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PROJECT REPORT

OF
M/s PRAMOD DAIRY

AT

Vill. Kanyoun, P.O. Rama, The. Nahan, Distt. Sirmour, H.P.

Promoter:
PRAMOD KUMAR
Vill. Kanyoun, P.O. Rama, Teh. Nahan Distt. Sirmour

Compiled by : Sumit Kumar Aggarwal

Chartered Accountants

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Confidential
This Document should be treated as
confidential and must not be reproduced,
copied, or disposed directly or indirectly, not
used for any purpose other than that for which
it is specially furnished without the permission
of “M/s Sumit Kumar Aggarwal & Associates”
Kala Amb.

Compiled by : Sumit Kumar Aggarwal

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Chartered Accountants

M/s PRAMOD DAIRY

CHAPTER 1
EXECUTIVE SUMMARY

Introduction

M/s Pramod Dairy is proposed sole proprietorship concern promoted by Sh. Pramod
kumar aged 30 years R/o Village kanyoun P.O. Rama, Teh Nahan, Distt. Sirmour, HP.
Promoter has decided to commence its business by producing dairy products. The
promoter has already owned land measuring 15 bighas at Village Kanyoun, Rama,
Nahan, Distt Sirmour HP. The piece of land is very strategically and ideally located on
Ramadhaun, Road at Kanyoun, just 11 k.m. from city Nahan.

Promoter & Their Background


The proposed project is promoted by Mr. Pamod Kumar. The promoter is well qualified
and experienced personality. He belongs to business family and has got the experience of
this field also.

Proposed Project and Related Products


The proposed unit will be modeled on the intention of collecting milk from local
villagers. The promoter proposed to setup a plant for processing of milk to produce
standardized and full cream milk and other allied products. The other products will be
cream, Desi Ghee, Paneer, Butter etc. as may be envisaged. The proposed capacity of the
plant is 3000 Liters of milk per day.
Therefore it can be said that promoter’s main focus
is to produce milk and milk products. The milk is being used by every people. As the
demand for milk and milk products is going to increase day by day that is why Promoter
decided to produce milk and milk products.

Cost of Project and Means of Finance

Total Cost of the Project Rs. 34.00 Lacs


Promoter’s Contribution (Including Subsidy) Rs. 14.00 Lacs
Term loan Rs. 20.00 Lacs

Initially components of the subsidy which is Rs 8.90 Lacs will be financed by the bank
which will be adjustable in the amount of the loan in the latter years.

Employment
Besides this the promoter will provide new employment opportunities for the
unemployed youth. It is proposed to provide new direct employment to 13 persons and
indirect employment will be provided to many more people.

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M/s PRAMOD DAIRY

CHAPTER 2
IMPORTANCE AND MARKET POTENTIAL

Recent study shows that India is the largest producer of the milk in the world which is
nearly 10% of the world production. Various milk- based products which can be
manufactured commercially in a rural industry are Paneer, Cheese, Curd, Ghee etc.These
products can be produce by the low cost traditional methods and machineries. This kind
of industries can be located in area where abundance quantity of milk available. The cost
of these products would be considerably low as compare to those of small companies.
Moreover a good number of employment generations are possible with low investment.
India derives nearly 33% of the gross domestic population form agriculture and
has 66% of economically active population, engaged in agriculture. The share of
livestock product is estimated at 21% of total agriculture sector. Growth prospects in the
dairy sector are very bright.

Milk and its products are the essential items of the daily life in our country, especially
majority of Indians are vegetarian and thus milk products are indispensable to Indians.
The per capita consumption was 122 gms per day in 1980 against an availability of 281
gms. Today per capita consumption as well as production quantity has increased and
there is a need to make available milk and milk products to the people at reasonable price
which can be attained only by setting small scale model dairy unit in different milk
producing areas to cater to the local needs. There is a challenge of multi-national
companies paying major role in this industry. So it would be better for rural industries to
produce milk products with a traditional as well as modern tinge.
Dairy development in India has been acknowledged the
world over as one of the modern India’s most successful development programme. India
is the second largest milk producing country with anticipated production of 78 million
tons during 1999-2000. The production of milk products stood at 3.07 lacs tons in 1999-
2000. Production of milk powder including infant milk food has
risen to 2.25 lacs tons in 1999-2000, whereas that of malted food is at 65000 tons. Off
late market for milk products is showing a steady increase.
Vast potential of growth of modern farms through scientific
planning, using emerging technologies of dairy production and modern management
techniques exist in India. The last few years saw an unprecedented growth in milk
procurement, processing, transportation, and milk distribution in most of the part of the
country. Bulks of this milk come from small unorganized, traditional dairy farmers
without giving much consideration for quality of milk. Tremendous potential exists for
large scale quality milk production through modern dairy farms to match the growth of
dairy processing industries in this country. The present low level of per capita availability
of milk with booming population clearly indicate ever increasing need as well as demand
of milk in this country. Availability of dependable source of irrigation for growing fodder
and comparatively low price of concentrate, high producing animals and modern dairy

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farming techniques are essential to turn a dairy farm in profit. Keeping all these points in
view it has been proposed to establish a commercial dairy farm.
Besides this the unit provides new employment
opportunities for the unemployed youth. It is proposed to provide new direct employment
to 13 persons and indirect employment will be provided to many more people. In it own
way the proposed unit will be contributing to remove the increasing unemployment in the
state thereby developing the enterprising atmosphere. The promoter intends to produce
the hygiene products in order to build up a reputation for the proposed unit. Considering
all the aspects especially the demand factor, marketing will not be a problem for the
proposed unit.

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M/s PRAMOD DAIRY

CHAPTER 3
COST OF PRODUCTION AND PROFITABILITY

The statement showing estimated cost of production and profitability is given in


Annexure-18. The calculations have been done for the seven years.

