Index. S.No. Sector Page No. 1 Mega Food Park 1. 2 Integrated Cold Chain Dehydrated Vegetables Fruit Processing 43

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2 Index S.No. Sector Page No. 1 Mega Food Park 1 2 Integrated Cold Chain 19 3 Dehydrated Vegetables 34 4 Fruit Processing 43 5 Green Peas Dehydration 52 6 Mushroom Processing 61 7 Potato and Banana Chips 69 8 Tomato Sauce, Ketchup and Puree 78 9 Ginger and Garlic Processing Papad Manufacturing Ready to Eat Noodles Peanut Processing Sesame Oil Vegetable Oil Refinery Bakery Products Biscuit Making Extruded Puffed Snacks Fish Processing Poultry Processing Ready-to-Eat Snacks 179

3 Model project Reports Mega Food Parks

4 CONTENTS 1. Mega Food Parks Scheme Major Objectives of MFPS Salient features of Scheme Pattern of Assistance Mega Food Park Model Features of the Mega Food Park Cluster Mapping Indentification of CPC, PPC and CCs Envisaged Project Components Estimated Project Cost and Means of Finance Proposed Business Plan Proposed Framework for Recovery of Charges Projected Financial Performance Project Implementation Framework and O&M Role of SPV 18

5 1. Mega Food Parks Scheme The Mega Food Parks Scheme (MFPS), a flagship program of the Ministry of Food Processing Industries (MFPI), Govt. of India, approved during the 11th five year plan, aims at accelerating growth of food processing industry in the country through facilitating establishment of strong food processing infrastructure backed by an efficient supply chain. It is also targeted towards achievement of the Vision 2015 of MFPI, which proposes to raise the processing of perishables from 6% to 20%, value addition from 20% to 35% and share in global food trade from 1.5% to 3% by the year Major Objectives of MFPS The key objectives of the scheme are outlined as follows: i. Provide state of the art infrastructure for food processing in the country in selected clusters to be identified in a demand driven manner. ii. iii. iv. Ensure value addition of agricultural commodities including poultry, meat, dairy, fisheries etc. Establish a sustainable raw material supply chain for each cluster Facilitate induction of latest technology v. Address issues of small farm size and small and medium nature of processing industries through a cluster approach with stakeholders managing the supply chain. vi. Provide an institutional mechanism for producers, processors, and retailers to work together to build in integrated supply chain from farm to retail Salient features of Scheme The salient features of the Scheme are outlined as follows: The MFPS envisages a cluster-based demand driven approach for developing decentralized infrastructure including farm proximate facilities such as primary processing centres (PPC) and collection centres (CCs) and a Central Processing Centre (CPC). The CPC would have needbased common infrastructure like warehouses, cold storage including CA & MA, IQF, Tetra Pack, ripening chamber, Quality Control Labs and R&D Facility including incubation center etc. It would also have basic enabling infrastructure like road, water, power, ETP & STP etc. The grant assistance 3

6 shall be utilized exclusively towards creation of common infrastructure in CPC and PPCs in the park. Such facilities are expected to complement the processing activities of the units proposed to be set up at the CPC in the park. The supply chain will establish on-farm Primary Processing Centre cum cold chain facilities for aggregation of the produce at village level, which will be linked to the retail as well as to CPC through appropriate produce aggregation facility and collection centre cum cold chain and reefer transportation net works. The food processing units would be located at CPC. The developed plots at the CPC shall be leased out to them on a long term lease basis. The processing units that can be set up in the Parks are expected to be in line with the availability of various processable raw materials in the zone of influence. Such units can avail the benefits of common facilities on a user fee basis. The Mega Food Park is proposed to be owned by the Special Purpose Vehicle who own, operate and manage common infrastructure established within the Park and will also provide requisite technical and extension services. Thus, the Central Processing Centers, Primary Processing Centers and Collection Centers, backward linkage mechanism and front end linkages will be owned and managed by the SPV Pattern of Assistance The Mega Food Parks Scheme provides for a capital grant of 50 percent of the eligible project cost subject to a maximum of Rs 50 crores in general areas and 75 percent of eligible project cost with a ceiling of Rs 50 crores in difficult and ITDP notified areas for creation of common Infrastructure facilities and requisite backward and forward linkages. As per the revised scheme guidelines, which came in to effect from , the eligible project cost is defined as total project cost minus the cost of land, pre-operative expenses and margin money for working capital. 2. Mega Food Park Model The Mega Food Parks (MFPs) have been envisaged to help in creation of enabling infrastructure for food processing and a comprehensive farm-to-plate supply chain system. These Parks would provide state-of- the- art infrastructure for food processing in the country on a pre identified cluster basis. This is aimed at reducing wastages and ensuring value addition, especially in perishables like fruits and vegetables. This is further aimed at reviving the agricultural 4

7 sector by increasing the returns for farmers besides making processing more economically viable and help creating large employment opportunities particularly in the rural areas. The proposed scheme for Mega Food Park is aimed at creating state of the art processing facilities in the major agricultural/horticultural clusters in the country. The scheme also will create opportunity to attract investment in the infrastructure for food processing in general paving the way for processing a range of value added products. The scheme also is expected to help the efforts of the Government of India to promote Secondary Agriculture in the country Features of the Mega Food Park Salient features of Mega Food Park are outlined below: Mega Food Park is based on the demand driven hub and spoke model with provisions of strong backward and forward linkages that create a sustainable agro horticultural value chain. It contains three vital components viz. the Central Processing Centre, Primary Processing Centers (PPC) and the integrated cold chain network that connects the CPC with the PPCs. The CPC and PPCs would be suitably linked to major consumption centers such as tier 1 and tier 2 cities and export markets. The Central processing Facility would be developed in the spirit of a typical Industrial Park model, yet customized to the need of food processing sector. Thus, it would have basic infrastructure which would include road, water and power including captive power plant, STP & ETP and other utilities. Based on need assessment and proposed product mix to be handled in the Park, it would also have common core processing infrastructure components which would include warehouse for raw material and finished goods, Cold Storage, IQF with deep freeze facility, Ripening Chambers, Integrated pack house for perishables and Silo facility for bulk storage of grains. Such facilities would be available for use by prospective units in the Park on a user fee basis. The ownership and maintenance of such common facilities shall be vested with SPV. These Parks will comprise of farm level infrastructure like Primary Processing Centers (PPCs) for sorting/grading/packing etc., cold chain/logistics and a Central Processing Centre (CPC). The CPC may have facilities like CA chambers, Aseptic packaging, Irradiation Plants, Quality control labs etc. along with requisite utilities like power and water supply, effluent treatment plants etc. The Mega Food Parks will be owned and managed by a Special Purpose Vehicle (SPV) in which potential stake holders could be the food processors, farmers bodies, retailers, state government agencies, financial institutions etc. The stakeholders, other than the Government, will have majority share holding of the SPV. As per existing Scheme guidelines, the SPV should have at least three independent entities, with at least one of them should 5

8 be from food processing experience and should have at least 26 percent equity in SPV. The combined net worth of SPV should be at least Rs.50 crore and the member with food processing experience should have a minimum net worth of Rs.10 crore. As the proposed Mega Food Parks are supposed to be demand driven, the size, structure and facilities within the Parks may vary depending on region/produces etc. However, the investment required for setting up a typical Mega Food Park in a cluster is estimated to be around Rs.120 Crore for common infrastructure including farm level infrastructure and central processing facilities. The additional investment by individual food processors in the park is estimated to be about Rs.300 Crore. A defining feature of the proposed Parks is that it does away with the requirement of big piece of land at a particular location. The Parks would be spread over a large area (a zone) with requisite infrastructure at various locations, viz acres of land for central processing and 5-10 acres of land at various locations for PPCs. The proposed PPCs may also have facilities for transfer of technology, information kiosks, supply of inputs etc. They would be linked to CPC as well as organized retailers for procuring raw material for processing and catering to fresh segment. The geographical limit of the clusters for these Parks would be delineated based on the products and quantity of raw material. Appropriate product mix would be chosen based on availability of raw material in the identified clusters to ensure minimum of 200 days of working of Mega Food Park. The product mix should also be compatible in terms of usage of common facility. The proposed model provides for strong backward linkages, which would be established by involving farmer groups/traders/commission agents and attempts would be made to federate them into an appropriate structure, including possibility of a producer company. Mega Food Park Model Farmer Groups Solf Help Groups Individual farmers Importer Exporter Domestic sales PPC PPC PPC Value added Product Mega Food Park -CPC Fresh Products Domestic Retail Sales Field Collection Centers Primary Processing centere Predooling Grading pulping Sorting, waxing, packing, Temperary storage. Central Processing Center Pulping, Aseptic packing, CA lab, Logietics center, Processing Units etc. 6

9 3. Cluster Mapping The cluster approach envisaged in the MFPS is one of the most essential aspects of the project. The mega food park Cluster may be defined as a geographic region where identified crops are sourced, processed and transformed into finished product for marketing. From sourcing to finished product, a region without any physical boundary would be required, which would consist of several Collection Centers for sourcing of raw produce, a number of Primary Processing Centers and a Central Processing Unit where produces are not only transformed to finished product but are also stored for marketing during off season. The entire zone can be termed as the Zone of Influence (Zol). The clusters would typically include similar business units operating in a similar industrial sector. They will be located near each other and will compete among themselves only if catering to the same end-product category, in similar markets, and they will also share common inputs such as raw materials, labor with specific skills sets. Thus it can be said that clusters can encompass the entire value chain of a broadly defined sector from raw produce to end products. This cluster should produce significant quantities of vegetables, fruits, and food grains, which are necessary raw material required to undertake various food processing activities in the Mega Food Park. The cluster should also enjoys relatively better infrastructure in terms of connectivity, power supply etc, which will enable the Mega Food Park in attracting prospective entrepreneurs for setting up of their units in the proposed Mega Food Park. Based on the availability of produce within the Zone of Influence and the processing opportunities, a number of focus crops should be identified for the Mega Food Park. Following criteria should be adopted for identifying focus crops in the cluster: Availability of sufficient quantities of raw material Processability of the produce Seasonality Proposed product mix Marketability of end products The geographical limit of the identified cluster may be suitably delineated based on the diversity and quantity of raw material available and contiguity of the potential area for future expansion. Also, comparative advantage of crops in terms of processability, marketing opportunities, seasonal advantage, local consumption, export/import substitution, scope for intensification and productivity improvement should be duly taken into consideration. Since Mega Food Park would require continuous supply of large volume of raw material, this would necessitate investment in food 7

10 processing infrastructure, strengthening of supply chain to reduce wastage, prevent quality deterioration and timely availability of various focus crops. Appropriate product mix should also be chosen based on raw material available in the cluster and their scope for processing and value addition. Development of Mega Food Parks (MFP) need a diverse and sustainable agricultural raw material supply region serving as a catchment area for sourcing of agricultural produce. In addition to identification of focus crops in the cluster, it is also important to analyze the existing marketing system and value chains to identify the flow of agricultural produce and identify critical gaps so as to identify key interventions that would be taken up by the Food Park so as to build an efficient supply chain for various units in the mega food park. Based on the supply strengths of the cluster, it would then be important to identify location of primary processing centers and collection centers within the catchment area so as to secure smooth flow of raw material to the processing units in the MFP. 4. Identification of CPC, PPC and CCs The Mega Food Park is envisaged to provide an efficient and sustainable supply chain. Based on surplus raw material available and infrastructure assessment, potential locations for Central Processing Centre (CPC) and Primary Processing Centers (PPCs) will be identified and mapped which would be further supported by cold chain infrastructure to reduce wastages and check quality deterioration. Strong backward linkages would be established by involving farmer groups/traders/ca and federating them into appropriate entities wherever possible. PPCs will have modular needs-based facilities which would include sorting, grading, packing and transit storage facilities. These centers may also have facilities for transfer of technology, information kiosks, supply of inputs etc. They will be linked to the Central Processing Center of the Park as well as with potential retail markets for procuring raw material for processing and catering to fresh segment as well. Collection Centers will serve as aggregation points in the catchment areas of each of the PPC, from where produce will be aggregated for onward dispatch. Farm produce will be brought at these collection centers by the producers or village aggregators. From here, depending upon the type of item, it will either be taken directly to the CPC for storage, value addition and processing or to the nearest PPC for intermediate processing after which it will be sent to the CPC or to the fresh retail markets. 8

11 5. Envisaged Project Components The Mega Food Parks projects needs to be conceptualized and developed based on adequate demand assessment and thus, primarily should be demand driven and pre-marketed. The types of common facilities and capacities therein should be finalized based on the need assessment and the type of product mix available in the region/cluster. Hence, the facilities in each project shall vary based on these two factors as well as other related reasons and business plan envisaged by SPV. As per the existing Scheme guidelines, the mega food park project would have following components: Central Processing Hub (CPC): The CPC is the hub of value addition and combines agro-processing, collection, quality control and food testing, trade and other related activities. To augment the efficiencies of processing within the CPC, not only adequate basic infrastructure will be developed such as roads, in-house captive power plant and water supply and waste management, but also specialized common post-harvest infrastructure such as IQF, deep freeze and dry warehousing facilities, pack house with sorting and grading facility, ripening chambers and common cold storage facility. Common Core Processing Infrastructure: Following could be the proposed core processing facilities in the park. It may, though, be noted that the components proposed and capacities indicated therein may vary from project to project depending on specific business plan as envisaged by SPVs. Also, certain components like silo storage facilities may be considered in cases where there is large production of food grains and cereals. # Core Processing Facilities Capacities 1 Cold Storage 4000 MT (2 Chambers x 2000 MT) 2 Deep Freeze 1600 MT (4 Chambers x 400 MT) 3 Pack House (Washing, Sorting, Grading, Packaging 2 MT/Hr etc) 4 Dry Warehouse for Raw Materials 5000 MT 5 Dry Warehouse for Finished Goods 5000 MT 6 Platform for Storage Silos MT (5 Nos. x 5000 MT) 7 Unloading Shed for Storage Silos MT ( 5 Nos. x 5000 MT) 8 IQF (including pre-process set-up & packaging of 2 MT/ Hr finished goods) 9 Ripening Chambers 125 MT (5 Nos. x 25 MT) 10 CA/MA Storage Chamber 500 MT 11 Quality Assurance, Food Testing & Product Development Lab 9

12 Basic Enabling Infrastructure: This would include roads, Common parking facility, Water supply, treatment and distribution system, Storm water drains and disposal system, Effluent & Sewerage collection, treatment and disposal arrangement, Water - recycling system, Electrical substation and power distribution system, Internal Communication network, Street lighting, Fire fighting system and security. Non-core Infrastructure: It may include reception area, training centre, office, guest house etc. Land Use Pattern : The land use plan places strong emphasis on open and green spaces. It should also be arrived at in accordance with the statutory planning norms. Following indicative land use pattern may be adopted for the Mega Food Park: Land Use: CPC Indicative Percentage Plots 40 Core infrastructure Basic Enabling Infrastructure 20 Non- core infrastructure 2 Standard Design Factory Sheds 1-2 Green and Open Space 10 Total 100 Primary Processing Centre : PPCs would provide for primary processing facilities such as storage, washing, sorting, grading, weighing and packaging. It may also have certain need based processing facilities as may be required. While the PPCs would be directly linked to the CPC, they would also have linkages to retail markets in major consumption centers within as well as in neighbouring States. Produce collected at the PPCs would be transported using reefer vans for highly perishable produce while all other items shall be transported under ambient conditions. PPCs will also serve as a point of contact with farmers and would be the points of price discovery. These centers may also have facilities for transfer of technology, information and supply of inputs etc. The prime considerations for selecting the locations of PPCs within the Zone of Influence of the project are as follows: PPCs should be located in such a way so as to ensure uniform distribution over the Zone of Influence as this will balance the collection of raw materials. PPCs should be selected in order to have an optimum area under Zone of Influence to ensure a wider product mix to support round the year processing operations at the CPC 10

13 Model Project Report Mega Food Park PPCs should be located in areas commanding adequate availability of processable surplus. The selected locations should have good road and/ or rail connectivity PPC would have following components: Common Core Processing Infrastructure: It may include dry warehouse, cold storage, sorting and packing hall etc. Basic Enabling Infrastructure: Road, Water supply, electricity, communication lines etc Non-core infrastructure: Admin building 6. Estimated Project Cost and Means of Finance Total cost of the project for setting up of project has been estimated at approximately Rs. 150 crores. The component wise cost has been estimated on the basis of quotations received for plant and machinery from various manufacturers and on the basis of industry and engineering estimates for civil work. The component-wise break up is provided in table below. Description Table: Estimated Project Cost Amount (Rs Lakh) Land 700 Land & Infrastructure Development 4500 Buildings 4600 Plant & Machinery 3100 Utilities & other fixed assets 200 Preliminary and Pre-Operative Expenses 1200 Contingencies 600 Margin Money for Working Capital 100 Total cost of project The cost of the project is proposed to be financed through a mix of equity and debt and grant assistance under the Mega Food Parks Scheme. The indicative means of finance is as follows: Table: Means of Finance Particulars Amount Share (%) (Rs Lakh) Equity Grant from MoFPI Debt Total

14 Model Project Report Mega Food Park 6.1. Assumptions in Project Cost The key assumptions under major project components and costs therein are outlined as below: (a) Land : The total land size for Central Processing Center has been considered as 70 acres. A cost of Rs.7.201akhs per acre has been considered while arriving at the cost of land. However, the cost of land may vary greatly from project to project as it would largely depend on the location and other attributes of a particular land. The total land area of 10 acres is assumed for all five PPCs (two acres each). The land cost has been taken as Rs 15.0 lakhs / acre based on the prevailing market rate in the identified areas. Therefore, a total of Rs. 7 crore has been assumed towards cost of land for the project. Rate/ Acre Amount Particulars Acre (Lakh Rs) (Lakh Rs) CPCLand Cost Registration Cost 70 7% Total CPC land PPCs Total for 5 PPCs Registration cost 7% 10.5 Total PPCs Land Total Land Cost (b) (c) Land and Infrastructure Development : The estimated cost for development of land and construction of basic enabling infrastructure/utilities such as boundary wall, gate, security cabin at gates, green area development, roads, water treatment & supply, storm water drains, sewage collection and treatment, ETP/STP, electrical supply and distribution system, parking etc. is Rs akhs (Rs akhs at CPC and Rs lakhs at PPCs). Buildings : The civil construction involves construction of core processing infrastructure components, non-core facilities and Standard Design Factory sheds for MSMEs. The major common core processing facilities are Dry Warehouses, Cold Stores, Ripening facilities, IQF, Silos, Quality Control and Food Testing & Product Development Lab etc. Non-core facilities include mainly admin block, shopping complex, canteen, worker s amenities, guest house etc. The estimated cost of civil work for core processing facilities is Rs. 4, akhs (Rs akhs at CPC and Rs lakhs at PPCs). The estimated cost of buildings for noncore infrastructure is Rs akhs (Rs akhs at CPC and Rs akhs at PPCs). The cost of Standard Design Factory Sheds (SDFs) for MSMEs is estimated at Rs lakhs. 12

15 Model Project Report (d) Mega Food Park Plant and Machinery: The total estimated costs of plant and machinery is Rs lakhs. Major components include refrigeration systems for Cold Storage, IQF, Deep Freeze Storage, CA Storage, Ripening Chambers, Sorting/Grading/Packing line with material handling equipment, Silos and Quality Assurance, Food Testing and Product Development Lab etc. The cost of plant & machinery is based on the quotation received from reputed suppliers. The quotations indicate only basic price of the equipment whereas taxes, duties, transit insurance, VAT, freight and loading / unloading charges are payable extra. The final cost of P&M is, therefore, estimated by adding 15.3% towards aforementioned additional. (e) Miscellaneous Fixed Assets: The cost of misc fixed assets for the project is estimated at Rs lakhs. The major components included under this head are MIS and IT system, office equipments and furniture & Fixtures, security etc. (f) Preoperative Expenses: The provision towards preliminary and pre-operative expenses includes expenditure towards preliminary expenses such as detailed design and engineering, construction supervision and interest during construction period, business development expenses, site insurance, security, salary & wages during construction period etc. It is envisaged that the project will be completed over a period of two years and the interest during construction period of 2 years is capitalized in the project cost. (g) Margin Money for Working Capital: The project will generate revenue by charging rental from the users of the facilities. Rentals will be charged from users on monthly basis. Once the project commences operation, it would incur major operational expenses on monthly basis towards electricity bills, manpower expenses, and other administrative expenses. Therefore, the project would require cash flow on monthly basis to meet the requirement of working capital. The total estimated working capital for first year of operation would be Rs lakhs, 25% of the estimated working capital required has been assumed as the margin money, which comes to around Rs akhs. 13

16 Model Project Report Mega Food Park 7. Proposed Business Plan The business plan of Mega Food Park, taking into account the proposed business model in line with the Mega Food Parks Scheme, is as follows: SPV would provide developed land plots and OF sheds to various units in the park on long term lease The project will provide warehousing facility to various players such as grain traders, distributors/stockists of cement, fertilizers etc. The project will generate revenue by charging rental from the users. Cold storage facility (multi-commodity, deep freeze etc.) will be rented out to farmers, traders, wholesalers and organized retailers and food processors for storage of various fruits, vegetables, spices and dairy products etc. SPV will also put ripening chambers on rental for ripening of banana, mango, papaya etc to various traders and wholesalers. SPV will provide facilities such as IQF, sorting/grading/packing lines etc on rental to the users on job work basis SPV would provide material handling and logistics facilities and equipments (crates and refer vans) on rental basis to user SPV would also be supplying power and treated water to units in the CPC. SPV would be recovering the supply cost with a mark-up of about 15% (mainly to recover the transmission and distribution losses) on the cost. The power and water cost would be recovered proportionately (as SPV would be using about 20% of power and about 2% of water for core-processing facilities) from the units. SPV would also recover the cost of effluent treatment from the units. Non-core facilities would also be given on rental basis to various users by the SPV SPV will also be recovering infrastructure management fee from the units on annual basis. Mega Food Park (MFP) is conceived for providing enabling infrastructure like plots, processing infrastructure etc for prospective tenants thereby ensuring revenues for the park. By providing infrastructure and services which otherwise would have been commercially unviable for such units to set up on individual basis, MFP frees the entrepreneurs from investing in capital intensive infrastructure components. This strategy ensures win-win situation for both the MFP developers and the tenants by making their relationship mutually beneficial. Keeping the above strategy in mind, the following are the various ways of revenue generation for the MFP developers. Lease of developed plots to prospective companies/entrepreneurs for setting up processing facilities 14

