INTRODUCTION

To an economist, an entrepreneur is one who brings resources, labor, materials, and other assets into combinations that make their value greater than before, and also one who introduces changes,

innovations, and a new order. To a psychologist, such a person is typically driven by certain forces the needs to obtain or attain something, to experiment, to accomplish, or perhaps to escape the authority of others. To one businessman, an entrepreneur appears as a threat, an aggressive competitor, whereas to another businessman the same entrepreneur may be an ally, a source of supply, a customer, or someone who creates wealth for others, as well as finds better ways to utilize resources, reduce waste, and produce jobs others are glad to get.

Entrepreneurship is the dynamic process of creating incremental wealth. The wealth is created by individuals who assume the major risks in terms of equity, time and/or career commitment or provide value for some product or service. The product or service may or may not be

new or unique, but value must somehow be infused by the entrepreneur by receiving and locating the necessary skills and resources.

INDUSTRIAL BACK GROUND OF INDIA

India has been one of the best performers in the world economy in recent years, but rapidly rising inflation and the complexities of running the worlds biggest democracy are proving challenging. Indias economy has been one of the stars of global economics in recent years, growing 9.2% in 2007 and 9.6% in 2006. Growth had been supported by markets reforms, huge inflows of FDI, rising Foreign exchange reserves, both an IT and real estate boom, and a flourishing Capital market. Like most of the world, however, India is facing testing economic times in 2008. The Reserve Bank of India had set an inflation target of 4%, but by the middle of the year it was running at 11%, the highest level seen for a decade. The rising costs of oil, food and the resources needed for Indias construction boom are all playing a part.

India has to compete ever harder in the energy market place in particular and has not been as adept at securing new fossil fuel sources as the Chinese. T he I n d i a n Government is looking at alternatives, and has signed a wide-ranging nuclear treaty with the US, in part to gain Access to nuclear power plant technology that can reduce its oil thirst. This has proved contentious though, leading to leftist members of the ruling coalition pulling out of the government. As part of the fight against inflation a tighter monetary policy is expected, but this will help slow the growth of the Indian economy still further, as domestic demand will be dampened. External demand is also slowing, further adding to the downside risks.

The Indian stock market has fallen more than 40% in six months from its January 2008 high. $6b of foreign funds have flowed out of the country in that period, reacting both to slowing economic growth and perceptions that the market was over-valued.

It is not all doom and gloom, however. A growing number of investors feel that the market may now be undervalued and are seeing this as a buying opportunity. If their optimism about the long term health of the Indian
3

economy is correct, then this will be a needed correction rather than a downtrend.

The Indian government certainly hopes that is the case. It views investment in the creaking infrastructure of the country as being a key requirement, and has ear-marked 23.8 trillion rupees, approximately $559 billion, for infrastructure upgrades during the 11th five year plan. It expects to fund 70% of project costs, with the other 30% being supplied by the private sector. Ports, airports, roads and railways are all seen as vital for the Indian Economy and have been targeted for investment. Further hope comes from the confidence of Indias home bred companies. As well as taking over the domestic reins, where they now account for most of the economic activity, they are also increasingly expanding abroad. India has contributed more new members to the Forbes Global 2000 than any other country in the last four years. Recent Growth Trends in Indian Economy

Indias Economy has grown by more than 9% for three years running, a nd has seen a decade of 7%+ growth. This has reduced poverty by 10%, but with 60% of Indias 1.1 billion population living off agriculture and with droughts and floods increasing, poverty alleviation is still a major challenge . The structural transformation that has been adopted by the national government in recent times has reduced growth constraints and contributed greatly to the overall growth and prosperity of the country. However there are still major issues around federal vs state bureaucracy, corruption and tariffs that require addressing. Indias public debt is 58% of GDP according to the C I A Wo r l d F a c t bo o k , and this represents another challenge. During this period of stable growth, the performance of the Indian service sector has been particularly significant. The growth rate of the service sector was 11.18% in 2007 and now contributes 53% of GDP. The industrial sector grew 10.63% in the same period and is now 29% of GDP. Agriculture is 17% of the Indian economy.

Growth in the manufacturing sector has also complemented the countrys

5

excellent growth momentum. The growth rate of the manufacturing sector rose steadily from 8.98% in 2005, to 12% in 2006. The storage and communication sector also registered a significant growth rate of 16.64% in the same year. Additional factors that have contributed to this robust environment are sustained in investment and high savings rates. As far as the percentage of gross capital formation in GDP is concerned, there has been a significant rise from 22.8% in the fiscal year 2001, to 35.9% in the fiscal year 2006. Further, the gross rate of savings as a proportion to GDP registered solid growth from 23.5% to 34.8% for the same period India economy, the third largest economy in the world, in terms of purchasing power, is going to touch new heights in coming years. As predicted by Goldman Sachs, the Global Investment Bank, by 2035 India would be the third largest economy of the world just after US and China. It will grow to 60% of size of the US economy. This booming economy of today has to pass through many phases before it can achieve the current milestone of 9% GDP.

