PROJECT ON HOLLOW BRICKS

                                                                 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 Hollow bricks in Kottayam district and all over Kerala. 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 Smt. Rajalekshmi A.R, Indeevaram, M.L.A Road, Puthiyakavu, Pin-682301. She has been associated with this business and trade related activities for the past 5 years.  The experience and the market contact that she received will help her in establishing the proposed activity of manufacturing and marketing of hollow bricks in a successful manner.

3.0 Scope and Market Potential:

                        Hollow block industry is one of the fastest growing segments of Industry in Kerala. The growth of the tile industry has shown steep fluctuations. The increase in number of households and the over the country created a great demand for hollow bricks.

Hollow concrete blocks are substitutes for conventional bricks and stones in building construction.  They are lighter than bricks, easier to place and also confer economies in foundation cost and consumption of cement.  In comparison to conventional bricks, they offer the advantages of uniform quality, faster speed of construction, lower labor involvement and longer durability. In view of these advantages,   hollow concrete blocks are being increasingly used in construction activities.

                            

4.0 Manufacturing process:                      

The ratio of cement, sand and stone chips (metal) in the raw material mix determines the properties of  hollow concrete blocks. A ratio of 1:3:6 (cement : sand : metal) confers higher strength, while a ratio of 1:5:6 can be employed for normal load bearing construction.  The water to cement ratio is usually 0:4:1.

5.0 Location, Land and Building:

                     The unit is proposed to be located at Manjoor Village  in Vaikom Taluk. An extent of 23 cents of land available and is leased  by the promoter for establishing the unit. Building required for establishing the unit has to be constructed. The amount invested for civil work on construction of building for office, common amenity, well etc is Rs 200000/-. The survey number assigned to the land  is 125/23..

 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 372000/-

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.

CAPACITY UTILISATION PER MONTH ( for 70 % capacity utilisation)
Sl.No.	Item	Qty	Unit	Sale Rate	Amount
1	Hollow bricks	52500	Nos	11.00	577500

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 10 days. The details of requirement for 100% 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	Raw material	Quantity per month	Price per load/sack	Total amount required per month
1	Rock powder	25 loads	7000	175000
2	Cement	750 sacks	300	225000
3	Chips (metal powder)	25	10000	250000
4	Total raw material required for 100% capacity utilization			650000
5	Raw material required for 70% capacity utilization			455000

9.0 Man power requirement and other expenses:

Total manpower of the unit including the Workers is 10 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		workers		5		7000	35000
2		helpers		4		5000	20000
3		Office assistant		1		3500	3500
		Total		10			58500
OTHER EXPENSES PER MONTH
Sl.No.	Item		Amount
1	Power		3500
2	Postage & Telephone		500
3	Printing & Stationery		1000
4	Travelling expenses		10000
5	Miscellaneous		5000
	Total		20000

10.0 Working capital requirement:

Total requirement of working capital for the first Month (phase) of operation is 3 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	6924000	7418571	7913143	8407714	8902286
	Cost of raw materials	300	5520000	5914286	6308571	6702857	7097143
	Cost of production	300	6322800	6765449	7208550	7652061	8095940
A	Current Assets
1	Stock of raw materials                                ( day's consumption)	12	220800	236571	252343	268114	283886
2	Stock in process                                  ( day's cost of production)	2	42152	45103	48057	51014	53973
3	Stock of finished goods                                ( day's cost of production)	2	42152	45103	48057	51014	53973
4	Receivables( day's cost of sales)	2	46160	49457	52754	56051	59349
	Total(A)		351264	376235	401211	426193	451180

11.0 Total Cost of the Project:

Sl.No.	Particulars	Amount RS	Existing	Proposed	Total	Margin money @35%	margin@5%
1	Building ( advances)	0		0	0	0
0	Building and ther civil construction	200000	0	200000	200000	70000
3	Machinery & Equipment(proposed )	372000		372000	372000	130200
4	Equipment(sales)	0	0	0	0	0
5	Electrification and machinery installation cost	50000	0	50000	50000	17500
6	Office Furniture	6000		6000	6000	2100
7	Brochure, advt and web site	2000		2000	2000	700
8	Prelim & Pre-operative expenses	20000	0	20000	20000	7000
9	Working Capital	350000	0	350000	350000	122500
	Total	1000000	0	1000000	1000000	350000	50000

12. Means of finance:

Sl.No.	Particulars	Amount RS
O	Term loan for building (interior decoration )	1000000
2	Term loan for machinery&equipment, office furniture etc
3	Loan for prelim&pre-operative including electrification ,brochure etc
	Woking capital loan
5	MAGIN FROM kvic	350000
6	MARGIN OF THE PROMOTER	50000

