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PREPARES PROJECT REPORTS/ MARKET

RESEARCH & FEASIBILITY STUDIES SUITED


TO THE INDUSTRIAL/ ENTREPRENEURIAL
NEEDS
PROJECT ON RUBBER BAND PRODUCTION
PROJECT REPORT

1.0 Introduction:
This proposal evaluates the technical feasibility and financial
viability in setting up of a small-scale enterprise to do the activity on manufacturing and
sale of Rubber bands at Vazhoor in Kottayam district and all over India. Unit has been
filed memorandum Part-1 with the district Industries center, Kottayam and also applied
for permission from Local body for the construction of building and for the installation of
plant and machinery.

2.0 Promoter and Management:


The ownership of the unit is as a propetoership
concern by Sri.Pravin Nair, Prasant House, Arppukkara east, Kottayam-686504 .he has
been associated with this business and trade related activities for the past 5 years. The
experience and the market contact that he received will help him in establishing the
proposed activity of manufacturing and marketing of hollow bricks in a successful
manner.

3.0 Scope and Market Potential:


Rubber bands are one of the most convenient products of the
twentieth century used by numerous individuals and industries for a wide variety of
purposes. The largest consumer of the rubber bands in the world is USA. The news

paper industry also uses massive quantities of rubber bands to keep the individual
newspapers rolled or folded together before home delivery. This unit intends to make
rubber bands to cater the industry needs in outside states and also got good expertise
to produce and sell all products without delay.

4.0 Manufacturing process:


1.
2.
3.
4.
5.
6.
7.
8.

Manufacturing process is described below.


Processing the natural latex
Purification and making into slabs
Squeezing the slabs to required size
Mixing and milling
Heating and squeezing
Extrusion after heating
Curing in mandrels
Slicing to form rubber bands

5.0 Location, Land and Building:


The unit is proposed to be located at Vazhoor Panchayath in
Changanasserry Taluk. . Building required for establishing the unit has been
constructed. The amount invested for civil work on construction of building for office,
common amenity, well etc. are invested by the promoter himself. Building number
assigned to the unit is 2/634

6.0 Machinery & equipment:


Details are shown in the annexure. The plant and machinery
proposed to be installed in the unit are Indigenous. . Total cost of machinery and
equipment to be purchased is evaluated as Rs 300000/-

7.0 Installed capacity of production


The unit is proposed to be operated in 300 days per annum ( 25
days in a month of single shift operation of 8 hours duration in a day). As per the

capacity of machinery to be installed and by considering production wastage the


monthly production is worked out in the following table.
It is proposed to utilize 70% of the installed capacity in the first year of operation
and 75%, 80%, 85%, 90% in the consecutive years of operation. The sales realization
for first month of operation is shown below.

production per
Sl No
1

items

month in Tonnage

RUBBER BANDS

1.5

Total amount
amount /Tonnage

/production per month

2,00,000

3,00,000

8.0 Raw material Requirement:


All the raw materials required by the unit are available
throughout the year. The raw material can also be procured from the nearby districts.
The stock and procurement period proposed in this scheme is for a period of 22 days.
The details of requirement for 70 % capacity utilisation in the unit are tabulated as
below. The raw material required by the unit is proposed to be arranged through local
distributors. The requirements of the unit for the targeted production are as below.

Sl No
1
2
3
4
5
6

items
LATEX
WHITENER
CHALK POWDER
TITANIUM
RUBBER CHEMICALS
PACKING MATERIALS
raw materials required per
month (100 % Capacity
utilization)
For 70% capacity utilization

Rate
/kg
/tonnes
200
7
5
215
155
70

Rate /Tonnage
650
350
50
250
100
20

Tonnage
required
/month
1.5
1.5
1.5
1
2
1.5

Total amount requ


per month
195000
3675
375
53750
31000
2100
285900
200000

9.0 Man power requirement and other expenses:


Total manpower of the unit including the Workers is 5 numbers and the details of
manpower requirement, salary and other expenses per month are as follows .
Sl.N
o.
1
2
3

