PROJECT ON RUBBER BAND PRODUCTION

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 of Rubber bands at Vazhoor   in  Kottayam district and all over India. Unit has been filed memorandum Part-1 with the district Industries center, Kottayam and also applied for 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 propetoership concern by Sri.Pravin Nair, Prasant House, Arppukkara east, Kottayam-686504 .he has been associated with this business and trade related activities for the past 5 years.  The experience and the market contact that he received will help him in establishing the proposed activity of manufacturing and marketing of hollow bricks in a successful manner.

3.0 Scope and Market Potential:

                        Rubber bands are one of the most convenient products of the twentieth century used by numerous individuals and industries for a wide variety of purposes. The largest consumer of the rubber bands in the world is USA. The news paper industry also uses massive quantities of rubber bands to keep the individual newspapers rolled or folded together before home delivery. This unit intends to make rubber bands to cater the industry needs in outside states and also got good expertise to produce and sell all products without delay.

  

 4.0 Manufacturing process: 

                    Manufacturing process is described below.

1.      Processing the natural latex

2.      Purification and making into slabs

3.      Squeezing the slabs to required size

4.      Mixing and milling

5.      Heating and squeezing

6.      Extrusion after heating

7.      Curing in mandrels

8.      Slicing to form rubber bands

5.0 Location, Land and Building:

                     The unit is proposed to be located at Vazhoor Panchayath in Changanasserry Taluk. . Building required for establishing the unit has been constructed. The amount invested for civil work on construction of building for office, common amenity, well etc.  are invested by the promoter himself. Building number assigned to the unit is 2/634

 6.0 Machinery & equipment:

                          Details are shown in the annexure. The plant and machinery proposed to be installed in the unit are Indigenous.  .  Total cost of machinery and equipment to be purchased is evaluated as Rs 300000/-

7.0 Installed capacity of production

                                   The unit is proposed to be operated in 300 days per annum ( 25 days in a month of single shift operation of 8 hours duration in a day). As per the capacity of machinery to be installed and by considering production wastage the monthly production is worked out in the following table.

It is proposed to utilize 70% of the installed capacity in the first year of operation and 75%, 80%, 85%, 90% in the consecutive years of operation. The sales realization for first month of operation is shown below.

Sl No	items	production per month in Tonnage	amount /Tonnage	Total amount /production per month
1	RUBBER BANDS	1.5	2,00,000	3,00,000

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. The stock and procurement period proposed in this scheme is for a period of 22 days. The details of requirement for 70 % capacity utilisation in the unit are tabulated as below. The raw material required by the unit is proposed to be arranged through local distributors. The requirements of the unit for the targeted production are as below.

Sl No	items	Rate /kg /tonnes	Rate /Tonnage	Tonnage  required /month	Total amount required per month
1	LATEX	200	650	1.5	195000
2	WHITENER	7	350	1.5	3675
3	CHALK POWDER	5	50	1.5	375
4	TITANIUM	215	250	1	53750
5	RUBBER CHEMICALS	155	100	2	31000
6	PACKING MATERIALS	70	20	1.5	2100
	raw materials required per month (100 % Capacity utilization)				285900
	For 70% capacity utilization				200000

9.0 Man power requirement and other expenses:

Total manpower of the unit including the Workers is 5 numbers and the details of manpower requirement, salary and other expenses per month are as follows.

Sl.No.	Designation / Category		No		Monthly salary	Amount Rs
1	Skilled workers(women)		1		8000	8000
2	un skilled worker		3		6000	18000
3	supervisor		1		10000	10000
	Total		5			36000
OTHER EXPENSES PER MONTH
Sl.No.	Item	Amount
1	Power 3 HP	1500
2	Postage & Telephone	1000
3	Printing & Stationery	3000
4	Travelling expenses	4000
5	Miscellaneous	3000
	Total	12500

10.0 Working capital requirement:

Total requirement of working capital for the first Month (phase) of operation is 2.0  lakhs .

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	3600000	3857143	4114286	4371429	4628571
	Cost of raw materials	300	2400000	2571429	2742857	2914286	3085714
	Cost of production	300	2910000	3110571	3312943	3514584	3717969
A	Current Assets
1	Stock of raw materials                                ( day's consumption)	22	176000	188571	201143	213714	226286
2	Stock in process                                  ( day's cost of production)	1	9700	10369	11043	11715	12393
3	Stock of finished goods                                ( day's cost of production)	1	9700	10369	11043	11715	12393
4	Receivables( day's cost of sales)	1	12000	12857	13714	14571	15429
	Total(A)		207400	222166	236943	251716	266501

11.0 Total Cost of the Project:

Sl.No.	Particulars	Amount RS	Proposed	Total	Loan required @70%	Margin@10%	subsidy/margin money @20%
1	Land and Building ( own)	own	Completed	own	0	0	0
2	room furnishing	own	Completed	own	0	0	0
3	Machinery & Equipment(proposed)	300000	300000	300000	210000	30000	60000
4	Working Capital as OD	200000	200000	200000	140000	20000	40000
	Total	500000	500000	500000	350000	50000	100000

