Agro Food Products Private LtdBusiness Report

Mr. Somnath Tapare 33, 22nd main, 10 cross, J P nagar, Bangalore, Karnataka-560078 India. Phone no. (080), 26631073. Mob No 08050998297 somnathtapare@agrofoodproduct.com www.agrofoodproduct.com

10/4/2010

Table of Contents

1. Executive summary.

2. Organization background.

3. Marketing plan.

3.1 Pricing.

3.2 Selling strategy.

4. Financial plan.

4.1 Land & building.

4.2 Machinery.

4.3 Manpower requirement.

4.4 Working capital requirement.

4.5 Cost of project.

4.6 Profitability calculation.

4.7 Break even analysis.

5. Risk analysis.

5.1 Risk management plan.

6. Decision making criteria.

6.1 Breakeven analysis.

1. Executive summary:

“Agro food products private ltd” is a manufacturing company and going to start production of jaggery from sugarcane(not traditional method). I am Mr. Somnath Tapare the owner of company.

Sugar industry in India is a well-developed industry and one of the largest after textiles. It provides rural employment opportunities and plays an important role in Indian economy.

Jaggery is also manufactured from sugarcane juice and is very widely used not only in individual households but also in many eateries, restaurants, clubs and hostels and it has certain industrial applications as well. Compared to this, production of jiggery is very simple and the capital cost is also very limited. Due to its wide applications, theMarket for jaggery is continuously growing.

We are investing Rs 12 laces in this project. In which, as a proprietor of company I (Mr. Somnath Tapare) would investing Rs 4 laces. i. e. 33% of total capital and remaining 67% will take from bank i. e. 7.5 laces.

We are making more than 10 different products. Those products we are selling in urban, rural areas. Basically few products like chocolate are going to sale in urban area.

India has good market for chocolate and it is growing day by day. What chocolate we are making? It will not create a problem for teeth.

2. Organizational background:

Number of employees:

S.No.

Designation No of person

1 CEO 12 At factory 123 On field i.e. for cane cutting 104 Drivers 2

Annual sales figures:

Company’s crushing capacity would be 20 tons/day. Company will have been operated 180 days in a year. From 1 ton of cane, 90 to 100 kg jaggery will make. In one season is 325 to 350 tons.

Company’s target of sales of jaggery is 350 tons per annum

Key product lines:

Jaggery is a typical Indian product with several uses in daily food preparations and it is also used to make many sweet food preparations. This is a product with scattered market.

Company’s concern is not only produce jaggery, but also chikki and so many other, jiggery related products. Now days people don’t bother about prepare food, so company also will make powder of it.

R & D has going on for, how to make chocolate, hot chocolate, drinking chocolate and I am successes in it.

2.1 R & D: on products• Chocolate Jaggery • Dry fruit Jaggery • Jaggery Candy • Jaggery Cubes • Jaggery Lad doo • Jaggery Powder • Jaggery Sugar • Jaggery Syrup • Kolhapuri Jaggery (chemical less jaggery)• Natural Jaggery

Location of facilities:

Project is located at near to sugarcane farm. Proprietor has 15 acre his own land. In which, every year almost 10 acre sugarcane we are growing. Project is in Maharashtra and Maharashtra is leading sugarcane grower.We are getting raw material i. e. sugarcane in only 1 km radius. Other all facilities are available at the place i.e. water, labor etc Company structure:Agro Food Products private limited is sole proprietor company. We register it with state government.Proprietor is Mr. Somnath Tapare, MBA(Finance).

3. Marketing plan:The demand for jaggery is steadily growing many folds in the urban, rural and semi-urban areas. There are several applications of jaggery and almost all Indian households use it on day-to-day basis. Market for jaggery is round the year whereas its production is only during the sugarcane season and thus factory works for around 6 to 7 months every year. Apart from individual households, it is used in large quantities in restaurants, road-side dhabas, other eateries, hostels and clubs and by caterers. It has shelf-life of more than couple of months.

Its production is undertaken at several places but

Maharashtra, Uttar Pradesh, Bihar and Tamil Nadu are the leading manufacturers. In view of constantly growing market, it should not be difficult for a new entrant to enter and capture the market

a. pricing:Cost-plus pricing:

In this method, first calculate the cost of the product, then includes an additional amount to represent profit. This pricing method we use only for retailerOtherwise, at government market there is fixed price for one season, i. e. one year.

b. selling of product:We are going to sale at local government market. Also we are selling in local retailer, urban big retailer

4. Financial plan:

Capital inputs:

4.1 land and building:

Where project will start, that is my own

The built up area requirement is estimated to be 500 sq.mtrs. and the rate of construction is taken at Rs.1000/sq.mtr. Since the roofing could be of steel sheets. The cost of construction would be Rs.5 lacs. Land cost Rs. 100/sq.mtrsParticulars Area in sq mtrs Cost in RsLand 1000 100000

