Pr- Plaumage Fabrics 1

Febin Lee & Co. 1

Chapter No Description Page No.

1 Executive summary 2 2 Introduction 3 3 The promoters 4 4 The concept 5 5 Project location 5 6 The marketing aspects 7 7 The production aspects 9 8 Raw material and sources 10 9 Building 10

10 Machinery 14 11 Computer and equipments 18 12 Manpower 19 13 Implementation schedule 23 14 Environmental management 25 15 Working capital 25 16 Cost of project 26 17 Means of finance 28 18 Bank finance 29 19 Financial feasibility 29 20 Cash flow statement and balance sheet 30 21 Ratio analysis 31 22 Conclusion 31

Annex. No Table Page No I Annual sales turnover 33 II Annual raw material cost 34 III Repayment schedule of term loan 35 IV Computation of depreciation under SLM 36 V Computation of depreciation under WDV 37 VI Computation of Income Tax 38 VII Projected profitability statement 39 VII Projected cash flow statement 41 IX Projected Balance Sheet 42 X Debt Service Coverage Ratio 43 XI Computation of Break Even Point 44

Building cost estimate 45 Machinery quotation 46 Computer quotation 47 Location sketch 48

TABLE OF CONTENTS

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1. EXECUTIVE SUMMARY

Name of the Firm M/s. Plumage Fabrics

Constitution Registered Partnership Firm

Name of the Promoters Mr. K.K. Abdul Latheef Mr. A. Muhammed Sadique

Registered Address

Building No.IV/544, Agriculture Co.Opp. Bank Building Velloorkunnam, Market P.O., Muvattupuzha, Ernakulam, Kerala 686 673

Proposed Project Location Sy. No.741/3A Punnoppady, Mudavoor P.O., Muvattupuzha, Ernakulam Kerala 686 669

Proposed Line of Activity Manufacturing Ready Made Garments

Project Consultant CA. Febin Lee James Febin Lee & Co., Chartered Accountants Thodupuzha.

Architect Mr. Sebastian Jose B. Arch, M. Arch. M/s Silpi Architects, Thevera, Kochi - 13

Cost of Project Rs. 3,916. 04 Lakhs

Means of Finance

Promoters Contribution Rs. 1,415.38 Lakhs

Term Loan from Bank Rs.1,455.66 lakhs

Working Capital Loan from Bank Rs.1,045.00 Lakhs

Number of direct employment 1242 employees

Debt Service Coverage Ratio 1.76

Key advantage of the Project

Ready Market for the Finished Product (Ready Made

Garments)

Promoters Well Experienced in the Line of Business

Usage of Proven and Universally Accepted Latest

Technologies

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Plumage Fabrics (PF) is a registered Partnership Concern formed

with the main objective to enter into the business of ready made

garment manufacturing with a plant capacity of thirty five thousand

garments per day per shift at Mulavoor village, Muvattupuzha in

Ernakulam district of Kerala. Muvattupuzha city being developing as

the ready made garment hub in the region with all modern

communication and transportation facilities has been selected as the

location for operation of the unit.

Plumage Fabrics was registered on 1st August, 2009. Since then it is conducting the market study,

planning the production process, and creating the project plan based on the experts advices and

industry dynamics to produce ready made garments at lower cost and in good quality to lead the

competitive market.

In its start up project Plumage Fabrics proposes to set up a factory having 54,835 Sq. Ft built up

area to accommodate 952 stitching and related machines and 1,242 employees with a well

structured marketing plan to market its products allover India and export to Middle East and to

European countries. Garments industries are much depends on the availability of trained labour

force for producing quality products. In order to retain the laour force Plumage Fabrics has planed

to construct a dormitory building near to the factory building with 41,860 Sq. Ft built up area. This

would substantially reduce the employee turnover of the organization and result in good quality

product at much lower cost.

The proposed facilities of the project are as summarized below:

Factory Building 54,835 Sq. Ft.

Dormitory Building 41,860 Sq. Ft

Stitching and Other Machines 952 Nos.

Employees 1,242 Nos.

2. INTRODUCTION

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As the dressing habits of people and fashion trends are changing day by day, marketing of Plumage

Fabrics garments does not seem to posses any concern. Moreover not only benefits of lower

employee turnover and but also large scale production have been the encouraging factures for

Plumage Fabrics to set up the dormitory building for its employees.

In view of the above Plumage Fabrics has assigned M/s. Febin Lee & Co., Chartered Accounts to

critically examine all aspects and derive a Techno-Commercially feasible model for its proposed

project.

Mr. K.K. Abdul Latheef (Managing Partner): Mr. K.K. Abdul Latheef is a

graduate having twenty five years experience in business field. For the last

twenty years he is actively engaging in ready made garment manufacturing and

marketing field. At present he is successfully running a medium scale ready made

garment manufacturing unit at Koovalloor near Kothamangalam in Ernakulam

district of Kerala. The total investment in that unit is around fifty lakhs rupees with employee

strength of fifty workers. The out put of this unit is selling in the local market and in the export

market. The present exports are in small lots, even though he is getting bulk export orders, because

of lower production capacity of the unit. He is having a good knowledge in fabrics selection for the

readymade garments. Presently he purchases cloths directly from Ahamadabad, Mumbay, Surath,

Eroad, and Bangalore, the leading markets of cloths and garments in India. His experience in the

garment designing and stitching is an important aspect in the success of his present unit. He is also

experienced in labour management. The workers in his present unit are from Tripur, Assam and

Bengal, which reduces the labour cost of his products.

