cost sheet.pdf

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DETAILED FEASIBILITY ANALYSIS OFSCHOOL BAGS & UNIFORMS

Part III

For

DEPARTMENT OF INDUSTRIESMINISTRY OF ECONOMIC AFFAIRSROYAL GOVERNMENT OF BHUTAN

ByIDRG CONSULTANCY SERVICES

In Association with Sherpa Consultancy

February, 2009
http://www.iteksoft.com/modules.php?op=modload&name=Sections&file=index&req=viewarticle&artid=4http://pdf.iteksoft.com/modules.php?op=modload&name=Sections&file=index&req=viewarticle&artid=4


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CONTENTS

CHAPTER 1PROJECT AT A GLANCE.3

CHAPTER 2JUSTIFICATION OF THE PROJECT..6

CHAPTER 3MARKET ANALYSIS..8

CHAPTER 4RESOURCES20

CHAPTER 5THE PLANT24

CHAPTER 6PLANT LOCATION AND INFRASTRUCTURE33

CHAPTER 7ENVIRONMENTAL ASPECT..35

CHAPTER 8PROJECT IMPLEMENTATION..37

CHAPTER 9COST PRESENTATION...39

CHAPTER 10FINANCIAL ANALYSIS45

CHAPTER 11ECONOMIC ANALYSIS..59

ANNEXURES.61

Annexure 1List of machine suppliers

Annexure 2List of raw material suppliers

Annexure 3 - List of lab testing equipment suppliers


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CHAPTER 1 - PROJECT AT A GLANCE

1. Project concept Detailed feasibility analysis of school bags and uniforms. Theproject envisages the manufacture of school bags and air bags invarious sizes and designs and school uniforms as well asreadymade garments.

2. Location - Thimphu, Chhukka, Trashigang, Samdrup, Paro and Monggarhappen to be the main education centres in terms of enrollment tillhigher secondary. As the students happen to be the targetcustomers, it would be quite logical to locate the unit near to theseeducation centres. Besides, as the unit would also bemanufacturing air bags and readymade garments, the vicinity totrade centres would be an added advantage. Keeping in view,various other parameters, these sites have been short listed in theorder of preference.

Location Overall ratingThimphu 42Paro 40Chhukka 40Trashigang 35Monggar 35Samdrup 35

3. Markets - The detailed study of school supplies scenario has revealed thatthere is enough demand of school bags and school uniforms to

justify the setting up of an integrated manufacturing unit for thesetwo products. The current demand level for school bags is around1,60,000 nos while the demand of uniforms is around 90,000 setsof uniforms. In addition to this, there is a substantial marketdemand for air bags and readymade garments which could beeasily manufactured in the proposed unit. Presently, there are nomanufacturing units for school bags and uniforms. The demand isbeing met through imports. There being sufficient demand, bothin school supplies sector as well as in open market and therebeing no indigenous production, the proposed unit is expected tohave bright prospects for capturing a substantial share ofdomestic market. Besides, the unit could also explore thepossibilities for export to neighboring markets.

4. Annual Productioncapacityrecommended - School bags1,00,000 pieces per annum

Sets of uniform1,20,000 pieces per annum


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5. Land and

buildingrequirement Plot area 1500 sq. mts

Built up area 300 sq. mtsIndustrial shed 950 sq. mts

6. Power 45 KWHrequirement

7. Main machinery

For bag section Industrial sewing machinesemi-automaticHeavy duty craftsman sewing machineTape braiding machine

For Uniform section Cloth cutting machineSingle needle sewing machineuniversalOver lock safety stitching machineButton holing machineButton stitching machine

8. Man power Managerial and office staff 7

requirement Production supervisor 2Cutting master 2Tailoring staff for bag section 35Tailoring staff for uniform section 90Unskilled workers with helpers 70

9. Total projectcost Rs. 163.82 lacs

10. Projectimplementation

period 10 months

11. Means of Debt - Rs. 114.67 lacs (70%)finance Equity - Rs. 49.14 lacs (30%)

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12. Break up of Machinery - Rs. 36.11 lacs

cost of project Construction cost - Rs. 51.25 lacsMisc. fixed assets - Rs. 3.00 lacsPre-operative exp. - Rs. 5.00 lacsTraining expenses - Rs. 0.36 lacsInterest - Rs. 11.49 lacsWorking capital - Rs. 56.61 lacs

Total - Rs.163.82 lacs

13. Annual sales Rs. 7.2 croresturnover

14. Financial IRR36% on investmentanalysis IRR56% on equity

NPVRs. 206.75 lacs (discount rate of 12%)Pay back period2 years 6 monthsProject break-even69%




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CHAPTER 2JUSTIFICATION OF THE PROJECT

2.1 Project Concept

The project envisage detailed feasibility analysis for setting up a manufacturingunit in Bhutan for school bags and school uniforms mainly to cater the domestic demandin school supplies sector.

2.2 Project Justification

As mentioned in part 1 of the report, with the rapid increase in urban populationand growing level of per-capita income, the education sector is undergoing a perceptiblechange. More and more schools with modern system of education both in the Govt.sector as well as in private sector are being set up. Consequently there has been achange in the demand pattern both in terms of quality and quantity of the various inputsrequired for efficiently running the school system.

School bags & school uniform happen to be the most important items required bythe students mainly in urban and semi urban areas. Along with exercise books, school

bags and uniform constitute the major segment of school supplies which are mostlypurchased by the students and their parents from the market.

One or the other type of bag is required by each and every student for carryingthe books, notebooks and other articles required for study in the school. In view of thegrowing syllabus at every stage of schooling and consequent increase in number ofbooks and exercise note books and other items which a student is required to carryevery day to school, bags with specific designs are made in durable materials to withstand the requisite load and handling conditions. At present, there are no manufacturingfacilities for the production of school bags in Bhutan and the requirement is being metthrough imports from India, Thailand and other countries.

Similarly, the various schools prescribe the design, fabric and shade of theuniform for their students as a part of school discipline. The system of specifying uniformis more prevalent in urban schools. Invariably, the schools prescribe the type of fabricand the shade / colour of the uniform and many a times, the uniform of the student isidentifiable with the school. In Bhutan, there are no industrial units manufacturing schooluniforms and these are either being got fabricated from tailoring shops or procured fromadjacent markets in India.

This project has been drawn for the manufacture of schools bags and uniforms.The proposed unit will have two separate departments, the first for the production ofschool bags and the second for the production of the uniforms. As there are no industrialunits manufacturing these items, there exists a good potential for establishment of

setting up of such manufacturing facilities in Bhutan. The proposed industrial unit would




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be equipped with the machines and equipment for the production of bags and uniforms

and besides meeting the requirement of school bags and uniforms, this unit can alsomanufacture and supply air bags and other readymade garments for meeting thegeneral market requirement. To begin with Thimphu or Paro would be ideal location forthis unit as they constitute the major markets both for school supplies was well as forgeneral market supplies.

As would be seen from the part 1 of the report, the current demand level forschool bags and school uniforms is sufficient to justify the setting up of a manufacturingunit in Bhutan. Besides, there exists substantial market demand for air bags andreadymade garments specially children garments which could also be manufactured inthe proposed unit. The project concept is to setup an integrated unit having twoproduction sections, the first one for the manufacture of bags and the second for the

manufacture of garments. The demand for both these items is likely to grow at a veryfast pace keeping in view the future economic growth in Bhutan leading to higherpurchase power and the consequent preference for readymade garments and bags, it isconsidered that there is sufficient justification for setting up such an unit in Bhutan.

