BANKABLE PROJECT OF ROLLER FLOUR MILL

Subject: New Enterprise Management

Prepared by:

TITHAL PARIKH (38)

INDEX
Sr.No 1 2 3 Particulars Introduction General information Industry analysis Porters five force model SWOT analysis 4 5 6 7 8 9 Economical analysis Ecological analysis Technical Analysis Financial Analysis Scenario Analysis Sensitivity Analysis Pg.No. 04 05 06 06 07 08 08 09 15 27 28

Declaration
We hereby declare that the Business Plan entitled Roller Flour Mill is submitted as a part of Our Project for the MBA program.

The project has been done under the guidance of 1.Prof.Naresh Shah and 2.Prof.Mansi Rathod.

This project has not been submitted in full elsewhere for the award or any degree.

Tithal parikh

INTRODUCTION
Wheat Flour We will offer our customers a premium range of Wheat Flour that is processed using high quality ingredients. These ingredient are procured from reliable farmers and market vendors. Our products will be used in home baking and are the frame work for almost every commercially baked product like pasta and varieties of Indian bread. The products offered by us will be widely appreciated as these are rich in terms of nutritional content that contains vitamins and minerals.

Wheat Bran We are a well recognized manufacturer and supplier of a wide gamut of Wheat Bran. The high quality range of wheat bran, we offer is widely being used in Human Food and Animal Feeding Industry. Further, the finished bran which is offered undergoes various checks to ensure zerodefect range to the customers.

GENERAL INFORMATION
Name of Organization: Chandan Industries Form of Organization: Private Limited(Partnership) Date of registration: 30 January 2012 Date of commencement of business: 1 June 2012 Location: Mega GIDC , DAHOD Nature of the project : New Venture

Nature of industry and products: Major Players in India: (1) ITC (2) SHAKTI BHOG (3) ANNAPURNA Buyer: Wholesalers, Retailers, Govt. institutions, Charitable trusts, etc Demand: Estimated demand growth 10 to 12% in next 5 years. Customer Satisfactory Standards: Minimum lead time, Maintaining quality standards, consistently Product development efforts, to meet new demands Efficiency in operations to remain cost-competitive. Pricing: As per weight and quality of product Suited channel of distribution: Wholesalers, Retailers.

INDUSTRY ANALYSIS
India is the world's second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. The total food production in India is likely to double in the next ten years and there is an opportunity for large investments in food and food processing technologies, skills and equipment, especially in areas of Canning, Dairy and Food Processing, Specialty Processing, Packaging, Frozen Food/Refrigeration and Thermo Processing. Fruits & Vegetables, Fisheries, Milk & Milk Products, Meat & Poultry, Packaged/Convenience Foods, Alcoholic Beverages & Soft Drinks and Grains are important sub-sectors of the food processing industry. Health food and health food supplements is another rapidly rising segment of this industry which is gaining vast popularity amongst the health.

India is one of the world major food producers but accounts for less than 1.5 per cent of international food trade. This indicates vast scope for both investors and exporters. Food exports in 1998 stood at US $5.8 billion whereas the world total was US $438 billion. The Indian food industries sales turnover is Rs 140,000 crore (1 crore = 10 million) annually as at the start of year 2000. The industry has the highest number of plants approved by the US Food and Drug Administration (FDA) outside the USA.

India's food processing sector covers fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods etc. We cover an exhaustive database of an array of suppliers, manufacturers, exporters and importers widely dealing in sectors like the -Food Industry, Dairy processing, Indian beverage industry etc. We also cover sectors like dairy plants, canning, bottling plants, packaging industries, process machinery etc. The most promising sub-sectors includes -Soft-drink bottling, Confectionery manufacture, Fishing, aquaculture, Grain-milling and grain-based products, Meat and poultry processing, Alcoholic beverages, Milk processing, Tomato paste, Fast-food, Ready-to-eat breakfast cereals, Food additives, flavors etc.

PORTERS FIVE FORCE MODEL FOR HACKSAW BLADE INDUSTRY

(1)Threat of New Entrants HIGH Market Entry is not free, Low cost of Capital , Market exit Barrier is not High. (2)Intensity of Rivalry among existing competitors is VERY HIGH Low profit margin, less technological differences. (3)Pressure from substitute Product HIGH Corn flour, Rava, Maida, Bajra flour (4)Bargaining Power of Supplier HIGH

(5)Bargaining power of Buyer - HIGH Customer will buy after checking prices of different manufacturers and but they want delivery of product as per time, Buyer will switch to other supplier based on delivery delay.

