project management
DESCRIPTION
pharmaceutical industry descriptionTRANSCRIPT
Project On
HASH biotech Pvt.ltd
SUBMITTED TO: SUBMITTED BY:Ms Sarpreet Kaur Sunil KumarLec. In Management studies MBA_09_14
CONTENTS
Introduction Principal Suppliers Market Segments Pharma Industry in India Export Destination Feasibility Study Financial Analysis
Introduction – Spirulina
INTRODUCTION
Spirulina is multi cellular and filamentous blue green algae that had gained considerable
popularity in the health food industry. It gets its name from shape of plant which looks like little
spirals. The dark green colour comes from chlorophyll present in it. No one fruit, vegetable or
meat can provide everything of human demand but tiny spirulina comes so close to this ideal. It
is available in tablet, flakes and powder form. It is found in both sea and fresh water. It is
produced primarily from two species of cyanobacteria Arthrospira platensis and Arthrospira
maxima. It is produced in more than 22 countries and used in over 77 countries. It occurs
naturally in tropical and subtropical lakes, high PH and high concentration of carbonate and
bicarbonate. Arthrospira plantsis occurs in Africa, Asia and south America. Arthrospira occurs in
Central America.
Magnify view of spirulina platensis
Hash biotech ltd introduces spirulina into 4 different forms into the market:1
1) Powder form
2) Granular form
3) Tablet form
4) Capsule form
In Chandigarh company releases only , tablet and capsule form of spirulina.
Company provides the product in 2 SKU i.e, 2 botttles of packing (90 tablets
and 180 tablets)
Price of 60 tablets packing is Rs.150
Price of 120 tablets packing is Rs.300
Four different form of the product
INDUSTRY DISCRIPTION:
The global pharmaceutical market is divided into three segments – Functional medicines,
functional beverages and dietary supplements. Spirulina is a part of the third category..The
global nutraceuticals market is poised to grow at compounded annual growth rate (CAGR) of
6.1% during 2000-2010. Sales of nutraceutical are projected to reach 187.4 billion dollars by
2011 against an estimated of 155.9 billion dollars in 2007. The Spirulina market is dominated by
U.S, INDIA, CHINA, and TAIWAN. These countries cultivate micro algae both for commercial
sale and for use in proprietary nutraceuticals. Additionally, there are large numbers of small scale
local and international distributors who sell Spirulina under their own brand name (e.g. Jarrows)
or custom packing (e.g. Whole foods). The US represents the largest market worldwide for
nutraceuticals. The US represents the 32 % of world nutraceutical market. The estimated sales
figure of US market is 50 billion dollars in 2007. The Asia pacific is also expected to witness fast
growth through 2015, reflecting rising consumer income levels, increasing per capita
consumption of nutritional product and growing investment in both bulk and end use product
industries.
PRINCIPAL SUPPLIER:
The Global spirulina industry is dominated by U.S, INDIA, CHINA and EUROPE. There
are only a few dominant firms (for Spirulina) and a large number of competitive fringe
firms in these countries. As a result, the current Spirulina market can be characterized as
monopolistic competition. The products being sold by all these firms are Algae based,
however they are minutely different from each other, on the basis of raw materials used.
U.S is the dominating country among these countries. U.S produces 960 tons of the
spirulina while INDIA produces 810 tons and CHINA produces 580 tons of the spirulina.
Taiwan also produces 300 tons of spirulina and Australia produces 175 tons of spirulina.
Hash Biotech. The main supplier of spirulina in the INDIA are :
Thapar group Nandanpur, Mysore
Parry India, Chennai
Hydrolina ltd, Chennai
NB Labs Pvt ltd, Nagpur
Sanat Pvt ltd, Delhi
Miscellaneous (small plants)
MARKET SEGMENTATIONThe Spirulina (nutraceutical) market can be segmented in the following ways for a
supplier:
Location: Urban & Suburban.
The market for Spirulina distribution is primarily concentrated in urban and suburban
areas where the demand for nutritional supplements is the highest based on the need to
supplement as a result of lifestyle followed by consumers.
Type of Market (B2C, B2B)
The business to business market would consist of retailers to whom Hash Biotech would
sell its spirulina powder under private labelling contracts. The business to consumer
market would consist of retailers like Wholefoods, to whom the company would sell its
spirulina tablets under its own brand.