Under his management, the future of Plumage Fabrics is also seems to be bright. Presently he is

residing at Kallupurath House, Koovalloor P.O., Kothamangalam, Ernakulam district,

Kerala- 686 671

3. THE PROMOTERS

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Mr. A. Muhammed Sadique (Managing Partner): Mr. A. Muhammed Sadique

is graduate and having thirteen years experience in business field. Presently he is

running garment wholesale business at Muvattupuzha in Ernakulam district of

Kerala. He is having wide marketing networks all over Kerala with a number of

small, medium and large textiles outlets as his customers. Presently he is having

ten marketing staffs for selling his products. With his wide knowledge of market

and products, Plumage Fabrics will not face any difficulty to find market for its products. Presently

he is residing at Vaikkilazhikam (Siddikamanzil) house, Mulavoor P.O., Muvattupuzha, Ernakulam

district, Kerala- 686 673.

The promoters of Plumage Fabrics propose

to start a readymade garment

manufacturing unit at Punnoppady,

Mudavoor P.O., Muvattupuzha in

Ernakulam district of Kerala state with

most modern machineries and facilities for

manufacturing ready made Shirts, Skirts,

New born baby dress and Undergarments

in the initial stage and in the next stage they will start manufacturing other readymade garments

like, Trousers, T shirts, Night wares, etc. The promoters propose to sell the products in local market

and in export market with here on marketing networks.

The project will be located in 2.10 acres of own land (Sy. No. Sy. No.741/3A of Mulavoor Village)

at Punnoppady, Muvattupuzha in Ernakulam district of Kerala which shall be sufficient enough to

house the Factory building and Dormitory building of the upcoming unit.

4. THE CONCEPT

5. POJECT LOCATION

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The location is well connected through road network

with MC Road connecting Muvattupuzha and

Perumbavoor, passing just 1 Km. away. The site is

about 3 Km from the Muvattupuzha city.

Source of water shall be from ground water through

well. The required quantity of power shall be drawn

from the 11KV power line which is available nearby.

The raw materials shall be received at the location by road through trucks. The products shall also

be dispatched by road. Export of products can be possible through Cochin International Airport,

which is just 45 Km. away from the unit and Cochin Ship Yard which is around 35 Km away from

the unit.

The factory layout has been developed looking into the placement of technological and service units

so that there is no interference, and the movement of men and material is easy and minimal.

PLUMAGE FABRICS

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DETAILS OF THE LOCATION

1 Location : Punnoppady

2 Sy. No. : 741/3A of Mulavoor Village

3 Extent : 2.10 Cents

5 Panchayath : Paipra

6 Ward No. : XVI

7 Village : Mulavoor

8 Block : Muvattupuzha

9 Taluk : Muvattupuzha

10 Road facility : By the side of Veettoor Pezhakkappilly road

11 Distance from the nearest town :

Muvattupuzha - 3 K.M

Ernakulam - 35 K.M.

Thodupuzha - 20 K.M.

Kottayam - 45 K.M.

Nedumbassery - 45 K.M.

GENERAL

Readymade garments are the choice of urban people. It is also gaining wider

acceptance in semi-urban and rural areas. The huge charges made by tailors

and delay in delivery have made people to switch over to readymade garments.

In domestic market and export market, it has made spectacular progress in the

6. THE MARKETING ASPECTS

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last decade. This industry is becoming very vibrant and lot of foreign investment pouring in this

industry because of low risk and high earning nature of this industry. As these products are fashion

oriented, entrepreneurs should always keep in mind the changing fashion styles. Considering its

advantageous position, it is assumed that there will be no constraint in marketing of readymade

garments.

The demand for ready made garments is increasing at around 18-20 % annually in the country. The

popularity of ready made garments is good among youth and fashion conscious public. The

domestic market and the export market are growing rapidly and the unit for manufacturing can be

run quite successfully if they can tap the market by giving good price and quality.

The manufacture and marketing of garments is one of the most basic and

most competitive industries in the world. Whereas the country of

manufacture has continually changed over the years as companies

sought to reduce costs, the marketing of garments has become a

very specialized activity due to changing national and fashion

trends within the buying nations. Not only do low costs need to be

maintained, but constantly changing market requirements also need to

be met.

India is the worlds second largest producer of textiles and garments after China. The textile and

garment industry in India is one of the oldest manufacturing sectors in the country and is currently

its largest. The textile and garment industry fulfils a pivotal role in the Indian economy. It is a major

foreign exchange earner and, after agriculture, it is the largest employer. Textiles and garments

accounted for about 14% of industrial production and 16% of export earnings of India.

Readymade Garments account for approximately 41% of the countrys total textiles exports. During

2007-08 the Readymade Garments exports have amounted to US$ 9.065 billion, recording an

increase of 9.46 % over the exports during 2006-2007. During the period of April-December 2008,

the Readymade Garments exports have amounted to US$ 6.8 billion, recording an increase of

5.97% over the exports during the corresponding period of 2007.

MARKETING

M/s. Plumage Fabrics proposes to set up a structured marketing division for marketing its

products. Customers of the unit include large textile shops and textile distributors. The unit plans to

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produce varies verities of products as per market requirement. The common products of the unit are

shirts, skirts, newborn baby garments and brassieres. Export of garment is also a field having

immense scope. It is therefore investigated that marketing of Plumage Fabrics garments would not

be difficult at all.

