papercups and plates project

                                                                          

M/S APPLE PAPER PRODUCTS   

                               

PROJECT REPORT

1.0 Introduction:

                      This proposal evaluates the technical feasibility and financial viability in setting up of a small-scale enterprise to do the activity on manufacturing and sale Paper cups and paper plates in Eranakulam district and all over Kerala. Unit has been filed memorandum Part-1 with the district Industries center, Kottayam and also obtained permission from Local body for the construction of building and for the installation of plant and machinery.

2.0 Promoter and Management:

                                                          The ownership of the unit is as a proprietorship concern by Smt. Manju .C Rajan, Maramala house, Kakkoor P.O, Eranakulam District. She has been associated with this business and trade related activities for the past 5 years.  The experience and the market contact that they received will help them in establishing the proposed activity of manufacturing and marketing of paper cups and paper plates in a successful manner.

3.0 Scheme (Reimbursement under CGTMSE)

                                        This scheme intends to reimburse the one time guarantee fee and annual service fee remitted by enterprise to avail collateral free loan from financial institutions under Credit Guarantee Scheme of Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This will increase the flow of credit to MSME sector.

                              As per order No G.O (Rt) No.920/2011/ID , Dated 27/07/2011 , Thiruvananthapuram of Industries  (B) Department , The state Government shall reimburse to eligible to MSME’s the amount equivalent to the onetime Guarantee fee and annual fee recovered from it by the credit lending institution while availing collateral free loan under CGTMSE on or after 01.04.2011. The assistance for onetime Guarantee fee shall be limited to a maximum of Rs 1.50 lakhs per enterprise . The total annual service fee shall be limited to a maximum of Rs 75,000/-per enterprise.

4.0 Scope and Market Potential:

                                                        Paper cups and plates are made from mill board, grey board, kraft paper, grease proof paper and other papers, printed and given the desired shape and are extensively use. The disposable nature of these cups and plates not only obviates the need for washing and cleaning but also save loses due to breakages that normally occur while using porcelain or glass wares. Paper cups & plates find extensive usage for serving eatables in parties, functions, social gatherings, etc., catering departments of railways, airlines and other establishments also amount for a major share of the demand of cups and plates.

                 

5.0 Manufacturing process:   

                                                Paper cups and plates are normally made as per the specifications of the customer.  The paper is first printed on a printing press, the printed part is then cut to size and given shape by die cutting. The bottom   part and upper part of the cup are then assembled to a cup shape in screw press. For plates, the paper is cut to the required size of circles. The cut circles are pressed in a screw press for obtaining desired design and shape. For wax coated cups & plates are put in wax coating machine.

                

6.0 Location, Land and Building:

                                             The unit is proposed to be located at Thirumarady panchayath in Thirumarady Village. Building is available on rent and has been assigned in establishing the unit. But it requires additional maintenance works  The amount invested for civil work on construction of building for office, common amenity, well etc is Rs 100000/-. The door number assigned to the unit is 10/492A.

 7.0 Machinery & equipment:

                          Details are shown in the annexure. The plant and machinery proposed to be installed in the unit are Indigenous and some of them are locally fabricated.  Total cost of machinery and equipment to be purchased is evaluated as Rs 917000/-

7.1 Installed capacity of production

                                   The unit is proposed to be operated in 300 days per annum ( 25 days in a month). As per the capacity of machinery to be installed and by considering production wastage the monthly production is worked out in the fallowing table.