The history of Indian economy can be broadly divided into three phases: Pre- Colonial, Colonial and Post Colonial . Pre Colonial: The economic history of India since Indus Valley Civilization to 1700 AD can be categorized under this phase. During Indus Valley Civilization Indian economy was very well developed. It had very good trade relations with other parts of world, which is evident from the coins of various civilizations found at the site of Indus valley. Before the advent of East India Company, each village in India was a self sufficient entity. Each village was economically independent as all the economic needs were fulfilled with in the village

Then came the phase of Colonization. The arrival of East India Company in India ruined the Indian economy. There was a two-way depletion of resources. British used to buy raw materials from India at cheaper rates and finished goods were sold at higher than normal price in Indian markets. During this phase India's share of world income declined from 22.3% in 1700 AD to 3.8% in 1952.
7

After India got independence from this colonial rule in 1947, the process of rebuilding the economy started. For this various policies and schemes were formulated. First five year plan for the development of Indian economy came into implementation in 1952. These Five Year Plans, started by Indian government, focused on the needs of Indian economy. If on one hand agriculture received the immediate attention on the other side industrial sector was developed at a fast pace to provide employment opportunities to the growing population and to keep pace with the developments in the world. Since then Indian economy has come a long way. The Gross Domestic Product (GDP) at factor cost, which was 2.3 % in 1951-52 reached 9% in financial year 2005-06. Trade liberalization, financial liberalization, tax reforms and opening up to foreign investments were some of the important steps, which helped Indian economy to gain momentum. The Economic Liberalization introduced by Man Mohan Singh in 1991, then Finance Minister in the government of P V Narsimha Rao, proved to be the stepping-stone for Indian economic reform movements.

To maintain its current status and to achieve the target GDP of 10% for financial year 2006-07, Indian economy has to overcome many challenges.

Challenges before Indian economy: Population explosion: This monster is eating up into the success of India. According to 2001 census of India, population of India in 2001 was 1,028,610,328, growing at a rate of 2.11% approx. Such a vast population puts lots of stress on economic infrastructure of the nation. Thus India has to control its burgeoning population. Poverty: As per records of National Planning Commission, 36% of the Indian population was living Below Poverty Line in 1993-94. Though this figure has decreased in recent times but some major steps are needed to be taken to eliminate poverty from India. Unemployment: The increasing population is pressing hard on economic resources as well as job opportunities. Indian government has started various schemes such as Jawahar Rozgar Yojna, and Self Employment Scheme for Educated Unemployed Youth (SEEUY). But these are proving to be a drop in an ocean.
9

Rural urban divide: It is said that India lies in villages, even today when there is lots of talk going about migration to cities, 70% of the Indian population still lives in villages. There is a very stark difference in pace of rural and urban growth. Unless there isn't a balanced development Indian economy cannot grow.

The Indian economy is set to grow between 7 per cent and 7.5 per cent in the current fiscal, according to Dr C Rangarajan, Chairman of the Prime Ministers Economic Advisory Council (PMEAC). The mid-year review has projected a growth rate of 7.75 per cent for the fiscal. India's gross domestic product (GDP) grew by 7.9 per cent during JulySeptember 2009, up from 6.1 per cent in the previous quarter, as per data released by the Central Statistical Organisation (CSO). According to the latest estimates available on the Index of Industrial Production (IIP), the index of mining, manufacturing and electricity, registered growth rates of 9.5 per cent, 9.2 per cent and 7.5 per cent, respectively in Q2 of 2009-10, as compared to the growth rates of 3.8 per cent, 4.9 per cent and 3.2 per cent in these industries in Q2 of 2008-09. The key indicators of construction
10

sector, namely, cement and finished steel registered growth rates of 12.6 per cent and 2.1 per cent, respectively in Q2 of 2009-10, as against the growth rates of 5.2 per cent and 3.8 per cent, respectively in Q2 of 2008-09. The Economic scenario Overseas investors have infused US$ 816.69 million into the stock market in the first trading week of 2010, reflecting a positive start for the year after record inflows in the last year. FIIs were net investors of US$ 973.22 million in debt instruments in the first trading week of the year, according to the data released by Securities and Exchange Board of India (SEBI). The wealth of foreign institutional investors (FIIs) in leading Indian companies now stands at more than double the level a year ago, vindicating Indias image of being a safe and lucrative investment destination. Consumers in India continued to be optimistic slightly more than what they were six months ago, as per a latest MasterCard Worldwide Index of Consumer Confidence survey. "In India consumers are more optimistic than six months ago (68.0) and a year ago (63.9)," said the study. Additionally, India ranks second with 117 points in consumer confidence in the fourth quarter of 2009, according to the Nielsen Global Consumer Confidence
11

survey. The survey results indicate that the recovery from the global economic downturn is faster in India as compared with other countries in the world. Global ratings firm Moody's has upgraded long-term foreign currency (FC) deposit ratings of 14 Indian banks, including the country's largest bank. State Bank of India (SBI), by one notch to Ba1 from Ba2 with a stable outlook. This reflects a slight improvement in the credit quality of the rated entities. This move has come in wake of the revision in Indias sovereign outlook by the ratings firm. Among the banks which would be benefited by the ratings decision include Axis Bank, Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Export-Import Bank of India, HDFC Bank, ICICI Bank, IDBI Bank, Oriental Bank of Commerce, Punjab National Bank, State Bank of India, Syndicate Bank and Union Bank of India. India's local currency rating outlook has been raised to positive' from stable' by Moody's Investors Service on the back of the country's demonstrated resilience to the global crisis and expectation that it will resume its high growth path. The global credit rating major also held out the possibility of upgrade of the local currency bond rating.

