Freeze. Distribution channels will be created for thedistribution of products in Export market.

4.6 Market Segments

The company expects to export 80% of its production to the neighboring GCC countries. Theremaining 20% will be marketed to the regional Automobile, Construction and Energy sectorsrespectively.

The Global Sector wise consumption of the coolant is pictured below.

From a market segment viewpoint the consumer automotive segment accounts for an estimated41% and the commercial automotive segment accounts for 37%, whilst the industrial segmentaccounts for an estimated 22% of the total. This has a close link to automotive, transport andindustry market evolution.

41%

37%

22%

ConsumerCommercialIndustrial

In terms of countries volume demand for 2010, Iraq, Iran and KSA represent the highestdemands, followed by Pakistan and Kazakhstan that are equally balanced and the remainingcountries in the target region represent round 6% each.

4.7 Major Competitors & their Market Share

Comparison of Global Coolants/Anti-freeze business performance with that of competitors isdifficult due to the lack of segmentation in the published accounts of the majority the MajorInternational Oil Companies. A similar situation prevails for the National Oil Companies andlocal small operators.

Globally, the 5 super-majors hold the highest market share. For 2010, we estimate that Shell,Exxon Mobil, BP Castrol, ChevronTexaco and Total hold 43% market share in the target region,with a different position from country to other. The rest of the market, 57%, is made up of mini-majors, e.g. Fuchs which holds strong positions in a particular region or in a number of selectedcountries such as KSA, Global coolants/antifreeze specialized companies such as Prestone andregional players such as, Gulf, Ac Delco and National Oil Companies.

4.8 Pricing

The prices are set after consideration of the cost of production and the competitors prices.Options of manufacturing the accessories required or purchasing them from suppliers have beenconsidered. It should be noted that the prices are dependent on supply of certain chemicals whichare subject to wide fluctuations. The sales prices of various products in are given in Annexure 5.

4.9 Promotion

A dynamic marketing team will promote the manufactured products to the potential customerssuch as automobiles, contractors and industrial units. Contractors operating in the GCC countrieswill also be approached either directly by the marketing team or by agencies. The primarypurchase locations of coolants are as below.

Auto chain 78%Discount/department store 47%Independent auto store 17%Dealership 14%Online/Internet 11%Other 7%

The company expects to spend 1% of the revenue earned each year on marketing

4.10 Market Potential

The company has identified that there is a tremendous potential market of coolant/Antifreeze inthe targeted regional MarketsOrbit estimates that in the year 2011 the target region consumed round 200 Million litres.

Primary target for the coolant/Antifreeze manufacturing unit will be the export market, and thecompany has projected to acquire around 2% of the market share in 2012.

The size of the Omani local market for coolant/Antifreeze is very small with an estimatedconsumption of roughly 6 Million litres per year. However, this market can offer attractivedividends catering to high economic growth, vehicles park increase, the construction sectorbooming and formal corporate sector.

It is envisaged that Orbit Petrochemicals LLC will grip approximately 2% target regionalMarkets share, during 2012, the projected turnover would be around RO 2 million and increasedup to RO 4 million approximately in 2021.Currently, the market is rapidly expanding by 4-5% per year, as the coolants/Antifreeze marketin highly linked to passenger cars, light and heavy-duty trucks, buses, industrial, andconstruction sectors movements.

4.11 Marketing Strategy

As the market is very fragmented with no clear leader, and demand is driven by prices, Orbit willrely on Direct Marketing to push their products to the end users. This will be achieved by havingan impressive portfolio of business contacts. Mr. Cherian Zachariah with over 45 years ofexperience in the chemical industry will be invaluable asset to the company.

4.12 Projected Market Share

The company estimates that it will be able to capture around 2% of the market share in the initialyear of its operation and 3% by the 2021. The factory will be ideally located to facilitate entryinto the Omani coolant market and also for exports of finished goods. The new developmentslike Sohar Port, Refinery, Booming automotive sector and industrial activities will enhance theprospects of the project.

4.13 Strategic Direction - SWOT Analysis

Strengths

Shell Customers Database handover almost 300 customers in the region

Shell Distribution network to be used to penetrate the market (Including Shell RetailStations in Oman)

Large and adapted products portfolio including all segments and Lob’s.