17 Model Project Report Mega Food Park Levy of user charges for various common facilities in core infrastructure such as Warehouses, cold storages, ripening chambers Sorting, grading facility for fresh produce IQF including deep freeze Utilities like Water, Steam, STP, WTP, Power etc Maintenance charges for all tenants Parking, office space, canteen services Rentals from standard design factory sheds for MSEs Levy of charges against various services to be offered by SPV to units in the Park Levy of various utilities charges on a monthly basis from units in the Park The above is an illustrative representation of proposed revenue streams and as the implementation of the project progresses, more avenues for revenue generation can be explored and put in place to reduce gestation make the project commercially viable on a long term Proposed Framework for Recovery of Charges 1. Charge I - Lease rentals through long term lease of developed plots to units in the Park and rentals from MSME units for usage of Plug n Play facility 2. Charge II - Charges based on usage of the facilities like a. Parking for trucks (both inward and outward) b. Weighbridge c. Cold storage facilities d. Ripening chambers e. IQF and Deep Freeze f. Rentals of plastic crates g. Laboratory samples testing and others. 3. Charge II - Monthly variable Utility charges will be based on monthly consumption of utilities such as water, power, effluent treatment, steam, will be charged from the member units as per actual consumption and on cost basis. 4. Charge III - Monthly Rentals from other Facilities The SPV will outsource common facilities like shops, canteen, banks and other space to different agencies for providing requisite facilities. These agencies / individuals will be charged on actual for the facilities like water, electricity utilized by them. 15

18 Model Project Report Mega Food Park 5. The operations of the units will be adequately supported by requisite capacities to absorb the cost of the infrastructure to recover the capital and operational costs as briefly described above. 6. The MFP shall enter into an Agreement with the units. The Agreement shall provide rights to the units for setting up food processing facilities in the park. 8. Projected Financial Performance The revenue projection of the mega food park project shall largely depend on the specific business plan envisaged by SPVs and thus, the revenue statements will differ from project to project. Based on the project components and estimated project cost, an indicative profitability statement for the project is given below for reference: Table: Profitability Statement Rs in Lakh Year Capacity Utilization 50% 65% 75% 85% 90% 90% 90% Revenue CPC Land Lease Rentals Rentals from OF Sheds Core Infrastructure Non Core Infrastructure Enabling Infrastructure Management Fee Total CPC Revenue PPC PPC- I PPC - II PPC -ill PPC - IV PPC-V Total PPCs Total Revenue Expenses Power Water ETP Fuel Employee Cost Maintenance Insurance

19 Model Project Report Mega Food Park Admin & Selling Overheads Provision for Crates replacement Total Expenses EBITDA Interest Long Term Debt (LTD) Interest Working Capital borrowing Depreciation PBT Tax Net Profit (PAT) Net Cash from Operations The above table indicates that the project will be able to achieve profit from 2na year of operation, which will reach to Rs akhs in the 4th year of operation and to Rs lakhs in the 10t year of operation. Table: Financial Performance Indicators Year EBITDA Margin 24.13% % 31.79% % % 31.23% % PAT margin % 1.61% 7.92% % % 12.30% % Return on Capital Employed (ROCE) -6.65% 0.92% 5.69% % % 11.76% % Current Ratio Debt-Equity Ratio Total Liability to Net Worth Ration(TOL/TNW) Debt to EBITDA ratio Interest Coverage Ratio DSCR Average DSCR 1.82 Project IRR 14.91% Equity IRR 19.40% From the analysis of the above indicators, it is evident that the financial health of the projects seems to be good. The project is earning good returns and profit margins. Annual DSCR is showing increasing trend and the average DSCR is about 1.82, which indicates that the project will be able to repay its debt liabilities. Moreover, the time series analysis of debt-equity ratio shows that project will be easily able to reduce its debt burden from its capital structure. 17

20 Model Project Report Mega Food Park 9. Project Implementation Framework and 0&M The Mega Food Park is proposed to be owned by the Special Purpose Vehicle. This SPV will own and manage common infrastructure established within the Park and will also provide requisite technical and extension services. Thus, the Central Processing Centers, Primary Processing Centers and Collection Centers, backward linkage mechanism and front end linkages will be owned and managed by the SPV. In case of PPCs, SPV may consider leasing out operation and management of these to interested professional agencies or entrepreneurs in the region. Since the 0&M management is a critical component of the overall functioning of Mega Food Park (MFP). The overall 0&M management would be broadly coordinated through distinct functions namely Operations & Maintenance, Sales & Marketing, Finance and Administration. The key lies in the welldefined functions and the linkages between organizations and how well the operations department and the outsourced agencies, as the case may be, take this forward for efficient functioning of the MFP Role of SPV The role of SPV for the Project would be as under: The SPV for the project should be formed and registered. The shareholders of SPV would appoint their representatives in the Board of Directors and recruit manpower that would be responsible for implementation of the Project in a transparent, efficient, and timely manner. SPV shall ensure that the shareholders/members contribution for the Project is made available in time to meet financial obligation during project implementation. SPV would also obtain from concerned statutory authorities necessary sanction / approval etc requisite for commencement and operation of the Project. SPV would have to appoint a Project Management Consultant (PMC) from the approved panel of PMC drawn by the Ministry. The PMC would assist SPV in appointing requisite professional agencies like design contractors, construction contractors, suppliers of equipments, operations and management contractor. PMC would extend necessary technical support to SPV to obtain such clearances. ************************ 18

21 Model Project Report Integrated Cold Chain Scheme for C.61d Chain, Value Addition and Preservatim Infrastructure Ministry of Food, Processing Industries, Government of India 19

22 Scheme for Cold Chain, Value Addition and Preservation Infrastructure Ministry of Food Processing Industries through its Scheme for Cold Chain, Value Addition and Preservation Infrastructure is promoting integrated cold chain projects in the country with an aim to: Provide integrated and complete cold chain and preservation infrastructure facilities without any break, from the farm gate to the Consumer Enable linking of groups of producers to the processors an arket through well equipped supply chain Establish value addition with infrastructural facilities like sorting, grading, packaging and processing for horticulture including organic produce, marine, dairy, poultry, etc. The Scheme aims to establish value addition with infrastructural facilities like sorting, grading, storing, associated processing and packaging for a variety of products such as fruit and vegetable, marine, dairy, poultry, etc. The eligible components under the Scheme are as follows: Minimal Processing Centre at the farm level and this centre is to have facility for weighing, sorting, grading waxing, packing, pre-cooling, Controlled Atmosphere (CA) 1 Modified Atmosphere (MA) cold storage, normal storage and IQF. Mobile pre-cooling vans and reefer trucks. Distribution hubs with multi product and multi CA /MA chambers cold storage /Variable Humidity Chambers, Packing facility, CIP Fog treatment, IQF and blast freezing. Irradiation facility. To avail financial assistance, any two of the components, from (a), (b) or (c) above will have to be set-up by the units. Considering the functional nature of the facility, Irradiation facility can be treated as a standalone one for the purpose of availing grant. Since the aim of the Scheme is to facilitate establishment of cold chain, value addition and preservation along the supply chain which would integrate and streamline forward and backward linkages of food processors, stand alone facilities, except irradiation facility, are not considered for assistance under the Scheme. The assistance under the Scheme includes financial assistance (grant-in-aid) of 50% the total cost of plant and machinery and technical civil works in General areas and 75% for NE region and difficult areas (North East including Sikkim and J&K, Himachal Pradesh and Uttarakhand) subject to a maximum of Rs 10 Crore. 20

23 Model Project Report The model project report would assist in understanding of the type of projects which are being supported under the Scheme and would also showcase a typical integrated cold chain project along with the eligible components, revenues, expenditures, etc. As the approved integrated cold chain projects under the Scheme have many different types of cold chain and related components/facilities, the components/facilities for the model project have been selected in a way so that it would a typical representative integrated cold chain. It has been envisaged that the project would undertake procurement (from the farm proximate collection centres), storage, value addition to frozen fresh products (Central Processing Hub) and distribution of fresh and processed foods in the consumption centres. The components/facilities envisaged for the model project are as follows: A) A Central Processing/Distribution Hub consisting of : A multi-chambered multi-commodity cold storage having both plus (5000 MT) and minus (2000 MT) temperature chambers as per the requirement of various products handled Individual Quick Freeze (2 MT/Hr) line for production of value added products from excess produce available during glut season Air cooled grading, sorting and packaging hall for handling of raw material both for IQF line and for storage. Refrigerated Vehicles (4 No. of 10 MT capacity each) Weigh Bridge, etc. B) Five farm proximate Collection Centres each consisting of : Shed and platform for aggregation of produce from farm and their primary sorting/ grading Weigh Bridge The capacities of the components/facilities have been decided in way to present a standard set of components/facilities which may be replicated in various locations across most of the regions of the country with the locally available fruits and vegetables. A brief description of the process envisaged for the project is as follows: Fruits and vegetables from the catchment area will be aggregated at the collection centres where primary sorting/grading will be done. The produce will be then weighed and sent to the central processing hub by refrigerated vehicles to reduce wastages. Some produce will also be directly 21

24 procured from the farms. At the central processing hub, the produce will be either stored in the plus temperature chambers of the cold storage or would be processed in the IQF line as per the requirement. The produce stored in plus cold storage chambers will be either eventually processed in the IQF line or will be directly sold to the wholesalers for fresh market. The IQF processed products will be stored in the minus temperature chambers of the cold storage for future distribution. From the storage the produce will be sent to the end users (such as organized retail chains, hotels, caterers, wholesalers, etc.) by refrigerated vehicles and hence maintaining the cold chain from the farm to the consumers. The Process Flow of the Model Project Farms CC CC CC Feefers Feefers Multi-Chambered Above Zero Cold Storage IQF Line Deep Freezer Feefers Feefers Consumers It is assumed that the project will put in place a process that will deliver high quality and safe products to its customers. Standard operating procedure manuals will be prepared for quality assurance. Further, the project will get the facility and processes certified for HACCP and ISO standards to assure safe and quality products to its esteemed customers. Brief descriptions of the major components/facilities proposed in the project are as follows: 1) Multi-chambered Cold store with above zero and sub-zero temperature control: The project envisages is to set up 12 chambered, 5000 MT above zero temperature multi commodity cold storage and 4 chambered 2000 MT sub zero temperature cold storage. Strategic placement of key components to build reliability and efficiency is the key to success of such facility. The technology that will be used will result in accurate monitoring of equipments, tighter temperature control and faster recovery. Pre-fabricated insulated metal laminated panels with insulation of Poly Urethane Foam (PUF) having a thickness of 100 mm will be used for construction of cold room chambers. Joinery will be achieved through cam locks and finished with Silicone Sealant. For the above zero cold storage motorized sliding doors made of high density PUF as per the required specifications will be provided for zero degree application and up to 90% humidity. For 22

25 the multi commodity cold storage the suggested cooling system comprises of open drive single screw compressor unit with liquid pumping system integrated to forced air circulation evaporators. For the sub-zero temperature cold storage air cooled condensation system with Freon based coolant will be used for creating chilling and freezing temperatures. Vibration eliminators will be used in refrigeration piping to achieve greater efficiency in temperature control. Safety systems like high and low pressure cut outs, microprocessor based thermo controls, pressure relief valves for deep freezers, etc. will be used appropriately to ensure high efficiency and low loss in the system. The major produces which will be processed in the IQF are potato, green peas, sweet corn and other vegetables and fruits such as apple, mango, etc. 2) Individually Quick Frozen Line (IQF): IQF is a food preservation technology where fresh food passes through the low temperature zone very quickly, leaving very low and safe microbial counts. This type of freezing results in the product free rolling and not clotting into lumps. Through the IQF process it is possible to offer fresh picked flavors (fruit, vegetable, sea foods, meat, and other fresh foods) all year round, in packaging convenient for the busy consumer. IQF foods lock in the essential nutrients and flavour, with optimum colour, taste and texture. The appeal of IQF foods is that it closely resembles the muchsought-after appearance, flavour and nutrition of the fresh versions. The project envisages to install a 2000 kg per hour IQF Line capable of handling a variety of products. The suggested system for achieving the sub zero temperature temperatures is ammonia liquid pumping system. The major produces which will be processed in the IQF are green peas, mixed vegetables, sweet corn and other vegetables and fruits. 3) Air cooled Sorting, Grading, Processing and Packaging Hall: It is envisaged to undertake handling of IQF and stored produce by establishing an air cooled processing hall/room to carry out the various operations before and after processing. A prefabricated air-cooled sorting, grading, processing and repackaging hall will be constructed to handle a variety of operations. The facilities will include a sorting grading line of 2 MT/hour capacity. 4) Material Storage and Handling equipment Proper handling of produce is critical to ensure that the product is not damaged during the physical handling and storage operations. Further, proper utilisation of space and cost effective movement of produce within the cold storage and distribution can be achieved by user appropriate storage and handling equipment. It is envisaged to procure plastic pallets, plastic crates, electric forklifts and crate washing system for the same. 23

26 5) Refrigerated Vehicles: Transportation through owned reefer vehicle will ensures temperature reliability and prompt delivery. Reefer vehicles will be used to ensure delivery of products from the collection centres to central processing hub and delivery of processed products further from the processing hub to retail outlets and other customers. The project envisages to procure and operate a fleet of 4 vehicles with capacity 10 MT each. Project Cost The estimated capital cost for the project is Rs lakhs. The margin money for working capital Rs lakhs has been capitalised to the project cost. Hence the total project cost comes to Rs lakhs. The component wise cost has been estimated on the basis of quotations received for plant and machinery from various manufacturers and on the basis of industry and engineering estimates for civil work. The Project cost details are provided in table below. Amount Share Deseription (Lakh Rs) (%) Land Land & Infrastructure Development Buildings Plant & Machinery Utilities & other fixed assets Preliminary and Pre-Operative Expenses Contingencies Total Project Cost (Capex) Margin Money for Working Capital Total Project Cost The components wise detail of project cost is as below: Land The total land area for the project has been estimated at 2.5 acres by assuming 45% builtup area. A breakup of the builtup areas for the components is as follows: Sr. Components Built up No. (In Sq.m) 1 Cold Stora:e.lus Dees freezer `IQF hall Collection Centre Sheds (5 No.s)

27 4 Administration Block 100 Total 4500 The cost of land has been taken at Rs 25.0 lakhs per acre (excluding land registration fee). The land registration fee is assumed as 7.0% (6% towards stamp duty and 1% towards various legal expenses) of value of land. Hence, the total cost of land for the project is estimated at Rs lakhs (including registration fee). Land development and Support Infrastructure The estimated cost for development of land and construction of basic enabling infrastructure/utilities such as boundary wall, gate, security cabin at gates, green area development, roads, water treatment & supply, stonu water drains, sewage collection and treatment, ETP/STP, electrical supply and distribution system, parking etc. is Rs. 50 Rs. 201akhs per acre. The estimated cost is based on standard market rates. Civil Construction - Buildings The civil construction involves construction of multi chamber cold storage and deep freezer, IQF Hall, Collection Centre Sheds and Administrative Block. The component wise civil work is given in the below table. Sr. Components Built Up Rate Civil Cost No. (In Sq.m) (Rs./Sq.m) (Rs. In Lacs) 1. Multi Product Cold Storage (PEB) , Multi Product Cold Storage (Insulation) Dee. Freeze (PEB) , Deep Freeze (Insulation) IQF hall , Collection Centre Sheds 500 6, Total (1) Administration Block , Total (2) Sub Total (A = 1+2) The total cost of civil work for buildings is estimated to be about Rs lakhs. The construction rates are as per industry standards and for some components such as puff panels, doors, insulation materials, etc, estimates have been made based on quotations received from suppliers. Plant and Machinery The total estimated costs of plant and machinery is Rs akhs. Major components include refrigeration systems for cold storage & deep freezer, IQF, Sorting/grading/packing line, Refrigerated Vehicles, Weigh bridges etc. The cost of plant & machinery is based on the quotation received from 25

28 reputed suppliers. The quotations indicate only base prices of the equipments by excluding CST, transit insurance, VAT, transportation and any other taxes. The final cost of P&M is estimated by adding 15.3% as taxes etc to the base cost of the plant & Machinery. The component wise details of the plant and machinery are provided in the table below: Base Cost Sr. Components Caspacity (Rs. In 15.3% Amout No. Lacs) (Rs. In Lacs) (Rs. In Lacs) 1 Cold Storage 5000 MT Deep Freeze Store 2000 MT IQF 2000 Kg/Hr Reefer Vehicles (Nos.) Sorting Grading Line Other equipments LS Weighbridges at CCs 5 x 40 MT Total (1) Utilities & Other Fixed Assets The cost of misc fixed assets for the project is estimated at Rs lakhs. The major components included under Utilities & Other Fixed Assets are IT system, software, office equipments and furniture, power backup, etc. For power back up, 2 DG sets of 500 KVA each have been envisaged, which will be able to supply power to all the components during power cuts. The component wise cost details are given as below: Sr. Amount No. Deseription Capaceity (Rs. In Lacs) 1 IT System, Software and office equipments LS Furniture fixtures etc. LS Power Backup Ls Total Preliminary and Pre-operative Expenses The provision towards preliminary and pre-operative expenses includes broadly expenditure towards administrative expenses and interest during construction period. It is envisaged that the project will be completed over a period of 18 months and the interest during construction period of 18 months is capitalized in the project cost. The total estimated preliminary pre-operative expense is Rs lakhs and the details are given as below: Amount Particulars Unit (Lakh Rs) Basis A. Adminstrative 26

29 Contingencies Salaries & Wages LS Lakh p.a. Traveling LS lakh p.a. Power & Fuel Cost LS lakh p.a. Insurance etc. 0.50% 7.15 of equipments Bank Processing & Upfront fees 0.50% 4.39 of loan amount Business Development Expenses LS 2.00 Trial Runs Expenses LS 2.00 Sub Total (B) C. Interest During Construction Quarter Quarter Quarter Quarter Quarter Quarter Sub Total (C) Grand Total (A+B+C) Contingencies have been assumed at 5% of the cost of buildings, plant & machinery and utilities and other fixed assets. Means of finance The cost of the project is proposed to be financed through a mix of equity, grant from MoFPI under the Scheme for Cold Chain, Value Addition and Preservation Infrastructure and term loan from Bank. The promoters would contribute about 25% of the capital cost of project as equity contribution which is estimated at Rs lakhs. The grant from MoFPI would be either 50% of Technical Civil Work (TCW) and Plant & Machinery (P&M) cost, or Rs lakh whichever is lower. In, this case the estimated grant amount is Rs lakhs. The remaining funds (Rs lakhs) would be arranged as term Loan from Bank. Particulars Share Amount (Lakh Rs) Equity 25.00% Grant from MoFPI 39.95% 1, Debt 35.05% Total % 2, Business Plan The business plan for the model project has been envisaged keeping in mind the most commonly used business plan for these types of facilities. The business plan may however be modified by 27

30 the promoters depending on the location, raw materials available, financial capability of the promoters and other factors. The business plan for the model project is as follow: Most of the space in the above zero temperature storage would be given out on rent to farmers, traders, etc, although some space may be utilized by the project promoters for storing raw material for the IQF process. The IQF processing line will be operated by the promoters and deep freezers would be used to store IQF processed products. The refrigerated vehicles would be used to transport raw material from farm to the facilities and from the facilities to forward buyers. In off-season, the refer vehicles will also be rented out to other users. The sorting, grading and packing line will be used by the promoters for the IQF operations. It will be rented out to other users also depending on the availability. Operating Assumptions The key operating assumptions underlying the business plan are described below: Operating Cost Assumptions Power Cost The total connected load of the project is estimated at about 1.2 MW. The power tariff has been assumed equivalent to the currently prevalent tariff of Rs 5.5 per unit (Rs 4.2 per unit, time charges of Rs 0.75 per unit and fix charges of Rs 0.55 per unit) for industries with HT connection. The table below explains the annual power consumption cost at full capacity: Rate/KW (Rs) 5.5 Load (MW) 1.2 Proportion-running on power 80% Avg. Load Factor (%) 70% Annual Consumption (KWH) Annual cost of Power (Lakhs Rs) It is expected that in the base year the power consumption cost would be about Rs lakhs if the project runs at full capacity though the actual consumption would depends on the utilization of the facilities. 28