The details of the products, products range, quality parameters, manufacturingtechnologies, machines and equipment and f inancial implications have been dealt with insubsequent chapters of this report.




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CHAPTER 3 MARKET ANALYSIS

3.1 Demand and supply scenario

The demand level for various types of uniforms and school bags have earlierbeen estimated as has 90,000 sets of uniform and around 1,60,000 set of school bagsper annum. Besides, uniforms and school bags, with the machines and equipmentproposed to be installed in the unit, it would be possible to manufacture ready madegarments and air travel bags also.

Some or the other type of uniform is required by each and every school going

children. However, the schools in urban areas are more specific in the matter ofuniforms. Presently, these uniforms are either being got stitched from tailoring shops orprocured from adjoining markets. There exists a good scope for setting up an organizedunit for the manufacture of uniforms suiting to the requirement of various schools. Itwould be desirable for the manufacturing unit to develop an organic linkage with theschools with a view to manufacture and supply uniforms as per their specifications anddesigns. The project has been designed to produce various types of garments. Inaddition to, school uniforms, the unit could also manufacture the uniforms and dressesfor police personnel, defence personnel, hospital staff viz doctors and nurses. Besides,there is a huge potential for production of ready made garments specially childrengarments to cater to the open market requirements. The part capacity of the uniformmanufacturing department of the unit could well be utilized for the production of children

garments. As the unit is proposed to be setup in the vicinity of capital city, the tradedistribution channels in Thimphu could well be utilized for marketing of the ready madegarments all over Bhutan.

Similarly, each and every student needs a school bag for carrying the books,exercise books, etc. to the school. The maximum life of a school bag is 1 year andinvariably while graduating to next standard, the children buy a new school bag and ademand becomes a recurring demand. Presently, the entire demand of school bags isbeing met through imports from India and other countries. Similarly, the demand of airtravel bags is also being met through imports. A wide variety of air travel bags in varyingprice range are available in the market and the proposed unit need to adopt the designsand patterns as per products being currently sold in the market.

3.2 Competitive Advantages

In view of the above, the unit is expected to have bright prospects for capturing asubstantial share of market both in the school bags, air travel bags, school uniforms andready made garments. The competitive advantage factors of the indigenously produceduniforms and garments which would provide them an edge over the competitors mostlyimported products can be listed as under: -

Facility of introducing the product with locally acceptable fabrics, designsand patterns resulting in higher acceptability in the market.




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Possibilities of producing bags with school logos, popular local slogans,

ethnic designs resulting in better marketability. Better inventory control management, the production can be planned as

per demand. Direct purchase of raw materials from wholesale trade channels at the

most competitive rates leading to lower input cost. Lower input cost in terms of power, transport and labour. Possibilities of introducing new products and new designs as per local

requirement. Quality control can be enforced starting from the raw material stage to

finished production and possibilities of adopting ISO 9000. Value addition on raw materials leading to savings in foreign exchange. Possibilities of introducing quality garments based on local handloom

fabric specially for high end market like Khadi Garments in India.

In view of all these competitive advantage factors, it is envisaged that the unitwould be able to produce bags, uniforms and garments of acceptable quality at arelatively lower cost and thus, shall have an edge over the other competitors.

3.3 Marketing Strategy

Presently, most of the school bags and air travel bags are being imported inBhutan. As regards, school uniforms and readymade garments, there are no organized

production units and the requirement is being met either through imports or through localtailoring shops. There are no government purchases and all these products are requiredto be sold in open market. Accordingly, the following marketing strategies could beadopted by the unit.

Marketing through trade channels viz by appointing whole-sellers in major citiesor through direct sales to stationery shops.

Dedicated production with logo and monogram etc of the schools and institutionsspecially for school bags and school uniforms and sales through these schoolsand institutions.

Contract with concerned hospital authorities for producing doctors apparels,dress for nursing staff and gowns for patients.

Display of products specially readymade garments at main shopping centres andlocal fairs.

The proposed unit needs to mainly focus on school supply sector and markettheir products through school students in major educational centres. The unit needs toidentify departmental stores and shops which could function as the retail outlets forselling uniforms and bags manufactured by the unit. The unit also needs to develop anorganic linkage with main schools and produce the uniforms as per their specificationsand designs in the identified shades of fabric. The possibilities of manufacturing thebags in classical Bhutanese designs need to be explored and this could help higher levelof acceptance of the bags manufactured by the unit. In case of air bags and readymadegarments, these need to be fabricated as per market requirement based on feedback




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available from the leading readymade garment stores and shops selling luggage goods.

Besides, the possibilities of exports to adjoining areas of India viz. north-eastern regioncould also be explored. The possibilities of exporting the product to other neighboringmarkets also need to be looked into. Besides, the possibilities of exports especially incase of air travel bags to adjoining market could also be explored for achieving bettereconomics of production and improving profitability.

3.4 Product range and target markets

The project envisages setting of a unit for the production of two distinct productsviz school bags and school uniforms. The proposed unit shall comprise of following twomanufacturing departments:

3.4.1 Bag manufacturing Departments: This department would be equipped with thefacilities for the production of bags mainly in nylon fabric or canvas fabric. The mainproduct would be the school bags in various sizes and designs. The manufacturingfacilities of this section are also proposed to be utilized for the production of air bags forsupply to the general market. Thus following would be the two main products:

- School bags in various sizes and designs.

- Air bags in various sizes and designs.




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3.4.2 Garments manufacturing department: This department shall have

manufacturing facilities for the production of ready made garments. The main focus shallbe on the production of school uniforms as per fabric type and design prescribed by the

schools. The remaining capacity of this department is proposed to be utilized for theproduction of ready made garment especially children garments for supply to generalmarket. This department shall be manufacturing the following products:

- School Uniforms as per school specifications.

- Ready made garments mainly for children in various colours and designs as permarket demand.




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All school bags are to be provided with a patch pocket in front, piping all round

the edges and buckles with straps for closure. The school bags may be provided withside strap or back strap or both if the both strap are required by the market. A handlemay also be provided if the same is required by the trade channels and market.

According to BIS specifications, the shape and dimensions of three sizes of school bagsviz. small, medium and large would be as shown below:

The length of the side strap of the bag is made adjustable by means of a buckleas shown in figure above. The length shall be adjustable between 260 mm to 960 mm.The lengths of the back strap for small, medium and large size of bags are specified as430 mm, 455 mm and 470 mm respectively.

In addition to above shapes and dimensions, the school bags could bemanufactured in other shapes and dimensions also as per market demand and

customers requirement. BIS has also specified the following design, workmanship andfinishing parameters for school bags:

The school bag shall be made from three pieces of material i.e., front, back withtop flap and gusset. The specification and details of fabric are given in the nextchapter.

The front portion shall be provided with a patch pocket for small articles for use inschool as shown in above. The bag may also be provided with tow patch pocketsin the front portion. The shape of the pocket or pockets should be such as toprovide sufficient space for keeping lunch-box, pencil box, instrument box etc.This may be done with or without gusset.

Size A B C D E F

Small 330 230 90 140 130 65

Medium 360 260 110 140 130 65

Large 380 280 140 140 180 65

All dimensions in millimeters




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The bag shall be provided with minimum 10 mm wide piping at the pocket, top

edges and the sides as shown in fig. above. The piping shall be of the materialsspecified in the next chapter.

The school bag shall be assembled lock stitch or chain stitch regulated to give6 to 8 stitches per 25 mm. All ends shall be securely fastened off and loosethreads properly trimmed.

Two buckles with straps shall be provided in the bag for closure as shown in Fig.above. A handle may also be provided if required by the purchaser or the market.

