DPR Paper Recycling Unit VFinal

Re-Cycling Paper Manufacturing Unit

Application No. 5119CA0109 Date: July 30, 2013 Page|1

Detailed project report

RE-CYCLING PAPER MANUFACTING UNIT

Application No: 5119CA0109

SUBMITTED TO: RAJASTHAN FINANCIAL CORPORATION


Table of Content

Content Page No.

1. Project Profile

1.1 Project Brief 2

1.2 Scope of Project 2

1.3 Project Location 2

1.4 Project Investment 3

2. Corporate information

2.1 Formation 3

2.2 Source of Fund 4

2.3 Profile of the Project Executors 4

3. Market Information

3.1 Indian Paper Industry 5

3.2 Used Paper Collection in India 5

4. Project implementation 9

5. Production Process

5.1 Technology and Paper Recycling process 10

5.2 Raw material availability 12

5.3 Machinery Requirement 12

5.4 Other Fixed Assets Requirement 13

6. Land and Building Requirement

6.1 Land 14

6.2 Plant and Office Infrastructure 14

7. Human Resource Requirement 14

8. Assumptions 14

9. Financial Feasibility

9.1 Project Cost 16

Annexure 1 - Projected Cash Flow Statement 17

Annexure 2 - Debt Draw-Down Schedule 18



1. Project Profile

1.1 Project Brief

Our Business plan is to setup a plant that converts used paper to the new, re-useable paper. The

process is known as Paper Recycling. Our business will help the paper industry to fulfill the

rapidly increasing demand of paper products. Due to the inability for paper industry to meet the

demand of paper, country needs to import paper from abroad. Due to this demand-supply gap,

prices of paper products are increasing day by day. Our business plan will not only decrease the

import bill of the country but also will decrease the price of paper products and as we know

Recycling industries also promote the growth and up lift the society by economic value

addition.

1.2 Scope of Project

Since writing paper is a part of day today life for every individual there is no classification on

the target customer, however from the output quality of the recycled paper (which is marginally

lower than the virgin paper) point of view it is mainly targeted for students and organizations,

Newspaper and Publishing Houses. It can be used as a normal writing/printing/copier paper for

daily use.

India, country as whole is only recycling 27% out of total 13 metric tons of paper and

paperboard consumption per year. With the suitable mechanism there will be an increase in the

effective recycling of paper for manufacturing. With our Self Model of collecting Used Paper

from Schools and Organizations will benefit our raw material and logistic cost.

1.3 Project Location

Various locations have been identified and it is evaluated based on the different criteria’s like its

population, geographic location, availability of used paper and paperboard, water and power for

uninterrupted operations. After the detailed analysis we have identified Jaipur as an Option 1

and Udaipur as an Option 2 for this project. With the advantage of its location in centre of three

states Rajasthan, Gujarat and Madhya Pradesh and in the point of logistics as well Udaipur can

have easy flow of finished paper and paperboard products from neighboring divisions/districts

like Gandhinagar and Ahmedabad in Gujarat and Indore and Bhopal in Madhya Pradesh. For

the above mentioned purpose Udaipur has been finalized as a primary location for the project.

However based on the other criteria like easy of setting up business in the district and

availability of land and other resources the location will be finalized during the planning stage

of execution.

1.4 Project Investment



Total Initial Cost of the Project is worked out as follows:

Table 1.1 Project Cost

Amount (INR in Lakhs)

Capital Investment Requirement 295.39

Working Capital Requirement 111.51

Total Project Investment Requirement 406.90

The proposed pre-feasibility is based on the assumption of 10% Equity and 90% Debt. Debt

INR 90lakhs of Debt will flow from RFC and remaining from other institutes or though bank

loans. However this composition can be changed as per the discussions with Investors.

Table 1.2 Project Financing

Amount (INR in Lakhs)

Equity 29.90

Debt RFC 90.00*

PE or JV 287.00

Total Project Investment Requirement 406.90

* Based on the YUPY

Ceiling of 90 lakhs

Table 1.3 Project Viability

IRR % Age 28%

NPV @ 16% (INR in Lakhs) 173.80

2 Corporate information

1.

2.

3.

2.1 Formation

Once the project is approved from RFC, a company will be formed to fund, execute and running

the project with below vision and mission.

Vision

“To be a leading and innovative manufacturer in the field of paper recycling”



Mission

1. To preserve the natural systems on which all forms of life depends

2. To providing our customers competitive rates and exceptional service in a clean,

professional atmosphere

2.2 Source of Fund

The formed company will be on a partnership basis with equal contribution in terms of finance

as well as execution of the project. The profile of the executors is covered in the section the

total fund for the project will be contributed by three parties. Below figure shows the funding

pattern of the project once it gets approve for execution.