31 Fuel Cost Fuel cost for DG set has been calculated on the basis of per unit cost of production of power by DG sets. It is estimated that the average running of DG set would be for 5 hrs/ day throughout the year. The cost of power generation by using diesel as fuel has been taken at Rs 10 per unit and thus the annual power cost comes to around Rs lakhs at full capacity utilization. Employee Cost The employee cost has been estimated based the present scenario of man power requirement by such scale of facilities and the present market salaries. The details of calculation are given below: Salary/month Total/ Month Grade/ Employee Number (Rs) (Rs) Manager Operations Managers Commercial (Finance, Account etc.) Operator Account Assistant Support Staff Total Manpower planning for the proposed project has been done after analyzing business operations of similar units. Other than the above list of employees, about more people will be employed as unskilled labour on daily wages basis for loading/ unloading purpose. Cost of Maintenance The annual cost of maintenance has been assumed at 1.0% of the value of buildings, plant & machinery and infrastructure. Cost of insurance The cost of insurance has been 1% of capital cost of basic enabling infrastructure, plant & machinery, misc fixed assets and buildings. Admin Overheads It includes cost towards travelling, communication, stationary and to meet day to day administrative expenses. The detail of administrative overheads is given in table below: Particulars Amount Basis (Lakh Rs) 29

32 Security and House Keeping Expenses Rs 1.0 Lakh Per Month Traveling lakh p.m. Stationary and Consumables lakh p.m. Business Development Expenses 7.00 Lakh Rs Total Lakh Rs/ Annum Financial Assumptions Taxes The income tax has been 30.9% as per the prevailing rate of income tax for corporate/ industry players. The Minimum Alternate Tax (MAT) rate is taken as 18.5% as per the prevailing rate. Depreciation Rates Depreciation has been calculated using straight-line method for book purpose, whereas for tax purpose written down value method has been used. The rate of depreciation for plant & machinery, Misc fixed assets, buildings and enabling infrastructure has been given in the table below: Interest Assets Category Book Depr Tax Depr One shift Two shift Three Shift Plant & Machinery 4.75% 7.42% 10.34% 15.00% Miscellaneous Fixed Assets 4.75% 7.42% 10.34% 15.00% Buildings 3.34% 3.34% 3.34% 5.00% Interest has been 13.50% per annum for term Loan 14.00% for working capital loan. The repayment period has been kept at 8.5 years including the moratorium period of ten quarters. The Equated Quarterly Instalment is estimated at Rs lakhs for term loan of Rs lakhs. Revenue Assumptions Multi-chambered Multi-Commodity Cold Store The rental charges for cold storage facility depend on commodity stored in the chamber. The charges vary due to different volume, density and storage requirements (temperature, humidity etc.) of different commodities. For the model project, a standard rate has been considered which is comparable to prevailing market rates. The cold storage facilities will be able to generate an income of about 30

33 Rs lakhs at current prices at full capacity utilization. The table below provide details about capacity, rentals and revenue for each location. IQF Line Months of Amount Capacity (MT) Rate/ MT/month (Rs) operation (Lakh Rs) As mentioned earlier, it has been assumed that green peas, vegetables, sweet corn and fruits will be processed in the IQF. The operational period of the facility has been assumed to be 9-10 months. It is also assumed the facility will be operational for 16 hrs a day and hence would be able to process about 8600 MT of fruit & vegetables. The table below provides snapshot of revenue calculation for IQF line: Green Mixed Sweet Other Products Peas Veg Corn Veg Fruits Installed capacity /shift (MT) Rated 90% MT Days in Season Available shifts of supply in season Available capacity MT Sales Rate per ton (Rs) 30,000 25,000 75,000 40,000 50,000 Sales Revenue (Rs. Lakh) Projected Financial Performance The projected profitability statement is given below: (In Lakhs Rs) Year Capacity Utilization 40% 50% 70% 90% 90% 90% Revenue CPC Cold Storages IQF User Charges for Refer Vans Packhouse Revenue Expenses Raw Material Packing Material Power

34 Fuel Labour Employee Cost Maintenance Insurance Admin & Selling Overheads Total Expenses EBITDA Interest Long Term Debt (LTD) Interest Working Capital borrowing Depreciation PBT Tax Net Profit (PAT) The above table indicates that the project will be able to achieve profit from 2nd year of operation, which will reach to Rs lakhs in the 4th year of operation and to Rs lakhs in the 10th year of operation. Financial Performance indicators Year EBITDA Margin 16.20% 17.73% 19.58% 20.54% 20.32% 20.09% 19.85% PAT margin -1.75% 3.01% 7.86% 8.04% 8.05% 8.13% 8.26% Return on Capital Employed (ROCE) -2.00% 4.42% 15.01% 17.87% 16.50% 15.63% 14.34% Current Ratio Debt-Equity Ratio Total Liability to Net Worth Ration (TOL/TNW) Debt to EBITDA ratio Interest Coverage Ratio DSCR Average DSCR 2.79 Project IRR 13.86% Equity IRR 21.37% From the analysis of the above indicators, it is evident that the financial health of the project seems to be good. The project would be earning good returns and profit margins. Annual DSCR is showing an increasing trend and the average DSCR is about 2.79, which indicates that the project will be able to repay its debt liabilities. The project and equity IRRs are 13.86% and 21.37% respectively which are acceptable. 32

35 Sensitivity Analysis To boost the private investment in cold chain infrastructure in the country, assistance from government will have significant effect on the viability of the project. Also, there are some risk factors which are involved which may affect the viability of the projects, especially in terms of fluctuating costs and revenues. Keeping this factor in view the sensitivity analysis has been done. The sensitivity analysis in terms of 3 scenarios is given below: Performance Indicators IRR DSCR Present Project Cost and Revenues 13.97% 2.64 Project Cost Increase by 5% 12.93% 2.42 Project Cost Increase by 10% 11.93% 2.23 Revenue Decrease by 5% 8.28% 1.94 The sensitivity analysis shows that even with an increase of 10% in the project cost, the project is still viable with an IRR of 11.93% and DSCR of However, if the revenue is decreased by 5% the viability of the project will be affected to certain extent, which indicates that accurate and in-depth revenue assumptions need to be made based on market research to ensure the expected revenues. 33

36 DEHYDRATED VEGETABLES 1.0 INTRODUCTION Vegetables are available during specific seasons and they are perishable. Hence, majority of them are not available during off-season. To overcome this problem, dehydration technique has been developed by which vegetables in dehydrated form are preserved for a longer period and are made available during off-season. With this technology, certain high value and popular vegetables can be profitably sold. 2.0 PRODUCTS 2.1 Applications Dehydration technology is well established and proven. Certain products like green peas, cauliflower, carrots, spinach etc. command good prices during lean and off-season. Onion and garlic powder also has good demand round the year but these products are generally available throughout the year and powder is somehow not favoured by the Indians. Hence, this note does not include onion and garlic powder. This project can be set up in many parts of the country but this note considers Maharashtra as the preferred location. 2.2 Availability of know how, Quality Standards and Compliance CFTRI, Mysore, has successfully developed the technical know-how. BIS has specified quality standards for different vegetables and depending upon the exact product mix, the promoters may like to adhere to them. Compliance with PFA Act is mandatory. 3.0 MARKET POTENTIAL 3.1 Demand and Supply Food habits of Indians are such that most of the households prepare vegetables every day. Due to climatic conditions and types of soil, many vegetables are cultivated throughout the year. The major limitation of bulk of the green vegetables is they are grown only during predetermined 34

37 season which lasts for 3-4 months and thus their availability during rest of the months is a major problem. Hence, if they are made available during this period, then they command premium. Green house method enables cultivation of any vegetable during any season but calls for huge investment which affects the economic viability. Dehydration technique is, therefore, preferred. 3.2 Marketing Strategy With growing incomes, changing lifestyles and hectic daily schedule, market for dehydrated vegetables is growing especially in urban areas. Proper placement of products in the departmental stores, super markets, shopping malls etc. backed-up by publicity is the key to success. It is also possible to have tie-up with exclusive restaurants, star hotels, renowned caterers etc. for regular supplies 4.0 MANUFACTURING PROCESS This note primarily considers dehydration of cabbage, cauliflower, spinach and carrots. Other suitable vegetables can also be thought of. In case of cauliflowers; they are chopped to make small pieces and washed. Then they are blanched and dried in cold air. Spinach leaves are separated from the stalk, washed and dried in the drier. As regards carrots, they are washed, scrapped and cubed after washing. Cubes are then blanched and dried. These dehydrated vegetables are then packed and stored carefully. Packing is very critical as any fungal growth would damage the product. Process and weight loss varies from vegetable to vegetable but on an average it is 25% as the vegetables are dehydrated. In other words, the input-output ratio is 4: CAPITAL INPUTS 5.1 Land and Building The plot of about 500 sq.mtrs. is required as the built-up area requirement will be 220 sq.mtrs. Storage of vegetables would require area of 35 sq.mtrs, whereas packing room and finished goods godown will occupy about 60 sq.mtrs. Vegetable washing tanks could be constructed adjacent to the raw material godown with asbestos sheets. Main production hall will be of around 100 sq.mtrs. and balance 25 sq.mtrs. could be allotted for office and laboratory. The entire area has to be neat and clean and completely hygienic. Considering price of Rs.400/- per sq.mtr; the total cost of land would be Rs lacs whereas that of civil work it will be Rs.5.50 Rs.2500/- per sq.mtr. Construction cost is taken on a higher side as flooring, painting etc. of the building has to be of superior quality to maintain hygienic standards. 5.2 Plant and Machinery Easy and regular availability of fresh vegetables during each season and nearby urban markets are the critical aspects for arriving at the installed production capacity. For the purpose of this note and with a view to minimising initial capital investment, the rated capacity is taken at 400 tonnes with 2 shift working and 300 working days. For this following machines shall be required. 35

38 (Rs. in lacs) Item Qty. Price Washing tanks with sets of cubers, slicers, etc Blanching tank with thermostat control Stacking trays for vegetables 0.30 Pre-cooling facility for vegetables 1.75 Vibratory shakers Fluidized bed dryer to dehydrate vegetables complete with all attachments and electricals Hot-water boiler with attachments Automatic form, fill and seal machines complete with attachments Pin mill with accessories of 50 kgs/hr. capacity 3.50 Testing equipments 0.75 Electrification 1.75 Total Miscellaneous Assets Other assets like storage racks and bins, aluminium top working tables, exhaust fans, furniture and fixtures, electrical, plastic trays/jars/tubs, office equipments etc. shall be required for which a provision of Rs.1.25 lacs is made. 5.4 Utilities Power requirement shall be 50 HP whereas water required for washing of vegetables and for potable and sanitary purposes will be 2000 ltrs. per day. 5.5 Raw Material The all-important raw material will obviously be fresh vegetables. Hence, the location of the project has to be nearer to vegetable growing areas. Depending upon the availability of vegetables during different seasons, the product-mix may change. Likewise the prices of raw materials would also change depending upon the exact product mix and crop pattern. Even at 100% capacity utilisation, the monthly requirement of different vegetables, considering an average process and weight loss of 50%,will be about 25 tonnes. This is not a very large quantity. Prices of vegetables vary and the product-mix may also change according to quantum of crop and consumer preferences. Hence, it is not feasible to arrive at variety-wise vegetables required every month and their individual prices. Therefore, average price of each vegetable is taken at Rs.4,000/- per ton. The all important packing materials will be plastic bags made from suitable grade plastic, corrugated boxes, box strapping, labels etc. 36

39 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Machine Operators 4 2,500 10,000 Skilled Workers 4 2,000 8,000 Semi-skilled Workers 4 1,500 6,000 Helpers 6 1,250 7,500 Laboratory Technician 1 2,500 2,500 Salesmen 2 2,750 5,500 Clerk 1 2,500 2,500 Total 42, TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land 500 2,00,000 Building 220 5,50, Plant and Machinery The plant with rated annual capacity of 150 tonnes would cost Rs lacs as explained earlier. 8.3 Miscellaneous Assets A provision of Rs lacs will be adequate under this head as mentioned earlier. 8.4 Preliminary & Pre-operative Expenses There will be many expenses under this category like registration charges, market survey expenses, scrutiny fee of the financial institution, pre-production administrative overheads including salaries, travelling, interest during construction and implementation period, trial run expenses and so on. Hence, a provision of Rs.2.50 lacs is made. 37

40 8.5 Working Capital Requirement As against rated capacity of 150 tonnes per year, capacity utilisation of 60% is assumed in the first year. At this activity level, the project would require working capital of Rs.5.80 lacs as worked out herebelow. (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Materials 1 Month 25% Stock of Finished Goods ½ Month 25% Receivables 1 Month 25% Working Expenses 1 Month 100% Total Stock of raw materials/vegetables are not considered, as with proper arrangements, there is no need to have more than 2 or 3 days stock and it may also be possible to get credit of about a week. 8.6 Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Land and Building 7.50 Plant and Machinery Miscellaneous Assets 1.25 P&P Expenses % on Land, Building and P&M 2.55 Working Capital Margin 2.20 Total Means of Finance Promoters Contribution Loan from Bank/FI Debt Equity Ratio 1.82 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The installed production capacity of the plant will be 400 tonnes per year whereas capacity utilisation of 60% is assumed in the first year and second-year onwards it is restricted to 75%. 38

41 9.2 Sales Revenue at 100% As explained in earlier chapters, there will not be exact sales-mix every month. It will vary according to the availability of vegetables and their prices and consumer demand or preferences. A firm tie-up with a large buyer may also change the sales mix. Hence, average price realisation is taken at Rs. 50,000/- per ton or Rs lacs per year. 9.3 Raw Materials Required at 100% (Rs. in lacs) Product Qty. Rate/Ton Value (Tonnes) (Rs) Vegetables 400 3, Packing Materials Total Utilities Total annual expenses at 100% activity level under this head are expected to be Rs lacs. 9.5 Interest Interest on term loan of Rs lacs is 12% per annum assuming repayment in 6 years including a moratorium period of 1 year. Interest on working capital assistance from bank is taken at 14% per annum 9.6 Depreciation It is computed on WDV basis and rates assumed are 10% on building and 15% on plant and machinery and miscellaneous assets. 39

42 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 400 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling and 7.5% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) o. Particulars Amount [A] Sales [B] Variable Costs Raw Materials Utilities (60%) 1.57 Salaries (50%) 3.93 Stores & Spares 0.66 Selling Expenses (65%) 1.96 Administrative Expenses (30%) 0.40 Interest on Working Capital [C] Contribution [A] - [B] [D] Fixed Cost 9.42 [E] Break-Even Point (D C) 53% 40

43 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.80 Operating Leverage = Contribution/EBT = = 4.11 Degree of Total Leverage = FL/OL = = 0.44 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr 6th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

44 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% Accruals The IRR is around 18%. Some of the machinery suppliers are 1. M/s.G.R. Engg. Works Pvt Ltd, Worli, Mumbai M/s.Raylon Metal Works, JB Nagar, Andheri (E), Mumbai M/s. Laxicon Engg, Sita Bardi, Nagpur Techno Equipments, 31, Parekh Street, Girgaum, Mumbai

45 FRUIT PROCESSING 1.0 INTRODUCTION Fruits are an important source of energy for human-beings but they are perishable items. Hence since many years various products are made from juice of fruits so that they can be consumed during off season as well. Products like jam, jelly, squash etc. are made from fruits since long. With the advent of technology and preservatives, shelf life of such products has gone up and they can be preserved for many months with proper packing. The proposed location of this activity could be many centres in India as number of tropical fruits are grown in the country. However, this note deals with a project in Manipur as several fruits like pineapples, oranges, lemons, peaches etc. are cultivated in large quantities. Hence, it is suggested to undertake fruit processing activity. 2.0 PRODUCTS 2.1 Applications Fruits are perishable in nature and for their preservation, they need to be processed to make juices, squashes, jams, nectars etc. However, this note is restricted to making of orange and pineapple juice and squash. 2.2 Availability of know-how and Compliances Strict compliances with the provisions under the FPO and PFA Act are mandatory. CFTRI, Mysore, has successfully developed the technical know-how. 3.0 MARKET POTENTIAL Demand and Supply Fruits are liked by people of all age groups but they are available only during specific season. Due to high water or juice contents, they are perishable. Certain fruits require very careful and 43

46 consequently costly transportation. Hence, many down-the-line products like squash, fruit-juice concentrates, jam, nectars etc. are made from fruits with preservative which increases their shelf-life substantially. Market for such products has witnessed a quantum jump during last few years and with growing urbanisation, increase in disposable incomes and changing life styles, demand for them is steadily going up. Marketing Strategy There are some established brands available in the market but they are costly and hence people would prefer low cost, good quality products. It is possible to introduce competitive pricing for a small scale unit due to its inherent features. Proper care has to be taken in creating and maintaining adequate network. 4.0 MANUFACTURING PROCESS The manufacturing process for making fruit juice and squash is standardised and not very complicated or time consuming. CFTRI, Mysore, has successfully developed this technology. In the first process, fully ripe and matured fruits are washed, cleaned, graded and then peeled. Thereafter juice is extracted from fruits and then it is filtered to remove seeds, fibres etc. This juice is then processed, sterilised and bottled after adding preservatives. In case of squash, syrup of sugar along with preservatives are added to juice and this mixture is stirred till uniform solution is formed and then it is bottled. As regards oranges, recovery of juice is substantial and weight and process loss is 10%. But in case of pineapple, wastages are around 50%. Process loss of 5-6% is compensated by addition of sugar syrup. The process flow chart is as under: 5.0 CAPITAL INPUTS 5.1 Land and Building Washing, grading and peeling of fruits Juice extraction and filtration Sterilization Packing Total requirement of built-up area shall be around 150 sq.mtrs. and hence land measuring about 300 sq.mtrs. will be adequate. The built-up area is adequate to have production, storage and packing facilities. Cost of land is estimated to be Rs. 90,000/- whereas that of civil work Rs.3,75,000/-.FPO provisions about layout of factory building must be adhered to. 44

47 5.2 Plant and Machinery In view of size of the market and to ensure economic viability of the project, rated production capacity of 150 tonnes per year with 2 shift working and 300 working days is advisable. To install this capacity following machines shall be required: Item Qty. Price (Rs.) Fruit Washing Tanks 2 10,000 Juice Extractors 2 85,000 Steam Jacketed Kettles- 60 Ltrs. Capacity 2 40,000 Stirrer 1 15,000 Baby Boiler- 100 kgs/hr 1 60,000 Bottle Washing and Filling Machine 1 75,000 Testing Equipments like Refracto Meter, Salinometer, Pipette, Burette etc. 30,000 Total 3,15, Miscellaneous Assets Many other assets like stainless steel utensils, plastic tubs, exhaust fans, storage racks, furniture & fixtures, etc. shall be needed. A provision of Rs.50,000/- is made for the same. 5.4 Utilities Power requirement will be 40 HP whereas per day water requirement would be 2000 litres for washing of fruits and potable and sanitation purposes. Hard coke of around 25 tonnes will be required annually for boiler. 5.5 Raw Material The all-important raw material will be fresh, ripe and matured oranges and pineapples. North- East states including Manipur are famous for horticulture products. The highest fruit crop of Manipur is pineapple with production of more than 70,000 tonnes whereas that of oranges it is about 4500 tonnes. Thus, availability of few hundred tons will not pose any problems. Other items like sugar, salt, additives and preservatives etc. shall be available locally. Packing materials like food grade plastic or glass bottles, labels, corrugated boxes, BOPP tape etc. shall be required for which prior arrangement is advisable. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Workers 4 1,800 7,200 Semi-skilled Workers 2 1,500 3,000 Helpers 4 1,000 4,000 Salesman 1 2,000 2,000 Total 16,200 45

48 7.0 TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land300 90,000 Building ,75,000 Total 4,65, Machinery Production capacity of 150 tons can be installed with investment under this head to the extent of Rs.3.15 lacs as discussed earlier. 8.3 Miscellaneous Assets A provision of Rs. 50,000/- is adequate to have support assets as explained earlier. 8.4 Preliminary & Pre-operative Expenses There are certain expenses which are incurred prior to the commencement of production such as registration, establishment and other administrative expenses, interest during implementation and so on. A provision of Rs.50,000/- is made towards them. 8.5 Working Capital Requirement Against installed production capacity of 150 tonnes per year, actual capacity utilisation in the first year is expected to be 65%. At this level of activity, the working capital needs will be as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Materials 1 Month 30% Stock of Finished Goods ½ Month 25% Receivables ½ Month 25% Working Expenses 1 Month 100% Total

49 8.6 Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Land and Building 4.65 Plant and Machinery 3.15 Miscellaneous Assets 0.50 P&P Expenses % on Land & Building and Plant & Machinery 0.80 Working Capital Margin 1.12 Total Means of Finance Promoters Contribution 3.22 Term Loan from Bank/FI 7.50 Total Debt Equity Ratio 2.33 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The rated production capacity of the plant will be 150 tonnes per year. But actual utilisation is restricted to 65% in the first year and 75% thereafter. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Selling Price Sales (Tonnes) (Rs/Ton) Orange Juice 35 32, Orange Squash 40 40, Pineapple Juice 35 32, Pineapple Squash 40 40, Total

50 9.3 Raw Materials Required at 100% (Rs. in lacs) Product Qty. Price/Ton Value (Tonnes) (Rs) Oranges 80 13, Pineapples 150 8, Sugar Additives, Preservatives, Flavours, etc Packing Rs.5000/Ton 7.50 Total Utilities Utilities like power, water and hard coke would cost around Rs.1,00,000/- at 100% activity level. 9.5 Selling Expenses There will be competition from some established national brands and local brands as well. Henc, a 15% of sales income has been made towards selling commission, free sampling and publicity in local media. 9.6 Interest Interest on working capital assistance from bank is 14% per annum. Interest on term loan of Rs lacs is 12% per annum considering repayment of loan in 5 years including a moratorium period of 1 year. 9.7 Depreciation It is computed on WDV 10% on building and 20% on machinery and miscellaneous assets. 48

