HERITAGE SHIRTS

BASIS AND PRESUMPTION

Land to be leased from SICOP at Industrial Estate, Gangyal, Jammu. Working hours: Single shift of 10 hours, for 300 working days in a year. Capacity Utilization: 60% during the 1st year 75%, in the 2nd year and 90% in 3rd year

and onwards. Salary and wages: Monthly basis. Power tariff: Rs. 2.90 per unit(Prevailing) No local Competition as of now Sale of the product in the State of J&K only

LEGAL REQUIREMENTS

The requirements for starting a new manufacturing business include getting the approvals from various Government agencies and fulfilling the necessary legal formalities. The requirements are as follows:

Leased land from SICOP Pollution Control Board’s NOC Labor Registration Certificate Tax. No. and Certificate from Sales Tax Department. Water Supply Connection form Power sanction Partnership agreement Project report Approval of site plan by the Municipality i.e. JMC. Approval of JMC for working in night Health Safety Certificate & License from JMC

STAFF REQUIREMENTS

The staff requirements to effectively manufacture, package and sell is as follows:

Manager: 1 No.s

Expert Cutter: 1 No.s

Tailors: 4 No.s

Sales and Marketing: 1 No.s

Watchman: 1 No.s

PRODUCTION PROCESS FLOW CHART

Technical Skills Involve:

Packing

Stitching

Dying/Processing

Cutting

Shipment

Finishing

In the stitching unit basically work will done in three phases. These phases and technical skills

required in each phase are given in detail.

Technical Skills for Cutting:

Before sewing can begin, pattern pieces must be made, layouts determined, and fabric cut. This

is very technical work and high expertise requires for this job because a small mistake during

fabric cutting can be cause of rejection of whole shipment. The main technical skill required for

cutting fabric is that the cutter should have to avoid wastage as much as possible. Some other

important technical skills that required for cutting dept are given below:

1. Fabric planning

Fabric planning is very important skill for cutting department. In this phase cutting master plan

the fabric that how much required for the specific order and what type of fabric will use. Fabric

planning decision is very critical because if proper fabric planning has not done then the whole

shipment can be refused.

2. Marker making

In marker making cutting master outline the fabric which will be used for the cutting on

spreading table. Marker making is very technical thing because if this done not properly then

wastage of fabric can be increase. In this way company has to face loss and so marker making

should be done carefully.

3. Spreading

Lay man spread the fabric pieces on the spreading table. For spreading the layers of fabric should

be regular manners and should not overlap on each other.

4. Cutting

The cutting of garment parts should accurately and economically and in sufficient volume to

keep the sewing room supplied with work.

The three processes involved are:

A. The planning, and if appropriate the drawing and reproduction of the marker

B. The cutting of the fabric.

C. Preparation for sewing

Technical Skills for Stitching:

After fabric receives from cutting dept now the work of stitching dept starts. The main skills

required for stitching are given below:

Machine operating skills

Operator should have control on machine because the speed of machine running should be

according to stitch per length. To operate the computerized machine the operators should have

proper knowledge and experience.

Inspection skills

The inspection staff needs very good experience to find out the very narrow faults to increase the

quality and to get proper work from operators.

Management skills

This means six things:

a. Checking the suitability of raw materials

b. Checking the manufacturing capability of the production undertaking

c. Monitoring production; feeding back information; responding to that information; and

removed at source

d. Reduction of the fault rate

e. Saving costs

f. Maintenance of product consistency

Technical Skills for Packing:

All these materials required for packing and the finished material is packed in bales and it is

defined by the buyer and all the garments are packed according to the specification given by the

buyer. For export packing the packer labor should have special expertise because it has lot of

difference between local and export packing.

Area Required for Unit: Total Area 2 Kanals (10880 sq. ft.)

Fabric and Inventory room

Stitching Room

Packing finishing and Inspection Room

Finished Garments Store

Management Block

1400

5000

1400

1200

1000

Total Area Required 10000

COST ANALYSIS

PLANT & MACHINERY

S.No Description No. Rate Amount

1. Power operated cutting machine 1 35,000 35000

2. Power operated SNLS Stiching Machine 8 10000 80000

3. Overlock Motor stiching Machine 1 10000 10000

4. Garment Washing machine (15kg) 1 35000 35000

5. Tumbler Dryer (15kg) 1 25000 25000

6. Potable Steam Press 1 20000 20000

7. Other Miscellaneous Items 20000 20000

Total Rs. 2,25,000

SALARIES

Designation No. Per Month Annual

Manager: 1 15000 180000

Expert Cutter: 1 7000 84000

Tailors: 4 5000 240000

Sales and Marketing: 1 10000 120000

Watchman: 1 3000 36000

Total Rs. 6,60,000

Cost of the project

S. No.Items Total cost (in Rs.)

1. Building (200 sq ft rented) Rented 

2. Plant and machinery (Including installation) 2,25,000.00

3. Misc. Fixed Assets(Dummies, Scissors, Presses, Scales etc.) 10,000.00

4. Furniture and fixtures (including office equipments) 10,000.00

5. Preliminary and pre-operative expenses 4,000.00

6. Contingencies (including cost escalation) 2,000.00

7. Working capital 200,000.00

8. Salaries 6,60,000.00

10. utilities 25,600

11 Raw material (including Packing material) 6,00,000.00

12 Stores & Spares 16,000.00

13 Rent 25,000.00

14 Transportation/Freight 12,000.00

15 Selling expenses 

(including advertising distribution cost, commission and rebates)15,000.00

16 Repair and Maintenance 25,000.00

17 Interest 6,000.00

TOTAL 18,35,600

Utilities (per annum)

