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PROJECT REPORT


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BUSINESS SCHOOL OF DELHI

PGDM III TRIMESTER FINANCIAL MANAGEMENT

ASSIGNMENT ON INTER COLLEGE

SUBMITTED TO: SUBMITTED BY:

Prof. Dr. Md. Athar Ali shankar kumar

dhiraj kumar

biswajit ray

pooja

mohit

Section (C)


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Table of Contents

Summary

1. INTRODUCTION

2. QUALITY POLICY MISSION AND VISION

3. SUMMARY

4. MARKET APPRAISAL

5. TECHNICAL APPRAISAL

6. FINANCIAL APPRAISAL

7. ECONOMIC APPRAISAL

8. RISK AND UNCERTAINTY


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FINANCIAL APPRAISAL

PROJECT TOTAL COST IS = 2 CRORE

1.Furnitures & fixture cost = 20 lakhs.

2.Plant & machinery= 120 lakhs

3.Operating cost = 45 lakhs.

4.Saving cost= 15 lakhs

Sources of funds :

EQUITY CAPITAL = 40 LAKHS

TERM LOAN = 40 LAKHS

Contribution= 120 LAKHS

Thegroup member are five andthey contributedequal some of amount of

capital.


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ARE ASFOLLOWS:

DHIRAJ KUMAR = 24 lakhs

SHANKAR KUMAR = 24 lakhs

BISWAJIT RAY = 24 lakhs

MOHIT = 24 lakhs

POOJA = 24 lakhs

The projectexpected life of 5 year.

y Depreciation on furniture @ 20%

y RE (Requiredreturn onequity) @ 20%

y RD (Return ondebt) @ 14%

y TAX rate @ 40%

WEIGHETED AVG COST OF CAPITAL

WACC = E\V *RE + D/V *RD

= ( 16000000*20/20000000) +( 4000000*14/20000000)

= 18.8 TAKE APROX 19%


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K= 19 %

Year 1st 2nd 3rd 4th 5th

Sales 180,00000 180,00000 180,00000 180,00000 180,00000

Less o.c. 140,00000 140,00000 140,00000 140,00000 140,00000

Less

dep.=28,00000

28,00000 28,00000 28,00000 28,00000 28,00000

PBT 1200000 1200000 1200000 1200000 1200000

Less TAX 4.8 LAKHS 4.8 LAKHS 4.8 LAKHS 4.8 LAKHS 4.8 LAKHS

PAT 7.2 LAKHS 7.2 LAKHS 7.2 LAKHS 7.2 LAKHS 7.2 LAKHS

ADD Dep. 28 LAKHS 28 LAKHS 28 LAKHS 28 LAKHS 28 LAKHS

Cash in flow 35.2

LAKHS

35.2 LAKHS 35.2 LAKHS 35.2 LAKHS 35.2 LAKHS

NPV= 140,00,000*PVFA(i=19%,n=5)

= 140,00,000*3.058

=4,28,12,000

Assumption:-

y The project ofthetransportis feasibleso the project

is accepted.

y The capital which weinvestin our projectitreturns

back in aprox: 4 year.


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YEAR 0 1 2 3 4 5 6 7

CASH FLOW 35.2

LAKHS

35.2

LAKHS

35.2

LAKHS

35.2

LAKHS

35.2

LAKHS

35.2

LAKHS

35.2

LAKHS

35.2

LAKHS

CUMMULATIVE

CASH FLOW(140LAKHS)

104.8

LAKHS

69.6

LAKHS

34.4

LAKHS

-.8

LAKHS

36

LAKHS

71.2

LAKHS

106.4

LAKHS

141.6

LAKHS

Payback period:

The project will generate cash flow of Rs 35, 20,000/-

in a year.

So thatin one month is Rs 2.9333333 LAKHS.

So the project will generate cash inflow aprox: 2

crorein 3year 9 month.

Payback period = Threeyear 9 month


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SANGAM DAIRYGOOD HEALTH (RICH LIFE)

INTRODUCTION

If you have love for animals such as cows and recognize their

money-making capabilities, then you can start a dairy farm

business. You can make money off milking cows and selling

them off to big dairy companies, or sell them off as your own

products if you can afford the processing equipment. There

fore we choose dairy firm for multiple purpose.