51 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 150 Tonnes - Capacity Utilisation 65% 75% Sales Realisation B Cost of Production Raw Materials Packing Material Utilities Salaries Stores & Spares Repairs & Maintenance Selling and 15% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw Materials & Packing Materials Utilities (65%) 0.42 Salaries (65%) 1.26 Stores & Spares 0.24 Selling Expenses (75%) 3.98 Admn Expenses (50%) 0.21 Interest on Working Capital [C] Contribution [A] - [B] 7.44 [D] Fixed Cost 4.89 [E] Break-Even Point [D C] 65% 49

52 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.49 Operating Leverage = Contribution/EBT = = 2.92 Degree of Total Leverage = FL/OL = = 0.51 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

53 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% 24% Accruals The IRR is around 22%. Some of the equipment and packing machinery suppliers are 1. Auric Techno Services Pvt. Ltd. C-101, Shreenath Hermitage, Baner Road, Pune Tel No / Fax No PRS Technologies Pvt. Ltd. D-26, NDSE Part II New Delhi Tel No /77, Fax : SS Engg. B-25, Khanpur Ext. New Delhi Tel No Divecha Glass Industries, 249, Balrajeshwar Road, LBS Marg, Mulund (W), Mumbai DK Barry and Compnay Pvt. Ltd. 11/35, West Punjab Baug, New Delhi Tel No

54 GREEN PEAS DEHYDRATION 1.0 INTRODUCTION Green peas are available for around 5 months during winter season only. They are used for making vegetables, as additives in certain vegetables and for making several snack preparations. Hence, if they are made available even during off-season, there is a good market for them. There are some established brands in Maharashtra like Mafco but even then there is a fairly large market for dehydrated peas in urban and semi-urban areas if the prices are reasonable. A small scale unit with lower overheads can offer competitive prices. Marketing would play a critical role. Likewise, the promoters should have adequate financial resources as the finished good stock of around 5-6 months shall have to be stored. The preferred locations for this product are Maharashtra, HP, UP, Bihar etc. 2.0 PRODUCT 2.1 Applications Like any other green vegetable, green peas are available for around 4-5 months only. In view of their demand round the year, they can be preserved with the help of dehydration process and sold during off-season. It is also possible to produce powder which has got good market prospects. But this note considers only dehydration of green peas. 2.2 Availability of technical know-how, Compliances and quality standards CFTRI, Mysore, has successfully developed the technical know-how. Compliance with FPO and PFA Act is mandatory. BIS has standardised quality parameters vide IS 4626:1968 and it is advisable to adhere to it. 52

55 3.0 MARKET POTENTIAL Indians generally prefer green and fresh vegetables but they are available only during seasons. Some their shelf life is not more than 3-4 days. But dehydration technique preserves them for few months and the original taste, flavour and colour is also retained. Green peas are very popular and they are used along with other vegetables in many vegetarian and continental dishes. Many fast food and snack items also include green peas. Thus apart from household demand, there is a continuous demand from restaurants, dhabas, caterers and canteens. Price is the main consideration as these eateries can not afford high prices. Brands like Mafco or Amul are in the market but their products are costly. If a small scale unit can offer competitive price of around Rs.40/- per kg. then there is a large untapped market segment. It is also advisable to enter into a long term supply contract with some bulk consumers at least during first 2-3 years to penetrate the market with retailing of around 25% to 30% of production and gradually retailing can be increased. 4.0 MANUFACTURING PROCESS This note does not envisage very high capacity and totally mechanised plant as it would call for investment in excess of Rs lacs. Instead, a moderate capacity semi-automatic plant is suggested. Fresh, sound and green pea pods are thoroughly washed in water and then pea seeds are separated and cleaned with the help of pea podder. Then they are pricked as pricking facilitates quick and uniform drying of peas. Then they are blanched and sulphited to retain colour, taste and texture in the final product. Blanched peas are then dried in a drier wherein moisture is reduced to 7-8%. Drying time is around 3 hours. Finally dried peas are graded and packed. On an average, the process and weight loss is 75%. The process flow chart is as under: Washing of pea pods Separation and cleaning of pea seeds Pricking and Blanching Drying and Packing 5.0 CAPITAL INPUTS 5.1 Land and Building Plot of around 300 sq.mtrs. with built-up area of 150 sq.mtrs. would be adequate. Land may cost Rs.1.00 lac whereas cost of civil work will be Rs.3.75 lacs. Production area would occupy around sq.mtrs. whereas the balance area can be utilised for storage and packing. 53

56 5.2 Machinery The plant is expected to operate for around six months due to seasonal availability of green pea pods. The processing capacity of the plant is assumed to be 30 tonnes per month on 2 shift working and working of 25 days every month or 150 days during season of 6 months. It is possible to dehydrate other vegetables during off-season but this note considers only green peas. This would need the following machines: Item Qty. Price (Rs.) Pea Podder- 50 Kgs/Hr 1 75,000 Peas Pricking Machine-50 Kgs/Hr 1 80,000 Blanching Tank with Thermostat Control 1 1,00,000 Fluidized Bed Dryer complete with all attachments and accessories- 48 trays 1 1,75,000 Hot Water Boiler with attachments- 100 Kgs 1 60,000 Washing Tanks 2 40,000 Automatic Form, Fill and Seal Machine complete with all accessories 1 1,00,000 Weighing-scales, Testing Equipments, etc. 35,000 Total 6,65, Miscellaneous Assets Some other assets like SS utensils, storage racks, furniture and fixtures, exhaust fans etc. shall be required for which a provision of Rs.50, 000/- is made. 5.4 Utilities Power requirement shall be 40 HP during the season whereas water requirement during same period would be ltrs. every day. 5.5 Raw and Packing Materials The most critical raw material shall be fresh, matured and green pea pods. Even though, the monthly requirement during the season will not be more than 30 tonnes, proper arrangements must be made especially during the beginning and fag-end of the season. Prices of green pea pods also fluctuate during the beginning, peak and end of the season. Hence, average price is Rs.5, 000/- per ton. Printed rolls of appropriate food grade plastic shall be required for inner packing and corrugated boxes, box strapping, labels etc. for the outer packing. 54

57 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Machine Operators 2 2,500 5,000 Skilled Workers 2 2,000 4,000 Semi-skilled Workers 2 1,650 3,300 Helpers 4 1,250 5,000 Salesman 1 2,500 2,500 Total 19,800 Salesman and couple of helpers may be employed round the year and others only for 6 months. 7.0 TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of Orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land300 1,00,000 Building 150 3,75,000 Total 4,75, Machinery The total cost of machinery is estimated to be Rs lacs as discussed earlier. 8.3 Miscellaneous Assets A provision of Rs.50, 000/- is adequate under this head as narrated earlier. 8.4 Preliminary & Pre-operative Expenses There will be many pre-production expenses towards market survey, registration, establishment and administrative charges, interest during implementation, trial runs, etc. for which a provision of Rs.80,000/- is made. 55

58 8.5 Working Capital Requirements Capacity utilisation in the first year is expected to be 65% for which following working funds will be required. (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Materials 1 Month 30% Stock of Finished Goods 5 Months 40% Receivables ½ Month 25% Other Expenses 1 Month 100% Total Cost of the Project & Means of Financing (Rs. in lacs) Item Amount Land and Building 4.75 Machinery 6.65 Miscellaneous Assets 0.50 P&P Expenses % on Land and Building & Plant & Machinery 1.15 Working Capital Margin 2.40 Total Means of Finance Promoters Contribution 4.85 Term Loan from Bank/FI Total Debt Equity Ratio 2.35 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity & Build-up As against the rated capacity of 30 tonnes per month, the plant is expected to operate at 65% in the first year and 80% thereafter. 9.2 Sales Revenue at 100% Considering 25% recovery of dehydrated peas, yearly turnover would be 45 tonnes. Thus, turnover at 100% activity level would be Rs lacs considering selling price of Rs.55,000/ Ton. 56

59 9.3 Raw and Packing Materials Required at 100% Green peas pods of 30 tonnes per month or 180 tonnes during season would cost Rs.9.00 lacs assuming average price of Rs.5, 000/- per ton as explained earlier. Aluminium silicate and bleaching powder worth Rs.60, 000/- shall be required whereas cost of packing materials would be Rs.3, 000/- per ton or Rs lacs for 72 tonnes of finished goods. Thus, the raw and packing material would cost Rs lacs at 100% capacity utilisation. 9.4 Utilities Total expenses during the season at 100% would be Rs.60, 000/ Selling Expenses Initially, the concentration would be on direct sale to bulk buyers with around 25% retailing. Accordingly a lump sum provision has been made. 9.6 Interest Interest on term loan of Rs lacs is 12% per annum assuming repayment in 5 years including a moratorium period of 1 year whereas on working capital loan from bank, it is taken at 14% per annum. 9.7 Depreciation It is computed on WDV 10% on building and 15% on machinery and miscellaneous assets. 57

60 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 180 Tonnes Capacity Utilisation 65% 80% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs & Maintenance Selling Expenses Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials 9.40 Utilities (70%) 0.35 Salaries (70%) 1.19 Stores & Spares 0.36 Selling Expenses (75%) 0.46 Admn. Expenses (50%) 0.30 Interest on WC [C] Contribution [A] - [B] 7.14 [D] Fixed Cost 4.17 [E] Break-Even Point [D] [C] 59% 58

61 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 2.01 Operating Leverage = Contribution/EBT = = 3.38 Degree of Total Leverage = FL/OL = = 0.59 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

62 [C] Internal Rate of Return (IRR) Cost of the project Rs lacs. Year Cash 16% 18% 20% Accruals (Rs. in lacs) The IRR is around 19%. Some of the machinery suppliers are 1. International Food Machinery Corpn, Opp. Deep Bhavan, Pandit Nehru Marg, Jamnagar Raylon Metal Works, PO BOX NO , Andheri (E), Mumbai Auric Techno Services Pvt. Ltd. C-101, Shreenath Hermitage, Baner Rd., Pune Tel No. : /99113 Fax No Flavourite Foods and Services Pvt. Ltd., 208, Manas Bhavan, 11 RNT Marg, Indore Tel No. :

63 MUSHROOM PROCESSING 1.0 INTRODUCTION Mushrooms are gradually becoming popular as they are rich in minerals and vitamins and very low on fat and sugar. Fresh mushrooms have very limited life and hence they need to be consumed within few hours. But processing and canning increases their shelf life to few months. Mushrooms are used to make soups, pickles, vegetables etc. and they are also used as additives in many food preparations. As a matter of fact, they are considered as a vegetarian delicacy all over the world and their consumption is increasing in India as well. Their household use is picking up but they are consumed in large quantities in star hotels and restaurants. Hence, firm tie-up with some of them is advisable. 2.0 PRODUCT 2.1 Applications Mushroom is an exotic and nutritious source of vegetarian food and is also easy to digest. It is considered as a suitable substitute for meat and eggs. There are many varieties ofmushroom and most of them are edible. It is a universal product and UP has been considered as a likely location. 2.2 Availability of know-how and Compliances CFTRI, Mysore, has successfully developed the technical know-how. Compliance under the PFA Act is mandatory. 3.0 MARKET POTENTIAL Mushrooms are very popular in most of the developed countries and they are becoming popular in many developing countries like India. Applications and market for mushrooms is growing rapidly in India because of their nice aroma, nutritious values, subtle flavour and special taste. 61

64 Many exotic food preparations like soup, vegetables, pickles etc. are made from them. They are also used for garnishing, to prepare many varieties of gravy and for stuffing several food preparations. But they are still considered as up-market product and their consumption is limited to urban and semi urban areas. Fresh mushrooms have very limited shelf life but processed and canned mushrooms have fairly long shelf life and can be sold even at far off places. Star hotels, exclusive restaurants, certain caterers are the bulk consumers and a firm tie-up for regular supply with some of them is advisable. The product can be sold even through departmental stores, super markets etc. 4.0 MANUFACTURING PROCESS Fresh mushrooms are washed in cold water and then blanched in boiling water for around 3-4 minutes. Then they are dehydrated in drier and packed. It is advisable to pre-treat fresh mushrooms in a solution containing brine to prevent discolouration. Packing is very critical as formation of moisture contaminates mushrooms very quickly. Hence plain cans and brine O of 2% salt and 0.2% citric acid are used for packing. The cans are exhausted at 19 C for 7-8 minutes, sealed and processed under pressure for around half an hour. Yield of final product depends up on the quality of dryer, manufacturing process employed, moisture content in fresh mushrooms and moisture required in the final product. Hence, average yield is taken at 25%. 5.0 CAPITAL INPUTS 5.1 Land and Building Land measuring around 200 sq.mtrs. with built-up area of about 100 sq.mtrs. is adequate. Land may cost Rs. 60,000/- whereas cost of construction could be Rs lacs. 5.2 Machinery A thorough market survey would help to arrive at the proposed processing capacity. Assuming daily capacity of 1 ton or annual capacity of 300 tonnes considering 300 working days would require following machines: Item Qty. Price (Rs.) Baby Boiler 1 60,000 Tray-type Dehydrator 1 70,000 Can Seamer 1 20,000 Can Reforming with Rubber Rollers, Hand Flanger etc. 1 25,000 Exhaust Box with electric Motor 1 15,000 Steam Jacketted Kettle 1 30,000 Weighing Scales 2 5,000 Laboratory Equipments 25,000 Total 2,50,000 62

65 5.3 Miscellaneous Assets Some other support assets like furniture and fixtures, storage racks, packing tables, SS utensils etc. shall be required for which a provision of Rs. 40,000/- is made. 5.4 Utilities The power requirement will be 30 HP and everyday water requirement shall be 1000 ltrs. 5.5 Raw and Packing Materials The most crucial raw material will be good quality fresh mushrooms. Shelf life of fresh mushrooms is few hours and hence the location has to be very close to the cultivation area. Prior arrangements with some cultivators for regular supply must be made. Future planning may include mushroom cultivation for captive consumption. Salt and citric acid will be required in small quantities. Cans of appropriate size, lables and corrugated boxes would form packing materials. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Workers 2 2,250 4,500 Helpers 4 1,250 5,000 Salesman 1 2,500 2,500 Total 12, TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land ,000 Building 100 2,50,000 Total 3,10,000 63

66 8.2 Machinery Machinery worth Rs lacs shall be required as discussed earlier. 8.3 Miscellaneous Assets A provision of Rs. 40,000/- is adequate under this head as explained earlier. 8.4 Preliminary & Pre-operative Expenses A provision of Rs. 60,000/- is made towards pre-production expenses like market assessment, registration, establishment and administrative charges, intereast during implementation, trial runs, etc. 8.5 Working Capital Requirements As against the processing capacity of 300 tonnes, the plant is expected to run at 60% in the first year which would call for following working funds: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Material 1 Month 3 0% Stock of Finished Goods 1 Month 2 5% Receivables 1 Month 25% Other Expenses 1 Month 100% Total Cost of the Project & Means of Financing (Rs. in lacs) Item Amount Land and Building 3.10 Machinery 2.50 Miscellaneous Assets 0.40 P&P Expenses % on Land and Building & Plant & Machinery 0.55 Working Capital Margin 1.40 Total 8.55 Means of Finance Promoters Contribution 2.55 Term Loan from Bank/FI 6.00 Total 8.55 Debt Equity Ratio 2.33 : 1 Promoters Contribution 30% 64

67 Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity & Build-up As against the rated processing capacity of 300 tonnes, capacity utilisation in the first year is assumed to be 60% and thereafter 75%. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Price/Ton Sales Value (Tonnes) (Rs.) Tinned Mushrooms 75 55, Raw and Packing Materials Required at 100% (Rs. in lacs) Product Qty. Price/Ton Value (Tonnes) (Rs.) Fresh Mushrooms , Salt, Citric Acid etc Cans1,76,500 Rs.3/Tin 5.30 Cartons, Labels etc Total Utilities Expenditure on utilities at 100% activity level would be Rs.80,000/ Selling Expenses It is advisable to enter into long term supply arrangements in bulk. This would reduce packing expenses considerably apart from savings in the commission to be paid to retailers. Hence, average selling expenses are considered to be 7.5% of total sales. 9.6 Interest Interest on term loan of Rs 6.00 lacs is 12% per assuming repayment in 3½ years including a moratorium period of 6 months whereas it is 14% per annum on working capital loan from bank. 9.7 Depreciation It is calculated on WDV 10% on building and 20% on machinery and miscellaneous assets. 65

68 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 150 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs & Maintenance Selling 7.5% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials Utilities (70%) 0.35 Salaries (70%) 1.00 Stores & Spares 0.15 Selling Expenses (70%) 1.30 Admn Expenses (50%) 0.24 Interest on WC [C] Contribution [A] - [B] 5.43 [D] Fixed Cost 2.98 [E] Break-Even Point [D] [C] 55% 66

69 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.42 Operating Leverage = Contribution/EBT = = 2.22 Degree of Total Leverage = FL/OL = = 0.64 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

70 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. Year Cash 24% 28% 32% Accruals (Rs. in lacs) The IRR is around 24%. Some of the machinery and packing material suppliers are: 1. Nagpal Brothers, C-127, Phase II, Mayapuri Industrial Area, New Delhi Tel No / SP Engg Works, PB No. 218, Kanpur 3. Lyalpur Engg. Co, PB No. 8, Gaziabad 4. Cowel Can Ltd., PO Barotiwala, Dist. Solan, HP 68

71 POTATO & BANANA CHIPS 1.0 INTRODUCTION Chips are the most popular variety of snacks on various occasions. Besides being salty, spicy or flavoured, consumer preference is always for fresh quality. Potato and banana chips are popular processed food items resulting in substantial value-addition. 2.0 PRODUCTS 2.1 Application Chips are very popular amongst all age groups and they are made from various materials. This industry is very large and is dominated mainly by local manufacturers. Easy availability, freshness and competitive price are the main features. These products can be manufactured in any part of the country but this note envisages Meghalaya as the location. 2.2 Quality standards, Compliances and availability of technology Compliances under the FPO and PFA Act are mandatory. Quality standards as specified by BIS are IS 2397:1988. CFTRI, Mysore, has developed the technical know-how. 3.0 MARKET POTENTIAL 3.1 Demand and Supply There exists a very large market for chips and they can be sold at various retail outlets, paan shops, bus-stands, railway stations, roadside eateries, etc. There also exists institutional market consisting of clubs and other institutions, school & college canteens, army establishments, bars & pubs, railway and airlines caterers, etc. 69

72 3.2 Marketing Strategy Competition from organised sector is increasing but local and small units have distinct advantages in terms of less overheads and transportation costs, longer shelf life, quick access to market and cost. 4.0 MANUFACTURING PROCESS It is very well established and simple. It involves visual inspection and sorting of damaged potatoes and bananas and washing them in water. Then they are peeled and trimmed before slicing or cutting them to the required size. Then they are once again washed and dried. They are then fried and either salt or other spices/flavours are mixed homogenously. After cooling them, they are packed in pouches or plastic bags. A typical process flow chart is as under: Washing, sorting and Peeling of potatoes and bananas Slicing/ Cutting Washing and Drying Frying Seasoning Packaging 5.0 CAPITAL INPUTS 5.1 Land and Building Land measuring to around 250 sq.mtrs. with built-up area of 125 sq.mtrs. would be adequate. Apart from main factory area of sq.mtrs; there will be godown and packing room. Cost of land is estimated to be Rs.0.75 lac whereas that of building Rs.3.15 lacs. 70

73 5.2 Plant and Machinery Following machinery shall be required to produce about 50 tonnes of chips every year with working of two shifts and 300 working days. Item Qty. Price (Rs.) Slicer made of SS with attachments and electric motor 1 30,000 Electrically-operated dryer with trolleys and 96 trays 1 80,000 Automatic Potato Peeling Machine 2 30,000 Automatic Sealing Machine 2 20,000 Coal-fired Furnace 1 15,000 Electrical Installations 10,000 Cutting and peeling knives, aluminium utensils, weighing scale, etc. 20,000 Total 2,05, Miscellaneous Assets It is expected that storage racks, working tables etc. would cost Rs. 45,000/ Utilities Power requirement shall be 10 HP and about 1500 ltrs. of water shall be required in production process. 5.5 Raw Material Potatoes and bananas are grown abundantly in the entire North-East region. It is estimated that Meghalaya grows around 65,000 to 70,000 tonnes of bananas and 1,70,000 tonnes of potatoes every year. Other materials required are salt, edible oil, spices and flavours. But their quantities shall be very small. Printed polythene bags and corrugated or cardboard boxes would form the packing materials. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Workers 2 1,800 3,600 Semi-skilled Workers 2 1,500 3,000 Unskilled Workers 2 1,200 2,400 Salesman 1 2,500 2,500 Total 11,500 71

74 7.0 TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land250 75,000 Building 125 3,15, Plant and Machinery The total cost under this head is likely to be Rs.2.05 lacs as explained earlier. 8.3 Miscellaneous Assets A provision of Rs.45, 000/- is made under this head as explained earlier. 8.4 Preliminary & Pre-operative Expenses A lump sum provision of Rs.40, 000/- is made under this head towards registration charges, establishment expenses and pre-production expenses. 8.5 Working Capital Requirement The total requirement of working capital in the first year at 60% capacity utilisation is estimated at Rs lacs consisting of bank finance of Rs lac and margin money of Rs lac. The detailed calculations are as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw & Packing Materials 1 Month 30% Stock of Finished Goods ½ Month 25% Receivables 1 Month 30% Working Expenses 1 Month 100% Total

75 8.6 Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Land and Building 3.90 Plant and Machinery 2.05 Miscellaneous Assets 0.45 P&P Expenses % on Building and P&M 0.60 Working Capital Margin 0.51 Total 7.91 Means of Finance Promoters Contribution 2.31 Loan from Bank/FI 5.60 Total 7.91 Debt Equity Ratio 2.42 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The installed production capacity shall be 50 tonnes of chips every year considering 300 working days and working of 2 shifts per day. It is expected that the factory would operate at 60% and 75% respectively during first two years. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Selling Price Sales (Tonnes) (Rs.) Potato Chips 30 55, Banana Chips 20 50, Total