Recochem has a good technical leadership and R&D in the coolants/anti-freeze Market

Exclusive agent for Recochem in all the region

The Only large blending plant in Oman

Management experience in automotive market

Global marketing and technical support from Recochem Australia

OEM recommendations

Weaknesses

New entrant in the market

New brand in the regional market

Low experience in coolant/Anti-Freeze business

High costs of operating due to low volume and low margin

Opportunities

Market Growth 5-10% (depend on markets)

Growth Segments – Construction / Infrastructure / Industry / Automobiles / Transport /Marine

Operations Excellence – Ability to create a name for excellence in the market

Marketing – There is a clear product differentiation in term of quality required

Being an international brand has an appeal to customers, specially B2B segments

Government support for industry investment and export.

Additional margin from others automotive and chemicals products.

B2B customers looking for high quality products.

Threats

Very competitive and fragmented market

Price competition from Locals or imported products

Price driven market, Customer looking for low prices

Limited margins versus costs increases

5 TECHNICAL ANALYSES

5.1 Project Location

The project is set up in Oman. An application has been submitted to the PEIE for the allotmentof land consisting of 20,000 Esq. The annual lease rent is RO 5,000 as per the existing rates.

This project is the first of its kind in Oman and targets to servethe demands of the various sectors within the local and regionalmarkets. The layout of the plant has been provided in Annexure21.

5.2 Manufacturing Process / Technology (Description of Operations)

The company intends to produce 4 types of coolants with varying measurements. Themanufacturing process is similar for all the products with small quantities of different additivesbeing added.

The general chemical composition of coolants is give below,

Ethylene Glycol + Quality Water + CorrosionInhibitor = Engine

Coolant

Depending upon the operating locations and geographic locations, the typical recommendedconcentrate dilution ratio is 1 part concentrate to 1 part water i.e. 50%. Equatorial regions useless glycol such as 1 part glycol to 2 parts water, 33%,

Concentrate Pre-Diluted

5% Additives

3% Water

92% Glycol

Equatorial2.5% Additives

67.67% Water

30.66% Glycol

The Characteristics of the products manufactured with different technologies are as under.

Conventional Hybrid Technology Organic AdditiveTechnology

Commonly Green Mix of conventional andorganic types

Colors vary- red, orange ,violet

Service life - 100K Kms Colors vary – red , green ,blue, yellow , violet

Corrosion inhibitor based onneutralized organic additives ,which have near neutral Phand low to moderate Ph

High Ra and Ph Near neutral Ph and moderateto high RA

Long service life

Silicate gel can form duringservice and storage

Long service life Superior heat transferproperties and hightemperature corrosionprotection

Poor temperature stability

5.3 Capacity of Project & Its Utilization

The project envisages an annual output of approximately 10 million litres of de-mineralizedwater at installed capacity. Production will be based on demand estimates of individual products.In the first year of production, it is estimated that de-mineralized water consumption would be at2.7 million liters. Sales demand for Multiroad 1ltr, Multiroad 5ltr, HD premium 30% and HDpremium 50% would stand at 10%, 20%, 30% and 40% respectively. The Production of De-mineralized water is expected to increase to 4.3 million litres by 2021.

5.4 Building & Civil Works

The manufacturing facility will have a main De-mineralization plant, Blending Vessel, Storagetanks, Packing space and an open yard. In addition an office, storage room, a guard room and anelectrical room will be constructed. The civil works will also comprise of asphalt work,construction of a compound wall and chain link fencing.

5.5 Machinery & Equipment

The Machinery & Equipment required for the production of coolant and other products intendedto be manufactured includes De-mineralizing plant , Blenders, Automatic welding machines,Coolant Dilution/Blending Tanks, Circulation pumps, Heating (Steam Boiler or heated oil),Cooling System (Chilled/refrigerated water system), Transfer pumps Large pack filling line andSmall pack filling line/s.

5.6 Utilities

The main utility required for the coolant project is electricity.The machineries used such as the De-mineralizing plant ,Blenders, Automatic welding machines, CoolantDilution/Blending Tanks, Circulation pumps, Heating (SteamBoiler or heated oil), Cooling System (Chilled/refrigerated watersystem), Transfer pumps, Large pack filling line, Small packfilling line/s are expected to consume approximately 100,000kilowatts of power per year.

This will be from the transformer installed at the industrial estate. All utilities required will beeasily available at site

5.7 Manpower

The project requires manpower for production and office administration. As the factoryoperations increase, additional staff will be recruited for enabling smooth running of operations.The detailed organizational of the chart is attached Annexure 20.

The project is expected to commence with a total of 15 employees.The level of skills and expertise required for operations are easily available and company doesnot envisage any difficulty in filling vacancies with right caliber staff.The detailed requirements and cost of manpower is provided in Annexure 9.

