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Prakriti Colors
-Group 4Aditi Jaisinghani
Madhura Bakre
Mayank Gupta
Mohd. Shoeb AbbasNitika Gupta
Pranay Dangi
Soumit Kundu
Sumit Jain
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Introduction
We propose to set up a company engaged in production and supplyof Natural Food Colors.
Management Vision:To provide high quality natural food colors tothe consumers through constant marketing efforts, end to end
servicing and efforts to improve efficiencies of the production and
resources We plan to set up a unit in Chinchwad MIDC
A brief on management 3 directors
Name of thedirectors
Mr. Sunil Joshi Mrs. AmritaJoshi
Mr. DarshanParekh
Qualification Msc chemistry Bcom- accountancy IT engineer
Experience 10 years experience of
working in food colors
manufacturing unit
- 15 years experience of
working in
multinational company.
Shareholding in the
company 40% 20% 40%
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The Hierarchy
3 DIRECTORS
FINANCIAL
MANAGER
1
ACCOUNTANT
2
ADMINISTRATIONSTAFF
PRODUCTION
MANAGER
2 PRODUCTIONENGINEERS
2 CHEMICALENGINEERS
3 CHEMISTS
16 LABOURERS
SALES
MANAGER
4
MARKETINGOFFICERS
8
BACK OFFICE STAFF
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Plant layout and details
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Details of machineryProjected Cost of Plant and Machinery
Particulars Quantity INR in Lakhs Total Cost
Shredding Machine 1 25.4 25.4
Pulping Machine 2 14.9 29.8
Spray Dryer 2 31.7 63.4
Sieving Machine 1 15.8 15.8
Blending Machine 1 19.0 19.0
Glass line Reactors 4 14.9 59.5
Chilled water plant 1 23.5 23.5
Stainless steel reaction vessels 1 16.1 16.1
Filters 1 15.4 15.4
De-mineralised water plant 1 19.2 19.2
DG set for Stand by power 1 27.8 27.8
Total Cost 223.8 315.0
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Why Natural food colors?
Our product is a part of food processing industry which has doneexceedingly well in the recent times. It is growing at a rate of 10% p.a.
The natural food colors industry is growing at a rate of 15-20% perannum.
The reason why the natural food colors industry is growing at a faster
pace than the food processing industry is because more and morecompanies are shifting from the synthetic food colors to natural foodcolors.
2005
20100%
10%
20%
30%
40%
bakeryproducts ready meals snacks and
soft drinksothers
dairy
16%
6.50%
28.30%
36.90%
8.70%
17.10%
7.70%
29.60%38.10%
11.10%
Switch to natural food ingredients
2005
2010
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Use of natural food colors
Beetroot: The color of beetroot is water soluble and has limited stability when exposed
to light, heat and oxygen. It is particularly suited to frozen, dried and short shelf-life
products, such as ice creams and yoghurt. Red color may also be used in lipsticks,
textile clothes etc.
Turmeric: Turmeric is a well known spice, used widely in cookery. Its pigment,
curcumin, is oil soluble and tends to fade in light, but has good heat stability. It gives a
lemon yellow shade in food systems. Its applications include pickles, soups and
confectionery. It is also used in hatchery and pharmaceuticals.
Marigold: Marigold is a commonly available flower. Its pigment has got a good stability
and gives a dark yellow color. Commonly used in confectionery, bakery products, baby
products etc
Spinach: It is a green, oil soluble color. Its pigment, chlorophyllins are water soluble
and relatively stable when exposed to heat and light. Uses include sugar confectionery
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Economic conditions of theindustry The food processing industry is employment intensive and creates 1.8 jobs
directly and 6.4 jobs indirectly across the supply chain for every Rs. 1 million
invested. The growth is also inevitable with rising incomes, favorable
demographic transition and changing consumption patterns.
At the same time there are also a few constraints in the food processing sector
due a key issue like affordability- because of cost and quality of farm produce,
infrastructure, credit, processing, packaging and fragmented supply chain
In order to overcome these constraints and explore the above opportunities the
government has initiated several steps such as:
-No industrial license required for the food processing except alcoholic beveragesand items reserved for SSI
-Custom duty reduced from 7.5% to 5% on food processing machinery
-Application of Hazard Analysis and Critical Control Points (HACCP) at various
stages
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Application of Porters 5 forces model
Industrycompetitor
s
Potentialentrants
Buyers
Substitutes
Suppliers
Bargainingpower of the
buyers
Threat of
substitutes-
synthetic
food colors
Threat ofnew
entrants
Bargaining
power of the
suppliers
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Process-High Pressure- Supercritical/ Sub criticalExtraction:
Washing ofvegetables/flowers
Shredding
Pulping
Spray Drying
Sieving
Blending
Sieving
Extracted color
Packaging
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Demand and supply
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FINANCIALS
Proposed Cost of ProjectParticulars INR in Lakhs
Building 240
Plant and Machinery 315
Miscellaneous Expenditure 35
Preliminary & Pre-operative Expenditure 80
Provision for contingencies 70
Fixed Assets 740
Working capital 60
Estimated Block Capital Cost of Project 800
Means of Finance
Total Debt 500
Promoters contribution 300
Total Means of Finance 800
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CAPITAL STRUCTURE
The D/E ratio comes out to be 1.67:1. This is above thebenchmark level of 1.33.
