PROJECT REPORT 1

PROJECT REPORT

OF

 M/S NEW BRIGHT SILVER PALACE,

1/177K, HIGH SCHOOL ROAD, KOOTTANADU  
 

                                                                                  

                                                         

                                                               

                                                   

                           

PROJECT REPORT

OF

 M/S NEW BRIGHT SILVER PALACE,

1/177K, HIGH SCHOOL ROAD, KOOTTANADU 

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 sale of silver Jewellery items .Unit has got permission from Local body for the installation of plant and machinery and the business activities.

2.0 Promoter and Management:

                     The ownership of the unit is as a proprietary concern by Sri P.V Illyas, Pallikkaravalappil, Vattanadu. .He is a business man and having rich experience in the management of business concern and having similar kind of business activity for almost four years. He can assure monitoring of the day to day affairs of the proposed unit. The experience from the market studies will help to establish the proposed activity and sale of designed jewellery items in a successful manner.

3.0 Scope and Market Potential:

                    Jewllery business is one of the fastest growing segments of business in Kerala. This has transformed into a highly profitable one since two years due to the huge demand of silver and other articles. Most of the people are keen to go for silver ornaments due to the huge prices of gold these days.  This is also one of the industries where at most care is to taken before investing. Shri.P.V Illyas is doing the same kind of business and hence he can easily monitor the activities in his firm.                         

4.0 Location, Land and Building:

                The unit is located at 1/177K at Pattithara Grama panchayath in Thrithala Block. The amount invested for additional fabrication work on building for office, office furniture, etc.. is Rs 60000/-.

5.0 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. Sale rate of silver ornaments is @Rs 32/-per gms.

Sl No	Items	Quantity per month	Sale rate per gms in Rs	Amount in one month
1	Silver ornaments	7410gms	32	237000
	TOTAL			237000

6.0 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 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 per item (per kgs) in Rs.	Item required per month	Amount in one month
1	Silver ornaments	27000	7.410 kgs	200000
	TOTAL			200000

7.0 Man power requirement and other expenses:

Total manpower of the unit including the workers is 2 numbers and the details of man power requirement, salary and other expenses per month are as follows.

Sl.No.		Designation / Category	No	Monthly salary		Amount Rs
1		manager	1	4000		4000
2		salesman	1	2000		2000
		Total	2			6000
OTHER EXPENSES PER MONTH
Sl.No.	Item		Amount
1	Power charges		200
2	Postage & Telephone		1000
3	Printing & Stationery		1000
4	Travelling expenses		1000
5	Miscellaneous		2000
	Total		5200

8.0 Working capital requirement:

                     Total requirement of working capital for the first year of operation is evaluated as Rs. 350000/- and 70% of the installed capacity of production is proposed to be utilised. An amount of Rs.200000/-, is proposed to be obtained as working capital loan from bank.

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	2844000	3047143	3250286	3453429	3656571
	Cost of raw materials	300	2400000	2571429	2742857	2914286	3085714
	Cost of production	300	2526330	2698073	2869916	3043559	3216401
A	Current Assets
1	Stock of raw materials                                ( day's consumption)	10	80000	85714	91429	97143	102857
2	Stock in process                                  ( day's cost of production)	7	58948	62955	66965	71016	75049
3	Stock of finished goods                                ( day's cost of production)	7	58948	62955	66965	71016	75049
4	Receivables( day's cost of sales)	8	75840	81257	86674	92091	97509
	Total(A)		273735	292881	312032	331267	350464

9.0 Total Cost of the Project:

Sl.No.	Particulars	Amount RS	Existing	Proposed	Total	Loan required	Margin
1	Building ( rented)	0	0	0	0	0	0
2	fabrication work in building	45000	45000	0	45000	0	45000
3	Electrification	500	500	0	500	0	500
4	Office Furniture	15000	15000	0	15000	0	15000
4	Prelim & Pre-operative expenses	5000	5000	0	5000	0	5000
5	Margin Money for Working Capital	350000	50000	300000	350000	200000	150000
	Total	415500	115500	300000	415500	200000	215500

10.0 Means of Finance:

Sl.No.	Particulars	Amount RS
1	Working capital Loan(Term Loan)	200000
2	Own Capital (including the amount already invested in acquiring the fixed assets of the unit)	215500
	Total	415500