SWOT ANALYSIS
Strengths: (1) The ability to meet customers particular needs (2) A wide range of personal contacts (3) Focused customer attention (4) Quality products

Weaknesses: (1) The need for significant capital for equipment (2) Capital expenses required for the development of a comprehensive dealer network (3) Difficulty in establishing brand equity.

Opportunities: (1) Export (2) Switch to different types of food products

Threats: (1) Changes in technology that could affect companies that are heavily invested in current technology. (2) Future/potential competition from a large company that decides to take a more flexible approach to meeting customers needs.

MARKET POTENTIAL
The demand of wheat flour is considerably increasing day by day with the growth of industrialization, agriculture sector, engineering sector, real estate, automobile sector etc.It is used by almost every person in day to day life. In India large nos. of small enterprises are engaged in its manufacturing. Demand of this product will increase 10 to 15% in next 5 years in this industry. Estimated Sales will grow 5% for our product

ECONOMIC ANALYSIS
Wheat flour are produced as per standards. Our product will be cheaper. Timely deliverly of procuct.

ECOLOGICAL ANALYSIS
It will not create high level of pollution, and it will be located in GIDC area.

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IMPLEMENTATION SCHEDULE
Selection of site & Preparation of bankable project report Submission of project report & sanction of finance From financial institution/ Bank Procurement of Plant, machinery & equipment Commissioning and erection of Plant & machinery and trial run Purchase of raw material & recruitment of labor & staff Start of commercial production 3 months

4 months 2 months 3 months 1 month after completion of above activities

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TECHNICAL ANALYSIS
MANUFACTURING PROCESS The flow chart of the manufacturing process is given below:

Raw material Cleaning Grinding Packing

Quality control: The will be checked after completion of each stage so that chance of rejection at the end is eliminated. Location and Land: City-Dahod Site- Mega Gujarat Industrial Development Corporation (GIDC) Why GIDC? GIDC establishes its estates after verifying the viability and availability of water, Power, linkages, communication, disposal of waste water etc Viability and availability of water, power, linkages, communication, disposal of waste water etc. So, we can get a really developed and planned area. Prevailing Labor Rates: Rs 100 to 200 per Day Chance of Strikes and Lockouts is very rare. Government Policy (a) no need to waste time on getting Non-Agricultural./ N.O.C (b) 5% subsidy on the applicable interest over the loan period Ancillary Units Like transportation, packaging material are nearly located. Location Advantage (Price Rate): Per sq.mtr rate is cheaper compare to other GIDC. Any medium or large scale unit having incurred cost for creation of infrastructure can avail 25% subsidy limited to Rs. 100 lakhs under medium and large scale units subsidy scheme - 2000. The upper limit is extendable to Rs. 250 lakhs for schemes under rural linkage projects.(www.gidc.com)

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Specific proposals on merits for activities related to research and development. Assistance will be provided at the rate of 50% limited to Rs. 5 lakhs for patent/ IPR. . (www.gidc.com) GIDC land is for industrial purpose. So no need to waste time on getting NonAgricultural / N.O.C. GIDC establishes its estates after verifying the viability and availability of water, power, linkages, communication, disposal of waste water etc. So the entrepreneur gets a really developed and planned area GIDC estates are provided with required amenities like school, bank, post office, dispensary, police chowky, community garden, garden etc. The chemical estates of GIDC are approved centers for chemical industries by Gujarat Pollution Control Board (GPCB) All titles related to land/ building within GIDC estates are clear and free from any encumbrances and are easily marketable An entrepreneur can start the industry by paying only 30 % of the total cost as down payment and can pay remaining amount in a period of 10 years. GIDC provides ready to occupy sheds for immediately starting an industry and also provides go down for storage of its material GIDC, being a Government organization, is transparent and fair in fixation of the prices of land/ building. The prices so fixed are approved by all financial institutions for quick approval of loans GIDC also provides sites/ land for solid waste disposal and CETPs and effluent disposal pipeline for disposal of liquid effluent which can be collectively used by the entrepreneur GIDC estates, one declared as Notified Area, are free from payment of local taxes and octroi. The Notified Area Tax payable in such area is only for maintenance and repairs purpose and is very reasonable GIDC estate provides a unique opportunity to an entrepreneur to avail cluster benefits related to raw material, market, technology, common services, linkages etc. Any up gradation program undertaken in GIDC estate provides direct advantage to all industries located therein. GIDC provides special services in acquiring and allotting land on agency basis to large enterprises. GIDC allots land on out of turn priority to existing units, land loosers, SC/ST/SEBC applicants, Ex- army personnel, NRIs, 100% EoU, lady entrepreneur and joint sector projects. 25% and 15% concession in land price is given to land loosers and remaining categories respectively. Subsidy in scrutiny fee and reduced down payment are the additional concessions offered to this category. GIDC provides 3% rebate on the balance loan amount if the unit makes full payment of the allotted property.