5.8 Raw Materials & Its Source

De-mineralized water will be produced on site from the plant. Mono Ethylene Glycol will besupplied from Saudi Arabia. Super Concentrate will be bought from Rechochem Inc in Australiaand Dye urea Liquid will be supplied from Saudi Arabia.

5.9 Quality Control Measures

The company will establish quality control measures that are implemented in accordance withthe Industry standards. A quality engineer will be appointed, who will be responsible for thequalitative matters. Special care will be taken to ensure that quality of the product is maintainedto the highest level. This shall be achieved by

Sourcing the Raw material and accessories only from the reliable suppliers manufactured

as per the recommended standards.

The facility should have current accreditation to a minimum of an ISO9001:2008 quality

system.

The system may be audited by Recochem prior to awarding the business.

Recruiting and retaining high caliber & competent personnel

Understanding the requirements of job and the system that supports to achieve, by proper

training and education.

Achieving compliance with relevant Standards, statutory & safety requirements, through

periodic Audits and reviews

Periodic Product & Process audit and reviews to ensure that Company policy, procedures

and Quality plans reflect in what we actually do.

Establishing a system to bring out Suggestions and ideas for improving products and

services.

5.10 Environmental Issues

Orbit will manage processes, materials, and people in order to reduce the environmental impactsassociated with work. The Environmental Policy provides the framework for setting andreviewing environmental objectives and targets. Orbit’s Environmental Policy is documented,implemented and maintained and communicated to all employees. Orbit pledges to implementand operate the Environmental Management System according to the International Standard ISO14001:2004 to further enhance environmental performance. The Companies’ main goals andcommitments are to:

Investigate the reduction of hazardous and toxic chemicals used

Reduce, reuse and recycle waste and packaging

Improve the efficiency of energy waste

This policy will be communicated to all parties interested in the performance of ourenvironmental management system, including the public.

5.11 Health & Safety

Providing Management Leadership & Commitment

Ensuring visibility throughout the organization

Providing adequate resources

Ensuring employees wear the necessary personal protective Equipments during work.

On time action at all levels to address unsafe conditions and unsafe acts.

By adequate training programs and effective monitoring systems.

Periodical safety audit and feed back

Investigation of all incidents and feedback system with learning.

5.12 Project Implementation

The project will take one year to implement from the commencement of the project. Thecritical activities are the construction of civil buildings and placement of orders for plantand machinery. A detailed schedule of expected implementation of the project is attached inAnnexure 10.

6 FINANCIAL ANALYSIS

6.1 Cost of Project

The project is expected to cost approximately RO 4,011,611. A brief summary is given below

Particulars Amount in ROBuilding 2,695,000Furniture & Office Equipments 10,000Plant & Equipment 962,924Vehicles (Forklifts , Cranes) 15,000Pre-Operative Expenses 15,000Working Capital 313,687Total 4,011,611

A detailed breakdown of the project cost is given in Annexure 11.

6.2 Working Capital

The enterprise requires an initial working capital of R.O 313,687. Additional working capitalrequirements are expected to be met through retained profits. Details of the components ofworking capital and the projections for the first ten years are provided in Annexure 12. The Basicassumptions in the Working Capital estimates are as under

1. Raw Material inventory is estimated as 1.5 month’s requirement2. Finished goods are expected to be stored for a period of 1.5 months3. Receivables are expected to be realized within a period of 2 months4. 3 months credit facilities are expected from the suppliers of raw materials and

consumables.

6.3 Means of Finance

The projected capital structure of the company is as follows:

Particulars Amount in ROPromoters Contribution 3,011,611Term Loan 1,000,000Total 4,011,611

The promoter proposes to avail a term loan for funding the project cost partially. The project costis proposed to be financed by a loan from ODB of OMR 1 million carrying an interest of 3%; therest will be financed by the promoters. The loan is to be repaid in eight annual installments, aftera grace period of 2 years.

6.4 Financial Analysis

The project is expected to attain a turnover of RO 1,795,318 in the first year of operation, whichis expected to touch RO 4,138,964 by the end of 10th year as indicated in the following graph

The detailed product wise break-up of revenue for 10 years is pictured below

6.5 Key Financial Indicators

Based on projected income and expenditure, key measures of evaluating projects such as IRR,NPV, Discounted Pay back period and Break Even Analysis have been calculated, the details ofwhich are included in Annexure 16.

The project has a positive Net Present Value, indicating the financial viability of the project. Thepromoters can expect to gain back their investment in 8 years’ time. The project expects to havean Internal Rate of Return (IRR) of approximately 15.17%.