COWSCows are the core of your dairy farm business. They are the

animals that provide the milk that you will be selling off for

money, and they are also responsible for reproducing other


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cows that can grow your business. Obviously, the majority of

cows that you will rear in your farm should be females.

However, if you also wish to make off money selling cows to

slaughterhouses, you might want to retain a male and a few

females for breeding.

COWS FEEDS

we Feeds ,When you rear animals, you should also feed them.

Cows feed on a number of plants: grass, corn or grain, among

others. You can buy these feeds from third-party farmers or,

better yet, you can choose to grow them right next to your

dairy farm. You can save up that way, and you can also make

another business: selling off the feeds that you have extra from

feeding your cows. You can also grow corn for your own

consumption.

EQUIPMENT

Dairy farms are one of the more expensive businesses to

operate and start. So we need to have some elaborate

equipment in order to pull the business off properly. Some of

the more important dairy farm equipment includes:

TRACTOR

An important equipment for pulling machinery around. Most of

the other equipment cannot be operated without this.


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HAY BALER

Responsible for producing bale that is then fed to the cows .

Each round bale produced by this machine is enough to feed 25cows a day.

COMBINE

The machine used to harvest crops for feeding to the cows, or

for selling off. If you plan to grow your own cow feeds, you

would need this definitely.

STORAGE BUILDINGS

These buildings are useful for storing the feeds and the plants

that we grow in our farm. There are also specialized buildings

that are designed to store cows manure, as they are good

fertilizers for the crops.

MILKING EQUIPMENT

This will help make our life easier. Having automated milking

equipment in our dairy farm will help cut the time required for

us to produce milk from our cows, rather than doing it by hand.

QUALITY POLICY

Ensure that milk producers and farmers regularly and continue all

receive market prices by offering quality milk, milk products and other


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food products to consumers at competitive prices. To ensure this BSD

Dairy operates such that the farmer gets 85% of the total cost of sales.

MARKET SIZE & INVESTMENT: -As we all ready says that firstly our main target is to capture the main

market of a, in this way first we capture the metros customer & try to

attract them towards our product. For this we can invest 2 Cr. Rupees

to establish our industry and after that 1to 5 lakh Rupees. we can

invest to advertise our product because its very necessary to aware

the customer about our product & services, by this they attract to use

our services. To start the business we issue a share capital in the

market approx 80 LAKHS Rs. & some fund will be contribute by Five

partners of the industry and remaining will be taken through bank

loan.We must be selective and smart when seeking money for start

up our business or it could turn our dream business into a nightmare.

GROWTH: -

The sector, which was growing in the range of 20 to 25 per cent up

to the year 2007-08, has moved to a higher growth path of an

average rate of 55-60 per cent during the last two years.

MARKET APPRAISAL:-

We have been designed to provide an honest and realistic idea

of business value. The Benchmark Valuation does not purport


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to be the only method of valuation available, but its aim is to

provide a guideline for the owner(s) of a business to plan for

development or sale. Ultimately, the only way to ascertain the

value of a business is to sell it. Our Benchmark believes that the

following principle is the most appropriate technique for the

valuation of :-

VALUE = Goodwill (Maintainable Earnings x Benchmark

Capitalization Factor) + Adjusted Net Assets (Fixed Assets +

Stocks + Debtors Current Liabilities (excluding surplus cash,

pensions and property)) + Property at Current Value.

This report outlines how the goodwill is appraised, through

illustrating how the Benchmark Capitalization Factor is achieved

and what the level of maintainable earnings should be set at. It

also reveals how the net assets are calculated.

Approxsize ofthe market and projectshare of

the market.

Once the size of the market has been determined, thenext step is to define the target market. The target marketnarrows down the total market by concentrating on

segmentation factors that will determine the totaladdressable market -- the total number of users within thesphere of the business's influence. The segmentationfactors can be geographic, customer attributes, or product-oriented.