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Building & structure: The Business is setup at GIDC so the all facilities like Roads, power, water, Transportation, labor are easily available. Machinery: Sr. No 1 2 3 4 5 6 Description 75 HP Motor Automatic packing Machine Dry stoner Grinding Mill Roll machine Plant Shifter Quantity 2 1 1 4 4 2

Raw Material: WHEAT (1)Power: Source of Power: This facility is separately located in GIDC Area for Business Purpose Only. The supplier of Power is MGVCL (Madhya Gujarat Vij Company Limited.) Supply voltage:250 Connected Load: 24Hour (2)Water: Source of Water: Water pump Capacity of Factory Tank: 20000 Liter (3)Transport: Railway transport is available in Dahod, which is nearly 7 km away from proposed site. And, many local transporters are also available. (4)Effluents: GIDC also provides sites/ land for solid waste disposal and effluent disposal pipeline for disposal of liquid effluent which can be collectively used by the entrepreneur. Product Mix: Wheat flour and wheat bran Production Capacity per Year: 1500 tons 14

Preventive Maintenance:

Preventive maintenance is conducted to keep equipment working and/or extend the life of the equipment. The time schedule for it in our Business is on the regular basis. The Oiling, Cleaning, Screwing, Tooling All the activity are Kept every 3 days. Corrective maintenance, called "repair", is conducted to get equipment working again .Machine Operator must inform to supervisor if there is any breakdown is found out in any equipment during the time of production

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FINANCIAL ANALYSIS
COST OF THE PROJECT

(A)Land and Land Development: Sr. No 1. Particulars Quantity Unit Cost Total Cost Rs in Lakhs 36.00

Land LAND DEVELOPMENT Land Leveling

2 acres

Rs 18.00 Lakhs/acres

2.

50000 Cu ft Total Cost

Rs 5 /Cu ft

2.50 38.5

(B)Civil Structures: Sr. No 1 Particulars Quantity Unit Cost Rs 8000/Sq.meter Rs 8000/Sq.meter Rs 8000/Sq.meter Total Cost Rs in Lakhs 80.00

2. 3.

Raw materials & 1000 Sq.meters finished goods godown Machinery hall/ 500 Sq.meters Workshop Office 80sq.meters Total Cost

40.00 6.40 126.4

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(C)Machineries and Equipments: Sr. No 1 2 3 4 5 6 Description 75 HP Motor Automatic packing Machine Dry stoner Grinding Mill Roll machine Plant Shifter Total Cost (D)Furniture and Office Equipments: Particulars Furniture and equipments Total cost Lakhs) 0.50 (Rs. In Quantity Cost Rs in Lakhs 2 2.50 1 1 4 4 2 20.00 0.40 2.00 6.00 4.00 34.90

(E)Miscellaneous Fixed Assets: Particulars other equipments Total Cost Lakhs) 2.00 (Rs. In

(F)Technical Knowhow: Particulars Technical knowhow Total Cost Lakhs) 3.00 (Rs. In

(G)Preliminary and Pre-operative expenses: Particulars Preliminary and pre-operative expenses Total Cost Lakhs) 1.00 (Rs. In

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Cost of the project statement Sr. No 1 2 3 4 5 6 7 8 Particulars Land & Land Development Civil Structures Machineries & Equipments Furniture & office equipments Miscellaneous Fixed Assets Technical Knowhow Preliminary & Pre-operative expenses Rs Lakhs 38.5 126.4 34.90 0.50 2.00 3.00 1.00 24.94 231.24 In