6.6 Key Assumptions Used

The main assumptions used in the preparation of projected financial statements and informationhave been listed below. The assumptions that form the basis of the forecast are critical for anyproject. We consider that assumptions made or implied in the study to be conservative,reasonable and plausible.

The Target Market, the Demand and the Market Share are provided by the promoters.

The installed capacity of the factory is estimated as approximately 10 million litres of De-mineralized water in a year based on the capacity of the plant on a single shift basis, for312 working days in a year.

The project is expected to utilize a single capacity for different products. The detailedworking on the Raw material consumption is provided as Annexure 7.

Sales are estimated to increase by 4.5% every year. The sales prices of the manufacturedproducts for the first year of operation are given in Annexure 5.

It is expected that raw material cost will increase by 5% each year during the projectionperiod. Raw material and accessories cost mainly depends on prevailing chemical price,which has a tendency to fluctuate. Raw material prices are given in Annexure 6.

Consumables & other Direct Expenses taken as 1% of direct material cost

Assets are depreciated on a straight line basis at the following rates

Buildings 3% Furniture & Fixtures 33.33% Vehicles 5% Plant & Equipments 3%

The plant is expected to consume 100 kilowatts of electricity per hour and the rates perunit is estimated as 16 Baizas per unit .No increase in rates in electricity is expectedduring the initial ten years of operation.

The details of manpower requirement and the cost are estimated as Annexure 9.

All salaries are expected to rise by 5% every year

Marketing cost is estimated as 1% of turnover in each year of operation. The Rawmaterial cost for each product is provided in Annexure 8.

Lease rent for the land is RO 5000 per year.

Details of Fixed Assets and depreciation workings are attached as Annexure 17.

Inventory is worked out on the basis of 3 months.

Receivables and Payables are based on 2 and 3 months of Revenue respectively.

The project is expecting an income tax exemption for the initial 10 years of operation;hence no tax is estimated on the projected profits.

Interest rate is expected to be 3% for term loan.

The loan is expected to be repaid in eight annual installments, after a grace period of 2years.

6.7 Ratio Analysis

Major relevant ratios have been worked out for the new business venture and it is expected thatthe new venture will yield adequate revenue, which will generate surplus funds for futureexpansion. The details are attached as Annexure 18.

6.8 Sensitivity Analysis

A sensitivity analysis of the project was also done to test the variations of the results against thepossible adverse variations in the operation, the details of which are given in Annexure 19.Main financial indicators selected for the study are

Projected Revenue Direct Cost

7 CONCLUSION

This project will be the first of its kind in the Sultanate of Oman. The company will bethe first local supplier for coolant products.

The project location in an Industrial Estate is a strategic advantage, due to its proximity toUAE and other GCC locations for both imports of raw material and export of finishedgoods. This location will also enable the company to expand the target market

The project will generate employment for Omani nationals, as a fair percentage of themanpower requirement will be met from local population.

The financial analysis with the mentioned assumptions gives fairly decent returns withample cash generations to pay the debt obligations and dividend in the future.

Annexure 1Registration Documents

Annexure 2Bio-Data of Mr. Cherian Zachariah

Mr. Cherian Zachariah, is an Indian national, holding a Bachelor degree in Commerce.

He has gained over 45 years experience in Sales , Marketing, Finance, HR and Administrationrelated matters.

He started his career as an Office Assistant and worked for 2 years at the Department of AtomicEnergy, a department directly under the Prime Minister of India with headquarters in Mumbai.The department is responsible for nuclear technology, including nuclear power and research.

He worked as Sales Assistant for two years with Delhi Cloth mills, a subsidiary of the DCMgroup.

He worked as Finance & Office Administration Manager at John R Harris Architects for 22years; an organization specialized in architectural, interior designing, engineering and planningconsultancy.

He worked as Administration & HR Manager for 3 years with a slew of consultancy companiessuch as Widnell & Trollope & Partners (Quantity Surveyors),Majan Engineering Consultants(Mechanical Engineers),Oman Information Technology Co (IT/Software Developers),SouthernBusiness Organization (Property Leasing),Majan Realty (Property Developers),and Oman LossAssessing Company (Insurance Brokers)

He worked as Business Development Manager for 16 years with Shell Oman MarketingCompany , a division of Royal Dutch Shell global oil and Gas Company. The company isinvolved in exploration and production, refining, distribution and marketing, petrochemicals,power generation and trading. It also has major renewable energy activities, including inbiofuels, hydrogen, solar and wind power.