Consumer Income (Premium, Commodity Market)
Based on consumer income, the market for spirulina can be categorized into premium
(high income consumers who are quality sensitive than price) and commodity market
(relatively lower income consumers who are relatively more price sensitive). At present
the U.S. made spirulina is distributed through the premium retail segment whereas the
imported spirulina is distributed through the commodity market.
Spirulina Application (Nutraceutical, Cosmetic, Medical Diagnostics)
Spirulina can be commercially used for multiple applications like as a nutritional
supplement for consumption by humans. It can further be used in the cosmetic industry as
a bio-ingredient in the preparation of various skin care products. Spirulina can also be
used for the purpose of cancer diagnostics, in place of radioactive isotopes.
EXPORT DESTINATION
Hash biotech pvt ltd exports the spirulina to different countries in the whole world. Hash biotech exports spirulina to:
MEXICO,THAILAND,
U.S.A, CHILE, P.R.CHINA , SPAIN,MYANMAR, ISREAL.
FEASIBILITY STUDY:
The feasibility study of any project is concerned with five kinds of analysis, which are:
(a) Market analysis
(b) Technical analysis
(c) Economic analysis
(d) Ecological analysis
(e) Financial analysis
Market analysis:In 2007, the US spirulina (Nutraceutical) industry was estimated to be worth $ 29.7
million with a demand of 11,000 tons. The supply was however 8000 tons. Further, the
combined demand for spirulina in California, Oregon and Washington was 1,200 tons1.
1
The demand is expected to grow rapidly because of successful blending of Spirulina with
snack foods. The distribution channels and retail supply of Spirulina is dominated by
Earthrise, LLC and Cyanotech, Inc, who jointly are the market leaders with more than
50% market share and the rest is supplied by fringe forms who act purely as importers
and distributors.
TECHNICAL ANALYSIS:
Important points related to technical feasibility are briefed as under:
Raw material: It is produced primarily from two species of cyanobacteria Arthrospira
platensis and Arthrospira maxima. It is produced in more than 22 countries and used in over 77
countries. It occurs naturally in tropical and subtropical lakes, high PH and high concentration of
carbonate and bicarbonate. Arthrospira plantsis occurs in Africa, Asia and south America.
Arthrospira occurs in Central America. Raw spirulina is produced from the fresh lakes , ponds
and ocean. Raw spirulina is purified and cleaned within few days. Cost of raw spirulina
production varies from countries to countries.
Research - The major research factors which help create a competitive advantage for a
spirulina manufacturer include identification of the spirulina strain (from about 3000
available spirulina strains), best sui3ted for commercial production in terms of current
climatic, environmental and water quality conditions and subsequent strain improvement,
identification of algal flora, design and development of photo-bioreactors, development
of micro propagation method and pigment production method from micro algae.
Production - The major production factors which help create a competitive advantage for
a spirulina manufacturer include hydro phoning, irrigation scheduling, agitation of
spirulina culture, extrusion, drying, purification and characterization of spirulina for
commercial use.
Packaging and Transportation - Packaging and transportation are one of the most
critical aspects of technological innovation. At present in India companies namely New
Quest and Parry India Chennai, Hydrolina ltd, Chennai, Sanat product, Hash biotech ltd
have their indigenously developed technological know how, regarding commercially
packaging and transportation of spirulina while optimally maintaining its complete
nutrient value. The nutrient value of spirulina is a major leveraging factor used by
companies while marketing their product.
ECONOMIC ANALYSIS
Demand and Supply - The current demand for Spirulina exceeds supply (e.g. in 2007,
the demand for industrial grade Spirulina was 11,000 tons and supply was 8000 tons).
Demand is set to rapidly grow in the next five years. The catalysts for the increase in
demand are growing public awareness about the benefits of consumption of Spirulina,
growing consumer trend towards health foods, lowering of prices because of entry of
foreign Spirulina distributors and breakthrough in R&D enabling the blending with snack
foods.
Substitutes - Substitutes like multi-vitamins, concentrated health foods pose a strong
challenge to Spirulina in the Gobal market. However the USP (unique selling
proposition) for Spirulina is that it is 100% organic and natural product. It has no proven
harmful effects, unlike other concentrated foods.
Price Elasticity – Based on the retail pricing survey, it can be said that the consumer
demand for Spirulina is more quality sensitive than price sensitive.