76 9.3 Raw and Packing Materials Required at 100% In case of potato chips, process loss is 30% whereas in case of banana chips, it is 20%. Accordingly the input costs have been worked out. Product Qty. Rate/Tone Total (Tons) (Rs.) Potatoes 44 8, Bananas 25 7, Hard Coke 1 5 1, Spices/Flavours, Salt, edible oil, etc Packing Materials 2.00 Total 8.82 (Rs. in lacs) 9.4 Utilities Annual power and water charges at 100% capacity level are assumed to be Rs. 60,000/ Selling and Distribution Overheads In view of competition in the market, there will be need to undertake advertisements in local TV channel, printing of pamphlets, small hoardings etc. Retailers shall have to be given commission of 8%to 10%. Hence, a provision of 12.5% of sales value has been made. 9.6 Interest Interest on term loan finance of Rs.5.60 lacs has been 12% per annum assuming that the loan shall be repaid in 3 years including a moratorium period of 6 months. Interest on bank finance for working capital is taken at 14% per annum. 9.7 Depreciation It is calculated on WDV basis and rates assumed are 10% on building and 20% on plant and machinery 74

77 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 50 Tonnes Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling and Distribution 25% of Sales Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials 5.30 Utilities (70%) 0.25 Salaries (70%) 0.97 Stores & Spares 0.18 Selling Expenses (70%) 2.80 Admn. Expenses (50%) 0.18 Interest on Working Capital [C] Contribution [A] - [B] 6.09 [D] Fixed Cost 3.50 [E] Break-Even Point (D C) 58% 75

78 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.26 Operating Leverage = Contribution/EBT = = 2.35 Degree of Total Leverage = FL/OL = = 0.54 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

79 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. Year Cash 24% 28% 32% Accruals (Rs. in lacs) The IRR is around 31%. Some machinery suppliers are 1. Industrial Equipments, Guwahati 2. Archana Machinery Stores, Guwahati 3. East End Engineering Company, 173/1, Gopalrai Thakur Road, Kolkata Tel. No /

80 TOMATO SAUCE, KETCHUP AND PUREE 1.0 INTRODUCTION Tomato is a very popular vegetable throughout the country and it is grown in many states. Apart from use in vegetables, its down stream products like soup, concentrates, sauce, puree, ketchup are also equally popular and they have a longer shelflife unlike fresh tomatoes. Tomato is perishable and needs to be transported carefully to avoid damage during transit. With the advent of new technology, many down the line products are made and are consumed round the year as table enrichers. 2.0 PRODUCTS 2.1 Applications The products suggested are sauce, ketchup and puree. They are made from tomato juice and many other ingredients and preservatives are added to it to enhance its shelf life and taste. These products are consumed by people of all age groups and demand is going up. These products can be made in states like Maharashtra, Gujarat, Karnataka, UP, HP, North Eastern states and so on, but this note considers Assam as the preferred location in view of the growing market. 2.2 Availability of know-how, Quality Standards and Compliances. CFTRI, Mysore, has successfully developed the technical know-how. BIS has laid down the quality standards vide IS 3881/2/3:1966. Compliances under FPO and PFA Act are mandatory. 78

81 3.0 MARKET POTENTIAL 3.2 Demand and Supply Tomatoes are available during the season at cheaper rates and prices start shooting up during off-season. But main reason for these products becoming popular is their extensive use as enrichers along with bread and other such preparations, in making some fastfood items like pizza, burger, hot dogs etc. and as additives with many food preparations. Hence, these products are witnessing increase in demand year after year. They have already become popular in urban and semi-urban areas and are now making in-roads in rural markets as well. Thus, there is a good scope for these products especially in semi-urban and rural areas. 3.2 Marketing Strategy There are many established national as well as regional brands but they have captured mainly the urban and elite markets and for a quality product, there is a vast market which can be penetrated by offering competitive prices. Apart from a growing household market, other lucrative segment is eateries, restaurants, sandwich makers, fastfood joints etc. Marketing would play a crucial role and placement, publicity, commission to retailers etc. are important aspects. 4.0 MANUFACTURING PROCESS Fully grown or matured and ripe tomatoes are thoroughly washed preferably in running water. Afterwards, they are boiled in the steam jacketed kettles to facilitate pulping. During pulping, juice is extracted and other solid materials are separated. This extracted juice is the basic material from which other products are made. Sauce is made by concentrating juice and during the process; salt, sugar, vinegar, spices, preservatives, onion etc. are added to the extent that the mixture contains not less than 12% tomato solids and 28% total solids. Sauce is passed through sieve to remove fibrous and other materials. In case of ketchup, the process is more or less same, but many spices like ginger, garlic, clove, pepper are added with salt, sugar, vinegar and preservatives. While making puree, juice is concentrated under vacuum with around 9% to 12% solids. Products are then packed in bottles. Depending upon quality of tomatoes, recovery of juice varies from 40% to 45%. 5.0 CAPITAL INPUTS 5.1 Land and Building A plot of land measuring around 300 sq.mtrs. is suggested. Considering price of Rs. 250/- per sq.mtr, cost of land would be Rs. 75,000/-. Requirement of total constructed area will be about 150 sq.mtrs. A large production hall of around 75 sq.mtrs. is suggested. Raw materials and finished goods godowns may occupy 25 sq.mtrs. Packing room of about 25 sq.mtrs. and office etc. of 25 sq.mtrs. would suffice. Cost of construction is taken at Rs. 2500/- per sq.mtr. Thus, total expenditure on civil work will be Rs. Rs.3.75 lacs. 79

82 5.2 Plant and Machinery Keeping in mind the overall size of the market and the financial viability or economics of the project, it is suggested to have rated production capacity of 300 tonnes per year with 300 working days and working of 2 shift every day. To facilitate installation of this capacity, following set of machineries will be needed: Item Qty. Total Cost (Rs.) Baby Boiler 1 50,000 Steam Jacketed Kettles 3 90,000 Washing Tanks 2 15,000 Pulper 1 35,000 Stirrers 3 45,000 Vacuum Filling Machines 2 45,000 Bottle Washing Machines 2 30,000 Crown Corking Machines 2 7,000 Concentration Tank 1 20,000 Laboratory Equipments 15,000 Precision Weighing Scale 1 10,000 Total 3,62, Miscellaneous Assets Expenditure of Rs. 75,000/- is considered for other assets like aluminium top working tables, furniture and fixtures, plastic buckets/tubs, storage rack and bins, SS utensils etc. 5.4 Utilities Total power requirement shall be 35 HP whereas water requirement per day will be 2,500-3,000 ltrs. for washing of tomatoes and for sanitation and potable purposes. Coal of around 60 tonnes will be required for boiler per year. The total cost of utilities at 100% capacity level is estimated to be Rs. 2,50,000/ Raw Material The most critical raw material will be fully grown and ripe tomatoes. They are grown almost all over Assam with annual production of more than 1 lac tons. Thus, availability of good quality tomatoes will not be a bottleneck. Other materials like sugar, various types of spices, vinegar, salt will not be required in large quantities and will be available locally. Regarding packing materials, glass bottles of 500 gms and 1 kg. shall be required with caps and corrugated boxes for outer packing. Other items like labels, BOPP tape etc. will also be needed. 80

83 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled-workers 6 1,800 10,800 Semi-skilled Workers 4 1,500 6,000 Helpers 6 1,000 6,000 Salesman 2 2,500 5,000 Total 27, TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building The total expenditure on land and civil work is estimated to be Rs lacs as explained earlier. 8.2 Plant and Machinery For the contemplated rated production capacity of 300 tonnes, machinery worth Rs lacs shall be required as detailed earlier. 8.3 Miscellaneous Assets A provision of Rs.75,000/- is made under this head which is considered to be adequate. 8.4 Preliminary & Pre-operative Expenses For pre-production expenses like registration and establishment charges, travelling, other administrative expenses, interest during implementation, trial runs etc. an amount of Rs. 60,000/ - is set aside. 81

84 8.5 Working Capital Requirement It is envisaged that the plant would operate at 60% in the first year. At this activity level following working capital needs are estimated: (Rs.in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Material 1 Month 30% Stock of Finished Goods ½ Month 25% Receivables 1 Month 25% Working Expenses 1 Month 100% Total Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Land and Building 4.50 Plant and Machinery 3.62 Miscellaneous Assets 0.75 P&P Expenses % on Building and Plant and Machinery 0.81 Working Capital Margin 3.10 Total Means of Finance Promoters Contribution 3.98 Term Loan from Bank/FI 9.40 Total Debt Equity Ratio 2.35 : 1 Promoters Contribution 29% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The rated production capacity of the plant is 300 tonnes per year whereas actual capacity utilisation is expected to be 60% and 75%. 82

85 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Selling Price Sales (Tonnes) (Rs.) Tomato Sauce , Tomato Ketch-up , Tomato Puree 50 25, Total Raw Materials Required at 100% Recovery of juice from tomato is 40-45%. To arrive at the realistic projections, it is taken at 40%. Prices of tomatoes vary from Rs. 3,000/- to Rs. 6,000-7,000 per ton depending upon season. Hence average purchase price is considered to be Rs. 5,000/- per ton. Product Qty. Rate Value (Tonnes) (Rs./Ton) Tomatoes 750 5, Sugar 20 16, Vinegar, Spices, Salt and preservatives 2.50 Packing Material Glass bottles of 500 gms 3,00,000 Rs Glass bottles of 1 kg. 1,50,000 Rs Corrugated Boxes 15,000 Rs.28/ Total (A) Labels, BOPP Tape, etc Total (B) Total (A+B) (Rs. in lacs) 9.4 Utilities As explained earlier, total cost of utilities like power, water and hard coke at 100% capacity shall be Rs lacs per year. 9.5 Selling Expenses Since the unit will be entering the market for the first time, it has to offer attractive selling commission of 15%-17.5% to dealers and retailers. Necessary back-up support by way of hoardings, advertisement on local TV-channel, free-sampling etc. has to be undertaken. A provision of 25% of sales income is made every year which is slightly on the higher side. 83

86 9.6 Interest Interest on term loan of Rs lacs is taken at 12% per annum considering full repayment in 4 years including a moratorium period of 1 year. Interest on working capital loan from bank is calculated at the rate of 14% per annum. 9.7 Depreciation The method applied is WDV with and 10% on building and 20% on machinery and miscellaneous assets PROJECTED PROFITABILITY (Rs. In lacs ) No. Particulars 1st Year 2nd Year A Installed Capacity 300 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw Materials Packing Materials Utilities Salaries Stores and Spares Repairs and Maintenance Selling 25% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % Profit after Tax Cash Accruals Repayment of Term Loan

87 11.0 BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw Material Packing Material Utilities (70%) 0.90 Salaries (60%) 2.00 Stores and Spares 0.24 Selling and Distribution Exps.(70%) Admn Expenses (50%) 0.36 Interest on WC [C] Contribution [A] - [B] [D] Fixed Costs [E] Break-Even Point [D] [C] 61% 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.31 Operating Leverage = Contribution/EBT = = 2.57 Degree of Total Leverage = FL/OL = =

88 [B] Debt Service Coverage Ratio (DSCR) (Rs. In lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr. Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR 3.63 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. Year Cash 24% 28% 32% Accruals (Rs. In lacs) The IRR is around 40%. The machines would be available with 1. M/s. Industrial Equipments 2. M/s. Archana Machinery Stores located at Guwahati, Assam 3. East END Engg. Company, 173/1, Goplarai Thakur Rd., Kolkata Tel No / Punjab Engg. Works, 32, Ramakrishna Samadhi Rd., Kolkata

89 GINGER & GARLIC PROCESSING 1.0 INTRODUCTION Ginger & garlic are important commercial crops cultivated throughout the country with major production in the states of Gujarat, Orissa, Maharashtra, Himachal Pradesh, Kerala, Haryana, Madhya Pradesh & Uttar Pradesh. Garlic is mainly used as a condiment in food preparations and is also used as carminative and gastric stimulant in many medicinal preparations. Processing of ginger is undertaken to dehydrate it and for preparing ginger candy. Ginger & garlic-based products have wide applications in food processing as well as many other industries. A proper market survey has to be conducted to find out demand potential for each industry segment. 2.0 PRODUCT 2.1 Applications Many products can be manufactured from ginger and garlic like dehydrated ginger or garlic, ginger candy, garlic powder, ginger oil and oleoresins and so on. This note considers dehydration of ginger and garlic and manufacture of ginger candy. This activity can be taken up in many parts of the country including the North-East region. However, this note considers UP as the preferred location in view of good market prospects. 2.2 Availability of know-how and Compliances CFTRI, Mysore, has successfully developed the technical know-how. Compliance under PFA Act is mandatory. 3.0 MARKET POTENTIAL Ginger and garlic are important commercial crops with versatile applications. As a condiment, ginger is used for flavouring many food products like tomato sauce or ketchup, salad dressings, 87

90 PAPAD MANUFACTURING 1.0 INTRODUCTION Papad is a popular and tasty food item in the Indian diet since many centuries. It is essentially a wafer-like product, round in shape and made from dough of powdered pulses, spices, powdered chilly and salt. Variety of pulses and proportion of pulses and spices varies from region to region depending upon preferences of local people whereas certain varieties are popular on a larger scale. Traditionally this activity was confined to household papad making but in view of increasing demand and availability of machinery (mechanisation) it has now been developed in cottage and small scale sector. 2.0 PRODUCT 2.1 Applications Papad is a favourite item with Indians and is used as taste enricher with the main course and as a snack item. Since it is made from pulses, it is easy to digest and nutritious as well. It is very easy to make instant food item and is either fried in edible oil or simply roasted before serving. Its shelf life is 2½ to 3 months. This product can be made anywhere in the country. The note envisages location at an appropriate place in Assam. 2.2 Availability of technology, quality standard and compliances CFTRI, Mysore, has successfully developed papad press. Compliance with PFA Act is mandatory. Quality standards as specified by BIS are available vide IS 2639: MARKET POTENTIAL Market for papad is steadily growing across the country. There are not much seasonal fluctuations but demand generally goes up by 10% to 15% during winter season. There are a couple of national brands but the market is predominantly controlled by the local brands. 96

91 This activity is yet to pick up in Assam and thus prospects for a new entrant are bright, provided quality is good and prices are competitive. It can be sold through many outlets of provision and departmental stores. Before launching the product, a quick assessment of consumer preferences is advisable. 4.0 MANUFACTURING PROCESS Papad can be manufactured from different varieties of pulses or there could be a combination of pulses as well. Adequate quantity of water is added in flour of pulses, common salt, spices and sodium bicarbonate and homogenous mixing is done to obtain dough. After about 30 minutes, small balls weighing around 7-8 grams of dough are made. These balls are then placed in papad making machine or papad press wherein these balls are pressed and circular papads are made as per the size of mould. These papads are then sun-dried but in this note drier with trolley is recommended as sun-drying may not be always feasible in Assam. Lot of 25 or 50 papads is then packed in polythene bags. CFTRI, Mysore, has successfully developed papad making press. 5.0 CAPITAL INPUTS 5.1 Land and Building A plot of land of about 150 sq.mtrs. with built-up area of approximately 80 sq.mtrs. shall be adequate to house all the equipments leaving sufficient space for storage and packing. The location need not be at a prominent place as counter sales is not envisaged. The total cost of land is taken at Rs. 50,000 whereas the construction cost is assumed to be Rs.2.00 lacs. 5.2 Plant and Machinery It is suggested to have annual rated production capacity with 300 working days and 2 shift working of 60 tonnes. To install this capacity, following machinery shall be needed: Item Qty. Price (Rs.) Grinder with electric motor having kgs/hr. capacity 1 22,000 Mixer of 20 kgs. per charge capacity with electric motor 1 20,000 Pedal-operated papad press 2 14,000 Drier with trolley and 48 trays with heating element of 9 KW 1 50,000 Extra aluminium trays 50 5,000 Sealing Machine 2 4,000 Water Storage tank 1 5,000 Laboratory Equipments 5,000 Weighing Scale 1 7,000 Total 1,32, Miscellaneous Assets Some other assets like aluminium top tables, furniture & fixtures, baskets, drums, storage racks, aluminium/stainless steel utensils etc. shall also be required for which a provision of Rs. 40,000/- is made. 97

92 5.4 Utilities The total power requirement shall be 25 HP whereas water required for process and sanitation and other purposes shall be about ltrs per day. The annual cost under this head at 100% capacity utilisation shall be around Rs. 50,000/ Raw Material The all important raw material would be flour of pulses depending upon the product mix. Since annual requirement even at 100% will not be more than 60 tonnes, availability would not be a bottleneck. Other materials like salt, spices, edible oil, preservatives etc. shall be required in small quantity and they will be available locally. Packing material like different sizes of polythene bags and corrugated boxes shall also be available locally. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Workers 2 1,800 3,600 Helpers 4 1,200 4,800 Salesman 1 2,000 2,000 Total 10, TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Item Area (Sq.Mtrs) Cost (Rs.) Land ,000 Building 80 2,00,000 Total 2,50, Machinery The total cost as spelt out earlier will be Rs. 1, 32,000/ Miscellaneous Assets A provision of Rs. 40,000 as explained before is considered to be sufficient. 98

93 8.4 Preliminary & Pre-operative Expenses Expenses like registration & establishment charges, trial run, interest during project implementation etc. will be around Rs.40,000/ Working Capital Requirement The rated production capacity of the project shall be 60 tonnes per year but it is assumed that it would operate at 60% in the first year. The working capital needs at this level shall be as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw Materials ½ Month 30% Stock of Finished Goods ½ Month 25% Receivables 1 Month 25% Other Expenses 1 Month 100% Total Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Land and Building 2.50 Machinery 1.32 Miscellaneous Assets 0.40 P&P Expenses % on Building and Plant & Machinery 0.38 Working Capital Margin 0.60 Total 5.60 Means of Finance Promoters Contribution 1.75 Term Loan from Bank/FI 3.85 Total 5.60 Debt Equity Ratio 2.20 : 1 Promoters Contribution 31% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 99

94 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The annual installed capacity shall be 60 tonnes but in view of teething troubles and other difficulties like power failure, absenteeism etc. the actual utilisation is taken at 60% and 75% respectively during first 2 years. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Selling Price Sales (Tonnes) (Rs.) Papad 60 32, Raw Materials Required at 100% (Rs. in lacs) Product Qty. Rate per Value (Tonnes) Ton Flour of Pulses 58 16, Edible Oil, Salt, Spices, Preservatives, etc Packing Material 0.70 Total Utilities Annual expenditure on utilities even at 100% activity level is likely to be Rs. 50,000/- as explained earlier. 9.5 Interest Interest on term loan of Rs lacs is 12% per annum considering a moratorium period of 1 year and then repayment in 3 years. Interest on working capital assistance from bank is taken at 14% per annum. 9.6 Depreciation The method adopted is WDV and rates considered are 10% on building and 20% on plant & machinery and miscellaneous assets. 100

95 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 60 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling 10% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % 0.30 Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw Materials 7.93 Utilities (70%) 0.28 Salaries (70%) 0.98 Stores & Spares 0.18 Selling Expenses (80%) 1.01 Admn. Expenses (50%) 0.12 Interest on WC [C] Contribution [A] - [B] 3.69 [D] Fixed Costs 2.10 [E] Break-Even Point [D] [C] 57% 101

96 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.77 Operating Leverage = Contribution/EBT = = 3.56 Degree of Total Leverage = FL/OL = = 0.50 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

97 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% 24% Accruals The IRR is around 20%. The machinery suppliers in Guwahati are 1. Industrial Equipments 2. Archana Machinery Stores

98 READY-TO-EAT NOODLES 1.0 INTRODUCTION Many fast food items have flooded the markets but noodles have emerged as the most popular item as it is cheaper, very easy to make and nutritious. Urban and semi-urban markets are controlled by Maggi and other players are Top Ramen and other brands. Maggi has revolutionised the concept and this product has gone to majority of the urban households. As an off-shoot of this development, noodles have become very popular in India. Good quality and cheaper product can be pushed in the market with systematic strategy and network. 2.0 PRODUCT 2.1 Applications There are many pasta products like vermicelli, macaroni, instant noodles etc. They are wheatbased snack food items. They are extruded products and are meant for direct consumption. Preparation time is hardly few minutes and even children can make it. The product has good market in most of the metros and accordingly the location has to be selected. 2.2 Compliances and quality standards Certification under the PFA Act is necessary. The BIS has specified standards vide 1485: MARKET POTENTIAL 3.1 Demand and Supply There is a very large and growing market. Urban market is captured by some national brands as mentioned earlier. But there is a good scope in semi-urban and certain rural markets as the branded products which are sold at about Rs. 100/- per kg. are considered to be costly. At the 104

99 PEANUT PROCESSING 1.0 INTRODUCTION Peanut is a mass consumption item and is used for extraction of oil, for making butter, chikkies and chocolates, as an ingredient in making several food and snack preparations, for munching and so on. India is one of the largest producers along with the USA; China and Argentina. Gujarat, Andhra Pradesh, Tamilnadu and Maharashtra are the main cultivating states. Peanuts from the Saurashtra region of Gujarat are famous all over the world on account of their big size, nutty flavour and crunchy taste. This note basically deals with processing for munching purpose for which there is a vast demand all over the state. The market is primarily controlled by the small and unorganised sector. The preferred locations are Gujarat, Maharashtra, TN, AP etc. 2.0 PRODUCT Groundnut is an agriculture produce with 2 crops, with the winter crop contributing more than the summer crop. Groundnuts in shell (pods) are de-stoned and then de-shelled to obtain peanuts. After grading them as per different sizes (known as counts) they are sold in the market. The product discussed here is roasted and salted peanuts for direct consumption. 2.1 Compliance under the PFA Act is compulsory. 3.0 MARKET POTENTIAL 3.1 Demand and Supply Large quantity of roasted and salted peanuts are sold throughout Gujarat round the year. The market is completely scattered and controlled by tiny or cottage units with few local established brands. In most of the cases, processing as well as handling is unhygienic and volumes are very small. Pricing is very crucial as the average price is around Rs.60/- per kg. 112