12

Simultaneously, the agency also raised the ceiling on banks' foreign currency deposits to Ba1' from Ba2' to reflect the robust external position of India better. Both Ba1 and Ba2' ratings, according to Moody's definition, fall in the speculative grade category. Of the more than 200 companies from over 50 countries that form part of the World Economic Forums Global Growth Companies (GGC) Community, India today has the second largest representation, with a total of 18 GGCs. Indian GGCs come from every sector, with a strong representation in information technology and electronics, retail, consumer goods and banking. The GGC Community was formed to engage high-growth companies with the potential to be tomorrows industry leaders and drive economic and social change. India ranks 49 among 133 countries in 2009-10 in the global competitiveness index (GCI) prepared by the World Economic Forum (WEF), an improvement of one position from last year. Indias position is a result of mixed performance across 12 categories covered

13

INDUSTRIAL BACK GROUND OF KERALA

Since its incorporation as a state, Kerala's economy largely operated under welfare based democratic socialist principles. In recent years, the state has liberalised its increasingly mixed economy, allowing greater participation by the free market and foreign direct investment. Kerala's nominal gross domestic product (as of 2004-2005) is an estimated 89451.99 crore INR, while recent GDP growth (9.2% in 2004-2005 and 7.4% in 2003-2004) has been robust compared to historical averages (2.3% annually in the 1980s and between 5.1% and 5.99% in the 1990s). The state has clocked a 8.93% growth in enterprises from 1998 to 2005 compared with the national average of 4.80%. Nevertheless, relatively few major corporations and manufacturing plants choose to operate in Kerala. This is mitigated by remittances sent home by overseas Keralites, which contributes around 20% of state GDP. Kerala's per capita GDP of 11,819 INR is significantly higher than the all India average, although it still lies far below the world

14

average. Additionally, Kerala's Human Development Index and standard of living statistics are the nation's best. This apparent paradox-high human development and low economic development-is often dubbed the Kerala phenomenon or the Kerala model of development, and arises mainly from Kerala's strong service sector.

The service sector (including tourism, public administration, banking and finance, transportation, and communications-63.8% of statewide GDP in 2002-2003) along with the agricultural and fishing industries (together 17.2% of GDP) dominate Kerala's economy. Nearly half of Kerala's people are dependent on agriculture alone for income. Some 600 varieties of rice (Kerala's most important staple food and cereal crop) are harvested from 3105.21 km (a decline from 5883.4 km in 1990) of paddy fields; 688,859 tonnes are produced per annum. Other key crops include coconut (899,198 ha), tea, coffee (23% of Indian production, or 57,000 tonnes), rubber, cashews, and spices-including pepper, cardamom, vanilla, cinnamon, and nutmeg. Around 1.050 million fishermen haul an annual catch of 668,000

15

tonnes (1999-2000 estimate); 222 fishing villages are strung along the 590 km coast. Another 113 fishing villages dot the hinterland Traditional industries manufacturing such items as coir, handlooms, and handicrafts employ around one million people. Around 180,000 small-scale industries employ around 909,859 Keralites; 511 medium and large scale manufacturing firms are located in Kerala. A small mining sector (0.3% of GDP) involves extraction of ilmenite, kaolin, bauxite, silica, quartz, rutile, zircon, and sillimanite. Home gardens and animal husbandry also provide work for hundreds of thousands of people.

INTRODUCTION

The concept of entrepreneurship has a wide range of meanings. On the one extreme an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme of definitions, anyone who wants to work for himself or herself is considered to be an entrepreneur. DEFINITION

16

The word entrepreneur originates from the French word, entreprendre, which means to undertake. In a business context, it means to start a business. The Merriam-Webster Dictionary presents the definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise. Schumpeters View of Entrepreneurship Austrian economist Joseph Schumpeter s definition of entrepreneurship placed an emphasis on innovation, such as:

new products new production methods new markets new forms of organization

Wealth is created when such innovation results in new demand. From this viewpoint, one can define the function of the entrepreneur as one of combining various input factors in an innovative manner to generate value to the customer with the hope that this value will exceed the cost of the

17

input factors, thus generating superior returns that result in the creation of wealth. Entrepreneurship vs. Small Business Many people use the terms entrepreneur and small business owner synonymously. While they may have much in common, there are significant differences between the entrepreneurial venture and the small business. Entrepreneurial ventures differ from small businesses in these ways: 1. Amount of wealth creation rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit. 2. Speed of wealth creation while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid; for example, within 5 years. 3. Risk the risk of an entrepreneurial venture must be high; otherwise, with the incentive of sure profits many entrepreneurs

18

would be pursuing the idea and the opportunity no longer would exist. 4. Innovation entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation.

SMALL SCALE INDUSTRIES

In 1947 after gaining independence, India initiated a path of industrialization to achieve economic prosperity. India focused on developing the manufacturing base. Much of the countries development was done through the five year plans. Industries like iron and steel, oil refineries, cement and fertilizer were brought under the gamut of public sector enterprises. The decision makers then encouraged the development of small scale industries. They perceived that Indian small scale industries would play a vital role in the economic progress of the country and had immense potential for employment generation. Developing small scale sector would also result in decentralized industrial expansion, better distribution of wealth and to encourage investment and entrepreunial

19

talent.

The government has initiated several policies for the growth and development of small scale industries. They included reservation of certain items to be manufactured only by the small scale sector. Other measures include credit marketing, technology, and entrepreneurship development, fiscal, financial and infrastructural support. In 1999, the government established the Ministry of Small Scale Industries and Agro and Rural industries to make policy decisions for the development and well being of the small scale industries.

Initially the small scale sector was characterized as traditional labor intensive units with outdated machineries and inefficient production techniques. But in the recent past the condition of the small scale units has improved. Today they have installed modern machines, applied better management techniques and are much more productive than before.

SSI-Location Small Scale Industries are located throughout the country, though

20

predominantly in the rural areas. The small scale industries in the rural areas are skill based, wherein the skill for manufacturing is passed on from one generation to another. Some of the goods manufactured in these units are textile handicrafts, woodcarving, stone carving, metal ware etc. Small scale industrial factories are also present in urban areas and usually they account for the maximum volume of production for that particular good in the country. For e.g. Ludhiana in the state of Punjab is the main center in the country for producing woolen hosiery, sewing machine parts, bicycles and its parts, similarly Tiruppur in Tamil Nadu accounts for small scale firms that are involved in spinning, weaving and dying of cotton garments.

