PROJECT ON HOLLOW BRICKS

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

2.0 Promoter and Management:

The ownership of the unit is as a propetoership concern by Smt. Rajalekshmi A.R, Indeevaram, M.L.A Road, Puthiyakavu, Pin-682301. She has been associated with this business and trade related activities for the past 5 years. The experience and the market contact that she received will help her in establishing the proposed activity of manufacturing and marketing of hollow bricks in a successful manner.

3.0 Scope and Market Potential:

Hollow block industry is one of the fastest growing segments of Industry in Kerala. The growth of the tile industry has shown steep fluctuations. The increase in number of households and the over the country created a great demand for hollow bricks. Hollow concrete blocks are substitutes for conventional bricks and stones in building construction. They are lighter than bricks, easier to place and also confer economies in foundation cost and consumption of cement. In comparison to conventional bricks, they offer the advantages of uniform quality, faster speed of construction, lower labor involvement and longer durability. In view of these advantages, hollow concrete blocks are being increasingly used in construction activities.

4.0 Manufacturing process:

The ratio of cement, sand and stone chips (metal) in the raw material mix determines the properties of hollow concrete blocks. A ratio of 1:3:6 (cement : sand : metal) confers higher strength, while a ratio of 1:5:6 can be employed for normal load bearing construction. The water to cement ratio is usually 0:4:1.

5.0 Location, Land and Building:

The unit is proposed to be located at Manjoor Village in Vaikom Taluk. An extent of 23 cents of land available and is leased by the promoter for establishing the unit. Building required for establishing the unit has to be constructed. The amount invested for civil work on construction of building for office, common amenity, well etc is Rs 200000/-. The survey number assigned to the land is 125/23..

6.0 Machinery & equipment:

Details are shown in the annexure. The plant and machinery proposed to be installed in the unit are Indigenous. . Total cost of machinery and equipment to be purchased is evaluated as Rs 372000/-

7.0 Installed capacity of production

The unit is proposed to be operated in 300 days per annum ( 25 days in a month of single shift operation of 8 hours duration in a day). As per the capacity of machinery to be installed and by considering production wastage the monthly production is worked out in the following table. It is proposed to utilize 70% of the installed capacity in the first year of operation and 75%, 80%, 85%, 90% in the consecutive years of operation. The sales realization for first month of operation is shown below.

CAPACITY UTILISATION PER MONTH ( for 70 % capacity utilisation) Sale Sl.No. Item Qty Unit Rate Amount 1 Hollow bricks 52500 Nos 11.00 577500

8.0 Raw material Requirement:

All the raw materials required by the unit are available throughout the year. The raw material can also be procured from the nearby districts and from other states. The stock and procurement period proposed in this scheme is for a period of 10 days. The details of requirement for 100% capacity utilisation in the unit are tabulated as below. The raw material required by the unit is proposed to be arranged through local distributors. The requirements of the unit for the targeted production are as below. Sl No 1 2 3 4 Raw material Quantity per month Price per Total amount load/sack required per month

Rock powder 25 loads Cement 750 sacks Chips (metal powder) 25 Total raw material required for 100% capacity utilization Raw material required for 70% capacity utilization

7000 300 10000

175000 225000 250000 650000 455000

9.0 Man power requirement and other expenses:

Total manpower of the unit including the Workers is 10 numbers and the details of manpower requirement, salary and other expenses per month are as follows. Designation / Monthly Amount Sl.No. Category No salary Rs 1 workers 5 7000 35000

helpers 4 Office assistant 1 Total 10 OTHER EXPENSES PER MONTH Sl.No. Item Amount 1 Power 3500 Postage & 2 Telephone 500 Printing & 3 Stationery 1000 Travelling 4 expenses 10000 5 Miscellaneous 5000 Total 20000

2 3

5000 3500

20000 3500 58500

10.0 Working capital requirement:

Total requirement of working capital for the first Month (phase) of operation is 3 lakhs . Perio Sl.N d in o. particulars Days 1 year 2 year 3 year 4 year Capacity utilisation(%) 300 70 75 80 85 69240 74185 79131 84077 Sales 300 00 71 43 14 55200 59142 63085 67028 Cost of raw materials 300 00 86 71 57 63228 67654 72085 76520 Cost of production 300 00 49 50 61 A Current Assets Stock of raw materials ( day's 22080 23657 25234 26811 1 consumption) 12 0 1 3 4 Stock in process ( day's cost of 2 production) 2 42152 45103 48057 51014 Stock of finished goods ( day's cost of 3 production) 2 42152 45103 48057 51014 Receivables( day's 4 cost of sales) 2 46160 49457 52754 56051 Total(A) 35126 37623 40121 42619

5 year 90 89022 86 70971 43 80959 40

28388 6

53973

53973 59349 45118

11.0 Total Cost of the Project:

Sl.No. 1 0 Particulars Building ( advances) Building and ther civil construction Machinery & Equipment(proposed ) Equipment(sales) Amount RS Existing Proposed 0 200000 0 0 200000 Total 0 200000 Margin money @35% 0 70000 margin@5%