7.2 Capacity utilization:

It is proposed to utilise 70% of the installed capacity in the first year of operation and 75%, 80%, 85%, 90% in the consecutive years of operation. The sales realisation for first year of operation is shown below. Paper plates are in two sizes( 8*12),(12*10 ) and sale rate is Rs 80  and 100 per hundred  paper plates and for paper cups, the  sale is for hundred pieces is Rs 35/-

CAPACITY UTILISATION  PER MONTH ( for 70% capacity utilisation)
Sl.No.	Item	Qty	Unit	Sale Rate per hundred	Amount
1	Paper plates 8’*12 size	62500	Nos	80	50000
2	Paper plates 12’*10 size	90000	Nos	100	90000
3	Paper cups	1750000	Nos	35	612500
	TOTAL				750000

8.0 Raw material Requirement:

                        All the raw materials required by the unit are available throughout the year. The raw material can also be procured from the nearby districts and from other states. The stock and procurement period proposed in this scheme is for a period of 12 days. The details of requirement for 70% capacity utilisation in the unit are tabulated as below.

REQUIREMENT OF RAW MATERIALS PER MONTH ( for 70% capacity utilisation)
Sl.No.	Items	Qty	Unit	Rate	Total Amount (including VAT)
1	Tetra pack paper(plates)	3	Ton	40000	124800.00
2	Paper (cups)	5	Ton	84000	420000.00
	TOTAL				544800.00 SAY 545000

09.0 Man power requirement and other expenses:

Total manpower of the unit including the Workers is 9 numbers and the details of manpower requirement, salary and other expenses per month are as follow.

Sl.No.		Designation / Category	No			Monthly salary	Amount Rs
1		Skilled workers	4			7000	28000
2		Helpers	3			5000	15000
3		Office assistant	2			6000	12000
		Total	9				55000
OTHER EXPENSES PER MONTH
Sl.No.	Item			Amount
1	Power (electricity charges)			10000
2	rent			2000
3	Printing & Stationery			2000
4	Travelling expenses			5000
5	Miscellaneous			5000
	Total			24000

10.0 Working capital requirement:

Sl.No.	particulars	Period in Days	1 year	2 year	3 year	4 year	5 year
	Capacity utilisation(%)	300	70	75	80	85	90
	Sales	300	9000000	9642857	10285714	10928571	11571429
	Cost of raw materials	300	6540000	7007143	7474286	7941429	8408571
	Cost of production	300	7420700	7933587	8448029	8963030	9478746
A	Current Assets
1	Stock of raw materials                                ( day's consumption)	12	261600	280286	298971	317657	336343
2	Stock in process                                  ( day's cost of production)	3	74207	79336	84480	89630	94787
3	Stock of finished goods                                ( day's cost of production)	2	49471	52891	56320	59754	63192
4	Receivables( day's cost of sales)	7	210000	225000	240000	255000	270000
	Total(A)		595278	637512	679772	722041	764322

            

11.0 Total Cost of the Project and Means of Finance:

Sl.No.	Particulars	Amount RS	Proposed	total	Loan required	Margin of the promoter
1	Land and Building ( rented)	0	0	0	0	0
2	Building and their civil construction	100000	100000	100000	75000	25000
3	Machinery & Equipment( proposed)	917000	917000	917000	733600	183400
4	Machinery & Equipment(existing)	0	0	0	0	0
5	Electrification and machinery installation cost	20000	20000	20000	16000	4000
6	Office Furniture	5000	5000	5000	4000	1000
7	Brochure, advt and web site	3000	3000	3000	2250	750
8	Prelim & Pre-operative expenses	10000	10000	10000	7500	2500
9	Working Capital Requirement	545000	545000	545000	381500	163500
		1600000	1600000	1600000	1219850	380150

Means of finance

Sl.No.	Particulars	Amount RS
1	Term loan for building (75%)	75000
2	Term loan for machinery & equipment, electrification, advt, furniture and preliminary expenses etc ---	763350
3	Margin money loan proposed to be obtained from DIC	190075
4	Investment subsidy assistance (15% of fixed investment for women)
5	Working capital Loan	381500
6	own contribution (after considering margin money loan)	190075
	Total	1600000

12.0 Profitability analysis:

Detailed statement is given in annexure. Assumptions made for the calculation are as follows:

(a)    Unit will function for 200 days per annum in single shift basis of 5 hours per day.