The bag shall be neatly finished with straight and parallel rows of stitching, whererequired.

The ends of buckle loops, side, back and buckle straps shall be properly tackedwith the rows of stitches as shown in Fig. above.

Bureau of Indian Standard (BIS) has also specified quality parameters and tests tobe carried out on to finished school bags so as to ensure the proper performance of thebags. These tests includes drop test and handle snatch test.

Drop Test: The school bag shall be fully loaded with books or any other suitablematerial, weighing 6 kg in case of small, 8 kg in case of medium and 10 kg in case oflarge size school bags. After filling the specified weight, the bags shall be close,buckles fastened and hung on pegs at the wall, with the help of either the side strap or

the back straps. The distance between the floor and the peg shall be 1.5 meter in caseof side strap and 1.0 meter in case of back strap. The bags shall then be suddenlydropped and this operation shall be repeated 10 times. During or after the test thestitches shall not open, the straps and buckles shall not give way or come off thestitched tacks.

Handle Snatch Test: the school bag shall be securely fixed in an inverted position as arigid support, leaving the strap free for applying the load. The strap shall be suitablyharnessed to distribute the load applied over the entire middle portion. A load of 50 N (5kg) shall be applied suddenly to the strap for a period of 30 seconds. This operation shallbe repeated 10 times. The weight may be applied either by means of spring balance orweights, suitably placed on a stirrup. During or after the test, the strap shall not have

snapped, loosened or come off the stitching.

Each bag is required to be legibly marked with the following:

- Manufacturers name or registered trade mark- Size




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3.5.2 Air travel bags

Air travel bags are extensively used while traveling for carrying the clothes andvarious other items of requirement. These are needed by every household and happento be mass consumption product. Air travel bags widely differ in design, shape, colourand size from one manufacturer to another. Even for a particular shape and size, thequality of the material viz. fabric and fittings and the workmanship may be differentresulting in large variation in selling prices.

Air travel bags are manufactured in various materials viz. leather, leather cloth,cotton canvas, coated nylon fabrics and in various designs and shape. However,keeping in view the utility criterion and performance requirements for air travel bagsfollowing typical design with essential components has been recommend by BIS.

Pocket

Handle

Fastener

Lock

Pi in

Main Com onents




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BIS has also prescribed standard dimension for above mentioned design of the

air travel bag which are given below:

However, as mentioned above the air travel bags are manufactured andmarketed in a large number of shapes and designs with varying storage space, numberof inner and outer pockets including those exclusive designs in which storage spacecould increased or reduced with the help of slide fastener mechanism. Some of qualityand workmanship parameters and other specifications requirement as prescribed by BISfor air travel bags are as given below. Irrespective of shape and design of the air travelbags, adherence to these quality specifications shall ensure the proper performance and

durability of the bag while in use by the customers.

The handles with its fittings and attachments shall be strong and shall not yieldunder normal usage. The handles shall be reinforced with vulcanized fibre stripinside and riveted. The handles shall be centrally located on longer sides. Theclearance between the body of the bag and the inner face of the handles shall beadequate to facilitate easy gripping when lifted.

Boss (feet) shall be provided to avoid ground contact.

Certain other provisions such as inside compartments, front pocket andalternative arrangements may also be provided as agreed to between the

purchaser and the supplier.

The locking device shall be fixed to the end of the tab of fastener and one of thelateral sides of the bag. The locking device shall be easily accessible to operate.

The stitches shall be strong and uniform. The stitches shall be lock stitch with 28to 32 numbers per decimeter and of even tension. The stitch ends shall besecured either by knotting the thread or back stitching or by an additional row ofstitch.

All loose ends of the threads shall be trimmed off. The seams shall be uniform,continuous and straight.

Dimension in millimeter




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The fasteners used for the outside closure of the bag shall be of heavy quality

and for inside compartments, pockets, etc, shall be of medium or light quality.

The air travel bags shall be provided with piping all round the outer edges. Thecore shall be spiral spring and covered with leather cloth or plastic piping.

The lock flap shall be single piece sewn to the lateral sides of the bag. The flapshall have sufficient size to accommodate components of the lock.

The steel components shall be plated chromium over nickel conforming tostandard specifications.

The air travel bags shall be soundly constructed and finished smooth without any

sharp edges or constructional defects. There shall not be any loose thread oruneven seams.

In respect of appearance, general workmanship and finish the air travel bag shallconform to the sample previously approved by the purchaser.

BIS has also prescribed the following performance test for air travel bags:

Handle Snatch Test: The air travel bag shall be securely fixed in an inverted position ona rigid support, leading the handle free for applying the load. The handle shall besuitably harnessed to distribute the load applied over the entire handle. A load of 100 N

(10 kgf) shall be applied suddenly to the handle and repeated 10 times.

The weight may be applied either by means of spring balance or weights, suitably placedon a stirrup. During or after the test, the handle shall not have snapped or shall not haveloosened in its fittings.

Drop Test: The air travel bag shall be filled with cloths or other suitable materials to thetotal contents to weight 50 + 2.5 N (5 + 0.25 kgf). The bag shall be locked after filling thespecified weight. The air bag shall be dropped from a height of 1 m on a wooden floor orboard for 10 times. The bag shall not be damaged or get splits. During or after the testthe contents shall not show out.

3.6 School Uniform

School uniform or ready made garments comprises of a wide variety of garmentsin different fabrics, colours, design and shapes. As the uniforms are required to be madein the specified shade and texture of a given fabric as per given design in the varioussizes, required for various age groups of children, no general quality specification couldbe prescribed. However as the fabrication of uniforms involves a number of stages ofmanufacturing, BIS has prescribed a list of factors and precautions which need to be




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adhered to at the various stages of garment manufacturing from design to packaging to

ensure the final quality of the garment uniform.

These factors and precautions being specific to various stages of processeshave been listed later while describing the various stages involved in the process ofmanufacture of the uniform.

Bureau of Indian Standards (BIS) have specified various factors and guidelinesto ensure the proper quality of uniform and ready made garments. The main guidelinesare as under:

The design of the garments and the materials to be used in the manufacture ofgarments should ensure the fitness for purpose and relate to the method of

production. Materials and trimmings selected for production of garments shouldbe compatible with each other.

The materials should be inspection for defects and variations, checked forconformity to the related specification and properly labeled.

While lay planning, following factors should be taken care of;

Correct positioning of pattern pieces on fabric grain;

Inclusion of all required pattern pieces;

Matching of checks and stripes;

Correct positioning of pattern pieces for pile fabrics or one side fabrics; No overlapping of pattern pieces;

Availability of sufficient space between parts for accurate cutting; Correct identification of all pieces by size, style etc;

Accurate marking; Inclusion and correct positioning of all notches and drill marks; and

Fully marking of parts within defined lay width.

While cutting, the knife profile and cutting speeds should be checked.Cleanliness and safety aspects should be ensured during cutting.

In production department the equipment, operations and materials which requireadequate attention for proper make-up and pressing of garments are givenbelow:

Sewing machines, cleanliness and settings;

Needles size, type and condition;

Stitch density and thread tension;

Sewing thread material, count, colour and shade;

The following aspects of garments should be checked at the final stage.

Correct dimensions;

Seam pucker, seam allowance and sewing faults;

Garment symmetry;

Pressing/ fusing defects;

Cleanliness;




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Loose threads;

Correct matching of fabric and trimmings; Shade variation;

Correct fitting and alignment of closures; and; Correct placing of labels.




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CHAPTER 4 - RESOURCES

4.1 Main Resources

The main resources required for the project include the following.

