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.
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 2nd 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 |
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 |