100 3.2 Marketing Strategy There are some locally famous brands at centres like Ahmedabad, Rajkot, Surendranagar etc. Hence, while selecting location, care has to be taken to ensure smooth supply of raw peanuts and lack of competition from regional established brands. Taluka place in Saurashtra may satisfy these aspects. There is competition from unorganised sector units and reasonable price, attractive packing, lucrative commission to retailers and consistent supply are the critical factors. Fast turnover is very important. 4.0 MANUFACTURING PROCESS Saurashtra region of Gujarat produces around lac tonnes of groundnuts (in shell) every year. Considering average recovery of peanuts at about 70%, more than 8 lac tonnes of peanuts are available every year. Peanuts of medium size would be bought from market yards and then roasted in electrically operated roaster. The roasting time will be around 90 minutes. These roasted peanuts will be cooled and then salt will be mixed with it before packing them. The process loss is about 2-3%. 5.0 CAPITAL INPUTS 5.1 Land and Building Pricing is very critical as explained earlier. Hence, it is advisable to buy a readymade shed of around 80 sq.mtrs. Production area would require about 30 sq.mtrs. and balance area can be utilised for storage and packing. The cost of shed is expected to be Rs.2.00 lacs. 5.2 Machinery For a new entrant, initial roasting capacity has to be moderate. Daily roasting capacity of 300 kgs. considering 8-10 hours working may be planned. With 300 working days, the annual capacity would be 90 tonnes. This would need following machines: Item Qty. Price (Rs.) Electrically-operated roaster of 75 kgs. Cap. 1 75,000 Weighing scales, bag sealing machines, etc. 25, Miscellaneous Assets Total 1,00,000 Some other assets like furniture and fixtures, packing tables, SS utensils etc. shall be required for which a provision of Rs. 35,000/- is made. 5.4 Utilities Power requirement shall be 10 HP whereas water of around 500 ltrs. shall be required for potable and sanitation. 113

101 5.5 Raw Materials The most important raw material shall be good quality peanuts. Availability would not be a problem as monthly requirement even at 100% utilisation would be just 75 tonnes. But care has to be taken to select peanuts with uniform size and minimum moisture. Requirement may not warrant direct procurement from the groundnut processor (due to low quantity) and hence the trader has to be selected carefully as high moisture content reduces shelf life of the peanut and may result in high level of aflatoxin which is harmful to human beings in the long run. Standard packing of 100 gms and 200 gms. may be introduced for which printed polythene bags shall be required. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Worker 1 2,500 2,500 Helpers 3 1,250 3,750 Salesman 1 2,500 2, TENTATIVE IMPLEMENTATION SCHEDULE Activity Total 8,750 Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Building A readymade shed of around 80 sq.mtrs. would cost Rs.2.00 lacs as stated earlier. 8.2 Machinery For installed production capacity of 90 tonnes per year, investment in machinery will be Rs.1.00 lac as explained earlier. 8.3 Miscellaneous Assets A provision of Rs. 35,000/- is sufficient under this head as described earlier. 8.4 Preliminary & Pre-operative Expenses Pre-production expenses like registration, establishment and administrative charges, interest during implementation, trial runs etc. may cost Rs. 40,000/-. 114

102 8.5 Working Capital Requirements Capacity utilisation in the first year is assumed to be 60% for which following working capital shall be required: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw and Packing Materials ½ Month 30% Receivables ½ Month 25% Working Expenses 1 Month 100% Total Cost of the Project & Means of Financing (Rs. in lacs) Item Amount Land and Building 2.00 Machinery 1.00 Miscellaneous Assets 0.35 P&P Expenses % on Land and Building & Plant & Machinery 0.30 Working Capital Margin 0.75 Total 4.80 Means of Finance Promoters Contribution 1.45 Term Loan from Bank/FI 3.35 Total 4.80 Debt Equity Ratio 2.31 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity & Build-up As against the rated annual capacity of 90 tonnes, actual utilisation is expected to be 60% in the 1st year and 75% thereafter. 9.2 Sales Revenue at 100% Assuming selling price of Rs. 55,000/- per ton, the annual income would be Rs lacs. 115

103 9.3 Raw and Packing Materials Required at 100% (Rs. in lacs) Product Qty. Price/Ton Value (Tonnes) (Rs.) Medium-sized Peanuts 93 31, Salt 6 5, Packing Materials (@ Rs.1500/Ton of finished goods) Utilities Yealry cost of utilities at 100% will be Rs. 45,000/-. Total Selling Expenses A provision of 22.5% of sales revenue every year is made which would take care of margins of stockists and retailers, transportation csots and some publicity at retail counters. 9.6 Interest Interest on term loan of Rs lacs is 12% per annum assuming repayment in 3 years including a moratorium period of 1 year. Interest on working capital from bank is 14% per annum. 9.7 Depreciation It is calculated on WDV 10% on building and 20% on machinery and miscellaneous assets. 116

104 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 90 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Repairs & Maintenance Selling 22.5% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials Utilities (70%) 0.19 Salaries (70%) 0.73 Selling Expenses (70%) 4.68 Admn Expenses (50%) 0.15 Interest on WC [C] Contribution [A] - [B] 5.44 [D] Fixed Cost 3.52 [E] Break-Even Point [D] [C] 65% 117

105 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.28 Operating Leverage = Contribution/EBT = = 2.83 Degree of Total Leverage = FL/OL = = 0.45 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

106 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% 24% 28% Accruals The IRR is around 26%. Some of the machinery suppliers are 1. Sagar Industries, GIDC Estate, Naroda, Ahmedabad 2. Yash Industries, Aji Indl. Estate, Rajkot 3. Sahyog Steel Fabrication, 28, Bhojrajpara, Gondal, Tel No Durai Industrial Works, 1143, Mettupalayam Rd., Coimbatore Tel No /

107 SESAME OIL 1.0 INTRODUCTION India is one of the major producers of many oilseed crops like groundnut, mustard, rapeseed, sesame seed etc. Traditionally, Indians consume substantial quantity of edible oils mainly as a cooking medium. Oil extraction is an age-old activity in the country and with the advent of new techniques, the extraction process is now convenient as well as hygienic. Oil extracted from sesame seeds is not as popular as other edible oils like groundnut, cottonseed, mustard or rapeseed but it is used as a cooking medium in some parts of the country, while producing hydrogenated oil to restrict its adultration in some other products and in preparation of certain medicines. 2.0 PRODUCT 2.1 Applications Sesame oil is extracted from sesame seeds. Recovery of oil from seeds is around 35% with the help of oil expeller, leaving around 4% oil in the cake which is sold to the cattle feed manufacturers. This product can be produced in western part of the country and this note considers Gujarat as the preferred location. 2.2 Availability of know-how, Quality Standards and Compliances CFTRI, Mysore, has successfully developed the technical know-how. BIS has laid down quality standard vide IS 547:1968. Compliance under the PFA act 3.0 MARKET POTENTIAL Edible oil is used in all Indian households since centuries as a cooking medium to make food as well as many snacks. In spite of very large production of many oilseeds, the country still imports 120

108 very large quantities of semi-processed edible oils due to their ever increasing demand. Apart from use in households, there is a vast market among of restaurants, dhabas, canteens and hostels, certain food processing units, farsan or snack makers, caterers and so on. Use of sesame seed oil is not as high as some other edible oils and hence a moderate production capacity has to be planned. But it has certain industrial applications as well and it is used while making hair oil, hydrogenated oil and certain medicines. 4.0 MANUFACTURING PROCESS It is simple and standardised. Sun-dried seeds are cleaned on shaker screen to remove stone, dust etc. and then they are fed to expeller wherein oil is extracted. This process is repeated to extract maximum oil. Oil is then filtered on filter press and packed. About 35% oil is extracted and balance is known as de-oiled cake which is sold to cattlefeed producers. 5.0 CAPITAL INPUTS 5.1 Land and Building Land measuring to around 200 sq.mtrs. with built-up area of 100 sq.mtrs. is enough for production, packing and storage. Cost of land is assumed to be Rs.60,000/- whereas construction cost is taken as Rs lacs. 5.2 Machinery To install annual processing capacity of 200 tonnes with 300 working days and double shift working, following machinery shall be required: Item Qty. Price (Rs.) Oil Expellers complete with long heating kettle, 2 2,50,000 other accessories and electricals Filter Press with plunger pump, filter cloth etc. 1 40,000 Mini Boiler 1 40,000 Shaker Screen with Blower 1 20,000 Weighing Scale, Oil storage tanks etc. 25,000 Total 3,75, Miscellaneous Assets Other assets like furniture and fixtures, electrical, working tables etc. would cost Rs. 60,000/ Utilities Total power requirement shall be 40 HP whereas water requirement per day would be 1000 ltrs. 121

109 5.5 Raw and Packing Materials The most important raw material would be good quality sesame seeds. Annual production of the state is around 75,000 tonnes with Botad, Dhaari, Rajkot being the major centres. Availability of sesame seeds would be sesonal and hence factory would work for 8 months. Oil will be packed in plastic containers of different sizes whereas packing of de-oiled cake would be in second-hand gunny bags. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Machine Operators 2 3,000 6,000 Skilled Workers 2 2,500 5,000 Unskilled Workers 4 1,250 5,000 Salesman 1 2,500 2,500 Total 18, TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land ,000 Building 100 2,50,000 Total 3,10, Machinery The total cost of machinery is expected to be Rs lacs as discussed earlier. 8.3 Miscellaneous Assets A provision of Rs. 60,000/- would take care of other assets as stated before. 122

110 8.4 Preliminary & Pre-operative Expenses A provision of Rs. 75,000/- would take care of pre-production expenses like registration, administrative and travelling expenses, interest during implementation and trial-runs, etc. 8.5 Working Capital Requirements At 65% working in the first year, the working capital needs would be as under. (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw Materials ½ Month 30% Stock of Finished Goods ½ Month 25% Receivables ½ Month 25% Working Expenses 1 Month 100% Cost of the Project & Means of Financing Item Total (Rs. in lacs) Amount Land and Building 3.10 Machinery 3.75 Miscellaneous Assets 0.60 P&P Expenses % on Land and Building & Plant & Machinery 0.70 Working Capital Margin 1.40 Total Means of Finance Promoters Contribution 3.20 Term Loan from Bank/FI 7.10 Total Debt Equity Ratio 2.21 : 1 Promoters Contribution 31% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 123

111 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity & Build-up As against the rated capacity of 200 tonnes, actual utilisation during season of 8 months is envisaged to be 65% and second year onwards at 75%. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Price/Ton Value (Tonnes) (Rs.) Sesame Oil 70 75, Doiled Cake 120 5, Raw and Packing Materials Required at 100% Total (Rs. in lacs) Product Qty. Price/Ton Value (Tonnes) (Rs.) Seasame Seeds , Packing Material and others Utilities Annual cost of utilities at 100% would be Rs. 80,000/-. Total Interest Interest on term loan of Rs lacs is 12% per annum assuming repayment in 4 years including a moratorium period of six months. On working capital loan from bank it is taken at 14% per annum. 9.6 Depreciation It is 10% on building and 15% on machinery and miscellaneous assets on WDV basis. 124

112 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 200 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs & Maintenance Selling 5% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials Utilities (70%) 0.36 Salaries (70%) 1.04 Stores & Spares 0.12 Selling Expenses (70%) 1.33 Admn Expenses (50%) 0.21 Interest on WC [C] Contribution [A] - [B] 5.76 [D] Fixed Cost 3.24 [E] Break-Even Point [D] [C] 56% 125

113 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.48 Operating Leverage = Contribution/EBT = = 2.29 Degree of Total Leverage = FL/OL = = 0.65 [B] Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

114 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 20% 24% 28% 32% Accruals The IRR is around 22%. Some of the machinery suppliers are 1. Chempro Engg. & Consultants, 43, Shukhshine Complex, Sunrise Park, Drive-in Road, Ahmedabad , Tel. No , Fax: Sifler International, Plot No. 83, Sector 6, Faridabad Tel. No , Fax: Osaw Agro Industries Pvt. Ltd., Osaw Complex, Jagadhri Road, Ambala Cant , Tel. No , Fax: Sahyog Steel Fabrication, 28, Bhojrajpara, Gondal Tel No

115 VEGETABLE OIL REFINERY 1.0 INTRODUCTION: Vegetable oil and fat resources are indispensable to mankind as a source of nutrient and industrial raw materials. Crude vegetable oil obtained from various oil milling units is further refined before use for edible purposes. Refined edible oil is a process where free fatty acids are volatized, condensed and recovered simultaneously with vacuum de-colouring operation. Sometimes, refining process is limited to simple physical treatment such as heating and filtering in regard to refining of superior quality of crude oil. Generally the cake in the oil is separated by centrifuge, decolouring by active clay and steam deodorization at high temperature in vacuum up to 5 mm. Hg. This is not a location specific project and can be set up at a place where crude oil is easily available. The preferred locations can be Gujarat, AP, Maharashtra and so on. 2.0 PRODUCTS It is possible to refine edible oils from crude groundnut oil, sesame oil, mustard oil etc. In this project, these three crude edible vegetable oils have been considered for refining purposes. 2.1 Apart from compliances under PFA Act, registration under AGMARK is advisable. 3.0 MARKET POTENTIAL The importance of edible refined vegetable oils has been appreciated and ambitious plan has been chalked out to increase production of edible refined vegetable oils, including soya bean oil, by the Government of India in the previous Five Year Plans. The demand for refined edible vegetable oils has increased in the consumer market. With growing population, increase in the 128

116 disposable income and overall trend of consumerism, demand for edible oils is shooting up year after year. The country still imports large quantities of crude edible oil and the Kandla port of Gujarat is active in such imports. The domestic production has gone up during last few years but there still exists a gap between demand and supply which results in large imports. Thus a new vegetable oil refinery has got good potential. 4.0 MANUFACTURING PROCESS Special pre-treatment steps which are essentially a combination of de-gumming and blending under special operating conditions, eliminate all impurities and render oil fit to be processed at elevated temperature under vacuum. Various steps involved in refining are (1) Super cleaning (2) Contobleaching and (3) De-acidification. All these processes are very well standardized and practiced in the country since long. The average recovery is 90% 5.0 CAPITAL INPUTS 5.1 Land and Buildings A plot of around 800 sq.mtrs. with built-up area of 600 sq.mtrs. shall be adequate. The built up area would accommodate three manufacturing sections leaving sufficient space for storage and packing. Cost of land would be around Rs lacs whereas that of civil work, it would be Rs lacs. 5.2 Plant and Machinery It is proposed to install a plant to obtain refined vegetable oils of 4 tons every day or 1200 tons every year considering 300 working days. 129

117 The requirement of plant and machinery for the proposed capacity would be as below: Particular Super cleaning section Contobleach Section Deacidification Section Steel Structure for main plant Water Cooling System Oil Storage Tanks Steam Generating Unit - Boiler etc- 150Kgs Capacity Water Softening Unit Raw Material Storage Tanks Steam piping, accessories, tools and equipments etc. Quantity/ Unit No. 1 set 1 Set 1 Set 1 Set 1 Set 1 Set 1 Set One Two 1 Set There are many turn-key suppliers of the refining plant and the estimated cost is Rs lacs. 5.3 Miscellaneous Assets Some other assets like furniture and fixtures, storage tanks, HDPE barrels, weighing scales, etc. are likely to cost Rs lacs. 5.4 Utilities Total power requirement shall be 75 HP whereas per day water requirement shall be 3000 ltrs. 5.5 Raw and Packing Materials The major raw materials required are crude groundnut oil, crude sesame oil and crude mustard oil. The state of Gujarat is famous for crude as well as refined vegetable oils with centers like Kadi, Rajkot, Gondal, Amreli, Dhaari etc. engaged in production of various edible oils round the year. Thus procuring adequate quantity of crude oil will not be a bottleneck. Other materials like phosphoric acid, citric acid, bleaching powder etc would be available from the nearby trading centres. Aluminum tins or plastic jars of different capacities along with corrugated boxes, labels, and box strappings would be the packing materials. 130

118 6.0 MANPOWER REQUIREMENTS Particulars No Monthly Total Monthly Salary (Rs.) Salary (Rs.) Machine Operators 4 3,500 14,000 Semi-skilled Workers 4 1,750 7,000 Helpers 6 1,250 7,500 Clerk 1 2,500 2,500 Salesman 1 2,500 2, TENTATIVE IMPLEMENTATION SCHEDULE Activity Total 33,500 Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building (Rs. in lacs) Particulars Area (Sq.Mtrs) Cost Land Building Total Plant and Machinery The total cost of machinery is estimated to be Rs lacs, as explained earlier. 8.3 Miscellaneous Assets The provision for miscellaneous assets of Rs lacs shall be adequate as explained earlier. 8.4 Preliminary and Pre-Operative Expenses The registration charges, establishment expenses, trial run expenses, interest during implementation etc would be around Rs.8 lacs. 131

119 8.5 Working Capital Requirement At 60% utilisation in the first year, the total working capital needs shall be as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw and ½ Month 30% Packing Materials Stock of Finished Goods ½ Month 25% Receivables ½ Month 25% Working Expenses 1 Month 100% Cost of the Project and Means of Financing Items Total (Rs. in lacs) Amount Land and Buildings Plant and Machinery Miscellaneous Assets Preliminary and Pre-operative Expenses % on land and building and machinery 7.75 Working Capital Margin Total Means of Finance Promoter s Contribution Bank Loan/ Financial Institutions Total Debt Equity Ratio 2.34 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The installed production capacity of the proposed unit would be 1200 MTA with 300 working days of 16 hours. The capacity utilization of 60% and 75% is envisaged during the first two years. 132

120 9.2 Sales Revenue at 100% Capacity (Rs. in lacs) Product Qty. in Selling Price Value Tonnes Per Ton/Rs. Refined Groundnut Oil , Refined Sesame Oil , Refined Mustard Oil , Raw and Packing Materials Required at 100% (Rs. in lacs) Total Product Qty Rate per Value (Tonnes) Ton Crude Vegetable Oils : Groundnut Oil , Sesame Oil , Mustard Oil , Phosphoric Acid, Bleaching Powder, Activated Carbon etc Packing Rs.600/Ton Utilities The annual cost of utilities at 100% activity level would be Rs.6.00 lacs. Total Interest Interest on term loan of Rs lacs has been 14% per annum assuming repayment in 6 years including a moratorium period of 1 year, whereas interest on working capital would be 14% per annum. 9.6 Depreciation It has been calculated on WDV 10% on building and 15% on machinery and other assets. 133

121 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No Particulars 1st Year 2nd Year A Installed Capacity 1200 MTA - Capacity Utilisation 60% 75% Sales Realisation B. Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs and Maintenance Selling 4% Administrative Expenses Total C. Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit Income 20% Profit after Tax Cash Accrual Repayment of Term Loan BREAK-EVEN POINT ANALYSIS (Rs. in lacs) No. Particulars Amount A Sales B Variable Cost Raw and Packing Materials Utilities (70%) 3.15 Salaries (70%) 3.32 Stores and Spares 3.60 Selling Expenses (70%) Administrative Expenses (50%) 1.95 Interest on working capital 4.95 Total C Contribution (A - B) D. Fixed Cost E. Break-Even Point (D C) 65% 134

122 12.0 [A] LEVERAGES Financial leverage = EBIT/EBT = = 2.50 [B] Operating Leverage = Contribution / EBT = = 4.49 Degree of Total Leverage = FL/OL = = 0.56 Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr 6th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

123 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% Accruals The IRR is around 17% Some of the equipment and packing machinery suppliers are as under: 1. Sifter International, Plot No. 83, Sector 6, Faridabad Tel. No , Fax: Osaw Agro Industries Pvt. Ltd., Osaw Complex, Jagadhri Road, Ambala Cant , Tel. No , Fax: Forsberge Agritech (I) Ltd, GIDC Estate, Makarpura, Vadodara 4. Chempro, Engg. and Consultants, 43, Sukhshine Complex, Sunrise Park, Nr. Drive In, Ahmedabad Tel No / Container Industries, C-299, Ghatkopar Industrial Estate, 72 LBS Marg, Mumbai

124 BAKERY 1.0 INTRODUCTION Bakery is a traditional activity and occupies an important place in food processing industry. Despite the advent of fully automatic and semi-automatic bread as well as biscuit making plants, a sizeable number of people still prefer fresh bread and other products from bakery. With growing population and preference for fresh and ready-to-eat convenient food items, demand for bakery products is steadily increasing. 2.0 PRODUCTS 2.1 Applications There are many bakery products like bread and its different variants, biscuits, cakes & pastries, cookies, puffs etc. having ready market round the year. Each product enjoys a very wide range in terms of size or weight, flavours, end-use and so on. There is a tremendous scope to introduce new varieties every year. However, this note deals only with bread and biscuits. This project can be started anywhere in the country and there is no preferred location as such. This note considers Meghalaya as the contemplated location in view of good market prospects. 2.2 Availability of technology, Quality Standards and Compliances CFTRI, Mysore, has successfully developed the technical know-how. BIS has specified quality standards vide IS 1483:1979. Compliance under the PFA Act is mandatory. 3.0 MARKET POTENTIAL A bakery can be set up in urban as well as rural areas. Depending upon its location, a suitable product mix can be worked out. This profile primarily considers semi-urban location from where nearby rural centres can also be catered to. In view of this consideration, the suggested products 137