Figure-2.1 Funding Source for Project

1.

2.

3.

3.1.

2.3 Profile of the Project Executors

Arun Prasad R

Mr. Arun Prasad R, 28, is a management graduate in Operations major from University of

Petroleum & Energy Studies, Dehradun and an Instrumentation Engineer from Anna University,

Chennai brings with him over 3.5 years of experience in the field of management & strategic

planning. Started his career working with an airport in India in the field of quality and in

planning departments and has experience across two international airports in India and abroad.



His area of expertise includes Lean Management, ISO, Financial Modeling, Business Analysis

and Strategic Planning.

Manish Pratap Singh

Mr. Manish Pratap Singh, 28, is a management graduate and honors in B.Com from UP, India

brings with him over 4.5 years of experience in the field of finance and planning. Started his

career working with an airport for 1.5 year in India and moved to one of the major International

Airliner based in India with his strong finance & planning background. His area of expertise

also includes Operations, Project Planning & Scheduling and Customer Relationship

Management.

3. Market Information

3.1 Indian Paper Industry

The estimated turnover of the Indian Paper industry is INR 35,000 Crore (USD 7 billion)

approximately and its contribution to the exchequer is around INR 3000 Crore (USD 0.6

billion). In last financial year the total production stood at 11.9 million tons and the industry

witnessed a CAGR of 9% from 2011-13. This comprises of combination of all the raw material

resource i.e. Woods Based, Agro Based and Recycled paper.

The Working Group committee for Paper Industry during 12th Five year plan has projected that

the demand for Paper in India will grow at the rate of 9.1% till 2025. Also the committee

suggested that to fill the current demand and supply gap (Refer Table Below 3.1) more units

needs to be set up.

Demand & Supply:

All units are in Million TonsYear Total Demand Total Production Production GAP

2010-11 11.2 10.1 1.10

2011-12 12.0 10.8 1.20

2012-13 13.0 11.9 1.10

2013-14 14.2 12.9 1.30

2014-15 15.4 14.0 1.40

2015-16 16.8 15.3 1.50

2016-17 18.4 16.7 1.70

2022-23 28.4 28.1 0.30

2024-25 36.9 33.4 3.50

2026-27 43.9 39.7 4.20



Table-3.1: Demand & Production Gap

Source: Working Group Paper, Twelfth Five Year Plan (2012-2017)

3.2 Used Paper Collection in India

The present recovery and utilization of waste paper by paper mills in India is a round 3.0

million tons annually, which translates to a recovery of only 27% of the total paper and

paperboard consumed in the count ry . This recovery rate is very low when

compared to developed countries like Germany-73%, Sweden-69%, Japan-60%, Western

Europe-56%, USA-49% and Italy-45%. Due to inadequate availability of indigenous

waste paper, Indian mills rely heavily on imported waste paper to meet the raw material

demand apart from the base raw material. India imports around 4.0 million tons of waste paper

annually which is about 57% of its requirements.

In India the collection of waste paper is mainly performed by the informal sector, i.e., by rag

pickers and door to door collectors/vendors. As much as 95% of the collection of waste

paper in the country is carried out by the informal sector. The value chain comprises the

direct collectors from various source points and small shops – where primary sorting of the

waste into different categories takes place – and zonal segregation centers owned by

wholesalers where the waste material gets collected from small shops and baled for

dispatch to the end users. The current mechanism adopted for collection of waste paper in

India is shown in Table-3.1.

Table-3.2: Current Waste Paper Collection Mechanisms in India

Source Items Collected Collected by Quantity Collected(MN tons per year)

Collection fromhouseholds

Old newspaper & magazinesHawkers

1.50

Notebooks & textbooks 0.50

Annual scrapContracts of printers, publishers & converters

Paper trimmings, print rejects, overprint/misprint sheets and other waste

Contractors 0.25

Scrap contractswith industries, offices, libraries

Old corrugated cartons, examination answer sheets, library records, old office and library records etc.

Contractors 0.50

TOTAL 2.75


Offices 50%

Business Establishments 40%

Others 10%

Printer house 20%

Paper traders 5%

Households 20%

Schools/ Colleges 10%

Offices 25%


Others 10%

Converting house 15%

Households 20%

Offices 5%


Others 10%

Publishing house 20%

Distributors 5%

Households 40%

Offices 10%


Others 10%


Source: ITC-WOW, Aug. 2011

Clearly, the existing institutional mechanisms are weak and lead to considerable leakages.