- Land and building- Plant and machinery- Different type of fabrics for bags and uniforms- Consumables viz sewing thread, fasteners, buttons, vellcrows, tapes,

buckles, hooks, etc.

- Power- Skilled and non-skilled workers

It has been envisaged in the project the land for the project would be available onlease basis from Government of Bhutan and the building as per requirement has to beconstructed for the two production department. The plant and machinery has to beimported as per details given in the project. There is a requirement of cutting mastersand tailoring staff both for bag section as well as uniform section of the project. In theinitial phase, the some experts viz cutting masters and tailoring staff has to be broughtfrom India who in turn would be able to train the local staff over a period of time. Theproduction supervisors also initially have to be employed from outside so as to maintainthe quality standard of the product. The experts from the machine suppliers could also

help in training the local staff on operations of machines, however, development ofadequate skills for stitching quality garments is rather a time consuming process and thetailoring staff employed from outside would be a necessity in the initial phase.

4.2 Details of raw materials and consumables

A). School bags & Air Travel bags:

For the production of school bags and air travel bags following main rawmaterials would be required.

Nylon or canvas fabric - coated nylon fabric is the main raw material used for the

construction of the body of the bag and pockets. The fabric could be either coated withPVC or polyurethane (PU). These are available in various deniers viz. 400 x 400, 600 x400, 600 X 600, 1200 x 1200 and 1800 X 1800 in form of 50 meter rolls with widthvarying from 1.35 meter to 1.5 meters. Starch coated canvas fabric of 210 x 210 count isalso used for the production of low price range school bags. The canvas fabric isavailable in the form of 35-45 meter rolls with around 90 cm width.

Nylon Viscose tape - Tapes are used for side straps, back straps and piping. Nylontapes are available in continuous rolls long with 2.5 cm to 4 cm width. The tape with 2.5




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cm width is used for piping and normally 4 cm width tape is used for construction of

straps.

Sewing thread -Three ply or four ply nylon thread is used. The cotton sewing threadvariety no. 28 or polyester sewing thread variety no. 9 is also used.

Buckles:Suitable metal buckles or plastic buckles are used.

Vellcrow-Vellcrow strips are stitched on the body of bags as per design. Vellcrow isavailable in 2.5 cm or more width in the form of rolls measuring 20 meters.

Slide Fasteners Metal or nylon slide fasteners of good quality are fixed in the bag asper design.

Locks:Steal or brass locks as per design are fixed in the bag.

Foundation Material: Especially in case of air bags, plywood or card board or fibreboard sheet is placed inside the bottom of the bag to provide strength to the base of thebag and avoid the chances of collapsing of the bottom part.

Besides rivets and washers, boss (feet) to be placed at bottom, metal or plastic labels,screen and screen printing inks are also required as raw materials for the production ofthe bags.

B). School uniforms and readymade garments

Fabric, trims and embellishments, sewing thread, washing chemicals, packingmaterials would be the raw materials for the manufacture of school uniforms andreadymade garments. The fabric happens to the major raw material in the production ofuniforms & garments and the quality of garments in terms of its appearance anddurability would much depend on the type of fabric used. The price range of the uniformand the garment would also depend on the type and quality of fabric used in theproduction process. Various type of fabrics are used for the garments, however, in theproject, cotton fabric and blended fabric have been taken into consideration for thepurpose of cost calculation.

As stated above, a large variety of fabric in cotton, synthetic and woolenmaterials in various shades, woven and printed designs are available in the market andthese are invariably sold by their trade names, their intended use or finishes imparted tothe fabric. Even in one type of fabric, there could be a number of varieties widelydiffering in prices. The selection of fabric would depend on the type of garmentsproposed to be manufactured and the estimated price range i.e. cost of production sincefabric constitute the major part of the cost in the total cost of garment. These types offabric also available in a wide range of prices. In the project, medium quality of thesetwo fabrics has been taken into consideration with a view to produce uniforms at anaffordable price to the students. Various other raw materials viz sewing thread, buttons,slide fasteners etc. are also required. The main raw materials are as under:




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Fabrics The fabric could be either cotton, woolen, synthetic, cotton synthetic blends,

woolen synthetic blends. The fabrics could be either be mill made or hand loom fabric.Normally for uniforms cotton, polyester cotton and polyester wool blends arerecommended.

Sewing thread - Both cotton and synthetic types of sewing threads are used for

stitching of the uniform.

Slide fasteners: Both metallic any nylon slide fasteners are used in uniforms. Nylonslide fasteners, now a days are more preferred.

Buckles and hooks Mostly metal buckles and hooks are used.

Buttons-Plastic button of requisite size are used. Besides depending on the type of

garment and design, embroidery thread, elastic tapes, eyelets and hooks, metal anddecorative buttons etc. may also be required.

Majority of the raw materials and consumables are required to be imported either fromIndia or any other neighboring country.

4.3 Comparative analysis of sources and prices of critical inputs& consumables

As mentioned earlier, various raw materials required for manufacture of bags anduniforms include the following: -

A). School bags / Air travel bags

Nylon fabric

Nylon tapes

Sewing thread

Buckles

Vellcrows Slide fasteners

Locks Foundation materials

B). School uniforms / readymade garments

Fabric

Sewing thread Slide fasteners

Buckles hooks and buttons




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The main raw material for both the products is fabric which can be either

imported or sourced from wholesale fabric dealers. Depending on the acceptability inthe market, indigenously produced handloom fabric could also be used. The fittings andaccessories can be sourced from specialized shops dealing in these products in theeastern region of India.

4.5 Recommended sources

A list of raw material supplier has been given in the Annexure II. In case of largerequirements of fabric for garments, this could be procured directly from the mills orthrough their wholesale dealers.

4.6 Annual requirement of raw materials

The annual requirement of various raw materials along with their prices havebeen given in the chapter 9 relating to cost presentation.




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CHAPTER 5THE PLANT

5.1 Selection of technology

Manufacture of school bags and uniforms essentially involves cutting andstitching of fabric industry. The main manufacturing operations include designing,pattern making, cutting, stitching and fixing of accessories. Depending on the type andsize of the market, these operations are carried out either manually or with the use ofsemi-automatic machines or by using completely automatic machines. Sometimes,partly manual and partly semi-automatic machines operations are also employed.

5.1.1 Process Technologies used

For the production of exercise books, normally following type of processtechnology are used

Manual process wherein the fabric is cut manually and hand operated stitchingmachine are used.

Semi-automatic process using manual cutting and motorized stitching machines. Fabrication of garments is outsourced through vendors and the main unit carries

out only finishing operations. All manufacturing operations are carried out in the unit.

5.1.2 Factors influencing the choice of technology

A number of factors need to be taken into considerations while deciding thechoice in favour of a process technology. These factors mainly include

Factor inputs. Market findings viz size of market and recurrence of repeat demand. Purchasing power of consumers and prevailing price spectrum. Future projections of market demand. Availability of skilled manpower and support facilities. Availability of infrastructure and transport facilities.

Environmental considerations.

5.1.3 Technology recommended

Manufacture of school bags and uniforms basically involves cutting and stitchingof fabrics as per given size and designs. It is desirable to produce a sizable quantity ofbags or garments to achieve the economy of production. The fabric and consumablesare also purchased in bulk at competitive prices in variably directly manufacturing millsor wholesale traders to keep down the cost of inputs. The manufacturing process beingessentially a fabrication process, the level of skills of the cutting and tailoring staffbecomes a critical factor for production of quality goods. The unit has to keep a constant




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touch with the market trends in order to produce the quality and designs as per market

requirement. The quality and performance of the tailoring machines also plays animportant part in ensuring the quality of goods and accordingly, the machines selected inthe project are of standard make with proven record of performance.