Post Liberalization

Post liberalization economic conditions has created immense growth prospect for the small scale industries. The government has also supported the small scale industries by the way of implementing policies like investment ceiling for the SSI sector and priority lending. The formation of WTO in 1995 resulted in a major challenge to the well being of the SSI. The

21

protection given to the SSI in the form of reservation and quantitative restrictions has been withdrawn. More than 160 items reserved under the SSI category have been de reserved. It has been found that if the SSI upgrades the technology, adopt better management practices, reengineer the factories to improve productivity and provide qualitative product, they would be competitive in the post WTO scenario. The advancement in computer and telecommunication technology, increase in e commerce, opening up of markets due to WTO, mergers and acquisitions, improved infrastructure and outsourcing noncore area of business have all contributed to the growth of SSi.

Definition of Small Scale Industrial (SSI) Undertakings The following requirements are to be complied with by an industrial undertaking to be graded as Small Scale Industrial undertaking w.e.f. 21.12.1999

22

An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms on lease or on hire purchase does not exceed Rs 10 million.

MANUFACTURING PROCESS

The soda bottle so common today is made of polyethylene terephthalate (PET), a strong yet lightweight plastic. PET is used to make many products,

23

such as polyester fabric, cable wraps, films, transformer insulation, generator parts, and packaging. It makes up 6.4 percent of all packaging and 14 percent of all plastic containers, including the popular soft drink bottle. Accounting for 43 percent of those sold, PET is the most widely used soft drink container. Aluminum, a close second, is 34 percent, while glass, which used to be 100 percent of the bottles, is only a small percentage of those sold today. Plastics were first made in the 1800s from natural substances that were characterized by having chains of molecules. When these substances were combined with other chemicals in the laboratory, they formed products of a plastic nature. While hailed as a revolutionary invention, early plastics had their share of problems, such as flammability and brittleness. Polyesters, the group of plastics to which PET belongs, were first developed in 1833, but these were mostly used in liquid varnishes, a far cry from the solid, versatile form they took later. Purely synthetic plastics that were a vast improvement on earlier plastics arrived in the early 1900s, yet they still had limited applications. Experimentation continued, with most of the hundreds of new plastics

24

created over the next several decades failing commercially. PET was developed in 1941, but it wasn't until the early 1970s that the plastic soda bottle became a reality. Nathaniel C. Wyeth, son of well-known painter N. C. Wyeth and an engineer for the Du Pont Corporation, finally developed a usable bottle after much experimentation. Wyeth's crucial discovery was a way to improve the blow-molding technique of making plastic bottles. Blow molding is ancient, having been used in glass-making technology for approximately two thousand years. Making plastic bottles by blow molding didn't happen until suitable plastics were developed around 1940, but production of these bottles was limited because of inconsistent wall thickness, irregular bottle necks, and difficulty in trimming the finished product. Wyeth's invention of stretch blow molding in 1973 solved these problems, yielding a strong, lightweight, flexible bottle. The overwhelming success of PET soda bottlesin 1991, more than eight billion bottles were manufactured in the U.S.has resulted in a disposal problem, but recycling of the bottles is growing, and manufacturers are finding new ways to use recycled PET.

25

Raw Materials PET is a polymer, a substance consisting of a chain of repeating organic molecules with great molecular weight. Like most plastics, PET is ultimately derived from petroleum hydrocarbons. It is created by a reaction between terephthalic acid (C 8 H 6 0 4 ) and ethylene glycol (C 2 H 6 0 2 ). Terephthalic acid is an acid formed by the oxidation of para-xylene (C 8 H 10 ), an aromatic hydrocarbon, using just air or nitric acid. Para-xylene is derived from coal tar and petroleum using fractional distillation, a process that utilizes the different boiling points of compounds to cause them to "fall out" at different points of the process.

26

In plastic soda bottle manufacture, the plasticpolyethylene terephthalate (PET)is first polymerized, which involves creating long strings of molecules. Once the plastic is prepared, it undergoes stretch blow molding. In this process, a long tube (parison) of PET is put into a mold, and a steel rod (mandrel) is inserted into it. Next, highly pressurized air shoots through the mandrel and forces the parison against the walls of the mold. A separate bottom piece is inserted into the mold to shape the bottle so that it can stand on a flat surface.

27

Ethylene glycol is derived from ethylene (C

) indirectly through

ethylene oxide (C 2 H 4 0), a substance also found in antifreeze. Ethylene is a gaseous hydrocarbon that is present in petroleum and natural gas, but is usually derived industrially by heating ethane or an ethane-propane mixture. The Manufacturing Process Polymerization

1 Before the bottles can be made, the PET itself must be manufactured, or polymerized. In polymerization, smaller molecules are combined to form larger substances. To make PET, terephthalic acid is first combined with methanol (CH 3 OH). This reaction yields dimethyl terephthalate and water. Next, the dimethyl terephthalat, is combined with an excess of ethylene glycol at 305 degrees Fahrenheit (150 degrees Celsius) to yield another substance, bis 2hydroxyethyl terephthalate and methanol.

2 The final step of polymerization involves the condensation polymerization of the bis 2-hydroxyethyl terephthalate. In this

28

process, a polymer is formed while another molecule is released, or "falls out." The condensation polymerization of bis 2-hydroxyethyl terephthalate is carried out in a vacuum at 530 degrees Fahrenheit (275 degrees Celsius) and results in chains of PET and ethylene glycol (see step #1 above); the latter substance is continuously removed during polymerization and used to make more PET. After the PET mixture reaches the required viscosity (thickness), it is cooled to avoid degradation and discoloration. Later, it can be reheated for its various uses. Bottle-making

3 PET beverage bottles are made using a process known as stretch blow molding (also called orientation blow molding). First, PET pellets are injection moldedheated and put into a moldinto a thin walled tube of plastic, called a parison. The parison is then cooled and cut to the proper length.