12. Means of finance:

Sl.No.	Particulars	Amount RS
1	Term loan for machinery & equipment,	210000
2	Margin money loan proposed to be obtained from DIC @20% of project cost	100000
3	Working capital Loan as over draft	140000
4	Own Capital (including the amount already invested in acquiring the fixed assets of the unit) @ 10% of P.C	50000
	Total	500000

13.0 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

1	Machinery and equipment	300000	270000	243000	218700	196830
	Depreciation(B)	30000	27000	24300	21870	19683
	WDV on Machinery and equipment	270000	243000	218700	196830	177147
	Total depreciation(A+B)	30000	27000	24300	21870	19683

SHEDULE OF IMPLIMENTATION

Construction of Building	Completed
Installation of plant and Machinery	COMPLETED after availing the loan
Trial run	COMPLETED after availing the loan
Commercial Production	September 2011

14.0 Conclusion:

The net profits after taxation in the first year of operation is estimated as                      RS 450000 /. The break-even point is 41 % of installed capacity. . 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 viabl

Submitted by:                                        

PRAVIN NAIR PRASANT HOUSE ARPPUKKARA EAST KOTTAYAM PIN-686008 ANNEXURE 1 Sl.No. Item Nos Rate in Rs Amount Rs 1 CUTTING MACHINE .5 HP 2 37500 75000 2 STIRROR 1 15000 15000 3 GRINDER 1 15000 15000 4 MOULDS 350 200 70000 5 DIP- IN TANKS 20000 20000 6 VULCANISING TANK, BUCKET, CUP ETC.. 25000 25000 7 DRYING STAND 30000 30000 8 BIOGAS PLANT (as directed by Kerala Pollution Control Board) 50000 50000 TOTAL 300000

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	5142857	5142857	5142857	5142857	5142857
	Capacity utilisation	70	75	80	85	90
	Production	3600000	3857143	4114286	4371429	4628571
A	Sales	3600000	3857143	4114286	4371429	4628571
B	Cost of Production
	Raw materials	2400000	2571429	2742857	2914286	3085714
	Wages	432000	462857	493714	524571	555429
	Power,  and Fuel charges	18000	19286	20571	21857	23143
	Repair & maintenance	20000	22000	25000	27000	30000
	Insurance	10000	8000	6500	5000	4000
	Depreciation	30000	27000	24300	21870	19683
	Total	2910000	3110571	3312943	3514584	3717969
C	Gross operating profit	690000	746571	801343	856844	910603
D	Admn. & Selling expenses
	1. Administrative expenses	132000	141429	150857	160286	169714
	2. Selling expenses	36000	38571	41143	43714	46286
E	Financial expenses
	1. Interest on term loan	31080	24360	17640	10920	65205
	2. Interest on WC loan	22400	24640	26880	29120	33600
	3. Interest on MM loan	0	0	0	0	0
F	Total of D&E	221480	229000	236520	244040	314805
G	Net operating profit	468520	517571	564823	612804	595798
H	Income tax	48258	53310	58177	63119	61367
I	Net profit	420262	464262	506646	549685	534431
J	Withdrawls
K	Depreciation	30000	27000	24300	21870	19683
L	Cash surplus	450262	491262	530946	571555	554114

                                         

                                                   ANNEXURE-3              

                                       BREAK EVEN ANALYSIS

	Particulars	1 YEAR	2 YEAR	3 YEAR	4 YEAR	5 YEAR
FIXED COST
	Salaries	432000	462857	493714	524571	555429
	Repair & Maintenance	20000	22000	25000	27000	30000
	Insurance	10000	8000	6500	5000	4000
	Administrative expenses	132000	141429	150857	160286	169714
	Depreciation	30000	27000	24300	21870	19683
	Interest on MM loan	0	0	0	0	0
	Interest on Term loan	31080	24360	17640	10920	65205
	Total	655080	685646	718011	749647	844031
VARIABLE COST
	Raw Materials	2400000	2571429	2742857	2914286	3085714
	Power Charges	18000	19286	20571	21857	23143
	Selling expenses	36000	38571	41143	43714	46286
	Interest on WC loan	22400	24640	26880	29120	33600
	Total	2476400	2653926	2831451	3008977	3188743
	BEP in % of installed capacity	40.81	42.74	44.78	46.77	52.76
	BEP in % of capacity utilization	58.30	56.98	55.97	55.02	58.62
	Return on Investment	84.05	92.85	101.33	109.94	106.89

ANNEXURE-4                        

DEBT SERVICE COVERAGE RATIO (DSCR)