There are two types of operations particularly in the case of garmentmanufacturing units in India. In the first type of operation, the manufacturing unitundertakes all the operations viz designing, cutting, stitching and finishing by themselvesand outsource only a limited operation like embroidery, etc. In the second type ofoperation, the unit undertakes designing and finishing operations only in their premisesand the cutting, stitching and fixing of buttons, etc is outsource from vendors. Keeping inview that the facility of vendor may not be available in Bhutan in the initial phase, it hasbeen envisaged that entire operation of garments and bag manufacturing is undertaken

by the unit in their premises.

5.2 Installed Capacity of Production

The installed capacity of the unit based on single shift operation, and 300working days in a year would be as under: -

School bags - 1,00,000 pieces per annumSets of uniform - 1,20,000 pieces per annum

Installed Capacity of Production

School bags

School uniforms

5.3 Details and specification of main machine and equipment

A).For bag section

1. Industrial sewing machine, single needle, Semi automatic

2. Heavy duty craftsmen sewing machine

3. Tape braiding machine




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4. Cutting tables

5. Cutting tools viz knife cutter, Aluminium sheets, angle scales, Cutting strips, patternsheets, etc.

6. Hand tools for button/revert fixing

7. Screen printing & label printing machine

B). For uniform section

1. Power driven, cloth cutting machine

2. Single needle sewing machine premium quality, with foot and motor

3. Single needle sewing machine universal with foot & motor

4. Double needle over lock safety stitching machine with edge trimming

5. Button holing machine

6. Button stitching machine

7. Hot fusing press

8. Garment washing machine

9. Hydro extractor

10. Tumbler drier

11. Steam press, industrial

12. Cutting and press tables




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5.4 Process of manufacture

5.4.1 School bags and air travel bags

The manufacturing process for the production of school bags and air travel bagswould involve the following stages.

Design and pattern Making: The design features and size are either supplied by thepurchaser or these are finalized by the manufacturing unit keeping in view the intendeduse, performance requirements and prices brackets. Once the design is finalized, thepatterns are cut in pattern sheets for different components.

Cutting of Components: The various components of bag viz bottom sides, top flaps,pocket etc are cut from the fabric with the help of pattern by using knife cutter. Therequisite lengths of tapes for piping and straps are also cut.

Stitching of bags: The various cut components in fabric are stitched as per designusing industrial sewing machines. The tapes and pockets are also stitched as perdesign. While stitching the piping is also placed along the stitched length. The slidefasteners Vellcrow are also stitched in the bag as per design.

Fixing of accessories: Various accessories viz buckles in metal or plastics, labels,washers, rivets, boss (feet), locks and bottom lining sheets are fixed in the bags.

Marking, Screen printing and packaging - The requisite design, trade mark and other

information is then printed or pasted in the form of labels in the bags. Each bag is placedin a polythene bags and then these are packed in card board cartons.




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The process flow chart for the production of school bags and air travel bags is as

under:

5.4.2 School Uniform and Ready made garments

The process flow chart for the production of school uniforms and ready madegarments is as given below. The main process operations to be carried out in each

section are also mentioned in the process flow chart.

Fabric & Raw Material Store

Designing and Pattern making

Cutting of fabric and tape as per

designs & Pattern

Stitching of the bags

Fixing of accessories

Marking, Screen printing

Packaging




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Fabric Store

Fabric and other accessories

Dying is out sourced, the fabric is

sent for dying if needed

Designing & pattern Making

The patterns are cut as per design from the pattern sheet

Cutting Department

Layers of cloth are placed on cutting tables.

Fabric is cut in to different components as per pattern

Cut components are numbered.

Before transferring cut components to production department, these will be tied inthe form of bundles, either garment piece wise or component wise.

Cutting table Cutting table Cutting table Cutting table

Production Department

Various components of uniform are stitched.

Over lock stitching is also made simultaneously.

Stitching M/c Stitching M/c Stitching M/c Stitching M/c

Stitching M/c Stitching M/c Stitching M/c Stitching M/c

Button, buckle and hook fixing

As per design the accessories are fixed to the uniform

Thread Cutting

Thread ends are cut manually

PressingSteam press

Table Table Table Table

Checking Finishing Department

While checking if any defects are found

Either the defective part is changed or

Garment is washed or dry cleaned

Packaging DepartmentUniform / Garments are packed in plastic bag and then packed in cartons




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As given in the process flow chart above the manufacturing of uniform and

garment would involve the following process operations.

- Selection of material, designing & pattern cutting- Lay planning and cutting- Stitching of garment- Fixing of buttons- Thread cutting- Inspection and packaging

5.5 Production capacity

The main machines in the project are sewing machine of various types. Thecapacity of the machines would depend on the type of garment or bag being producedand the skilled level of the machine operator. Keeping in view, the normal working, theproduction capacity has been calculated on 80% utilization of the machines. Theproduction capacity has been calculated on single shift basis and 300 working days in ayear. Based on these calculations, the production capacity works out as under: -

School bags / air travel bags - 1,00,000 nosSchool uniforms sets - 1,20,000 nos

5.5 Technical know-how

The technology involved in the production of school bags and school uniforms isrelatively a simple technology and basically involves cutting of the fabric as per designs,stitching of the fabric and fitting of accessories. The suppliers of stitching machineprovide assistance in proper operation of machine. In the initial phase, the experts in thefield of cutting of fabric, stitching of fabric may need to be brought from India who couldin turn train the local workers over a period of time.

5.6 Requirement of power and fuel

It is estimated that 60 HP power connection would be required for the productionunit including the power requirement for production machines and general purposelighting. The cost of the power has been calculated on the basis of Re. 1.45 per unit.

5.7 Manpower requirement

The production capacity and the financial projections are based on single shiftoperation. The manufacturing unit will have two production sections viz bagmanufacturing section and garment manufacturing section. For single shift operation ofthe unit, 5 managerial and office staff, 2 marketing executive, 2 cutting masters, 2production supervisors, 35 tailoring staff for bag section, 90 tailoring staff for uniform




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section and 70 unskilled workers would be required. In case the unit is required to be

operated in more than one shift, additional staff would be required. In addition to this,there would be a requirement of contract workers during construction phase of thefactory and installation of machinery and equipment.

5.8 Organization Flow Chart

The organization chart for single shift operation would be as under:

Organization Chart

Manager(Overall head of the factory operations)

The project has a good employment potential for skilled and unskilled workerswhich would be employed in the production unit. Beside the project would generateemployment potential in marketing & sales of its produce, transport of raw materials andfinished products. The project would thus create opportunity both for direct & indirectemployment.

Bag production

Section

Production

Supervisor

1

Cutting master

1

Tailoring Staff35 nos

Unskilled

workers 60

nos

Administration

and accounts

Accounts and

administrationstaff 4 nos

Marketing

Department

Marketing

Executive

2nos

Uniform

productionSection

ProductionSupervisor1

Cutting master1 no

Tailoring Staff

90 nos

Unskilledworkers10

nos




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5.9 Plant Layout




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CHAPTER 6

PLANT LOCATION ANDINFRASTRUCTURE

6.1 Potential Locations

The project has been designed mainly to cater to the requirement of uniform andschool bags for school children. Accordingly, vicinity to the centres of education andtrade centres has to the essential pre-requisites for deciding the location of the unit, sothat the products manufactured by the unit could be supplied to various locations inBhutan through trade channels. As mentioned earlier also, Thimphu, Chhukka,

Trashigang, Samdrup, Paro and Samatse happen to be the major education centre interms of size of enrollment till higher secondary and the unit could be setup at one ofthese locations.