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For instance, if the distribution of our product is confined toa specific geographic area, then we would want to furtherdefine the target market to reflect the number of users or

sales of that product within that geographic segment.Once the target market has been detailed, it needs to befurther defined to determine the total feasible market. Thiscan be done in several ways, but most professionalplanners will delineate the feasible market byconcentrating on product segmentation factors that mayproduce gaps within the market. In the case of a

microbrewery that plans to brew a premium lager beer, thetotal feasible market could be defined by determining howmany drinkers of premium pilsner beers there are in thetarget market.

It is important to understand that the total feasible marketis the portion of the market that can be captured providedevery condition within the environment is perfect and there

is very little competition. In most industries this is simplynot the case. There are other factors that will affect theshare of the feasible market a business can reasonablyobtain. These factors are usually tied to the structure ofthe industry, the impact of competition, strategies formarket penetration and continued growth, and the amountof capital the business is willing to spend in order toincrease its market share.

Projecting Market Share

Arriving at a projection of the market share for a businessplan is very much a subjective estimate. It is based on not


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only an analysis of the market but on highly targeted andcompetitive distribution, pricing, and promotionalstrategies. For instance, even though there may be a

sizable number of milk users to form the total feasiblemarket, we need to be able to reach them through ourdistribution network at a price point that is competitive, andthen we have to let them know it's available and wherethey can buy it. How effectively we can achieve ourdistribution, pricing, and promotional goals determines theextent to which we are able to garner market share.

For a business plan, we must be able to estimate marketshare for the time period the plan will cover. In order to

project market share over the time frame of the businessplan, will need to consider two factors:

1. Industry growth which will increase the totalnumber of users.

This is determined by growth models as described in the

"Market Research" chapter. Most projections utilize aminimum of two growth models by defining differentindustry sales scenarios. The industry sales scenariosshould be based on leading indicators of industry saleswhich will most likely be industry sales, industry segmentsales, demographic data and historical precedence.

2. Conversion of users from the total feasible market.

This is based on sales similar to a product life cycle whereyou have five distinct stages: early pioneer users, earlyusers, early majority users, late majority users, and lateusers. Using conversion rates, market growth will continueto increase your market share during the period from early


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pioneers to early majority users, level off through latemajority users, and decline with late users.The strategy used to position a product is usually a result

of an analysis of our customers and competition.

Cost-plus pricing -- Used mainly used for manfg . cost-plus pricing assures that all costs, both fixed and variable,are covered and the desired profit percentage is attained.Demand pricing -- Used by companies that sell our

product through a variety of sources at differing prices

based on demand.

Competitive pricing -- Used by companies that are

entering a market where there is already an establishedprice and it is difficult to differentiate one product fromanother.

Markup pricing -- Used mainly by retailers, markuppricing is calculated by adding our desired profit to thecost of the product. Each method listed above has itsstrengths and weaknesses.

Distribution

Distribution includes the entire process of moving theproduct from the dairy to the end user. The type ofdistribution network you choose will depend upon theindustry and the size of the market. A good way to make


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our decision is to analyze our competitors to determine thechannels they are using, and then decide whether to usethe same type of channel or an alternative that may

provide us with a strategic advantage.Some of the more common distribution channels include:

Direct Sales -- The most effective distribution channel isto sell directly to the end user.

Wholesale Distributors -- Using this channel, amanufacturer sells to a wholesaler, who in turn sells it to a

retailer or other agent for further distribution through thechannel until it reaches the end user.

Brokers -- Third-party distributors who often buy directlyfrom the distributor or wholesaler and sell to retailers orend users.

Retail Distributors -- Distributing a product through thischannel is important if the end user of our product is the

general consuming public.

Promotion Plan

With a distribution strategy formed, we must develop apromotion plan. The promotion strategy in its most basicform is the controlled distribution of communicationdesigned to sell our product or service.

Advertising -- Includes the advertising budget, creativemessage(s), and at least the first quarter's mediaschedule.


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Packaging -- Provides a description of the packagingstrategy. If available, mockups of any labels, trademarksor service marks should be included.

Public relations -- A complete account of the publicitystrategy including a list of media that will be approachedas well as a schedule of planned events .