(b)   Proposed to utilise 70% of the installed capacity in the first year of operation ,75%, 80% ,85% and 90% are in the consecutive years of operation.

(c)    Interest on term loan and working capital loan is assumed @ 12 % and repairing and maintenance as 5% of cost of fixed assets.

(d)   Depreciation @ 5% of cost of building and 10% of the cost of machinery.

(e)    Selling expense is considered as 5 % of total sales turn over. This includes the advertisement and publicity charges

(f)    Insurance expenses of building and machinery is calculated @ 1% of cost

(g)   The cost of raw material and finished product is based on the present market rate.

Depreciation: Depreciation on Building, Machinery and Equipment are evaluated on WDV basis and is tabulated as below

sl No	Particulars	I year	2 year	3 year	4 year	5 year
1	Building	100000	95000	90250	85738	81451
	Depreciation (A)	5000	4750	4513	4287	4073
	WDV on Building	95000	90250	85738	81451	77378
2	Machinery and equipment	942000	847800	763020	686718	618046
	Depreciation(B)	94200	84780	76302	68672	61805
	WDV on Machinery and equipment	847800	763020	686718	618046	556242
	Total depreciation(A+B)	99200	89530	80815	72959	65877

SHEDULE OF IMPLIMENTATION

Acquisition of land	Rented
Construction of Building	Rented  and maintenance will be completed after disbursement of loan
Installation of plant and Machinery	Expected to be completed by  nonember 2011
Trial run	Expected to be completed by november  2011
Commercial Production	December   2011

13.0 Conclusion:

The net profits after taxation in the first year of operation is estimated as                      RS 1343741 /. The break-even point is 30 % of installed capacity. The return on investment is obtained as 78 % in the 2^nd year of operation. The cost of production and profitability statement for the first 5 years, break-even analysis, repayment schedule for term loan, cash flow statement and the projected balance sheet are given in Annexure. Based on the analysis made above it is found that the scheme is technically feasible and economically viable.

 

                                    

                               

		ANNEXURE 1 (as per quotation)
	PLANT & MACHINERY
Sl.No.	Item		Nos	Rate Rs	Tax	Total amount
1	Hydraulic paper cutting and forming machine		1	140000	5600	145600
2	12” paper plate forming die and cutting die with heater accessories		1	18000	720	18270
3	10” paper plate forming die and cutting die with heater accessories		1	15000	600	15600
4	8” paper plate forming die and cutting die with heater accessories		1	12500	500	13000
5	6 “paper plate forming die and cutting die with heater accessories		1	9250	370	9620
6	Automatic paper cup forming machine		1	700000	14000	714000
	Total including VAT			894750	21790	916090 Say 917000

 ANNEXURE 2                                                                           

Profitability statement for 5 years of operation

	Particulars	1 YEAR	2 YEAR	3 YEAR	4 YEAR	5 YEAR
	No. of working days	300	300	300	300	300
	No. of shifts	1	1	1	1	1
	Installed capacity	12857143	12857143	12857143	12857143	12857143
	Capacity utilisation	70	75	80	85	90
	Production	9000000	9642857	10285714	10928571	11571429
A	Sales	9000000	9642857	10285714	10928571	11571429
B	Cost of Production
	Raw materials	6540000	7007143	7474286	7941429	8408571
	Wages	660000	707143	754286	801429	848571
	Power,  and Fuel charges	120000	128571	137143	145714	154286
	Repair & maintenance	1250	1000	1250	1250	1200
	Insurance	250	200	250	250	240
	Depreciation	99200	89530	80815	72959	65877
	Total	7420700	7933587	8448029	8963030	9478746
C	Gross operating profit	1579300	1709270	1837686	1965541	2092683
D	Admn. & Selling expenses
	1. Administrative expenses	168000	180000	192000	204000	216000
	2. Selling expenses	90000	96429	102857	109286	115714
E	Financial expenses
	1. Interest on term loan	0	0	0	0	0
	2. Interest on WC loan	64855	75864	80893	85923	90954
	3. Interest on MM loan	11405	11405	11405	11405	11405
F	Total of D&E	334260	363697	387154	410613	434073
G	Net operating profit	1245041	1345573	1450531	1554928	1658610
H	tax to municipality	500	500	500	500	500
I	Net profit	1244541	1345073	1450031	1554428	1658110
J	Withdrawls
K	Depreciation	99200	89530	80815	72959	65877
L	Cash surplus	1343741	1434603	1530846	1627387	1723987