The process of manufacture both in case of uniforms and school bags basicallyinvolves cutting and stitching of fabric and there are no solid, liquid or gaseous affluentgenerated in the manufacturing process. As such the unit could also be setup in thevicinity of the main city. The model of having the main processing unit and getting thefabrication done by the small fabrication units and vendors could also be adopted if theunit is near the main city.

= Education centres




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6.2 Selection of suitable locations

In order to select the suitable location for the manufacturing plant, variousparameters viz availability of land, environmental conditions, investments considerations,operational logistics, future development possibilities, socio-economic factors includingavailability of services viz road transport and communication facilities etc. have beentaken into consideration for ranking the locations. The table below shows the ranking oflocations:

Ranking of possible locations based on various parameters

Weightage of location related parameters

S.

No.

Locations Land

Accessconditions

Environmental

Conditions

Socio

economicfactors

Investment

Consideration

Operational

Logistics

Future

developmentpossibilities

Overall

Rating

1 Thimphu 7 7 7 7 7 7 42

2 Chukka 7 7 6 7 7 6 40

3 Trashigang 7 7 6 5 5 5 35

4 Samdrup 7 7 6 5 5 5 355 Paro 7 7 7 7 7 5 40

6 Samatse 7 7 6 5 5 5 35

It is accordingly suggested that the unit be located preferably at Thimphu,alternatively Paro or Chhukka. The requisite infrastructure viz land, power, road

transport and communication facilities required for the proposed unit are available atthese locations specially in Bjemina Industrial Estate. The project has beenconceptualized in totality and all the manufacturing operations are proposed to becarried out in the unit itself. The project has an inbuilt provision for spare parts,components and tools and the cost for the same has been incorporated. There may besome requirement of minor mechanical or electric repairs which could be taken care ofby the skilled workers of the unit. Alternatively, the assistance could be taken of fromthe existing mechanical and electrical repair workshops.

As the unit would also be producing ready made garments and air travel bags,which could be easily marketed through trade channels in the capital city, Thimphuwould be a preferred location for setting up this unit.




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CHAPTER 7 ENVIRONMENTAL IMPACT

7.1 Environmental aspect of manufacturing process

The manufacturing process involved in the production of school uniform andschool bags is basically a conversion process of fabric into garment or bag and thestitching is the main process involved in the production process. No gaseous and liquidaffluent are generated in the process. Dying is the only process in the manufacturer ofgarment which has pollution anger, however, in the proposed project, setting up of adying section has not been proposed. Some solid waste would be generated in the formof cuttings of the fabric which can be easily disposed off. The cotton fabric cuttings and

cotton sewing threads are bio-degradable and would not pose any pollution hazard. Inthe bag manufacturing section, some waste of nylon fabric would be generated whichcould be easily disposed off. The waste generation could be minimized by using themethod of economic cutting and the waste pieces could also be used for creatingdesigns and pattern on the bags.

7.2 Waste generated and mitigation measures

As stated above, the manufacturing process for school bags and school uniformis environment friendly and no toxic & hazardous waste would be generated. However,some waste in the form of fabric trimmings and cuttings would be generated duringmanufacturing process. Besides, there would be some waste of metal scrap, woodenscrap, broken bricks, stone aggregates, etc during construction phase of the project.The waste generated during construction phase is mainly used for earth filling & flooring.The details of the waste generated during construction phase and project operationphase along with mitigation measures are given below in subsequent paras.

7.2.1 Waste generated during construction phase

The details of the waste generated during construction phase and the mitigationmeasures are as under: -

S. No. Type of waste / scrap Quantity Mitigation measures Impact onEnvironment

1. Metal scrap Around 2-3 %of the steelused inconstruction

Sold to tradechannels forreprocessing.

No adverseimpact

2. Wooden scrap Around 5-7% ofthe wood usedin construction.

Used as fuel. No adverseimpact

3. Clay stones, mounds Dependingupon on thetopography ofthe constructionsite.

Used for earth filling. No adverseimpact.




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4. Brick stone cement

aggregate

5% of the

quantity used

Used for flooring

and earth filling.

No adverse

impact

7.3 Waste generated during project operation phase

The details of the waste generated during project operations and the methods ofthe disposal recommended are as under: -

S. No. Type of waste Quantity Mitigation measures Impact onenvironment

1. Liquid effluents(Dying plant for the

fabric has not beenincluded in theproject).

Nil Not applicable No adverseimpact

2. Gaseous effluents Nil Not applicable No adverseimpact

3. Solid effluents orwaste

Cotton fabric andnylon fabriccuttings

Fabric cuttings arepurchased by the tradefor multiple useincluding stuffing orreprocessing in case ofsynthetics.

No adverseimpact

As such, the manufacturing process is environment friendly and there is no

adverse impact of the project on the environment.




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Chapter 8

IMPLEMENTATION SCHEDULE8.1 Implementation schedule - Table

Implementation Schedule for manufacture of Exercise Book

Particular From To Total WeeksArrangement of Funds through Bank/Own 1 8 8

Procurement of Land 1 7 7

Procurement of Tech. know how/ transfer

of technology 1 18 18

Finalization of Building Contracts 6 11 5

Placement of Orders for Building Material 7 14 7

Placement of Orders for Machinery 9 19 10

Construction of Manufacturing premises 13 37 24

Delivery of Machinery 27 37 10

Erection, Commissioning of Plant &

Machinery & Utilities 37 41 4

Procurement of Raw Material and TrialRuns 39 43 4

Training for workers 42 43 1

Commercial Production 43 44 1




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8.2 Implementation Schedule - Graphic view

1 2 3 4 5 6 7 8 9 10 11 12 1 3 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44

Arrangement of Funds through Bank/ Own

Procurement of Land

Procurement of Tech. know how/ transfer

of technology

Finalization of Building Contracts

Placement of Orders for Building Material

Placement of Orders for Machinery

Construction of Manufacturing premises

Delivery of Machinery

Erection, Commissioning of Plant &

Machinery & Utilities

Procurement of Raw Material and TrialRuns

Training for workers

Commercial Production

Manufacture of Exercise Books

Week

Activity

Implementation Schedule

http://pdf.iteksoft.com/modules.php?op=modload&name=Sections&file=index&req=viewarticle&artid=4


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CHAPTER 9 - COST PRESENTATION

9.1 Capital Cost

9.1.1 Cost of Land and Building

A). Plot and built up area- Total land requirement - 1500 sq. mt.- Constructed area for godowns and offices - 300 sq. mt.- Industrial shed for installations of machines:

For bag manufacturing department - 250 sq. mt.

For uniform manufacturing department - 700 sq. mt.

B). Cost of Construction- Office and godowns (300 X 6000) - Rs. 18,00,000/-- Industrial sheds (950 X 3500) - Rs. 33,25,000/-

Total - Rs. 51,25,000/-

C). Land on lease @ Rs. 10/sq mt per annum.