Margin for working capital Total Cost of the project

Equity = Rs. 92.24 Lakhs (Cost of Equity is 14%) Debt (term Loan) @15% = Rs. 139 Lakhs So, Debt to Equity ratio = Debt/ Equity = 1.50 It is within acceptable region Repayment of term loan = 139/3 = Rs 46.33 Lakhs/year for 6 years Average Cost of Capital=Proportion of Equity*Cost of Equity+ Proportion of Debt*(Cost of debt- (Cost of debt*Tax rate)) =0.40*14% + 0.60*(15% - (15%*30%)) = 11.90%

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CALCULATION FOR 1st YEAR Raw Material Consumption (per Year) Sr. no. 1 Item Wheat Quantity Cost (Rs. In Lakhs) 1400 Tn @ Rs 11000 154.00 154.00

Total Cost (per Year)

It is 45.83 % of sales Power and Fuel Consumption Power & fuel consumption 10% of RM consumption Rs.15.4 Lakhs

Repair and Maintenance Repair & maintenances Salaries Sr. no. 1 2 3 5 6 7 Designation No. Salary (Rs per Month) Manager 1 14000 Supervisor 2 8000 Skilled worker 2 6000 Clerk-cum-Typist 3 5000 Peon 1 3000 Watchman 1 3000 Total salary (per month) Total salaries per year = 63000*12 = Rs. 7.56 Lakhs Total 14000 16000 12000 15000 3000 3000 Rs. 63000 Increase every year by 5% Rs. 3.00 Lakhs

Sales per Year Item Quantity Total (Rs in Lakhs) Wheat flour 1400 Tns@ Rs. 18000/ Tn 252.00 Wheat Bran 600 Tns@Rs 14000/Tn 84.00 19

Total sales It will increase 6% every year

336.00

Wages Wages 6% of total sales Rs 11.71 Lakhs

Other expense Selling & Distribution overhead Rs 2.00 Lakhs Other administrative overhead Rs. 1.00 Lakhs Selling & Distribution overhead increase 5% every year Other administrative overhead increase 6% every year

Working Capital Requirement calculation Operating Cycle Current assets Particulars Raw material Semi Finished Goods Finished Goods Receivable Days 45 12 30 60 Total CA Rs in Lakhs 18.98 6.87 17.18 55.23 98.26

Current Liabilities Particulars Payable Days Rs in Lakhs 15 6.32 Total CL 6.32 Margin for Working Capital = Rs 24.94 Lakhs Working Capital Bank Borrowing @ 14% = 67 Lakhs

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Operating statement:
Sales RM consumption Power & Fuel Repair and Maintanance Depriciation wages Cost Of Production Gross Profit Interst on WC borrowing Interest on term loan Salaries Selling and distribution administrative overhead Operating profit Tax np DSCR Average DSCR 336 356.16 377.5296 400.1814 153.9888 163.2281 173.0218 183.4031 15.39888 16.32281 17.30218 18.34031 3 3.15 3.3075 16.58 14.922 13.4298 20.16 21.3696 22.65178 209.12768 218.9925 229.7131 126.87232 137.1675 147.8165 9.38 20.85 7.56 2 9.38 13.9005 7.56 2.1 9.38 6.951 7.56 2.205 3.472875 12.08682 24.01088 241.314 158.8674 9.38 0 7.56 2.31525 1.191016 138.4211 41.52633 96.89477 2.35229

1 1.06 1.1236 86.08232 103.167 120.5969 25.824696 30.95009 36.17908 60.257624 72.21687 84.41785 1.454117654 1.677545 1.966905 1.862714276

Cash flow statement:

Cash Flow Statement 0 1st source of Fund 1 Opening Balance 0 2nd 30.507624 3rd 71.316495 4th 122.83414

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4 2 3 4 5 Equity Term Loan CL WC bank borrowing 92.24 139 6.32 67 60.25762 4 20.85 9.38 25.82469 6 16.58 202.3 98.26 4 20.85 9.38 25.82469 6 46.33 30.50762 4 13.9005 9.38 30.950087 8 46.33 71.316495 4 6.951 9.38 36.179078 46.33 122.83414 4 72.216871 4 13.9005 9.38 30.950087 8 14.922 84.417848 7 6.951 9.38 36.179078 13.4298