Sales promotions -- Establishes the strategies used to

support the sales message. This includes a description ofcollateral marketing material as well as a schedule ofplanned promotional activities such as special sales.

Personal sales -- An outline of the sales strategyincluding pricing procedures, returns and adjustment rules,sales presentation methods, lead generation, customerservice policies, salesperson compensation, andsalesperson market responsibilities

Sales Potential

Once the market has been researched and analyzed,conclusions need to be developed that will supply aquantitative outlook concerning the potential of thebusiness. The first financial projection within the businessplan must be formed utilizing the information drawn fromdefining the market, positioning the product, pricing,distribution, and strategies for sales. The sales or revenuemodel charts the potential for the product, as well as the

business, over a set period of time. Most business planswill project revenue for up to three years, although five-year projections are becoming increasingly popular amonglenders.


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When developing the revenue model for the businessplan, the equation used to project sales is fairly simple. Itconsists of the total number of customers and the average

revenue from each customer. In the equation, Trepresents the total number of people, A represents theaverage revenue per customer, and S represents thesales projection. The equation for projecting sales is:

T A = S

Using this equation, the annual sales for each yearprojected within the business plan can be developed. Of

course, there are other factors that you'll need to evaluatefrom the revenue model. Since the revenue model is atable illustrating the source for all income, every segmentof the target determine any differences, the variousstrategies utilized in order to sell the product have to beconsidered. As we've already mentioned, those strategiesinclude distribution, pricing, and promotion.

Post and present consumption trend and level

of export and import

This report covers all aspects of production,

consumption and exports of milk and dairy

products. Starting from an analysis of the

economic and social environment, the report looksat drivers and impediments of growth of dairy

sector in India. It gives statistics and insights into

domestic market dynamics of liquid milk, dairy fats


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(butter and ghee), curd, processed cheese, table

butter as well as for traditional Indian dairy

products like khoa, paneer, chhana etc. The report

has detailed country-wise export statistics for each

dairy product for the years 2004-05, 2005-06,

2006-07 and April-August 2007. The report has

forecast of production, consumption and exports

for years up to 2012. Contact details of all major

dairy companies are also included.

Structure of competition and price

elasticity and cross elasticity of demand

AS we know The Cross-Price Elasticity of Demand measures

the rate of response of quantity demanded of one good, due to a

price change of another good. If two goods are substitutes, we

should expect to see consumers purchase more of one good

when the price of its substitute increases. So from The Price

Elasticity of Demand we measures our rate of response of

quantity demanded due to a price change.

Consumer requirement and productionconstraint

Production milk is a moderate process that starts

by deciding how much milk of each type a packet


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to be launched in production must contain in order

to meet customer requirements. The total amount

of milk per packet is constant, and Two levels of

failure may arise during the manufacturing

process, namely 1) the ones that result in rejecting

a packet and, as a consequence, all the milk

contained in this wafer, and 2) the failures that

result in rejecting milk total packet. We know the

probability of a wafer to hole, as well as the

probability of a milk of any type to be rejected.

The goal is to minimize the number of wafers to

launch in production in order to meet the customer

requirements with a given probability. In this

paper, we propose an efficient heuristic algorithm

that leads to a near-optimal solution.

Technical appraisal

Basically we apply the three-tier cooperative structure.This structure consists of a Dairy Cooperative Society atthe village level affiliated to a Milk Union at the District

level which in turn is further federated into a MilkFederation at the State level. The above three-tierstructure was set-up in order to delegate the variousfunctions; milk collection is done at the Village DairySociety, Milk Procurement & Processing at the District Milk


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Union and Milk & Milk Products Marketing at the State MilkFederation. This helps in eliminating not only internalcompetition but also ensuring that economies of scale are

achieved. As the above structure was first evolved at Amulin Gujarat and thereafter replicated all

over the country under the Operation Flood Program, it isknown as the Amul Model or Anand Pattern of DairyCooperatives.