Designation /
Category
Skilled
workers(wome
n)
un skilled
worker
supervisor

No

Month
ly
salary

Amou
nt Rs

8000

8000

3
1

6000
10000

18000
10000

Total
5
OTHER EXPENSES PER
MONTH
Sl.N
Amou
o.
Item
nt
Power 3 HP
1
1500
Postage &
2
Telephone
1000
Printing &
3
Stationery
3000
Travelling
4
expenses
4000
Miscellaneo
5
us
3000
Total

36000

12500

10.0 Working capital requirement:


Total requirement of working capital for the first Month (phase) of operation is 2.0
lakhs .
Peri
Sl.N
o.

od in
Particulars
Capacity

Days 1 year
300

70

2 year

3 year

4 year

5 year

75

80

85

90

utilisation(%)

Sales

38571

41142

43714

46285

00

43

86

29

71

24000

25714

27428

29142

30857

00

29

57

86

14

29100

31105

33129

35145

37179

00

71

43

84

69

17600

18857

20114

21371

22628

22

9700

10369

11043

11715

12393

9700

10369

11043

11715

12393

12000

12857

13714

14571

15429

20740

22216

23694

25171

26650

300

Cost of raw materials

Cost of production
A

36000

300

300

Current Assets
Stock of raw
materials
( day's

consumption)
Stock in
process
( day's cost of

production)
Stock of finished
goods
( day's cost of

production)
Receivables( day's

cost of sales)

Total(A)

11.0 Total Cost of the Project:

Loan
Amount
Sl.No. Particulars

required

RS

Proposed

Total

@70%

subs

Margin@10% mon

Land and Building


1

( own)

own

Completed

own

room furnishing

own

Completed

own

300000

300000

300000

210000

30000

OD

200000

200000

200000

140000

20000

Total

500000

500000

500000

350000

50000

Machinery &
3

Equipment(proposed)
Working Capital as

12. Means of finance:


Amount
Sl.No.

Particulars

RS

Term loan for machinery &


1

equipment,

210000

Margin money loan proposed to


be obtained from DIC @20% of
2

project cost

100000

Working capital Loan as over


3

draft

140000

Own Capital (including the


amount already invested in
acquiring the fixed assets of the
4

unit) @ 10% of P.C

50000

Total

500000

13.0 Profitability analysis:


Detailed statement is given in annexure. Assumptions made for the calculation are
as follows:
(a) Unit will function for 200 days per annum in single shift basis of 5 hours per day.
(b) Proposed to utilise 70% of the installed capacity in the first year of operation ,75%, 80%
,85% and 90% are in the consecutive years of operation.
(c) Interest on term loan and working capital loan is assumed @ 12 % and repairing and
maintenance as 5% of cost of fixed assets.
(d) Depreciation @ 5% of cost of building and 10% of the cost of machinery.
(e) Selling expense is considered as 5 % of total sales turn over. This includes the
advertisement and publicity charges
(f) Insurance expenses of building and machinery is calculated @ 1% of cost
(g) The cost of raw material and finished product is based on the present market rate.

Depreciation: Depreciation on Building, Machinery and Equipment are evaluated on


WDV basis and is tabulated as below
1

Machinery and equipment


Depreciation(B)

300000

270000

243000

218700

196830

30000

27000

24300

21870

19683

270000

243000

218700

196830

177147

30000

27000

24300

21870

19683

WDV on Machinery and


equipment
Total depreciation(A+B)

SHEDULE OF IMPLIMENTATION
Construction of Building

Completed

Installation of plant and Machinery

COMPLETED after availing the loan

Trial run

COMPLETED after availing the loan

Commercial Production

September 2011

14.0 Conclusion:
The net profits after taxation in the first year of operation is estimated
as
RS 450000 /. The break-even point is 41 % of installed capacity. . The
cost of production and profitability statement for the first 5 years, break-even analysis,
repayment schedule for term loan, cash flow statement and the projected balance sheet
are given in Annexure. Based on the analysis made above it is found that the scheme is
technically feasible and economically viabl

Submitted by:

PRAVIN NAIR
PRASANT HOUSE
ARPPUKKARA EAST
KOTTAYAM
PIN-686008

ANNEXURE 1

Sl.No.
1
2
3
4
5
6
7
8

Item

Nos

Rate in Rs

75000

CUTTING MACHINE .5 HP

37500

STIRROR
GRINDER

1
1

15000
15000

MOULDS

350

DIP- IN TANKS
VULCANISING TANK, BUCKET,
CUP ETC..
DRYING STAND
BIOGAS PLANT (as directed by
Kerala Pollution Control Board)
TOTAL

Amount Rs

200
20000

15000
15000
70000
20000
25000

25000
30000

30000
50000

50000
300000

ANNEXURE 2
Profitability statement for 5 years of operation

Particulars
No. of working days
No. of shifts
Installed capacity
Capacity utilisation

1 YEAR

2 YEAR

3 YEAR

4 YEAR

5 YEAR

300

300

300

300

300

5142857 5142857 5142857 5142857 5142857


70

75

80

85

90

Production

3600000 3857143

4114286 4371429 4628571

Sales

3600000 3857143

4114286 4371429 4628571

Cost of Production
Raw materials
Wages

2400000 2571429 2742857 2914286 3085714


432000

462857

493714

524571

555429

18000

19286

20571

21857

23143

maintenance

20000

22000

25000

27000

30000

Insurance

10000

8000

6500

5000

4000

Depreciation

30000

27000

24300

21870

19683

Power, and Fuel


charges
Repair &

Total

2910000

3110571 3312943 3514584 3717969

Gross operating
C

profit

690000

746571

801343

856844

910603

132000

141429

150857

160286

169714

36000

38571

41143

43714

46286

31080

24360

17640

10920

65205

22400

24640

26880

29120

33600

Admn. & Selling


D

expenses
1. Administrative
expenses
2. Selling expenses

Financial expenses
1. Interest on term
loan
2. Interest on WC
loan
3. Interest on MM
loan

Total of D&E

221480

229000

236520

244040

314805

Net operating profit

468520

517571

564823

612804

595798

Income tax

48258

53310

58177

63119

61367

Net profit

420262

464262

506646

549685

534431

Withdrawls

Depreciation

30000

27000

24300

21870

19683

Cash surplus

450262

491262

530946

571555

554114

ANNEXURE-3
BREAK EVEN ANALYSIS
Particulars

1 YEAR

2 YEAR

3 YEAR

4 YEAR

5 YEAR

FIXED COST
Salaries

432000

462857

493714

524571

555429

Repair & Maintenance

20000

22000

25000

27000

30000

Insurance

10000

8000

6500

5000

4000

Administrative expenses

132000

141429

150857

160286

169714

30000

27000

24300

21870

19683

31080

24360

17640

10920

65205

655080

685646

718011

749647

844031

2400000

2571429

2742857

2914286

3085714

Power Charges

18000

19286

20571

21857

23143

Selling expenses

36000

38571

41143

43714

46286

Interest on WC loan

22400

24640

26880

29120

33600

2476400

2653926

2831451

3008977

3188743

40.81

42.74

44.78

46.77

52.76

utilization

58.30

56.98

55.97

55.02

58.62

Return on Investment

84.05

92.85

101.33

109.94

106.89

Depreciation
Interest on MM loan
Interest on Term loan
Total

VARIABLE
COST
Raw Materials

Total

BEP in % of installed
capacity
BEP in % of capacity

ANNEXURE-4
DEBT SERVICE COVERAGE RATIO (DSCR)
Debt Service Coverage
Ratio ( DSCR)

Particulars
A

2 Year

3 Year

4 Year

5 Year

Cash generated
1 Net Profit

468520

517571

564823

612804

595798

2 depreciation

30000

27000

24300

21870

19683

3 Interest on term loan

31080

24360

17640

10920

65205

22400

24640

26880

29120

33600

552000

593571

633643

674714

714286

42000

42000

42000

42000

42000

31080

24360

17640

10920

65205

loan

22400

24640

26880

29120

33600

Total (B)

95480

91000

86520

82040

140805

Debt service coverage ratio

5.78

6.52

7.32

8.22

5.07

Average DSCR

7.93

4 Interest on mm loan
5 Interest on wc loan
Total (A)
B

1 Year

Debt Service Requirement


1 Repayment of term loan
Repayment of interest on term
2 loan
Repayment of interest on mm
3 loan
Repayment of interest on wc

ANNEXURE-5
REPAYMENT OF TERM LOAN

Instalment
Year Number
1

Principal

Inst.