The ready made garment manufacturing process involves the following steps:

1. Procurement of Fabric: Dyed/ bleached/printed cotton/synthetic

fabrics as per demand are to be procured from the open market. The

fabric will be inspected by laying on the inspection table against

light before cutting so that unevenness in colour/ shade or any other

fault, if any visible in the fabric are eliminated. The quality of garments

mainly depends on quality of fabric used. Therefore, care must be taken while purchasing fabrics

to ensure good colour fastness properties, uniformity in shade etc.

2. Cutting and Stitching: The inspected fabric is placed on the plotter in

layers and then the different parts of the

respective garments are demarked by the

plotter as per the predefined patterns.

Cutting machines are used for cutting the

7. THE PRODUCTION ASPECTS

Procurement

Cutting and Stitching

Checking

Pressing

Packing

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fabrics. Stitching is carried out for individual portion of the garments by skilled workers with the

help of over lock, lock stitch machines etc.

3. Checking, Pressing and Packing: Final checking is done before pressing

and packing on the checking table so that any fault in the piece may be

removed and protruding threads eliminated. The individual pieces are pressed

by steam presses to remove any wrinkle marks and packed in the carton

boxes.

The main raw material required for the unit are cloths, buttons,

elastics, hook etc. which is purchased directly from

Ahamadabad, Mumbay, Surath, Eroad, Tripur and Bangalore.

These raw materials are purchased in bulk quantities.

Civil Works: The civil work comprises of site preparation, design and construction of building

structures underground structures, foundation for structures, floors, underground drainage pipe

lines, roads, boundary walls, fencing etc. for the following major areas;

Factory building 54,835 Sq. Ft.

Dormitory building 41,860 Sq. Ft.

8. RAWMATERIAL AND SOURCES

9. BUILDING

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Water supply facilities

Rain water harvesting facilities

Construction Futures: The factory building and Dormitory building are two independent

buildings. The factory building will have three floors (Ground + First + Second Floor) and the

dormitory building will have four floors (Basement + Ground + First + Second Floor). For both

buildings superstructures shall consists of RCC frames and filler brick walls.

Earth Works

The site leveling will have to be done in order to achieve required terraced level and also to

make the surface drainage effective. The terracing is aimed to be achieved by bringing red

earth from outside the site.

Foundation

Foundation of the buildings will be laid on isolated footings taken to a depth of 3 to 6 m

depending on technological requirement and soil characteristics.

Floors in Buildings

Floors in buildings shall be of either PCC or RCC according to

structural requirement.

Walls

All brick walls shall be constructed with best quality bricks to suit the

required thickness.

Columns and beams

All columns and beams shall be of reinforced concrete to suit technological requirement.

Roof

Both the building shall have RCC flat roof supported on RCC.

Wall finishing

Inside and outside surface of brick masonry walls shall be plastered smooth and finished

with putty finished emulsion. Exterior wall in the frond of the building shall be covered with

Structural Glazing.

Doors and windows

High quality aluminum doors and windows finished with glass will be provided for both the

building. The main outer doors will be covered with rolling shutters, rolling grills etc shall

be provided to suit requirement.

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Flooring

Generally RCC slabs shall be provided for floors. It will be finished with vitrified tiles or

ceramic tiles etc. as per technical requirement.

Sanitary installation

Generally white glazed earthen ware fittings of approved make will be used.

Power supply and Distribution: It is envisaged that electric power shall be drawn from nearest 11

KV line and step down to our requirement by installing a transformer in the factory premises. Silent

generators shall be installed for providing power

in case of KSEB power failure. Electrification

of the factory and dormitory building shall be

planed and executed as per standards prevailing

in the industry.

Electric Tower: There is a high tension electric

line passing through the proposed location and

one tower is located in the factory premises. As

per the agreement between KSEB and the Unit,

The unit has to construct retaining wall around

the tower as per the technical specification

provided by the KSEB. All construction

activities in the location will be as per the

guidelines provided by KSEB in this regard.

Furniture and Fittings: Furniture in the

factory and dormitory shall be of high quality

wood, steel, aluminum, etc. as per the technical

requirements.

Plumping: Plumping shall be done with top quality material as per technical requirements.

Lift: Two lifts shall be provided in each building.

Construction cost of the Buildings: The estimated construction cost of the buildings is given

bellow.

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BUILDING COST

Amount in Rupees

Sl. No. Description Amount Amount

I Civil Work 1 Factory building 57,500,000

2 Dormitory building 36,800,000

94,300,000 II Electrical Works 3 General electrical 16,900,000 4 Transformer 2,600,000 5 Generator 2,900,000

6 Electrical tower 2,000,000

24,400,000

III Plumbing Works 7 General Plumbing 8,900,000

8 S.T.P. 2,900,000

11,800,000

IV Furniture 9 Furniture ( Factory) 9,500,000

10 Furniture ( Dormitory) 7,000,000

16,500,000

V Lift 13,000,000

13,000,000

Total 160,000,000

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In order to compete with the existing competitive market condition the unit should

meet quality standards. This calls for adoption of high quality equipments. The promoters expect

that Rs. 415.16 Lakhs is to be spent for purchasing new machineries for the unit. The details of the

plant and machinery are given below.