4 Next, the parison tube is re-heated and placed into another mold, which is shaped like a soda bottle, complete with screwtop. A steel rod (a mandrel) is slid into the parison. Highly pressurized air then
29

shoots through the mandrel and fills the parison, pressing it against the inside walls of the mold. The pressure of the air stretches the plastic both radially ("out") and axially ("down"). The combination of high temperature and stretching in the desired direction causes the molecules to polarize, line up and essentially crystallize to produce a bottle of superior strength. The entire procedure must be done quickly, and the plastic must be pressed firmly against the wall, or the bottle will come out misshapen. In order to give the bottom of the bottle its proper concave shapeso that it can stand uprighta separate bottom piece is attached to the mold during the blowing process.

5 The mold must then be cooled. Different cooling methods are used. Water in pipes may flow around the mold, or liquid carbon dioxide, highly pressurized moist air, or room air is shot into the bottle to cool it more directly. The procedure is preferably done quickly, to set the bottle before creep (flow) occurs.

6 The bottle is then removed from the mold. In mass production, small bottles are formed continuously in a string of attached bottles

30

that are separated and trimmed. Other trimming must be done wherever the plastic leaked through the cracks of the mold (like the way pancake batter does when squeezed in a waffle maker). Ten to 25 percent of the plastic is lost this way, but it can be reused.

7 Some soft drink producers make their own bottles, but usually finished bottles are sent from specialty manufacturers to soft drink companies in trucks. Plastic is cheap to transport because it is light. Accessories such as lids and labels are manufactured separately. Occasionally, the plastic bottle manufacturer will put labels supplied by the soft drink company on the bottles before shipping them.

Quality Control Polymerization is a delicate reaction that is difficult to regulate once the conditions are set and the process is set into motion. All molecules produced during the reaction, some of which might be side effects and impurities, remain in the finished product. Once the reaction gets going, it's impossible to stop it at mid-point and remove impurities, and it is also difficult and expensive to eliminate unwanted products when the reaction is complete. Purifying polymers is an expensive process, and quality is hard
31

to determine. Variations in the polymerization process could make changes that are undetectable in routine control tests. The polymerization of terephthalic acid and ethylene glycol can yield two impurities: diethylene glycol and acetaldehyde. The amount of diethylene glycol is kept to a minimum, so that PET's final properties are not affected. Acetaldehyde, which is formed during the polymerization as well as during the production of the bottle, will give a funny taste to the soft drink if it occurs in large enough amounts. By using optimum injection-molding techniques that expose the polymer to heat for a short time, very low concentrations of acetaldehyde appear and the taste of the beverage will be unaffected. Testing is performed on those specific characteristics of PET that make it perfect for beverage bottles. Numerous standards and tests have been developed for plastics over the years. For instance, PET must be shatterproof under normal conditions, so bottles undergo impact resistance tests that involve dropping them from a specific height and hitting them with a specified force. Also, the bottle must hold its shape as well as resist pressure while stacked, so resistance to creep is measured by testing for

32

deformity under pressure. In addition, soft drinks contain carbon dioxide; that's what gives them their fizz. If carbon dioxide were able to escape through the bottle's plastic walls, most beverages bought would have already gone flat. Hence, the bottle's permeability to carbon dioxide is tested. Even its transparency and gloss are tested. All tests aim for consistency of size, shape, and other factors. Recycling A large number of the billions of PET bottles produced every year are thrown away, producing a serious environmental concern. Action has already been taken to stem the waste flow, mainly in the area of recycling. Only aluminum fetches a higher price at the recycling center than PET, so, at a one to two pecent recovery rate, PET is the most extensively recycled plastic. Products made from recycled PET bottles include carpeting, concrete, insulation, and automobile parts. Still, it wasn't until 1991 that the first PET soda bottle using recycled PET appeared. Consisting of 25 percent recycled PET, the bottle was introduced by Coca-Cola and Hoechst Celanese Corporation for use in North Carolina. By 1992, this bottle was

33

being used in 14 other states, and other manufacturers (such as Pepsi, in partnership with Constar International Inc.) had produced a similar bottle. Despite PET's high recycling rate compared to other plastics, many companies and officials want to make it even higher. Current plans are to look into PET incineration, in which it is claimed that, if done properly, the products of complete combustion are merely carbon dioxide and water. Current goals of state and federal governments are that 25 to 50 percent of PET be recycled, that recycling of PET be made available to one-half of the United States population, and that 4000 curbside recycling programs be implemented in the near future. In 1990, according to the National Association for Plastic Container Recovery, there were 577 curbside programs for PET.

34

PET bottles now account for 43 percent of the soft drink container market. The overwhelming success of PET soda bottlesin 1991, more than eight billion bottles were manufactured in the U.S.has resulted in a disposal problem, but recycling of the bottles is growing, and manufacturers are finding new ways to use recycled PET.

35

PROJECT AT A GLANCE

Name of the unit

M/S Classic Industries

Address

Nattakom Kottayam

Constitution

Proprietorship

Location

Nattakom Kottayam

About the project

Manufactures of soda Bottle

Name and address of proprietor

ArunKumar Anugraha house Kottaym

Cost of the project

Rs 97,30,000

Means of finance

Own Capital : Rs 57, 30,000 Bank loan: Rs 40, 00,000 Rs 97, 30,000

36

COMPANY PROFILE

M/S Classic Industries is a small scale business unit.It is the manufacturer of mineral water. The unit is located at Kottayam. It is a propertership concern. They produce packaged aerated water of various quantities. The location is favourable to the industry. The name of the proprietor is Mr.Arunkumar He has ten years experience in the field. The unit markets its products in Kerala within a short period the firm may capture major market in Kerala.