He is currently the Managing Director of Orbit Petrochemicals Trading L.L.C

Annexure 3Promoter’s Resume

Engr. Nasser Rashid Al Rajhi is an Omani national, holding a Bachelors Degree inCivil Engineering from New Castle University, UK.

His career commenced with Al Rajhi Group of Companies where he joined as Managerof Construction Division in 2007, he is currently the Vice-Chairman of Al Rajhi Group ofCompanies.

Apart from his tenure, he also supervises other companies both sole proprietorship andcorporation namely, Al Sarah Contracting and Engineering, Nimr International Group ofCompanies and Orbit Petrochemicals Trading LLC. These companies are engaged inthe trade of building materials, petrochemicals and civil works.

Mr. Mahmood Rashid Al Rajhi is an Omani national, holding a Bachelors Degree inBusiness Management from Majan College, Muscat.

His career commenced with Al Rajhi Group of Companies where he joined as Managerof Ready-mix and Concrete Products Division in 2007.

In 2008 he founded Al Rajhi Transport and Investment LLC which is currently dealing inthe transport business

Annexure 4Target Market

Years 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Total Market for Coolants inOman 6580329 7262112 7674982 8111482 8572971 8830160 9095065 9367917 9648955 9938423 10236576

Projected Sales (Ltrs) 450000 472500 496125 520931 546978 574327 603043 633195 664855 698098

Market Share % 6.20 6.16 6.12 6.08 6.19 6.31 6.44 6.56 6.69 6.82

Annexure 5Sales Prices of Manufactured Products

PRODUCTPRICE (inOMR)

Multiroad Coolant 1 LiterOman 0.711Kuwait 0.745Lebanon 0.603Qatar 0.663Bahrain 0.616KSA 0.562UAE 0.663Kazakhstan 0.562Jordan 0.623Lebanon 0.589Syria 0.501Pakistan 0.467Iran 0.548Iraq 0.501

Multiroad Coolant 5 litersOman 0.640Kuwait 0.670Lebanon 0.542Qatar 0.597Bahrain 0.554KSA 0.506UAE 0.597Kazakhstan 0.506Jordan 0.561Lebanon 0.530Syria 0.451Pakistan 0.420Iran 0.494

Iraq 0.451

HD Premium 50%Oman 0.533Kuwait 0.559Lebanon 0.452Qatar 0.498Bahrain 0.462KSA 0.421UAE 0.498Kazakhstan 0.421Jordan 0.467Lebanon 0.442Syria 0.376Pakistan 0.350Iran 0.411Iraq 0.376

HD Premium 33%Oman 0.462Kuwait 0.484Lebanon 0.392Qatar 0.431Bahrain 0.400KSA 0.365UAE 0.431Kazakhstan 0.365Jordan 0.405Lebanon 0.383Syria 0.326Pakistan 0.304Iran 0.356Iraq 0.326

Annexure 6Raw Material Price

Annexure 7Raw Material Consumption

Annexure 8Raw Material Cost

Annexure 9Detailed Manpower Requirements

Year I

12

SlNo Designation Expatriate/

Omani Nos BasicSalary HRA

AllowanceCTC /Month

CTC

Car FoodCost

ofliving

Month Annum

Indirect Manpower1 GM Strategy and Business Expatriate 1 1800 400 0 0 0 2200 2200 264002 Finance Manager Expatriate 1 1000 300 0 0 0 1300 1300 156003 Sales Person (Oman) Omani 1 500 250 0 32 0 782 782 93844 Sales Person (Export) Expatriate 1 700 250 0 32 0 982 982 117845 Technical Manager Expatriate 1 800 250 0 32 0 1082 1082 129846 General Secretary Omani 1 350 150 0 32 0 532 532 63847 Maintenance Technician Expatriate 1 300 100 0 32 0 432 432 5184

8 Laboratory and Quality ControlTechnician Expatriate 1 350 100 0 32 0 482 482 5784

9 Administrative/HR Manager Omani 1 900 250 0 32 0 1182 1182 1418411 PRO Omani 1 220 100 50 0 50 420 420 5040

Total 10 Total 9394 112728

Direct Manpower

1 Factory Employees Omani 5 220 100 0 0 50 370 1850 22200

Total 5 Total 1850 22200

Year II

II Year (5% increase toCTC)

105% 12

SlNo Designation Expatriate/

Omani NosI

YearCTC

CTC

Month Annum

Indirect Manpower1 GM Strategy and Business Expatriate 1 2200 2310 277202 Finance Manager Expatriate 1 1300 1365 163803 Sales Person (Oman) Omani 1 782 821 98534 Sales Person (Export) Expatriate 1 982 1031 123735 Technical Manager Expatriate 1 1082 1136 136336 General Secretary Omani 1 532 559 67037 Maintenance Technician Expatriate 1 432 454 54438 Laboratory and Quality Control Technician Expatriate 1 482 506 6073

