Wire Nails

Introduction: Iron nail is one hardware that is used mainly in Building construction work, manufacturing
boxes for packing etc. due to the increasing population and the necessities attached to it, they are always
in demand in the market. The most important aspect about the manufacturing of this product is that the
brand is not important as far as iron nails are concerned hence entrepreneurs can go for the
manufacturing at district or tehsil level. Keeping the quality standards in mind, and they could be on the
road to success. For the purpose of marketing one can contact hardware store and the stores that keep
stuff related to building construction.

Manufacturing process of nails: Two types of machines are required to manufacture nails (i) Crank
type (ii) Spring type. Out of these maintenance cost and are automatic. Cold drawn, bright wire is used to
make nails, and this wire is available in various gauges (20 S.W.G. to 65 W.G.). These wires are found in
round bundles, one end of the wire is fixed in tool stand and then the other is put in wire straightening
rollers and the wire automatically reaches the machine. To pull the wire further ahead, there is a grip after
the rollers and this grip pulls only as much wire as is needed for the specific of the nail. The head of the
gh the crank shot. The front end
of the wire is hit hard by the punch attached to the head-making mould. To make the other end and then
cutting of the nail is done automatically. Here the moulds press the wire and nail gets bifurcated & cut
from the wire. In this way, some part of the nail is still attached to the wire and an automatic trigger
separates the nail from the wire. When the nails come out of the machine, then the tiny bits of iron &
grease/lubricant deposited on the nails are remoulded by putting them into a polishing drum in which iron
balls and dust are also put and after the polish, they are sent to the markets in jute bags. The details of
the gauges of the wire, etc. required to manufacture various sizes of the nails are mentioned below:
iv) Nails of the length ranging from ½ inch to 2 inches wire gauge:- 20 to 12 S.W.G; capacity of
machines, etc. 400 nails per minute; electric motor of 2 H.P.
v) Nails of length ranging from ¾ to 3 inches wire gauge:- 14 to 9 S.W.G.; capacity of the
machines:- 300 nails/minute and 350 kg. nails per day. Electric motor of 3 H.P.
vi) Nails of length ranging from 1 to 4 inches wire gauge:- 12 to 6 S.W.G.; capacity of the
machine; 200 nails/minute and 650 kg nail/day. Electric motor of 5 H.P.

Wire fixing Wire nail Readymade Polishing Polish

on reel stand making Nails drum on nails

Sales
Production Capacity: The production target has been kept as 345600 kg per annum (size : ¾
- 3 Inches) . The total sales realization would be around Rs. 25, 92,000/-
Capital Cost Estimate:
(a) Land & Building 800 sq.ft Rented
(b) Plant & Machinery
(i) Wire nail making machine along with 3 H.P. Motor 1,88,300/-
(ii) Polishing barrel/ drum 55,200/-
(iii) Wire stand/ spool 9,000/-
(iv) Grinder & cutter 22,500/-
(v) Other equipments & hand tools etc. 25,000/-
Total 3,00,000/-
(c) Misc. fixed assets
(i) Electrification & water installation 5,000/-
(ii) Furniture & fixture 20,000/-
Total 25,000/-
Total Fixed Capital Rs.3,25,000/-
Working Capital
(a) Raw Material
1. M.S. Wire (cold drawn 5050 kg. bright wire) 20-9 gauge wire 1,59,500/-
2. Old sacs/ bags for packing 2,000/-
3. Other consumables 1,500/-
Total : Rs. 1,63,000/-