MACHINERY AND EQUIPMENTS

Amount in Rupees

Sl. No. Description No.

Price Per Unit Total

1 Eastman 629(8") cutting machine 1 78,750 78,750

2 Eastman EC-45 round knife cutting machine 25 22,500 562,500

3 Eastman EC-700 band knife cutting machine 1 311,250 311,250

4 Juki DDL - 8300N single needle lockstitch machine 700

19,375 13,562,500

5 Juki LH - 3528 two needle lockstitch machine 40 83,750 3,350,000

6 Juki LZ - 2284 zig zag sewing machine 40 189,062 7,562,480

7 Juki MO - 6716S DE4 - 40H five thread over lock machine 20

51,250 1,025,000

8 Yamato - CF 2339 elastic attaching machine 50 98,750 4,937,500

10. MACHINERY

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9 Yamato - CZ-6125-Y5DF four thread over lock machine 10

40,625 406,250

10 Yamato - CF- 2300-156 M flat lock machine 10 59,687 596,870

11 Yamato - CF- 2303 flat lock for binding operations 3

59,687 179,061

12 Gerber AE-SW pattern marker/ grading machine 1

1,202,500 1,202,500

13 Juki LBH - 1790 Computerized button hole machine 1

394,500 394,500

14 Juki LK-1903ASS Computerized button stitch machine 1

311,500 311,500

15 Hashima HP - 450 Fusing press 1 168,750 168,750

16 Rotondi Steam iron, Table with boiler 40 82,500 3,300,000

17 Juki MS -1190 Speed off the arm machine 4 169,600 678,400

18 Juki LH-3568 Two needle lock stitch machine 4 114,500 458,000

19 Scissors 1500 300 450,000

VAT 1,980,355

Total 41,516,166

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Pictures of the required machineries are given bellow.

CUTTING MACHINE ROUND KNIFE CUTTING MACHINE

BAND KNIFE CUTTING MACHINE

SINGLE NEEDLE STITCHING MACHINE

TWO NEEDLE LOCK STITCH MACHINE

ZIG ZAG SEWING MACHINE

FIVE THREAD OVERLOCK MACHINE

ELASTIC ATTACHING MACHINE

FOUR THREAD OVERLOCK MACHINE

FLATLOCK MACHINE FLATLOCK FOR BINDING

PATTERN MKER

PATTERN MAKING

CUTTING

STITCHING

Steam Iron with Boiler

BUTTON HOLE MACHINE

BUTTON STITCH MACHINE

FUSING PRESSSPEED OF THE ARM MACHINE

TWO NEEDLE LOCK STITCH MACHINE

IRONING

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The above mentioned machineries shall be utilized for production in the following manner.

MACHINARY UTILISATION

Sl.No. Description Total

Departments

Shirts

New born baby dress

Brassieres Under skirt Quality checking

I Gerber AE-SW pattern marker/ grading machine 1 Common

II Eastman 629(8") cutting machine 1 Common

III Eastman EC-45 round knife cutting machine 25 Common

IV Eastman EC-700 band knife cutting machine 1 Common

V Rotondi Steam iron, Table with boiler 40 Common

VI Juki DDL - 8300N single needle lockstitch machine 700 100 - 400 200 -

VII Juki LH - 3528 two needle lockstitch machine 40 5 - 30 5 -

VIII Juki LZ - 2284 zig zag sewing machine 40 35 5 -

IX Juki MO - 6716S DE4 - 40H five thread over lock machine

20 5 - 10 5 -

X Yamato - CF 2339 elastic attaching machine 50 - - 50 - -

XI Yamato - CZ-6125-Y5DF four thread over lock machine

10 - 10 - - -

XII Yamato - CF- 2300-156 M flat lock machine 10 - 10 - - -

XIII Yamato - CF- 2303 flat lock for binding operations 3 - 3 - - -

XIV Juki LBH - 1790 Computerized button hole machine

1 1

XV Juki LK-1903ASS Computerized button stitch machine

1 1

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XVI Hashima HP - 450 Fusing press 1 1

XVII Juki MS -1190 Speed off the arm machine 4 2 2

XVIII Juki LH-3568 Two needle lock stitch machine 4 2 2 XIX Scissors 1500 160 33 642 265 400

Details of computer and equipments for the unit are given below.

COMPUTER AND EQUIPMENTS

Amount in Rupees Sl. No. Description No. Price Per Unit Total

1 Intel Duel Core computer 9 25,000 225,000 2 IBM server class computer 1 85,000 85,000 3 HP Laser printer 1 17,000 17,000 4 Cannon Laser printer 1 6,500 6,500 5 Online UPS and Battery 92,000 6 Network accessories 15,500

Total 441,000

11. COMPUTER AND EQUIPMENTS

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The operation and maintenance need of the unit shall call for 1,242 employees. Department wise list

of employees, their expected remuneration and number of shift of work are given in the table given

below.