9 Administrative/HR Manager Omani 11182 1241 14893

11 PRO Omani 2 420 882 10584

Total 11 10305 123656

Direct Manpower1 Factory Employees Omani 5 370 1943 23310

Total 5 1943 23310

Year IIIIII Year (5% increase to

CTC)

105% 12

Sl No Designation Expatriate/Omani Nos II Year

CTCCTC

Month Annum

Indirect Manpower1 GM Strategy and Business Expatriate 1 2310 2426 291062 Finance Manager Expatriate 1 1365 1433 171993 Sales Person (Oman) Omani 1 821.1 862 103464 Sales Person (Export) Expatriate 1 1031.1 1083 129925 Technical Manager Expatriate 1 1136.1 1193 143156 General Secretary Omani 1 558.6 587 70387 Maintenance Technician Expatriate 1 453.6 476 5715

8 Laboratory and Quality ControlTechnician Expatriate 1 506.1 531 6377

9 Administrative/HR Manager Omani 11241.1 1303 15638

11 PRO Omani 2 882 1852 22226Total 11 11746 140952

Direct Manpower1 Factory Employees Omani 5 1943 2040 24482

Total 5 2040 24482

Annexure 10Project Implementation Schedule

Time Frame Details of Project StagesMonth 1 to 9 Construction of civil buildings (Work in

progress)Placement of Order for Equipments

Month 9 to 11 Installation of EquipmentCommissioning of EquipmentPlacement of Order for MaterialsRequired

Month 10 Manpower RecruitmentMonth 11 Purchase of Vehicles

Delivery of Materials OrderedMonth 12 Trial period to test equipment and

production run

Annexure 11Total Cost of Project

Amt (OMR)Building & civil works* 2695000

Furniture & Office Equipment 10000

Plant & EquipmentsBlending & Storage tanks 358474Lab Equipments 40425Electrical Installations 5775Piping Installations 558250 962924

Vehicles (Forklifts, Cranes) 15000

Pre-operative expenses 15000

Total 3697924

Working Capital 313687

Total Cost 4011611

Means of Finance:

Equity 3011611

Term Loan from ODB 1000000

Total 4011611

Note :

* :- Cost of Building includes Contingent Expense of OMR 1,000,000

Annexure 12Working Capital

Year 1 2 3 4 5 6 7 8 9 10

Inventory 264916 291245 319513 349850 382390 417262 463356 512937 575791 633577Debtors 299220 328319 360248 395282 433723 475903 522184 572966 628687 689827

564136 619564 679761 745132 816113 893165 985540 1085903 1204478 1323404Less: Creditors 250449 276120 303732 333415 365306 399554 444703 493369 555040 611932

Working Capital 313687 343444 376029 411717 450807 493611 540837 592534 649438 711472

Annexure 13Projected Profitability Statement

Year 1 2 3 4 5 6 7 8 9 10

Total revenue 1795318 1969912 2161486 2371691 2602338 2855415 3133104 3437799 3772125 4138964

Cost of raw materials/inputs 991876 1093544 1202897 1320456 1446757 1582392 1761201 1953937 2198180 2423494Direct labor Cost 22200 23310 24482 25706 26991 28341 29758 31246 32808 34448Electricity charges 3456 3629 3802 3974 4147 4147 4579 4838 5184 5443Consumables & other Directexpenses 9919 10935 12029 13205 14468 15824 17612 19539 21982 24235Distribution Cost 100000 105000 110000 115000 120000 125000 132500 140000 150000 157500Total Direct Expenses 1127451 1236418 1353209 1478341 1612363 1755704 1945650 2149561 2408153 2645120

Gross Profit 667867 733494 808277 893349 989974 1099711 1187454 1288238 1363971 1493844

Indirect labor cost 112728 123656 140952 143771 146647 149580 152571 155623 158735 161910Marketing 17953 19699 21615 23717 26023 28554 31331 34378 37721 41390Other Administrative Expenses 5000 5250 5513 5788 6078 6381 6700 7036 7387 7757Lease Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000Depreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488Finance Charges 30000 30000 30000 26250 22500 18750 15000 11250 7500 3750

Total Indirect Costs 284502 297426 316900 316514 318236 320253 324091 326774 329832 333294

Net Profit 383365 436068 491376 576835 671739 779458 863364 961464 1034140 1160550