Building 500 500000Total 600000

4.2 Machinery:This is a seasonal activity and the plant generally runs from October to March-April. To produce more than 350 tons of jaggery every season, following machines shall be required:

S.no Particulars Amt(Rs)1 Sugarcane Crusher complete roller

size 216mm x 8.5" length crushing capacity 25 ton in 24 hours

120000

2 Diesel engine Lister type TOPLAND 20000

15 HP3 Open Pan furnace- 4 no 800004 Foundation Frame for crusher. 10005 Counter shaft , pulley for crusher

and engine500

6 Water Pump 35007 Misc. nut bolts. 5008 Laboratory Equipments- 1 set 5000

9 Strong Iron Scrappers with Long handle

2000

10 Tank 5000 lit capacity- 2 no 20000

Total 2,52,500

4.3 Manpower requirement (salary):

Particulars No Amt in RsLabors at factory Rs150/day/person

12 1800/day

Labor on field Rs200/day/person 10 2000/day3800/day

Total For 6 month 5,92,800

4.4 Working capital requirement:

Raw material is on 2 months credit, cost of it is Rs 1700/ton

This is a seasonal business and sugarcane is available on credit. Main requirement is for post-sales for which a lump sum provision of Rs.2 lacs is made comprising margin of Rs. 60,000/- and bank finance of Rs. 140,000/-.

Preliminary & pre-operating expenses:

Capital requires for registration of firm, interest during implementation of project @ 14% on amount Rs 7.5 lacs is Rs 10500.

4.5 Cost of project and means of financing:

Particulars Amt in lacsLand & building 6Machinery 2.52500Preliminary & pre-operating expenses 1.2Contingencies @ 5% building & 0.37625

machinery(252500+500000)*.05Working capital margin 0.6Total 11.00125Means of financePromoter’s contribution 3.50125

Loan from bank 7.5

Total 11.00125

Debt-equity ratio 2.14:1

Promoters contribution 36%

Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. There is no tax on production of jiggery, because of it is agriculture product and in India no tax on agriculture products

4.6 Profitability calculation: Production capacity and build up:

The installed production capacity of jaggery making would be 350 tones during the season and capacity utilization

of 90% is envisaged during first year and thereafter it is restricted to 95%

Sales revenue:

Product quantity Selling price Total valueJiggery 350 tons 28000/ ton 98 lacs

Raw material requirement:

Product Quantity Rate in Rs value in lacsSugarcane 3600 tons 1700 61.2 Soda ash 3 Ganny bags 300 500 1.5

Total 65.7

Depreciation:

Depreciation on building has been worked out @ 10% p.a. The depreciation on plant and machinery as well as miscellaneous assets is assumed @ 20% per annum. The method applied is WDV.

Projected profitability: 2nd year, raw material price will Rs 1800/ton.

In Rs lacs

No Particulars 1st yr 2nd yrA Installed Capacity 350 tons 350 tons

Capacity Utilization 90% 95%Sales Realization 88.2 93.1

B Cost of ProductionRaw and Packing Materials

58.5 59.85

Utilities 0.90 0.95Salaries 5.928 6Stores and Spares 1 1.1Repairs and Maintenance 0.5 0.55Selling Expenses 1.3 1.4Administrative Expenses 0.5 0.6Total 68.628 70.45

C Profit before Interest & Depreciation

19.572 22.65

Interest on Term Loan@14%

1.05 0.84

Interest on Working Capital(1 lac @ 17%)

0.17 -

Depreciation 1 0.975

Tax octroi @ 7% 6.174 6.174

Total 8.394 7.989

Net Profit 11.178 14.661

Repayment term loan - 1.5

4.7 BREAK-EVEN POINT ANALYSIS:

No Particulars Amt Amt in lacs

A Sales 88.2B Variable Cost

Raw and Packing Materials 58.5Utilities (75%) 0.675Salaries (75%) 4.446Stores and Spares 0.01Selling Expenses (20%) 0.26Administrative Expenses (20%)

0.1

Interest on working capital 0.17Total 64.161

C Contribution 24.039D Fixed Cost 8.5E Break Even Point (D÷C) 35%

5. Risk analysis:

In this project only one risk is there, i.e. shortage of sugarcane.

Because of less rain fall, crop of sugarcane will be damage.

Another risk is co-operative sugar factories. They are big competitor.

5.1 Management of risk:

Project is located at such place, where big dam is there, so we can get sugarcane, but we will have to pay more transportation cost.

Second risk, we can give some more money for raw material,

So farmer will give sugarcane to us.

6. Decision making criteria:

Breakeven point is only 35%, i. e. when we sale 35% of total sales, we will get profit. Also it means, we will sale 122.5 tons jageery, after this sale our profit will start.