MANPOWER REQUIREMENT AND THEIR REMUNERATION

Amount in Rupees

Sl. No. Category

Number of staff

per shift

Number of Shifts

Salary per

month

Annual salary

Administration

1 General Manager 1 1 25,000

300,000

2 Assistant Manager 2 1 10,000

240,000

3 Executives 2 1 7,000

168,000

CAD Garment Pattern

4 Manager 1 1 15,000

180,000


168,000


120,000

Education

7 Manager 1 1 15,000

180,000


168,000


120,000

Electrical

10 Manager 1 1 8,000

96,000


144,000

12. MANPOWER

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240,000

Engineering and Maintenance

13 Manager 1 1 8,000

96,000


144,000


240,000

Export and Import

16 Manager 1 1 15,000

180,000


168,000


120,000

Finance and Accounts

19 Manager 1 1 15,000

180,000


168,000


240,000

Fire and Safety

22 Manager 1 1 15,000

180,000


84,000


120,000

Human Resource and Payroll

25 Manager 1 1 15,000

180,000


168,000


240,000

Legal

28 Manager 1 1 15,000

180,000


84,000

Purchase

30 Manager 1 1 15,000

180,000

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420,000


600,000

Marketing

33 Manager 1 1 15,000

180,000


420,000


1,500,000

Planning

36 Manager 1 1 15,000

180,000


168,000


120,000

Production (Garments)

39 Manager 4 2 18,000

1,728,000

40 Assistant Manager/ Supervisor 8 2 13,000

2,496,000

41 Executives/ In charge 950 2 5,000

114,000,000

Quality Assurance

42 Manager 1 2 18,000

432,000


624,000


8,400,000

Pressing

45 Manager 1 2 15,000

360,000


336,000


4,440,000

Packing

48 Manager 1 2 15,000

360,000


336,000


2,040,000

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Welfare

51 Manager 1 1 15,000

180,000


84,000


120,000

Canteen

54 Manager 1 1 15,000

180,000

55 Cook 10 2 7,000

1,680,000

56 Helpers 25 1 5,000

1,500,000

Dormitory

57 Manager 2 1 7,000

168,000


480,000

59 Security 5 2 7,000

840,000

60 Sweepers 10 1 5,000

600,000

61 Drivers 5 1 7,000

420,000

62 Gardner 3 1 5,000

180,000

TOTAL 1242 150,648,000

Add: Other benefits @5% 7,532,400

Annual salaries and wages (Rs. In Lakhs) 1,582

The above estimates have been based on production technology proposed, level of mechanization

and automation, number of operating shifts etc.

In all the departments there will be staffs in three layers, Managers, Assistant Managers,

Executives/ in charges. This system is proposed to be adopted in order to reduce the impact of

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labour turnover on the smooth functioning of the unit. If a manager resigns, an assistant manager

will be promoted as manager and if an assistant manager resigns, one of the executives will be

promoted as assistant manager in that department. Recruitment and training of executives/ in

charges /workers will be an ongoing procedure since the labour turnover in this segment is much

higher. Availability of good, skilled and experienced personnel does not seem to be big headache,

since accommodation facility will be provided in the factory premises itself for workers from

outside the location.

The time schedule for the implementation of the project is proposed

to be 12 months time from the Zero- date which has been

reckoned as Go-ahead for the project which was August 2009. The

project idea framed in August 2009 and the factory location was

identified in August itself. Building plan was finalized in September

2009. It is expected that approval from government agencies will be completed by the end of

November 2009. It may take another one month to arrange necessary bank finance for the project

and building construction can be started in the middle of December 2009. The construction of the

building will take four months to complete. Machinery erection, raw material purchase and

recruitment of staff will be done in the months of April, May and June of 2010. If the project

implementation activities are going as per the schedule, the trial run will be done at the beginning of

July 2010 and the commercial production will start by the end of July 2010.

13. IMPLIMENTATION SCHEDULE

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The proposed schedule is considered preliminarily at this stage, and may necessitate updating

during the detailed planning and implementation stages, based on updated volume of work, the

methods of operandi for the implementation etc.

It will be necessary to ensure selection of capable and reputed construction agencies and

mobilization of requisite resources of men, materials, and construction machinery as well as

construction and erection experts on modern and advance trends, to adhere to the proposed

schedule. It will also be necessary to ensure timely availability of the site infrastructure in time for

the work execution at site.

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Pollution: Normally the unit will not create any air pollution, noise

pollution, and water pollution, even though the unit will implement

all the guidelines issued by the government in this regard.

Waste material management: The various waste materials like

cutting waste, arising out of the production process will be collected

in a common area and sold out to outside parties. Other waste

materials, which cannot be sold out, are planned to be dumped in an environmental friendly manner

in a separate area.

Fire protection facilities: In order to combat any occurrence of fire in the premises, the unit plans

to adopt latest fire protection and extinguishing system as per the government guidelines.

The requirement of working capital for the unit has been

computed on the basis of minimum level of inventories to be

maintained for input raw materials, provision for stock of work

in progress and finished goods as per the norms laid down for

similar units in the industry for smooth and uninterrupted operation of the unit. The details of

working capital requirement are given bellow.

14. ENVIRONMENTAL MANAGEMENT

15. WORKING CAPITAL

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COMPUTATION OF WORKING CAPITAL

Rs.in Lakhs

Sl. No. Particulars

Duration Years

in Days 1 2

3

4

5

6

7

I Raw material 30 630

662

695

729

766

804

844

II Packing materials 15 79

83

87

92

96

101

106

III Work-in-progress 1 30

31

33

35

36

38

40

IV Finished goods 5 152

157

165

173

181

190

199

V Salaries and wages 30 158

166

174

183

192

202

212

VI Receivables 15 558

586

616

646

679

713

748

Working capital 1,608

1,685

1,769

1,857

1,950

2,047

2,150

Increase in working

capital

1,608

77

84

88

93

97

102

The total project cost comes to Rs 3,916.04 lakhs detailed below.