The life cycle analysis of different grades of paper, shown in Table-3, indicates the potential

for sizeable enhancement of recoveries, particularly for copier and cream wove paper from

offices and newspaper & packaging from households.

Figure 3.1 indicates the considerable potential for recovery of waste paper in India.

Recovery Potential

There exists a large potential for recovery of waste paper in India.

Paper Grades Source of Generation Collection

Collected Not Collected

Writing/Printing

Copier Paper20% 80%

100%

20% 80%

100%

Packaging Paper 50% 50%

100%


Cream wove

Publishing house 20%

Distributors 5%

Households 40%

Offices 10%


Others 10%


Newspaper

Figure-3.1: Current Waste Paper Collection Mechanisms in India

Source: Dept. of industrial policy & promotion, Discussion Paper, 2011



4. Project implementation

The project is scheduled to implement in a period of 8 months from the time it gets an

approval from RFC and Udaipur Municipality for implementation.

Fig 4.1: Project Implementation Steps

Project will follow in the below steps:

Step1 - Land and Funds Allotment (by Hon. Govt. of Rajasthan)

Step 2 - Inception- 6 months

Setting the plant:

Purchase and installation of Machinery like: conveyors, boilers, pulp-holding

containers, Chemical feeder pipes and power installations.

Hiring Work Force:

Mechanical Engineer, Electrical Engineer, Crane operators, Industrial

technicians, Packaging staff, Drivers for transport and Office Administration

Staff.

Step 3 - Plant Operations- 2 months

Raw Material Procurement/ Collection and Logistics Planning

Testing and Segregation of Raw Materials

Start of Paper Recycling Process



Paper Production and Testing

Waste and By Product Disposal

Step 4 - Sales and Marketing

After 8 months, best quality paper production and sales will start

Step 5 - Revenue Generation and Repayment of Financial Advances

5. Production Process

5.1 Technology and Paper Recycling process

The process of paper recycling involves mixing used paper with water and chemicals to break

it down. It is then chopped up and heated, which breaks it down further into strands of

cellulose, a type of organic plant material; this resulting mixture is called pulp, or slurry. It is

strained through screens, which remove any glue or plastic that may still be in the mixture

then cleaned, de-inked, bleached, and mixed with water. Then it can be made into new paper.

The same fibers can be recycled about seven times, but they get shorter every time and

eventually are strained out

Recovered paper reprocessing varies according to the type of recycled paper product, which

will in turn determine the type of recovered paper that is used as the process feedstock. The

higher quality, which need little cleaning, are used to make printing and writing papers,

tissues and wrapping papers, and are known as pulp substitute grades since the quality is

equal to virgin pulps. Newsprint and other papers needing de-inking are reprocessed for

further use in the production of newspaper and hygiene papers. The lower qualities are

mainly used for the production of packaging papers and board. Recovered paper is graded

into numerous categories. The process flow of the manufacturing process is shown in the

figure 5.1 below for better understanding.

Paper Recycling processes include the following main steps:

A. Pulping : Adding water and applying mechanical action to separate fibers from each

other.

B. Screening : Using screens, with either slots or holes, to remove contaminants that are

larger than pulp fibers.

C. Fig 5.1: Paper making Process



Fig 5.1: Paper making Process

D. Centrifugal cleaning: Spinning the pulp slurry in cleaner cause’s materials that are

denser than pulp fibers to move outward and be rejected.

E. Flotation : Passing air bubbles through the pulp slurry, with a surfactant present;

causes ink particles to collect with the foam on the surface. By removing

contaminated foam, pulp is made brighter. This step is sometimes called deinking.

F. Kneading or dispersion : Mechanical action is applied to fragment contaminant

particles.

G. Washing : Small particles are removed by passing water through the pulp.

H. Bleaching: If white paper is desired, bleaching uses peroxides or hydrosulfites to

remove color from the pulp.

I. Papermaking: The clean (and/or bleached) fiber is made into a "new" paper product

in the same way that virgin paper is made.

J. Effluent Treatment Plant (ETP): Processed water is transferred to ETP plant, where

it will get cleaned and ready to use.

K. Waste disposal : The unusable material left over, mainly ink, plastics, filler and short

fibers, is called sludge. The sludge is buried in a landfill, burned to create energy at

the paper mill, used as a fertilizer by local farmers or in (Municipal Solid Waste)

MSW plant.



5.2 Raw material availability

The raw material source is divided into 2 phases for the project as shown in the figure 5.2 below.