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

sl No	Particulars	I year	2 year	43year	4 year	5 year
1	Building	300000	270750	257213	244352	232134
	Depreciation (A)	15000	13538	12861	12218	11607
	WDV on Building	285000	257213	244352	232134	220528
2	Machinery and equipment	437500	354375	318938	287044	258339
	Depreciation(B)	43750	35438	31894	28704	25834
	WDV on Machinery and equipment	393750	318938	287044	258339	232505
	Total depreciation(A+B)	58750	48975	44754	40922	37441
		58750	48975	44754	40922	37441

SHEDULE OF IMPLIMENTATION

Acquisition of land	Agreement on lease
Construction of Building	Completed after availing the loan
Installation of plant and Machinery	Expected to be completed by  September 2010
Trial run	Expected to be completed by September 2010
Commercial Production	October 2010

14.0 Conclusion:

The net profits after taxation in the first year of operation is estimated as                      RS 600917 /. The break-even point is 35 % of installed capacity. The return on investment is obtained as 42 % 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.

  Submitted by:                                                  

ASHA XAVIER

KARUKULATHEL

MANJOOR P.O

KURUPPANTHURA

KOTTAYAM

ANNEXURE 1 (as per quotation)
	PLANT & MACHINERY
Sl.No.	Item	Nos	Rate Rs	Amount Rs
1	Egg laying type Concrete block machine with die	01	130000	130000
2	Trolley  for brick and mix handling	04	7500	30000
3	Solid die set 4”,6”	02	14000	28000
4	Hollow die set 4”,6”	02	18000	36000
5	Concrete mixer	01	130000	130000
6	Vat total @4%+ cess 1%	01	17700	17700
	Total			372000

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	9900000	9900000	9900000	9900000	9900000
	Capacity utilization	70	80	85	90	90
	Production	6930000	7920000	8415000	8910000	8910000
A	Sales	6930000	7920000	8415000	8910000	8910000
B	Cost of Production
	Raw materials	5460000	6240000	6630000	7020000	7020000
	Wages	264000	301714	320571	339429	339429
	Power,  and Fuel charges	120000	137143	145714	154286	154286
	Repair & maintenance	5000	5000	5000	5000	5313
	Insurance	5000	5000	5000	5000	1063
	Depreciation	58750	48975	44754	40922	37441
	Total	5912750	6737832	7151040	7564636	7557530
C	Gross operating profit	1017250	1182168	1263960	1345364	1352470
D	Admn. & Selling expenses
	1. Administrative expenses	204000	233143	247714	262286	262286
	2. Selling expenses	69300	79200	84150	89100	89100
E	Financial expenses
	1. Interest on term loan	82834	47014	29104	11194	4478
	2. Interest on WC loan	36000	36000	36000	36000	36000
	3. Interest on MM loan	9038	9038	9038	9038	6778
F	Total of D&E	401171	404394	406006	407617	398641
G	Net operating profit	616079	777774	857954	937747	953829
H	Income tax	73911	93315	102937	112512	114441
I	Net profit	542167	684459	755018	825235	839387
J	Withdrawls
K	Depreciation	58750	48975	44754	40922	37441
L	Cash surplus	600917	733434	799772	866157	876828

     

     

                                              

                                          

                                                  ANNEXURE-3              

                                       BREAK EVEN ANALYSIS

	Particulars	1 YEAR	2 YEAR	3 YEAR	4 YEAR	5 YEAR
FIXED COST
	Salaries	264000	301714	320571	339429	339429
	Repair & Maintenance	5000	5000	5000	5000	5313
	Insurance	5000	5000	5000	5000	1063
	Administrative expenses	204000	233143	247714	262286	262286
	Depreciation	58750	48975	44754	40922	37441
	Interest on MM loan	9038	9038	9038	9038	6778
	Interest on Term loan	82834	47014	29104	11194	4478
	Total	628621	649883	661181	672868	656786
VARIABLE COST
	Raw Materials	5460000	6240000	6630000	7020000	7020000
	Power Charges	120000	137143	145714	154286	154286
	Selling expenses	69300	79200	84150	89100	89100
	Interest on WC loan	36000	36000	36000	36000	36000
	Total	5685300	6492343	6895864	7299386	7299386
	BEP in % of installed capacity	35.35	36.42	36.99	37.60	36.70
	BEP in % of capacity utilization	50.50	45.52	43.52	41.78	40.78
	Return on Investment	42.11	53.16	58.64	64.10	65.20

        ANNEXURE-4                        

DEBT SERVICE COVERAGE RATIO (DSCR)