Cost of Land and Building

Office and godown

Industrial s heds

9.1.2 Cost of Machinery and Equipments

A).For bag section

1. Industrial sewing machine, 1 No. Rs. 40,000/-Single needle, Semi automatic (M1)

2. Heavy duty craftsmen 30 Nos. Rs. 3,60,000/-Sewing machine (M2)

3. Tape braiding machine (M3) 3 Nos. Rs. 45,000/-




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4. Cutting tables (M4) 2 Nos. Rs. 20,000/-

5. Cutting tools viz knife cutter, LS Rs. 25,000/-Aluminium sheets, angle scales,Cutting strips, pattern sheets, etc. (M5)

6. Hand tools for button/revert fixing (M6) LS Rs. 10,000/-

7. Screen printing & label printing 1 each Rs. 25,000/-Machine (M7)

Sub-Total Rs. 5,25,000/-

B). For uniform section

1. Power driven, cloth cutting machine (M8) 1 No. Rs. 1,00,000/-

2. Single needle sewing machine 40 Nos. Rs. 8,00,000/-Premium quality, withfoot and motor (M9)

3. Single needle sewing machineUniversal with foot & motor (M10) 40 Nos Rs. 3,60,000/-

4. Double needle over lock, 2 Nos. Rs. 1,00,000/-Safety stitching machineWith edge trimming (M11)

5. Button holing machine (M12) 1 No. Rs. 1,50,000/-

6. Button stitching machine (M13) 1 No. Rs. 80,000/-

7. Hot fusing press (M14) 1 No. Rs. 70,000/-

8. Garment washing machine (M15) 1 No. Rs. 1,50,000/-

9. Hydro extractor (M16) 1 No. Rs. 75000/-

10. Tumbler drier (M17) 1 No. Rs. 1,50,000/-

11. Steam press, industrial (M18) 5 Nos. Rs. 75,000/-

12. Cutting and press tables (M19) 8 Nos. Rs. 80,000/-

Sub-total Rs. 21,90,000/-

Total of (A) and (B) Rs. 27,15,000/-




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2. Blended fabric 1 lac meters Rs. 1,50,00,000/-

3. Trims & Embellishment LS Rs. 18,00,000/-

4. Sewing thread, detergents LS Rs. 10,00,000/-And other consumable

5. Packaging material LS Rs. 5,00,000/-

Sub-total Rs. 2,91,00,000/-

Cost of Raw Materials

Bag section

Uniform section

9.2.2 Salary and Wages

Manager - 1 no - Rs. 25,000/-Production Supervisor - 2 Nos - Rs. 30,000/-Office staff & Marketing Executive - 6 Nos - Rs. 72,000/-Cutting master - 2 Nos - Rs. 20,000/-Tailoring staff for bag section - 35 Nos - Rs. 2,45,000/Tailoring staff for uniform section - 90 Nos - Rs. 6,30,000/Helpers for bag section - 60 Nos - Rs. 3,50,000/

Helpers for uniform section - 10 Nos - Rs. 50,000/-

Annual salary and wages - Rs. 164.64 lacs




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Salary and Wages

Manager

Production Supervisors

Office and marketing staff

Cutting master

tailoring staff for bag section

tailoring staff for uniform section

helpers for bag section

helpers for uniform section

9.2.3 Cost of Power and Fuel

Power requirement for production machines - 32 KWHPower requirement for general purpose for lightingOf stores, offices and production unit - 16 KWH

Total - 48 KWH

Annual cost of powerRs. 1,25,280/-

Power Requirement

Power for production machines

Power for general purpose




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9.2.4 Annual Turnover

1 lac bags @ Rs. 280 per bag - Rs. 2,80,00,000/-1.2 lac sets of uniform @ Rs. 400 per uniform - Rs. 4,80,00,000/-

Total - Rs. 7,20,00,000/-

Annual Turnover

Bags

Uniform




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CHAPTER 10

FINANCIAL ANALYSIS

10.1 Project Assumptions

Assumptions at a Glance

S. No. Particulars Rate/Amount

1 Total Project Cost 163.82

2 Debt 70%

3 Equity 30%

4 Rate of Interest 12%

5 Depreciation (Building) SLM 10 yrs

6 Depreciation (Machinery) SLM 20 yrs

7 Tax 30%

8 Construction Cost (Building) per sq.m. 6000

9 Construction Cost (Shed) per sq.m. 3500

10 Repayment period of Debt 8 yrs

11 Moratorium period 1 yr.

12 Installed Capacity (Units in Thousands) 275

13 Capacity Utilization 80%

14 Working Capital Cycle 1 month

10.2 Total Project Cost

Total Project cost

1 Machinery 36.112 Construction Cost 51.25

3 Miscellaneous Fixed Assets 3.004 Pre operating Expenses 5.00

5 Training Expense 0.366 Interest 11.49

7 Working Capital 56.61

Total 163.82




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Break up of Total Project Cost

Machinery

Construction cos t

Miscellanous fixed assets

Pre operating expenses

Training expenses

Interest

Working capital

10.3. Means of Finance

Debt 114.67 70%

Equity 49.14 30%

Total 163.82 100%

Break up of Means of Finance

Debt

Equity

10.4. Investment on Machinery

A). For bag section

M1 40,000

M2 360,000

M3 45,000

M4 20,000M5 25,000

M6 10,000




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M7 25,000

Sub Total 525,000B). For uniform section

M8 100,000M9 800,000

M10 360,000

M11 100,000M12 150,000

M13 80,000

M14 70,000

M15 150,000

M16 75,000M17 150,000

M18 75,000M19 80,000Sub Total 2,190,000

Total 2,715,000

AddPackaging, Forwarding, Transport and Insurance@ 11% 298650

Add Installation, Erection and Commissioning @ 2% 54300

Add Duty and Taxes @ 10% 271500

Add Spare Parts @ 10% 271500Total Cost 3,610,950

Break up of Investment on Machinery

Cost of machinery

Packaging to Insurance

Installation to Commissioning

Duty and Taxes

Spare parts

10.5. Cost of Construction

Constructed Area (300 Sq. mtr. @ 6000per Sq.mtr.) 1800000

Shed (950 Sq. mtr. @ 3500 per Sq mtr.) 3325000




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Total 5125000

Break up of Cost of Construction

Constructed area

Industrial shed




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10.6 Statement of ExpenditureExpenses (in Rs.)

Salary and Wages

Type of Employees No. of Employees Per month Per Annum TotalManager 1 25000 300000 3

Product Supervisor 2 15000 180000 3.6

Office's Staffs and Marketing Executive 6 12000 144000 8.64Cutting Master 2 10000 120000 2.4

Tailoring Staff for Bag section 35 7000 84000 29.4

Tailoring Staff for Uniform section 90 7000 84000 75.6Helpers for bag section 60 5000 60000 36Helpers for Uniform section 10 5000 60000 6

Total 164.64Perks at 15% 24.70

Total 189.34

Training and Development Cost ( 1% ofMachinery) 0.36

Power (60HP @ 0.75per hour, 80%utilization, 8hrs/day, 25days/month) Rate=1.45/unit 10440 1.25

Diesel, Water 5000 0.6

Selling Expenses ( Publicity and MarketingExpense) 5% of Sales 38

Total 64.91

10.7. Cost of Raw MaterialsRaw material cost (Rs.)

A1 6,800,000

A2 1,800,000

A3 2,000,000A4 1,500,000

A5 1,000,000A6 1,000,000

A7 1,000,000Sub-total 15,100,000

B1 10,800,000B2 15,000,000

B3 1,800,000

B4 1,000,000

B5 500,000

Sub-total 29,100,000

Total 44,200,000




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10.8 Break up of cost of production

ParticularsAmount(in lacs)

Raw Material & Consumables 442.00

Utilities & Fuel 1.85

Wages & Salaries 189.34

Indirect Expenses 66.05

Cost Breakup

Raw Material & Consumables

Utilities & Fueles

Wages & Salaries

Indirect Expenses

10.9 Annual Turnover

Particulars Units Rate Total

Bags 100,000 280 28000000Uniforms 120,000 400 48000000

Total 220,000 76000000




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Break up of Annual Turnover

Bags

Uniforms




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10.10 Income statement

Operating years 1 2 3 4 5 6 7 8 9 10

Capacity

I nst al le d Cap aci ty ( Un its ) 275000. 00 275000.00 275000. 00 275000.00 275000.00 275000.00 275000. 00 275000. 00 275000. 00 275000.00