VARIOUS DEPARTMENTS ASSOCIATED WITH THE COMPANY

PRODUCTION DEPARTMENT The unit has a wide manufacturing process.So it has a production department to coordinate the activities 1. Reduce Wastage 2.Reduce the cost of Production 3. Maintain the quality 4.Increase the efficiency in production.

37

Marketing Department .Its functions are

1. Canvassing the new retailers. 2.Selecting the advertising Campaign. 3.Introducing new policy for marketing product.

Quality Testing Unit In a textile industry quality is a must.So they form a quality testing Depertmant.Its functions are. 1.Checking the product quality 2.Checking the BIS Standards

PRODUCTS OF THE COMPANY

Packaged aerated Water 1 litre Bottle 2 Litre Bottle Litre Bottle

38

MISSION OF THE COMPANY

Maintain good customer relationship. Provide good quality product. Protect the environment from pollution. Enhance the life style of employees.

PRICING METHOD
The price fixed by the firm in accordance with the prevailing market price.

BUYERS Small Retailers Offices Companys COMPETITORS Classic Industries Aquafina DISTRIBUTION CHANNEL
Retailers Direct Sales

39

COST OF THE PROJECT Details of Plant Table No: 4.1 Sl. No 1 2 3 Item Manufacturing unit Godown Quality Test Unit TOTAL Sqft 1500 500 500 2500 Amount 1500000 500000 500000 2500000

Details of Machinery Table No: 4.2

Category Plastic blowing Bottle Machine High Speed Auto Stretch Machin Moulding Machine Pet blow moulding Machine P E extrusion blow mould Pet Perform Mould Bottle blowing mould Injection Moulding Machine Lid/Cap Clousure Mould TOTAL

No Name of Suppliers 1 Nippon Machines New Delhi 1 1 1 1 1 1 1 1 9 Chrome Machines ,Gujarat Prime Machines Ltd, Bombay Chrome Machines ,Gujarat Nero Machines Ltd, Bangalore Prime Machines Ltd, Bombay Combo Machines ltd , Pune Everex Machines Ltd,kolkatta

Amount 200000 150000 200000 250000 250000 150000 200000 100000 1600000

Boche Machines ltd, New Delhi 100000

40

Details of Land Table No: 4.3

Sl.No 1

Acre/Cent 25 CENT TOTAL

Amount 20,00,000 20,00,000

Details of Vehicle Table No: 4.4

Sl.No 1 2 3

Item Tempovan Lorry Tata Ace TOTAL

No 2 1 1 4

Amount 500000 2300000 300000 3100000

Details of Computer & Accessories Table No: 4.5 Sl.No 1 Item Computer
41

No 8

Amount 200000

Accessories TOTAL

20 28

150000 350000

Details of Furniture Table No: 4.6 Sl.No 1 2 3 4 Item Chair Table Cubboard Rack TOTAL No 55 40 5 10 110 Amount 60000 85000 15000 20000 180000

Cost of Project at a Glance Table No: 4.7

Sl. Item No 1 2 3 4 5 6 Plant Machinery Vehicles Land Computer and Accessories Furniture

No 2500 Sq.ft 9 4 25 cent 28 110 TOTAL

Amount 2500000 1600000 3100000 2000000 350000 180000 9730000

42

Means of Finance Own Capital Borrowed Term loan 57, 30,000 40, 00,000 97, 30,000

PROFITABILITY ANALYSIS (A) SALES The expected average annual turnover for the proposed project is Rs.60, 00,000 and a nominal increase is made in the subsequent years. The details of turnover are as follows:Table No: 4.8 Sl. No 1 2 3 4 Item Plastic Bottle Glass Bottle Plastic Cap Steel Cap TOTAL Amount 2000000 2000000 1000000 1000000 6000000

B) EXPENDITURE a) Purchase of Material

43

The expected average annual material requirement for the proposed project is Rs. 24,00,000 and a nominal increase is made in the subsequent years. The details of purchase is given below;Table No: 4.9 Sl. No 1 2 3 4 Item Packing Material Glass Plastic Chemicals TOTAL Amount 200000 1000000 800000 400000 24,00,000

b) Salary This project may provide employment opportunity for 44 members. The expected average annual salary provided for these persons are Rs. 13,50,000 and a nominal increase is made in the subsequent years. Details of salary is as follows :Table No: 4.10 Sl. No 1 2 3 4 5 Category Supervisor Skilled Labour Computer Operator Quality Analyzer Research Development Officer TOTAL c) Electricity Charges No 2 25 7 5 5 44 Amount 2,50,000 4,00,000 2,00,000 2,00,000 3,00,000 13,50,000

44

The expected average annual electricity charges for the proposed project is Rs. 1,00,000 and a nominal increase is made in the subsequent years. d) Travelling Expense The expected average annual travelling expense for the proposed project is Rs. 75,000 and a nominal increase is made in the subsequent years. e) Quality test and Office Expense The expected average annual office expense for the proposed project is Rs.50,000 and a nominal increase is made in the subsequent years. f) Repairs and maintenance The expected average annual miscellaneous expense for the proposed project is Rs.50,000 and a nominal increase is made in the subsequent years. g) Interest on Loan Interest on loan provided at 10% per annum.

h) Depreciation Depreciation is provided at 10% per annum on straight line method. Depreciation Table No: 4.11 Sl. Item No 1 Plant 2 Machinery Amount 10% 10% 2,50,000 1,60,000