	Particulars	1 Year	2 Year	3 Year	4 Year	5 Year
A	Cash generated
1	Net Profit	616079	777774	857954	937747	953829
2	Depreciation	58750	48975	44754	40922	37441
3	Interest on term loan	82834	47014	29104	11194	4478
4	Interest on mm loan	9038	9038	9038	9038	6778
5	Interest on wc loan	36000	36000	36000	36000	36000
	Total (A)	802700	918800	976850	1034900	1038525
B	Debt Service Requirement
1	Repayment of term loan	80000	80000	80000	80000	80000
2	Repayment of interest on term loan	82834	47014	29104	11194	4478
3	Repayment of interest on mm loan	9038	9038	9038	9038	6778
	Repayment of interest on wc loan	36000	36000	36000	36000	36000
	Total (B)	207871	172051	154141	136231	127256
C	Debt service coverage ratio	3.86	5.34	6.34	7.60	8.16
	Average DSCR	7.03

ANNEXURE-5

REPAYMENT OF TERM LOAN

Year	Instalment  Number	Principal	Interest	Balance	repayment per month
1	1	746250	22388	708938	19900
	2	708938	21268	671625	19527
	3	671625	20149	634313	19154
	4	634313	19029	597000	18781
			82834		54278
2	5	597000	17910	559688	18408
	6	559688	16791	522375	18034
	7	522375	15671	485063	17661
	8	485063	14552	447750	17288
			64924		48308
3	9	447750	13433	410438	16915
	10	410438	12313	373125	16542
	11	373125	11194	335813	16169
	12	335813	10074	298500	15796
			47014		42338
4	13	298500	8955	261188	15423
	14	261188	7836	223875	15049
	15	223875	6716	186563	14676
	16	186563	5597	149250	14303
			29104		36368
5	17	149250	4478	111938	13930
	18	111938	3358	74625	13557
	19	74625	2239	37313	13184
	20	37313	1119	0	12811

REPAYMENT OF MARGIN MONEY LOAN

	Year	Principal	Interest	Balance
	1	150625	9038	150625
	2	150625	9038	150625
	3	150625	9038	150625
	4	150625	9038	150625
	5	150625	9038	112969
	6	112969	6778	75313
	7	75313	4519	37656
	8	37656	2259	0

 REPAYMENT OF WORKING CAPITAL LOAN

	1 Year	2 Year	3 Year	4 Year	5 Year
Total Working capital required	300000	300000	300000	300000	300000
Loan Amount	300000	300000	300000	300000	300000
Interest @12%	36000	36000	36000	36000	36000

ANNEXURE- 6

CASH FLOW STATEMENT

A	Source of Funds	Construction period	2 year	3 year	4 year	5 year
1	Cash accruals(profit before income tax)	0	807125	869825	932096	993978
2	Increase in capital equity	150625
3	Depreciation		53625	48975	44754	40922
4	Investment allowance
5	Increase in long term loan	746250
6	Increase in MM loan	150625
7	Increase in unsecured  loans
8	Increase in WC loan	0	-300000	300000	0	0
9	Sales of fixed assets/invests	0	0	0	0	0
10	Others( investment subsidy)	0	0	0	0	0
	Total	1047500	560750	1218800	976850	1034900
B	Disposition of Funds
	Prelim & Pre-op expenses	125000	0	0	0	0
	Increase in capital expenditure	862500	0	0	0	0
	Increase in current assets		21797	21804	21809	21815
	Decrease in long term loans		80000	80000	80000	80000
	Decrease in unsecured loans
	Decrease in MM loan		0	0	0	37656
	Decrease in WC loan		0	0	0	0
	Interest on term loan to bank		64924	47014	29104	11194
	Interest on WC loan		0	36000	36000	36000
	Interest on MM loan		9038	9038	9038	9038
	Taxation		87962	93315	102937	112512
	Divident  on equity		0	0	0	0
	Other expenses
	Total	987500	263720	287170	278887	308214
C	Opening balance	0	573881	870910	1802541	2500503
D	Net surplus	60000	297030	931630	697963	726686
E	Closing balance	60000	870910	1802541	2500503	3227190

ANNEXURE-7

PROJECTED BALANCE SHEET

A	Liabilities	Construction period	2 year	3 year	4 year	5 year
	Equity share capital	150625	150625	150625	150625	150625
	Reserve & Surplus	0	1187369	1871828	2626846	3452081
	Term loan	746250	586250	506250	426250	346250
	Margin Money loan	150625	150625	150625	150625	112969
	Working capital loan		0	300000	300000	300000
	Other liabilities(towards subsidy)	0	0	0	0	0
	Total Liabilities	1047500	2074869	2979328	3654346	4361925
B	Assets	Construction period	2 year	3 year	4 year	5 year
	Gross block	862500	803750	750125	701150	656396
	Depreciation	0	53625	48975	44754	40922
	Net block	862500	750125	701150	656396	615474
	InvestmenT(Prilim. Expences)	125000	125000	125000	125000	125000
	Current assets		328834	350638	372447	394262
	Reserved Stock accumulated to be added to current assets
	Cash and bank balance	60000	870910	1802541	2500503	3227190
	Total Assets	1047500	2074869	2979328	3654346	4361925