125 are bread and biscuits. These products are very well accepted in the market and have gained consumer acceptance. 4.0 MANUFACTURING PROCESS 4.1 Bread Sifting of flour Preparation of suspension Preparation of dough by kneading all the ingredients Fermentation of dough Baking Cooling and packing The Process Flow Chart is as under: Flour Sifting Dough Preparation Fermentation Baking Cooling and Packing 4.2 Biscuits Mixing of ingredients except flour in required proportion in paste form. Preparation of dough by mixing with flour. Placing dough in biscuit moulding and cutting machine Baking Cooling & packing 5.0 CAPITAL INPUTS 5.1 Land and Building It is advisable to buy a readymade shed of around 100 sq.mtrs. which can accommodate bakery as well as retail outlet-cum-show room. The total cost could be approximately Rs. 2,50,000/- as the location has to be conveniently approachable. 138

126 5.2 Plant and Machinery It is recommended to install bread making capacity of 72 tonnes per year considering 300 working days. Each bread would be of 400 gms and 600 breads could be made every day. Biscuit making capacity of 7.5 tonnes per year is suggested. Average weight of each packet could be 250 gms and 100 such packets may be produced each day for about 300 days every year. To install this production capacity, following machines are required costing about Rs. 2,75,000/-. Item Qty. Dough Kneader 1 Flour Sifter 1 Hand-dividers 4 Oven 1 Baby Boiler 1 Moulds and Dies Weighing Scale 1 Mixing Vessels 4 Misc. Equipments 5.3 Miscellaneous Assets Other assets like storage bins and racks in the factory as well as retail outlet, tables, glass covered display counters, chairs etc. shall be required which would cost about Rs.1,00,000/ Utilities Electricity requirement shall be 20 HP whereas per day water requirement would be 500 ltrs. 5.5 Raw Materials The major raw material required is flour. Ideally, the unit can enter into a long term supply arrangement with an established flour mill to ensure adequate and timely supply. Other items like yeast, sugar, ghee, milk powder, salt, edible colour and flavours shall be available from nearby trading centres. Since their requirement will not be substantial, supplies can be easily tied up. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs) Salary (Rs) Skilled Worker 1 1,800 1,800 Semi-skilled Workers 2 1,500 3,000 Salesmen 2 1,500 3,000 Total 7,

127 7.0 TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 1.5 Site selection and commencement of civil work 0.5 Completion of civil work and placement of 1.5 orders for machinery Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Building Built up area of around 100 sq.mtrs. can comfortably accommodate bakery as well as retail outlet for which a provision of Rs. 2,50,000/- is adequate. 8.2 Plant and Machinery The total cost is estimated to be Rs lac as explained before. 8.3 Miscellaneous Assets A provision of Rs lac has been made which includes retail outlet as well. Details are furnished earlier. 8.4 Preliminary & Pre-operative Expenses Expenditure like registration charges, establishment expenses, trial run expenses etc. would be around Rs. 30,000/ Working Capital Requirement It is estimated that the total working capital required in the first year at 60% capacity utilisation shall be Rs lacs comprising of bank loan of Rs lacs and margin of Rs.0.62 lacs as shown below: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw Materials ½ Month 30% Receivables ½ Month 25% Working Expenses 1 Month 100% Total

128 8.6 Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Building 2.50 Plant and Machinery 2.75 Miscellaneous Assets 1.00 P&P Expenses % on Building and 0.42 Plant & Machinery Working Capital Margin 0.62 Total 7.59 Means of Finance Promoters Contribution 2.20 Loan from Bank/Fl 5.39 Total 7.59 Debt Equity Ratio 2.44 : 1 Promoters Contribution 29% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The installed production capacity of bread making would be 72 tonnes and of biscuits 7.5 tonnes. Capacity utilisation of 60% and 75% is envisaged during first two years. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Selling Price Sales (Rs.) Bread 1.80 lac Nos (72 Tonnes) Rs.6/- each Biscuits 0.30 lac Packets (7.5 Tonnes) Rs.18/ Packet 5.40 Total

129 9.3 Raw Materials Required at 100% (Rs. in lacs) Product Qty. Rate per Ton Value (Tonnes) (Rs.) Flour 52 8, Yeast , Sugar , Ghee , Milk Powder , Salt 1.2 4, Edible Colours and Flavours 0.30 Packing Materials 0.45 Total Utilities Yearly cost of utilities at 100% activity level would be Rs.50,000/ Interest It is assumed that term loan of Rs lacs shall be repaid in 4%z years including a moratorium period of 1 year and carry 12% per annum whereas interest on working capital is considered to be 14% per annum. 9.6 Depreciation It is computed on WDV basis and rates assumed are 10% on building and 20% on plant and machinery and other assets. 142

130 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 80 Tonnes Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling 5% of Sales Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % Profit after Tax Cash Accruals Term Loan Repayment BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales 9.72 [B] Variable Costs Raw Materials 4.20 Utilities (70%) 0.21 Salaries (35%) 0.34 Stores & Spares 0.06 Selling Expenses (80%) 0.40 Admn Expenses (50%) 0.05 Interest on WC [C] Contribution [A] - [B] 4.26 [D] Fixed Cost 2.09 [E] Break-Even Point [D = C] 49% 143

131 12.0 (A) LEVERAGES Financial Leverage = EBIT/EBT = = 1.47 Operating Leverage = Contribution/EBT = = 2.13 Degree of Total Leverage = FL/OL = = 0.69 (B) Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

132 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% 24% 28% 32% Accruals The IRR is around 30%. Some machinery suppliers are 1. Industrial Equipments, Guwahati, Assam 2. Archana Machinery Stores, Guwahati, Assam 3. Delight Engg. Works, Lane No. 8, Aslatpura, Moradabad Tel No /1687, Fax: Foodmac Engg., Pvt. Ltd., 37038, Sector II, Parwanoo (HP) Tel No /5, Fax:

133 BISCUIT MAKING 1.0 INTRODUCTION Biscuit making is a conventional activity in many parts of the country. Despite the advent of modern, large capacity and automatic biscuit making plants, large section of people especially in semi-urban and rural areas still prefer fresh biscuits from local bakery as they are cheap and offer many varieties. These manufacturers are able to cater to some typical local palate as well. Thus, they are able to withstand competition from organised sector units. 2.0 PRODUCTS 2.1 Applications Biscuits are eaten by all sections of people across the board round the year. They are, thus, mass consumption items with number of varieties and shapes. The market is scattered. There are some dominant national and regional brands. Biscuits can be manufactured at a location which is close to the market. 2.2 Quality Standards and Compliances The BIS has specified quality standards vide IS 1011:1992. Compliance with PFA Act is necessary. 3.0 MARKET POTENTIAL 3.1 Demand and Supply Market for biscuits is scattered all over the country. There are three distinct market segments viz. urban, semi-urban and rural. Urban and semi-urban markets are dominated by many national and regional brands but even then many local manufacturers have also carved a special niche as their products are fresh, they offer many varieties and they are cheaper. 146

134 3.2 Marketing Strategy: Rural and certain semi-urban markets are mainly captured by small manufacturers. This note primarily suggests to enter this market. Apart from domestic customers, there is a vast market at bus and taxi stands, railway stations, weekly hats or bazaars, highway eateries or dhabas and melas or fairs. A small delivery vehicle can take care of destinations located in the vicinity of about km. Attractive margins to traders/retailers will be crucial. 4.0 MANUFACTURING PROCESS The process is conventional and easy. Wheat flour along with other ingredients is mixed with water and dough is prepared. Then it is kept at a normal room temperature for about couple of hours to allow proper fermentation. Then it is placed in biscuit moulding trays and these trays are placed in oven for baking. After requisite baking, trays are taken out, cooled and biscuits are packed. The process flow chart is as under: Mixing and Dough Making Fermentation Baking Packing 5.0 CAPITAL INPUTS 5.1 Land and Building It is advisable to buy a readymade shed of around 75 sq.mtrs. rather than buying land and then undertaking construction. This would save cost as well as time. The main production area would occupy about 40 sq.mtrs. whereas a store-cum-packing room and sales counter would be accommodated in remaining 35 sq.mtrs. The total cost would be Rs lacs. 5.2 Plant and Machinery It is suggested to have installed production capacity to manufacture 50 tonnes of biscuits per year assuming working for about 330 days for hours every day. This would require following set-up. Item Qty. Price (Rs.) Flour Sifter 1 5,000 Dough Kneader-50Kgs Capacity 1 50,000 Electrically-operated Oven- Size 48 inches 1 80,000 Biscuit Moulding Trays 20 30,000 Delivery Vehicle 1 1,50,000 Total 3,15,

135 5.3 Miscellaneous Assets Other assets like storage facilities, furniture and fixtures, weighing scales, sealing and wrapping machine and glass covered display counter for sales would need investment of about Rs. 90,000/ Utilities Electricity requirement shall be 20 HP whereas daily consumption of water for process and potable and sanitation purposes will be around 500 ltrs. 5.5 Raw Materials The all important raw material will be wheat flour. The requirement will not be substantial but supply arrangements with flour mill of the region would ensure smooth supplies. Other items like yeast, sugar, ghee, milk powder, salt, edible colours, flavours etc. will be required in small quantities. Packing wrappers and polythene bags will be the packing materials. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Worker 1 2,500 2,500 Semi-skilled Workers 2 1,750 3,500 Salesmen 1 2,000 2,000 Driver-cum-Salesman 1 2,000 2,000 Total 10, TENTATIVE IMPLEMENTATION SCHEDULE Activity Period (in months) Application and sanction of loan 1.5 Site selection and commencement of civil work 0.5 Completion of civil work and placement of orders for machinery 1.5 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Building Readymade shed of around 75 sq.mtrs. will be sufficient as explained earlier. Its cost is assumed to be Rs lacs. 8.2 Plant and Machinery The total cost under this head is likely to be Rs lacs as detailed earlier. 8.3 Miscellaneous Assets A provision of Rs lac would take care of all the requirements. 148

136 8.4 Preliminary & Pre-operative Expenses A provision of Rs. 50,000/- would take care of pre-production expenses like establishment, administrative and legal charges, travelling, interest during implementation, trial runs etc. 8.5 Working Capital Requirement It is assumed that the plant would operate at 60% activity level in the first year for which following working capital will be required: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Raw Materials ½ Month 30% Receivables ½ Month 25% Working Expenses 1 Month 100% Total Cost of the Project and Means of Financing Item (Rs. in lacs) Amount Building 1.25 Machinery 3.15 Miscellaneous Assets 0.90 P&P Expenses % on Building and Machinery 0.45 Working Capital Margin 0.52 Total 6.77 Means of Finance Promoters Contribution 2.17 Term Loan from Bank/FI 4.60 Total 6.77 Debt Equity Ratio 2.12 : 1 Promoters Contribution 31% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up As against the installed production capacity of 50 tonnes, the actual capacity utilisation is expected to be 60% and 75% respectively during first 2 years. 149

137 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty. Selling Price Sales (Tonnes) Rs. Assorted Biscuits 50 55,000/ Raw and Materials Required at 100% (Rs. in lacs) Product Qty. Rate per Value Tonnes Ton (Rs.) Wheat Flour 35 12, Yeast 1 35, Sugar 20 17, Ghee , Milk Powder , Salt 1 4, Edible Colours and 0.24 Flavours Packing Materials 1.20 Total Utilities Requirement of utilities are already discussed. Annual expenditure at 100% activity level is expected to be Rs.60,000/ Selling Expenses Marketing will be very crucial. Traders/retailers shall have to be paid attractive commission in the range of 12½% to 15½ %. Hoardings shall have to be put up or pamphlets to be distributed. Hence a provision of 20% of sales income is made. 9.6 Interest Interest on term loan of Rs lacs is 12% per annum considering repayment in 4 years including a moratorium period of 1 year. Interest on bank assistance for working capital is 14% per annum. 150

138 9.7 Depreciation It is calculated on WDV 10% on building and 20% on machinery and miscellaneous assets PROJECTED PROFITABILITY (Rs. in Lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 50 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling Expenses 20% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % Profit after Tax Cash Accruals Term Loan Repayment

139 11.0 BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials 7.25 Utilities (65%) 0.23 Salaries (65%) 0.78 Stores & Spares 0.30 Selling Expenses (70%) 2.31 Admn Expenses (50%) 0.12 Interest on WC [C] Contribution [A] - [B] 5.41 [D] Fixed Cost 3.26 [E] Break-Even Point [D] [C] 60% 12.0 (A) LEVERAGES Financial Leverage = EBIT/EBT = = 1.37 Operating Leverage = Contribution/EBT = = 3.20 Degree of Total Leverage = FL/OL = =

140 (B) Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR 2.60 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 18% 20% 24% Accruals The IRR is around 22%. Some of the machinery suppliers are Master Mechanical Works Pvt Ltd, 75,Link Road, Lajpat Nagar 3, New Delhi Nagpal Brothers, C-127, Phase 2, Mayapuri Industrial Area, New Delhi Delight Engg. Works, Lane No. 8 Aslat pura, Moradabad Tel No / , Fax: Foodmac Engg. Pvt. Ltd , Sector 2, Parwanoo (HP). Tel No /233295, Fax: KGN Engg., Plot No. 174, Old Airport Road, Secunderabad Tel No

141 EXTRUDED PUFFED SNACKS 1.0 INTRODUCTION Extruded puffed snacks are made from degermed corn or corn grits, wheat, rice or other cereals. There has been a remarkable growth in the varieties and popularity of such products because they are easily affordable, tasty, easy to make and nutritive. These products are flavoured with cheese, spices, onion, garlic or chilly and broadly fall in the fast food category. 2.0 PRODUCTS 2.1 Applications Many varieties with different flavours and sizes can be made. With some imagination, variants of these products can be introduced at regular intervals once the pulse of consumer taste and preference is understood. At times, even some cosmetic changes can lure the consumers. Familiarity with local tastes and likings is very essential. This is a universal project with no preferred location as such. This note considers Assam as the proposed location. 2.2 Availability of know-how and compliances DFRL, Mysore, has developed the know-how. Compliance with PFA Act is compulsory. 3.0 MARKET POTENTIAL With urbanisation, disposable incomes in urban, semi-urban and even in some rural areas are going up. This aspect coupled with changing life styles has opened up many new markets in many sectors including the food processing sector. Last few years have witnessed a remarkable change in preferences and spending habits especially of the younger generation and youth. Extruded puffed snacks are primarily targeted at this segment of the population. These products find various applications like tea time snacks, as munching during ceremonies or parties, during 154

142 picnics or outings or simply as fun products. Hence with proper publicity, adequate placement to ensure easy availability and attractive packaging the market can be captured, provided quality is upto the mark. 4.0 MANUFACTURING PROCESS Good quality corn grits or rice or wheat flour or a combination of these ingredients is mixed with water and then this mixture is fed to the hopper of the extruder. During the process, extruder machine converts natural starches in these cereals into cold solution, which on cooking in the extruder, is converted into an expanded form. These longish pieces are then cut into the desired length. The product at this stage has moisture content of about 6% and it is immediately dried in the dryer to bring down moisture level to about 2%. Raw dried pieces are then fed to blender for coating with oil and spices. Oil is sprayed through a spray gun activated by dried and filtered air from a compressor. These coated products are directly fed to the hopper of automatic form, fill and seal machine where they are packed. 5.0 CAPITAL INPUTS 5.1 Land and Building The built-up area requirement is about 100 sq.mtrs. and therefore a plot of land of around 200 sq.mtrs. is recommended. Price of land may vary according to the location but it is taken at Rs. 300/- per sq.mtr. Thus, an amount of Rs lacs is likely to be spent. As regards, the constructed area, main production hall of 50 sq.mtrs. would be enough. Storage and packing rooms would be of 30 sq.mtrs. and balance 20 sq.mtrs. for a small office and toilet blocks. The total construction cost is estimated to be Rs lacs. 5.2 Plant and Machinery Keeping in mind the financial viability of the project, it is advisable to have installed production capacity of 6 tonnes per month or 72 tonnes per year with 300 working days and working of 2 shifts per day. In view of this, following machines are suggested: Item Qty. Price (Rs.) Extruder with screws, barrel and electric motor and other attachments 1 3,00,000 Tray dryer with 48 trays 1 80,000 Blender with spray gun, heater and compressor 1 70,000 Automatic Form, fill and sealing machines 2 1,50,000 Weighing scale, hot air oven, laboratory equipments, etc. 50,000 Total 6,50, Miscellaneous Assets Many other support assets like furniture and fixtures, electrical, storage racks and bins, stainless steel utensils etc. shall be required for which a provision of Rs. 75,000/- is made. 155

143 5.4 Utilities Total power requirement is estimated to be 60 HP whereas about 1000 ltrs. of water shall be required every day. The total cost under this head at 100% activity level is assumed to be Rs. 1,00,000/ Raw Material The main raw materials are corn grits and rice or wheat flour. Other materials are edible oils, spices, salt, chillies, etc. All of them are available locally. Corns are not grown in much quantities in North-East but since the quantity required is not much, no difficulty is envisaged. However, it is advisable to line up the supplies well in advance. Packing would play a critical role and hence it is suggested to engage a professional designer. Suppliers who can supply printed rolls of pouches need to be contacted in advance. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Worker 4 1,800 7,200 Unskilled Workers 4 1,250 5,000 Semi-skilled Workers 2 1,500 3,000 Machine Operators 2 2,500 5,000 Clerk 1 2,000 2,000 Salesmen 2 2,500 5, TENTATIVE IMPLEMENTATION SCHEDULE Activity Total 27,200 Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 1 Completion of civil work and placement of orders for machinery 4 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Item Area (Sq.Mtrs) Cost (Rs.) Land ,000 Building 100 2,50,000 Total 3,10,

144 8.2 Plant and Machinery A detailed list is already furnished earlier. Total landed cost and installation charges are estimated to be Rs lacs. 8.3 Miscellaneous Assets A provision of Rs. 75,000 would take care of needs under this category as narrated before. 8.4 Preliminary & Pre-operative Expenses Expenses like registration charges, establishment and quick market assessment fees, interest during implementation, trial runs, etc. are taken at Rs. 65,000/ Working Capital Requirement The proposed installed capacity of the plant shall be 72 tonnes per year. But the capacity utilisation in the first year is assumed to be 65%. At this activity level, the working capital needs shall be as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Shock of RMs 1 Month 30% Stock of Packing Materials 1 Month 30% Stock of Finished Goods ¼ Month 25% Receivables ½ Month 25% Workin g Expenses 1 Month 100% Total Cost of the Project and Means of Financing (Rs. in lacs) Item Amount Land and Building 3.10 Plant and Machinery 6.50 Miscellaneous Assets 0.75 P&P Expenses % on Land, Building and Plant & Machinery 0.90 Working Capital Margin 1.35 Total Means of Finance Promoters Contribution 3.85 Loan from Bank/FI 9.40 Total Debt Equity Ratio 2.44 : 1 Promoters Contribution 29%

145 Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up The proposed production capacity of the plant at 100% is 72 tonnes per year. Capacity utilisation in the first year is envisaged to be 65% whereas second year onwards it is restricted to 75%. 9.2 Sales Revenue at 100% (Rs. in lacs) Product Qty Selling Sales Value (Tonnes) Price/Ton Extruded Puffed Snacks 72 70, Raw Materials Required at 100% (Rs. in lacs) Product Qty Price/Ton Value (Tonnes) (Rs) Corn Grits 50 13, Wheat/Rice Flour 15 14, Edible Oil 2 50, Spices 3 70, Salt 2 4, Printed Rolls of Food Grade Plastic Film (15 lacs pouches of 50 gms. capacity) 6.32 Corrugated Boxes (Assorted sizes) 7.04 Total Utilities The total expenditure under this head at 100% capacity utilisation is expected to be Rs.1,00,000/- as explained earlier. 9.5 Selling Expenses Extruded puffed snacks can be sold through number of outlets spread across a large area which would entail considerable transportation cost. Commission of 7% to 8% shall have to be paid to the retailers and product sampling is also required. 9.6 Interest Interest on term loan assistance of Rs lacs is 12% per year considering repayment in 5 years including a moratorium period of 1 year. Interest on working capital loan from bank is 14% per annum. 9.7 Depreciation It is calculated on WDV basis and rates considered are 10% on building and 20% on plant and machinery and miscellaneous assets. 158

146 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 72 Tonnes - Capacity Utilisation 65% 75% Sales Realisation B Cost of Production Raw Materials Packing Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling 12.5% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw Materials Packing Materials 5.90 Utilities (70%) 0.39 Salaries (35%) 1.95 Stores & Spares 0.60 Selling Expenses (70%) 2.87 Admn. Expenses (50%) 0.60 Interest on Working Capital [C] Contribution [A] - [B] 9.64 [D] Fixed Cost 5.84 [E] Break-Even Point (D C) 61% 159

147 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.50 Operating Leverage = Contribution/EBT = = 3.44 [B] Degree of Total Leverage = FL/OL = = 0.44 Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

148 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 18% 20% 24% Accruals The IRR is around 23% The machinery shall be available from: 1. M/s. Archana Machinery Stores, Guwahati 2. M/s. Narang Corporation, Shillong 3. Gurunanak Engg and foundry works, 166 Focal Point, Mehta Rd,Amritsar Tel No / , Fax: Sadanand Approtech Pvt. Ltd. B-34, Mini Nagar, Dahisar (E), Mumbai Tel No /