Annexure 14Statement of Financial Position

Year 1 2 3 4 5 6 7 8 9 10

ASSETS

Fixed assets 3569103 3455282 3341461 3279473 3167485 3055497 2992010 2878522 2765034 2651546

Current assetsInventories 264916 291245 319513 349850 382390 417262 463356 512937 575791 633577Receivables 299220 328319 360248 395282 433723 475903 522184 572966 628687 689827Bank & Cash 497186 517317 464929 443065 562702 786343 1040968 1439223 1904946 2491949

Total Assets 4630424 4592163 4486151 4467670 4546300 4735005 5018518 5403648 5874458 6466900

EQUITY ANDLIABILITIESCapital and reservesShare Capital 3011611 3011611 3011611 3011611 3011611 3011611 3011611 3011611 3011611 3011611Retained earnings 368365 304433 295809 372644 544383 823841 1187204 1648668 2182808 2843357

Non current liabilitiesTerm loan 1000000 875000 750000 625000 500000 375000 250000 125000 0 0

Current liabilitiesTrade payables 250449 276120 303732 333415 365306 399554 444703 493369 555040 611932Loan Payable 0 125000 125000 125000 125000 125000 125000 125000 125000 0

Total equity andliabilities 4630424 4592163 4486151 4467670 4546300 4735005 5018518 5403648 5874458 6466900

Annexure 15Projected Statement of Cashflows

PROJECTED CASH FLOWSTATEMENT RO in "000"

Year 1 2 3 4 5 6 7 8 9 10

Sources of fundEquity 3011611Term Loan 1000000Depreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488Net profit 383365 436068 491376 576835 671739 779458 863364 961464 1034140 1160550

Total 4508796 549888 605197 688823 783727 891445 976851 1074951 1147627 1274037

Application of fundsFixed Assets 3697924 50000 50000Loan repayments 0 0 125000 125000 125000 125000 125000 125000 125000 125000Increment in net current assets 313687 29757 32585 35688 39090 42804 47226 51697 56904 62034Dividends paid 500000 500000 500000 500000 500000 500000 500000 500000 500000

Total 4011611 529757 657585 710688 664090 667804 722226 676697 681904 687034

Opening cash balance 0 497186 517317 464929 443064 562701 786342 1040967 1439222 1904945Net surplus 497186 20131 -52388 -21865 119637 223641 254625 398254 465723 587003Closing cash balance 497186 517317 464929 443064 562701 786342 1040967 1439222 1904945 2491948

Annexure 16Measures of Project Evaluation

Year Cashflow

DiscountFactor@ 10%

Discountedcashflow

01 -3697924 0.909 -33617492 497186 0.826 4108973 549888 0.751 4131394 605197 0.683 4133585 638823 0.621 3966596 783727 0.564 4423937 891445 0.513 4574528 926851 0.467 4323839 1074951 0.424 455884

10 1147627 0.386 4424601274037 0.350 446542

NPV 949418

Present value of inflow 4311167Years 10Average yearly inflow 431117

Payback period 8 Years

Internal Rate of Return

Year 0 1 2 3 4 5 6 7 8 9 10

Out flow -3697924 -50000 -50000InflowProfit 383365 436068 491376 576835 671739 779458 863364 961464 1034140 1160550Depreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488Inflow 497186 549888 605197 638823 783727 891445 926851 1074951 1147627 1274037

Net cash flow -3697924 497186 549888 605197 638823 783727 891445 926851 1074951 1147627 1274037

Internal Rate of Return 15.17%

BREAK EVEN ANALYSIS

Years 1 2 3 4 5 6 7 8 9 10

Fixed CostsDepreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488Finance charges 30000 30000 30000 26250 22500 18750 15000 11250 7500 3750Indirect labor cost 112728 123656 140952 143771 146647 149580 152571 155623 158735 161910Marketing 17953 19699 21615 23717 26023 28554 31331 34378 37721 41390Lease Rent 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000

Total Fixed Costs 279502 292176 311388 310726 312158 313872 317390 319739 322444 325537

Total Cost 1411953 1533845 1670110 1794856 1930599 2075957 2269741 2476335 2737985 2978414

Variable Cost 1132451 1241668 1358722 1484129 1618441 1762086 1952351 2156596 2415541 2652877

Revenue 1795318 1969912 2161486 2371691 2602338 2855415 3133104 3437799 3772125 4138964

Contribution (Revenue - VariableCost) 662867 728244 802764 887561 983897 1093329 1180754 1281202 1356584 1486087