3) WORKING CAPITAL (P.M.) :-

2) STAFF SALARY & WAGES :-

a) Manager cum Supervisor - Self
b) Sales man cum accountant 2 nos. @ Rs. 1,500/- - Rs. 8,000/-
c) Skilled workers 3 nos.@ Rs. 1,000/- - Rs. 12,000/-
Sub total = Rs. 20,000/-
3) OTHER CHARGES :-
a) House Rent - Rs. 3,000/-
b) Electricity charge - Rs. 1,000/-
c) Transport/Traveling charge - Rs. 1,500/-
d) Royality charge - Rs. 600/-
e) Printing & stationery charge - Rs. 1,000/-
f) Misc. expenses - Rs. 500/-
Sub-total = Rs. 7,600/-
4) UTILITY :-
a) Water - Rs. 100/-
TOTAL WORKING CAPITAL (P.M.) :-
a) Raw Materials - Rs. 1,63,900/-
b) Staff salary - Rs. 20,000/-
c) Other charges - Rs. 7,600/-
Total = Rs. 1,91,500/
1) FIXED CAPITAL - Rs, 3,25,000/-
2) WORKING CAPITAL - Rs. 1,91,500/-
TOTAL PROJECT COST- Rs. 5,16,500/-
MEANS OF FINANCE :- Urban Rural
1) Bank Loan 70% 3,61,550/- 3,09,900/-
2) Margin Money 5% 25,825/- 25,825/-
3) Subsidy 25% 1,29,125/- 1,80,775/-
4) Debt equity ratio 2.33:1 1.5:1
Profitability: (Rs. in Thousands)
Sl.No. Description 1st year 2nd year 3rd year 4 year
th 5th year
1. Capacity utilized as percent of 60 70 80 80 80
installed capacity
2. Annual Sales Realization in 15,55,200 18,14,40 20,73,600 20,73,600 20,73,600
Rs.
3. Annual Costs in Rs.
a) Raw Materials 11,80,080 13,76,760 15,73,440 15,73,440 15,73,440
b) Utilities 7,920 9,240 10,560 10,560 10,560
c) Selling expenses 36,000 42,000 48,000 48,000 48,000
Variable Cost 12,24,000 14,28,000 16,32,000 16,32,000 16,32,000
d) Wages & Salaries 1,15,200 1,34,400 1,53,600 1,53,600 1,53,600
e) Administrative expenses 40,320 47,040 53,760 53,760 53,760
f) Depreciation 32,500 32,500 32,500 32,500 32,500
g) Interest on Composite Loan 41,529 33,590 24,429 14,657 4,886
Fixed & Semi Variable Cost 2,29,549 2,47,530 2,64,289 2,54,517 2,44,746
4. Total Cost 14,53,549 16,75,530 18,96,289 18,86,517 18,76,746
5. Annual Profit 1,01,651 1,38,870 1,77,311 1,87,083 1,96,854
6. Return on Investment 19.68% 26.88% 34.32% 36.22% 38.11%
7. Return on sales 6.53% 7.65% 8.55% 9.02% 9.49%
8. Annual contribution 3,31,200 - - - -
9. Break Even Point as percent 41.58%
of capacity
10. Cash accrual 1,34,151 1,71,370 2,09,811 2,19,583 2,29,354
11. Debt Servicing Capacity 1,75,680 2,04,960 2,34,240 2,34,240 2,34,240
12. Repayment of Composite 58,630 68,401 78,173 78,173 78,173
Loan
13. Debt Serviced 1,00,159 1,01,991 1,02,602 92,830 83,059
14. Pay Back Period 1 year 9 months
15. Debt Service Coverage Ratio 1.75:1

Cash Flow Statement (Rs. in Thousands)

Sl. Description Pre- Operating Years
No. operative
Period First Second Third Fourth Fifth
 1. 25,825 - - - - -
contribution
2. Increase in Term loan 3,61,550 - - - - -
3. Subsidy 1,29,125 1,91,500 - - - -
4. Depreciation - 32,500 32,500 32,500 32,500 32,500
5. Profit before interests - 1,43,180 1,72,460 2,01,740 2,01,740 2,01,740
A. TOTAL SOURCES 5,16,500 3,67,180 2,04,960 2,34,240 2,34,240 2,34,240
6. Increase in capital 5,16,500 - - - - -
investment
7. Increase in working capital - 1,91,500 - - - -
8. Interest - 41,529 33,590 24,429 14,657 4,886
9. Repayment of Term Loan - 58,630 68,401 78,173 78,173 78,173
B. TOTAL DISPOSALS 5,16,500 2,91,659 1,01,991 1,02,602 92,830 83,059
C. OPENING BALANCE NIL NIL 75,521 1,78,490 3,10,128 45,15,38
D. NET SURPLUS NIL 75,521 1,02,969 1,31,638 1,41,410 1,51,181
E. CLOSING BALANCE NIL 75,521 1,78,490 3,10,128 4,51,538 6,02,719

Projected Balance sheet:

Sl.No. Description Amount in Rupees as at the end of the
1st Yr. 2nd Yr. 3rd Yr. 4th Yr. 5th Yr.
1. Capital Account of 25,825 1,27,476 2,66,346 4,43,657 6,30,740
Promoter
2. Surplus from 1,01,651 1,38,870 1,77,311 1,87,083 1,96,854
operation
NET WORTH: 1,27,476 2,66,346 4,43,657 6,30,740 8,27,594
3. Subsidy 1,29,125 1,29,125 1,29,125 1,29,125 1,29,125
4. Term loan 3,02,920 2,34,519 1,56,346 78,173 -
outstanding
TOTAL LIABILITIES 5,59,521 6,29,990 7,29,128 8,38,038 9,56,719
1. Gross Block 3,25,000 3,25,000 3,25,000 3,25,000 3,25,000
Less Depreciation 32,500 65,000 97,500 1,30,000 1,62,500
NET BLOCK 2,92,500 2,60,000 2,27,500 1,95,000 1,62,500
2. Working capital 1,91,500 1,91,500 1,91,500 1,91,500 1,91,500
3. Cash & Bank Balance 75,521 1,78,490 3,10,128 4,51,538 6,02,719
TOTAL ASSETS 5,59,521 6,29,990 7,29,128 8,38,038 9,56,719
Suppliers of Machinery:
1. New Burma Machines Co., 97, East Mohannagar, Amritsar.
2. - 143 001.
3. Ultra Engineering, 172,B,Madhusudan Pal Choudhury Lane, HOWRAH.