Fig 5.1: Source of Raw Material

Phase I: In the initial phase, used paper will be collected from scrap dealers till the period

operation gets stabilized. In India currently paper recovery rate is only 27% of total paper and

paper board consumed. In the start, we will collect from intrastate and interstate paper scrap

dealers as the raw material

Phase II: As the production stabilized, we will start direct collection from Schools, Offices,

residential etc. For this collection process, we will hire individual for contacting and

managing the relationship with suppliers, main reason being to generate more employment

for the needy people.

5.3 Machinery Requirement

Following table shows the machinery & equipment requirement for setting up a Recycled

Paper Manufacturing Unit for 10 Ton per Day (TPD) production

Table -5.1: Cost of Machineries All No’s in INR Lakhs

S. No. Descriptions Unit Cost Quantity Total Amount1 Pulping Section 14.00 1.00 14.00

2 Head Box 5.00 1.00 5.00

3 Wire Part Section (2.6 X 26 mtr) 16.00 1.00 16.00

4 Press Section (1 Set) 13.00 1.00 13.00

5 M.G. Section (14’) 29.00 1.00 29.00

6 Pope Reel 6.00 1.00 6.00

7 Re winder 5.00 1.00 5.00



8 Drive Section 12.00 1.00 12.00

Total 100.00

5.4 Other Fixed Assets Requirement

Following additional fixed assets are required for factory and management offices.

5.4.1 Office Equipment

Table -5.2: Cost of Office equipment’s All No’s in INR Lakhs

S. No. Descriptions Unit Cost Quantity Total Amount1 Fans & Lights 0.03 15.00 0.45

2 Air-conditioning 0.25 3.00 0.75

3 Computer 0.20 5.00 1.00

4 Printer Laser 0.15 1.00 0.15

5 Fax 0.10 1.00 0.10

6 Networking 0.25 1.00 0.25

Total 2.70

5.4.2 Furniture & Fixture

Table -5.3: Cost of Furniture’s & Fixtures All No’s in INR Lakhs

S. No. Descriptions Unit Cost Quantity Total Amount

1 Executive Table 0.05 2 0.102 Computer Tables and others 0.02 5 0.103 Sofas 0.10 1 0.104 Chairs 0.02 15 0.305 Carpet, Curtains, etc. 0.10 1 0.10

Total 0.70

5.4.3 Motor Vehicles

Table -5.4: Cost of Motor Vehicles All No’s in INR Lakhs

S. No. Descriptions Unit Cost Quantity Total Amount

1 Tata Ace 4.00 3 12.00Total 12.00



6. Land and Building Requirement

6.1 Land

Keeping in view the proposed capacity of 10 TPD, approximately 1.5 Acre is sufficient to set

up the Recycled Paper Plant. An amount of Rs.4,50,000 per annum has been allocated for the

purpose of rent on usage of the land. However, rent on land may vary according to location.

6.2 Plant and Office Infrastructure

The Construction for Plant infrastructure including civil, electrical & mechanical works and

flooring will be carried on an area of 25000 sq. ft. The total cost of construction is estimated

at Rs.150,00,000 and the Construction for office place will be carried on an area of 1800 sq.

ft., construction cost of office is estimated at Rs.16,20,000. The rest of the area will be used

for the segregation of used paper and for setting up of an Effluent treatment plant.

7. Human Resource Requirement

Following table shows the requirements of Human Resources in the Recycled paper manufacturing unit. Salaries and wages are assumed to grow at 5% per annum.

Description No’s Monthly Salary (INR) Annual Salary (INR in Lakhs.)Managerial 1 18,000 2.16

Admin Staffs 4 12,500 6.00

Technical Supervisor 2 15,000 3.60

Supervisors 3 12,000 4.32

Operators 30 7000 25.20

Office Boys 6 4000 2.88

Total 44.16

8. Project Assumptions

The following assumptions have been made for calculating the business feasibility and to

analyze different scenario for the project.

Parameters Units In UseKey dates

Start Date of construction Date 01-Oct-13

Construction period Months 8

Commercial Operating date Date 01-Jun-14

First year of operation FY Year 2015

General Inputs



Number of months in a year no's 12

Number of operating Days in a year no's 364

Design Capacity of Plant Tons per day 10

Operating efficiency % 0.80

Production Capacity of Plant Tons per day 9

Revenue InputsSelling Price of Paper per ton INR per ton 22,000

Repair & MaintenanceMechanical & Electrical Works 5%

Civil Works 5%

Land RelatedLease rental INR Lakhs per yr. 4.50

UtilityPower

Power consumption Kw hr. 75

Unit Cost of Power INR Lakhs 5

Water

Water Requirement per ton production with recycling kilo litre per ton 10.00

Water Requirement per ton production without recycling kilo litre per ton 20.00

Unit Cost of Water per kilo litre 10.00

Raw MaterialWaste Paper Requirement Tons per ton 1.33

Waste Paper Cost INR per ton 9000

Chemicals requirement INR per ton 3000

Financials – YearlyInflation % 8%

Cost of Interest % 14%

Cost of Equity % 16%

Increase in Salary % 5%

Increase in Selling Price after every 5 year % 10%

Repayment Start Time 2016

Equity Proportion % 10%

Debt Proportion % 90%

9. Financial Feasibility



9.1 Project Cost

The total investment cost of the project including working capital is estimated around INR