45

3 4 5 6

Land Furniture Vehicle Computer and Accessories TOTAL

10% 10% 10%

18,000 3,10,000 35,000 7,73,000

WORKING CAPITAL REQUIREMENT OF THE PROPOSED PROJECT The working capital requirement of the proposed project is for 2 months. Its details are as follows:Table No: 4.12 Sl. No 1 2 3 4 5 6 7 8 Item Purchase of Material Salary Electricity Charges Travelling Expense Repairs and Maintenance Quality Test And Office expense Interest on Loan Depreciation TOTAL Amount 4,00,000 2,25,000 16,666 12,500 8,333 8,333 66,666 1,28,833 8,66,331

46

EXPENDITURE OF PROPOSED PROJECT AT A GLANCE

Table No: 4.13 Sl. No 1 2 3 4 5 6 7 8 Item Purchase of Material Salary Electricity Charges Travelling Expense Repairs and Maintenance Quality Test And Office expense Interest on Loan Depreciation TOTAL Amount 24,00,000 13,50,000 1,00,000 75,000 50,000 50,000 4,00,000 7,73,000 51,98,000

47

ANNEXURE REFERRED TO THE PROPOSED PROJECT

ANNEXURE I

PROJECTED PROFITABILITY STATEMENT

ANNEXURE II

PROJECTED CASH FLOW STATEMENT

ANNEXURE III

DEBT SERVICE COVERAGE RATIO

ANNEXURE IV

PROJECTED BALANCE SHEET.

ANNEXURE I : PROJECTED PROFITABILITY STATEMENT

RS IN LAKHS

Year A) INCOME Sales: B) TOTAL C)

VARIABLE COST

1 60.00 60.00 0.00 24.00 (1.00) 23.00

2 65.00 65.00 1.00 25.00 (2.00) 24.00

3 70.00 70.00 2.00 24.00 (1.00) 25.00

4 75.00 75.00 1.00 27.00 (2.00) 26.00

5 80.00 80.00 2.00 26.00 (1.00) 27.00

a) Opening stock b) Purchase of material c) Closing stock Material Consumed (a+b-c)

48

D) TOTAL E) GROSS PROFIT(B-D) F) OPERATING EXPENSE Salary Electricity charges Travelling Expense Repairs& maintanence Quality Test and Expense Interest on loan Depreciation G) TOTAL H) Net profit (E-G)

23.00 37.00 13.50 1.00 0.75 0.50 Office 0.50 4.00 7.73 27.98 9.02

24.00 41.00 14.00 1.50 1.00 1.00 1.00 3.20 7.73 29.43 11.57

25.00 45.000 14.50 2.00 1.25 1.50 1.50 2.40 7.73 30.88 14.12

26.00 49.00 15.00 2.50 1.50 2.00 2.00 1.60 7.73 32.33 16.67

27.00 53.00 15.50 3.00 1.75 2.50 2.50 0.80 7.73 33.78 19.22

ANNEXURE II PROJECTED CASH FLOW STATEMENT

RS IN LAKHS

Year

PreOperative Period 57.30 Term 40.00 from -

A) INFLOW Owned Capital Borrowed loan Inflow

9.02 7.73 0.00

11.57 7.73 0.00

14.12 7.73 1.00

16.67 7.73 0.00

19.22 7.73 1.00

operation Add Depreciation Decrease in Current Asset

49

B) Total C) Outflow Fixed Asset Land Vehicle Furniture Plant Machinery

97.30

16.75

19.30

22.85

24.40

27.95

20.00 31.00 1.80 25.00 16.00 1.00 8.00 1.25 6.45 97.30 0 0 16.70 0.05 0.05 1.00 8.00 2.01 8.20 19.21 0.09 0.14 0.00 8.00 2.78 12.00 22.78 0.07 0.21 1.00 8.00 3.54 11.76 24.30 0.10 0.31 0.00 8.00 4.31 15.49 27.80 0.15 0.46

Computer and 3.50 Accessories Increase in current asset Repayment of loan Income Tax Drawings D) Total E) Surplus F) Cumulative Surplus

ANNEXURE III : DEBT SERVICE COVERAGE RATIO

RS IN LAKHS

Year A) Source of Fund Inflow from operation fromDepreciation operation Add Less Income Tax B) TOTAL

1 9.02 7.73 1.25 15.50

2 11.57 7.73 2.01 17.29

3 14.12 7.73 2.78 19.07

4 16.67 7.73 3.54 20.86

5 19.22 7.73 4.31 22.64

50

C) Servicing of Debt Repayment of Loan D) TOTAL E) DSCR (B/D) 8.00 8.00 1.94 8.00 8.00 2.16 8.00 8.00 2.38 8.00 8.00 2.60 8.00 8.00 2.83

51

ANNEXURE IV PROJECTED BALANCE SHEET

RS IN LAKHS

Year

PreOperating period

A) Source of Fund Owned fund 57.30 Owned Borrowed Term 40.00 Capital Loan B) TOTAL 97.30 C) Application of Fund Fixed Asset Land Vehicle Furniture Plant Machinery Computer and Accessories Current Asset Stock Cash in hand D) Total 97.30 20.00 31.00 1.8 25.00 16.00 3.50

58.62 32.00 90.62

59.98 59.32 24.00 16.00 83.98 75.32

60.69 8.00 68.69

60.00 0.00 60.11

20.00 27.90 1.62 22.50 14.40 3.15

20.00 20.00 24.80 21.70 1.44 1.26 20.00 17.50 12.80 11.20 2.80 2.45

20.00 18.60 1.08 15.00 9.60 2.10

20.00 15.50 0.90 12.50 8.00 1.75

1.00 0.05 90.62

2.00 0.14

1.00 0.21

2.00 0.31 68.69

1.00 0.46 60.11

83.98 75.32

52

BREAK EVEN ANALYSIS Table No: 4.14

RS IN LAKHS

Particulars A) Sales B) Variable Cost Raw Material C) Contribution (A-B) D) PV Ratio (C/A)x100 E) Fixed Cost F) Break Even Value (E/D)