3.1 RAW MATERIAL:


The main Raw Material of the proposed unit is collection of milk from local
villagers which is locally available. The total requirement of Raw Material has
been given in Annexure-11 which has been calculated on required quantity and
availability price provided by the promoter.

3.2 MAN POWRE REQUIREMENT


The total man power requirement and detail of wages and salaries are given in
Annexure-12 which is considered sufficient. The unit will provide new direct
employment to 13 persons and indirect employment to many more persons. It is
assumed that 5 % increase in wages and salary in each year will be there.

3.4 POWER /FUEL


The statement of of power/fuel is given in the Annexure -13. As the consumption
of electricity, water is based on production capacity utilization so considered
variable.

3.5 REPAIR AND MAINTENANCE


The statement of repair and maintenance is given in Annexure-14. It is taken 3%
of the cost of fixed assets (repairable) in the first three years and 5% of the cost of
fixed assets (repairable) from forth year which is considered sufficient.

3.6 OVERHEADS
Necessary provision for the expenditures to be incurred on administration and
distribution have been done while working out profitability. Details of overheads
are given in annexure 15 and 16.

3.7 FINANCIAL EXPENSES


Interest on secured loan has been calculated @ 14% per annum. Unsecured loan
by the promoter has been provided as interest free so no calculation has been
made as agreed upon. The detail of which is given in annexure-04 and 17.

3.8 DEPRICIATION
Depreciation has been calculated by the WDV method. Rate of depreciation for
the Furniture & Fixture is @ 10%, Plant and Machinery @ 15%, Computers @

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25% and building @ % and Misc. Fixed Assets @ 10% as per detail given in
Annexure-06
Profitability statement indicates sound financial position of the proposed unit and is
therefore recommended for speedy implementation.

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M/s PRAMOD DAIRY

CHAPTER 4
COST OF PROJECT AND MEANS OF FINANCE

4.1 COST OF PROJECT


The tentative total cost of the project is Rs.34/- lacs. The detail of cost of the
project and means of the finance is given in Annexure-02. Total cost the project
includes Fixed Assets, Preliminary Expenses and working capital requirement.

4.1.1 FIXED ASSETS:


Fixed Assets include Land, Building, Plant and Machinery, Furniture and
Fixtures, Computers, and Misc. Fixed Assets. Description of each asset is given in
Annexure-05.

LAND:
The promoter has already owned 30 bigha of land at village chalana, Ddahu,
Nahan, Distt. Sirmour, HP. The relevant land documents are enclosed. In project
calculations only land development expenses capitalized to land account which
works out to Rs.6/- lacs.

BUILDING:
As per the detailed cost estimates provided by the promoter the total cost of the
construction of the building work out to Rs. 7.64 lacs

FURNITURE AND FIXTURES


The total cost of furniture & fixture work out to Rs. 0.50/- lacs. The items
required are easily available locally and the promoter is not likely to face any
difficulty on this account.

PLANT & MACHINERY


The total cost of plant and machinery workout to Rs.12.47 lacs. Quotation of all
the machinery has been already obtained by the promoter which is also being
enclosed for ready reference.

COMPUTERS
One computer and printer is considered sufficiently for running the project. The
total cost of the computer works out to Rs.0.35 lacs.

4.1.2 WORKING CAPITAL REQUIREMENT

The details of working capital requirement are given in Annexure-10. Inventory


period for raw material has been taken as 7 days (inclusive of WIP time). WIP

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(expenses other than RM) has been taken as average 30 days. Inventory period for
finished goods is taken on cost of production for 2 days. Debtor holding period is
taken 15 days on sale value. Creditors are ready to give credit of 10 days on
purchase value of raw material. It is estimated that the total working capital
requirement of the proposed organization would be 6.54/- lacs during the first
year operation. Any increase in the subsequent year would be met out of each
accruals of the project which are available throughout of the period.

4.1.3 PRE-OPERATIVE EXPENSES


The details of working capital requirement are given in Annexure-03 which
includes legal expenses, printing, postage, telephone and consultancy charges etc.
The total provision works out to Rs.0.50/- lacs which will be written off in the
first 5 year of the proposed project.
4.2 MEANS OF FINANACE

4.2.1 PROMOTER’S SHARE:


The promoter’s share is Rs.14/- lacs including subsidy component which work out
to 41.18% of the total cost of the project. Subsidy available is considered as
promoter’s contribution which will be initially financed by the bank.
4.2.2 LOAN:
The promoter proposes to avail term loan of Rs.20/- lacs. Initially bank will
provide finance of Rs. 28.90 lacs and later on subsidy amount will be adjusted
with repaying loan amount.

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M/s PRAMOD DAIRY

CHAPTER 5
ECONOMIC VIABILITY

5.1 Cash Flow Statement


The projected cash flow statement is given in Annexure-19. The repayment will
start from the first year onwards. The cash flow statement shows the significant
accumulation of the cash surplus which can be considered sufficient to repay the
term loan installments and to take care of the increasing working capital.

5.2 Projected Balance Sheet


are given in Annexure-20. Enough surplus and reserves would be generated by
the unit as is evident from the projected balance sheets. The overall financial
position of the unit will be sound.

5.3 Debt Service Coverage Ratio(DSCR)


The calculation of the debt service coverage ratio is given in Annexure-22. The
average DSCR works out to be 3.63:1 which can be considered as sound
and indicates the economic viability.

5.4 Break Even Statement(BEP)


The BEP is given in Annexure 23. The BEP is calculated on the basis of the unit’s
4th year performance at 80% capacity utilization and work out to be 42% which
can be considered satisfactory and feasible.

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