S. No. Items Total cost (in Rs.)

1.Power 22,000.00

2.Water 3,600.00

TOTAL 25,600.00

Raw material requirement(per annum)

S. No. Items Qty.(mtr) Rates (Rs.) Value (Rs.)

1.Cotton/synthetic plain & printed

fabric of various colours andshades. 5000 40 per mtr. 20,0000.00

2.Cotton printed fabric in different

colours and shades 5000 30 per mtr. 15,0000.00

3.Terry cot fabric in different colours

and Shades 500 60 per mtr 3,0000.00

4.Misc. items like sewing threads

cotton yarn button, hook, laces,

 packing material etc. LS 12,0000.00

TOTAL 50,0000.00

Working capital requirement

S. No. ItemsPeriod (Month) Amount (in Rs.)

1.Raw Material 1/2 25,000.00

2.Stores & spares ¼ 500.00

3.Stock in process ½ 12,000.00

4.Finished Goods  ½ 15,000.00

5.Receivable/debtors 1 5,500.00

6.Other Current assets 1 2,000.00

TOTAL 60,000.00

Cash profit ---- 6500 total shirts and 1800 per shirt

Which is 11700000

Depreciation @ 15% of fixed assets costs5,100.00

Profit before tax  45,300.00

Taxes-

Profit after tax  45,300.00

12.Viability indicators

S. No.Particulars Amount

1.Repayment per annum (period -5 years) 20,000.00

2.Return on Investment 45.30%

3.Debt Service Coverage Ratio 2.17%

FUNDING OF CAPITAL EXPENDITURE

The total investment cost of the project is estimated at Rs.18 Lakhs, which

shall be financed for term loan as per the projections made in the report subject to furnishing of latest cost comparative quotations from the authorized dealers besides contribution from the promoters during the implementation of the project, the specific details interalia as:

S.no Particulars Amt.(Lacs)

1 Promoters contribution 8 (2 lacs each )

2 Seed Capital 4.00

2 Long term borrowings 6

A: Equity

The share capital of the unit has been fixed at Rs.12 Lakhs comprising 66.6 % of

the total project cost. The unit has to raise share capital within this limit. The promoter shall arrange equity from the ancestral resources and from the Seed Capital.

B: Term loan

Term loan requirement to the extent of Rs. 6Lakhs for the purpose of purchases of plant &

machinery and misc. fixed assets shall be made available from the financial institutions or commercial banks well operating in the valley on the basis that the unit being proven technically feasible and financially viable. As the policies are liberal for such type of ventures to avail packages/incentives to encourage the entrepreneurs to promote industrial culture in the backward area of the country. The state Govt. is equally eager to give all possible support to the development of industry in the area, where the unit is being established more so when the promoter share is about 35% of the capital formulation, which is higher than the normal requirement of funding, insisted upon by the bankers.

INTEREST CALCULATION

It is proposed to raise the sum of Rs 6 lacs as long term loans from financial institutions to meet the capital cost of the project. For the purpose of calculating the interest on long-term loans an interest rate of 9.00 % per annum is taken into consideration in the project report.

A: Interest on long term loan

S.no Particulars amt (lacs)

01. Long term borrowings 6

02. Rate of interest 9.00%

03. Installment .65 lacs + int

04. Repayment schedule 7 yrs

05 Moratorium Period 12 months

MARKET ANALYSIS AND STRATEGY

MARKET CHARACTERRISTICS

6.2 MARKET OBJECTIVES

It determines where the company should place its product, how to promote the product, how the product can be marketed itself, and how to price the product effectively.

Puts emphasis either on the product’s benefits, what value it has for customers, or how it is different from a competing brand.

The distribution and pricing objectives would depend on the target segment the firm is going after.

The promotional medium would also depend on the target segment but the basic mediums are local T.V., radio, billboards, magazines, and the internet.

6.3 TARGET MARKET

Our company mainly focuses on:

6.4 SWOT ANALYSIS

STRENGTHS The managers and workers are natives of Jammu & Kashmir,

have strong ties to the community Products are also available online Offering delivery service to suppliers Providing high quality products at reasonable rates

WEAKNESSES New entrant in the state People are not aware of this brand and have to be made aware High Promotional cost

Dealing in only shirts.

OPPORTUNITIES Lack of competition in local area as there is no other

company Rural market tapping Tie-ups with local garment retailers and wholesalers

THREATS Low differentiation of goods Consumers tastes and preferences Rapid growth and no barriers to entry in this sector. Thus,

new firms can enter with different exciting offers

PORTER’S 5 FORCE MODEL

THREATS FROM COMPETITORS

Fortunately we will have very limited local competition since there are no manufacturers of shirts in our state. Our competitors will be international and national brands who enjoy a great deal of trust and respect from customers because of their decades long relationships with the market.

CUSTOMER BARGAINING POWER

Customers don’t have that much of bargaining power as we are already providing high quality product at reasonable rates. Thus, customer’s bargaining power is low.

SUPPLIERS BARGAINING POWER

The term suppliers comprise all sources for inputs that are needed in order to provide goods and services. Suppliers bargaining power is likely to be high when:

The market is dominated by a few large suppliers rather than a fragmented source of supply

The switching cost from one supplier to another is high

THREATS OF SUBSTITUTES

A threat from substitute exists if there are alternate products with lower prices of better performance parameters for the same purpose. Threat of

substitutes is determined by factors like brand loyalty of customers and close customers relationships. Thus, threat of substitutes is high as customers have a very readily available source of other brands.

THREAT OF NEW ENTRANT

Threat of new entrant is high as there are no barriers to entry in this sector.