149 FISH PROCESSING 1.0 INTRODUCTION Fish is a highly perishable item and reportedly, bulk of the catch is sun-dried after salt curing which is certainly an unhygienic process. However, with steadily growing market, it has become imperative to process scientifically for better shelf life as well. Kerala, Goa, Maharashtra, Gujarat, Orissa, Tamil nadu, West Bengal and Karnataka are the leading states where sea fish is available in plenty. The location has to be in close proximity of sea and major consumer centres must also be kept in mind. Apart from domestic market, there are good export possibilities as well but this note aims only at domestic market. 2.0 PRODUCT 2.1 Applications Fish and prawns are very popular amongst non-vegetarians and many delicacies including some snacks are made from fish. Availability of fresh fish is generally confined to the coastal areas and hence popularity of ready to serve fish and prawn products is increasing. 2.2 Availability of know-how and Compliances DFRL, Mysore, has successfully developed the technical know-how. Compliance under PFA Act is mandatory. 3.0 MARKET POTENTIAL Fish is a popular non-vegetian variety and many delicious food and snack items are prepared from fish & prawns. Number of non-vegetarians is growing steadily. Fish is a highly perishable item and salt curing and sun-drying method of processing is not only unhygienic but also imparts limited shelf life. Fresh fish is available only near the coastal areas and consumers at other locations get processed varieties. Apart from individual households, fish is regularly consumed 162

150 in restaurants, canteens, clubs etc. Flight kitchens and caterers is another important segment. The Defence Purchase Department of the Govt. of India is a major bulk consumer. There are many varieties which can be processed like tuna, prawn, pomfret, mackerel and so on. Apart from institutional supplies, retailing can be undertaken with proper placement in the departmental stores, super bazars, shopping malls etc. 4.0 MANUFACTURING PROCESS After cleaning fish in water, certain items like head, fins, tail etc. are removed and remaining parts are washed in water again to remove blood, dirt etc. Then they are cut and packed in sterilised tins. They are canned with tomato sauce, brine or oil. In case of prawns, after washing and cleaning meat is blanched in 3 to 5% brine for 8-10 minutes and then pieces are canned. Then these cans are subjected to live steam in the exhaust box at a temperature of around o C for minutes. Exhausted cans are immediately sealed air tight and treated in retort at a pressure of 10 to 15 lbs for 30 to 90 minutes. Pressure and processing time depends upon size of cans and products. Cans taken out from retort need to be cooled as early as possible. The net yield is around 65%. 5.0 CAPITAL INPUTS 5.1 Land and Building A plot of land of around 250 sq.mtrs. with built up area of 125 sq.mtrs. can accommodate processing equipments. Washing and cleaning (dressing) can be undertaken outside the main building with asbestos sheet roofing and water tanks. Land may cost Rs.75,000/- whereas cost of construction is assumed to be Rs lacs including washing area. 5.2 Machinery To install annual rated capacity of 200 tonnes with days and around 12 hours working, following machines shall be needed: Item Qty. Price (Rs.) Oil-fired Boiler 1 1,25,000 Autoclave complete with pressure gauges, safety valves, electricals etc. 1 60,000 Double-seamer complete with all accessories 1 70,000 SS Make blanching tank with steam heating pipe etc. 1 25,000 Straight line type exhaust box complete with heating pipe, reduction gear, electricals etc. 1 90,000 Straight-line type exdhaust box complete with heating pipe, reduction gear, electricals etc. 1 90,000 Canning Retort 1 70,000 Can reformer with flanger 1 80,000 SS Vessels, weighing-scales, cooling tanks, laboratory instruments, etc 1,00,000 Total 6,20,

151 5.3 Miscellaneous Assets Other assets like furniture & fixtures, storage racks, plastic crates and tubs, SS utensils, office equipments, packing tables etc. shall be needed for which a provision of Rs lacs is made. 5.4 Utilities Total power requirement shall be 60 HP whereas boiler would need oil. Everyday water requirement would be 5000 ltrs. 5.5 Raw and Packing Materials The all-important raw material would be good quality fresh fish & prawns. Tomato sauce or edible oil or brine shall be needed in small quantity. Empty cans of suitable size, lables, cartons, box strapping etc. shall be the packing material. 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Machine Operators 2 3,000 6,000 Skilled Workers 2 2,500 5,000 Semi-skilled Workers 4 1,750 7,000 Helpers 4 1,250 5,000 Salesman 1 2,500 2, TENTATIVE IMPLEMENTATION SCHEDULE Activity Total 25,500 Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 2 Completion of civil work and placement of orders for machinery 6 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land ,000 Building 125 3,50,000 Total 4,25,

152 8.2 Machinery The total cost of machinery is estimated to be Rs lacs as explained earlier. 8.3 Miscellaneous Assets The total cost under this head is likely to be Rs lacs as stated before. 8.4 Preliminary & Pre-operative Expenses There will be many pre-production expenses like registration, establishment and administrative charges, travelling, consultation, interest during implementation, trial runs etc. for which an amount of Rs.1.25 lacs is provided for. 8.5 Working Capital Requirements At 60% capacity utilisation in the first year, the working capital needs shall be as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Materials 1 Month 30% Stock of Finished Goods ½ Month 25% Receivables ½ Month 25% Other Expenses 1 Month 100% Total Cost of the Project & Means of Financing (Rs. in lacs) Item Amount Land and Building 4.25 Machinery 6.20 Miscellaneous Assets 1.50 P&P Expenses % on Land and Building & Plant & Machinery 1.05 Working Capital Margin 3.15 Total Means of Finance Promoters Contribution 5.10 Term Loan from Bank/FI Total Debt Equity Ratio 2.31 : 1 Promoters Contribution 29% 165

153 Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity & Build-up As against the annual rated of 200 tonnes, the plant is expected to operate at 60% in the first year and 75% thereafter. 9.2 Sales Revenue at 100% The selling price would largely depend upon the variety of fish/prawns. But on an average, it is taken as Rs.160/- per kg. or Rs lacs per ton. Assuming 65% yield, the total sales at 100% would be Rs lacs. 9.3 Raw and Packing Materials Required at 100% Price of fresh fish/prawn would differ from variety to variety but average price is taken as Rs.60,000/- per ton and thus total cost of 200 tonnes would be Rs lacs and other materials would cost around Rs.6.00 lacs. Cost of packing materials would be Rs.12,000/- per ton of finished goods or Rs lacs. Thus, total raw and packing materials cost at 100% would be Rs lacs. 9.4 Utilities Annual cost of utilities at 100% would be Rs.3.00 lacs. 9.5 Selling Expenses A provision of 20% of sales income is made to take care of expenses like selling commission, transportation, publicity, free sampling etc. 9.6 Interest Interest on term loan of Rs lacs is 12% per annum assuming repayment in 5 years including a moratorium period of 1 year whereas on working capital loan from bank it is 14% per annum. 9.7 Depreciation It is 10% on building & 15% on machinery & miscellaneous assets on WDV basis. 166

154 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 200 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs & Maintenance Selling 20% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials Utilities (70%) 1.26 Salaries (70%) 2.15 Stores & Spares 0.60 Selling Expenses (70%) Admn Expenses (50%) 0.36 Interest on WC [C] Contribution [A] - [B] [D] Fixed Cost [E] Break-Even Point [D] [C] 62% 167

155 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.59 [B] Operating Leverage = Contribution/EBT = = 4.16 Degree of Total Leverage = FL/OL = = 0.38 Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

156 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 20% 24% 28% 32% Accruals The IRR is around 23%. Some of the machinery and Packing Materials suppliers are 1. T Alimohammed & Co, MJ Phule Market, Mumbai Raylon Metal Works,JB Nagar, Andheri (E), Mumbai Techno Equipments, 31, Parekh Street, Girgaon, Mumbai Container Industries, C-299, Ghatkopar Industrial Estate, 72, LBS Marg, Mumbai

157 POULTRY PROCESSING 1.0 INTRODUCTION Poultry farms are increasing steadily. Many government agencies are encouraging poultry farming and even short term training courses are organised regularly. Such farms have generated considerable employment opportunities in semi urban and rural areas. Marketing of poultry birds is expensive and death of birds during transit is the main bottleneck. This compels most of the poultry farms to concentrate on nearby markets even if it means less prices. Instead, if these birds are processed after dressing and packed in tins then transportation is easier, shelf life of the product goes up and the product is more hygienic. 2.0 PRODUCT 2.1 Applications Good quality poultry birds are slaughtered and after dressing, they are cooked and packed in cans. This ensures longer shelf life and also takes care of problems associated with transportation of live birds, higher costs and loss of birds during transit. Proposed processing plant must be located in the vicinity of poultry farms. This project has good potential in several states of the country and this note considers UP as the preferred location. 2.2 Availability of know-how and Compliances DFRL, Mysore, has successfully developed the technical know-how. Compliance with PFA Act is mandatory. 3.0 MARKET POTENTIAL Number of non-vegetarians is steadily increasing year after year and because of changing social structure, eating non vegetarian food is no more a taboo. Even amongst the non vegetarians, various food and snack preparations made from chicken are very popular. Increase in the 170

158 disposable incomes of people, changing lifestyles and preference for instant or convenience food has seen many new products becoming very popular during last few years. Likewise, number of star hotels, exclusive restaurants and other eateries are also going up year after year. Clubs, canteens, caterers and flight kitchens is yet another growing market. Longer shelf life and hygienically packed poultry products would be preferred by many. Proper marketing network supported by publicity would be very important. 4.0 MANUFACTURING PROCESS The process starts with slaughtering of birds and subsequently their feathers, lungs, kidneys, head and other unwanted parts are removed and balance portion is thoroughly washed in water. Then this cleaned portion is cut into required sizes and packed into sterilised tins. They are canned either with 3 to 5% brine or with curried vegetables. Then these tins are subjected to live steam in an exhaust box for around 15 minutes at a temperature of about oc. Then the cans are sealed air tight and are further processed in retort at a pressure of 10 to 15 lbs. for about minutes. Then the cans are immediately cooled to room temperature and labelling and further packing is undertaken. The process flow chart is as under: Slaughtering and Cleaning of Birds Washing Cutting and Canning Steaming of Cans Sealing Cooling and Labeling 5.0 CAPITAL INPUTS 5.1 Land and Building A plot of land of about 300 sq.mtrs. with built-up area of 125 sq.mtrs. would be needed. Slaughtering and dressing operations can be undertaken in a shed adjacent to main factory with asbestos sheet roofing along with water storage tanks and processing and packing can be 171

159 undertaken in the main shed. Cost of land is assumed to be Rs. 90,000/- whereas total construction cost is taken as Rs.4.00 lacs. 5.2 Machinery Annual rated processing capacity (after dressing) of 120 tonnes with 300 working days and 12 hours working every day would need following equipments: Item Qty. Price (Rs.) Oil-fired Steam Boiler 1 1,00,000 Straight Line Exhaust Box complete with reduction gear boxes, electric motor and accessories 1 75,000 Canning Retort with pressure gauge, safety valve and other accessories 1 60,000 Can Reformer & Flanger 1 each 1,00,000 Can Seamer 1 85,000 Can Tester 1 50,000 Laboratory equipments, SS utensils, weighing scales, knives/cutters, plastic crates etc. 80,000 Total 5,50, Miscellaneous Assets Other assets like furniture & fixtures, packing tables, exhaust fans, plastic buckets/tubs etc. would cost Rs. 80, Utilities Power requirement shall be 40 HP whereas furnace oil shall be required for boiler. Daily water requirement will be around 5000 ltrs. 5.5 Raw and Packing Materials The most critical raw material would be good quality poultry birds. Prior arrangements for regular supply are advisable. Other materials like spices and salt, citric acid, garlic, onion, tomatoes and coriander shall also be required in small quantities. Cans, cartons, labels, box strapping would be the packing materials. 172

160 6.0 MANPOWER REQUIREMENTS Particulars Nos. Monthly Total Monthly Salary (Rs.) Salary (Rs.) Machine Operators 2 3,000 6,000 Skilled Workers 2 2,500 5,000 Semi-skilled Workers 2 1,750 3,500 Helpers 12 1,250 15,000 Salesman 1 2,500 2, TENTATIVE IMPLEMENTATION SCHEDULE Activity Total 32,000 Period (in months) Application and sanction of loan 2 Site selection and commencement of civil work 2 Completion of civil work and placement of orders for machinery 6 Erection, installation and trial runs DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building Particulars Area (Sq.Mtrs) Cost (Rs.) Land ,000 Building 125 4,00,000 Total 4,90, Machinery The total cost is estimated to be Rs lacs as explained earlier. 8.3 Miscellaneous Assets Total expenditure on other assets is likely to be Rs. 80,000/- as stated before. 8.4 Preliminary & Pre-operative Expenses An amount of Rs lacs would take care of pre-production expenses like establishment, registration, administrative and travelling charges, interest during implementation, trial runs etc. 173

161 8.5 Working Capital Requirements At 60% utilisation in the first year, the working capital needs shall be as under: (Rs. in lacs) Particulars Period Margin Total Bank Promoters Stock of Packing Materials 1 Month 30% Stock of Finished Goods ½ Month 25% Receivables ½ Month 25% Other Expenses 1 Month 100% Total Cost of the Project & Means of Financing (Rs. in lacs) Item Amount Land and Building 4.90 Machinery 5.50 Miscellaneous Assets 0.80 P&P Expenses % on Land and Building & Plant & Machinery 1.05 Working Capital Margin 2.35 Total Means of Finance Promoters Contribution 4.75 Term Loan from Bank/FI Total Debt Equity Ratio 2.33 : 1 Promoters Contribution 30% Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity & Build-up As against the rated processing capacity of 120 tonnes, actual utilisation in the first year is taken at 60% and thereafter at 75%. 9.2 Sales Revenue at 100% With selling price of Rs. 130/kg. or Rs.1.30 lac per ton annual income of 120 tonnes would be Rs. 156 lacs. 174

162 9.3 Raw and Packing Materials Required at 100% (Rs. in lacs) Product Qty. Price/Ton Value (Tonnes) (Rs.) Poultry Birds, Spices, Salt, Vegetables , Citric Acid etc Packing Rs.13000/Ton Utilities The annual cost of utilities at 100% would be Rs lacs. Total Selling Expenses A provision of 20% of sales income is made towards selling commission, transportation, hoardings, publicity materials at major sales outlets etc. 9.6 Interest It is 12% per annum on term loan of Rs lacs considering complete repayment in 5 years inclusive of a moratorium period of 1 year and on working capital from bank it is 14% per annum. 9.7 Depreciation It is calculated on WDV 10% on building and 15% on machinery and miscellaneous assets. 175

163 10.0 PROJECTED PROFITABILITY (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 120 Tonnes - Capacity Utilisation 60% 75% Sales Realisation B Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs & Maintenance Selling 20% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax % Profit after Tax Cash Accruals Repayment of Term Loan BREAK-EVEN ANALYSIS (Rs. in lacs) No Particulars Amount [A] Sales [B] Variable Costs Raw and Packing Materials Utilities (70%) 2.10 Salaries (70%) 3.33 Stores & Spares 0.54 Selling Expenses (70%) Admn Expenses (50%) 0.50 Interest on WC [C] Contribution [A] - [B] [D] Fixed Cost 8.43 [E] Break-Even Point [D] [C] 47% 176

164 12.0 [A] LEVERAGES Financial Leverage = EBIT/EBT = = 1.61 [B] Operating Leverage = Contribution/EBT = = 4.39 Degree of Total Leverage = FL/OL = = 0.37 Debt Service Coverage Ratio (DSCR) (Rs. in lacs) Particulars 1st Yr 2nd Yr 3rd Yr 4th Yr 5th Yr Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

165 [C] Internal Rate of Return (IRR) Cost of the project is Rs lacs. (Rs. in lacs) Year Cash 16% 18% 20% Accruals The IRR is around 17% Some of the equipment and packing machinery suppliers are 1. B. Sen Berry & Co, Karol Baugh, New Delhi Narang Corporation, Connaught Place, New Delhi Cowel Can Ltd, Barotiwala, Solan (HP) 4. DK Barry and Compnay Pvt. Ltd., 11/35, West Punjabi Baug, New Delhi Tel No Dr. Froeb (India) Pvt. Ltd., B-136, 2ND Floor, Kalkaji, New Delhi Tel No /

166 READY-TO-EAT SNACKS 1.0 INTRODUCTION Indians love to eat spicy food. Their meals contain many spicy items of different varieties and many snacks are also prepared with spices and chilly. This note basically discusses ready-toeat spicy snacks targeted at rural areas. Many national brands like Pepsi and Haldiram have entered this market with huge investments and attractive packaging. These products are obviously very costly. There are many regional brands as well. But a large part of rural India just cannot afford these products as they are priced above Rs.100/- per kg. Rural market is aimed at under the proposed project. There are many wholesale manufacturers who supply to retailers and they in turn repack these products in small packs and sell. These items fall under the category of Farsan and include many products like masala puffed rice, chevda, fried peas, fried dal mix, roasted masala peanuts etc. At times, nomenclature may vary but items more or less remain same. More and more variants or new products can be added depending upon the local tastes. These products can be made and sold anywhere in the country but the location considered here is Maharashtra. 2.0 MARKET POTENTIAL 3.1 Demand and Supply The manufacturing unit has to be located at a taluka or district place where traders from nearby towns and villages come regularly for wholesale purchases. They, in turn, repack the products in smaller quantities and sell them. This is a very well established practice for many low value consumer goods. The items contemplated under this project shall also be packed in 1, 2 or 5 kgs. plastic bags and sold at wholesale rates. Shelf-life of these items is generally not more than 15 days and hence quick turnover is the key element. This is typically a High Volume Low Margin activity. 179

167 3.2 Marketing Strategy Marketing is restricted to dealers and deciding factors are reasonably good and consistent quality and competitive pricing. A three wheeler delivery vehicle is advisable as it can move around the radius of kms. covering all major rural centres at a pre-determined day of every week. With proper canvassing and contacts, marketing network can be established. There could be minor changes in the product-mix based on consumer feedback and seasonal availability of certain raw materials but many items would have demand round the year. 3.0 CAPITAL COST OF THE PROJECT Capital investment has to be planned very judiciously to remain competitive. Certain operations can be undertaken outside the main building or on the terrace under asbestos roofing. The total capital cost is estimated to be Rs.4.50 lacs, the break up being as under: Particulars Qty. Amount (Rs.) Land and Building with selling Area 1,50,000 Oil-fired Furnace (Bhatti) 3 45,000 Stainless steel utensils, frying pans, rotating mixer, steel trays, etc. 60,000 Weighing scales, heat sealing machines, plastic trays and crates 20,000 Sales Counter with Glass covered Storage Facility 50,000 Three-wheeler Delivery Vehicle 1 1,25,000 Total 4,50,000 Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. There is no need to have a factory-type construction and attempt should be made to minimise this cost. The equipments will be available from M/s. T Alli Mohammad & Co, MJ Phule Market, Mumbai; M/s. S.R. Engg Works, Satpur, Nashik or M/s.Sujata Enterprises, Pune. 4.0 ECONOMIC VIABILITY Production capacity can be easily altered in this activity. Addition of one bhatti or closure of the existing ones, increasing or decreasing the working hours can easily change it. However, for the purpose of calculations it is taken at 500 kgs. per day. In this industry, there are very few holidays and annual working is for almost 350 days. There is no fixed product-mix and demand is the only guiding factor. On an average, the selling price is around Rs.50/- per kg. in bulk packing with raw materials constituting around 90% or Rs.45/- per kg. Selling prices are adjusted if the prices of inputs witness major changes. Thus, margin of Rs. 5/- per kg. has to take care of all fixed costs. The objective is to work on very low margins to capture larger and larger share of market and to minimise overheads. 180

168 Economic viability has been worked out with these peculiarities of the industry on following assumptions: 4.1 Capacity Utilisation As against capacity of 500 kgs. per day, the utilisation will be 325 kgs. and 375 kgs. per day during first two years. 4.2 Manpower Requirements Particulars Nos Monthly Total Monthly Salary (Rs.) Salary (Rs.) Skilled Worker 2 2,750 5,500 Helpers 6 1,250 7,500 Salesman (on Counter) 1 2,500 2,500 Total 15, Power and Other Fuels Monthly power bill in the first year will be around Rs.2000/- whereas about 10 LPG cylinders will be required. 4.4 Interest It is envisaged that term loan assistance of Rs lacs will be given by the bank to be repaid in 4 years including a moratorium period of 1 12% and the promoters would bring in Rs.1.75 lacs including Rs.75,000/- towards working capital. 4.5 Depreciation It is calculated on WDV 10% on building and 15% on remaining block of Rs lacs. 181

169 Based on these assumptions, the profitability projections are as under: (Rs. in lacs) No. Particulars 1st Year 2nd Year A Installed Capacity 175 Tonnes Capacity Utilisation (in Tons) Total Income (@ Rs.5000/Ton) B Operating Costs Salaries Utilities Repairs & Maintenance Vehicle Running & Maintenance Administrative Expenses Total C Profit before Interest & Depreciation Interest Depreciation Profit before Tax % 0.28 Profit after Tax Cash Accruals Repayment of Term Loan CONCLUSIONS As can be seen from these figures, this activity can provide substantial returns on investment. The critical aspects are complete involvement of promoter and fast turnover. Most of the overheads are direct in nature and maximum utilisation brings down the unit cost. Hence, promoters should always be vigilant and ensure that sales volume continuously grows. Taking optimum work from staff is equally important as salaries constitute 50% of the operating costs. Increased volumes would also bring down per unit fixed cost and profits would go up. Wastage of materials is another important profit determinant. Utmost care has to be taken to ensure minimum wastages. In other words, the promoter has to put in hard work and must pay adequate attention to all critical aspects. Personal involvement of the promoter is the key factor. 182

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