16. COST OF PROJECT

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COST OF PROJECT

Rupees in Lakhs

Sl. No. Description Amount

I Land 250.00 II Building 1600.00

III Machinery and Equipments 415.16

IV Computer and equipments 4.41 V Working Capital 1607.69

VI Preoperative expenses and contingencies 38.77

Total 3916.04

Land, 250

Building, 1600

Machinery and Equipments, 41

5

Computer and equipments, 4

Working Capital, 1608

Preoperative expenses and

contigencies, 39

COST OF PROJECT

Febin Lee & Co. 28

The total project cost of Rs. 3,916.04 lakhs is proposed to be financed as follows. The debt equity

ratio considered for the project is 1.77: 1

MEANS OF FINANCE

Rupees in Lakhs

Sl. No. Description Amount

I Promoters Capital 1415.38 II Term Loan from Bank 1455.66

III Working Capital Loan from Bank 1045.00

Total 3916.04

17. MEANS OF FINACE

Promoters Capital, 1415

Term Loan from Bank, 1456

Working Capital Loan from

Bank, 1045

MEANS OF FINANCE

Febin Lee & Co. 29

The promoters expect that Bank will sanction Rs. 1455.66 Lakhs as term loan and Rs. 1445.00

Lakhs as working capital loan. Interest rate of the loan is worked out at 12.50% per annam

repayable with in seven years with a moratorium period of one year. The loan will be secured on the

movable and immovable assets of the unit.

A detailed projected profitability statement of the unit for the next seven years of operation is

attached as Annexure VII. The profit before tax is graphically shown below.

18. BANK FINACE

19. FINANCIAL FEASIBILITY

-

200

400

600

800

1,000

1 2 3 4 5

P

.

B.

T

YEAR

OPERATING PROFIT

Febin Lee & Co. 30

The profitability statement has been worked out on the basis of the following assumptions.

1. It is expected that the unit will be open for 300 days in a year in double shift.

2. The calculation of annual sales turn over is worked out in Annexure I.

3. The expected annual raw material requirements are worked out in Annexure II.

4. Remuneration to staff has been increased by 5% every year to provide for annual increment.

5. Interest on loan is worked out @12.50% per annum. The repayment schedule of term loan is given in Annexure III.

6. Depreciation has been worked out under SLM method and WDV method. Computation of

depreciation is given in Annexure IV& V respectively.

7. Income tax is computed as per the tax rates applicable to partnership firms. The details are given

in Annexure VI.

8. Carriage inward is estimated at 2% of raw material cost and carriage outward is estimated at 4%

of the sales turnover.

9. Costs of secondary packing materials are expected to be 1% of the sales price.

10. Selling and Administrative expenses are assumed to be 1.5% and 0.75% of the sales turnover.

Projected Cash Flow statement and Balance Sheet for a period of seven years based on

the above profitability statement are furnished as Annexure VIII & IX respectively.

20. CASH FLOW STATEMENT AND BALANCE SHEET

Febin Lee & Co. 31

The calculation of Debt Service Coverage ratio and Breakeven Points are given in annexure X & XI

respectively.

The various factors covering the projects scope and profitability have been discussed in the

preceding sections. The business will generate a profit after tax of Rs. 321 lakhs in the first year of

operation. The profit generation is adequate and also ensures reasonable return to the promoters.

The total cost of the project comes to Rs 3,916.04 lakhs of which Rs1,455.66 lakhs is expected to be

financed by Bank as term loan and Rs 1,045.00 lakhs as working capital loan.

21. RATIO ANALYSIS

0

0.5

1

1.5

2

2.5

Years

1.76 1.92

2.11 2.32

Year

DEBT SERVICE COVERAGE RATIO

22. CONCLUSSION

Febin Lee & Co. 32

The unit will provide direct employment to 1,242 people and is eligible to get assistance from DIC.

The proposal is economically feasible and deserves support from the financial

institution.

Prepared by:

PLUMAGE FABRICS Managing Partner

Febin Lee & Co. Chartered Accountants

Thodupuzha 14/11/2009

Febin Lee & Co. 33

ANNEXURE - I ANNUAL SALES TURNOVER

Sl.No. Description Shirts New born

baby dress

Brassieres Under skirt

I Number of working days per annam (Days) 300

300

300

300

II Number of shifts per day 2

2

2

2

III Production capacity per shift (Number of garments) 1,500

2,000

20,000

10,000

IV Capacity utilisation 80% 80% 80% 80%

V Annual production (In Numbers) (I X II X III X IV) 720,000

960,000

9,600,000

4,800,000

VI Wastage @ 2% (Seconds sale) (In Numbers) V X 2% 14,400

19,200

192,000

96,000

VII Finished goods per annam ( In numbers) V-VI 705,600

940,800

9,408,000

4,704,000

VIII Average Sales price per unit (Amount in Rs.) 500

25

40

75

IX Annual sales turnover (Amount in Rs.) (VII X VIII) 352,800,000

23,520,000

376,320,000

352,800,000

X Average sales price per unit of seconds (Amount in Rs.) 250

13

20

38

XI

Annual sales turnover of seconds (Amount in Rs.) (VI X X) 3,600,000

240,000

3,840,000

3,600,000

Total Sales Turnover per annam (Rs. In Lakhs) (VII + X) 11,167

Febin Lee & Co. 34

ANNEXURE - II ANNUAL RAWMATERIAL COST

Sl.No. Description Shirts New born baby dress Brassieres Under skirt

I Total number of garments produced per annam

720,000

960,000

9,600,000

4,800,000

II Average requirement of cloth per unit (In meter)