                                                        ANNEXURE-3  

                                                          

BREAK EVEN ANALYSIS

	Particulars	1 YEAR	2 YEAR	3 YEAR	4 YEAR	5 YEAR
FIXED COST
	Salaries	660000	707143	754286	801429	848571
	Repair & Maintenance	1250	1000	1250	1250	1200
	Insurance	250	200	250	250	240
	Administrative expenses	168000	180000	192000	204000	216000
	Depreciation	99200	89530	80815	72959	65877
	Interest on MM loan	11405	11405	11405	11405	11405
	Interest on Term loan	0	0	0	0	0
	Total	940105	989277	1040005	1091292	1143293
VARIABLE COST
	Raw Materials	6540000	7007143	7474286	7941429	8408571
	Power Charges	120000	128571	137143	145714	154286
	Selling expenses	90000	96429	102857	109286	115714
	Interest on WC loan	64855	75864	80893	85923	90954
	Total	6814855	7308007	7795179	8282351	8769526
	BEP in % of installed capacity	30.12	31.78	33.41	35.05	36.72
	BEP in % of capacity utilization	43.02	42.37	41.76	41.24	40.80
	Return on Investment	77.78	84.07	90.63	97.15	103.63

       ANNEXURE-4                    

DEBT SERVICE COVERAGE RATIO (DSCR)

	Particulars	1 Year	2 Year	3 Year	4 Year	5 Year
A	Cash generated
1	Net Profit	1245041	1345573	1450531	1554928	1658610
2	Depreciation	99200	89530	80815	72959	65877
3	Interest on term loan	0	0	0	0	0
4	Interest on mm loan	11405	11405	11405	11405	11405
5	Interest on wc loan	64855	75864	80893	85923	90954
	Total (A)	1420500	1522371	1623643	1725214	1826846
B	Debt Service Requirement
1	Repayment of term loan	167670	167670	167670	167670	167670
2	Repayment of interest on term loan	0	0	0	0	0
3	Repayment of interest on mm loan	11405	11405	11405	11405	11405
	Repayment of interest on wc loan	64855	75864	80893	85923	90954
	Total (B)	243930	254938	259967	264997	270029
C	Debt service coverage ratio	5.82	5.97	6.25	6.51	6.77
	Average DSCR	6.44

ANNEXURE-5

REPAYMENT OF TERM LOAN

Year	Instalment  Number	Principal	Inst. Amt	Interest @16%	Balance	repayment per month
1	1	838350	41918	33534	796433	25151
	2	796433	41918	31857	754515	24592
	3	754515	41918	30181	712598	24033
	4	712598	41918	28504	670680	23474
			167670	0		55890
2	5	670680	41918	26827	628763	22915
	6	628763	41918	25151	586845	22356
	7	586845	41918	23474	544928	21797
	8	544928	41918	21797	503010	21238
			167670	0		55890
3	9	503010	41918	20120	461093	20679
	10	461093	41918	18444	419175	20120
	11	419175	41918	16767	377258	19562
	12	377258	41918	15090	335340	19003
			167670	0		55890
4	13	335340	41918	13414	293423	18444
	14	293423	41918	11737	251505	17885
	15	251505	41918	10060	209588	17326
	16	209588	41918	8384	167670	16767
			167670	0		55890
5	17	167670	41918	6707	125753	16208
	18	125753	41918	5030	83835	15649
	19	83835	41918	3353	41918	15090
	20	41918	41918	1677	0	14531