1 60.00 23.00 37.00 61.66 27.98

2 65.00 24.00 41.00 63.07 29.43

3 70.00 25.00 45.00 64.28 30.88

4 75.00 26.00 49.00 65.33 32.33

5 80.00 27.00 53.00 66.25 33.78

0.4537 0.4666 0.4803 0.4948 0.5098

BREAK EVEN POINT It is a point on sale at which total revenue is equal to total cost. BREAK EVEN POINT:Fixed Cost/PV Ratio PV Ratio: (Contribution/Sales) x 100 Contribution: Sales Variable Cost

53

BREAK EVEN ANALYSIS

SCALE : 1 UNIT=0.01 1.2 1 1 0.8 0.6468 BREAK EVEN 0.6 POINT 0.4 0.2 0 1 2 3 YEAR 4 5 0.7875 0.7142 0.8835

54

DEBT EQUITY RATIO Table No: 4.15 Particulars A) Borrowed Fund B) Owned Fund C) Debt Equity Ratio (A/B) 1 32.00 58.62 2 24.00 59.98 3 16.00 59.32
RS IN LAKHS

4 8.00 60.69

5 0.00 60.11

0.5458 0.4001 0.2697

0.1318 0.00

DEBT EQUITY RATIO It is a ratio between proprietors fund and outsiders fund. Debt Equity Ratio: - Borrowed Fund/Owned Fund

55

DEBT EQUITY RATIO

SCALE : 1 UNIT=0.1 1.2 1 1 0.8 0.6468 DEBT EQUITY 0.6 RATIO 0.4 0.2 0 1 2 3 YEAR 4 5 0.7875 0.7142 0.8835

56

FIXED ASSET TO NET WORTH RATIO Table No: 4.16

RS IN LAKHS

Particulars A) Fixed Assets B) Owned Fund C) FANWR (A/B)

1 89.57 58.62 1.527

2 81.84 59.98

3 74.11 59.32

4 66.38 60.69 1.093

5 58.65 60.11 0.9757

1.3644 1.249

FIXED ASSET TO NET WORTH RATIO It is the ratio between fixed assets to proprietors fund. Fixed asset to net worth ratio = fixed assets/owned fund

57

FIXED ASSET TO NET WORTH RATIO

58

SCALE : 1 UNIT=0.2 1.2 1 1 0.8 FIXED ASSETS TO NETWORTH 0.6 RATIO 0.4 0.2 0 1 2 3 YEAR 4 5 0.6468 0.7875 0.7142 0.8835

59

FIXED ASSET TURNOVER RATIO Table No: 4.17

RS IN LAKHS

Particulars A) Sales B) Fixed Asset C) FATR (A/B)

1 60.00 89.57 0.6698

2 65.00 81.84

3 70.00 74.11

4 75.00 66.38 1.129

5 80.00 58.65 1.364

0.7942 0.9445

FIXED ASSET TURNOVER RATIO It is the ratio between sales and fixed assets. Fixed Asset Turnover Ratio = Sales/Fixed Assets

60

FIXED ASSET TURNOVER RATIO

SCALE : 1 UNIT=0.2 1.2 1 1 0.8 FIXED ASSETS TURNOVER 0.6 RATIO 0.4 0.2 0 1 2 3 YEAR 4 5 0.6468 0.7875 0.7142 0.8835

NET PROFIT RATIO Table No: 4.18

61

RS IN LAKHS

Particulars A) Net Profit B) Sales C) Net Profit (A/B)*100

1 9.02 60.00 Ratio 15.03

4 16.67 75.00 22.22

5 19.22 80.00 24.03

11.57 14.12 65.00 70.00 17.80 20.17

NET PROFIT RATIO It is the ratio between net profit and sales Net Profit Ratio = (Net profit/Sales x 100)

NET PROFIT RATIO

62

SCALE : 1 UNIT=5 1.2 1 1 0.8 0.6468 NET PROFIT 0.6 RATIO 0.4 0.2 0 1 2 3 YEAR 4 5 0.7875 0.7142 0.8835

63

PROPRITORY RATIO Table No: 4.19

RS IN LAKHS

Particulars A) Shareholders fund B) Total Assets C) Proprietary (A/B)

1 58.62 90.62 Ratio 0.6468

2 59.98 83.98 0.7142

3 59.32 75.32 0.7875

4 60.69 68.69 0.8835

5 60.11 60.11 1.00

PROPRITORY RATIO It is the ratio between shareholders fund and total assets. Proprietary Ratio = Shareholders Fund/Total Asset

64

PROPRITORY RATIO
SCALE : 1 UNIT=0.2 1.2 1 1 0.8 0.6468 PROPRITORY 0.6 RATIO 0.4 0.2 0 1 2 3 YEAR 4 5 0.7875 0.7142 0.8835

65

CONCLUSION

Increase in profitability reveal in profitability statement prove the operating efficiency of the firm. By verifying the balance sheet it is identified that the financial position of the firm is sound. The firm has the capacity to repay all their liabilities in time All the ratios of the firm are in idle .

SUGGESTION
The marketing of the product should be done with utmost care.Delivery of goods with in time is another major factor. The firm should try meet the standards for getting ISO certification.

66

BIBLIOGRAPHY
Entrepreneurship Development Program C R Kothari,Tata Mc hill Publication. Cost Accounting V K Kapoor Reliance Publication Web Site www.indian economy.com www.keralaeconomy.co.in www.manufacturingprocess.com

67