Market Power - The two dominant Spirulina companies in the U.S., namely Earthrise and
Cyanotech and in India Parry India, Hash Biotech Pvt Labs, New Quest corp., Sanat ltd
and Hydrolina Chennai have considerable market power and have been the market (price)
leaders, whereas the fringe firms have primarily been the followers. However, as a result
of rapidly decreasing demand-supply gap, it is expected that the market power of these
dominant firms would be considerably reduced.
ECOLOGICAL ANALYSIS
100% organic and natural - According to a recent research study, competition for
natural and Organic Nutraceuticals is heating up and the number of natural and organic
product introductions to the nutraceutical market is up by 57% than in 2003. The
consumers have shown a gradual shift towards natural and organic foods and this trend is
also evident in the nutraceutical industry.
Aging Population - The aging of the national population is also seen as a major social
catalyst for increased demand for Spirulina. Between 1996 and 2006, there was an
increase of 11% in doctor visits by patients aged 55 and over. It is estimated that there are
75 million baby boomers. The aging population and its need for enhanced nutritional
foods to extend functionality in the later years have more than ever necessitated and
catalyzed the economic viability of the nutraceutical industry.
Environmental Benefits - Conventional crops have hidden costs like depletion of
rainforests, fresh water resources, fertile topsoil, pollution from pesticides, herbicides and
climate change. Since Spirulina is 60% to 70% protein, which is higher than any other
natural food, its rapid growth means it yields 20 times more protein per acre than
soybeans, 40 times more than corn, and over 200 times more than beef.
.
FINANCIAL ANALYSIS:
PROJECTED INCOME STATEMENT
1st year 2nd 3rd year 4th year 5th
year year
SALES 10000000 125000
00
17280000 192000
00
208832
00
PRODUCTION
COST
4000000 550000
0
9700000 110000
00
125000
00
Gross Profit 6000000 700000
0
7580000 820000
0
83832
00
Operating
expenses
Salary of workers 2400000 240000
0
2400000 240000
0
240000
0
Rent of Building 24000 24300 24600 24900 25200
Electricity Bill
-Fixed 15000 15000 15000 15000 15000
-Variable 21600 22800 24000 25200 26400
Telephone charges
-Fixed 2400 2400 2400 2400 2400
-Variable 12000 13200 14400 15600 16800
Insurance charges 5000 5000 5000 5000 5000
Transportation
charges
500000 550000 600000 700000 800000
Municipal Charges 36000 39000 42000 45000 48000
Operating Profits 2984000 392830
0
4452600 496690
0
50444
00
Dep.On
machine/Maintena
nce
75000 60000 50300 43870 27683
Profits before
Interest & taxes
2909000 386830
0
4402300 492303
0
50167
17
Interest on loan 225000 180000 135000 90000 45000
Profit before Tax 2784000 368830
0
4267300 483303
0
49717
17
Tax @ 35% 974400 129090
5
1493555 169156
0
17401
00
Profit after tax 1809600 239739
5
2773745 314147
0
32316
17
Administrative expenses: 40 workers @ Rs. 5000 Per month
Rent of Building: Rs. 24000 per month. After 1 year there is
increase in Rent charges i.e. Rs. 300 per month.
Telephone Bill: Fixed – Rs. 200 per month i.e. Rs. 2400 per year.
Insurance: Fixed premium amount of Rs. 5000 per year.
SCHEDULE OF DEPRECIATION
Yea
rs
Opening
Balance
Dep. @ 10% W.D.V.