11.0 Profitability analysis:

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

(a)    Unit will function for 300 days per annum in single shift basis 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	200000	190000	180500	171475	162901
	Depreciation (A)	10000	9500	9025	8574	8145
	WDV on Building	190000	180500	171475	162901	154756
2	Machinery and equipment	497574	447817	403035	362731	326458
	Depreciation(B)	49757	44782	40303	36273	32646
	WDV on Machinery and equipment	447817	403035	362731	326458	293812
	Total depreciation(A+B)	59757	54282	49328	44847	40791
		51000	46000	42000	38000	35000

12.0 Conclusion:

The net profits after taxation in the first year of operation is estimated as                      Rs.1196290 /. The break-even point is 34.85% of installed capacity. The return on investment is obtained as 34.97% 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:                                       

Sri P.V Illyas,

Pallikkaravalappil,

Vattanadu.

Pattithara Gramapanchayath

 

                                                                            

ANNEXURE:1

Cost of production & Profitability statement

	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	4062857	4062857	4062857	4062857	4062857
	Capacity utilisation	70	75	80	85	90
	Production	2844000	3047143	3250286	3453429	3656571
A	Sales	2844000	3047143	3250286	3453429	3656571
B	Cost of Production
	Raw materials	2400000	2571429	2742857	2914286	3085714
	Wages	72000	77143	82286	87429	92571
	Power,  and Fuel charges	2400	2571	2743	2914	3086
	Repair & maintenance	775	775	25	775	25
	Insurance	155	155	5	155	5
	Depreciation	51000	46000	42000	38000	35000
	Total	2526330	2698073	2869916	3043559	3216401
C	Gross operating profit	317670	349070	380370	409870	440170
D	Admn. & Selling expenses
	1. Administrative expenses	60000	64286	68571	72857	77143
	2. Selling expenses	28440	30471	32503	34534	36566
E	Financial expenses
	1. Interest on term loan	21738	17038	12338	7638	2938
	2. Interest on WC loan	0	0	0	0	0
	3. Interest on MM loan	0	0	0	0	0
F	Total of D&E	110178	111795	113412	115029	116646
G	Net operating profit	207493	237275	266958	294841	323524
H	Income tax	62203	71138	80042	88407	97012
I	Net profit	145290	166138	186916	206434	226512
J	Withdrawals
K	Depreciation	51000	46000	42000	38000	35000
L	Cash surplus	196290	212138	228916	244434	261512

     

                                            ANNEXURE:2

BREAK EVEN ANALYSIS          

	Particulars	1 YEAR	2 YEAR	3 YEAR	4 YEAR	5 YEAR
FIXED COST
	Salaries	72000	77143	82286	87429	92571
	Repair & Maintenance	775	775	25	775	25
	Insurance	155	155	5	155	5
	Administrative expenses	60000	64286	68571	72857	77143
	Depreciation	51000	46000	42000	38000	35000
	Interest on MM loan	0	0	0	0	0
	Interest on Term loan	21738	17038	12338	7638	2938
	Total	205668	205396	205225	206853	207682
VARIABLE COST
	Raw Materials	2400000	2571429	2742857	2914286	3085714
	Power Charges	2400	2571	2743	2914	3086
	Selling expenses	28440	30471	32503	34534	36566
	Interest on WC loan	0	0	0	0	0
	Total	2430840	2604471	2778103	2951734	3125366
	BEP in % of installed capacity	34.85	34.80	34.77	35.05	35.19
	BEP in % of capacity utilization	49.78	46.40	43.46	41.23	39.10
	Return on Investment	34.97	39.99	44.99	49.68	54.52
	DSCR	4.91	5.30	5.72	6.11	34.24

ANNEXURE:3

 

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	207493	237275	266958	294841	323524
2	depreciation	51000	46000	42000	38000	35000
3	Interest on term loan	21738	17038	12338	7638	2938
4	Interest on mm loan	0	0	0	0	0
5	Interest on wc loan	0	0	0	0	0
	Total (A)	280230	300313	321296	340479	361461
B	Debt Service Requirement
1	Repayment of term loan	40000	40000	40000	40000	40000
2	Repayment of interest on term loan	21738	17038	12338	7638	2938
3	Repayment of interest on mm loan	0	0	0	0	0
	Repayment of interest on wc loan	0	0	0	0	0
	Total (B)	61738	57038	52338	47638	42938
C	Debt sercice coverage ratio	4.54	5.27	6.14	7.15	8.42
	Average DSCR	7.30