REPAYMENT OF WORKING CAPITAL LOAN

	1 Year	2 Year	3 Year	4 Year	5 Year
Total Working capital	545000	637512	679772	722041	764322
Loan Amount	381500	446259	475840	505429	535025
Interest@17%	64855	75864	80893	85923	90954

REPAYMENT OF MARGIN MONEY LOAN

      

	Year	Principal	Inst. Amt	Interest @6%	Balance
	1	190075		11405	190075
	2	190075		11405	190075
	3	190075		11405	190075
	4	190075		11405	190075
	5	190075	47519	11405	142556
	6	142556	47519	8553	95038
	7	95038	47519	5702	47519
	8	47519	47519	2851	0

        

ANNEXURE- 6

CASH FLOW STATEMENT

A	Source of Funds	Construction period	1 year	2 year	3 year	4 year	5 year
1	Cash accruals(profit before int&tax)	0	1321300	1432841	1542828	1652256	1760969
2	Increase in capital equity	190075	0
3	Depreciation		99200	89530	80815	72959	65877
4	Investment allowance
5	Increase in long term loan	838350	0
6	Increase in MM loan	190075	0
7	Increase in unsecured  loans
8	Increase in WC loan	0	381500	64759	29582	29588	29597
9	Sales of fixed assets/invests	0	0	0	0	0	0
10	Others( investment subsidy)	0	0	0	0	0	0
	Total	1218500	1802000	1587130	1653225	1754803	1856442
B	Disposition of Funds
	Prelim & Pre-op expenses	10000	0	0	0	0	0
	Increase in capital expenditure	1045000	0	0	0	0	0
	Increase in current assets		545000	92512	42260	42269	42281
	Decrease in long term loans		167670	167670	167670	167670	167670
	Decrease in unsecured loans
	Decrease in MM loan		0	0	0	0	47519
	Decrease in WC loan		0	0	0	0	0
	Interest on term loan to bank		0	0	0	0	0
	Interest on WC loan		64855	75864	80893	85923	90954
	Interest on MM loan		11405	11405	11405	11405	11405
	Taxation		500	500	500	500	500
	Divident  on equity			0	0	0	0
	Other expenses
	Total	1055000	789430	347951	302727	307766	360329
C	Opening balance	0	163500	1176071	2415250	3765747	5212784
D	Net surplus	163500	1012571	1239179	1350498	1447036	1496114
E	Closing balance	163500	1176071	2415250	3765747	5212784	6708897

ANNEXURE-7

PROJECTED BALANCE SHEET

A	Liabilities	Construction period	1 year	2 year	3 year	4 year	5 year
	Equity share capital	190075	190075	190075	190075	190075	190075
	Reserve & Surplus	0	1244541	2589613	4039644	5594073	7252182
	Term loan	838350	670680	503010	335340	167670	0
	Margin Money loan	190075	190075	190075	190075	190075	142556
	Working capital loan		381500	446259	475840	505429	535025
	Other liabilities(towards subsidy)	0	0	0	0	0	0
	Total Liabilities	1218500	2676871	3919032	5230975	6647321	8119839
B	Assets	Construction period	1 year	2 year	3 year	4 year	5 year
	Gross block	1045000	1045000	945800	856270	775456	702497
	Depreciation	0	99200	89530	80815	72959	65877
	Net block	1045000	945800	856270	775456	702497	636620
	InvestmenT(Prilim. Expences)	10000	10000	10000	10000	10000	10000
	Current assets		545000	637512	679772	722041	764322
	Reserved Stock accumulated to be added to current assets
	Cash and bank balance	163500	1176071	2415250	3765747	5212784	6708897
	Total Assets	1218500	2676871	3919032	5230975	6647321	8119839