basis
Closin
g
Balan
ce
1st 3000000 300000 27000
00
2nd 2700000 270000 24300
00
3rd 2430000 243000 21870
00
4th 2187000 218700 19683
00
5th 1968300 196830 17714
70
SCHEDULE OF INTEREST ON LOAN @9%
Yea
rs
Loan
amount
Interest
amount
1st 2500000 225000
2nd 2000000 180000
3rd 1500000 135000
4th 1000000 90000
5th 5000000 45000
PROJECTED BALANCE SHEET
1st
year
2nd
year
3rd
year
4th
year
5th
year
CURRENT ASSETS
Cash in hand and at
bank
69312
50
66584
00
79195
00
907324
0
975423
0
Inventories 10000
00
15000
00
18000
00
230000
0
250000
0
Total Current Assets 79312
50
81584
00
97195
00
11373
240
12254
230
Fixed Assets
Machine 27000
0
24300
0
21870
0
196830 177147
Total Fixed Assets 27000
0
24300
0
21870
0
196830 177147
TOTAL ASSETS 82012
50
84014
00
99382
00
11570
070
12431
377
LIABILITIES & CAPITAL
Owner’s Capital 50000 50000 50000 500000 500000
00 00 00 0 0
Reserves & Surplus 14512
50
19514
00
36882
00
552007
0
658137
7
9% Secured Loan 15000
00
12000
00
10000
00
800000 600000
Creditors 25000
0
25000
0
25000
0
250000 250000
Total 81312
50
84014
00
99382
00
11570
070
12431
377
PRESENT VALUE OF CASH INFLOWS
Years Cash inflows P.V.@
10%
Present
Value
Cumulative
Value
1st 1809600 .909 1644926 1644926
2nd 2397395 .826 1980248 3625174
3rd 2773745 .751 2083082 5708256
4th 3141470 .683 2145624 7853880
5th 3231617 .621 2006834 9860714
Present value of Cash inflows = Rs. 9860714
PRESENT VALUE OF CASH OUTFLOWS
Years Cash
outflows
P.V. @ 10% Present
Value
Initial 5000000 1 5000000
1st 1000000 .909 909000
2nd 1000000 .826 826000
3rd 1000000 .751 751000
4th 1000000 .683 683000
5th 1000000 .621 621000
Present value of Cash outflows = Rs.8790000
NET PRESENT VALUE: It is the difference between cash inflows and cash
outflows. Therefore NPV of Project comes to Rs.9860714-Rs. 8790000 =
Rs.1070714
Therefore the project gives positive NPV and hence is acceptable.
DISCOUNTED PAY BACK PERIOD:
Pay back period represents the period in which the total investment pays
back itself. The present value of all cash outflows and inflows are computed
at which the cumulative present value of cash inflows equals the present
value of cash outflows is the discounted pay back period.
The cumulative present value of cash inflows at the end of 4th year is
Rs7853880
and it is Rs. 9860714 at the end of 5th year. Hence discounted pay back
period falls between 4 and 5 years. To be exact,
Discounted pay back period =4 years & 936120/2006834
=4 years and 4 months
INTERNAL RATE OF RETURN OF THE PROJECT
The cash inflows of the project are discounted at a suitable rate by hit and
trial method, which equates the net present value so calculated to the
amount of the investment. It is the rate at which the present value of cash
inflows is equal to the present value of cash outflows.
Yea
rs
Cash
inflows
PV
@12%D.F.
P.V. PV
@15%D.F.
P.V.
1st 1809600 .892 16141
63
.869 15725
42
2nd 2397395 .797 19107
23
.756 18124
30
3rd 2773745 .712 19749 .653 19749
04 04
4th 3141470 .635 19948
33
.567 17812
13
5th 3231617 .567 18323
26
.494 15964
18
93269
49
87375
07
The present value of net cash inflows at 12% rate of discount is Rs. 9326949
and at 15% rate of discount, it is Rs. 8737507 and present value of cash
outflows is Rs. 879000. It means IRR falls between these two discount rates:
= 12% +879000/(9326949-8737507)*3
=12% + 4.4
=16.4%
LIQUIDITY RATIOS
CURRENT RATIO: It may be defined as the relationship between
current assets and current liabilities. A relative high current ratio is an
indication that the firm is liquid and has ability to pay its current
liabilities in time.
Years 1st 2nd 3rd 4th 5th
Current
Assets
79312
50
81584
00
97195
00
113732
40
122542
30
Current
liabilities
25000
0
25000
0
25000
0
250000 250000
Current
Ratio
31.2 32.63 38.87 45.49 49.01
LIQUID RATIO: It shows the ability to pay short-term obligations as
and when they become due. Cash in hand and at bank are more liquid
assets. Inventories cannot be termed into liquid asset, as they cannot
be converted into cash immediately without sufficient loss of value.
Years 1st 2nd 3rd 4th 5th
Liquid
assets
69312
50
66584
00
79195
00
90732
40
97542
30
Current 25000 25000 25000 25000 25000
liabilities 0 0 0 0 0
Liquid Ratio 27.7 26.63 31.67 36.29 39.1
PROFITABILITY RATIOS
OPERATING PROFIT RATIO: It establishes the relationship between
operating profits and sales.