ANNEXURE:4

REPAYMENT SCHEDULE OF TERM LOAN						monthly repayment
Year	Instalment  Number	Principal	Inst. Amt	Interest	Balance
1	1	200000	10000	5875	190000	5292
	2	190000	10000	5581	180000	5194
	3	180000	10000	5288	170000	5096
	4	170000	10000	4994	160000	4998
			40000	21738
2	5	160000	10000	4700	150000	4900
	6	150000	10000	4406	140000	4802
	7	140000	10000	4113	130000	4704
	8	130000	10000	3819	120000	4606
			40000	17038
3	9	120000	10000	3525	110000	4508
	10	110000	10000	3231	100000	4410
	11	100000	10000	2938	90000	4313
	12	90000	10000	2644	80000	4215
			40000	12338
4	13	80000	10000	2350	70000	4117
	14	70000	10000	2056	60000	4019
	15	60000	10000	1763	50000	3921
	16	50000	10000	1469	40000	3823
			40000	7638
5	17	40000	10000	1175	30000	3725
	18	30000	10000	881	20000	3627
	19	20000	10000	588	10000	3529
	20	10000	10000	294	0	3431
			40000	2938

       ANNEXURE:5

                                                         CASH FLOW STATEMENT

A	Source of Funds	Construction period	1 year	2 year	3 year	4 year	5 year
1	Cash accruals(profit before income tax)	0	229230	254313	279296	302479	326461
2	Increase in capital equity	215000	0
3	Depreciation		51000	46000	42000	38000	35000
4	Investment allowance
5	Increase in long term loan	200000	0
6	Increase in MM loan	0	0
7	Increase in unsecured  loans
8	Increase in WC loan	0	0	0	0	0	0
9	Sales of fixed assets/invests	0	0	0	0	0	0
10	Others( investment subsidy)	0	0	0	0	0	0
	Total	415000	280230	300313	321296	340479	361461
B	Disposition of Funds
	Prelim & Pre-op expenses	5000	0	0	0	0	0
	Increase in capital expenditure	60500	0	0	0	0	0
	Increase in current assets		0	0	0	0	0
	Decrease in long term loans		40000	40000	40000	40000	40000
	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		21738	17038	12338	7638	2938
	Interest on WC loan		0	0	0	0	0
	Interest on MM loan		0	0	0	0	0
	Taxation		62203	71138	80042	88407	97012
	Divident  on equity			0	0	0	0
	Other expenses
	Total	65500	123940	128175	132380	136045	139950
C	Opening balance	0	349500	505790	677928	866843	1071277
D	Net surplus	349500	156290	172138	188916	204434	221512
E	Closing balance	349500	505790	677928	866843	1071277	1292789

ANNEXURE:6

PROJECTED BALANCE SHEET

A	Liabilities	Construction period	1 year	2 year	3 year	4 year	5 year
	Equity share capital	215000	215000	215000	215000	215000	215000
	Reserve & Surplus	0	145290	311428	498343	704777	931289
	Term loan	200000	160000	120000	80000	40000	0
	Margin Money loan	0	0	0	0	0	0
	Working capital loan		0	0	0	0	0
	Other liabilities(towards subsidy)	0	0	0	0	0	0
	Total Liabilities	415000	520290	646428	793343	959777	1146289
B	Assets	Construction period	1 year	2 year	3 year	4 year	5 year
	Gross block	60500	60500	9500	-36500	-78500	-116500
	Depreciation	0	51000	46000	42000	38000	35000
	Net block	60500	9500	-36500	-78500	-116500	-151500
	InvestmenT(Prilim. Expences)	5000	5000	5000	5000	5000	5000
	Current assets		0	0	0	0	0
	Reserved Stock accumulated to be added to current asset
	Cash and bank balance	349500	505790	677928	866843	1071277	1292789
	Total Assets	415000	520290	646428	793343	959777	1146289