Responsible for Marketing of Milk & Milk ProductsResponsible for Procurement & Processing of MilkResponsible for Collection of Milk Responsible for MilkProduction

Village Dairy Cooperative Society (VDCS)

The milk producers of a village, having surplus milk afterown consumption, come together and form a Village DairyCooperative Society (VDCS). The Village DairyCooperative is the primary society under the three-tierstructure. It has membership of milk producers of thevillage and is governed by an elected ManagementCommittee consisting of 9 to 12 elected representatives ofthe milk producers based on the principle of one member,one vote. The village society further appoints a Secretary(a paid employee and member secretary of theManagement Committee) for management of the day-to-day functions. It also employs various people for assisting


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the Secretary in accomplishing his / her daily duties. Themain functions of the VDCS are as follows:

Collection of surplus milk from the milk producers of the

village & payment based on quality & quantity Providing support services to the members like

Veterinary First Aid, Artificial Insemination services,cattle-feed sales, mineral mixture sales, fodder & fodderseed sales, conducting training on Animal Husbandry &Dairying, etc.

Selling liquid milk for local consumers of the village

Supplying milk to the District Milk UnionThus, the VDCS in an independent entity managed locallyby the milk producers and assisted by the District MilkUnion.

District Cooperative Milk Producers Union (Milk Union)

The Village Societies of a District having surplus milk afterlocal sales come together and form a District Milk Union.The Milk Union is the second tier under the three-tierstructure. It has membership of Village Dairy Societies ofthe District and is governed by a Board of Directorsconsisting of 9 to 18 elected representatives of the VillageSocieties. The Milk Union further appoints a professionalManaging Director (paid employee and member secretaryof the Board) for management of the day-to-day functions.

It also employs various people for assisting the ManagingDirector in accomplishing his / her daily duties. The mainfunctions of the Milk Union are as follows:

Procurement of milk from the Village Dairy Societies ofthe District


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Arranging transportation of raw milk from the VDCS tothe Milk Union.

Providing input services to the producers like Veterinary

Care, Artificial Insemination services, cattle-feed sales,mineral mixture sales, fodder & fodder seed sales, etc.

Conducting training on Cooperative Development,Animal Husbandry & Dairying for milk producers andconducting specialised skill development & LeadershipDevelopment training for VDCS staff & ManagementCommittee members.

Providing management support to the VDCS along withregular supervision of its activities.

Establish Chilling Centres & Dairy Plants for processingthe milk received from the villages.

Selling liquid milk & milk products within the District

Process milk into various milk & milk products as per therequirement of State Marketing Federation.

Decide on the prices of milk to be paid to milk producers

as well on the prices of support services provided tomembers.

State Cooperative Milk Federation (Federation)

The Milk Unions of a State are federated into a StateCooperative Milk Federation. The Federation is the apextier under the three-tier structure. It has membership of allthe cooperative Milk Unions of the State and is governed

by a Board of Directors consisting of one electedrepresentative of each Milk Union. The State Federationfurther appoints a Managing Director for management ofthe day-to-day functions. It also employs various peoplefor assisting the Managing Director in accomplishing his


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daily duties. The main functions of the Federation are asfollows:

Marketing of milk & milk products processed /

manufactured by Milk Unions. Establish distribution network for marketing of milk &

milk products.

Arranging transportation of milk & milk products from theMilk Unions to the market.

Creating & maintaining a brand for marketing of milk &milk products (brand building).

Providing support services to the Milk Unions &members like Technical Inputs, management support &advisory services.

Pooling surplus milk from the Milk Unions and supplyingit to deficit Milk Unions.

Establish feeder-balancing Dairy Plants for processingthe surplus milk of the Milk Unions.

Decide on the prices of milk & milk products to be paidto Milk Unions.

Decide on the products to be manufactured at variousMilk Unions and capacity required for the same.

Conduct long-term Milk Production, Procurement &Processing as well as Marketing Planning.

Arranging Finance for the Milk Unions and providing

them technical know-how.

Designing & providing training on CooperativeDevelopment, Technical & Marketing functions.


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We the dairy industry in India and particularly in the State ofBIHAR

looks very different. India for one has emerged as the largest milk

producing country in the World.BIHAR has emerged as the mostGROWTH State in terms of milk and milk product production through

its cooperative dairy movement.

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