Years 1st 2nd 3rd 4th 5th
Operating
profits
29840
00
39283
00
44526
00
49669
00
50444
00
Net sales 100000
00
125000
00
172800
00
192000
00
208832
00
Ratio 29.84% 31.42% 25.76% 25.86% 24.15%
NET` PROFIT RATIO: It establishes the relationship between net
profit after taxes and sales. It indicates the efficiency, higher the ratio,
the better is the profitability position.
Years 1st 2nd 3rd 4th 5th
Net profit after
tax
18096
00
23973
95
27737
45
31414
70
32316
17
Net Sales 100000
00
125000
00
172800
00
192000
00
208832
00
Ratio 18.09% 19.17% 16.05% 16.36% 15.47%
RETURN ON INVESTMENT: It shows the relationship between net
profit after interest and taxes and the net worth of the owner.
Years 1st 2nd 3rd 4th 5th
Net profit after
interest & tax
18096
00
23973
95
27737
45
31414
70
32316
17
Net worth 29090
00
38683
00
44023
00
49230
30
50167
17
Ratio 62.2% 61.97
%
63% 63.81
%
64.41
%
FINANCIAL LEVERAGE: It is calculated as:
Years 1st 2nd 3rd 4th 5th
EBIT 29090
00
38683
00
44023
00
49230
30
50167
17
EBIT-Interest 27840
00
36883
00
42673
00
48330
30
49717
17
Financial
leverage
1.04 1.04 1.03 1.01 1.009
COST OF DEBT: The cost of debt is the rate of interest payable on the
debt.
Kd = Interest/Principal*(1-Tax rate)
Years 1st 2nd 3rd 4th 5th
Intere
st
22500
0
18000
0
13500
0
90000 45000
Princi
pal
25000
00
20000
00
15000
00
10000
00
50000
00
9% 9% 9% 9% 9%
OPERATING LEVERAGE: It is obtained by dividing
contribution i.e. sales minus variable cost, by the EBIT.
Years 1st 2nd 3rd 4th 5th
Sales 100000
00
125000
00
172800
00
192000
00
208832
00
Less: variable cost
Cost 400000
0
550000
0
970000
0
110000
00
125000
00
Electricity Bill 21600 22800 24000 25200 26400
Telephone charges 12000 13200 14400 15600 16800
Transportation
charges
500000 55000 60000 70000 80000
Municipal expenses 36000 39000 42000 45000 48000
Contribution 58804
00
68700
00
74396
00
80442
00
82120
00
EBIT 29090
00
38683
00
44023
00
49230
30
50167
17
Operating leverage 2.02 1.75 1.66 1.60 1.64
Financial leverage 1.04 1.04 1.03 1.01 1.009
Composite leverage 3.06 2.79 2.69 2.61 1.65
BREAK EVEN POINT: It may be defined, as that point of
sales volume at w3hich total revenue is equal to total cost. It is a point of
no profit, no loss.
Sales revenue at break-even point= Fixed costs+ Variable costs.
B.E.P.= Total fixed cost/ P/V Ratio
P/V Ratio= Contribution/Sales * 100
Years 1st 2nd 3rd 4th 5th
Sales 100000
00
125000
00
172800
00
192000
00
208832
00
Variable CostCOSTS 400000
0
550000
0
970000
0
110000
00
125000
00
Electricity Bill 21600 22800 24000 25200 26400
Telephone charges 12000 13200 14400 15600 16800
Transportation
charges
50000 55000 60000 70000 80000
Municipal expenses 36000 39000 42000 45000 48000
Contribution 58804
00
68700
00
74396
00
80442
00
82120
00
Fixed Cost
Administrative
expenses
240000
0
240000
0
240000
0
240000
0
240000
0
Rent 24000 24300 24600 24900 25200
Electricity Bill 15000 15000 15000 15000 15000
Telephone charges 2400 2400 2400 2400 2400
Insurance 5000 5000 5000 5000 5000
Dep. On machines 75000 60000 50300 43520 27683
Interest on Loan 225000 180000 135000
0
90000 45000
Total fixed cost 27464
00
26867
00
38473
00
25808
20
25202
83
P/V RATIO = Total Contribution/ Total Sales *100
= 36446200/79863200*100
=45.63%
TOTAL FIXED COST = Rs.14381503
BREAK EVEN POINT= Rs. 14381503/45.63%
= Rs. 31517648