Profit Volume Ratio 36.92% 36.97% 37.14% 37.42% 37.81% 38.29% 37.69% 37.27% 35.96% 35.90%(Contribution/Revenue * 100)

Break Even Revenue 757007 790342 838429 830305 825636 819729 842188 857942 896590 906668(Fixed Cost/ Profit volume ratio)

Annexure 17Fixed Asset Schedule

Year 1 2 3 4 5 6 7 8 9 10BUILDINGGross Value 2695000 2614150 2533300 2452450 2371600 2290750 2209900 2129050 2048200 1967350Accumulated Depreciation 80850 80850 80850 80850 80850 80850 80850 80850 80850 80850Closing Value 2614150 2533300 2452450 2371600 2290750 2209900 2129050 2048200 1967350 1886500

FURNITURE & FIXTURESGross Value 10000 6667 3334Accumulated Depreciation 3333 3333 3333Closing Value 6667 3334 0

Vehicles (Cranes,Forklifts)Gross Value 15000 14250 13500 12750 12000 11250 10500 9750 9000 8250Accumulated Depreciation 750 750 750 750 750 750 750 750 750 750Closing Value 14250 13500 12750 12000 11250 10500 9750 9000 8250 7500

PLANT & EQUIPMENTSGross Value 962924 934036 905148 926260 895873 865485 885097 853210 821322 789434Accumulated Depreciation 28888 28888 28888 30388 30388 30388 31888 31888 31888 31888Closing Value 934036 905148 876260 895873 865485 835097 853210 821322 789434 757546

Gross Book Value 3682924 3569103 3455282 3391460 3279473 3167485 3105497 2992010 2878522 2765034AccumulatedDepreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488Net Book Value 3569103 3455282 3341461 3279473 3167485 3055497 2992010 2878522 2765034 2651546

Annexure 18Ratio Analysis

Year 1 2 3 4 5 6 7 8 9 10Gross Profit 37 37 37 38 38 39 38 37 36 36Net Profit 21 22 23 24 26 27 28 28 27 28Current Ratio 4.24 2.83 2.67 2.59 2.81 3.20 3.56 4.08 4.57 6.23Total Asst Turnover Ratio 0.39 0.43 0.48 0.53 0.57 0.60 0.62 0.64 0.64 0.64Management Rate of Return 0.10 0.11 0.13 0.16 0.19 0.22 0.24 0.28 0.30 0.35Working Capital to AssetRatio 0.068 0.075 0.084 0.092 0.099 0.104 0.108 0.110 0.111 0.110Retained Earnings to TotalAsset 0.08 -0.01 0.00 0.02 0.04 0.06 0.07 0.09 0.09 0.10Deb Equity Ratio 0.30 0.26 0.23 0.18 0.14 0.10 0.06 0.03 0.00 0.00

Graphs

Annexure 19Sensitivity Analysis

Effects on Net Profit before taxYear 1 2 3 4 5 6 7 8 9 10

Base Case 1795318 1969912 2161486 2371691 2602338 2855415 3133104 3437799 3772125 4138964

Revenue down by 5% 293599 337572 383302 458250 541622 636687 706708 789574 845533 953601

Direct Cost up by 5 % 331992 379497 429228 508706 597198 698054 772782 861021 921119 1036050

Effects on DSCRYear 1 2 3 4 5 6 7 8 9 10

Base Case 17.52 19.33 4.10 4.73 5.46 6.33 7.08 7.97 8.72 9.92

Revenue down by 5% 14.54 16.05 3.40 3.94 4.58 5.34 5.97 6.71 7.29 8.32

Direct Cost up by 5 % 15.82 17.44 3.70 4.28 4.96 5.77 6.44 7.23 7.86 8.96

IRR Calculation for Sensitivity Analysis

Revenue down by 5%Year 0 1 2 3 4 5 6 7 8 9 10

Outflow -3697924InflowProfit 293599 337572 383302 458250 541622 636687 706708 789574 845533 953601Depreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488

Net flow -3697924 407420 451393 497123 570238 653610 748674 820196 903062 959021 1067089

IRR 11.54%

Direct Cost up by 5%Year 0 1 2 3 4 5 6 7 8 9 10

Outflow -3697924InflowProfit 331992 379497 429228 508706 597198 698054 772782 861021 921119 1036050Depreciation 113821 113821 113821 111988 111988 111988 113488 113488 113488 113488

Net flow -3697924 445813 493318 543049 620694 709186 810042 886269 974509 1034607 1149538

IRR 13.23%

Annexure 20Organizational Structure

Annexure 21Plant layout