1.40

0.50

0.20

1.25

III Price per meter of cloth (In Rupees)

150

15

45

45

IV Cost of cloth per unit II X III

210.00

7.50

9.00

56.25

V Purchase cost of cloth per annam (In Rs. ) I X IC

151,200,000

7,200,000

86,400,000

270,000,000

VI Average cost of elastic, buttons etc per unit (In Rs.)

10.00

4.00

5.00

3.00

VII Purchase cost of elastic, buttons etc per annam (In Rs. ) I X VI

7,200,000

3,840,000

48,000,000

14,400,000

VIII Average cost of primary packing materials per unit (In Rs.)

40.00

1.00

1.00

0.50

IX

Purchase cost of primary packing materials per annam (In Rs. ) I X VIII

28,800,000

960,000

9,600,000

2,400,000

Total Sales Turnover per annam (Rs. In Lakhs) VII + IX + XI 6,300

Febin Lee & Co. 35

ANNEXURE III

REPAYMENT SCHEDULE OF TERM LOAN Rs. In lakhs

Particulars Years

1

2

3

4

5

6

7

Opening Balance

1,456

1,456

1,213

970

728

485

243

Principal Repayment

-

243

243

243

243

243

243

Interest Payment

182

167

136

106

76

45

15

Closing Balance 1,456

1,213

970

728

485

243

-

Febin Lee & Co. 36

ANNEXURE - IV

COMPUTATION OF DEPRECIATION UNDER STRAIGHT LINE METHOD

Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7

Land

Opening balance

250

250

250

250

250

250

250

Depreciation

-

-

-

-

-

-

-

Closing balance

250

250

250

250

250

250

250 Building

Opening balance

1,600

1,440

1,280

1,120

960

800

640

Depreciation

160

160

160

160

160

160

160

Closing balance

1,440

1,280

1,120

960

800

640

480 Machinery and Equipments

Opening balance

415

374

332

291

249

208

166

Depreciation

42

42

42

42

42

42

42

Closing balance

374

332

291

249

208

166

125 Computer and Equipments

Opening balance

4

4

4

3

3

2

2

Depreciation

0

0

0

0

0

0

0

Closing balance

4

4

3

3

2

2

1 Summary

Opening balance

2,270

2,068

1,866

1,664

1,462

1,260

1,058

Depreciation

202

202

202

202

202

202

202

Closing balance

2,068

1,866

1,664

1,462

1,260

1,058

856

Febin Lee & Co. 37

ANNEXURE - V

COMPUTATION OF DEPRECIATION UNDER WDV METHOD

Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7

Land

Opening balance

250

250

250

250

250

250

250

Depreciation

-

-

-

-

-

-

-

Closing balance

250

250

250

250

250

250

250 Building

Opening balance

1,600

1,520

1,444

1,372

1,303

1,238

1,176

Depreciation

80

76

72

69

65

62

59

Closing balance

1,520

1,444

1,372

1,303

1,238

1,176

1,117 Machinery and Equipments

Opening balance

415

353

300

255

217

184

157

Depreciation

62

53

45

38

33

28

23

Closing balance

353

300

255

217

184

157

133 Computer and Equipments

Opening balance

4

2

1

0

0

0

0

Depreciation

3

1

0

0

0

0

0

Closing balance

2

1

0

0

0

0

0 Summary

Opening balance

2,270

2,125

1,995

1,877

1,770

1,672

1,583

Depreciation

145

130

118

107

98

90

82

Closing balance

2,125

1,995

1,877

1,770

1,672

1,583

1,500

Febin Lee & Co. 38

ANNEXURE - VI

COMPUTATION OF INCOME TAX Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7

Net Profit as per Profit & Loss Account

490

685

775

868

964

1,064

1,175

Add: Depreciation under SLM

202

202

202

202

202

202

202

Less: Depreciation under WDV

145

130

118

107

98

90

82

Taxable Income

547

757

859

963

1,068

1,176

1,294

Income Tax

169

234

265

298

330

363

400

Febin Lee & Co. 39

ANNEXURE - VII

PROJECTED PROFITABILITY STATEMENT Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7

A. Income

Sales

11,167

11,726

12,312

12,927

13,574

14,252

14,965

Total - A

11,167

11,726

12,312

12,927

13,574

14,252

14,965 B. Manufacturing Cost

Raw materials

6,300

6,615

6,946

7,293

7,658

8,041

8,443

Salaries and wages

1,582

1,661

1,744

1,831

1,923

2,019

2,120

Packing materials (Secondary)