	Debt Service Coverage Ratio ( DSCR)
	Particulars	1 Year	2 Year	3 Year	4 Year	5 Year
A	Cash generated
1	Net Profit	468520	517571	564823	612804	595798
2	depreciation	30000	27000	24300	21870	19683
3	Interest on term loan	31080	24360	17640	10920	65205
4	Interest on mm loan	0	0	0	0	0
5	Interest on wc loan	22400	24640	26880	29120	33600
	Total (A)	552000	593571	633643	674714	714286
B	Debt Service Requirement
1	Repayment of term loan	42000	42000	42000	42000	42000
2	Repayment of interest on term loan	31080	24360	17640	10920	65205
3	Repayment of interest on mm loan	0	0	0	0	0
	Repayment of interest on wc loan	22400	24640	26880	29120	33600
	Total (B)	95480	91000	86520	82040	140805
C	Debt service coverage ratio	5.78	6.52	7.32	8.22	5.07
	Average DSCR	7.93

    

ANNEXURE-5

REPAYMENT OF TERM LOAN

Year	Instalment  Number	Principal	Inst. Amt	Interest @14%	Balance
1	1	210000	10500	8400	199500
	2	199500	10500	7980	189000
	3	189000	10500	7560	178500
	4	178500	10500	7140	168000
			42000	31080
2	5	168000	10500	6720	157500
	6	157500	10500	6300	147000
	7	147000	10500	5880	136500
	8	136500	10500	5460	126000
			42000	24360
3	9	126000	10500	5040	115500
	10	115500	10500	4620	105000
	11	105000	10500	4200	94500
	12	94500	10500	3780	84000
			42000	17640
4	13	84000	10500	3360	73500
	14	73500	10500	2940	63000
	15	63000	10500	2520	52500
	16	52500	10500	2100	42000
			42000	10920
5	17	42000	10500	63000	31500
	18	31500	10500	1103	21000
	19	21000	10500	735	10500
	20	10500	10500	368	0

REPAYMENT OF WORKING CAPITAL LOAN AS O.D

	1 Year	2 Year	3 Year	4 Year	5 Year
Total Working capital	200000	220000	240000	260000	300000
Loan Amount	140000	154000	168000	182000	210000
Interest@14%	22400	24640	26880	29120	33600

                                           

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	522000	566571	609343	652844	694603
2	Increase in capital equity	50000	0
3	Depreciation		30000	27000	24300	21870	19683
4	Investment allowance
5	Increase in long term loan	210000	0
6	Increase in MM loan	100000	0
7	Increase in unsecured  loans
8	Increase in WC loan	0	140000	14000	14000	14000	28000
9	Sales of fixed assets/invests	0	0	0	0	0	0
10	Others( investment subsidy)	0	0	0	0	0	0
	Total	360000	692000	607571	647643	688714	742286
B	Disposition of Funds
	Prelim & Pre-op expenses	0	0	0	0	0	0
	Increase in capital expenditure	300000	0	0	0	0	0
	Increase in current assets		200000	20000	20000	20000	40000
	Decrease in long term loans		42000	42000	42000	42000	42000
	Decrease in unsecured loans
	Decrease in MM loan		0	0	0	0	0
	Decrease in WC loan		0	0	0	0	0
	Interest on term loan to bank		31080	24360	17640	10920	65205
	Interest on WC loan		22400	24640	26880	29120	33600
	Interest on MM loan		0	0	0	0	0
	Taxation		48258	53310	58177	63119	61367
	Divident  on equity			0	0	0	0
	Other expenses
	Total	300000	343738	164310	164697	165159	242172
C	Opening balance	0	60000	408262	851524	1334470	1858026
D	Net surplus	60000	348262	443262	482946	523555	500114
E	Closing balance	60000	408262	851524	1334470	1858026	2358139

ANNEXURE-7

PROJECTED BALANCE SHEET

A	Liabilities	Construction period	1 year	2 year	3 year	4 year	5 year
	Equity share capital	50000	50000	50000	50000	50000	50000
	Reserve & Surplus	0	420262	884524	1391170	1940856	2475286
	Term loan	210000	168000	126000	84000	42000	0
	Margin Money loan	100000	100000	100000	100000	100000	100000
	Working capital loan		140000	154000	168000	182000	210000
	Other liabilities(towards subsidy)	0	0	0	0	0	0
	Total Liabilities	360000	878262	1314524	1793170	2314856	2835286
B	Assets	Construction period	1 year	2 year	3 year	4 year	5 year
	Gross block	300000	300000	270000	243000	218700	196830
	Depreciation	0	30000	27000	24300	21870	19683
	Net block	300000	270000	243000	218700	196830	177147
	InvestmenT(Prilim. Expences)	0	0	0	0	0	0
	Current assets		200000	220000	240000	260000	300000
	Reserved Stock accumulated to be added to current assets
	Cash and bank balance	60000	408262	851524	1334470	1858026	2358139
	Total Assets	360000	878262	1314524	1793170	2314856	2835286