Interest

Amt

@14%

Balance

210000 10500

8400

199500

199500 10500

7980

189000

189000 10500

7560

178500

178500 10500

7140

168000

42000

31080

168000 10500

6720

157500

157500 10500

6300

147000

147000 10500

5880

136500

136500 10500

5460

126000

42000

24360

126000 10500

5040

115500

10

115500 10500

4620

105000

11

105000 10500

4200

94500

12

94500 10500

3780

84000

42000

17640

13

84000 10500

3360

73500

14

73500 10500

2940

63000

15

63000 10500

2520

52500

16

52500 10500

2100

42000

42000

10920

17

42000 10500

63000

31500

18

31500 10500

1103

21000

19

21000 10500

735

10500

20

10500 10500

368

REPAYMENT OF WORKING CAPITAL LOAN AS O.D

1 Year

2 Year

3 Year

4 Year

5 Year

Total Working
capital

200000

220000

240000

260000

300000

Loan Amount

140000

154000

168000

182000

210000

Interest@14%

22400

24640

26880

29120

33600

ANNEXURE- 6
CASH FLOW STATEMENT
Construction
A

Source of Funds

period

1 year

2 year

3 year

4 year

5 yea

Cash accruals(profit before


1

int&tax)

0 522000 566571

Increase in capital equity

Depreciation

Investment allowance

Increase in long term loan

210000

Increase in MM loan

100000

50000

609343

652844

6946

27000

24300

21870

196

14000

14000

14000

280

0
30000

Increase in unsecured
7

loans

Increase in WC loan

0 140000

Sales of fixed
9

assets/invests

360000 692000 607571

647643

688714

Others( investment
10

subsidy)
Total

Disposition of Funds
Prelim & Pre-op expenses

300000

Increase in capital
expenditure

7422

Increase in current assets

200000

20000

20000

20000

400

42000

42000

42000

42000

420

Decrease in MM loan

Decrease in WC loan

bank

31080

24360

17640

10920

652

Interest on WC loan

22400

24640

26880

29120

336

Interest on MM loan

48258

53310

58177

63119

300000 343738 164310

164697

165159

Decrease in long term


loans
Decrease in unsecured
loans

Interest on term loan to

Taxation
Divident on equity

613

Other expenses
Total

60000 408262

2421

Opening balance

851524 1334470 18580

Net surplus

60000 348262 443262

Closing balance

60000 408262 851524 1334470 1858026 23581

482946

523555

5001

ANNEXURE-7
PROJECTED BALANCE SHEET

Construction
A

Liabilities

period

Equity share capital

1 year
50000

2 year

3 year

4 year

50000

50000

0 420262

884524

Term loan

210000 168000

126000

84000

42000

Margin Money loan

100000 100000

100000

100000

100000

1000

140000

154000

168000

182000

2100

Reserve & Surplus

Working capital loan

50000

5 yea

50000

500

1391170 1940856 24752

Other liabilities(towards
subsidy)
Total Liabilities

360000 878262 1314524 1793170 2314856 28352

Construction
B

Assets
Gross block
Depreciation
Net block

period

1 year

300000 300000

2 year

3 year

4 year

5 yea

270000

243000

218700

1968

30000

27000

24300

21870

196

300000 270000

243000

218700

196830

1771

200000

220000

240000

260000

InvestmenT(Prilim.
Expences)
Current assets

3000

Reserved Stock
accumulated to be added
to current assets
Cash and bank balance
Total Assets

60000 408262

851524 1334470 1858026 23581

360000 878262 1314524 1793170 2314856 28352