112

117

123

129

136

143

150

Carriage inwards

126

66

69

73

77

80

84

Electricity charges

168

106

111

116

122

128

135

Travelling expenses

558

586

616

646

679

713

748

Reparse and maintenance

56

59

62

65

68

71

75

Depreciation

202

202

202

202

202

202

202

Total - B

9,103

9,412

9,872

10,356

10,863

11,396

11,956 C. Selling and Distribution Expenses

Carriage outwards

447

469

492

517

543

570

599

Advertisement

558

586

616

646

679

713

748

Selling expenses

168

176

185

194

204

214

224

Total - C

1,173

1,231

1,293

1,357

1,425

1,497

1,571 D. Administrative Expenses

Insurance

5

5

5

5

5

5

5

Other administrative expenses

84

88

92

97

102

107

112

Febin Lee & Co. 40

Total - D

89

93

97

102

107

112

117 E. Financing charges

Interest on Term Loan

182

167

136

106

76

45

15

Interest on W. C. Loan

131

131

131

131

131

131

131

Total - E

313

297

267

237

206

176

146

F. Preoperative expenses written off

-

8

8

8

8

8

-

G. Grand Total - (B+C+D+E+F)

10,677

11,041

11,537

12,060

12,610

13,189

13,791

H. Operating Profit (A-F) (PBT)

490

685

775

868

964

1,064

1,175

I. Income Tax

169

234

265

298

330

363

400

J. Profit After Tax

321

451

509

570

634

700

775

K. Withdrawals

305

316

356

399

444

490

542

L. Retained Profit

16

135

153

171

190

210

232

Febin Lee & Co. 41

ANNEXURE - VIII PROJECTED CASH FLOW STATEMENT

Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7

A. SOURCES

Profit before tax

490

685

775

868

964

1,064

1,175

Depreciation

202

202

202

202

202

202

202

Preoperative expense written off

-

8

8

8

8

8

-

Interest on loan

313

297

267

237

206

176

146

Promoters capital

1,415

Term loan

1,456

Working Capital Loan

1,045

Total - A

4,921

1,192

1,252

1,314

1,380

1,450

1,522 B. APPLICATION

Fixed assets

2,270

Increase in Working Capital

1,608

77

84

88

93

97

102

Preoperative expenses

39

Repayment of Loan

-

243

243

243

243

243

243

Income Tax

169

234

265

298

330

363

400

Interest on loan

313

297

267

237

206

176

146

Drawings

305

316

356

399

444

490

542

Total - B

4,703

1,167

1,216

1,264

1,316

1,370

1,433

Opening balance

-

218

243

279

329

393

473

Difference

218

25

36

50

65

80

90

Closing balance

218

243

279

329

393

473

563

Febin Lee & Co. 42

ANNEXURE - IX

PROJECTED BALANCE SHEET Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7 A. Fixed Assets

Net block 2,068

1,866

1,664

1,462

1,260

1,058

856 B. Current Assets

Current assets 1,608

1,685

1,769

1,857

1,950

2,047

2,150

Cash balance 218

243

279

329

393

473

563

1,826

1,928

2,048

2,186

2,343

2,521

2,712 C. Other Non Current Assets Preliminary exp. To the extent of not

written off 39

31

23

16

8

-

-

D. Current Liabilities -

-

-

-

-

-

-

E. Net Current Assets (B+C-D) 1,864

1,959

2,071

2,202

2,351

2,521

2,712 F .NET OPERATING ASSETS (A+E) 3,932

3,825

3,735

3,663

3,611

3,578

3,568

G. Term Loan 1,456

1,213

970

728

485

243

-

H. Working Capital Loan 1,045

1,045

1,045

1,045

1,045

1,045

1,045

I. NET WORTH (F-G-H) 1,431

1,567

1,719

1,891

2,081

2,291

2,523 Evidenced By;

Promoters Capital 1,415

1,415

1,415

1,415

1,415

1,415

1,415

Retained profit 16

151

304

475

665

875

1,108

TOTAL 1,431

1,567

1,719

1,891

2,081

2,291

2,523

Febin Lee & Co. 43

ANNEXURE- X

DEBT SERVICE COVERAGE RATIO Rs.in Lakhs

Particulars Years

1

2

3

4

5

6

7

Profit after tax

321

451

509

570

634

700

775

Add: Depreciation

202

202

202

202

202

202

202

Interest on loan

313

297

267

237

206

176

146

Total -A

836

950

978

1,009

1,042

1,078

1,122

Interest on loan

313

297

267

237

206

176

146

Repayment of Term Loan -

243

243

243

243

243

243

Total - B

313

540

510

479

449

419

388

Debt service coverage ratio A/B

1.76

1.92

2.11

2.32

2.58

2.89

Febin Lee & Co. 44

ANNEXURE - XI

COMPUTATION OF BREAKEVENPOINT Rs.in Lakhs

Particulars Amount

A INCOME 11,167 B VARIABLE EXPENSES Raw materials 6,300 Salaries and wages 1,582 Carriage inwards 126 Electricity charges 168 Packing materials (Secondary) 112 Travelling expenses 558 Reparse and maintenance 56 Carriage outwards 447 Selling expenses 168 Total - B 9,515 C FIXED EXPENSES Insurance 5 Other administrative expenses 84 Depreciation 202 Advertisement 558 Interest on Loan 313 Total - C 1,162 Contribution (A-B) 1,652 P/V RATIO=Contribution/Sales 0.15

BREAKEVENPOINT=Fixed overhead/PV Ratio 7,853

Febin Lee & Co. 45

Febin Lee & Co. 46

Febin Lee & Co. 47

Febin Lee & Co. 48

Febin Lee & Co. 49

Documents

Pr- Plaumage Fabrics 1