All the expenses after the operation of the project has startedwill be funded by the cash flows generated by the project, asthe projected cash flows from the project are very high and
project will generate profit from first year onwards.
FROM AMOUNT (Rs. In
lakhs)
Debt 500
Equity 300
Total 800
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COST OF CAPITAL
Cost of Debt: 13.75% (Base Rate + Spread)
Cost of Equity: 15.00% (Food Color Industry
Average)
WACC = 13.75%*0.625 + 15%*0.375 =
14.29%
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Year 2012-13 2013-14
2014-
15 2015-16
2016-
17
Breakeven 0.32 0.31 0.29 0.26 0.22
Average Breakeven point=28%
Since we are growing at 7%, 9%, 11% and 13 % as we have assumed our firms
growth rate, our demand is increasing thus our sales. This employ that in the
first year we are achieving break even at 32%, as sales grow our breakeven point
is going down and our average breakeven point is at 28% and we achieve this
after second year of operations.
BREAKEVEN POINT
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IRR,NPV
The IRR of our company is 32 %.
The Cost of Capital of our company is14.29%. This implies that IRR is much
greater than the Cost of Capital whichmeans that the project is highlyprofitable.
The NPV of our company is 642.05lakhs for the next 8 years which a bigpositive value.
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Profit margin in each color
Srno. Color name
RMcost(per kg)
manufacturingcost
Selling, Distribution,
Admin &Other Expenses
margin(15%)
1
MARIGOLD
EXTRACT 342 243 180 135
2
BEET ROOT
EXTRACT 228 162 120 90
3
SPINACH
EXTRACT 152 108 80 60
4
TURMERIC
COLOR LIQUID 304 216 160 120
TOTAL (monthly) 1026 729 540 405
YEARLY
selling
cost (per
kg)
total
production(kg) rm + m c Admin total sales
Yearly
Sales profits
Yearly
profit
900 5400 3159000
97200
0 4860000 58320000 729000 8748000
600 3600 1404000
43200
0 2160000 25920000 324000 3888000
400 1800 468000
14400
0 720000 8640000 108000 1296000
800 7200 3744000
115200
0 5760000 69120000 864000 1036800027000 202500
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PROFIT LOSS statement
Years 2012-13 2013-14 2014-15 2015-16 2016-17
INCOMESales 1620.00 1733.40 1889.41 2097.24 2369.88
Other Income
Increase /(Decrease) in Stock
TOTAL A 1620.00 1733.40 1889.41 2097.24 2369.88
EXPENDITURE
Manufacturing and Operating Expenses 1053.00 1126.71 1228.11 1363.21 1540.42
adminitrativeexpenses & Selling and Distribution
Expenses 324.00 346.68 377.88 419.45 473.98
TOTAL B 1377.00 1473.39 1606.00 1782.65 2014.40
PROFIT BEFORE DEPRECIATION (A - B) 243.00 260.01 283.41 314.59 355.48
Depreciation 59.20 59.20 59.20 59.20 59.20
amortisation 8.00 8.00 8.00 8.00 8.00
PROFIT BEFORE INTEREST AND TAXATION 175.80 192.81 216.21 247.39 288.28
Interest 67.00 64.00 59.00 55.00 49.00
PBT 108.80 128.81 157.21 192.39 239.28
Taxation 32.70 38.70 47.22 57.78 71.84
PAT 76.10 90.11 109.99 134.61 167.44
PROFIT LOSS STATEMENT
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Coverage Ratios
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DSCR
The minimum DSCR for the project is 1.31 which is in the firstyear and the average DSCR is 1.60. This DSCR means thaton an average, the project will generate 60% more revenuethan required to cover its debt payments which is above thebenchmark level of 1.50.
AVERAGE DSCR-1.59970476
Years 2012-13 2013-14 2014-15 2015-16 2016-17
D S C R 1.318177653 1.415530934 1.55899664 1.747705643 2.01063309
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Years 2012-13 2013-14 2014-15 2015-16 2016-17 2017-2018 2018-2019
LLCR
-1.01 -0.71 -0.38 0.03 0.55 1.30 2.66
This table indicates that after a few years the company will have
sufficient money available for debt repayment to pay their
balance senior debt.
LLCR
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Years 2012-13 2013-14 2014-15 2015-16 2016-17 2017-2018 2018-2019
ICR3 4 4 6 8 10 14
This table implies that we have a very high interest coverage
ratio right from the beginning. This also implies that there is a
high probability that we will not be unable to pay.
ICR