406 lakhs. The details of the same is shown in the below table. The Project’s profit & loss

details and the debt repayment schedule have been shown in the annexure 1 & 2 respectively.

Capex Units Total CostMachinery Related to Paper Manufacturing INR Lakhs 100

Machinery Requirement for ETP INR Lakhs 13.79

Plant Infrastructure INR Lakhs 166.2

Office Equipment INR Lakhs 2.7

Furniture & Fixture INR Lakhs 0.7

Motor Vehicles INR Lakhs 12

Total CAPEX Requirement 295.39Project Cost

Equity INR Lakhs 29.54

Debt INR Lakhs 265.85

Working Capital Requirement INR Lakhs 111.51

Total Project Cost 406.90Financial Viability

IRR % 28%

NPV INR Lakhs 173.80

With the above assumptions the NPV of the project for 20 years is coming around INR 173.8 lakhs with an IRR of 28%.



Annexure 1:

Projected Cash Flow Statement All Figures are in INR lakhs

P&L Statement Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

Revenue 680.68 682.55 793.95 793.95 793.95 1,103.18 1,100.16 1,100.16 1,385.88 1,389.69 1,524.47 1,920.39 1,920.39 1,925.67 2,419.14

OPEX 565.63 569.04 664.18 666.55 669.05 918.04 918.99 922.63 1,167.07 1,175.34 1,273.62 1,611.42 1,618.79 1,631.00 2,059.20

EBIDTA 115.05 113.51 129.77 127.39 124.90 185.14 181.16 177.52 218.81 214.34 250.85 308.97 301.60 294.67 359.94

% EBIDTA Margin 17% 17% 16% 16% 16% 17% 16% 16% 16% 15% 16% 16% 16% 15% 15%

Depreciation 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54

Interest Cost 52.83 52.31 50.99 49.40 47.83 45.25 41.65 38.06 33.72 26.00 19.40 10.62 1.79 - -

PBT 32.68 31.66 49.24 48.46 47.53 110.35 109.97 109.92 155.55 158.81 201.91 268.82 270.27 265.13 330.40

TAX 9.80 9.50 14.77 14.54 14.26 33.10 32.99 32.98 46.66 47.64 60.57 80.65 81.08 79.54 99.12

PAT 22.87 22.16 34.47 33.92 33.27 77.24 76.98 76.95 108.88 111.17 141.34 188.17 189.19 185.59 231.28

% PAT Margin 3% 3% 4% 4% 4% 7% 7% 7% 8% 8% 9% 10% 10% 10% 10%

Cash flow Statement

Net Income 22.87 22.16 34.47 33.92 33.27 77.24 76.98 76.95 108.88 111.17 141.34 188.17 189.19 185.59 231.28

Add: Depreciation 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54 29.54Less: Debt Repayments - 7.39 11.49 11.31 11.09 25.75 25.66 25.65 36.29 37.06 47.11 62.72 63.06 12.78 -

Less: CAPEX 295.39 - - - - - - - - - - - - - -

Free Cash Flow (242.98) 44.31 52.52 52.15 51.72 81.03 80.86 80.84 102.13 103.65 123.76 154.99 155.67 202.35 260.82



Annexure 2:

Debt Draw-Down Schedule All Figures are in INR lakhs

Description Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Year 12 Year 13 Year 14 Year 15

Opening Balance 377.36 377.36 369.97 358.48 347.18 336.09 310.34 284.68 259.03 222.74 185.68 138.57 75.84 12.78 -

Repayment - 7.39 11.49 11.31 11.09 25.75 25.66 25.65 36.29 37.06 47.11 62.72 63.06 12.78 -

Closing Balance 377.36 369.97 358.48 347.18 336.09 310.34 284.68 259.03 222.74 185.68 138.57 75.84 12.78 - -

Interest payable 52.83 52.31 50.99 49.40 47.83 45.25 41.65 38.06 33.72 26.00 19.40 10.62 1.79 - -


Documents

DPR Paper Recycling Unit VFinal