6 NP 7 interest on term loan 8 interest on WC 9 Tax 10 Depeiciation Application Of Fund 1 FA 2 CA 3 Intangible Assets Interest on Term 4 Loan 5 Interest on WC 6 TAX 7 Repayment of Term Loan Balance 0

96.894766 7 0 9.38 41.526328 6 12.08682

0 9.38 41.526328 6 46.33 185.48573 1

BALANCE SHEET:
Balance Sheet 0 1st

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1 2 3 4 5

Liabilities Term loan Equity NP CL WC borrowing

139 92.67 92.24 92.24 0 60.257624 6.32 6.32 67 67

Assets 1 FA 2 CA 4 Inatangible assets 6 cash balance Balance

202.3 98.26

185.72 98.26

4 4 0 30.507624 0 0

Cash Flow from Explicit Point of View

Initial Cash Flow 1st 202.3 91.94 2nd

RS. IN LAKHS
3rd 4th& Terminal cash flow

1 FA 2 CA-Creditors

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3 Revenue 4 Cost 5 Depriciation Interest on term 6 loan 7 Interest on WC borrowing 8 Operating Profit 9 Tax 10 Net Profit

336 203.1076 8 16.58 20.85 9.38 86.08232 25.82469 6 60.25762 4

356.16 214.79054 1 14.922 13.9005 9.38 103.16695 9 30.950087 8 72.216871 4

377.5296 227.17187 3 13.4298 6.951 9.38 120.59692 7 36.179078 84.417848 7 FA salvage value Tax CA 109.27934 9

400.181376 240.293461 12.08682 0 9.38 138.421095 41.5263286 96.8947667 150 1.415586 33.43

Net Cash Flow=(NP+Dep+Int(1 -T)

-294.24 143.716855 5 29%

97.99862 4

103.43522 1

297.562001

NPV IRR

Cash Flow from Equity Point of View

Initial cash flow

Rs in Lakhs
4th & Terminal cash flow

1st

2nd

3rd

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1 equity 2 Revenue 3 4 5 6 Cost Depritiation Interest on term loan interest on WC borrowing

92.24 336 203.1076 8 16.58 20.85 9.38 86.08232 25.82469 6 60.25762 4 356.16 214.79054 1 14.922 13.9005 9.38 103.16695 9 30.950087 8 72.216871 4 377.5296 227.17187 3 13.4298 6.951 9.38 120.59692 7 36.179078 84.417848 7 FA salvage CA Term loan CL WC bank borrowing 97.847648 7 400.181376 240.293461 12.08682 0 9.38 138.421095 41.5263286 96.8947667 150 98.26 139 6.32 67

7 Operating profit 8 Tax 9 Net profit

Net csah flow=(NP+Depritiatio n)

-92.24

76.83762 4

87.138871 4

144.921587

NPV IRR

208.279981 8 88%

BREAK EVEN ANALYSIS:

Breakeven Analysis 1st 2nd 3rd 4th 400.18137 6

Sales

336

356.16

377.5296

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Variable Cost Raw material 1 Consumption 2 Power & fuel 3 Wages Interest on WC bank 4 borrowing

153.9888 15.39888 20.16 9.38

163.22812 8 16.322812 8 21.3696 9.38 210.30054 1

173.02181 6 17.302181 6 22.651776 9.38 222.35577 3

183.40312 5 18.340312 5 24.010882 6 9.38

Total variable cost C 1 2 3 4 5 6 Fixed cost Administrative Overhead Selling & distribution overhead Repair and maintainance Salaries Interest on term loan Depriciation Total Fixed Cost

198.92768

235.13432

1 2 3 7.56 20.85 16.58 50.99

1.06 2.1 3.15 7.56 13.9005 14.922 42.6925 145.85945 9

1.1236 2.205 3.3075 7.56 6.951 13.4298 34.5769 155.17382 7

1.191016 2.31525 3.472875 7.56 0 12.08682 26.625961 165.04705 6

Contribution Produced units in Lakhs BEP (in terms of Volume of production)

137.07232

2000 74398682. 4

2120 62051580. 7

2247.2 50073656. 9

2382.032 38427762. 7

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