Capacity Utilisation 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%

PRODUCTION 220000 220000 220000 220000 220000 220000 220000 220000 220000 220000

Sales Revenue 760.00 760.00 760.00 760.00 760.00 760.00 760.00 760.00 760.00 760.00

Raw Material & Consumables 442.00 442.00 442.00 442.00 442.00 442.00 442.00 442.00 442.00 442.00

Utilities & Fueles

Power 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25

Water, Diesel, etc 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60

Sub Total 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.85

Wages & Salaries 189.34 189.34 189.34 189.34 189.34 189.34 189.34 189.34 189.34 189.34

Factory Overheads 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00

General Overheads 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

Lease

Land 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12

Estimated Cost of Production 641.31 641.31 641.31 641.31 641.31 641.31 641.31 641.31 641.31 641.31

Selling Expenses 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00

Cost of Sales 679.31 679.31 679.31 679.31 679.31 679.31 679.31 679.31 679.31 679.31

EBITDA 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69

Interest 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00Depreciation 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17

PBT 60.76 62.48 64.20 65.92 67.64 69.36 71.08 72.80 74.52 74.52

Taxation 18.23 18.74 19.26 19.78 20.29 20.81 21.32 21.84 22.36 22.36

PAT 42.53 43.73 44.94 46.14 47.35 48.55 49.75 50.96 52.16 52.16

Income Statement

It would be seen from table above that the PBT in the 1styear of operation in Rs. 60.76 lacs which works out to be 8% of the total sales. In the 10

th

year, the %age of PBT would be 10%. Similarly PAT in the 1styear is Rs. 42.53 lacs accounting for 6% of total turnover. PAT in 10

thwould rise to

7%. These figures could vary depending upon change in tax structure.



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10.11 Repayment and Interest schedule for Loans

Repayment and Interest Schedule for Loans

Operating Years 1 2 3 4 5 6 7 8 9 10Rate of Interest 12%Loan (Outstanding) 114.67 100.34 86.00 71.67 57.34 43.00 28.67 14.33 0.00 0.00

Interest 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00MoratoriumRepayment 14.33 14.33 14.33 14.33 14.33 14.33 14.33 14.33 0.00 0.00Closing Balance 100.34 86.00 71.67 57.34 43.00 28.67 14.33 0.00 0.00 0.00

10.12 Depreciation

Depreciation

Operating Years 1 2 3 4 5 6 7 8 9 10

Machinery @ 10% 3.61 3.61 3.61 3.61 3.61 3.61 3.61 3.61 3.61 3.61Construction Cost @5% 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56

Total 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17



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10.13 Projected Fund flow statement

Construction Period

1 1 2 3 4 5 6 7 8 9 10

SOURCES OF FUNDS

Equity 49.14Debt 114.67

PBDIT 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69

Total Sources A 163.82 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69

APPLICATION OF FUNDS

Fixed Assets Purchase 104.21

Miscellaneous Fixed Assets 3.00

Increase in Current Assets 56.61

Repayment of Loan Payment 14.33 14.33 14.33 14.33 14.33 14.33 14.33 14.33 0.00 0.00

Payment of Interest on Term Loan 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00

Taxation 18.23 18.74 19.26 19.78 20.29 20.81 21.32 21.84 22.36 22.36

Total Application B 163.82 46.32 45.12 43.91 42.71 41.51 40.30 39.10 37.89 22.36 22.36

SURPLUS/(DEFICIT) A-B 0.00 34.37 35.57 36.78 37.98 39.19 40.39 41.59 42.80 58.34 58.34

OPENING CASH & BANK BALANCES 0.00 34.37 69.94 106.72 144.70 183.89 224.28 265.87 308.67 367.01

CLOSING CASH & BANK BALANCES 0.00 34.37 69.94 106.72 144.70 183.89 224.28 265.87 308.67 367.01 425.34

Years

Projected Funds Flow Statement

Operation period



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10.14 Projected Balance Sheet

Sn Description

Construction

Period Operati0on Period

1 1 2 3 4 5 6 7 8 9 10

1.1 Equity 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14

1.2 General Reserves 42.53 86.26 131.20 177.34 224.69 273.24 323.00 373.95 426.12 478.28

1.3 Debt 114.67 100.34 86.00 71.67 57.34 43.00 28.67 14.33 0.00 0.00 0.00

Total Liabilities 163.82 192.01 221.41 252.02 283.82 316.84 351.05 386.47 423.10 475.26 527.42

2 Assets

2.1 Gross Fixed Assets 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21

2.2 Accumulated Depreciation 6.17 12.35 18.52 24.69 30.87 37.04 43.21 49.39 55.56 61.73

2.3 Net Fixed Assets 107.21 101.03 94.86 88.69 82.51 76.34 70.17 63.99 57.82 51.65 45.47

2.4 Working Capital Assets 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61

2.5 Cash & Bank Balances 0 34.37 69.94 106.72 144.70 183.89 224.28 265.87 308.67 367.01 425.34

Total Assets 163.82 192.01 221.41 252.02 283.82 316.84 351.05 386.47 423.10 475.26 527.42

Projected Balance Sheet



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10.15 Discounted Cash Flow Statement

Discounted Cash flow statement (Total Investment)

Construction Period

Years t=0 t=1 1 2 3 4 5 6 7 8 9 10

Inflows

Net Cash Accruals After Interest &

Tax 48.70 49.91 51.11 52.32 53.52 54.72 55.93 57.13 58.34 58.34

Less: Change in Working Capital 0 0 0 0 0 0 0 0 0 0Add back financial Expenses 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00

Terminal value 290

Total inflow 62.46 61.95 61.43 60.92 60.40 59.88 59.37 58.85 58.34 348.34

Outflows

Investment 107.21 56.61

Bridge Loan 0 0

Total outflow 107.21 56.61

Net Cashflow -107.21 -56.61 62.46 61.95 61.43 60.92 60.40 59.88 59.37 58.85 58.34 348.34

IRR on Investment (%) 32%

NPV (12% Discount Rate) Rs. 206.75

Pay Back Period 2 years 6 months

Discounted Cashflow Statement (Equity)

Years t=o t=1 1 2 3 4 5 6 7 8 9 10

Inflows

Net Cash Accruals After Interest &

Tax 48.70 49.91 51.11 52.32 53.52 54.72 55.93 57.13 58.34 58.34

Less: Change in Working Capital 0 0 0 0 0 0 0 0 0 0

Less: Loan Repayment 14.33 14.33 14.33 14.33 14.33 14.33 14.33 14.33 0.00 0.00

Terminal Value 191Total Inflow 34.37 35.57 36.78 37.98 39.19 40.39 41.59 42.80 58.34 249.34

Outflows

Equity 32.16 16.98

Total Outflow 32.16 16.98

Net Cash Flow -32.16 -16.98 34.37 35.57 36.78 37.98 39.19 40.39 41.59 42.80 58.34 249.34

IRR on Equity 56%

Operation Period

The IRR on investment is 32% which is quite a positive indication about the financial health of the project because the cost of borrowing is 12%.

Similarly IRR on Equity is 56% which again is a positive indicator. The NPV @ of 12% on investment is Rs. 206.75 lacs which is quite good for any

investment.



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10.16 Break Even Point and Sensiti

cost sheet.pdf

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