372000

372000

372000

130200

4 Electrification and machinery installation cost 5 6 7 8 9 Total Office Furniture Brochure, advt and web site Prelim & Preoperative expenses Working Capital

50000 6000 2000 20000 350000 1000000

50000 6000 2000

50000 6000 2000 20000 350000 1000000

17500 2100 700 7000 122500 350000 50000

0 0 0

20000 350000 1000000

12. Means of finance:

Sl.No. O Particulars Term loan for building (interior decoration ) Term loan for machinery&equipment, office furniture etc Loan for prelim&preoperative including electrification ,brochure etc
Woking capital loan

Amount RS

3 5

MAGIN FROM kvic MARGIN OF THE PROMOTER

1000000 350000

50000

13.0 Profitability analysis:

Detailed statement is given in annexure. Assumptions made for the calculation are as follows:

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

Depreciation: Depreciation on Building, Machinery and Equipment are evaluated on WDV basis and is tabulated as below

sl No 1

Particulars Building Depreciation (A) WDV on Building

I year 300000 15000 285000 437500 43750 393750 58750 58750

2 year 270750 13538 257213 354375 35438 318938 48975 48975

43year 257213 12861 244352 318938 31894 287044 44754 44754

4 year 244352 12218 232134 287044 28704 258339 40922 40922

5 year 232134 11607 220528 258339 25834 232505 37441 37441

Machinery and equipment Depreciation(B) WDV on Machinery and equipment Total depreciation(A+B)

SHEDULE OF IMPLIMENTATION

Acquisition of land Construction of Building Installation of plant and Machinery Trial run Commercial Production

Agreement on lease Completed after availing the loan Expected to be completed by September 2010 Expected to be completed by September 2010 October 2010

14.0 Conclusion:
The net profits after taxation in the first year of operation is estimated as RS 600917 /. The break-even point is 35 % of installed capacity. The return on investment is obtained as 42 % in the 2nd year of operation. The cost of production and profitability statement for the first 5 years, break-even analysis, repayment schedule for term loan, cash flow statement and the projected balance sheet are given in Annexure. Based on the analysis made above it is found that the scheme is technically feasible and economically viable.

Submitted by: ASHA XAVIER KARUKULATHEL MANJOOR P.O KURUPPANTHURA KOTTAYAM

ANNEXURE 1 (as per quotation) PLANT & MACHINERY

Sl.No. Item 1 Egg laying type Concrete block machine with die 2 Trolley for brick and mix handling 3 Solid die set 4,6 4 Hollow die set 4,6 5 Concrete mixer 6 Vat total @4%+ cess 1% Total

Nos 01 04 02 02 01 01

Rate Rs Amount Rs 130000 7500 14000 18000 130000 17700 130000 30000 28000 36000 130000 17700 372000

ANNEXURE 2 Profitability statement for 5 years of operation

Particulars No. of working days No. of shifts 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR 300 300 300 300 300 1 1 1 1 1

Installed capacity Capacity utilization Production A B Sales Cost of Production Raw materials Wages Power, and Fuel charges Repair & maintenance Insurance Depreciation Total Gross operating profit Admn. & Selling expenses 1. Administrative expenses 2. Selling expenses Financial expenses 1. Interest on term loan 2. Interest on WC loan 3. Interest on MM loan Total of D&E Net operating profit Income tax Net profit Withdrawls Depreciation Cash surplus

9900000 70 6930000 6930000

9900000 9900000 80 85 7920000 8415000 7920000 8415000

9900000 9900000 90 90 8910000 8910000 8910000 8910000

5460000 264000 120000 5000 5000 58750 5912750

6240000 6630000 301714 320571 137143 145714

7020000 7020000 339429 339429 154286 154286

5000 5000 5000 5000 48975 44754 6737832 7151040

5000 5313 5000 1063 40922 37441 7564636 7557530

C D

1017250

1182168 1263960

1345364 1352470

204000 69300

233143 79200

247714 84150

262286 89100

262286 89100

82834 36000 9038 401171 616079 73911 542167 58750 600917

47014 36000 9038 404394 777774 93315 684459 48975 733434

29104 36000 9038 406006 857954 102937 755018 44754 799772

11194 36000 9038 407617 937747 112512 825235 40922 866157

4478 36000 6778 398641 953829 114441 839387 37441 876828

F G H I J K L

ANNEXURE-3 BREAK EVEN ANALYSIS

Particulars FIXED COST Salaries Repair & Maintenance Insurance Administrative expenses Depreciation Interest on MM loan Interest on Term loan Total VARIABL E COST Raw Materials Power Charges Selling expenses Interest on WC loan Total BEP in % of installed capacity BEP in % of capacity utilization Return on Investment 546000 0 120000 69300 36000 568530 0 624000 0 137143 79200 36000 649234 3 663000 0 145714 84150 36000 689586 4 702000 0 154286 89100 36000 729938 6 702000 0 154286 89100 36000 729938 6 264000 5000 5000 204000 58750 9038 82834 628621 301714 5000 5000 233143 48975 9038 47014 649883 320571 5000 5000 247714 44754 9038 29104 661181 339429 5000 5000 262286 40922 9038 11194 672868 339429 5313 1063 262286 37441 6778 4478 656786 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR

35.35 50.50 42.11

36.42 45.52 53.16

36.99 43.52 58.64

37.60 41.78 64.10

36.70 40.78 65.20

ANNEXURE-4 DEBT SERVICE COVERAGE RATIO (DSCR)

Particulars A Cash generated 1 Net Profit 2 Depreciation 1 Year 616079 58750 2 Year 3 Year 4 Year 937747 40922 5 Year 953829 37441

777774 857954 48975 44754

3 Interest on term loan 4 Interest on mm loan 5 Interest on wc loan Total (A) B Debt Service Requirement 1 Repayment of term loan Repayment of interest on 2 term loan Repayment of interest on 3 mm loan Repayment of interest on wc loan Total (B) Debt service coverage C ratio Average DSCR

82834 9038 36000 802700 80000 82834 9038 36000 207871 3.86 7.03

47014 29104 9038 9038 36000 36000 918800 976850 80000 47014 9038 80000 29104 9038

11194 4478 9038 6778 36000 36000 1034900 1038525 80000 11194 9038 36000 136231 7.60 80000 4478 6778 36000 127256 8.16

36000 36000 172051 154141 5.34 6.34

ANNEXURE-5 REPAYMENT OF TERM LOAN

repayment Year Instalment Number Principal Interest Balance per month 1 1 746250 22388 708938 19900 2 708938 21268 671625 19527 3 671625 20149 634313 19154 4 634313 19029 597000 18781 82834 54278 2 5 597000 17910 559688 18408 6 559688 16791 522375 18034 7 522375 15671 485063 17661 8 485063 14552 447750 17288 64924 48308 3 9 447750 13433 410438 16915 10 410438 12313 373125 16542 11 373125 11194 335813 16169 12 335813 10074 298500 15796 47014 42338 4 13 298500 8955 261188 15423 14 261188 7836 223875 15049 15 223875 6716 186563 14676 16 186563 5597 149250 14303 29104 36368

17 18 19 20

149250 111938 74625 37313

4478 3358 2239 1119

111938 74625 37313 0

13930 13557 13184 12811

REPAYMENT OF MARGIN MONEY LOAN

Year 1 2 3 4 5 6 7 8 Principal 150625 150625 150625 150625 150625 112969 75313 37656 Interest Balance 9038 150625 9038 150625 9038 150625 9038 150625 9038 112969 6778 75313 4519 37656 2259 0

REPAYMENT OF WORKING CAPITAL LOAN 1 Year Total Working capital required Loan Amount Interest @12% 300000 300000 36000 2 Year 300000 300000 36000 3 Year 300000 300000 36000 4 Year 300000 300000 36000 5 Year 300000 300000 36000

ANNEXURE- 6 CASH FLOW STATEMENT

A 1 2 3 4 5 6 7 8 9 1 Source of Funds Cash accruals(profit before income tax) Increase in capital equity Depreciation Investment allowance Increase in long term loan Increase in MM loan Increase in unsecured loans Increase in WC loan Sales of fixed assets/invests Others( investment Constructio n period 0 150625 53625 48975 44754 40922 2 year 807125 3 year 869825 4 year 932096 5 year 993978

746250 150625

0 0 0

-300000 0 0

300000 0 0

0 0 0

0 0 0

subsidy) Total 1047500 560750 121880 0 976850 103490 0

Disposition of Funds Prelim & Pre-op expenses Increase in capital expenditure Increase in current assets Decrease in long term loans Decrease in unsecured loans Decrease in MM loan Decrease in WC loan Interest on term loan to bank Interest on WC loan Interest on MM loan Taxation Divident on equity Other expenses Total

125000 862500

0 0 21797 80000

0 0 21804 80000

0 0 21809 80000

0 0 21815 80000

0 0 64924 0 9038 87962 0 987500 263720

0 0 47014 36000 9038 93315 0 287170

0 0 29104 36000 9038 102937 0 278887 180254 1 697963 250050 3

37656 0 11194 36000 9038 112512 0 308214 250050 3 726686 322719 0

C D E

Opening balance Net surplus Closing balance

0 60000 60000

573881 297030 870910

870910 931630 180254 1

ANNEXURE-7 PROJECTED BALANCE SHEET

Liabilities Equity share capital Reserve & Surplus Term loan Margin Money loan Working capital loan Other liabilities(towards subsidy) Total Liabilities

Constructio n period 2 year 3 year 4 year 5 year 150625 150625 150625 150625 150625 187182 262684 345208 0 1187369 8 6 1 746250 586250 506250 426250 346250 150625 150625 150625 150625 112969 0 300000 300000 300000

0 1047500

0 2074869

0 297932 8

0 365434 6

0 436192 5

Assets Gross block Depreciation Net block InvestmenT(Prilim. Expences) Current assets Reserved Stock accumulated to be added to current assets
Cash and bank balance

Constructio n period 2 year 3 year 4 year 5 year 862500 803750 750125 701150 656396 0 53625 48975 44754 40922 862500 750125 701150 656396 615474 125000 125000 328834 125000 350638 125000 372447 125000 394262